Grenz v. Mont. Dep't of Natural Res.

• Citation: 248 P.3d 785,2011 MT 17,359 Mont. 154
• Decision Date: 10 February 2011
• Docket Number: No. DA 09–0659.,DA 09–0659.
• Parties: C.A. GRENZ, Petitioner and Appellee,v.MONTANA DEPARTMENT OF NATURAL RESOURCES AND CONSERVATION, Respondent and Appellant,andJohn and Angela Heitz, Respondents.
• Court: United States State Supreme Court of Montana

359 Mont. 154

248 P.3d 785

2011 MT 17

C.A. GRENZ, Petitioner and Appellee,

v.MONTANA DEPARTMENT OF NATURAL RESOURCES AND CONSERVATION, Respondent and Appellant,andJohn and Angela Heitz, Respondents.

No. DA 09–0659.

Supreme Court of Montana.

Argued and Submitted July 28, 2010.Decided Feb. 10, 2011.

For Appellant: Tommy H. Butler (argued), Special Assistant Attorney General, Department of Natural Resources and Conservation, Helena, Montana.For Appellee: George W. Huss (argued), Brown and Huss, Miles City, Montana.Justice BRIAN MORRIS delivered the Opinion of the Court.

[359 Mont. 155] ¶ 1 The Montana Department of Natural Resources and Conservation (Department) appeals from an order of the Sixteenth Judicial District Court, Garfield County that invalidated Admin. R.M. 36.25.125(3) (1987). We reverse.

¶ 2 We review the following issues on appeal:

¶ 3 1. Whether the District Court's order for remand constituted a final judgment under M.R.App. P. 6(1).

¶ 4 2. Whether the District Court correctly invalidated Admin. R.M. 36.25.125(3) (1987).

¶ 5 3. Whether the Montana leasing statutes require a new lessee to reimburse a former leaseholder for all the improvements previously approved by the Department.

FACTUAL AND PROCEDURAL HISTORY

¶ 6 Grenz acquired State of Montana Lease No. 10,159 on March 1, 1996. Grenz purchased improvements made by the former leaseholder, John and Angela Heitz (Heitzes). Grenz paid Heitzes approximately $7,205 for 2.5 miles of fence and a stock water well. Grenz made additional improvements after acquiring the lease. Grenz first constructed one mile of fence along the west side of the section that borders Heitzes' property. He also repaired the existing fence, repaired the well, and built a corral. Grenz repaired the holding pond, and installed a stock water tank to use in place of the holding pond. Grenz also installed a new three inch pump, pipe, and wire on the well because Heitzes had removed their pump.

¶ 7 Grenz filed an improvement request form in September 1996 with the Department pursuant to § 77–6–301, MCA, and Admin. R.M. 36.25.125(1)(a). The one-page improvement request form requires the lessee to list the type, approximate cost, and location of the improvements and repairs. Grenz calculated the cost of the new improvements and repairs that he made that year at $13,897.15 based on several receipts and his own estimates. Randy Dirkson (Dirkson), the Department employee reviewing Grenz's request, approved the improvements and repairs in November 1996. Dirkson did not confirm Grenz's estimated costs.

¶ 8 Grenz used the improvements over the course of his ten-year tenancy. The Department put the lease up for a competitive bid when it expired. The Department awarded the bid to Heitzes in 2006. The Department notified Grenz of his option either to remove improvements, to enter into a private agreement to sell the improvements, or to begin the arbitration process pursuant to Admin. R.M. 36.25.125.

¶ 9 Heitzes and Grenz failed to agree on the compensation for improvements. Heitzes did not want to purchase what they characterized as Grenz's movable improvements. Grenz sought compensation of $32,700 for all of the improvements, including the movable improvements. Heitzes offered $10,000.

¶ 10 The parties submitted the dispute to arbitrators in accordance with § 77–6–306, MCA. Each party appointed an arbitrator and these two arbitrators appointed a third arbitrator. Section 77–6–306, MCA. The three arbitrators examined all of the improvements that Grenz had made during his ten-year tenancy. Heitzes did not want to purchase certain movable improvements, specifically, the one mile of new fence that borders their property, the livestock water tank, the water pump on the well, and the corral. The arbitrators did not value the movable improvements that Heitzes did not want to purchase in accordance with Admin. R.M. 36.25.125. The arbitrators valued the rest of the improvements at $8,370.

¶ 11 Grenz timely appealed the arbitrators' decision to the Department under § 77–6–306(3), MCA. Grenz argued that the leasing statutes entitled him to compensation for all improvements, including the movable improvements. The Department conducted its own appraisal of the improvements and likewise did not value the movable improvements that Heitzes did not want. The Department's valuation closely mirrored the arbitrators' valuation. The Department's final decision upheld the arbitrators' valuation.

