SKILLMAN v DEPT OF STATE LANDS

Annotate this Case

Download PDF

No. 80-47 I N THE SUPREME COURT O T E STATE O M N A A F H F OTN 1980 ED SKILLMAN, P l a i n t i f f and A p p e l l a n t , THE DEPARTMENT O STATE LANDS O THE F F STATE O MONTANA; THE BOARD O LAND F F COMISSIONERS a n d JAMES R. FOSTER, D e f e n d a n t s and R e s p o n d e n t s . Appeal from: The D i s t r i c t C o u r t o f t h e F i r s t 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 County o f L e w i s and C l a r k , The Honorable P e t e r G. Meloy, J u d g e p r e s i d i n g . Counsel o f Record: For Appellant: H a r r i s o n , Loendorf and P o s t o n , H e l e n a , Montana For Respondents : David Woodgerd, Department o f S t a t e Lands, H e l e n a , Montana H. A. B o l l i n g e r , Bozeman, Montana S u b m i t t e d on B r i e f s : Decided : J u n e 5 , 1980 J L 2 8 1980 U J u s t i c e John Conway H a r r i s o n d e l i v e r e d t h e Opinion of t h e Court. Mr. Respondent Ed S k i l l m a n p e t i t i o n e d t h e D i s t r i c t C o u r t f o r j u d i c i a l r e v i e w of a d e c i s i o n by t h e S t a t e Board of Land Commissioners t o renew a l e a s e of s t a t e l a n d t o James R. Foster. The Board of Land Commissioners had renewed t h e l e a s e a f t e r f i n d i n g t h a t F o s t e r had a p r e f e r e n c e r i g h t . The D i s t r i c t C o u r t h e l d t h e Board of Land Commissioners e r r e d i n renewing t h e lease. The c o u r t remanded t h e c a s e t o t h e Board w i t h d i r e c t i o n s t o c a n c e l t h e F o s t e r l e a s e and lease t h e land without a preference r i g h t . The Department of S t a t e Lands and t h e S t a t e Board of Land Commissioners a p p e a l t h e d e c i s i o n of t h e D i s t r i c t C o u r t a s s e r t i n g t h e l e a s e t o F o s t e r s h o u l d be r e i n s t a t e d . S k i l l m a n c r o s s - a p p e a l s con- t e n d i n g t h e c o u r t s h o u l d have awarded t h e lease t o him r a t h e r t h a n o r d e r i n g t h e l e a s e reopened f o r b i d s . The f a c t s i n t h i s c a s e a r e n o t d i s p u t e d by t h e p a r t i e s . F o s t e r h e l d a S t a t e of Montana s u r f a c e l e a s e t o 6 4 0 acres of g r a z i n g l a n d i n Park County, Montana. F e b r u a r y 28, 1979. The l e a s e e x p i r e d on On J a n u a r y 2, 1979, F o s t e r a p p l i e d t o renew h i s l e a s e on t h e l a n d a t a r a t e of $7.50 p e r AUM (animal-unit-month). On J a n u a r y 23, 1979, S k i l l m a n a p p l i e d t o lease t h e l a n d a t a r a t e of $18.75 p e r AUM. F o s t e r was n o t i f i e d of t h e b i d s u b m i t t e d by S k i l l m a n and informed t h a t a s c u r r e n t lessee he was e n t i t l e d t o e x e r c i s e a p r e f e r e n c e r i g h t t o meet t h e b i d . F o s t e r e x e r c i s e d t h e p r e f e r e n c e and m e t t h e b i d on F e b r u a r y 22, 1979. The l e a s e was renewed t o him on F e b r u a r y 28, 1979. F o s t e r a l s o r e q u e s t e d and was g r a n t e d a h e a r i n g t o d e t e r m i n e whether t h e b i d was i n t h e b e s t i n t e r e s t o f t h e S t a t e of Montana. S t a t e Land Commissioner Leo B e r r y con- d u c t e d t h e h e a r i n g on t h e m a t t e r on March 27, 1979. Evi- dence i n t r o d u c e d a t t h e h e a r i n g showed t h a t F o s t e r had s u b l e a s e d t h e l a n d t o J i m S e r r a z z e n b u t had n o t f i l e d a s u b l e a s e form w i t h t h e Commissioners. Subsequent t o t h e h e a r i n g , Commissioner B e r r y recommended t h a t a renewal l e a s e be i s s u e d t o F o s t e r a t t h e r a t e of $7.50 p e r AUM. The Board a c c e p t e d t h e recommendation and renewed t h e l e a s e a t t h e $7.50 r a t e . On J u l y 2 , 1979, t h e Department of