Mitchell v. Glacier Cnty.

• Decision Date: 25 October 2017
• Docket Number: DA 16-0716
• Citation: 389 Mont. 122,406 P.3d 427,2017 MT 258
• Parties: Elaine MITCHELL, and all others similarly situated, Plaintiffs and Appellants, v. GLACIER COUNTY, and State of Montana, Defendants and Appellees.
• Court: Montana Supreme Court

389 Mont. 122

406 P.3d 427

2017 MT 258

Elaine MITCHELL, and all others similarly situated, Plaintiffs and Appellants,

v.GLACIER COUNTY, and State of Montana, Defendants and Appellees.

DA 16-0716

Supreme Court of Montana.

Argued: August 9, 2017

Submitted: August 22, 2017

Decided: October 25, 2017

For Appellants: Lawrence A. Anderson (argued), Attorney at Law, P.C., Great Falls, Montana

For Appellees: Kirk D. Evenson (argued), Marra, Evenson & Bell, P.C., Great Falls, Montana (Attorney for Glacier County), Gary M. Zadick, James R. Zadick (argued), Ugrin, Alexander, Zadick & Higgins, P.C., Great Falls, Montana (Attorneys for State of Montana)

Justice Beth Baker delivered the Opinion of the Court.

¶ 1 Elaine Mitchell, a resident of Glacier County, began paying her property taxes under protest in 2015 in response to an independent audit that revealed deficiencies in the County's budgeting and accounting practices. Mitchell, on behalf of herself and other County residents, sued the County over its alleged financial mismanagement and the State over its failure to take legal action against the County. The District Court dismissed the suit on the ground that Mitchell and the putative class (collectively Taxpayers) did not have standing to sue either the County or the State. Taxpayers appeal. We affirm.

PROCEDURAL AND FACTUAL BACKGROUND

¶ 2 Taxpayers own real property and pay property taxes in Glacier County. They have been paying their taxes under protest in response to a March 2015 independent audit of the County's finances for fiscal years 2013 and 2014. The audit identified budget deficits in numerous County funds and stated that the County had exceeded its budgetary authority in many of those funds. A subsequent County Treasurer's report showed ongoing deficit balances in a number of the County's funds.

¶ 3 Taxpayers sued Glacier County and the State of Montana, alleging that both entities had failed to comply with budgeting and accounting laws. They asked the District Court for numerous forms of relief, including: (1) permission to prosecute the case as private attorneys general; (2) a declaration that the County had failed to comply with generally accepted governmental accounting standards; (3) a declaration that the County was in violation of laws designed to ensure "strict accountability" of government finances; (4) a declaration that County officials who incurred financial obligations in excess of appropriations were personally liable for the resulting budget deficits; (5) an order requiring the State to withhold public funds from the County under the Single Audit Act until the County complied with its budgeting obligations; (6) an order requiring the State to hold County officials personally liable for their failure to ensure strict accountability; (7) an order appointing a receiver for the County; (8) permission to prosecute the case as a class action; (9) an order allowing Taxpayers to continue paying their taxes under protest until the County complied with its budgetary duties; and (10) a determination that the County violated Taxpayers' right to know under the Montana Constitution.

¶ 4 In their Second Amended Complaint, Taxpayers made the following assertion regarding their alleged injury:

Based on the 2013 and 2014 Audits of the county, and the deficiencies described therein, it is foreseeable that the county's residents and taxpayers would be injured as a result of the State's failure to enforce the terms of the Single Audit Act to "insure strict accountability of all revenues received and money spent" by the county.

Taxpayers moved for partial summary judgment, and the State and County challenged Taxpayers' standing to sue.

¶ 5 The District Court denied Taxpayers' motion for partial summary judgment, denied class certification, and dismissed the case for lack of standing. It explained that Taxpayers had "failed to demonstrate [they have] suffered a concrete injury to [their] property or to [their] individual constitutional or statutory rights sufficient to establish standing under Montana law." It reasoned that Taxpayers' "vague, speculative statement" that it was "foreseeable that the county's residents and taxpayers would be injured" was insufficient to establish the injury requirement for standing. The court noted that the legal provisions under which Taxpayers alleged injury—Article VIII, Section 12, of the Montana Constitution and the Single Audit Act, Title 2, chapter 7, Part 5, MCA—did not establish private rights and did not grant Taxpayers the right to judicial relief. Taxpayers appeal the court's dismissal of their case.

