No. 85-494
IN THE SUPREME COURT OF THE STATE OF MONTANA
1986
LEWIS E. BRUEGGEMANN,
Plaintiff and Appellant,
CITY OF BILLINGS,
Defendant and Respondent.
YELLOWSTONE COUNTY BAR ASSOCIATION,
NEIL S. KEEFER, individually, and as
President of the Yellowstone County
Bar Association,
Plaintiffs and Appellants,
-vs-
CITY OF BILLINGS,
Defendant and Respondent.
APPEAL FROM: District Court of the Thirteenth Judicial District,
In and for the County of Yellowstone,
The Honorable Leonard Langen, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Gerald J. Neely argued for Brueggemann, Billings,
Montana
Moses Law Firm; Charles F. Moses argued for Keefer,
Billings, Montana
Lewis E. Brueggemann argued pro se, Billings, Montana
For Respondent:
K.D. Peterson; Peterson, Schofield & Leckie, Billings,
Montana
Submitted: April 24, 1986
Decided: June 4, 1986
Filed:
Mr. Justice Fred J. Weber delivered the Opinion of the Court.
In 1982, pursuant to its self-government powers, the
City of Billings (Billings) passed ordinance 82-4474 (4474),
which imposed an annual tax on all persons and entities doing
business within Billings. Mr. Brueggemann and the
Yellowstone County Bar Association (Bar) challenged the
constitutionality of the ordinance. After cross motions for
summary judgment, the Yellowstone County District Court
granted Billings' motion, but, in doing so, first severed
offending sections then affirmed the ordinance. Mr.
Brueggemann and the Bar appeal. We reverse.
We restate the issues:
1. Did the District Court err in finding ordinance 4474
a valid and constitutionally permissible tax?
2. Did the District Court err in awarding Messrs.
Brueggemann and Neely attorney fees?
Ordinance 4474 evolved from two previous ordinances. In
June 1982, Billings enacted ordinance 82-4445 (4445), which
required all businesses to be licensed in order to carry on
business. The cost of the license was based on a business'
gross revenue. In July 1982, Mr. Brueggemann brought an
action to test the validity of ordinance 4445. In August
1982, the Bar brought an action to test the validity of the
same ordinance. Later, the cases were consolidated. In
September 1982, ordinance 4445 was amended by ordinance
82-4463 (4463). In November 1982, ordinance 4463 was re-
pealed and 4474 was adopted.
In October 1983, the Court decreed ordinance 4445 uncon-
stitutional insofar as it attempted to license attorneys. At
the same time, the District Court temporarily restrained
enforcement of ordinances 4463 and 4474 pending the outcome
of Harlen v. City of Helena (Mont. 1984), 676 P.2d 191, 41
Following Harlen, which held a Helena business license
tax unconstitutional because it infringed on this Court's
constitutional authority to supervise and regulate attorneys
and the practice of law, all parties moved. for summary judg-
ment. The District Court held ordinance 4474 constitutional,
but, in doing so, severed provisions of the ordinance con-
trary to Harlen. As severed, ordinance 4474 subjects every
lawyer or law firm carrying on the practice of law to an
annual tax. The basic annual tax is calculated on a busi-
ness' gross revenue.
Did the District Court err in finding ordinance 4474 a
valid and constitutionally permissible tax?
At the outset, we note that attorneys are the only
businesspeople properly before the Court, although similar
arguments may be made by other businesspeople. Mr.
Brueggemann originally filed suit "on his own behalf and on
behalf of all other persons similarly situated, that is, all
other attorneys at law practicing within the exterior bounda-
ries of the City of Billings." The Bar is an incorporated
association composed of attorneys practicing law within the
City of Billings.
Plaintiffs contend that the tax constitutes a sales tax,
which is beyond the scope of self-government power and vio-
lates § 7-1-112, MCA, that states in pertinent part:
7-1-112. Powers requiring delegation. A local
government with self-government powers is prohibit-
ed the exercise of the following powers unless the
power is specifically delegated by law:
(1) the power to authorize a tax on income or the
sale of goods or services, except that this section
shall not be construed to limit the authority of a
local government to levy any other tax or establish
the rate of any other tax ...
In Montana Innkeepers Ass'n v. City of Billings (Mont.
1983), 671 P.2d 21, 23, 40 St.Rep. 1753, 1756, the Court held
that a tax on the sale of temporary lodging by a hotel or
motel is a sales tax prohibited by 5 7 - - 1 2 1 , MCA,
stating:
Hotels and motels sell a product or service which
is temporary lodging. The occupant is the consumer
since he purchases the service. No title changes
hands, but the consumer comes into temporary pos-
session of the room. A tax placed on that transac-
tion is a sales tax.
As severed, ordinance 4474 imposes a tax on the gross reve-
nues generated from attorney-client relationships. The
ordinance is not related to any regulatory control measure
for the health or welfare of the City of Billings. We con-
clude ordinance 4474 is a tax on the sale of attorneys'
services. We hold ordinance 4474 is prohibited by
5 7-1-112 (I), MCA.
I1
Did the District Court err in awarding Messrs.
Brueggemann and Neely attorney fees?
The District Court concluded that Messrs. Brueggemann
and Neely were entitled to reasonable attorney fees, arising
out of the suit to have city ordinance 4445 declared uncon-
stitutional. The District Court denied attorney fees for the
suit relating to ordinance 4474.
Messrs. Brueggemann and Neely contend they are entitled
to attorney fees for both suits. They maintain attorney fees
could be awarded under 55 25-10-101, 25-10-201, 25-10-711,
MCA; or under the equity power of the District Court; or
because they served the role of a private attorney general.
Section 25-10-101, MCA, allows a plaintiff to recover
costs in certain types of cases, one of which is an action
involving the legality of any tax. Section 25-10-201, MCA,
lists which costs may be reimbursed. "Attorney fees are not
included in the list of recoverable costs." Masonovich v.
School Dist. No. 1 (1978), 178 Mont. 138, 140, 582 P.2d 1234,
1235.
Section 25-10-711, MCA, allows reasonable attorney fees
against a governmental entity when suit or defense is frivo-
lous or pursued in bad faith. We find the defense of the
ordinance was neither frivolous nor pursued in bad faith.
Individual attorneys cite State ex rel. Wilson v. Dept.
Of Natural Resources (Mont. 1982), 648 P.2d 766, 39 St.Rep.
1294, for the proposition that a District Court can award
attorney fees under its general equity powers. While a
District Court may award attorney fees under its equity
powers, such an award of attorney fees must be documented in
the record. We will not uphold an award of attorney fees on
appeal on the theory that the award stems from the equity
powers of the District Court where the record provides no
language that indicates the award is based on equitable
principles. Here, the record does not support an award of
attorney fees.
Finally, Messrs. Brueggemann and Neely maintain they
served the role of a private attorney general, which benefit-
ed a common number of persons. Because the only individuals
properly before this Court are attorneys and a large number
of attorneys were represented by the Bar, we find this con-
tention without merit. We hold the District Court erred in
awarding attorney fees.
We reverse the award of attorney fees by the District
Court and hold that ordinance 4474 is invalid as to attorneys
under § 7-1-112 ( I ) , MCA.
We Concur: /