source: Caselaw Access Project

author: CHIEF JUSTICE TURNAGE JUSTICE NELSON JUSTICE TRIEWEILER

license: Public Domain

text:
    MARLENE CHOR and MARTIN ANDRE, Plaintiffs and Respondents, v. PIPER, JAFFRAY & HOPWOOD, INCORPORATED, and JOHN LAWRENCE SCHULTZ, Defendants and Appellants.
    No. 92-540.
    Submitted on July 15, 1993.
    Decided October 18, 1993.
    50 St.Rep. 1234.
    261 Mont. 143.
    862 P.2d 26.

      For Defendants and Appellants: John G. Crist and James L. Jones, Dorsey & Whitney, Billings.
    For Plaintiffs and Respondents: Gregory O. Morgan and Charles F. Proctor, Bozeman.
   CHIEF JUSTICE TURNAGE

delivered the Opinion of the Court.

The District Court for the Second Judicial District, Silver Bow County, refused to enforce three arbitration agreements entered between Marlene Chor and Piper, Jaffray & Hopwood, Inc. (Piper). Piper appeals. We reverse and remand.

The issues are:

1. Did the court err by refusing to enforce the agreements because Piper did not fully comply with Rule 21 of the National Association of Securities Dealers?

2. Did the District Court err by relying on Chor’s intent not to be bound by the legal consequences of the arbitration clauses in the agreements she signed?

3. Did the court err by concluding the arbitration agreements are void because they are unconscionable or contracts of adhesion?

4. Did the court err by concluding that the agreements are void because Piper committed actual and constructive fraud by not explaining the legal implications of the arbitration clauses to Chor when she signed the agreements?

Marlene Chor was forty-seven years old when this matter was heard in the District Court. Although she was not a sophisticated investor in securities, she has a college degree and was president, part-owner, and operator of a million-dollar-a-year gambling machine business. She and her brother, Martin Andre, became owners of the business after their father’s death in 1985.

In 1988, Chor became acquainted with defendant John Schultz. Schultz was a broker for Piper and was registered as a securities salesman. Relying on Schultz’s advice, Chor invested in stock and bought an annuity through Piper. Chor testified that she signed many papers with Piper and that Schultz pointed out the important items in the documents and explained their impact to her.

In August of 1989, based upon Schultz’s advice and direction, Chor wrote a check for $25,000 to “The Terran Corporation” for purchase of one of the Terran investments. The following month, she wrote a check to “Terran Financial Group” in the amount of $25,000 and delivered it to Schultz for a second Terran investment. Chor received certificates of a limited partnership interest in “Terran Partners I Limited Partnership.”

In August of 1990, the Montana State Auditor’s Office issued a cease and desist order in connection with the sale of the Terran Partnership I Limited Partnership. Chor and Andre (who had also invested in Terran) filed this suit against Piper and Schultz. Because Andre did not sign any agreements containing arbitration clauses, Piper has not challenged the District Court’s jurisdiction to decide his claim.

Piper contends it had no role in marketing the Terran investments and that Schultz was acting independently in selling them to Chor. The validity of that defense has not yet been decided. Here, Piper argues that if it is held responsible in this action, Chor’s claims are subject to arbitration, pursuant to three agreements she signed.

The first agreement, denominated a “Co-owner Account Agreement,” was executed on June 17, 1988. Chor testified that she was led to believe the only purpose for the agreement was so that she and her husband could hold an account jointly. The third page of the agreement includes a paragraph entitled “Arbitration:”

We agree to arbitrate any disputes between PJH and us. We specifically agree and recognize that all controversies which may arise between PJH, its agents, representatives or employees and us, concerning any transaction, account or the construction, performance or breach of this or any other agreement between us, whether entered into prior, on, or subsequent to the date hereof, shall be determined by arbitration to the full extent provided by law. Such arbitration shall be in accordance with the rules then in effect of the Arbitration Committee of the New York Stock Exchange or the National Association of Securities Dealers, Inc., as we may elect. We authorize PJH, if we do not make such election by registered mail addressed to PJH at its main office within fifteen (15) days after receipt of notification from PJH requesting such election, to make such election on our behalf.

On September 30, 1988, Chor signed another Co-owner Account Agreement, for an account she held with her son. That agreement contained the same arbitration provision set forth above.

