State v. J.P. Lamb Land Co., 11284

• Decision Date: 02 March 1987
• Docket Number: No. 11284,11284
• Citation: 401 N.W.2d 713
• Parties: STATE of North Dakota, Plaintiff and Appellant, v. J.P. LAMB LAND COMPANY, a North Dakota corporation, Defendant and Appellee. Civ.
• Court: North Dakota Supreme Court

Page 713

401 N.W.2d 713

STATE of North Dakota, Plaintiff and Appellant, v. J.P. LAMB LAND COMPANY, a North Dakota corporation,

Defendant and Appellee.

Civ. No. 11284.

Supreme Court of North Dakota.

March 2, 1987.

Robert O. Wefald, Sp. Asst. Atty. Gen., Bismarck, for plaintiff and appellant.

John D. Kelly, of Vogel, Brantner, Kelly, Knutson, Weir & Bye, Fargo, for defendant and appellee.

VANDE WALLE, Justice.

The State of North Dakota appealed from a summary judgment dismissing its complaint against the J.P. Lamb Land Company [Lamb]. We are asked to determine whether or not the 1981 amendments to the North Dakota Corporate Farming Law apply so as to prohibit Lamb from continuing to operate a corporate farm which, under the principle of res judicata, was considered to be in compliance with that law prior to the 1981 amendments. We conclude that the 1981 amendments do prohibit the operation of the corporate farm by Lamb and we therefore reverse and remand.

Lamb is a North Dakota corporation with a principal purpose of leasing more than 5,000 acres of farmland it owns in Nelson and Walsh counties. Lamb was originally incorporated on February 1, 1904, for a term of twenty years. The term of Lamb's incorporation was renewed in 1924 and again in 1944 for twenty years, and in 1964 it was granted perpetual existence. Lamb acquired ownership of all the farmland relevant to this dispute before July 29, 1932.

On July 29, 1932, North Dakota voters approved an initiated measure prohibiting corporations from engaging in farming or agriculture and requiring all corporations then owning or thereafter acquiring real estate, "except such as is reasonably necessary in the conduct of their business," to dispose of that real estate within ten years. 1933 N.D.Sess.Laws, p. 494, I.M. June 29, 1932; see also, 1933 N.D.Sess.Laws, Ch. 89. That initiated measure is currently found in Chapter 10-06, N.D.C.C. [Corporate Farming Law].

In 1965 the State brought an action against Lamb alleging that it was in violation of Chapter 10-06, N.D.C.C. The district court concluded that the "except such as is reasonably necessary in the conduct of its business" exception applied to Lamb in its business of leasing farmland and dismissed the State's complaint. No appeal was taken in that action.

In 1981 the Legislature amended Chapter 10-06, N.D.C.C.1981 N.D.Sess.Laws, Ch. 134. Insofar as they are relevant to this case, the 1981 amendments repealed the exception relied upon by the district court in its 1965 decision and essentially permitted only closely held family-farm corporations to own or lease land used for farming or ranching or to engage in the business of farming or ranching. Section 10-06-07, N.D.C.C. ¹ Lamb does not qualify to own farmland under the 1981 amendments, and in 1983 the State brought a declaratory-judgment action against Lamb seeking enforcement of the 1981 amendments. The Burleigh County district court entered summary judgment dismissing the State's action, and we affirmed the dismissal for lack of jurisdiction but without prejudice because Section 10-06-13, N.D.C.C., ² required the action to be brought in Nelson County, not Burleigh County. State of North Dakota v. J.P. Lamb Land Co., 359 N.W.2d 368 (N.D.1984).

Thereafter the State commenced this action in Nelson County, and Lamb moved to dismiss, asserting that (1) the 1981 amendments to Chapter 10-06, N.D.C.C., were not applicable to it, (2) the application of those amendments to it violated the North Dakota and United States Constitutions, and (3) the doctrine of res judicata barred the State's action. The district court concluded that the 1965 district court decision was res judicata as to this action and that 1981 amendments were not applicable to Lamb because the Legislature had not expressly declared that they applied retroactively to corporations lawfully owning farmland before 1981. The district court granted Lamb's motion for summary judgment, and the State has appealed.

The State contends that the 1981 amendments to Chapter 10-06, N.D.C.C., apply to Lamb's ownership of farmland. The State argues that a corporation is a creature of statute and not a natural person, and the Legislature may alter, suspend, or repeal any statutorily granted corporate power. Lamb counters that the Legislature did not intend retroactive application of the 1981 amendments to its ownership of farmland. Lamb asserts that the Legislature's silence on the application of the 1981 amendments to corporations complying with the Corporate Farming Law before 1981 compels the conclusion that the amendments are not to be applied retroactively, citing Section 1-02-10, N.D.C.C. ³

Our analysis of this issue begins with Art. XII, Sec. 2, N.D. Const., which, as relevant to this appeal, has been the same since first adopted as Art. VII, Sec. 131, in the Const. of 1889. It provides, in part:

"No charter of incorporation shall be granted, changed or amended by special law, ... but the legislative assembly shall provide by general laws for the organization of all corporations hereafter to be created, and any such law, so passed, shall be subject to future repeal or alteration."

