School Trust v. State ex rel. Bd. Of Com'rs

• Decision Date: 02 November 1999
• Docket Number: No. 98-535.,98-535.
• Citation: 989 P.2d 800,1999 MT 263
• Court: Montana Supreme Court
• Parties: MONTANANS FOR THE RESPONSIBLE USE OF THE SCHOOL TRUST, Plaintiff, Respondent, and Cross-Appellant, v. STATE of Montana, ex rel. BOARD OF LAND COMMISSIONERS and Department of Natural Resources and Conservation, Defendants, Appellants, and Cross-Respondents.

989 P.2d 800

1999 MT 263

MONTANANS FOR THE RESPONSIBLE USE OF THE SCHOOL TRUST, Plaintiff, Respondent, and Cross-Appellant, v. STATE of Montana, ex rel. BOARD OF LAND COMMISSIONERS and Department of Natural Resources and Conservation, Defendants, Appellants, and Cross-Respondents.

No. 98-535.

Supreme Court of Montana.

Argued May 18, 1999.

Submitted May 27, 1999.

Decided November 2, 1999.

Tommy H. Butler (argued), Special Assistant Attorney General, Montana Department of Natural Resources & Conservation, Helena, Montana, for Appellants.

Roy H. Andes (argued), Attorney at Law, Missoula, Montana, for Respondent.

David J. Dietrich (argued); Dietrich Law Offices, Billings, Montana, for Montana Leaseholders Association.

Mark L. Stermitz, Montana Appleseed Center for Law & Justice, Missoula, Montana, Amicus.

Justice W. WILLIAM LEAPHART delivered the Opinion of the Court.

¶ 1 The State of Montana (hereafter, the State), appeals from the judgment and order of the First Judicial District Court, Lewis and Clark County. Respondent Montanans for the Responsible Use of the School Trust (hereafter, Montrust) cross-appeal the judgment of the District Court.

¶ 2 We affirm in part and reverse in part.

¶ 3 The parties raise the following issues:

¶ 4 1. Whether the District Court erred in concluding that § 77-1-130, MCA, is unconstitutional.

¶ 5 2. Whether the District Court erred in concluding that the Department's rental policy for cabin site licenses and leases under § 77-1-208, MCA, is unconstitutional.

¶ 6 3. Whether the District Court correctly determined that § 77-1-208, MCA, does not violate the trust.

¶ 7 4. Whether the District Court erred in concluding that § 77-5-211, MCA, violates the State's fiduciary duties regarding school trust lands.

¶ 8 5. Whether the District Court erred in concluding that § 77-6-304, MCA, is constitutional.

¶ 6. Whether the District Court erred in concluding that § 77-6-305, MCA, is constitutional.

¶ 10 7. Whether the District Court abused its discretion in denying Montrust reasonable attorney fees.

Standard of Review

¶ 11 We review a district court's conclusions of law to determine whether they are correct. Steer, Inc. v. Dept. of Revenue (1990), 245 Mont. 470, 474-75, 803 P.2d 601, 603. Statutes are presumed to be constitutional and it is the duty of the Court to avoid an unconstitutional interpretation if possible. State v. Nye (1997), 283 Mont. 505, 510, 943 P.2d 96, 99 (citations omitted). A party challenging the constitutionality of a statute "bears the burden of proving the statute unconstitutional. Any doubt is to be resolved in favor of the statute." State v. Martel (1995), 273 Mont. 143, 148, 902 P.2d 14, 17 (citations omitted). A statute will be "upheld on review except when proven to be unconstitutional beyond a reasonable doubt." Davis v. Union Pacific R. Co. (1997), 282 Mont. 233, 239, 937 P.2d 27, 30.

Factual and Procedural Background

¶ 12 In February, 1997 Montrust filed a complaint challenging the constitutionality of fourteen statutes that concern Montana's school trust lands and seeking declaratory and injunctive relief. In May, 1997 Montrust filed an amended complaint. Following a hearing in May, 1997 the District Court issued a preliminary injunction prohibiting the State from issuing deeds for historic rights of way on school trust lands under House Bill 607 (codified as § 77-1-130, MCA) and from leasing or disposing of school trust lands under § 20-6-621, MCA. A hearing was held in October, 1997, and the District Court issued its Decision, Order and Permanent Injunction in April, 1998. Concluding that ten of the statutes challenged by Montrust violated Montana's Enabling Act and Constitution and that another statute was invalid as applied, the District Court permanently enjoined eleven statutes. In June, 1998 the District Court awarded Montrust costs of $312 but denied Montrust attorney fees. The State appeals the District Court's permanent injunction of three statutes. Montrust cross-appeals the District Court's ruling on three other statutes and the District Court's denial of attorney fees.