The third arbitration agreement was contained on page 4 of a Margin Agreement Chor signed in Februaiy 1991. Chor testified she believed the purpose of the Margin Agreement was to clear up a debit balance on her account. She further testified that she believed the arbitration provision in the Margin Agreement would apply to future disputes only.

The District Court denied Piper’s motion to compel arbitration, stating that it first needed to rule on the validity of the arbitration agreements. It held a joint hearing on that question for purposes of this case and another case which was also appealed to this Court, Mueske v. Piper, Jaffray & Hopwood (1993), [260 Mont. 207], 859 P.2d 444, 50 St. Rep. 1009.

After the hearing, the District Court ruled that the arbitration agreements are invalid. The court concluded that: Piper failed to correct its procedures and amend its account forms to reflect new disclosure requirements under the Rules of the National Association of Securities Dealers; Chor did not intend that the arbitration clause would be utilized in the event that she was defrauded by Piper or one of its agents; the Co-owner Account Agreements are adhesion contracts which do not state their effect of waiving the right to trial by jury, and enforcement of the arbitration clauses would therefore be unconscionable; and Chor’s consent to the Co-owner Account Agreements was obtained through actual and constructive fraud. Piper appeals.

Before we discuss the issues raised in this case, we point out that contracts requiring arbitration of disputes are as enforceable in Montana as are any other contracts. Section 27-5-114, MCA. Further, this Court has acknowledged the federal policy favoring arbitration. E.g., Vukasin v. D.A. Davidson & Co. (1990), 241 Mont. 126, 133, 785 P.2d 713, 718; Passage v. Prudential-Bache Securities, Inc. (1986), 223 Mont. 60, 64, 727 P.2d 1298, 1300, cert. denied 480 U.S. 905, 107 S.Ct. 1347, 94 L.Ed.2d 518.

I

Did the court err in refusing to enforce the agreements because Piper did not fully comply with Rule 21 of the National Association of Securities Dealers?

The arbitration agreements between Piper and Chor are governed, through operation of their terms, by the rules of the National Association of Securities Dealers (NASD). Effective September 7, 1989, NASD Rule 21(f)(3) required that:

A copy of the agreement containing any such [arbitration] clause shall be given to the customer who shall acknowledge receipt thereof on the agreement or on a separate document.

Piper did not obtain Chor’s signature acknowledging receipt of a copy of any of the three arbitration agreements she signed.

However, by its own terms, NASD Rule 21 does not apply retroactively. The rule provides at subsection (f)(5) that: “The requirements of this subsection (f) shall apply only to new agreements signed ... after September 7,1989.” Therefore, the first two arbitration agreements, which Chor signed in 1988, are not subject to the requirements of Rule 21.

The Margin Agreement, on the other hand, is subject to Rule 21. We held in Mueske that failure to comply with controlling law incorporated into an arbitration agreement, such as an NASD rule, renders a pre-dispute arbitration clause invalid. Mueske, [260 Mont. 207], 859 P.2d at 447, 50 St.Rep. at 1013. Based on our holding in Mueske, we hold that the arbitration provision in the Margin Agreement between Chor and Piper is invalid for violation of NASD Rule 21(f)(3).

Without citing authority, the District Court concluded that the Margin Agreement superseded the two previous agreements. Chor does not defend that conclusion. Because there is nothing in the Margin Agreement to indicate it supersedes or nullifies the first two agreements, and in the absence of any citation to legal authority supporting the District Court’s conclusion, we conclude that the court was in error. We will therefore proceed to analyze the remaining issues as to the first two arbitration agreements.

II

Did the District Court err by relying on Chor’s intent not to be bound by the legal consequences of the arbitration clauses in the agreements she signed?

As Piper has pointed out, Chor does not address this issue in her brief to this Court, effectively conceding it. When a contract is reduced to writing, the intention of the parties is to be ascertained from the writing alone, if possible. Section 28-3-303, MCA. We hold that the District Court erred in relying upon Chor’s subjective intent not to be bound by the legal consequences of the arbitration clauses in the agreements she signed.

Ill

Did the court err by concluding the arbitration agreements are void because they are unconscionable or contracts of adhesion?

