No. 91-082
IN THE SUPREME COURT OF THE STATE OF MONTANA
1991
HELENA AERIE NO. 16, F.O.E., a Montana corporation
Plaintiff and Appellant,
r]Ec 3 .- 1991
-
-vs-
MONTANA DEPARTMENT OF REVENUE,
Defendant and Respondent.
APPEAL FROM: District Court of the First Judicial District,
In and for the County of Lewis and Clark,
The Honorable Thomas C. Honzel, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Chadwick H. Smith; Smith Law Firm, Helena, Montana.
For Respondent:
R. Bruce McGinnis, Department of Revenue, Helena,
Montana.
Submitted on briefs: September 24, 1991
Decided:
Filed:
Chief Justice J. A. Turnage delivered the Opinion of the Court.
Helena Aerie No. 16, F.0.E. (Eagles Club) , brought this action
for a declaratory judgment that its liquor license is transferable
and assignable. On cross-motions for summary judgment, the
District Court of the First Judicial District, Lewis and Clark
County, ruled that the Department of Revenue (DOR) had properly
classified the license as non-transferable and non-assignable and
that this action is barred under any statute of limitations. The
Eagles Club appeals. We reverse.
The issue is whether the Eagles Club holds a transferable and
assignable license to sell alcoholic beverages, and, if so, whether
the Eagles Club may apply for and receive a non-transferable and
non-assignable all-beverage license as a lodge of a recognized
national fraternal organization under § 16-4-201(4), MCA.
The Eagles Club first obtained a beer license in 1934,
pursuant to the Beer Act, Ch. 106, L. 1933. In 1937, the Eagles
Club was granted a liquor license pursuant to the newly-enacted
Retail Liquor License Act, Ch. 84, L. 1937. From 1934 to the
present, the Eagles Club has renewed its liquor licenses annually.
In 1947, the legislature enacted a quota law limiting the
number of beer and liquor licenses that could be issued in each
city or town. Ch. 225 and 226, L. 1947. In 1949, non-transferable
and non-assignable beer and liquor licenses granted to certain
fraternal and veterans1 organizations were exempted from the quota
system:
the foregoing limitations shall not prevent the grantinq
of non-transferable and non-assignable licenses to posts
of nationally chartered veterans' organizations, and
lodges of recognized national fraternal organizations,
which said national organizations have been in existence
for five (5) years or more prior to January lst, 1949.
[Emphasis supplied.]
Ch. 164 and 165, L. 1949. The quota system and the exemption for
licenses issued to veterans' and fraternal organizations remain in
effect today. Section 16-4-201, MCA.
On March 15, 1961, the Montana Liquor Control Board adopted
its regulation 3-23, providing that beer and liquor licenses issued
to fraternal and veterans' organizations were not transferable or
assignable. The regulation also provided that such organizations
could sell liquor and beer only to bona fide members of the
organization and their guests. The Benevolent and Protective Order
of Elks, Helena Lodge No. 193, brought suit in the District Court
of the First Judicial District, Lewis and Clark County, Cause No.
28,573, to challenge regulation 3-23. The District Court held that
regulation 3-23 was "unlawful, unenforceable and of no force and
effect whatever." That decision was not appealed.
In 1975, the Montana Alcoholic Beverage Code replaced the Beer
Act, the Liquor Control Act, and the Retail Liquor Act. The Code
replaced the separate licenses previously required with a single
all-beverage license. All renewal of licenses issued to the Eagles
Club between 1975 and 1989 have been marked with the words "non-
transferable and non-assignable as to ownership."
In 1989, the attorney for the Eagles Club wrote the Chief of
the Liquor Division Licensing Bureau at the DOR, stating that it
appeared the "non-transferable and non-a~signable~~
designation did
not apply to the Eagles Club license. The Division stood behind
that designation. In May 1990, the Eagles Club filed this action,
seeking a declaratory judgment that the designation of its liquor
license as non-transferable and non-assignable is contrary to the
Fifth Amendment of the United States Constitution and Article 11,
Section 17, of the Montana Constitution.
On cross-motions for summary judgment, the District Court
pointed out that the parties agree that there are no issues of
material fact barring summary judgment under Rule 56, M.R.Civ.P.
Because whether summary judgment should be granted is, under these
circumstances, a question of law, our standard of review is whether
the lower court's determination is correct. Steer, Inc. v.
Department of Revenue (1990), 245 Mont. 470, 474, 803 P.2d 601,
603.
