Montana Tavern Ass'n v. State By and Through Dept. of Revenue

• Decision Date: 11 December 1986
• Docket Number: No. 86-189,86-189
• Citation: 224 Mont. 258,729 P.2d 1310,43 St.Rep. 2180
• Parties: MONTANA TAVERN ASSOCIATION, et al., Plaintiffs and Respondents, v. STATE of Montana, acting By and Through the DEPARTMENT OF REVENUE, Defendant and Appellant.
• Court: Montana Supreme Court

Page 1310

729 P.2d 1310

224 Mont. 258

MONTANA TAVERN ASSOCIATION, et al., Plaintiffs and Respondents, v. STATE of Montana, acting By and Through the DEPARTMENT OF REVENUE, Defendant and Appellant.

No. 86-189.

Supreme Court of Montana.

Submitted on Briefs Sept. 4, 1986.

Decided Dec. 11, 1986.

Michael G. Garrity, Dept. of Revenue, Helena, for defendant and appellant.

Philip W. Strope, Helena, for plaintiffs and respondents.

SHEEHY, Justice.

The Department of Revenue, State of Montana, appeals the judgment of the District Court, Second Judicial District, Silver Bow County, enjoining the Department from enforcing its administrative rules to the detriment of the plaintiffs. We affirm the District Court for the reasons set forth below.

In 1984, this Court held electronic poker machines were illegal under the Montana Card Games Act. Gallatin County v. D & R Music & Vending (Mont.1984), 676 P.2d 779, 41 St.Rep. 224. The 49th Legislature of the State of Montana passed H.B. 236, Ch. 720, Laws of 1985 the following year. This law, known as the Video Draw Poker Machine Control Law of 1985, Secs. 23-5-601 through -615, MCA, legalized the operation of electronic video draw poker machines in the State of Montana. The effective date of the law was July 1, 1985.

Pursuant to its authority under Sec. 23-5-605(2), MCA, the Department promulgated emergency administrative rules to become effective July 1, 1985. The Department certified the Notice of Adoption of Emergency Rules to the Secretary of State on June 17, 1985. The reason cited for adoption of the emergency rules was the insufficient time after the end of the 49th Legislative session in which to promulgate permanent rules. The Department further found that the lack of permanent rules between the effective date of the law and the adoption of permanent rules posed an imminent peril to public health, safety, and welfare, and also worked economic hardship on potential licensees and local governments.

On June 27, 1985, plaintiffs Montana Tavern Association and tavern owners Pavlovich, Keith, and Bullock, filed a complaint seeking to enjoin the Department from enforcing certain of its emergency rules. Plaintiffs claimed the Video Draw Poker Machine Control Law authorized three categories of video draw poker machines: (1) all used video poker machines in operation before February 3, 1984; (2) new video poker machines meeting the description and specifications of Sec. 23-5-606, MCA; and (3) used video poker machines in operation before February 3, 1984 meeting all the specifications of Sec. 23-5-606 except subsections (4)(j), (4)(k), and (4)(o). Plaintiffs argued that the Department's emergency rules denied the owners of used video poker machines in category 1 the right to operate their machines. Plaintiffs claimed immediate and irreparable economic injury if they were not allowed to license their unmodified, used machines after July 1, 1985.

In its answer to the complaint, the Department responded that Sec. 23-5-612(2), MCA, required all used video poker machines to meet the requirements of Sec. 23-5-606 except subsections (4)(j), (4)(k), and (4)(o) as a condition precedent to licensure. The Department also argued that its emergency administrative rules complied with the provisions of the statute.

The same day the complaint was filed, the District Court granted a temporary restraining order against the Department, restraining it from enforcing those sections of the emergency rules which imposed the specifications of Sec. 23-5-606, MCA, upon used video poker machines. The restraining order was to be in effect until a hearing was set on the issuance of a preliminary injunction.

A hearing on the preliminary injunction was held July 8, 1985. The District Court found that the Video Draw Poker Machine Control Law was ambiguous, in that it could be construed to authorize three types of machines. The court also found that plaintiffs would be irreparably injured if they were not allowed to operate their unmodified, used machines, and that plaintiffs at that time were unable to buy the necessary modification kits. The court found the public health, welfare and safety would not be endangered by licensing these used machines, and granted plaintiffs' preliminary injunction.

The Department petitioned this Court for a writ of supervisory control, which was denied October 31, 1985. The District Court extended the preliminary injunction from November 7, 1985 until a final hearing in December, 1985. On February 3, 1986, the District Court entered its final judgment enjoining the Department from enforcing the Video Draw Poker Machine Control Law and its administrative rules in such a way as to deny plaintiffs the right to keep licenses for, and to maintain and operate, used video poker machines which were owned and operated in Montana before February 3, 1984.

