                                                 No.    88-374

                    I N THE SUPREME COURT O F T H E S T A T E O F MONTANA

                                                       1989




MONTANA STOCKGROWERS A S S O C I A T I O N ,
J O S E P H F . "BUD" MAURER; a n d TOM
LORANG,
                    P l a i n t i f f s and R e s p o n d e n t s ,
           -vs-

THE S T A T E O F MONTANA, DEPARTMENT O F
REVENUE, and J O H N D. L a F A V E R , D I R E C T O R
O F T H E DEPARTMENT O F REVENUE,

                       D e f e n d a n t s and A p p e l l a n t s .




A P P E A L FROM:      D i s t r i c t C o u r t of t h e E i g h t h ~ u d i c i a l i s t r i c t ,
                                                                                      D
                       I n and f o r t h e C o u n t y of C a s c a d e ,
                       T h e H o n o r a b l e T h o m a s M c K i t t r i c k , Judge p r e s i d i n g .

COUNSEL O F RECORD:

           For A p p e l l a n t :

                       L a r r y G.    Schuster argued, D e p t .            of R e v e n u e , H e l e n a ,
                       Montana

           For R e s p o n d e n t :

                       T h o m a s E . H a t t e r s l e y argued a n d R o n a l d W a t e r m a n a r g u e d ;
                       G o u g h , S h a n a h a n , Johnson and W a t e r m a n , H e l e n a , M o n t a n a
                       John C . H o y t ; H o y t & B l e w e t t , G r e a t F a l l s , M o n t a n a




Filed:
Mr. Justice R.   C. McDonough delivered the Opinion of the
Court.

     This appeal concerns a judgment from the District Court
of the Eighth Judicial District, Cascade County, declaring
classification of livestock in property tax valuation
unconstitutional in violation of equal protection guarantees
in the United States and Montana Constitutions.          The
Department of Revenue (DOR) appeals this decision, and also
appeals the District Court's interpretations of applicable
statutes, its decision to take judicial notice of facts
denied by the DOR in answer to requests for admissions from
Respondent, the Montana Stockgrowers Association (MSA), and
the remedy provided the MSA for the DOR's alleged improper
assessment of taxes.      We reverse the District Court's
decision on the initial issues, and thus render the issue of
the appropriate remedy moot.

                           Issues
     (1) Did the District Court     err by concluding that the
enactment of Senate Bill 47 and     Senate Rill 283 denied MSA
equal protection of the law?
     (2) Did the District Court     err by concluding that all
livestock in Montana are business   inventory?
     (3)   Did the District Court err by taking judicial
notice of certain facts called for by the plaintiffs'
requests for admission?
     (4) Did the District Court err in its interpretation of
Chapter 330 and Chapter 613 of the Laws of Montana 1981?
     (5) Did the District Court err by fashioning a remedy
which is beyond the scope of the Uniform Declaratory
Judgments Act, and S 15-1-406, MCA?
     In the lower court, MSA, three members of MSA, and three
stock owners brought suit seeking a declaration that the
classification of livestock separate from business inventory
was invalid.      Both parties moved for judgment on the
pleadings.    The District Court granted the motion made by
MSA .
      The legislature's enactment of laws affecting the rate
of taxation for business inventory and livestock spawned the
current litigation.     In 1981, the legislature passed two
bills which affected tax rates for livestock and business
inventories.   Senate Bill 47, entitled "AN ACT TO REMOVE
LIVESTOCK, POULTRY, AND THE UNPROCESSED PRODUCTS OF BOTH FROM
CLASS SEVEN AND PLACE THEM IN CLASS SIX FOR PURPOSES OF
PROPERTY TAXATION; AND PROVIDING AN APPLICABILITY AND
IMMEDIATE EFFECTIVE DATE; AMENDING SECTIONS 15-6-136 AND
15-6-137, MCA" appeared to mandate that livestock be valued
with property defined as class six in the tax code, effective
on approval. See I Laws of Montana, Chapter 330 (1981)    .SB
47, however, did not provide a directive to code compilers to
actually amend S 15-6-136, MCA, so that livestock would be
listed in the code books with class six property following
its passage.    Instead, and engendering some confusion,
another bill also passed in 1981, accomplished the actual
code amendment. Senate Bill 283, entitled ''AN ACT TO EXEMPT
BUSINESS INVENTORIES FROM TAXATION; PROVIDING TAX CREDITS FOR
BUSINESS INVENTORY TAXES PAID PRIOR TO EXEMPTION; AMENDING
SECTIONS 15-6-136, 15-6-202, 15-8-104, AND 15-24-301, MCA;
AND REPEALING SECTIONS 15-24-402 AND 15-24-403, MCA; AND
PROVIDING EFFECTIVE DATES" directed code compilers to amend
the list of class six property contained in S 15-6-136, MCA,
to include livestock.     I1 Laws of Montana, Chapter 613
(1981).   SB   283 also directed code compilers to delete
business inventory from the list of class six property.       The
effective date of this amendment, however, was January 1,
1983.
     Following the 1981 Session, the DOR recognized that the
effect of the passage of SB 283 and SB 47, while clearly
spelling out treatment of livestock property for the tax year
1983 when SB 283 became effective, left the classification of
livestock in limbo for the tax year 1982. The title of SB 47
indicated that livestock would no longer be taxed as class
seven property effective on passage of SB 47 in 1981.
However, the placement of livestock in class six (which
provided a lower tax rate than class seven), was not
effective until SB 283 became effective, that is, in 1983.
To provide for classification in the interim, the DOR drafted
ARM § 42-21-120 (1981) which proposed classifying livestock
as class six property for the 1982 tax year.         The DOR
submitted this proposal to the Legislature's Revenue
Oversight Committee. Thus, we are assured that at least the
Committee scrutinized the DOR's interpretation of SB 43 and
SB 283. However, the Committee did not specifically poll the
legislature on the issue of whether livestock should be
treated as class six property for the 1982 tax year.
Following applicable procedures, the DOR adopted the rule and
taxed livestock as class six property for the 1982 tax year.
In 1983, code compilers specifically listed livestock as
class six property.    The legislature has not amended the
statute to provide the same exemption for livestock which has
been effective for business inventory since 1983.