S t a t e Lands c a n c e l e d F o s t e r ' s l e a s e f o r f a i l u r e t o f i l e a sublease. On c a n c e l - l a t i o n of t h e lease, i t was e x p l a i n e d t o F o s t e r t h a t h i s l e a s e would be renewed i f he p a i d a p e n a l t y of 50 p e r c e n t of t h e a n n u a l r e n t a l of t h e l a n d . F o s t e r p a i d t h e p e n a l t y , and the lease was reinstated. The f o l l o w i n g i s s u e i s r a i s e d by t h e Department of S t a t e Lands f o r review: Did t h e D i s t r i c t C o u r t err i n d e t e r m i n i n g F o s t e r s h o u l d n o t be g r a n t e d a p r e f e r e n t i a l r i g h t t o l e a s e t h e l a n d i n q u e s t i o n under t h e a u t h o r i t y of J e r k e v . S t a t e Department of Lands ( 1 9 7 9 ) , Mont. , 597 P.2d 49, 36 St.Rep. 389? Respondent S k i l l m a n r a i s e s t h e f o l l o w i n g i s s u e on cross-appeal: Did t h e D i s t r i c t C o u r t err i n d e c l a r i n g t h e l a n d i n q u e s t i o n s h o u l d be reopened f o r p u b l i c b i d r a t h e r t h a n awarding t h e lease t o S k i l l m a n ? The arguments of t h e S t a t e a r e n o t p e r s u a s i v e i n t h i s case. Although t h e S t a t e i s c o r r e c t i n s t a t i n g t h a t J e r k e i s l i m i t e d t o i t s f a c t s , t h e d i s t i n c t i o n s made by t h e S t a t e a r e not f a t a l t o i t s application here. A s Chief ~ u s t i c e Haswell p o i n t e d o u t i n J e r k e , t h e c r u c i a l p o i n t of t h e case is this: "To a l l o w a n e x i s t i n g lessee who d o e s n o t u s e t h e land t o exercise a preference r i g h t constit u t e s a n u n c o n s t i t u t i o n a l a p p l i c a t i o n of t h e preference r i g h t s t a t u t e , s e c t i o n 81-405(1), R.C.M. 1947, now s e c t i o n 77-6-205 (1) MCA." , 597 P.2d a t 51, 36 St.Rep. a t 392. The m e r e f a c t t h a t t h e l e s s e e i n t h i s c a s e i s a n i n d i v i d u a l i n s t e a d of a g r a z i n g d i s t r i c t i s n o t s u f f i c i e n t l y m a t e r i a l t o t h e p o l i c y involved t o disallow t h e a p p l i c a t i o n of t h e p r e c e d e n t . F u r t h e r , i f t h e c a s e i s d i s t i n g u i s h a b l e and J e r k e s h o u l d n 6 t be c o n t r o l l i n g a s p r e c e d e n t , t h e r e i s even more j u s t i f i c a t i o n f o r a p p l y i n g t h e r a t i o n a l e of J e r k e h e r e . In J e r k e , a l t h o u g h t h e r e was a s u b l e a s e i n v o l v e d , t h e r e i s no e v i d e n c e t h a t t h e r e was a n i l l e g a l s u b l e a s e , as i n t h e c a s e before us. Here t h e l e s s e e , F o s t e r , s u b l e t h i s g r a z i n g l e a s e w i t h o u t h a v i n g t h e s u b l e a s e approved by t h e Department of S t a t e Lands a s r e q u i r e d by h i s lease w i t h t h e S t a t e . S e c t i o n 77-6-205(1), MCA, r e c i t e s i n a p p l i c a b l e p a r t : " ( 1 ) A l e s s e e of s t a t e l a n d c l a s s e d a s a g r i c u l t u r a l , g r a z i n g , town l o t o r c i t y l o t who h a s p a i d a l l t h e r e n t a l s due from him t o t h e s t a t e of h i and - - n o t v i o l a t e d - t e r m s - -s lease who h a s the i s e n t i t l e d t o have h i s l e a s e renewed (Emphasis s u p p l i e d . ) . . ." F u r t h e r , ARM §26.3.108(2) e s t a b l i s h e s t h e D e p a r t m e n t ' s policy: " ( 2 ) A s u r f a c e lessee h a s a p r e f e r e n c e r i g h t t o renew h i s l e a s e p r o v i d e d a l l r e n t a l s have of t h been p a i d and t h e t e r m s - -e p r e v i o u s l e a s e have n o t been --- v i o l a t e d . " (Emphasis s u p p l i e d . ) A s t r i c t r e a d i n g of t h e s e s t a t u t e s r a i s e s a s e r i o u s q u e s t i o n whether F o s t e r even had a r i g h t t o renew ( s e c t i o n 77-6-205, MCA) o r a p r e f e r e n t i a l r i g h t i n t h e l e a s i n g pro- c e d u r e (ARM § 2 6 . 