Helena Parents Commission v. Lewis & Clark County Commissioners

No. 95-579

IN THE SUPREME COURT OF THE STATE OF MONTANA

1996

HELENA PARENTS COMMISSION, et al.,

Plaintiffs and Appellants,

JUL 25 1996 ,j

v.

&J J&&J :

LEWIS AND CLARK COUNTY COMMISSIONERS, et al., CLERK OF SUPREME COURT, )

STAtE OF MOHTAA)* .

Defendants and Respondents

APPEAL FROM: District Court of the First Judicial District,

In and for the County of Lewis and Clark,

The Honorable Jeffrey M. Sherlock, Judge presiding.

COUNSEL OF RECORD:

For Appellants:

Lawrence G. Allen and William Wewer,

Wewer Law Firm, Helena, Montana

For Respondents:

Allen B. Chronister, Chronister, Moreen

& Larson, Helena, Montana

(for Lewis and Clark County Respondents)

P. Keith Keller, Keller, Reynolds, Drake,

Johnson & Gillespie, Helena, Montana

(for School District Respondents)

Submitted on Briefs: May 2, 1996

Decided: July 25, 1996

Filed: .

Justice Terry N. Trieweiler delivered the opinion of the Court.

Appellants, the Helena Parents Commission and several

individuals (HPC), filed a complaint in the District Court for the

First Judicial District in Lewis and Clark County in which they

sought a declaratory judgment against respondents, Lewis and Clark

County and Helena School District Number One, related to certain

investments of public funds made by them from 1991 to present.

Respondents filed motions to dismiss and after a hearing, the

District Court granted the dismissal. The Court dismissed a claim

against the County Attorney for failure to state a claim and

dismissed the other claims for lack of standing. HPC appeals the

court's order of dismissal. We affirm that part of the District

Court's order which pertains to the County Attorney and reverse the

remainder of the order in which the Court concluded that HPC did

not have the requisite standing.

Two issues are presented on appeal:

1. Did the District Court err when it dismissed HPC's claim

against both respondents for lack of standing?

2. Did the District Court err when it dismissed HPC's claim

against the County Attorney for failure to state a claim?

FACTUAL BACKGROUND

Appellants, Helena Parents Commission and several individuals

(HPC), brought a declaratory judgment action, in which they asked

the District Court to interpret relevant Montana statutes and

determine the parties' rights pursuant to those statutes. HPC

2

contends that Lewis and Clark County and Helena School District

Number One (respondents) illegally managed public funds from 1991

to the present. HPC asserts standing as property taxpayers

residing in Lewis and Clark County, as parents who have children

attending school in Helena School District Number One, or as

persons who receive benefits or services from local government

entities.

HPC's complaint consists of several counts:

Count I alleges that respondents illegally invested School

District and County funds in certain collateralized mortgage

obligations (CMOS) ; Count II alleges that Lewis and Clark County

illegally purchased the School District's illegal CM0 investments;

Count III alleges that Lewis and Clark County illegally invested

its own money in CMOS; Count IV alleges that there was an illegal

investment concerning the County's bond sinking funds in CMOS;

Count V alleges that the County Treasurer violated her statutory

duty to protect the investments of the County's bond sinking funds;

Count VI alleges that the Treasurer or Finance Officer made an

improper accounting of interest earned on bond sinking fund

investments; and Count VII alleges that the Lewis and Clark County

Attorney had an affirmative duty to pursue legal recourse and seek

recovery of the losses against such government officials but failed

to do so despite being informed by HPC prior to its filing of the

request for declaratory judgment. HPC contended that these

investments of public funds were not only illegal pursuant to

3

statute, but also resulted in a loss of more than $5.5 million of

property tax revenue intended to support taxpayer services provided

by the School District and the numerous local government entities

of Lewis and Clark County.

Respondents filed a motion to dismiss and after a hearing, the

District Court granted the dismissal. The court dismissed the

claim against the County Attorney for failure to state a claim and

dismissed the other claims for lack of standing. HPC appeals the

court's order of dismissal.

ISSUE 1

Did the District Court err when it dismissed HPC's claim

against both respondents for lack of standing?

The question of whether the District Court properly granted

the motion to dismiss is a conclusion of law. Common Cause v. Argenbright

(Mont. 1996), 917 P.2d 425, 427, 53 St. Rep. 386, 387. We review

a district court's conclusions of law to determine whether the

court's interpretation and application of the law is correct. Jim’s

ExcavatingSew V. HKMAssocs. (1994), 265 Mont. 494, 501, 878 P.2d 248,

252.

