No
No. 98-417
IN THE SUPREME COURT OF THE STATE OF MONTANA
1999 MT 11
THOMAS WINCHELL and DAVID WINCHELL,
Petitioners and Appellants,
v.
MONTANA DEPARTMENT OF NATURAL RESOURCES
AND CONSERVATION, and JIM HAGEMEISTER,
Respondents and Respondents.
APPEAL FROM: District Court of the Seventh Judicial District,
In and for the County of Dawson,
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The Honorable Richard G. Phillips, Judge presiding.
COUNSEL OF RECORD:
For Appellants:
Steven S. McPherson; Schneider & Howe, P.C.; Glendive, Montana
For Respondents:
Tommy H. Butler, Special Assistant Attorney General, Montana
Department of Natural Resources and Conservation; Helena, Montana
A. Lance Tonn, Lucas & Tonn, P.C.; Miles City, Montana
(for respondent Hagemeister)
Submitted on Briefs: November 24, 1998
Decided: January 25, 1999
Filed:
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__________________________________________
Clerk
Justice Jim Regnier delivered the opinion of the Court.
¶1. Appellants, Tom and David Winchell, sought judicial review of the Department
of Natural Resources and Conservation's valuation of improvements upon their lease
on state land. The Winchells allege that the Department exceeded its statutory
authority under § 77-6-306(3), MCA, when it substituted its values for the values
established by a panel of arbitrators. Both the Winchells and the Department moved
for summary judgement in the Seventh Judicial District Court, Dawson County. On
May 8, 1998, the District Court granted summary judgment in favor of the
Department and the Winchells appeal. We affirm.
¶2. The issue before us is whether the District Court erred when it concluded that the
Department of Natural Resources and Conservation did not exceed its statutory
authority under § 77-6-306(3), MCA, by establishing its own values of improvements
on state land.
FACTUAL BACKGROUND
¶3. At issue in this case is State Lease No. 0343, a 477.9 acre tract of state trust land
located in Dawson County. The lease has been the subject of long-standing litigation
which has culminated in a series of cases before the Montana Supreme Court.
¶4. Litigation commenced when the Department of State Lands (now known as the
Department of Natural Resources and Conservation) canceled the Winchells' lease
because the Winchells failed to pay agricultural rents on thirty-two acres where they
made agricultural improvements. Through the District Court, the Winchells
obtained a writ of prohibition to avoid paying the agricultural rents. We upheld the
writ in Winchell v. Department of State Lands (1988), 235 Mont. 10, 764 P.2d 1267
(Winchell I), on the basis that the thirty-two acres were not suited for agricultural
use, despite the Winchells' improvements. Thus, lower grazing rents were due
instead.
¶5. The Winchells, thereafter, used the land for grazing. Then, in Winchell v.
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Department of State Lands (1990), 241 Mont. 94, 785 P.2d 212 (Winchell II), we
affirmed the Department's second attempt to cancel the Winchells' lease. This time
the Department successfully argued that the Winchells mismanaged the lease by
permitting the land to be overgrazed.
¶6. In Winchell v. Department of State Lands (1993), 262 Mont. 328, 865 P.2d 249
(Winchell III), we considered the Winchells' efforts to regain the lease by submitting
the highest bid in a competitive bid process for a new lease. We concluded that the
Department could reject the Winchells' bid if it provided written findings as to why
acceptance of the bid was not in the State's best interest.
¶7. When the Department solicited bids a second time for a new lease, the Winchells
again submitted the highest bid. This time, the Department awarded the lease to the
second highest bidder, Jim Hagemeister. In order for Hagemeister to obtain the
lease, however, he had to pay the Winchells the value of the useable improvements
they placed on the land, pursuant to § 77-6-305, MCA. Since the Winchells and
Hagemeister were not able to agree on a value of the improvements, a three-person
panel of arbitrators was requested to ascertain a value, pursuant to § 77-6-306(1),
MCA. Two of the three arbitrators agreed that the improvements should be valued
in excess of $20,000; however, they did not explain their rationale. The third
arbitrator submitted a much lower value of $1,407.35.
