Gottlob v. Desrosier

• Decision Date: 18 August 2020
• Docket Number: DA 20-0081
• Parties: Jeff GOTTLOB, Elaine Mitchell, James Childress, and all others similarly situated, Plaintiffs and Appellees, v. Michael DESROSIER, Ron Rides At the Door, Tom McKay, Don Wilson, Galen Galbreath, and Glacier County, Defendants and Appellants, and State of Montana, Defendant.
• Court: Montana Supreme Court

401 Mont. 72

470 P.3d 194

2020 MT 212

Jeff GOTTLOB, Elaine Mitchell, James Childress, and all others similarly situated, Plaintiffs and Appellees,

v. Michael DESROSIER, Ron Rides At the Door, Tom McKay, Don Wilson, Galen Galbreath, and Glacier County, Defendants and Appellants,andState of Montana, Defendant.

DA 20-0081

Supreme Court of Montana.

Submitted on Briefs: June 24, 2020

Decided: August 18, 2020

For Appellants: Kirk D. Evenson, Marra, Evenson & Levine, P.C., Great Falls, Montana, Terryl T. Matt ; Glacier County Attorney, Cut Bank, Montana

For Appellees: Lawrence A. Anderson, Attorney at Law, P.C., Great Falls, Montana

Justice Dirk Sandefur delivered the Opinion of the Court.

¶1 Defendants Glacier County and named county officials (collectively "County Officials" or the "County") appeal from the September 23, 2019, and January 14, 2020, judgments of the Montana Ninth Judicial District Court granting Plaintiffs’ motion for appointment of a financial receiver for the County pursuant to § 27-20-102(3), MCA. The narrow issue on appeal is:

Whether the District Court erroneously appointed a receiver to determine the personal liability of County officers under § 7-6-4005(2), MCA, on the underlying claims for relief?

We reverse.

FACTUAL AND PROCEDURAL BACKGROUND

¶2 This is the fifth case arising from the ongoing dispute between Plaintiffs Jeff Gottlob, et al. , and the County, specifically including its individual Commissioners and Treasurer, and regarding alleged financial mismanagement and non-compliance with government budgeting, auditing, and tax laws in 2015-2018.¹ We accordingly set forth only the factual and procedural background necessary to address the narrow issue presented.

¶3 On July 19, 2019, Plaintiffs filed their Fourth Amended Complaint asserting various claims against the County and County Officials which we construe and summarize as follows:

(1) Count 1: claim for declaratory judgment pursuant to §§ 15-1-406(1)(b), (5), and 27-8-101, MCA (declaratory judgment remedy for property tax challenges and Uniform Declaratory Judgment Act), that the County Officials disbursed protested taxes prior to a final determination of this action in violation of § 15-1-402(4)(a), MCA (maintenance of protested property taxes in protest fund until final determination);

(2) Counts 2 and 4 (alternative remedies): claim for declaratory judgment pursuant to § 15-1-406(1)(b), MCA, that County Officials levied taxes for tax years 2015-2017 in violation of §§ 7-6-4020, -4021, and -4030, MCA, with prayer for property tax refunds pursuant to § 15-1-408(1), MCA (Count 2), or ensuing tax year levy reduction pursuant to § 15-1-408(2), MCA (Count 4);

(3) Count 3: claim for declaratory judgment pursuant to § 27-8-101, MCA (Uniform Declaratory Judgment Act), that County Officials owe common law fiduciary duties to taxpayers and that they breached those duties by:

(A) disbursing or "liquidat[ing]" protested property taxes in violation of § 15-1-402(4)(a), MCA ;

(B) spending in excess of the County's budget authority in violation of §§ 7-6-4005(1), -4033, -4034(1), and (2), MCA ; and

(C) levying taxes and spending violation or in excess of their budget authority for tax years 2015-2019 in violation of §§ 7-6-4005(1), -4006(2), -4020, -4021, -4024, -4030, -4033, -4034(1), -4036, and 15-10-420, MCA ;

(4) Count 5: claim for declaratory judgment pursuant to § 27-8-101, MCA (Uniform Declaratory Judgment Act), that the Single Audit Act ( § 2-7-501, et seq ., MCA ) is unconstitutional in violation of "the substantive due process guarantees" of the Montana and United States constitutions, the Montana constitutional "right-to-a-remedy guarantee," and the Montana constitutional "strict accountability guarantee";

(5) Count 6: claim for specified class action certification pursuant to M. R. Civ. P. 23(a), (b)(2), (b)(3), or (c)(4), MCA;

(6) Count 7: claim for common fund assessment of litigation costs and attorney fees;

(7) Count 8: claim for judicial invalidation of "all Glacier County decisions" in violation §§ 7-6-4020, -4021, -4030, -4034, and -4036, MCA, made in violation of the plaintiffs’/class members’ rights "to know and to participate" under Article II, Sections 8 - 9 of the Montana Constitution, and §§ 7-6-4021 and -4030, MCA ; and

(8) Count 9: claim for private attorney general attorney fees-shifting based on private enforcement of Article VIII, Section 12 ; Article II, Sections 8 - 9 of the Montana Constitution ; and § 15-1-402(4)(a), MCA.