When it considers a motion to dismiss made pursuant to

Rule 12(b) (6), M.R.Civ.P, a court must view the allegations in the

light most favorable to the plaintiff and accept as true all facts

well pleaded. Lockwoodv. KR. Grace&Co. (1995), 272 Mont, 202, 207,

900 P.2d 314, 317. A complaint should not be dismissed for failure

to state a claim unless it appears beyond doubt that the plaintiff

4

can prove no set of facts in support of his claim which would

entitle him to relief. Farrisv. Hutchinson (1992), 254 Mont. 334, 336,

838 P.2d 374, 375.

The District Court concluded that HPC lacked standing and

dismissed HPC's complaint. "In essence the question of standing is

whether the litigant is entitled to have the court decide the

merits of the dispute or of particular issues." Worth v. Seldin ( 19 7 5 ) ,

422 U.S. 490, 498. In addition, "when standing is placed in issue

in a case, the question is whether the person whose standing is

challenged is a proper party to request an adjudication of a

particular issue and not whether the issue itself is justiciable."

Flastv. Cohen (19681, 392 U.S. 83, 99-100. We have stated that the

following criteria must be satisfied to establish standing:

(1) The complaining party must clearly allege past,

present or threatened injury to a property or civil

right; and (2) the alleged injury must be distinguishable

from the injury to the public generally, but the injury

need not be exclusive to the complaining party.

Sanders v. Yellowstone County (Mont 19 96 ) , 915 P.2d 196, 198, 53 St. Rep.

305, 306 (citing Stewartv. BoardofCountyComm’rs (1977), 175 Mont. 197,

201, 573 P.2d 184, 186).

As to the injury requirement, we have stated that a plaintiff

is required to allege "a personal stake in the outcome of the

controversy," Bowenv.McDonald (Mont. 1996), 915 P.2d 201, 206, 53

St. Rep. 343, 346 (citing Olsonv. DepartmentofRevenue (1986) , 223 Mont.

464, 469, 726 P.2d 1162, 1166 ) ; Western Litho v. Board of County Comm’rs

5

(1977), 174 Mont. 245, 247, 570 P.2d 891, 892 (quoting Bakerv. Cur

(19621, 369 U.S. 186, 204), and that 'l[ilt is not enough that

appellants allege an injury which others may have suffered by the

operation of some statute. They must allege an injury personal to

themselves as distinguished from one suffered by the community in

general." Olson, 233 Mont. at 470, 726 P.2d at 1166. But see Grossman

v.DepartmentofNaturalResources (1984), 209 Mont. 427, 439, 682 P.2d 1319,

1325 (holding that in special circumstances, presenting issues of

an urgent nature, this Court will accept original jurisdiction and

drape the taxpayer with standing). The requirement that a

plaintiff demonstrate an injury "is most easily satisfied if a

plaintiff alleges either a direct economic injury or alleges that

she is confronted with the prospect of criminal prosecution." Eric

J. Kuhn, Comment, Stood UQ at the Courthouse Door, 63 Geo. Wash. L.

Rev. 886, 891 (1995) (citing Pennelv.CityofSanJose (1988), 485 U.S. 1,

8 (concluding that the likelihood of enforcement of a rent-control

ordinance causing lower rents for landlords is sufficient to

constitute an injury-in-fact) and Virginia v. American Booksellers Ash

(1988), 484 U.S. 383, 392-93).

Here, plaintiffs alleged that the government will impose tax

burdens on them as it seeks to recoup losses and that the

investments will result in a lessening of governmental services.

These allegations of an economic injury satisfy the injury

requirement.

The District Court, however, did not conclude that HPC failed

to meet the injury requirement. Instead, it based its dismissal of

HPC's complaint on its failure to meet the second requirement for

standing--"the alleged injury must be distinguishable from the

injury to the public generally.'~ Sanders, 915 P.2d at 198, 53 St.

Rep. at 306. In dismissing HPC's complaint, the Court relied on

Chovanakv.Matthews (1948), 120 Mont. 520, 527, 188 P.2d 582, 585, and

stated that "the interest of a citizen, electorate, taxpayer, and

resident of Lewis and Clark County is not, alone, sufficient to

invoke the exercise of judicial power." In so holding, the court

failed to consider that "the injury need not be exclusive to the

complaining party," Sanders, 915 P.2d at 198, 53 St. Rep. at 306, and

failed to consider Leev.Siute (1981), 195 Mont. 1, 635 P.2d 1282.