¶ 12 The Department based its decision on Admin. R.M. 36.25.125(3) (1987) (renumbered to Admin. R.M. 36.25.125(6) (1 Mont. Admin. Reg. 36–37 (Jan. 14, 2010))). The pertinent language in Admin. R.M. 36.25.125(3) (1987) remains identical to Admin. R.M. 36.25.125(6). Admin. R.M. 36.25.125(6) allows a new lessee to decide whether to purchase movable improvements and fixtures. The former leaseholder must remove the movable improvements if the new lessee does not choose to purchase them. Admin. R.M. 36.25.125(6). The movable improvements revert to state ownership if the former leaseholder fails to remove them within 60 days. Section 77–6–302(3), MCA. The Department directed Grenz to remove the movable improvements that Heitzes did not want to purchase.

¶ 13 Grenz timely petitioned for judicial review. Grenz sought compensation for all of the improvements. The District Court ordered Grenz to join Heitzes to the action. The Department moved for summary judgment. Grenz filed a pro se response. The court granted partial summary judgment to the Department. The court upheld the arbitrators' valuation of the improvements. The court remanded the matter to the Department, however, to value the movable improvements that Heitzes had elected not to purchase.

¶ 14 The court invalidated Admin. R.M. 36.25.125(6) on the basis that it irreconcilably conflicted with governing statutes and thereby exceeded the Montana Board of Land Commissioners' rulemaking authority. The court determined that §§ 77–6–302, and –303, MCA, require a new lessee to pay to the former leaseholder the reasonable value of all the improvements on the property, regardless of whether the improvements are movable or permanent. The court rejected the notion that the Department could authorize the new lessee to choose whether the lessee wanted to purchase the movable improvements. The Department appeals.

STANDARD OF REVIEW

¶ 15 A district court may grant summary judgment when no material facts are in dispute and the moving party is entitled to judgment as a matter of law. M.R. Civ. P. 56(c). No issues of material fact exist in this case. We review de novo a district court's ruling on a summary judgment motion. Plains Grains L.P. v. Bd. of Co. Commrs. of Cascade Co., 2010 MT 155, ¶ 21, 357 Mont. 61, 238 P.3d 332. We review the district court's conclusions of law to determine whether they were correct. Id.

¶ 16 Section 77–6–306(3), MCA, authorizes a lessee to appeal to the Department an arbitration panel's valuation of improvements. Either party may petition the district court for review of the Department's final decision. Section 77–6–306(4), MCA. A district court reviews an agency's decision under the standard of review set forth in § 2–4–704, MCA. A district court must confine its review of an agency's decision to the record. Section 2–4–704(1), MCA. We apply the same standard of review. Owens v. Mont. Dept. of Revenue, 2007 MT 298, ¶ 12, 340 Mont. 48, 172 P.3d 1227.

DISCUSSION

¶ 17 Whether the District Court's order for remand constituted a final judgment under M.R.App. P. 6(1).

¶ 18 We must address one preliminary matter. Neither party has argued to this Court that the Department's appeal presents an unappealable interlocutory judgment. See M.R.App. P. 4(1)(b). We address this question, however, in response to the Dissent's concern that the District Court has not entered a final judgment in this matter. A party may appeal only a district court's final judgment. M.R.App. P. 6(1). A final judgment conclusively determines the rights of the parties and settles all claims in controversy. M.R.App. P. 4(1)(a).

¶ 19 We addressed whether an agency can appeal an order for remand from the district court in Whitehall Wind, LLC v. Mont. Pub. Serv. Commn., 2010 MT 2, ¶¶ 16–18, 355 Mont. 15, 223 P.3d 907. The Montana Public Service Commission (PSC) appealed an order from the district court that remanded the matter to allow the PSC to calculate new rates for purchasing electricity from Whitehall Wind in accordance with the district court's order. Whitehall Wind, ¶ 18, 223 P.3d 907. We concluded that the district court's order constituted a final order for purposes of M.R.App. P. 4(1)(a), and, therefore, the PSC had a right to appeal. Id.

¶ 20 This appeal presents similar facts. The District Court here invalidated Admin. R.M. 36.25.125(6) and remanded to the Department to recalculate the cost of Grenz's improvements in accordance with the court's order. We conclude, like we did in Whitehall Wind, that to require the Department to recalculate the value of Grenz's improvements before allowing it to appeal would undermine the Department's right to appeal under § 2–4–711, MCA. The District Court's order constitutes an appealable final order. M.R.App. P. 4(1)(a).

¶ 21 Whether the District Court correctly invalidated Admin. R.M. 36.25.125(3) (1987).

¶ 22 The Montana Constitution established the Board of Land Commissioners (Board) as the trustee of state lands. Mont. Const. art. X, § 4. The Constitution provides the Board with the authority to “direct, control, lease, exchange, and sell” state trust lands. Id. The legislature also has empowered the Board to manage state lands. Sections 77–1–202, –209, MCA. The Board may set leasing rules that it considers necessary to attain the highest value for the State. Id.

¶ 23 The Board bears a fiduciary responsibility as the trustee to manage state lands in the best interest of the State of Montana (State). Montanans for the...