In Passage, this Court held that an arbitration clause may be enforced even if the agreement in which the clause appears is an adhesion contract, absent evidence that the arbitration clause was not within the parties’ reasonable expectations or that the clause is oppressive or unconscionable. Passage, 727 P.2d at 1302. Chor maintains that this case presents an exception to the general rule stated in Passage because, here, the District Court specifically concluded that the arbitration clauses were not within the parties’ reasonable expectations. This conclusion was erroneous, based on Chor’s own deposition testimony.

Chor testified that she read the arbitration agreements before signing them and that her understanding of the first agreement was “if I were to have any problems, that we would agree to arbitrate the problem.” As to her claim that she did not fully understand the legal impact of the arbitration clauses, a party cannot avoid the legal consequences of an agreement simply by later claiming that she did not understand the impact of the plain language of the contract on her legal rights. See Wright v. Elevens (1985), 217 Mont. 439, 444, 705 P.2d 113, 117. More specifically, “Agreements to arbitrate disputes in accordance with SEC-approved procedures are not unconscionable as a matter of law.” Cohen v. Wedbush, Noble, Cooke, Inc. (9th Cir. 1988), 841 F.2d 282, 286.

Chor also claims that her agreements with Piper are contracts of adhesion.

Contracts of adhesion arise when a standardized form of agreement, usually drafted by the party having superior bargaining power, is presented to a party, whose choice is either to accept or reject the contract without the opportunity to negotiate its terms.

Finkle and Ross v. A.G. Becker Paribas, Inc. (D.C.N.Y. 1985), 622 F.Supp. 1505, 1511, as cited in Passage, 727 P.2d at 1301. This claim is not convincing in light of Chor’s deposition testimony. Chor testified that since 1983 she had investment accounts with five other brokerage houses besides Piper, none of which required her to consent to arbitrate future disputes. She clearly had the ability to go elsewhere if the terms of the agreement with Piper did not suit her. Indeed, she did so in the spring of 1990, when Schultz left Piper. At that time, Chor terminated her accounts with Piper and transferred them to another brokerage firm for a few months, before returning to Piper.

The arbitration clauses here discussed, by their plain meaning, concern stock transactions. By no stretch of judicial fiction or fantasy does this opinion suggest that the clauses would bind Chor to arbitrate a claim based on an automobile accident with a Piper secretary, or other torts not related to stock transactions, as postulated in the concurring and dissenting opinion.

We hold that the District Court erred in concluding the arbitration agreements are void due to unconscionability or because they are contracts of adhesion.

IV

Did the court err by concluding that the agreements are void because Piper committed actual and constructive fraud by not explaining the legal implications of the arbitration clauses to Chor when she signed the agreements?

A prima facie case of actual fraud or constructive fraud would require, among other elements of proof, evidence that Piper misrepresented or omitted some material fact. Van Ettinger v. Papin (1978), 180 Mont. 1, 10, 588 P.2d 988, 994 (actual fraud); Hartfield v. City of Billings (1990), 246 Mont. 259, 263, 805 P.2d 1293, 1296 (constructive fraud). The District Court concluded that Piper made a materially false representation to Chor by failing to inform her that she waived her right to a jury trial by signing the first two arbitration agreements.

In order for an omission, rather than an affirmative misrepresentation, to constitute fraud, the plaintiff must first demonstrate that the defendant had a duty to disclose the fact at issue. Chiarella v. United States (1980), 445 U.S. 222, 228, 100 S.Ct. 1108, 1114, 63 L.Ed.2d 348, 356. According to Chor, a duty arose from the commercial nature of the relationship between herself and Piper, the admissions of Piper, and § 30-10-301(1), MCA, concerning prohibited practices in securities transactions.

Chor cites McJunkin v. Kaufman & Broad Home Systems (1988), 229 Mont. 432, 748 P.2d 910, as authority establishing a duty on the part of Piper to disclose the legal effect of the arbitration clause to her, as a result of the commercial relationship between them. In McJunkin, the buyer of a mobile home alleged that the seller failed to inform him of structural defects therein. This Court stated:

We have recognized that a sufficient duty can arise in a commercial transaction such as the one at hand. [Citation omitted.] We find the defendants had a duty to refrain from intentionally or negligently creating a false impression by words or conduct. [Citations omitted.]