                            I.
    The District Court held that no distinction exists which
would justify classification of livestock separate from
business inventory. Therefore, according to the lower court,
the classifications attempted by SB 47 and SB 283 violated
equal protection guarantees found in the Fourteenth Amendment
to the United States Constitution, and in Article 11, § 4 of
the Montana Constitution. The lower court applied both the
rational basis test and middle tier analysis to conclude that
the classification at issue violated equal protection
guarantees.
     The DOR contends that the District Court erred because
middle tier analysis does not apply, and a review of the
history of livestock tax treatment demonstrates that
livestock has always been reasonably classified as a distinct
type of property.     MSA responds that the District Court
correctly concluded that no distinction exists between
livestock and business inventory which would justify
disparate tax treatment under state and federal equal
protection guarantees.
     Initially, we note that middle tier scrutiny does not
apply in this case. The District Court's decision to apply
middle tier analysis rests on its interpretation of Article
XII, S 1 of the Montana Constitution, which reads:

     Section 1.    Agriculture.    (1)  The legislature
     shall provide for a Department of Agriculture and
     enact laws and provide appropriations to protect,
     enhance, and develop all agriculture.
The lower court held that the interest in agriculture
possessed by MSA resulting from the constitutional provision
mandated middle tier scrutiny citing Butte Community Union v.
Lewis (1986), 219 Mont. 426, 712 P.2d 1309. Butte Community
Union held that the guarantee to the needy to receive state
assistance as provided by Article XII, S 3 (3) of the Montana
Constitution,    mandated    middle    tier    scrutiny    of
classifications burdening certain individuals' interest in
obtaining welfare benefits. We disagree that Butte Community
Union provides the rule for this case.
     Article XII, S 1 requires the Legislature to "enact laws
and provide appropriations to protect, enhance, and develop
agriculture". We disagree Article XII, § 1, imparts to stock
growers a constitutionally significant interest in tax
classifications.    The language provides a broad directive
whose specifics are implemented through legislative decision,
not by constitutional mandate.    Thus, it is in no sense a
self-executing provision which can be enforced by this Court.
See generally 16 Am. Jur. 2d Constitutional Law § 143.
Moreover, the power to exempt particular classes of
properties is specifically enumerated under Article VIII, § 5
of the Montana Constitution. Reading this provision with the
vague instruction to enact laws to benefit agriculture in
Article XII, $ 1, leads us to conclude that middle tier
scrutiny is not required. Therefore, we reverse the District
Court and hold the middle tier analysis inapplicable.
     The proper test for the classification at issue here is
the rational basis test. As explained by the United States
Supreme Court, to survive scrutiny under the rational basis
test, classifications must be reasonable, not arbitrary, and
they must bear a fair and substantial relation to the object
of   the    legislation, so that all persons        similarly
circumstanced shall be treated alike.    Eisenstadt v. Baird
(1972), 405 U.S. 438, 447, 92 S.Ct. 1029, 1035, 31 L.Ed.2d
349, 359.     In applying this test the Court in Eisenstadt
fra.med the inquiry as:

     whether there is some ground of difference that
     rationally explains the different treatment .  . .
Eisenstadt, 438 U.S. at 447.
-
     Decisions by this Court have explained and employed the
rational basis test to determine whether various tax
classifications pass equal protection muster:

         "Equal protection of the law is seldom, if
    ever, obtained; and because of the very frailty of
    human agencies, the authorities all recognize the
    right of the legislative branch of government to
    make reasonable classifications of subjects, for
    property or occupation taxes * * * and if the
    classification is reasonable, - - - -o -the
                                    and if all f
    subiects withinauiven class are accorded --the same
    treatment, the regislation cannot be said to deny
    to anyone within such class the equal protection of
    the law, even though the burden imposed upon him
    may be more onerous than that imposed upon a member
    of another class. [citing cases] ~ u to justify
                                             t
    such discriminatory legislation, and avoid the
    condemnation - - Fourteenth Amendment - -
                  of the    -   -   -   -   -   -to the
                                                    ~-~ - - - - -   -   - .   -   -



    federal Constitution, the cla~sification - -be
                                               must
    reasonable   --that   is.  must    be  based   uwon                       L
    substantial distinctions which really make -
                                               - one
    class different from another."
Peter Kiewit Sons' Co. v. State Board of Equalization (1973),
161 Mont. 140, 147, 505 P.2d 102, 106-07 (quoting State ex
rel. Schulz-Lindsay v. Board of Equalization (1965), 145
Mont. 380, 403 P.2d 635; emphasis in original).      An older
case concerning tax classifications reflects the same
judicial deference for legislative classifications of taxable
property in analyzing equal protection guarantees:

    A classification is not open to objection unless it
    precludes the assumption that the classification
    was made in the exercise of legislative judgment
    and discretion. [citation omitted].
    Any classification is permissible which has a
    reasonable relation to some permitted end of
    governmental action. [citations omitted].
    When there is a difference between various
    properties, it need not be great or conspicuous in
     order to    warrant   classification.    [citations
     omitted].   ...
     It makes no difference that the facts on which the
     classification is based may be disputed or their
     effect opposed by argument and opinions of serious
     strength.   It is not within the province of the
     courts   to   arbitrate  any   such   contrariety.
     [citation omitted].
Bank of Miles City v. Custer County (1933), 93 Mont. 291,
296-97, 19 P.2d 885, 887.
     Under this authority, the issue here is whether there
exists a distinction between business inventory and livestock
sufficient to justify a classification which exempts business
inventory from taxation while taxing livestock at 48 of its
market value.   The Colorado Supreme Court faced a similar
question on different tax treatment for mobile homes and
other residential property, and in disposing of the appeal,
the Court explained the operation of the rational basis test
in judicial inquiry over such distinctions:

     [A]fter deciding that movable structures have been
     placed in a separate class for taxation, we need
     now only decide whether the legislature could have
     constitutionally treated and classified movable
     structures     differently    than     conventional
     residences.             .  If the classification
     conceivably     rests    upon    some    reasonable
     considerations of difference or policy, there is no
     constitutional violation. The burden is therefore
     on the one attacking the classification to negative
     every conceivable basis which might support it, at
     least where no fundamental right is imperiled.
American Mobile Home Association, Inc. v. Dolan (Colo. 1976),
553 P.2d 758, 762 (emphasis added).
     The record leaves no doubt that the burden MSA must bear
has not been met.   The State has affirmatively demonstrated
not only conceivable bases for different treatment, the State
has answered MSA's contentions with actual policy reasons
submitted to successive legislatures justifying different
treatment of livestock and business inventory. For example,
a study completed in 1966 for the Montana Legislative Council
Subcommittee on Taxation pointed out certain problems in
assessing business inventories, and outlined improvements for
assessing livestock. The Study recommended an exemption for
business inventories, but not for livestock.            Other
legislative materials also demonstrated differences in
livestock and business      inventory justifying disparate
treatment.    For example, one legislator contrasted the
difference between breeding stock and business inventory
pointing out that breeding stock is not property held for
sale, rather, it is property held to produce products for
sale.   (Minutes of the Senate Taxation Committee, March 6,
1987.) Another legislator, arguing against a proposal which
would have reduced rates on livestock in 1977, pointed out
his constituency's reliance on livestock property to raise
revenue for local government.       (Minutes of the Senate
Taxation Committee, April 6, 1977.)        These legislative
materials support finding that the legislature rationally
decided livestock and business inventory should be treated
differently for property tax purposes.
     Furthermore, the    legislature has     always made    a
distinction between livestock and stocks of merchandise of
all sorts, the classification which formerly covered business
inventories. For example, in 1919 the legislature provided
for Montana's first property tax classification system. Laws
of Montana, Chapter 51 (1919). Livestock and merchandise of
all sorts appear in the 1919 classification system in the
same tax class, but are listed separately.
     The separation of livestock and merchandise within the
same class existed in Montana law until 1975. In 1975, the
legislature went further in distinguishing between these
properties by placing them in separate tax classifications
with different percentages of taxable value. See I1 Laws of
Montana, Chapter 507 (1975)  .   The legislature once again
grouped livestock and business inventories in the same class
in 1979, but maintained a separate listing in the code for
the two types of properties.     Section 15-6-136, MCA.    Of
course, finally, the separate treatment received by livestock
and business inventories in 1981 created the current dispute.
The history of separate treatment, and the legislative
debates concerning the proper classification of business
inventory and livestock, support the conclusion that the
different tax treatment for the two types of property is
justified.
     Other conceivable differences between the two types of
property also support this conclusion.      For example, one
could effectively contrast the distributions of livestock
property as compared to placement of business inventories in
Montana.   Many counties have an abundance of livestock and
little in the way of business inventories.         These and
doubtless other conceivable differences in use, productivity,
and discoverability serve to justify the classification at
issue here.     Thus, the legislature acted rationally in
classifying the two properties differently, and continuing
the tax on livestock serves the legitimate state interest in
raising revenue. We reverse the District Court and hold that
the classification at issue passes muster under the
applicable equal protection analysis.

                            11.
     The District Court also erred in holding that livestock
constitutes business inventory under $ 15-6-202(5), MCA.
Subsection (5) defines business inventory as:
     "Business inventories" includes goods primarily
     intended for sale and not for lease in the ordinary
     course of business and raw materials and work in
     progress with respect to such goods.       Business
     inventories do not include goods leased or rented
     or mobile homes held by a dealer or distributor as
     part of his stock and trade.
Section 15-6-202(5), MCA. The District Court took judicial
notice of the "fact" that livestock property by and large
becomes goods destined for sale for food consumption, and
thus concluded that livestock constituted business inventory
under the subsection.
     In construing statutory definitions according to the
intent of the legislature, it is fundamental that the
specific prevails over the general. Section 1-2-102, MCA.
The intent of the legislature in inserting livestock as class
six property through SB 283, and deleting business inventory
through the same bill, obviously indicates that the two types
of property are to receive separate treatment. In addition:
   15-1-101 (i), MCA, specifically defines livestock; S
15-24-902, MCA,     continues to    provide   an   assessment
methodology for taxing livestock; S 15-8-201, MCA, provides
that livestock is subject to the general assessment date of
the tax code; and S 15-8-706, MCA, maintains a reporting
requirement for assessors of livestock. Construction of the
definition of business inventory to include livestock would
be to presume that these assessment statutes are superfluous.
Such a construction is to be avoided. Section 1-2-101, MCA.
Finally, even though business inventory, a class of property
formerly denoted as "stocks of merchandise of all sorts", has
at times been taxed at the same rate as livestock, it has
always appeared in the tax code separately from livestock.
We find nothing in the record demonstrates that the
legislature intended to depart from the historically separate
treatment of the two properties. Thus, for all the reasons
stated above on this issue, we reverse the District Court.



     The District Court memorandum records its decision to
take judicial notice of facts alleged by the MSA as follows:

                     1.   Judicial Notice
    The Defendant's [sic] denied certain requests for
    admissions stating the requests called for legal
    conclusion.   The Plaintiff's [sic] request this
    Court take judicial notice of the matters denied by
    the Defendant's [sic].
    Specific requests denied by the Defendant [sic] are
    as follows: (numeric references correspond to
    Plaintiffs' numeration)
    1. a commercial enterprise which raises livestock
    intended for sale in the ordinary course of
    business constitutes a "business";
    2. that livestock are things which are movable at
    the time of identification to a contract for sale;
    3. that livestock constitute "personal property";