¶8. Hagemeister appealed the arbitrators' higher value to the Department. Pursuant
to § 77-6-306(3), MCA, the Department "examine[d] the records pertaining to the
costs of the improvements" in ascertaining a new value. In addition, the Department
sent its own staff appraiser to conduct an on-site inspection of the improvements. The
Department set aside the arbitrators' higher value and established a much lower
value of $1,564.
¶9. The Winchells appealed the Department's valuation process in the Seventh
Judicial District Court, Dawson County, pursuant to § 77-6-306(4), MCA. Both
parties moved for summary judgment, and on May 8, 1998, the District Court
granted summary judgment in favor of the Department. From this, the Winchells
appeal.
STANDARD OF REVIEW
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¶10. On appeal from a summary judgment, this Court reviews a case de novo based
on the same criteria applied by the district court. See Stutzman v. Safeco Ins. Co.
(1997), 284 Mont. 372, 376, 945 P.2d 32, 34 (citing Treichel v. State Farm Mut. Auto.
Ins. Co. (1997), 280 Mont. 443, 446, 930 P.2d 661, 663). Thus,
[t]he movant must demonstrate that no genuine issues of material fact exist. Once this has
been accomplished, the burden then shifts to the non-moving party to prove by more than
mere denial and speculation that a genuine issue does exist. Having determined that
genuine issues of material fact do not exist, the court must then determine whether the
moving party is entitled to judgment as a matter of law. [This Court] reviews the legal
determination made by a district court as to whether the court erred.
Stutzman, 284 Mont. at 376, 945 P.2d at 34 (quoting Bruner v. Yellowstone County (1995),
272 Mont. 261, 264-65, 900 P.2d 901, 903).
¶11. Upon a de novo review of a proceeding in a case that is not "contested," our
standard of review is limited to whether the agency erred in law or whether its
decision is wholly unsupported by the evidence or clearly arbitrary or capricious. See
Johansen v. Department of Natural Resources & Conservation, 1998 MT 51, ¶26, 955
P.2d 653, ¶26, 55 St. Rep. 211, ¶26 (citing North Fork Preservation Assoc. v.
Department of State Lands (1989), 238 Mont. 451, 457, 778 P.2d 862, 866). In such a
proceeding, we only inquire insofar as to ascertain if the agency has stayed within its
statutory bounds and has not acted arbitrarily, capriciously, or unlawfully. See
Johansen, ¶26 (citing North Fork Preservation, 238 Mont. at 457, 778 P.2d at 866. We
afford great deference to agency decisions, especially where it implicates substantial
agency expertise. See Johansen, ¶29.
¶12. This standard of review is different than the standard we apply in a contested
case under the Montana Administrative Procedures Act, §§ 2-4-701 to -711, MCA.
Although the District Court applied the standard of review for a contested case, we
will affirm its decision regardless of its reasoning where it reached the correct result.
See Farmers Union Cent. Exchange, Inc. v. Department of Revenue (1995), 272 Mont.
471, 475, 901 P.2d 561, 563 (citing Lindey's, Inc. v. Goodover (1994), 264 Mont. 449,
453, 872 P.2d 764, 766; Tisher v. Norwest Capital Mgmt. & Trust (1993), 260 Mont.
143, 153-54, 859 P.2d 984, 990).
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DISCUSSION
¶13. Did the District Court err when it concluded that the Department of Natural
Resources and Conservation did not exceed its statutory authority under § 77-6-306
(3), MCA, by establishing its own values of improvements on state land?
¶14. We begin our analysis by considering the statutory language that requires
improvements to be valued at their reasonable value. Section 77-6-302(1), MCA,
requires a new lessee of state land to pay the former lessee a "reasonable value" for
improvements made by the former lessee. A reasonable value of improvements must
be established at the time the new lessee takes possession of the land. In 1993, the
Legislature amended this statute to require that a reasonable value not be "less than
the full market value of the improvements." The 1993 amendments also require that
records pertaining to the cost of the improvements be used to establish a reasonable
value. See §§ 77-6-302(2) and -306(3), MCA.