McJunkin, 748 P.2d at 915.

The admissions of Piper upon which Chor relies are contained in the deposition of her Piper stockbroker. He “admitted” that he owed her a duty to assess her needs and to recommend to her appropriate investments to fit those needs. He also “admitted” that it is reasonable for a customer to rely upon her broker’s information and that the broker owes a duty to use reasonable care in giving information to customers.

Section 30-10-301(1), MCA, provides:

It is unlawful for any person, in connection with the offer, sale, or purchase of any security, directly or indirectly, in, into, or from this state, to:
(a) employ any device, scheme, or artifice to defraud;
(b) make any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading; or
(c) engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.

This Court has stated that § 30-10-301(1), MCA, creates an implied code of conduct for brokers, violation of which may constitute a breach of the duty that a broker owes to his customer. Brown v. Merrill Lynch, Pierce, Fenner, Etc. (1982), 197 Mont. 1, 9-10, 640 P.2d 453, 457. Brown involved a broker’s alleged failure to warn a customer of the amount of risk involved in a “tax straddle” investment.

We are unwilling to construe this Court’s rulings in McJunkin and Brown so broadly as to state that a stockbroker has a duty to disclose to his customers every possible misunderstanding which might be reached upon signing a contract. Nor do the “admissions” of Chor’s Piper stockbroker establish a duty to inform a customer of the specific legal ramifications of an agreement to arbitrate. His “admissions” only emphasize that the central focus of a relationship between a stockbroker and an investor is the wise investment of funds according to the goals of the investor.

In Cohen, the Ninth Circuit Court of Appeals considered investors’ claims of fraud against their stockbroker for persuading them to sign an agreement to arbitrate future disputes with the broker. The investors alleged that the broker had told them the agreement to arbitrate would “not compromise any of [their] rights.” Cohen, 841 F.2d at 286. The Ninth Circuit stated:

We know of no case holding that parties dealing at arm’s length have a duty to explain to each other the terms of a written contract. We decline to impose such an obligation where the language of the contract clearly and explicitly provides for arbitration of disputes arising out of the contractual relationship.

Cohen, 841 F.2d at 287. We agree with the Ninth Circuit Court of Appeals.

The plaintiffs’ case in Cohen was stronger than that of Chor, because Chor has only alleged an omission, rather than a positive misrepresentation. Further, there is no evidence that Piper or its agents concealed information from Chor. She testified that she had ample opportunity to ask questions of Schultz and that he responded to all questions she asked.

Chor argues that Schultz’s role as her investment advisor supports a finding that a fiduciary relationship existed between them and that his breach of his duty as a fiduciary to explain to her the effect of the arbitration clause justifies her claim of constructive fraud. Absent special circumstances, a fiduciary duty is required to prove constructive fraud. Bottrell v. American Bank (1989), 237 Mont. 1, 20-21, 773 P.2d 694, 706. However, “a fiduciary relationship is not automatically established in a stockbroker-client relationship.” United Methodist Church v. D.A. Davidson (1987), 228 Mont. 288, 296, 741 P.2d 794, 799 (Sheehy, J., dissenting). In the absence of discretionaiy authority by a stockbroker to buy and sell in a customer’s account, no fiduciary relationship is created in a broker-customer relationship. Caravan Mobile Home Sales v. Lehman Bros. Kuhn Loeb (9th Cir. 1985), 769 F.2d 561, 567.

Chor has not alleged that Piper stockbrokers had discretionary authority over her accounts. She stated that Schultz “acted as if he did,” but that she made it clear to him that he did not have the authority to buy and sell stocks in her account without her permission. The District Court’s finding that Piper had de facto control over Chor’s accounts is therefore clearly erroneous.

Chor has provided no legal or factual reason for this Court to ignore Cohen and the general nde binding a person to the written agreements she enters. We conclude that no duty has been established on the part of Piper to explain to Chor, at the time the first two arbitration agreements were entered, that by signing the agreements to arbitrate future disputes, she waived her right to a jury trial. We therefore hold that the District Court erred in concluding that the arbitration agreements are void based upon actual or constructive fraud.

Finally, Chor maintains in her brief to this Court that the language of the arbitration agreements is too narrow to include matters outside the contracts themselves. This claim was not raised in the court below. It therefore will not be considered.

