No. 14522
I N THE S P E F COURT OF THE STATE OF MXTANA
UR M,
1979
DAYID NORMAN,
P l a i n t i f f and Respondent,
THE STATE OF MXTANA; THE STATE
HIGHbmY ~ S S I O N THE STATE
OF
OF MXTANA; et dl.,
Defendant and Appellant,
and
Defendant and Respondent.
Appeal from: D i s t r i c t C o u r t of t h e Second J u d i c i a l D i s t r i c t ,
Honorable J m s D. Freebourn, Judge presiding.
a e
Counsel of W r d :
For Appellants :
N. A. Mtering, James R. Beck and Donald A. Douglas, Helena,
Mntana
Donald A. Douglas argued, H e l e n a , mntana
For Respondents:
Corette, 9nith, Dean, Pohlman and Allen, Butte, Mntana
Kendrick Smith argued, Butte, Mntana
MTaffery and Peterson, Butte, Mntana
W i l l i a m D. Murray, Jr., argued, Butte, Mntana
Submitted: W c h 20, 1979
Decided : JUN 1 3 1979
-pr; 7 c &<.-7Q
Filed : '-
Mr. Justice John C. Sheehy delivered the Opinion of the
Court.
The State of Montana appeals from a judgment and order
dated June 8, 1978, of the District Court, Second Judicial
District, Silver Bow County sitting without a jury. The
judgment and order quieted title to a certain parcel of land
in David Norman and awarded damages against the State to
William Gozden.
On September 18, 1946, the State of Montana purchased a
certain parcel of land in Butte, Montana, from William and
Paul Gozden. The State Highway Department in 1974 decided
to sell this parcel containing 5.3 acres as excess highway
lands and published a notice to that effect asking for bids.
Envelopes presumably containing bids were received by the
Department including one from respondent Gozden, but the
Department decided to withdraw the parcel of land from sale
and returned the "bids" unopened.
In February 1975, the State, acting through the Department
of Highways, again sought to dispose of this same excess
land and prepared an advertising copy for publication in the
Montana Standard, Silver Bow County, Montana, and a letter
of instruction for such publication dated February 6, 1975.
This copy and letter were placed in the regular Department
of Highways' office channels for mailing to the Montana
Standard in the regular course of the Department's business.
This copy, however, was never published by the newspaper.
No bids were received by the Department of Highways by the
time specified in the notice and the official in charge of
excess lands, unaware no publication was made, assumed
the lack of bids was due to a doubling of appraised value
from 1974 to 1975. Subsequently, in the summer of 1975,
respondent Norman was advised by another party that the land
was available for sale. Norman visited the local office of
the Department of Highways for information.
As a result of his inquiries Norman wrote a letter to
the official responsible for the sale of excess lands offering
to purchase the parcel in question for $5,962.50 which was
90% of the 1975 appraised value of $6,625.00. Norman was
advised his offer would be considered. Thereafter, in
September 1975, the offer was accepted and Norman secured a
quit claim deed to the property from the State, paid the
$5,962.50 and recorded the deed. He also erected a fence
around the property. At no time prior to the sale did the
officials involved ascertain whether in fact publication had
been made as required by statute before a private sale may
be consummated. Testimony at trial indicated the officials
responsible for sale of excess lands customarily did not
wait for proof of publication before sale of lands.
In September 1976, the Department of Highways received
a letter from an individual questioning the validity of the
sale. The Department then inquired of the Montana Standard
whether publication had been made. Receiving no answer, the
Department searched the back issues of the newspaper and
determined no publication had been made. Thereupon, in
February 1977, the Department tendered to Norman the purchase
price previously received and offered to pay him the cost of
the fence that had been erected. Norman refused the offer
and instituted this quiet title action.
Norman named as defendants the State of Montana and
William Gozden, original owner of the property. Norman claimed
in the alternative, to quiet title to the property in question
in himself, to estop the State of Montana from denying
the validity of the sale, or to require the State to pay
damages of $26,600 to Norman for its failure to convey the
property to him. Defendant Gozden answered and crossclaimed
against the State for $30,000 damages alleged to have arisen
from the State's negligence. Gozden claimed the State's
negligence in not ascertaining whether publication had been
made, prevented him from exercising his right pursuant to
statute as original owner to reacquire the property.
At the trial before the Hon. James Freebourn, sitting without
a jury, the testimony elicited the facts set forth above.
In addition, Norman testified he had been offered $26,600
for the land approximately three weeks after notification
by the State that the sale was invalid. Gozden also testified,
based upon his experience in land sales in the area, the
property was worth $6,000 per acre in 1978.