STANDARD OF REVIEW

¶ 6 Standing is one of several justiciability doctrines that limit Montana courts to deciding only cases and controversies. Heffernan v. Missoula City Council, 2011 MT 91, ¶ 29, 360 Mont. 207, 255 P.3d 80. The determination of a party's standing to maintain an action is a question of law that we review de novo. Heffernan, ¶ 28.

DISCUSSION

¶ 7 Taxpayers argue that they have standing to sue the County over its alleged financial mismanagement and to sue the State over its failure to hold County officials accountable for their unlawful actions. They contend that the County and the State violated Montana budgeting and accounting laws and that it is "foreseeable" that these violations will cause Taxpayers to "suffer additional property tax burdens because of the County's unauthorized deficit spending, accounting failures, and disregard of audits." They assert also that they should be permitted to pursue this suit under the private attorney general doctrine and the Declaratory Judgments Act.

¶ 8 Taxpayers seek the following specific remedies on appeal: (1) a declaration that they may continue to pay taxes under protest until the County complies with its statutory duties; (2) a declaration that the County is in violation of the laws that implement the "strict accountability" provision of the Montana Constitution; (3) an order requiring the State to withhold public funds from the County under the Single Audit Act until the County complies with its responsibilities; (4) an order requiring the State to hold County officials accountable under the law for their financial mismanagement; (5) an order appointing a receiver for the County; and (6) a declaration that the County has violated their right to know under the Constitution.¹

¶ 9 Courts lack "power to resolve a case brought by a party without standing—i.e., a personal stake in the outcome—because such a party presents no actual case or controversy." Heffernan, ¶ 29. Standing is a threshold jurisdictional requirement. Heffernan, ¶ 29. "There are two elements to standing: the case-or-controversy requirement imposed by the Montana Constitution, and judicially created prudential limitations imposed for reasons of policy." Schoof v. Nesbit, 2014 MT 6, ¶ 15, 373 Mont. 226, 316 P.3d 831 (citing Heffernan, ¶ 31 ).

¶ 10 Under the constitutional case-or-controversy requirement, the plaintiff must show, "at an irreducible minimum," that he or she "has suffered a past, present, or threatened injury to a property or civil right, and that the injury would be alleviated by successfully maintaining the action." Schoof, ¶ 15 (citation and internal quotations omitted); accord Chipman v. Nw. Healthcare Corp., 2012 MT 242, ¶¶ 26-27, 366 Mont. 450, 288 P.3d 193. The alleged injury must be "concrete" rather than "abstract." Schoof, ¶ 20 (citation and internal quotations omitted). To qualify as "concrete," an injury must be "actual or imminent, not conjectural or hypothetical." Heffernan, ¶ 32. In other words, "the plaintiff must show that he has sustained, or is in immediate danger of sustaining some direct injury ... and not merely that he suffers in some indefinite way in common with people generally." Schoof, ¶ 20 (citation and internal quotations omitted).

¶ 11 A plaintiff's standing may arise from an alleged violation of a constitutional or statutory right. See Schoof, ¶ 23 (holding that plaintiff's allegation that County Commissioners violated his constitutional and statutory rights to know and to participate by adopting a policy at an unannounced meeting satisfied standing requirements). The Legislature "may enact statutes creating legal rights, the invasion of which creates standing, even though no injury would exist without the statute." Heffernan, ¶ 34 (citation and internal quotations omitted). If the alleged injury "is premised on the violation of constitutional and statutory rights, standing depends on whether the constitutional or statutory provision ... can be understood as granting persons in the plaintiff's position a right to judicial relief." Schoof, ¶ 21 (citation and internal quotations omitted). "[I]n all events," however, "the standing requirements imposed by the Constitution"—i.e., a showing of an alleged injury—"must always be met." Heffernan, ¶ 34.

¶ 12 Article VIII, Section 12, of the Montana Constitution provides, "The legislature shall by law insure strict accountability of all revenue received and money spent by the state and counties, cities, towns, and all other local governmental entities." The Legislature responded to this directive by enacting the Single Audit Act, §§ 2-7-501 to -522, MCA, and the Local Government Budget Accounting Act, §§ 7-6-4001 to -4036, MCA.

¶ 13 The Local Government Budget Accounting Act requires local government officials to not "make a disbursement or an expenditure or incur an obligation in excess of the total appropriations for a fund." Section 7-6-4005(1), MCA. Further, "A local government official who violates subsection (1) is liable for the amount of the excess disbursement, expenditure, or obligation personally." Section 7-6-4005(2), MCA. "[T]he governing body, each county or municipal official, and the district courts are limited to the amount of appropriations and by the classifications in the annual appropriation resolution provided for in 7-6-4030 when making disbursements or...