We hold that the arbitration agreements entered between Chor and Piper on June 17,1988, and on September 30,1988, are binding and enforceable. Reversed and remanded for further proceedings consistent with this Opinion.

JUSTICES HARRISON and WEBER concur.

JUSTICE NELSON

specially concurs and dissents.

I concur with the Court’s discussion and holding on issues 2., 3. and 4.1 respectfully dissent from the Court’s discussion and holding on issue 1. on the basis of my dissent in Mueske v. Piper, Jaffray & Hopwood, (1993) [260 Mont. 207], 850 P.2d 444.

Specifically, in Mueske, we held that a failure to comply with controlling law incorporated into an arbitration agreement, such as an NASD rule, renders a pre-dispute arbitration clause invalid. However, if the NASD rule is “controlling law”, as held by the Court here and in Mueske, then all of the NASD rules should control. The NASD rules provide that a violation of Rule 21 can result in sanctions being issued against the violating dealer. There is no provision for invalidating the arbitration agreement in its entirety.

If there is some legal basis for the Court to determine that a violation of a choice of law provision can result in a remedy not provided for by that law, this legal basis should be clearly articulated. If there is no legal basis for allowing this remedy, one should not be artificially created.

For the foregoing reasons, I respectfully dissent from the Court’s decision on Issue 1.

JUSTICE GRAY concurs in the foregoing special concurrence and dissent.

JUSTICE TRIEWEILER

concurring in part and dissenting in part.

I concur with the majority’s conclusions under Issues I and II.

I dissent from the majority’s conclusions under Issues III and IV.

However, it is not necessary to conclude that the arbitration clauses at issue are contracts of adhesion, nor that they were induced by fraud. Neither federal nor state law permits enforcement of any provision so broad as the arbitration agreements relied on in this case. In fact, I conclude that the arbitration clauses in plaintiffs’ contracts with Piper, Jaffray & Hopwood, Inc., are void by reason of the fact that they violate public policy in the State of Montana. To explain why that conclusion is necessary, further factual background is helpful.

The arbitration clauses relied on by PJH and enforced by the majority’s decision were included in two co-owner account agreements signed by plaintiff Marlene Chor. The first agreement was entered into among PJH, Marlene Chor, and her husband, John Michael Chor, on June 17, 1988. It related only to PJH account number 730-194699-500. Its purpose was to authorize either of the co-owners of that account to deal with PJH individually and provided that each co-owner would be bound by the actions and decisions of the other with regard to that account.

The second co-owner account agreement was entered into among PJH, Marlene Chor, and her son, John Martin Chor. It related to PJH account number 730-194696-500. Its purpose was the same as the previous co-owner account agreement, but related to a different account owned by different parties.

The fact that the two agreements were separate agreements relating to different subject matters and involving different parties is evident from the fact that two separate agreements were required by PJH.

Referring to the two co-owner account agreements and the margin agreement in its appellate brief, PJH’s attorneys correctly pointed out that “[e]ach agreement is a separate document, executed at a different time. The three agreements created three separate and distinct accounts with different account numbers. Even the parties are different.”

The cause of action which is the subject of this appeal is based on plaintiffs’ allegation that John Schultz, while employed by PJH, sold Marlene Chor and her brother, Martin Andre, unregistered Terran Partnership investments in violation of the Montana Securities Act. This transaction was unrelated to any of the three accounts for which Marlene Chor had signed co-owner account agreements or a margin agreement. In fact, it is PJH’s position that it neither underwrote nor marketed the Terran Partnership securities and that Schultz was unauthorized by PJH to sell them.

The point of all this background is that PJH is relying on an arbitration provision in three account agreements to compel arbitration of a dispute arising out of a transaction which is unrelated to any of those accounts, and therefore, unrelated to those specific agreements.

According to PJH, because the arbitration provision in its co-owner account agreements is so broad, once Marlene Chor signed them, she became bound to arbitrate every future dispute with PJH, regardless of the basis for that dispute. In other words, based on the arbitration agreement in the co-owner account agreements, if one of PJH’s secretaries ran over Marlene Chor while she was a pedestrian crossing a Butte city street with a green light and a dispute arose over liability for that collision, Marlene Chor would be bound to arbitrate that dispute and would be denied her right of access to Montana’s courts and her right to a jury trial.

