                                        No. 12548

          I N THE SUPREME C U T QF THE STATE O MONTANA
                           OR                 F

                                               1974



THEODORE CARKULIS, D i r e c t o r
of t h e Department of S o c i a l and
R e h a b i l i t a t i o n S e r v i c e s of t h e
S t a t e o f Montana,

                                  Petitioner,



J O H N DOE, i n d i v i d u a l l y and on behalf
of a l l o t h e r s i m i l a r l y s i t u a t e d ,

                                  Respondents.




ORIGINAL PROCEEDING:

      For P e t i t i o n e r :

              Thomas H. Mahan argued, Helena, Montana

      For Respondents:

           Steven L . Bunch argued, Helena, Montana
           Nick R o t e r i n g appeared, Helena, Montana
           N e i l Haight appeared, Helena, Montana
      For Amicus Curiae:
           James B. Wheelis, Missoula, Montana
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                                                       Submitted : Januaq- -&By 1974

                                                        Decided   :m7        1914
Filed :    lh'U8' 7 1974
Mr. Justice John C. Harrison delivered the Opinion of the Court.
        This is an original proceeding brought by the director
of the Department of Social and Rehabilitation Services for the
purpose of obtaining a declaratory judgment under Title 93,
Chapter 89, R.C.M. 1947.   Petitioner requests this Court to
declare H.B. 60 of the Forty-third Legislative Assembly uncon-
stitutional.   The named respondent, a property owner of Lewis
and Clark County, appears individually and on behalf of others
similarly situated.   The Court invited participation of those
interested in the outcome of the proceedings.
        The essential allegations of the petitioner's complaint
are :
        1.   That the respondents, individually and as a class,
own real estate in the State of Montana upon which has been placed
liens by reason of the fact that they have applied for and are
receiving or have received at some time since July 1, 1953, wel-
fare assistance through the old age assistance or aid to the dis-
abled assistance plans of the Welfare Act.
        2.   That, as a condition precedent to receiving said
assistance, all such recipients have been required to sign an
agreement for a lien on real property, acknowledging and agreeing
that the amount of all assistance thereafter paid to the appli-
cant shall constitute an obligation and an indebtedness of the
applicant or recipient to the state and county.
        3.   That there are approximately 100,000 individuals who
have received aid over the period from 1953 who now have liens
against their property in the 56 counties of the state.
        4.   That petitioner acts as an agent for the 56 counties
and the federal government in the recovery of benefits paid, and
that over the years the counties, state and federal government
have benefited to the extent of approximately a quarter million
dollars,       ($250,000) p e r y e a r .

             5.     That under t h e l i e n law, s e c t i o n 91-3601,                 R.C.M.

1947, t h e l i e n h a s a No. 4 p r i o r i t y i n t h e o r d e r o f payment o f

e s t a t e debts.       Under t h e p r o v i s i o n s o f H.B.         60, t h a t p r i o r i t y

d r o p s t o No. 5 c a t e g o r y , t h a t of a g e n e r a l c r e d i t o r , and t h a t i n

s u c h a c l a s s t h e s t a t e would s u f f e r a r e d u c t i o n of a r e c o v e r y i f

n o t a t o t a l l o s s of i t s c l a i m as a g e n e r a l c r e d i t o r .

             There a r e no q u e s t i o n s of f a c t t o be l i t i g a t e d .            There

r e m a i n . o n l y q u e s t i o n s of law f o r o u r c o n s i d e r a t i o n :

              (1) Could t h e L e g i s l a t u r e r e t r o a c t i v e l y r e n d e r l i e n s on

r e a l p r o p e r t y u n e n f o r c e a b l e i n view of t h e p r o v i s i o n s of t h e
Montana C o n s t i t u t i o n ?

              ( 2 ) I n t h e e v e n t t h a t H.B.      60 i s u n c o n s t i t u t i o n a l , f o r

t h e r e a s o n t h a t t h e L e g i s l a t u r e may n o t r e n d e r w e l f a r e l i e n s on

r e a l p r o p e r t y u n e n f o r c e a b l e i n a r e t r o a c t i v e manner, would t h e

e n t i r e a c t be n u l l and v o i d , o r o n l y t h a t p o r t i o n t h a t i s r e t r o -
a c t i v e i n nature?

             P r i o r t o c o n s i d e r i n g t h e two above i s s u e s w e n o t e t h a t

i n a r e c e n t o p i n i o n o f t h i s C o u r t , S t a t e e x r e l . R o b e r t L. Wood-

ah1     v. Straub,               Mont   .-
                                         1         -P.2d                ,   3 1 St.Rep.       138, we
h e l d t h a t t h e 1973 L e g i s l a t u r e c o u l d e n a c t p r o s p e c t i v e o r a n t i c i -

p a t o r y l e g i s l a t i o n t o become e f f e c t i v e J u l y 1, 1973, under t h e

t e r m s of t h e 1972 C o n s t i t u t i o n which became e f f e c t i v e on J u l y 1,

1973.

             A s t o the f i r s t i s s u e presented, t h e r e t r o a c t i v e e f f e c t

of t h e A c t , we answer i n t h e a f f i r m a t i v e .           A s n o t e d above, from

1953 t o 1973, a s t a t u t o r y l i e n was r e c o r d e d a s s e c u r i t y f o r r e -
imbursement f o r a l l p e r s o n s r e c e i v i n g s p e c i f i e d a i d g r a n t s .           The
e f f e c t of H.B.      60 i s t o remove t h e l i e n p r i o r i t y of t h e w e l f a r e

c l a i m and r e d u c e i t t o t h a t o f an o r d i n a r y g e n e r a l c r e d i t o r c l a i m .
The p e t i t i o n e r a r g u e s t h a t i n s o d o i n g t h e l e g i s l a t u r e d i m i n i s h e d
an obligation due the State of Montana and that such action
would be clearly unconstitutional under Article 11, 5 31, of the
1972 Constitution of Montana, which provides:
       "No ex post facto law nor any law impairing the
       obligation of contracts, or making any irrevocable
       grant of special privileges, franchises, or im-
       munities, shall be passed by the legislature."
        We do not agree with petitioner's position.    We have care-
fully examined the authorities cited in the briefs and find those
relied upon by the respondent to be more persuasive.    In 1942
the Supreme Court of Indiana in a factual case very similar to
this case, County Dept. of Pub. Welfare v. Potthoff, 44 N.E.2d
494, held that the state's contractual rights were not subject
to the protection of the contract clause stating:
       "While the contract clause of the Constitution
       protects parties dealing with the state, it does
       not, of course, affect the validity of statutes
       releasing obligations due the state. * * * "
        In Potthoff the court found that the real party in interest
to the contract was the state, not the State Welfare Department,
thus the statute was merely a voluntary release of the contractual
right of the contracting party.
        The rationale of the Potthoff decision indicates that the
grant to an agency of the state does not, and cannot, vest rights
and can thus be both retroactively and prospectively repealed by
the Legislature.   H.B. 60 is, therefore, a legitimate and con-
stitutional exercise of legislative power.   16 C.J.S. Constitu-
tional Law 5 243; 29 ALR 2d 731.
       Having affirmatively decided the first issue we need not
consider the second.
       The judgment is affirmed.
                                       A
We concur:       '.



  Chief Justice




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