¶15. When the Winchells and Hagemeister did not agree on a reasonable value for
the improvements on the land, pursuant to § 77-6-302, MCA, a panel of arbitrators
was asked to ascertain a value pursuant to § 77-6-306(1), MCA. The arbitrators
requested the Department to instruct them on what to consider in their valuation
process. The Department referred them to § 77-6-303, MCA, which states:
In determining the value of these improvements, consideration shall be given to their
original cost, their present condition, their suitableness for the uses ordinarily made of the
lands on which they are located, and to the general state of cultivation of the land, its
productive capacity as affected by former use, and its condition with reference to the
infestation of noxious weeds. Consideration shall be given to all actual improvements and
to all known effects that the use and occupancy of the land have had upon its productive
capacity and desirableness for the new lessee.
The Department's response indicated that the present condition of the improvements and
their suitableness for ordinary uses should reflect their full market value in their present
condition and their reasonable value. Thus, the Department's instruction was consistent
with the language of § 77-6-302, MCA.
¶16. The Department's own valuation of the improvements included a staff
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appraiser's physical inspection. Pursuant to § 26.3.152(6), ARM (now known as §
36.25.125(6), ARM), the appraiser formulated his own values for the Winchells'
water spreading project, cross-fencing, spring development, stock water
development, and prairie dog control, and used the prevailing area rates for
(1)
agricultural labor.
¶17. The Winchells argue that when the appraiser performed his own physical
inspection and valuation of the improvements, the Department violated its statutory
authority. The Winchells contend that the Department's authority is limited by the
Legislature's 1993 amendment, which allows the Department only to "examine the
records pertaining to the costs of the improvements." The Winchells distinguish this
language from the statute's pre-1993 language which provided the Department
authority to "examine the improvements." Contrasting the original language from
its amended version, the Winchells argue that the Department no longer has the
authority to perform a de novo review of the value of the improvements. The
Winchells contend that the Department must give deference to the arbitrators'
factual conclusions and review only the records pertaining to the costs of the
improvements. Thus, they ask us to reverse the District Court's decision granting
summary judgment on this issue.
¶18. The Department interprets the statutes differently. The Department first refers
to the language of § 77-6-306(3), MCA, which states that the Department's decision
"is final"--a term that characterizes its decision as independent of the arbitrators'
decision. The Department also points out the absence of any language that
characterizes its review as an appellate review. The Department argues that an
appellate review is mandated only upon the District Court under § 77-6-306(4),
MCA. Next, the Department argues that the language of § 77-6-303, MCA, which
requires that the value of the improvements reflect their present condition and
suitableness for ordinary uses of the land, makes the appraiser's physical inspection
and independent valuation essential.
¶19. The District Court relied on the language of § 77-6-303, MCA, as well, and
determined that if the Department limited its review to only the records, all the other
factors intended to be considered by the Legislature in the valuation of
improvements would be ignored. Thus, by limiting the Department to a review of the
records, the court would violate the rule of statutory construction that requires
courts to read all parts of a statute as a whole and to give effect to every part. In
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addition, the District Court found no statutory language prohibiting the Department
from considering the factors listed in § 77-6-303, MCA. Looking at § 77-6-306(4),
MCA, which refers to a district court's judicial review of improvement values "fixed
by the [D]epartment," the District Court concluded that if the Department was
merely to review the procedures used by the arbitrators and the records pertaining
to the costs of the improvements, the Department would be in no position to "fix"
values.
¶20. We agree with the District Court that it is significant that we read all provisions
of the statute and give effect to all of them. See Albright v. State (1997), 281 Mont.