Counts 1-4 further seek declaratory judgment that the named County Commissioners are each personally liable pursuant to § 7-6-4005(2), MCA, for the alleged illegalities. The Fourth Amended Complaint also separately prayed for appointment of a "financial receiver ... to assure [County] compliance with budgeting and expenditure laws" and a "forensic auditor to determine the nature and extent of [the] County's violations of budgeting and expenditure laws."

¶4 By motion filed prior to filing of their Fourth Amended Complaint, Plaintiffs sought appointment of a financial receiver pendente lite to:

be responsible to assure that the budgeting, tax levying, expenditure and disbursement, and accounting laws are strictly complied with until [the] County can demonstrate [that] its officials are able to strictly comply with such laws.

The motion also sought appointment of a separate forensic auditor to:

be responsible to determine the nature and extent of County officials’ personal liability for disbursements and expenditures in violation of § 7-6-4005(1) and (2), MCA, and other laws that seek to ensure public accountability of public monies.^{[2 ]}

The County and co-defendant State of Montana separately opposed both requests on various asserted legal grounds but did not materially dispute Plaintiffs’ supporting factual assertions regarding alleged financial mismanagement and related illegalities by the County.³

¶5 By written judgment entered on the briefs without evidentiary hearing on September 23, 2019, the District Court partially denied and partially granted Plaintiffs’ motion. Acknowledging the County's assertion that appointment of a receiver with the broad purpose and powers requested (i.e., power and duty to assure strict county compliance with "budgeting, tax levying, expenditure and disbursement, and accounting laws") would usurp executive branch functions in violation of Montana Constitution Article III, Section 1 (separation of powers), the District Court refused to appoint a receiver for the purpose requested by Plaintiffs. On the stated ground that they provided no "legal authority for such an appointment nor any discussion of the specific need for one," the court further denied Plaintiffs’ motion for appointment of a separate forensic auditor.

¶6 The District Court ultimately found and concluded, however, that appointment of a more limited receivership "to determine the extent of personal liability" of the County Commissioners for deficit spending under § 7-6-4005(2), MCA, was warranted pursuant to § 27-20-102(3), MCA, based on the following findings and conclusions:

(1) a class "property interest" exists "in [Plaintiffs’] protested property tax payments" previously released by the County from the property tax protest fund in violation of § 15-1-402(4)(a), MCA, and the continued maintenance of their "remaining" protested tax payments in protest fund as required by § 15-1-402(4)(a), MCA ;

(2) the class property interest is "in danger of being removed or materially injured by [the] County" based on its prior unlawful release of protested tax payments and its "alleged intermingling of public school funding and other public funds";

(3) the County "is in dire financial straits" as indicated by an independent audit for the period of 2015-2016;

(4) "recent audits" indicate that the County "may have already intermingled or failed to properly account for the Class's recent tax protest payments";

(5) neither the State (in the administration of the Single Audit Act), nor "the voters of Glacier County," have held the County "responsible for its fiscal mismanagement"; and

(6) "neither the Glacier County Attorney nor the [State] Attorney General ... have adequately investigated the potential personal liability of the County Commissioners."

In the subsequent appointment and charging order entered January 14, 2020, the Court clearly and unambiguously⁴ ordered the appointment of a receiver, to be nominated by Plaintiffs’ counsel, with the unqualified "duty ... to calculate," and report on, "the personal liability of [the] Glacier County Commissioners" under § 7-6-4005, MCA (personal liability for disbursements, expenditures, and obligations in excess of the total appropriations for a fund), from fiscal year 2015 to date.⁵ The order further decreed the County responsible to pay all court-approved costs of the receivership and summarily overruled, without specification or explanation, all prior County objections not previously addressed. The court stayed execution of the receivership order pending appeal and the County timely appealed.

STANDARD OF REVIEW

¶7 District court orders granting or denying appointment, directing, or refusing to dissolve appointments of receivers are immediately appealable. M. R. App. P. 6(3)(g). Our scope of review under M. R. App. P. 6(3)(g) is limited to the appealable issue and the evidentiary basis, pertinent conclusions or applications of law, and ultimate rationale for the action or ruling of the court. See M. R. App. P. 6(3)(g) ; Crowley v. Valley W. Water Co. , 267 Mont. 144, 150, 882 P.2d 1022, 1025 (1994). We accordingly review district court appointments of receivers for an abuse of discretion under the standards of Title 27, chapter 20, MCA, and related principles of equity upon which those statutes are based. Sandrock v. DeTienne , 2010 MT 237, ¶ 25, 358 Mont. 175, 243 P.3d 1123 ; Johnson v. Booth , 2008 MT 155, ¶ 12, 343 Mont. 268, 184 P.3d 289 ; Crowley , 267 Mont. at 150, 882 P.2d at 1025. A court...