The court entered its findings, conclusions, judgment,
and order on June 8, 1978. The court concluded the State was
estopped from questioning the title of Norman and quieted
that title in Norman. The court further concluded the State
was negligent in not following the procedures for sale as
outlined by statute. The court concluded with respect to
Gozden that the State's negligence had precluded him from
exercising his statutory rights to reacquire the property and
awarded damages in the amount of $25,837.50. (The court arrived
at this figure by deducting from the total price of 5.3 acres
at $6,000 per acre, $31,800, the amount Gozden would have had
to pay to reacquire the property, $5,962.50.)
The issues raised by this appeal may be framed as follows.
1. Was the District Court correct as a matter of law in
concluding appellant State of Montana was estopped from
denying the validity of its deed to respondent Norman?
2. Are the findings and conclusions of the District
Court supported by substantial, credible evidence?
3. If the deed is held valid as to these parties, is
respondent Gozden prevented by the prohibition against retro-
activity from asserting his right as a prior owner to reacquire
the property?
With respect to the first issue, the State contends the
constitutional and statutory framework for the sale of excess
lands established publication of notice of an intended sale, a
condition precedent to the grant of power to sell. Without
such publication, appellant argues there was no authority to
sell and the "sale" was therefore void. The State then asserts
it cannot be estopped to deny the deed because its agents had
no authority to make the "sale". In response, Norman asserts
the State in disposing of excess lands was acting in a
proprietary capacity and is therefore subject to estoppel
both by deed and on equitable grounds. Therefore, Norman
argues, the State is precluded from denying the validity of
its deed to him and from asserting any right or title in
derogation of the deed.
The question presented to this Court by the first issue
is whether the State may be estopped, either by deed or equitably
from denying the validity of its deed to respondent Norman.
If this Court decides the State may not be estopped then we
need not consider the other issues raised.
Estoppel by deed precludes one party to a deed from
asserting as against the other party any right or title in
derogation of the deed, or from denying the truth of any material
facts asserted in it. 28 Am.Jur.2d Estoppel - Waiver 8 4 ,
and
p. 602. Equitable estoppel is a term applied to a situation
-5-
where, because of something which he has done or omitted to
do, a party is denied the right to plead or prove an otherwise
important fact. -
28 Arn.Jur.2d Estoppel and Waiver S27, p.
627. Generally, the State, when acting in a proprietary
capacity as it was here, is subject to either doctrine.
Strand v. State (1943), 16 Wash. 2d 107, 132 P.2d 1011,
1016; People v. Gustafson (1942), 53 Cal. App. 2d 230, 127
P.2d 627, 634; 31 C.J.S. Estoppel SS49, 140, pp. 354, 695.
However, it is widely recognized that regardless whether
acting in a governmental or proprietary capacity, a state
cannot be estopped by the unauthorized acts of its officers
or agents. Murphy v. State (1947), 65 Ariz. 338, 181 P.2d
336, 355; Strand v. State, 132 P.2d at 1017. See, Utah
Power & Light Co. v. United States (1916), 243 U.S. 389, 37
S.Ct. 387, 61 L.Ed. 791. Thus, this Court must decide whether
the actions of the State in this cause were unauthorized or
merely improper.
The 1972 Montana Constitution provides in Article X I
S11, that all lands of the State acquired by grant shall be
public lands held in trust for the people. The section
further provides that no such land shall be disposed of
except pursuant to the statutes providing for such disposition
The section also indicates "full market value" should be
received for the property; this Court has indicated "full
market value" as used in this provision means actual value.
Rider v. Cooney (1933), 94 Mont. 295, 23 P.2d 261. The
lands in question here were acquired by the State in 1946 by
purchase from William and Paul Gozden and therefore fall
within the ambit of the above constitutional provision. See
section 70-1-507 MCA (formerly section 67-1508, R.C.M.
1947. )
To effectuate the policy respecting lands held in trust
for the people announced by Article X I S11, the legislature
enacted, with respect to State lands designated as excess
-6-
highway lands, sections 60-4-202, -203, -204, -205 MCA
(formerly sections 32-3910, -3911, -3912, -3913, R.C.M.
1947).
These sections provide for first a public sale and
then, if necessary, a private sale. The Department of
Highways must publish notice of the intended sale stating a
value of the property based upon an appraisal made within
three months of the date of sale. Section 60-4-203 MCA.
The original owner or his successor in interest is given the
opportunity to meet the highest bid received pursuant to the
published notice. Section 60-4-204 MCA. If "after proper
notice is published" no bid is received nor an offer by the
original owner is made, the Department may sell the property
at a private sale. Section 60-4-205 MCA.
