DEPT OF REVENUE v NEW LIFE FELLOW

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No. 85-88 I N THE SUPREME COURT O F THE S T A T E O F MONTANA 1985 T H E DEPARTMENT O F REVENUE O F THE S T A T E O F MONTANA, P e t i t i o n e r and R e s p o n d e n t , NEW L I F E F E L L O W S H I P O F MONTANA, INC. , R e s p o n d e n t and A p p e l l a n t . A P P E A L FROM: D i s t r i c t C o u r t of t h e S i x t e e n t h J u d i c i a l D i s t r i c t , I n and f o r t h e C o u n t y of C a r t e r , T h e H o n o r a b l e R. C. M c D o n o u g h , Judge p r e s i d i n g . COUNSEL O F RECORD: For A p p e l l a n t : R i c h a r d 0. H a r k i n s , Ekalaka, Montana For R e s p o n d e n t : L a r r y G. Schuster, D e p t . of R e v e n u e , I l e l e n a , M o n t a n a S u b m i t t e d on B r i e f s : Decided: Filed: ; \985 , - f /I ; - & ;, 4 , &- f Clerk J u l y 11, 1 9 8 5 A u g u s t 1, 1 9 8 5 Mr. Justice Frank B. Morrison, Jr., delivered the Opinion of the Court. New Life Fellowship of Montana, Inc. (New Life) appeals the December 21, 1984, order of the Sixteenth Judicial District Court denying its motion to assess attorney's fees and costs against the Department of Revenue and awarding actual costs in the amount of $28.00 to New Life. New Life is a non-profit Montana We affirm. organization. It operates a religious and educational facility near Ekalaka , Montana, called Trails End Ranch. The Ranch consists of approximately 80 acres, plus improvements. It is used as a camp for groups of all ages. On July 24, 1981, New Life applied to the Department of Revenue for a property tax exemption for Trails End Ranch as a religious organization. The application was denied. Application for exemption as an educational institution was also made and denied. New Life appealed the denial of its exemption request to the State Tax Appeal Board (Board). The Board found on September 22, 1.983, that the "clear purpose of the camp is spiritual, moral and ethical training." fact VIII. The Board then Board's finding of concluded that pursuant to Flathead Lake Methodist Camp v. Webb (l.965), 144 Mont. 565, 399 P.2d 90, New Life is an educational institution as "its clear purpose is education in nature." Board's conclusion of law #1. Since S 15-6-201(c), MCA, exempts from taxation all property used exclusively for educational purposes, the Board reversed the Department's denial of New Life's request for an exemption. The Board's Department decision to S 2-4-702(1) (a), MCA. of Revenue the thereafter District Court, appealed pursuant the to The District Court, after considering the six issues raised, dismissed the Department's appeal in an order dated July 2, 1984. That order reserved until a future time consideration of New Life's motion for attorney's fees and costs. rs That motion b a heard on December 4, 1984, following which the District Court judge issued an order denying New Life's motion. On appeal, New Life raises the following issue: Whether or not the Department of Revenue's appeal of the Board's decision to District Court constituted a frivolous appeal made in bad faith, thus entitling New Life to costs and attorney's fees under 5 25-10-711, MCA? Section 25-10-711, MCA, states: "25-10-711. Award of costs against governmental entity when suit or defense is frivolous or pursued in bad faith. (1) In any civil action brought by or against the state, a political subdivision, or an agency of the state or a political subdivision, the opposing party, whether plaintiff or defendant, is entitled to the costs enumerated in 25-10-201 and reasonable attorney's fees as determined by the court if: "(a) he prevails against subdivision, or agency; and the state, political " (b) the court finds that the claim or defense of the state, political subdivision, or agency that brought or defended the action was frivolous or pursued in bad faith. "(2) Costs may be granted pursuant to subsection 1 notwithstanding any other provision of the law to the contrary.'' Section 25-10-711(1) (b), MCA, requires that the District Court find bad faith or a frivolous action by the State before awarding attorney's fees to the opposing party. The District Court found that this appeal was neither frivolous nor made in bad faith. We refuse to substitute our judgment for that of the District Court where the District Court is acting as the trier of fact and there is substantial evidence to support the decision of the District Court. Robinson v. Schrade (Mont. 1985), 697 P.2d 923, 42 St.Rep. 401. New L i f e ' s a l l e g a t i o n s i n i t s r e p l y b r i e f r e g a r d i n g t h e Department's selective reliance on this scope of review a p p l i e s e q u a l l y t o N e w L i f e , which i s a p p e a l i n g a d e c i s i o n o f f a c t t h a t t h e r e i s sub- a D i s t r i c t Court judge d e s p i t e t h e s t a n t i a l evidence t o support t h a t decision. The s i x t h i s s u e r a i s e d t o t h e t r i a l c o u r t by t h e D e p a r t ment questions Board's the L i f e ' s exemption s t a t u s . tive application respondent, to be application of New The t r i a l c o u r t h e l d t h e r e t r o a c erroneous, stating that only the and n o t t h e p r e v i o u s l a n d o w n e r , i s e n t i t l e d t o a refund o f t a x e s paid. within retroactive t h e bounds of Where a p o s i t i o n on a p p e a l legitimate a r g u m e n t on a "is w e l l substantial i s s u e o n which t h e r e i s a bona f i d e d i f f e r e n c e o f o p i n i o n " , an a p p e a l i s n o t f r i v o l o u s . of Business Regulation 46. A l b e r t s o n ' s I n c . v. ( 1 9 7 9 ) , 184 Mont. Department 1 2 , 1 8 , 601 P.2d 43, O b v i o u s l y , t h e D e p a r t m e n t ' s p o s i t i o n on i s s u e number s i x i s " w e l l w i t h i n t h e bounds o f l e g i t i m a t e a r g u m e n t . " N e w L i f e ' s c o n t e n t i o n t h a t t h e a p p e a l was i n bad f a i t h b e c a u s e t h e Department c h a l l e n g e d t h e e x i s t i n g law found i n F l a t h e a d Lake M e t h o d i s t Camp, supra, i s a l s o unfounded. a p p e a l o f a d e c i s i o n b a s e d on a t w e n t y - y e a r - o l d an a p p e a l made i n bad faith. The law i s n o t An case is not static. c h a n g e s t o meet t h e demands o f a c h a n g i n g s o c i e t y . It Further- more, w e a g r e e w i t h t h e D i s t r i c t C o u r t ' s f i n d i n g t h a t i s s u e one, regarding whether sively for educational New Life's purposes property within the i s used exclu- context of the l a w , was n o t r e s o l v e d by F l a t h e a d Lake M e t h o d i s t Camp, s u p r a . The f a c t s show T r a i l s End Ranch i s n o t a camp i d e n t i c a l t o t h e M e t h o d i s t camp i n t h a t c a s e . i Since t h ~ r e s s u b s t a n t i a l evidence t o support t h e t r i a l c o u r t ' s d e t e r m i n a t i o n t h a t t h e D e p a r t m e n t ' s a p p e a l was n e i t h e r f r i v o l o u s n o r made i n bad f a i t h , t h e o r d e r d e n y i n g N e w Life's motion to assess its attorney's / Department is affirmed. We concur: fees against the Mr. Justice John C. Sheehy, specially concurring: I concur with the decision of the majority in this case. However, I would rule that the appeal by the Department of Revenue on the education exemption from taxation in this case was frivolous, though the Department did have a legitimate issue for appeal on the question of retroactivity. T

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