The Department raises four issues on appeal:

(1) Whether the District Court properly issued the injunctions requiring the Department to license unmodified, used video poker machines?

(2) Whether the District Court erred in construing Sec. 23-5-612(2), MCA?

(3) Whether the District Court erred in admitting evidence on legislative intent?

(4) Whether the District Court erred in ordering injunctive relief to persons who were not parties to the lawsuit?

The plaintiffs respond that the issues raised by the Department are moot, since the relief prayed for by the Department (dissolution of the District Court's injunction) has been available to the Department since June 30, 1986, within the terms of the District Court's judgment. ¹ We find that the issues are not moot.

An issue is moot when, due to an event or passage of time, the issue has ceased to exist and no longer presents an actual controversy. State ex rel. Miller v. Murray (1979), 183 Mont. 499, 503, 600 P.2d 1174, 1176; Baker v. Bink (Mont.1986), 726 P.2d 822, 823, 43 St.Rep. 1801, 1803. In the instant case, the Department was forced to license a total of 474 used video poker machines under the District Court's injunction. While most of the licenses for these used machines have expired, there are still 13 machines remaining whose licenses expire between November 7, 1986 and January 21, 1987. The District Court's judgment remains in effect as to these 13 machines until their present licenses expire. Thus an actual controversy exists as to the legitimacy of the licensure of these machines.

The first issue raised by the Department concerns whether the District Court properly issued its injunction. Under Sec. 27-19-103(4) and (6), MCA, an injunction cannot be granted either to prevent the execution of a public statute by officers of the law or to prevent the exercise of a public office in a lawful manner. The Department argues the District Court's injunctions prevent the Department, its Director, and employees from enforcing the Video Draw Poker Machine Control Law. We must turn to the terms of the District Court's injunctions to determine whether those terms are inconsistent with the Video Draw Poker Machine Control Law thereby preventing the Department's enforcement of it. In reviewing the District Court's issuance of the injunctions, we will not interfere with the court's exercise of discretion unless there is a showing of manifest abuse of such discretion. Smith v. Ravalli Co. Bd. of Health (Mont.1984), 679 P.2d 1249, 1251, 41 St.Rep. 716, 718; Erie v. State Highway Comm'n. (1969), 154 Mont. 150, 154, 461 P.2d 207, 209.

The District Court's first temporary restraining order set forth the license criteria to be used by the Department during the pendency of the order. The court ordered all used video poker machines to meet the following basic requirements in addition to all other provisions of the Video Draw Poker Machine Control Law, and the emergency administrative rules not in conflict with the restraining order. The license criteria were:

(a) Licensee must be a person who has been granted a license under section 16-4-401(2), MCA, to sell alcoholic beverages for consumption on the premise [sic]. [See Sec. 23-5-611, MCA.]

(b) The used machine must be a machine that was owned and operated in the state on or prior to February 3, 1984. County or city tax receipts, county or city license receipts, bills of sale, security documents for conditional sales agreements, or such other kinds of proof of ownership as the Department of Revenue may authorize will be sufficient to establish ownership or operation of a used machine on or before February 3, 1984. [First sentence corresponds to Sec. 23-5-602(4), MCA; proof of ownership was not described in the statutes or regulations--an applicant merely checked a box on the license application indicating ownership on or before February 3, 1984.]

(c) The machine must have an expected payback value of one credit played to be at least 80% of the value of the credit. [See Sec. 23-5-607, MCA.]

(d) Each used machine must have an electronic device that the department may use to verify the winning percentage. [See Sec. 23-5-607, MCA.]

(e) The licensee must pay to the state of Montana the license fee of $1,500 and such other and additional charges as the city or county in his home district may require. [See Sec. 23-5-612(1)(b), MCA.]

(f) Each licensee licensed under the authority of this temporary restraining order must make his machines available for inspection by the Department of Revenue at any reasonable time. [See Sec. 23-5-613, MCA.]

It is well settled in Montana that the purpose of a temporary restraining order is to preserve the status quo until a hearing can be held to determine whether an injunction should be granted. Boyer v. Karagacin (1978), 178 Mont. 26, 32, 582 P.2d 1173, 1177. None of the criteria set forth by the District Court change or contravene the Video Draw Poker Machine Control Law. If licensees meet the above requirements plus the requirements of the statutes and the non-conflicting portions of the...