The District Court held that the Eagles Club has been on
notice since at least 1975 that the DOR considers its license to be
non-transferable and non-assignable and that the time for commenc-
ing an action has long passed. But this is a declaratory judgment
action, not an action for damages. The DOR's notations on the
Eagles Club licenses did not resolve the issue of the licenses'
transferability and assignability. More importantly, the Eagles
Club has not applied for transfer of its liquor license and
transfer has not been refused by the DOR. Only after the Eagles
Club applies for transfer of its all-beverage license and the DOR
refuses would any applicable statute of limitations begin to run.
We conclude that no statute of limitations precludes this action.
The DOR argues that this action is barred by collateral
estoppel as the result of the 1964 First Judicial District Court
judgment in the Benevolent and Protective Order of Elks case. In
that case, the District Court made a finding that the Eagles Club,
which was a plaintiff in intervention in the lawsuit, is "the owner
and holder of non-assignable retail beer and liquor licenses." The
DOR's position is that the Eagles Club is bound by that finding.
However, the regulation being challenged, regulation 3-23, itself
provided that all licenses held by veterans' and fraternal
organizations were nontransferable. The District Court ultimately
determined that regulation 3-23 was "unlawful and of no force and
effect whatever." We conclude that the existence of the above
finding does not bar this action by collateral estoppel.
Furthermore, contrary to the position taken in the dissent,
the issues in the two cases are different. The issue in Benevolent
and Protective Order of Elks was the validity of the restriction in
regulation 3-23 that fraternal organizations could sell liquor only
to members and their guests. That is not the issue in the present
case. As discussed in the dissent, one element of collateral
estoppel is that the issue must be identical to an issue previously
decided.
The DOR also asserts that the doctrine of laches bars the
Eagles Club from bringing this action. Laches requires a showing
that the passage of time has prejudiced the party asserting it or
has rendered the enforcement of a right inequitable. Brabender v.
Kit Mfg. Co. (1977), 174 Mont. 63, 67-68, 568 P.2d 547, 549. The
DOR has made no showing that it has been prejudiced by the passage
of time in this case. The DOR's argument that if this action is
allowed to proceed, other liquor license holders will suffer harm
and the public will lose the protection of the quota system is not
persuasive.
We now reach the central issue concerning the nature of the
liquor license held by the Eagles Club. All licenses issued under
the 1933 Montana Beer Act were transferable on application to the
Board of Equalization. Ch. 46, Sec. 15, Extraordinary Legislation
of 1933. All liquor licenses issued under the 1937 Retail Liquor
License Act were "non-transferable except and only with the consent
of the board." Ch. 84, Sec. 8, L. 1937.
The DOR maintains that club licenses issued under the above
statutes were transferable only to another club location. It
argues that there was no need for transfer of ownership of a
license in pre-quota days, because, at that time, there was no
limit on the number of licenses issued. However, nothing in either
the Beer Act or the Retail Liquor License Act said that a fraternal
organization may transfer its liquor or beer license only to
another location or, more importantly, only to another fraternal
organization or club.
The 1947 legislation limiting the number of beer licenses and
liquor licenses that could be issued in each city or town provided
that "licenses already issued which are in excess of said limita-
tions and which are of issue on the date of the passage and
approval of this act, shall be renewable." Ch. 225 and 226,
L. 1947 (emphasis supplied). Chapters 164 and 165, L. 1949, in
which the legislature adopted exemptions from quotas for licenses
issued to veterans' and fraternal organizations, said nothing about
converting licenses previously issued to veterans' and fraternal
organizations to non-transferable and non-assignable licenses.
The DOR urges that we apply the principle of granting judicial
deference to the interpretation given a statute by the executive
agency charged with its enforcement. In this case, that executive
agency is the DOR. Such deference is appropriate when the statute
is ambiguous. Mont. Tavern Ass'n v. State, Dept. of Revenue
(1986), 224 Mont. 258, 265, 729 P.2d 1310, 1316. That is not the
case here.
We do not find it necessary to reach the constitutional issues
raised because we conclude that the DOR's classification of the
Eagles Club liquor license conflicts with the applicable statutory
authority. Under the statutes in effect at the time the beer and
liquor licenses originally were granted to the Eagles Club, those
licenses were transferable and assignable, subject to the require-
ment that approval must be obtained from the Board of Equalization
for the transfer of any license. The Eagles Club licenses remained
renewable under the 1947 quota law, and the restrictions on
transferability of licenses issued to fraternal organizations under
Ch. 164 and 165, L. 1949, do not apply. We hold that there has
been no showing that the license held by the Eagles Club has lost
its original characteristics of being transferable and assignable.