A corporation is a creature of statute which cannot exist without the consent of the sovereign, and the power to create a corporation is an attribute of sovereignity. Airvator, Inc. v. Turtle Mountain Manufacturing Co., 329 N.W.2d 596 (N.D.1983). Because a corporation is a creature of statute, it is subject to conditions that the State may impose. Asbury Hospital v. Cass County, 72 N.D. 359, 7 N.W.2d 438 (1943), aff'd after remand, 73 N.D. 469, 16 N.W.2d 523 (1944), aff'd, 326 U.S. 207, 66 S.Ct. 61, 90 L.Ed. 6 (1945).

In Asbury Hospital v. Cass County, supra, 7 N.W.2d at 451, this court said:

"Where there is a reservation in the state constitution of power to alter, suspend or repeal all laws, providing for organization of corporations--such as there is in the constitution of this state--this reservation becomes a part of the charter of the corporation ... and it is beyond the power of the legislature to confer upon corporations powers that are not subject to abrogation or change pursuant to the legislative power so reserved." [Citations omitted.]

Section 10-23-17, N.D.C.C., originally enacted in 1957, and applicable to the Corporate Farming Law by virtue of Section 10-06-07.1, N.D.C.C., provides, in relevant part:

"Every grant of corporate power is subject to alteration, suspension, or repeal in the discretion of the legislative assembly, and any statute of this state relating to corporations may be repealed or amended, and all corporations organized under this title may be dissolved by the legislative assembly at any time."

In this case, the State is seeking to apply the 1981 amendments to Lamb's ownership of farmland after 1981 and not to its ownership of farmland before 1981. See Thompson v. Thompson, 78 N.W.2d 395 (N.D.1956). We are not persuaded by Lamb's argument that the State is seeking retroactive application of the 1981 amendments. A statute receives retroactive application when it operates on transactions which have occurred, or on rights or obligations which have existed, before its enactment. Perry v. O'Farrell, 120 Colo. 561, 212 P.2d 848 (1949); Walker State Bank v. Chipokas, 228 N.W.2d 49 (Iowa 1975); City of Harlem v. State Highway Commission, 149 Mont. 281, 425 P.2d 718 (1967); Village of Menomonee Falls v. Michelson, 104 Wis.2d 137, 311 N.W.2d 658 (1981). In this case Lamb's ownership of farmland continued after the 1981 amendments. Although Lamb may not have been in violation of the law when it acquired its land or before the 1981 amendments, the Legislature had the authority to repeal or alter that law by virtue of Art. XII, Sec. 2, N.D. Const., and Section 10-23-17, N.D.C.C. Asbury Hospital v. Cass County, supra. The 1981 amendments repealed the exception relied upon by the district court in its 1965 decision, leaving in effect statutory language which forbids the ownership of land by a corporation except under circumstances not here pertinent. That language provides no authorization for a corporation such as Lamb to own farmland. Rather, the unambiguous language of the 1981 amendments can only be construed to mean that the Legislature intended that a corporation's continuing ownership of farmland is subject to those amendments. ⁴ We conclude that Lamb's ownership of farmland is subject to the 1981 amendments to Chapter 10-06, N.D.C.C.

The State contends that the 1981 amendments to Chapter 10-06, N.D.C.C., changed the relevant law and precluded Lamb from relying on the 1965 district court action as a bar to this action. Lamb responds that the underlying facts in this action (i.e., ownership of farmland) are identical to the underlying facts in the 1965 action and therefore that decision is res judicata as to this action.

In Oakes Municipal Airport Authority v. Wiese, 265 N.W.2d 697, 700 (N.D.1978), we described the doctrine of res judicata:

"The doctrine of res judicata is that a valid, existing final judgment is conclusive, with regard to the issues raised and determined therein, as to the parties and their privies in all other actions.... The purpose of the doctrine is to require a definite termination of litigation and to prevent the multiplicity, waste, and harassment which would result if a party could compel an adversary to re-litigate matters previously raised at issue and determined." [Citations omitted.]

It is also a well-established principle that res judicata is not a defense if, between the first judgment and the second action, there has been an intervening change in the law or modification of significant facts creating new legal conditions. State Farm Mutual Automobile Ins. Co. v. Duel, 324 U.S. 154, 65 S.Ct. 573, 89 L.Ed. 812 (1945); Jackson v. DeSoto Parish School Bd., 585 F.2d 726 (5th Cir.1978); Texaco, Inc. v. United States, 579 F.2d 614, 217 Ct.Cl. 416 (1978).

...