3 . 1 0 8 ( 2 ) ) , when t h i s c a s e was f i l e d i n D i s t r i c t Court. Assuming h i s s u b l e a s e a r r a n g e m e n t , a l t h o u g h n o t approved by t h e Department, w a s n o t s u f f i c i e n t t o d e p r i v e him of h i s p r e f e r e n c e r i g h t , he would c l e a r l y be t h e t y p e of lessee t h a t t h e p o l i c y of J e r k e was d e s i g n e d t o a f f e c t . I n c o n s i d e r a t i o n of o u r r e a s o n i n g i n J e r k e , w e a r e compelled t o a p p l y t h e same r e a s o n i n g t o t h e c a s e b e f o r e u s . I n Jerke, w e held: "Where t h e p r e f e r e n c e r i g h t d o e s n o t f u r t h e r t h e p o l i c y of s u s t a i n e d y i e l d , i t c a n n o t be given e f f e c t . I n s u c h a s i t u a t i o n , f u l l market v a l u e can be o b t a i n e d o n l y by p u r e c o m p e t i t i v e b i d d i n g . Here, t h e Grazing D i s t r i c t , t h e h o l d e r of t h e p r e f e r e n c e r i g h t , d o e s n o t even u s e t h e l a n d ; i t c a n n o t u s e good a g r i c u l t u r a l p r a c t i c e s o r make improvements t h e r e o n . .. "To a l l o w t h e p r e f e r e n c e r i g h t t o be e x e r c i s e d i n t h i s c a s e would be t o i n s t a l l t h e Grazing D i s t r i c t a s t h e t r u s t e e of t h e l a n d . It, r a t h e r t h a n t h e Department of S t a t e Lands, would d e c i d e who w i l l occupy t h e l a n d , b u t i t would n o t be bound by a c o n s t i t u t i o n a l o r f i d u c i a r y d u t y . Under such a scheme, t h e c o n c e p t of s u s t a i n e d y i e l d would have no p l a c e . " 597 P.2d a t 51, 36 St.Rep. a t 391. There a p p e a r s t o be no o p e r a t i v e f a c t on t h e r e c o r d h e r e t h a t would j u s t i f y o v e r r u l i n g t h e t r i a l c o u r t ' s d e c i sion t o follow Jerke. Every p o i n t o f law and e v e r y p o l i c y c o n s i d e r a t i o n i s a s a p p l i c a b l e t o F o s t e r a s i t was t o t h e grazing d i s t r i c t . Therefore, the underlying r a t i o n a l e t h a t o r i g i n a l l y d e c i d e d J e r k e i s e q u a l l y d i s p o s i t i v e of t h i s case. On c r o s s - a p p e a l S k i l l m a n c o n t e n d s t h a t h e s h o u l d be awarded t h e l e a s e b e c a u s e h e was t h e h i g h e s t b i d d e r when b i d s w e r e o r i g i n a l l y opened. H e i n t e r p r e t s t h e l a n g u a g e of J e r k e and s e c t i o n 77-6-205(2), MCA, r e l a t i n g t o " p u r e comp e t i t i v e b i d d i n g " a s meaning b i d d i n g once and a s u b s e q u e n t award t o t h e h i g h e s t b i d d e r . I t would be t r u l y i n e q u i t a b l e t o f o l l o w t h i s i n t e r p r e - tation. F o s t e r was under t h e i m p r e s s i o n t h a t he would have a v a l i d p r e f e r e n c e r i g h t , and he s h o u l d n o t b e p e n a l i z e d f o r t h a t good f a i t h b e l i e f . t o b i d on t h e l e a s e . He should have a n e q u a l o p p o r t u n i t y I n d e e d , i f he i s n o t a l l o w e d t o p a r t i - c i p a t e , t h e n t h e s p i r i t of t h e c o m p e t i t i v e b i d d i n g s t a t u t e would be d e f e a t e d . I n a d d i t i o n , F o s t e r had no r e a s o n t o s u s p e c t t h a t he c o u l d n o t e x e r c i s e t h e p r e f e r e n c e r i g h t s i n c e J e r k e had n o t been d e c i d e d by t h i s C o u r t . The judgment of t h e D i s t r i c t C o u r t i s a f f i r m e d . The l e a s e i s c a n c e l e d and reopened f o r b i d d i n g by a l l p a r t i e s . W concur: e 3 4 Chief J u s t i c e , / % ~

Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.