    4. that "inventory" designates personal property
    held for sale in the ordinary course of business;
    5. that livestock raised and intended for sale in
    the   ordinary  course   of  business  constitute
    "inventory";
    6. that livestock raised and intended for sale in
    the   ordinary   course of business    constitute
    "business inventory."
    The Defendant's    [sic] denials of the above
    referenced requests for admissions were improper.
    The matters requested to be admitted are not
    subject to reasonable dispute. Those matters are
    "generally   known     within   the   territorial
     jurisdiction" of this Court and are "capable of
     accurate and ready determination by resort     to
     sources whose accuracy cannot be reasonably
     questioned."   Those are the standards governing
     judicial notice of facts. Rule 201, Montana Rules
     of Evidence. Therefore, this Court takes judicial
     notice of the above mentioned facts.
We have held on the prior issue that livestock is not
included in the definition of business inventory for property
tax classification. Thus, at least in the context relevant
here, it is obvious that the District Court incorrectly
noticed "facts" supporting a legal interpretation of two
separate property classifications as one classification.
This construction violates the rule that:

     [Tlechnical words and phrases and such others as
     have acquired a peculiar and appropriate meaning in
     law . . .   are to be construed according to such
     peculiar and appropriate meaning or definition.
Section 1-2-106, MCA.     Here, the tax code supplies the
definitions applicable for determining appropriate tax
treatment of livestock and business inventory. We reverse
the District Court's decision to take judicial notice of the
terms in MSA's requests for admissions.

                             IV
     The District Court ruled that the passage of SB 43 and
SB 283 created an ambiguity in the proper classification of
livestock which must be construed against the taxing
authority. This conclusion is also erroneous and we hereby
reverse on this issue.
     The directive provided by passage of SB 283 that
livestock be specifically included in        15-6-136, MCA,
supports the DORIS argument that no ambiguity exists in
regard to tax treatment of livestock for the tax year 1983.
Since 1983, the legislature has not amended $ 15-6-136 to
exempt livestock from taxation. For the tax year 1982, the
title of SB 43 demonstrates legislative intent to place
livestock in class six effective as of the passage of SB 43.
But more specifically, the effect of passage of both SB 43
and SB 283 was spelled out in a coordination instruction
attached to SB 283:

     Section 5. Coordination instruction. Senate Bill
     47, introduced in the 47th legislature, removes
     livestock, poultry, and the unprocessed products of
     both from class seven and places them in class six
     for purposes of property taxation. If Senate Bill
     47 is passed and approved, then Section 1 of this
     act [SB 2831 is to be replaced with the following
     section:
     Section 1.   Section 15-6-136, MCA, is amended to
     read :
     15-6-136.  Class six property - description -
     taxable percentage.   (1) Class six property
     includes:
     (a) livestock and   poultry   and   the   unprocessed
     products of both;
I1  Laws of Montana, Chapter 613 at p. 1404 (1981).       The
coordination instruction attached to SR 283, the same bill
which provides the exemption for business inventory,
conclusively demonstrates that livestock property was not
included in the exemption provided for business inventory.
Therefore, the District Court erred in concluding that the
statute's treatment of livestock was ambiguous.
     As noted in the facts surrounding this dispute, SB 283
was not effective until the 1983 tax year.      Thus, as the
District Court correctly pointed out, SB 283 provides no
directive as to treatment of livestock for the tax year 1982.
Nevertheless, the effect of SB 43 and SB 283 was sufficiently
unambiguous that the DOR drafted and passed a rule which was
sent to the Revenue Oversight Committee governing treatment
of livestock for the tax year 1982. Moreover, even if SB 47
and SB 283 were ambiguous as to the types of property
included in the exemption for business inventory, such an
ambiguity relative to exemptions is generally strictly
construed against - taxpayer, not against the taxing
                    the
authority. See Montana Bankers Association v. Department of
Revenue (1978), 177 Mont. 112, 580 P.2d 909.      Finally, as
passage of the rule providing for class six treatment of
livestock indicates, the delay in the actual code amendment
was only a mistake in timing, not an ambiguity in tax
treatment. Therefore, we hold that the passage of SB 47 and
SB 283 properly classified livestock separately from business
inventory, and we reverse the District Court on this issue.

                            v.
     The last issue here concerns whether the District Court
erred in deciding the appropriate remedy for the improper
assessment of the MSA's property. Our decision that the DOR
properly assessed the MSA's property moots this issue.
Therefore, we reverse on all relevant issues and remand for
proceedings in accordance with this opinion.