Discussion

¶ 13 Under the Act of February 22, 1889 (hereafter, the Enabling Act), ch. 180, 25 Stat. 676 (1889), the federal government granted Montana the sixteenth and thirty-sixth sections of each township in Montana "for the support of common schools." Section 10 of the Enabling Act.¹ The federal government's grant of those lands to Montana constitutes a trust (hereafter, the trust). See Rider v. Cooney (1933), 94 Mont. 295, 306-07, 23 P.2d 261, 263 (citations omitted). The terms of the trust are set forth in Montana's Constitution and the Enabling Act. See Art. XVII, Sec. 1, Mont. Const.(1889) (providing federal grant of lands "shall be held in trust for the people, to be disposed of as hereafter provided, for the respective purposes for which they have been or may be granted") (emphasis added); Department of State Lands v. Pettibone (1985), 216 Mont. 361, 366, 702 P.2d 948, 951 (concluding Montana's 1889 Constitution accepted the lands and "provided they would be held in trust consonant with the terms of the Enabling Act. . . . The 1972 Montana Constitution continued those terms") (citations omitted).

¶ 14 The State of Montana is a trustee of those lands (hereafter, the school trust lands). See, e.g., Toomey v. State Board of Land Com'rs (1938), 106 Mont. 547, 559, 81 P.2d 407, 414; State v. Stewart (1913), 48 Mont. 347, 349, 137 P. 854, 855. Further, "The state board of land commissioners, as the instrumentality created to administer that trust, is bound, upon principles that are elementary, to so administer it as to secure the largest measure of legitimate advantage to the beneficiary of it." Stewart, 48 Mont. at 349-50, 137 P. at 855. The State Board of Land Commissioners (hereafter, the Board) "owe[s] a higher duty to the public than does an ordinary businessman." State v. Babcock (1966), 147 Mont. 46, 54, 409 P.2d 808, 812. Finally, Montana's Constitutional provisions are "limitations on the power of disposal by the legislature." Rider, 94 Mont. at 307, 23 P.2d at 263. One limitation on the legislature's power of disposal is the trust's requirement that full market value be obtained for trust lands. See Section 11 of the Enabling Act (as amended by the Act of May 7, 1932, ch. 172, 47 Stat. 150 (1932)) (providing that "none of such lands . . . shall ever be disposed of . . . unless the full market value of the estate or interest disposed of, to be ascertained in such manner as may be provided by law, has been paid or safely secured to the State").

¶ 15 With the foregoing as background, we note the pertinent provisions of the Enabling Act and Montana's Constitution. The Enabling Act provides in part:

That all lands granted by this Act shall be disposed of only at public sale after advertising — tillable lands capable of producing agricultural crops for not less than $10 per acre and lands principally valuable for grazing purposes for not less than $5 per acre. . . .

The said lands may be leased under such regulations as the legislature may prescribe.

The State may also, upon such terms as it may prescribe, grant such easements or rights in any of the lands granted by this Act, as may be acquired in privately owned lands through proceedings in eminent domain: Provided, however, That none of such lands, nor any estate or interest therein, shall ever be disposed of except in pursuance of general laws providing for such disposition, nor unless the full market value of the estate or interest disposed of, to be ascertained in such manner as may be provided by law, has been paid or safely secured to the State.

Section 11 of the Enabling Act (as amended by the acts of May 7, 1932, ch. 172, 47 Stat. 150 (1932) and October 16, 1970, Pub.L. No. 463, 84 Stat. 987 (1970)).

¶ 16 Article X, Section 4 of Montana's Constitution provides:

Board of land commissioners. The governor, superintendent of public instruction, auditor, secretary of state, and attorney general constitute the board of land commissioners. It has the authority to direct, control, lease, exchange, and sell school lands and lands which have been or may be granted for the support and benefit of the various state educational institutions, under such regulations and restrictions as may be provided by law.

Art. X, Sec. 4, Mont. Const.

¶ 17 Article X, Section 11 further provides:

Public land trust, disposition. (1) All lands of the state that have been or may be granted by congress, or acquired by gift or grant or devise from any person or corporation, shall be public lands of the state. They shall be held in trust for the people, to be disposed of as hereafter provided, for the respective purposes for which they have been or may be granted, donated or devised.

(2) No such land or any estate or interest therein shall ever be disposed of except in pursuance of general laws providing for such disposition, or until the full market value of the estate or interest disposed of, to be ascertained in such manner as may be provided by law, has been paid or safely secured to the state.

(3) No land which the state holds by grant from the United States which prescribes the manner of disposal and minimum price shall be disposed of except in the manner and for at least the price prescribed without the consent of the United States.

Art. X, Sec. 11, Mont. Const.

¶ 18 As a preliminary matter, we note that the parties disagree over the standard of review in the present case. The State urges that this Court should determine whether the legislation in question "irrevocably" conflicts with the Board's fiduciary duties as a trustee "in any conceivable instance" and whether the Board may constitutionally apply the legislation. Montrust argues rather that there are two essential inquiries: whether the legislation comports with the Montana Constitution, and whether the legislation is preempted by the Enabling Act....