In Lee, we discussed Chovanak and held that a plaintiff who

drove an automobile on Montana's highways had sufficient standing

to attack, via a declaratory judgment, the constitutionality of a

55 mile-per-hour speed limit proclaimed by the attorney general.

Lee, 195 Mont. 1, 7, 635 P.2d 1282, 1285. In Lee, the State claimed

that the plaintiff lacked standing because all members of the

driving public had an affected interest in the statute, and

attempted to dismiss the case on those grounds. We distinguished

Chovanak, rejected defendant's argument, and noted that such an

argument would render the Uniform Declaratory Judgment Act

meaningless. We stated:

7

In that case [Chovanakl Chovanak attacked a 1945 Montana

statute providing for the licensing of slot machines

owned and operated by religious, fraternal, charitable or

nonprofit organizations. He sued as a resident, citizen

and elector. This Court pointed out that he was suing

against gambling in general, and said that it appeared

from his complaint that slot machines, licensed or

unlicensed, were utterly anathema to him. This Court

found no controversy between him and the defendants in

that case.

On the other hand, Gary Lee is directlv affected by

the operation of the statute he attacks. . . . The

statute he attacks operates against him and all drivers

in Montana directly. All members of the driving public

have an affected interest under the statute attacked, but

that does not mean that no member of that driving public

can question the constitutional validity of the statute

without being arrested for a violation. The acts of the

legislature which directly concern large seqments of the

public, or all the oublic, are not thereby insulated from

judicial attack. Otherwise, the Uniform Declaratory

Judgment Act would become largely useless . . .

Lee, 195 Mont. at 7, 635 P.Zd at 1285 (emphasis added). Therefore,

we concluded that while the harm must be distinguishable from

injury to the public in general, it need not be an expressly unique

harm. See also O’Donnell Fire Serv. cf.! Equip. Co. Y. Billings ( 19 8 5 ) , 2 19 Mont . 3 17,

320, 711 P.2d 822, 824; Stewartv.BoardofCountyComm’rs (1977), 175 Mont.

197, 201, 573 P.2d 184, 186.

This case is similar to Lee in several respects. While Lee

asked for a declaratory ruling concerning the legality of the

Attorney General's action as measured by the 1972 Montana

Constitution, in this case, HPC asks for a declaratory ruling

concerning various government officials' actions pursuant to

relevant Montana statutes. Further, HPC alleges direct injury from

the conduct complained of. HPC alleges that those of its members

8

who pay property taxes will have them increased, that those of its

members who have children in school will see a reduction in

opportunities, and that those of its members who receive various

public services will see a reduction in those services as the

government seeks to recoup its alleged $5.5 million in losses. Not

everyone who claims they will be injured claims to have been

injured in the same way, and while each plaintiff claims a form of

harm in common with other members of a larger class of people, the

harm each claims is not common to all members of the general

public.

Not only have we held that the harm need not be exclusive to

the plaintiff, but the United States Supreme Court has also held

similarly. As one commentator noted:

The [United States Supreme] Court's refusal to serve "as

a forum in which to air . . . generalized grievances"

should be distinguished from situations in which a large

group of people share the same injury. In the former

situation the Court typically denies standing; in the

latter situation the Court has indicated a willingness to

adjudicate on the merits.

Kuhn, Stood Uo at the Courthouse Door, 63 Geo. Wash. L. Rev. at 895

(footnotes omitted).

The United States Supreme Court demonstrated this willingness

to invest large groups of people with standing when it upheld the

standing of a group of Georgetown law students to contest a

railroad rate increase approved by the Interstate Commerce

Commission. UnitedStatesv. SCRAP (1973), 412 U.S. 669. The students

argued that an increase in the cost of shipping would discourage

9

recyclable containers in favor of disposables and that some of the

disposables would be discarded in parks frequented by the students,

causing them aesthetic injury. The Supreme Court accepted this

contention. "To denv standinq to nersons who are in fact injured

simply because manv others are also iniured, would mean that the

most iniurious and widespread Government actions could be

questioned bv nobodv." SCRAP, 412 U.S. at 688 (emphasis added); see

also SierraClub V. Morton (1972), 405 U.S. 727, 734 (holding that "the

fact that particular environmental interests are shared by the many

rather than the few does not make them less deserving of legal

protection through the judicial process.").

