Yovetich v. McClintock

No. 12731

I N THE SUPREME C U T O T E STATE O M N A A
OR F H F OTN

1974

LOUIS YOVETICH, on behalf o f himself and a l l
o t h e r r e s i d e n t s and p r o p e r t y owners i n t h e
County of Yellowstone, S t a t e of Montana,
similarly situated,
P l a i n t i f f s and A p p e l l a n t s ,
and

STEVE TRENKA and M B L TRENKA, husband and w i f e ,
AE
CLAYTON ORR, J O H N GLANTZ and M L Y GLANTZ,
OL
husband and w i f e e t a l . ,
P l a i n t i f f and Appellant I n t e r v e n o r s ,
-vs -
M. E. McCLINTOCK, A.S. ROBERTS e t a l ,
Defendants and Respondents
KOBER CONSTRUCTION COMPANY, Yellowstone E l e c t r i c
Company, e t a l . ,
Defendant and Respondent I n t e r v e n o r s ,
DAVID G. DRUM, WARREN F. VAUGHAN e t a l . ,
Defendant and Respondent I n t e r v e n o r s .

Appeal from: D i s t r i c t Court of t h e T h i r t e e n t h J u d i c i a l D i s t r i c t ,
Honorable M. James S o r t e , Judge p r e s i d i n g .

Counsel of Record :

For A p p e l l a n t s :

Larry D. Herman argued, L a u r e l , Montana
Ralph H e r r i o t t argued, Hysham, Montana

For Respondents :

Harold F. Hanser, County Attorney, argued, B i l l i n g s
Montana
C. W. Jones argued, B i l l i n g s , Montana
Anderson, Symmes , Forbes, P e e t e and Brown, B i l l i n g s ,
Montana
Benjamin N. Forbes argued, B i l l i n g s , Montana
Crowley, Kilbourne, Hanson and Gallagher, B i l l i n g s ,
Montana
Moulton, Bellingham, Longo and Mather, B i l l i n g s , Montana
William H. Bellingham argued, B i l l i n g s , Montana

Submitted: June 1 4 , 1974
Decided
'AW2'9 1974
Mr. Justice John C. Harrison delivered the Opinion of the Court.

This is an appeal from a judgment of the district court
of Yellowstone County denying a petition for injunctive or
declaratory relief against the Board of County Commissioners,
Yellowstone County, for its method of funding the multi-use
building presently being constructed at the fairgrounds in
Billings, Montana.
The facts disclose that on November 2, 1971, the voters
of Yellowstone County approved the sale of general obligation
bonds in the sum of $3,000,000 for the purpose of constructing
and equipping a multi-use building at the fairgrounds in the City
of Billings. The ballot presented to and approved by the voters
read :
"Shall the Board of County Commissioners be
authorized to issue, negotiate and sell bonds
of the County of Yellowstone in the amount of
Three Million Dollars ($3,000.000.00) payable
during a period of not to exceed twenty (20)
years, redeemable on any interest due date
after five (5) years; for the purpose of con-
structing and equipping a Multi-Use Building
at the Midland Empire Fairgrounds, Yellow-
stone County, Montana, with a seating capacity
of at least 10,000 and an arena of approxi-
mately 250 feet by 400 feet."
When the bond issue was approved, the county commission-
ers had no access to a cost estimate of the building based on
plans and specifications. In October 1972, the county commis-
sioners employed architects who submitted a schematic design
which set forth the size, shape, and cost of the building. The
schematic design estimated the total cost of the building to be

Toward the end of 1972, the county commissioners began
to anticipate the receipt of federal revenue sharing funds.
Consequently, the county commissioners made some refinements in
and broadened the use of the building. These changes plus the
existing severe inflation served to increase the cost of the
building beyond the sum originally anticipated by the county
commissioners.
Bids for the construction of the multi-use building
were opened on November 28, 1973 and contracts were awarded
to the defendant-intervenor construction companies on December

In January 1974, the county commissioners adopted a
funding program which projected the cost of the building at
$5,880,504.04. Three main sources of funds were to be utilized
to meet this obligation:
1. Proceeds from the bond sale and
interest thereon---
2. Principal and interest on fire in-
surance proceeds resulting from the
destruction of the previous building--- $ 358,591.26
3. Revenue Sharing Funds from the federal
government, plus interest for entitle-
ment periods one through six--- $2,009,188.68
TOTAL --- $5,896,410.83
Plaintiffs, as taxpayers and residents of Yellowstone
County,protested the funding program and set forth three main
issues for this Court to consider:
1. Does the funding program as adopted by the county
commissioners of Yellowstone County violate section 16-807,
R.C.M. 1947?
2. Is the county commissioners' action in contracting
with defendant construction companies ultra vires because it
limits future boards in the exercise of their governmental powers?