No Montana cases directly address the question presented,
namely, whether the State's action here was unauthorized or
merely improper; however, in Franzke v. Fergus County (1926),
76 Mont. 150, 245 P. 962, an analogous situation was at issue.
There the county commissioners attempted to sell county property
via an executory contract. Although authorized by statute to
sell county lands, the mode the commissioners chose did not
conform exactly to the procedure provided by the statute.
This Court held the county was without authority to sell the
land in such a manner and the contract would therefore be void,
stating, "since the Legislature has seen fit to indicate with
particularity the essential steps necessary to be taken, and
has prescribed the precise mode of procedure, the statute must
be held to exclude any other." 245 P. at 964.
In Murphy v. State (1947), 65 Ariz. 338, 181 P.2d 336,
the Arizona Court was faced with a problem similar to
the one presented by this appeal. In 1940, the State exchanged
lands with Murphy without regard to provisions of ~rizona's
Enabling Act, constitution and statutes requiring notice,
bidding and amount of land that may be conveyed to an
individual. When the State later sued to cancel the deeds,
one of the arguments opposing its suit was that the doctrine
of estoppel prevented the State from denying the validity of
the transaction and resulting deeds. The Arizona Supreme
Court disagreed, stating:
"The state is not estopped to deny its deed
against a bona fide mortgagee of its grantee
where its officers were- authorized by
- not
law in the first to deed away its land and,
as in this case, were positively prohibited
--
from doing so without complying with the
provisions of - [Enabling Act] - -
- the - and the
Constitution." 181 P.2d at 355-356. (Emphasis
added. )
See, Penner v. State (Okla. 1955), 302 P.2d 144, 150.
The Montana Constitution unequivocally states that no
lands shall be disposed of without complying with the
appropriate statutory provisions. Those provisions require
publication of notice before any sale is consummated. We
conclude therefore that not having complied with the statute,
the State through its Department of Highways, was without
authority to make the sale and cannot be estopped from
denying the validity of the deed. Franzke, supra; Murphy,
supra; Strand v. State, 132 P.2d at 1017. See also, Utah
Power & Light Co. v. United States, 243 U.S. at 409; Walsonavich
v. United States (3rd Cir. 1964), 335 F.2d 96, 101; Stone v.
United States (8th Cir. 1961), 286 F.2d 56, 59; Weatherly v.
Jackson (1934), 123 Tex. 213, 71 S.W.2d 259, 266. Because
there was no authority to make the sale, the resulting deed
was void. Franzke, 245 P. at 965.
We recognize it was the negligence of the State's agents
that caused the situation which gave rise to this appeal.
However, the interest we seek to protect is that of the citizens
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of this State to receive the highest value from the sale of
the lands their State government holds in trust for them.
Strict compliance with the constitutional and statutory
provisions relating to those lands is the best mode to
insure that protection. It is generally conceded that while
estoppel may be effected against State government, it may
not be asserted where it would interfere with the protection
of the public's interest in lands. People v. Bradford
(1939), 372 Ill. 63, 22 N.E.2d 691; 28 Am.Jur.2d Estoppel
and Waiver S122, p. 782. The United States Supreme Court
has indicated that the government's efforts to enforce and
maintain a policy respecting lands held in trust for the
people stand on a different plane from an ordinary suit to
regain title or remove a cloud upon it. Utah Power and
---
Light Co., 243 U.S. at 409.
Because we conclude the State was without authority to
issue this deed and thus it is void, we need not consider the
remaining issues of this appeal. The judgment of the District
Court quieting title to this land in David Norman is reversed
as is the injunction against the State and William Gozden
enjoining them from asserting any claim or interest in this
real property. The award of damages to William Gozden is
also reversed. Because the sale and deed were void, Gozden
has suffered no actual damage and can now assert his interest
under the statute as a prior owner should the land be again
put up for sale. The State of Montana is directed to tender
again the purchase price of the property paid by Norman plus
the cost of any improvements upon the land to the date of this
opinion to David Norman. In addition, because its negligence
has caused Norman to be without the use of the amount of his
purchase price for almost five years, and because it is regaining
property currently worth over $31,000, the State is directed to
pay, pursuant to our authority as stated in section 3-2-
204 MCA (formerly section 93-216, R.C.M. 1947), interest upon
the sum of $5,962.50 at 6% per annum from September 16, 1975
until the date of this opinion.
Judgment reversed and remanded to the District Court with
instructions to enter judgment according to this opinion.
Because of the circumstances under which this case arose, we
award costs on appeal to respondents Norman and Gozden against
the State.
Justice u
We Concur:
p i e £ Justice