196, 206, 933 P.2d 815, 821 (citing Larson v. Crissmore (1987), 228 Mont. 9, 15, 741
P.2d 401, 405). Thus, despite the Legislature's mandate that the Department review
the records pertaining to the improvements, the Department cannot ignore the
requirements of § 77-6-303, MCA. While the Legislature's amendatory language
requires the Department to consider the records, it does not prohibit the Department
from considering other factors referenced in § 77-6-303, MCA, as well. In our
determination, a reasonable value must incorporate all factors that will reflect the
value of improvements at their current market rate, including any appreciation or
depreciation. Thus, our interpretation of the relevant statutes affords the
Department a de novo review of the arbitrators' decision and the opportunity to
establish its own values of improvements made on state land.
¶21. In a previous decision, Evertz v. State (1991), 249 Mont. 193, 815 P.2d 135, we
recognized the Department's authority to value improvements on state land,
pursuant to § 77-6-306(3), MCA. The Department asks us to advance our holding in
Evertz; however, Evertz does not support our decision here. In Evertz, we considered
the Department's valuation procedure in light of a due process analysis before the
1993 amendments were made. At that time, the Department's authority to perform a
de novo review was not at issue.
¶22. Based on our determination that the Department has the authority to conduct a
de novo review of the value for improvements on state land, we also are not
compelled to advance the Winchells' argument that the Uniform Arbitration Act,
found at Title 27 of the Montana Code Annotated, should limit the Department's
authority. We hold that because the Uniform Arbitration Act establishes a district
court's standard of review in an appellate procedure, the Act does not apply here.
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¶23. The Winchells do not contest the Department's findings, so we will not consider
them any further. Thus, we conclude that the District Court did not err when it
decided that the Department of Natural Resources and Conservation did not exceed
its statutory authority under § 77-6-306(3), MCA, by establishing its own values of
improvements on state land. The Department has stayed within its statutory bounds
and has not acted arbitrarily, capriciously, or unlawfully.
¶24. We affirm.
/S/ JIM REGNIER
We Concur:
/S/ J. A. TURNAGE
/S/ WILLIAM E. HUNT, SR.
/S/ TERRY N. TRIEWEILER
Justice James C. Nelson specially concurs.
¶25. I concur in our opinion, although somewhat reluctantly. By the plain language
of the amendments which it adopted, the 1993 Legislature appears to have restricted
the scope of the Department's involvement in valuation proceedings under § 77-6-306
(3), MCA. Prior to the 1993 amendments, the Department was required to "examine
the improvements," thus contemplating a physical or on-site inspection. From 1993
to the present, however, the Department is required to "examine the records
pertaining to the costs of the improvements." (Emphasis added.) In construing a
statute, this Court presumes that the legislature intended to make some change in
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existing law by passing it. State ex rel. Dick Irvin, Inc. v. Anderson (1974), 164 Mont.
513, 523-24, 525 P.2d 564, 570. Arguably, the 1993 Legislature intended some change
in the Department's review authority under § 77-6-306(3), MCA, and it appears,
facially, that the contemplated change was to restrict the Department's authority to
examine the improvements on-site. Unfortunately, given the lack of any definitive
legislative history explaining the amendment and taking into consideration the rest of
the statutory scheme, this sort of interpretation does not make a whole lot of sense.
Thus, what might be an otherwise clear statement of legislative intent in amending
the statute becomes confusing and ambiguous.
¶26. I concur in our opinion, because it is about the only interpretation that
preserves the entirety of the statutory scheme for valuing improvements. If the
legislature had something else in mind, then it will have to make that clear in another
statutory amendment.
/S/ JAMES C. NELSON
1
1. The Winchells do not contest the validity of § 36.25.125(6), ARM, which states:
Summer fallowing, necessary cultivation done after the last crop grown, seeding and
growing crops shall be considered improvements. The value of seeded acreage and
growing crops shall be limited to costs for seeding, seedbed preparation, fertilization and
agricultural labor at the prevailing rate in the area. The former lessee's or licensee's
anticipated profit shall not be included in such value. . . . The original breaking of the
ground shall also be considered an improvement; however, if 1 year's crops have been
raised on the land, the value shall not exceed $2.50 per acre and if 2 year's [sic] crops have
been raised, there shall be no compensation.
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