3. Is the use of federal revenue sharing funds for the
purpose of funding the multi-use building improper?
In the first issue, plaintiffs argue that the county
commissioners, in using revenue sharing funds to finance the
project, violated the terms of section 16-807, R.C.M. 1947, the
pertinent part of which states:
" * * * No county must incur any indebtedness
or liability for any single purpose to an
amount exceeding forty thousand dollars
($40,000) without the approval of a majority
of the electors thereof voting at an election
to be provided by law."
In State ex rel. Diederichs v. State Highway Commission,
89 Mont. 205, 211, 296 P. 1033, this Court explained the purpose
of Art. XI11 § 2 of the 1889 Montana Constitution which forbade
the legislature from incurring a debt or liability in excess of

$100,000 without submitting the question to a vote of the people:
"Knowing the tendency of governments to run
in debt, to incur liabilities, and thereby
to affect the faith and credit of the state
in matters of finance, thus imposing addit-
ional burdens upon the taxpaying public, the
framers of the Constitution placed positive
limitations upon the power of the legislative
assembly to incur a debt or impose a liabil-
ity upon the state beyond the limit prescribed,
without referring the proposition to the elec-
torate for its approval."
Thus, the question to be decided here is whether the
expenditure of revenue sharing funds creates an "indebtedness or
liability" within the meaning of the statute thereby imposing ad-
ditional tax burdens upon the residents of Yellowstone County.
In State ex rel. Diederichs v. Board of Trustees of
Missoula County High School, 91 Mont. 300, 307, 7 P.2d 543, the
plaintiff sought to enjoin the Board of Trustees of Missoula
County High School from applying fire insurance proceeds to rebuild
a high school. In holding that the expenditure of the funds did
not constitute an "indebtedness or liability" this Court stated:
"It seems plain that the constitutional limi-
tation does not apply to the expenditure of cash
on hand provided for a specific purpose; but
rather to the creation of an obligation to be
met and paid in the future by the taxpayers.
[Citing cases] " .
Here, it is plain the revenue sharing funds are not an
obligation to be "met and paid for in the future by the taxpayers".
 In State ex rel. Rankin v. State Board of Examiners,
59 Mont. 557, 197 P. 988, this Court held that the words
"indebtedness or liability" meant the creation of a debt or
obligation in excess of "cash on hand and revenues having a po-
tential existence by virtue of existing revenue laws." See also:
Graham v. State Board of Examiners, 116 Mont. 584, 155 P.2d 956.
The expenditure of the federal revenue sharing funds
does not incur an "indebtedness or a liability" of the county
within the meaning of the statutory restriction. Section 16-807,
R.C.M. 1947, was never intended to prevent the expenditure of
revenue provided for a specific purpose as noted in Diederichs v.
Board of Trustees of Missoula County High School, supra. Had
the legislature intended that result, it would have used the
term "expenditure" instead of the terms "indebtedness or liability".
As stated, the manifest purpose of the statute is to prevent the
taxpayers from being burdened with oppressive taxation. Here,
the county commissioners are not obligating the taxpayers to pay
any additional sums over and above the amount included in the
bond issue to finance the project. The entire costs of construc-
tion are to be paid from the bond issue, insurance proceeds and
revenue sharing funds. Thus, the evil which the statute is de-
signed to prevent, will never come into existence here. In the
second issue plaintiffs argue the action of the county comrnis-
sioners is ultra vires because it limits future boards in the
exercise of their governmental functions. We disagree.
In Bennett v. Petroleum County, 87 Mont. 436, 447, 288 P.
1018, a taxpayer brought suit to enjoin the county commissioners
of Petroleum County from leasing a building to be used as a court-
house for a period of four years with an option to renew the
lease for an additional four year period. The plaintiff contended,
inter alia, that the lease was void because it extended beyond the
 t e r m s of o f f i c e o f i n d i v i d u a l members of t h e board, of c o u n t y

commissioners. A t t h e t i m e t h e l e a s e was e n t e r e d i n t o , S e c t i o n

4465 Rev. Codes 1921, a s amended by Chap 38, L a w s of 1929 a u t h o r -
i z e d t h e board t o lease r e a l p r o p e r t y n e c e s s a r y f o r t h e u s e of

t h e county. T h i s C o u r t upheld t h e v a l i d i t y o f t h e l e a s e w i t h

t h e s e words:

"The s t a t u t e s p e c i f i c a l l y c o n f e r s t h e power t o
s o c o n t r a c t upon t h e board o f c o u n t y commis-
s i o n e r s , t h e body e x i s t i n g a t t h e t i m e , and
t h e mere f a c t t h a t t h e t e r m o f o f f i c e o f a
member of t h e body which s o c o n t r a c t s may ex-
p i r e b e f o r e t h e c o n t r a c t , d o e s n o t i n any
manner a f f e c t i t s v a l i d i t y . Were t h e r u l e of
law o t h e r w i s e , t h e b u s i n e s s of c o u n t i e s would
be v e r y g r e a t l y hampered and a t t i m e s , s u s -
pended, w i t h r e s u l t i n g damage. The board o f
c o u n t y commissioners f u n c t i o n s f o r t h e munici-
p a l c o r p o r a t i o n i n i t s a u t h o r i z e d powers a s a
c o n t i n u o u s body, and w h i l e t h e p e r s o n n e l o f i t s
membership c h a n g e s , t h e c o r p o r a t i o n c o n t i n u e s
unchanged. The c o u n t y h a s power t o c o n t r a c t ,
and i t s c o n t r a c t s a r e t h e c o n t r a c t s o f i t s board
of c o u n t y commissioners, n o t of t h e i n d i v i d u a l
members t h e r e o f . "

W e agree with t h i s reasoning. By s t a t u t e , t h e board o f
c o u n t y commissioners h a s t h e power t o e r e c t a r e c r e a t i o n c e n t e r .

S e c t i o n 16-1008A, R.C.M. 1947. S i n c e t h e board h a s t h i s power,
i t can e n t e r i n t o c o n s t r u c t i o n c o n t r a c t s t h a t e x t e n d beyond t h e

t e r m s of o f f i c e of t h e i n d i v i d u a l members o f t h e board. Were t h e

r u l e o t h e r w i s e , t h e board would be u n a b l e t o e n t e r i n t o long-term

c o n s t r u c t i o n c o n t r a c t s t o e r e c t p u b l i c b u i l d i n g s a s contemplated

by s e c t i o n 16-1008A, R.C.M. 1947. Such a r e s u l t would be d e t r i m e n -

t a l t o t h e r e s i d e n t s of Yellowstone County.

P l a i n t i f f s c o r n e r s t o n e much of t h e i r argument on t h i s
i s s u e i n what t h i s Court r e c e n t l y h e l d i n B u r l i n g t o n N o r t h e r n v.
F l a t h e a d County, 162 Mont. 371, 512 P.2d 710, 30 St.Rep. 684, and
B u r l i n g t o n Northern v . R i c h l a n d Co., 162 Mont. 364, 512 P.2d 707,
30 St.Rep. 691. The h o l d i n g i n t h o s e two c a s e s was based on an
i n t e r p r e t a t i o n of s e c t i o n 16-807, R.C.M. 1947, which i s r e l i e d upon

by t h e p l a i n t i f f s h e r e . However, t h i s c a s e i s f a c t u a l l y d i f f e r e n t
t h a n t h e above c a s e s f o r t h e r e t h e c o u n t y commissioners a t t e m p t e d ,

by u s e of t h e t a x i n g a u t h o r i t y , t o c i r c u m v e n t S e c t i o n 5 , A r t i c l e

XI11 of t h e 1889 Montana S t a t e C o n s t i t u t i o n and s e c t i o n 16-807,

R.C.M. 1947, by b u d g e t i n g e x c e s s i v e l y i n o r d e r t o o b t a i n and expend
a b u i l t - u p r e s e r v e i n subsequent f i s c a l y e a r s . Here, p l a i n t i f f s

t r e a t t h e revenue s h a r i n g fund payments a s money budgeted and un-

expended a t t h e end o f t h e f i s c a l y e a r . Further, they argue t h a t
t h e s e f u n d s s h o u l d be p l a c e d i n t h e g e n e r a l fund t o be used t o

reduce t a x e s i n subsequent years. To s o h o l d would be f o r t h i s

C o u r t t o e l i m i n a t e many, i f n o t a l l , o f t h e p e r m i s s i b l e e x p e n d i t u r e s

a l l o w e d by Congress under s e c t i o n 31, C.F.R. 51.31. Too, it would

mean t h a t revenue s h a r i n g f u n d s , u n l e s s s p e n t p r i o r t o J u l y 1 of

e a c h f i s c a l y e a r , would be used o n l y t o r e d u c e t a x e s . To c a r r y

o u t t h e p u r p o s e s o f t h e revenue s h a r i n g a c t i t must be g i v e n a more

liberal interpretation.