For these reasons we reverse the order of the District Court

dismissing HPC's complaint for lack of standing.

ISSUE 2

Did the District Court err when it dismissed HPC's claim

against the County Attorney for failure to state a claim?

We review a district court's conclusions of law to determine

whether the court's interpretation and application of the law is

correct. Jim’s Excavating Serv. V. HKMAssocs. (1994), 265 Mont. 494, 501,

878 P.2d 248, 252. As stated above, in considering a motion to

dismiss made pursuant to Rule 12(b) (6), M.R.Civ.P., a court must

view the allegations in the light most favorable to the plaintiff

and accept as true all facts well pleaded. Lockwood v. W.R. Grace & Co.

(1995)r 272 Mont. 202, 207, 900 P.2d 314, 317

10

Count VII of HPC's complaint addresses the County Attorney's

duty to prosecute public officials for illegal investments.

Specifically, the complaint alleges that "the County Attorney has

refused to prosecute or otherwise pursue a course of legal action

against the governmental officials, officers, employees or agents

involved in the mismanagement of County, School District, and Local

Authority funds." The District Court dismissed HPC's complaint

against the County Attorney for failure to state a claim.

It is well established that a decision as to whether or not to

prosecute and what charge to bring against an individual is

entirely within the discretion of the county attorney. state v. Lemmon

(19841, 214 Mont. 121, 126, 692 P.2d 455, 457. Moreover, a county

attorney 'I is a quasi-judicial officer who enjoys common law

immunity from civil liability for conduct within the scope of his

duties." Ronekv. GallatinCounty (1987), 227 Mont. 514, 516, 740 P.2d

1115, 1116. See also State ex rel. Fletcher v. District Court ( 19 93 ) , 2 6 0 Mont . 4 10 ,

415, 859 P.2d 992, 995; Lemmon, 214 Mont. at 126, 692 P.2d at 457.

Therefore, the District Court correctly dismissed HPC's claim

against the Lewis and Clark County Attorney.

We affirm the District Court's dismissal of the complaint

against the County Attorney, reverse the court's dismissal of the

remainder of the complaint, and remand for further proceedings.

We concur:

Chief Justice

Justices

12

Justice W. William Leaphart, specially concurring.

I concur with the Court's conclusion that the claim against

the county attorney was properly dismissed and that HPC has

standing. I specially concur, however, to note that § 20-3-332,

MCA, which was invoked by the plaintiffs and discussed by the

District Court, provides authority for HPC's standing to sue the

school district trustees. Section 20-3-332(2), MCA, provides that:

(2) The trustees of each district shall be

responsible for the proper administration and utilization

of all moneys of the district in accordance with the

provisions of law and this title. Failure or refusal to

do so shall constitute grounds for removal from office.

Those trustees consenting to illegal use of the moneys

shall be jointly and individually liable to the district

for any losses the district has realized. The county

attorney shall prosecute any proceeding arising pursuant

to this section, or a party seeking such action may

retain private counsel. The party commencing the action

shall be liable for the costs if the action fails.

[Emphasis added.]

Section 20-3-332(2), MCA, provides for trustee liability for

illegal use of monies. The statute also clearly envisions that, in

addition to the county attorney being able to file suit to impose

this liability on behalf of the public, other private parties may

retain counsel and seek to impose the liability as well. 1n

recognizing that parties may retain private counsel and file suit

pursuant to this statute, the legislature has acknowledged that

private parties too will be injured by the illegal use of monies

and that such injury is distinguishable from the injury to the

public generally. Stewart v. Board of County Commr's (1977), 175

Mont. 197, 201, 573 P.2d 184, 186. If plaintiffs, as parents and

taxpayers, do not qualify as such "parties," then it is difficult

13

to imagine who would. Accordingly, I would hold that HPC has

standing to sue the school district trustees based upon the narrow

provisions of 5 ZO-3-332(2), MCA.

14

-” i

CERTIFICATE OF SERVICE

I hereby certify that the following certified order was sent by United States mail, prepaid, to the

follqwing named:

Lawrence G. Allen, Esq. -.

William Wewer, Esq. -7

Box 555

Helena MT 59624-0555

Allen B. Chronister

Chronister, Moreen & Larson

P.O. Box 1152

Helena, MT 59624

Keith Keller

Keller, Reynolds, Drake, Johnson & Gillespie -

38 South Last Chance Gulch

Helena, MT 59601

ED SMITH

CLERK OF THE SUPREME COURT

STATE OF MONTANA

Deputy