We further hold that nothing has been shown that would prohibit the
Eagles Club from selling or otherwise disposing of its current
liquor license and then applying for a non-transferable and non-
assignable all-beverage license pursuant to 5 16-4-201(4), MCA.
The decision of the District Court is reversed and the motion
of the Eagles Club for summary judgment is granted.
We concur:
Justices
Justice William E. Hunt, Sr., dissenting.
I dissent. The majority should have affirmed t h e District
Court because the statute of limitations has long since expired,
and because appellant's claim is barred by collateral estoppel and
laches. In addition, the majority's opinion undermines the DORIS
regulatory authority to restrict the sale and ownership of liquor
licenses granted to it by the legislature.
I find the appellant's claim that it had just recently
discovered that its l i c e n s e w a s restrictive to be unconvincing .
The Montana Alcoholic Beverage Code was enacted in 1975. Ch. 387,
1975, Mont Laws 786. The code replaced separate beer and liquor
licenses with a single all-beverage license. Under this statute,
the code required these licenses to be displayed in a prominent
area on the premises where the business was being conducted. Since
at least 2975, and possibly as far back as 1950, the licenses
issued to the Eagles Club received a stamp which stated that the
license was nontransferable and nonassignable. Because t h e Eagles
Club received and posted its restrictive license yearly, it was
placed on notice that the DOR considered the license to be
nontransferable and nonassignable.
With the exception of the tolling statutes, the longest
statute of limitation allowed is ten years. Section 27-2-201(1),
MCA. For the majority to grant a declaratory judgment on an issue
that is at least 16, and perhaps 41, years old is alarming. This
far exceeds any statute of limitation set forth in the code. The
10
granting of this declaratory judgment will allow persons to assert
antiquated claims with evidence that is stale due to the passage of
time .
Appellant's action is also barred by collateral estoppel.
Collateral estoppel bars the relitigation of an issue
where the issue is identical to an issue previously
decided, a final judgment as to the issue has been
rendered, and the party against whom the claim is
advanced remains the same or is a privy of the earlier
party.
Matter of Unfair Labor Practice No. 38-80 (1986), 222 Mont. 172,
In 1964, when the Elks challenged the Montana Liquor Control
Board's adoption of Regulation 3-23, the Eagles Club joined the
Elks as a plaintiff in intervention. The Eagles Club admitted in
its answer to the counterclaim filed by the Liquor Control Board
that it had a nontransferable, nonassignable license. In addition,
the District Court adopted by reference to the Eagles Club's
proposed findings of fact that the club held a nontransferable,
nonassignable license. It is clear from the pleadings and the
District Court's decision in the Elks case, that the Eagles Club
had a nontransferable, nonassignable fraternal license and that the
Eagles Club recognized this restriction. If the Eagles Club did
not have a fraternal license, but rather had a general retail beer
and liquor license which was transferable, it would not have been
subject to the rule. Therefore, it would not have been necessary
for the Eagles Club to enter the lawsuit as a plaintiff in
intervention challenging the rule. Although the District Court
declared the regulation unlawful and of no force and effect, its
decision did not change the classification of licenses because
classification of licenses was based upon statute and not upon the
challenged regulation. All of the elements of collateral estoppel
were met and summary judgment should have been affirmed by this
Court.
Appellant's claim is also barred by laches. This Court has
defined laches as:
[A] creature of equity and means negligence in the
assertion of a right. It exists where there has been a
delay of such a duration as to render enforcement of the
asserted right inequitable.
Castillo v. Franks (1984), 213 Mont. 232, 241, 690 P.2d 425, 429.
The purpose of laches is to discourage stale claims. It
allows the court to refuse to intervene in a case where the party
asserting the claim has been negligent in prosecuting his rights.
Laches is appropriate when a person is aware of his rights yet
fails to act. Johnson v. Estate of Shelton (1988), 232 Mont. 85,
90, 754 P.2d 8 2 8 , 8 3 1 .
Finally, the statute was sufficiently vague to grant the DOR
judicial deference in the interpretation and implementation of
liquor licensing law. For these reasons, I would affirm the
District Court's granting of summary judgment in favor of the DOR.
/
December 3, 1991
CERTIFICATE OF SERVICE
I hereby certify that the following order was sent by United States mail, prepaid, to the following
named:
Chadwick H. Smith
Smith Law Firm
P.O. Box 604
Helena, MT 59624
R. Bruce McGinnis, Tax Counsel
Dept. of Revenue, Office of Legal Affairs
Mitchell Bldg.
Helena, MT 59620
ED SMITH
CLERK OF THE SUPREME COURT
STATE ORMONTANA
BY:
~e~d$f '1