I t was c o n t e m p l a t e d by P u b l i c Law 92-512 (revenue s h a r i n g
s t a t u t e ) S e c t i o n 103, and it was t h e e x p e c t a t i o n of t h e P r e s i d e n t

and Congress i n p a s s i n g and s i g n i n g t h e Act t h a t many new c a p i t a l

improvements would b e made by t h e v a r i o u s m u n i c i p a l and c o u n t y

governments t h r o u g h o u t t h e c o u n t r y . W e note t h a t i n passing t h e

A c t , and s e t t i n g a s i d e t r u s t f u n d s t h r o u g h December 1976, and making
n e c e s s a r y t h e expending o f o r o b l i g a t i n g t h e f u n d s w i t h i n two y e a r s

o f r e c e i p t t h e r e o f , t h a t Congress i n t e n d e d t h e v a r i o u s g o v e r n i n g
u n i t s c o u l d and would r e l y on r e c e i v i n g same t h r o u g h December 1976.

W e c a n f i n d no v i o l a t i o n of s e c t i o n 16-807, R.C.M. 1947, n o r i s

t h i s f i n d i n g c o n t r a t o o u r h o l d i n g s i n t h e F l a t h e a d County and
Richland County c a s e s .
I n t h e t h i r d i s s u e , p l a i n t i f f s argue t h a t t h e expenditure
of r e v e n u e s h a r i n g f u n d s f o r t h e p u r p o s e of f i n a n c i n g a r e c r e a t i o n
c e n t e r i s i l l e g a l b e c a u s e t h e revenue s h a r i n g a c t f o r b i d s t h e

c a p i t a l e x p e n d i t u r e of f u n d s f o r r e c r e a t i o n - t y p e b u i l d i n g s .
 The State and Local Assistance Act, P.L. 92-512, Section
103, 1972, more commonly known as the Federal Revenue Sharing
Act, allocates federal revenues to state and local governments
to be used only for "priority expenditures". The act has defined
"priority expenditures" as ordinary and necessary maintenance
and operating expenses for public safety, environmental protec-
tion, public transportation, health, recreation, libraries, social
services for the poor or aged, financial administration, and
ordinary and necessary capital expenditures authorized by law. 31
U.S.C.A. § 1222.
To qualify for the funds a unit of local government must
establish a trust fund to deposit all payments received and use
the funds for "priority expenditures". A penalty of 110% of the
amount expended is assessed against the local government if funds
are allocated in violation of the Act. See: 31 U.S.C.A. 5 1243(a) (3).
The local government is also required to provide for the expendi-
ture of the funds in accordance with the applicable laws dealing
with the expenditure of its own revenues. See: 31 U.S.C.A. 5
1243 (a) (4) .
Plaintiffs argue that the funds are illegally spent be-
cause a recreation center is not an "ordinary and necessary capi-
tal expenditure authorized by law." We disagree with such a res-
trictive reading of the Act. See Murphy v. McClintock, 160 Mont.
355, 503 P.2d 1013, 29 St.Rep. 883; Skaggs Drug Centers v. Mont.
Liquor Control, 146 Mont. 115, 404 P.2d 511.
The word "ordinary" is defined in Black's Law Dictionary
(4th ~ d . 1 as:
"Regular; usual; normal; common; often re-
curring; according to established order;
settled; customary; reasonable; not charac-
terized by peculiar or unusual circumstances;
belonging to, exercised by, or characteristic
of, the normal or average individual."
 The word "necessary" is defined in Black's Law
Dictionary (4th Ed. ) as:
"This word must be considered in the connection
in which it is used, as it is a word susceptible
of various meanings. It may import absolute
physical necessity or inevitability, or it may
import that which is only convenient, useful,
appropriate, suitable, proper, or conducive to
the end sought. It is an adjective expressing
degrees, and may express mere convenience or that
which is indispensable or an absolute physical
necessity. It may mean something which in the
accomplishment of a given object cannot be dis-
pensed with, or it may mean something reasonably
useful and proper, and of greater or lesser bene-
fit or convenience, and its force and meaning must
be determined with relation to the particular
object sought."
The Federal Revenue Sharing Act is broad in scope with
the purpose of aiding local givernments defray the cost of
capital expenditures. It accordingly appears to us that the
words "ordinary and necessary" should be construed liberally and
with latitude. It is our opinion that the multi-use building in
question is "reasonable", "useful" and "proper", and within the
terms of the Act.
The judgment of the district court is affirmed.

Justice I
We concur:
(2'

L
Hon. Paul Hatfield, ~~$,g~k~
Judge, sitting in plac
Justice Frank I. Haswell.
Mr. Justice Thomas Dignan, District Judge, sitting in place
of Mr. Chief Justice James T. Harri~on~dissents.

District Judge