To approve enforcement of an arbitration provision so broad, under the circumstances in this case, is unconscionable and shows a blatant disregard for the importance of access to our courts and the jury system.

The public policy in Montana is clearly set forth at § 28-2-708, MCA, where it provides that:

Every stipulation or condition in a contract by which any party thereto is restricted from enforcing his rights under the contract by the usual proceedings in the ordinary tribunals or which limits the time within which he may thus enforce his rights is void. This section does not affect the validity of an agreement enforceable under Title 27, chapter 5.

Title 27, chapter 5, is known as Montana’s Uniform Arbitration Act. Section 27-5-114, MCA, of the Act provides that with some exceptions, an agreement to submit a controversy to arbitration is a valid and enforceable agreement. However, an important qualification is found in subsection (4) which provides:

Notice that a contract is subject to arbitration pursuant to this chapter shall be typed in underlined capital letters on the first page of the contract; and unless such notice is displayed thereon, the contract may not be subject to arbitration.

Neither of the two co-owner account agreements complied with this requirement. However, more importantly, a contract to purchase an interest in the Terran Partnership was a separate agreement for which no notice whatsoever was given that plaintiff would be required to arbitrate disputes arising from that transaction.

It is correct that, to the extent Montana’s public policy requiring a judicial forum for the resolution of claims is inconsistent with federal policy, Montana’s policy is preempted. Southland Corp. v. Keating (1984), 465 U.S. 1, 104 S. Ct. 852, 79 L. Ed. 2d 1. However, the Federal Arbitration Act is not inconsistent in this respect.

Piper, Jaffray & Hopwood concedes that the Federal Act’s starting point for determining whether this claim must be arbitrated is found at 9 U.S.C. § 2 (1925). That section provides, in relevant part, as follows:

A written provision in any ... contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract. [Emphasis added].

All that is authorized by § 2 of the Federal Arbitration Act is a contract provision requiring arbitration of disputes which arise from the contract which includes the arbitration provision. There is nothing in the Federal Arbitration Act which allows a party to a contract to include in that contract the requirement that the other party to the contract submit every future dispute between the parties to arbitration regardless of whether the future dispute relates to the contract in question. To include such a sweeping provision in a contract of adhesion, like the one in question, is simply unconscionable.

While on the subjects of adhesion and unconscionability, it is important to take a look at this Court’s previous analysis of brokerage agreements in the context of the District Court’s findings in this case.

In Passage v. Prudential-Bache Securities, Inc. (1986), 223 Mont. 60, 727 P.2d 1298, we cited with approval the following rule from Finkle and Ross v. A.G. Becker Paribas, Inc. (D.C.N.Y. 1985), 622 F. Supp. 1505, 1511-12:

Contracts of adhesion arise when a standardized form of agreement, usually drafted by the party having superior bargaining power, is presented to a party, whose choice is either to accept or reject the contract without the opportunity to negotiate its terms, (citation omitted.) Here, the investor is faced with an industrywide practice of including Arbitration Clauses in standardized brokerage contracts. As the investor faces the possibility of being excluded from the securities market unless he accepts a contract with such an agreement to arbitrate, such clauses come within the adhesion doctrine.

Passage, 727 P.2d at 1301.

The District Court made the following findings of fact which satisfy the above legal criteria of an adhesion contract:

19. ... The co-owner account agreement was drafted by PJH, printed on PJH form, and filled out by Schultz....
20. Schultz presented the co-owner account agreement to her representing that it was necessary to sign it in order to open the account. Chor was given no alternative to signing.
21. O’Neil further testified that the customer had no choice in agreeing to arbitration. If a customer refused to so agree, O’Neil said he would refuse to accept the account. He stated the customer would “go down the road” and do business elsewhere.

The above findings are supported by substantial evidence. They clearly satisfy the requirements for an adhesion contract, as set forth above. By finding that this contract was not a contract of adhesion, the majority simply retried that issue of fact.

Establishment of an adhesion contract is, however, not the end of our inquiry. The rule cited in Passage goes on to provide:

However, mere inequality in bargaining power does not render a contract unenforcible [sic], (citation omitted) nor are all standardized contracts unenforcible [sic], (citations omitted.) As a consequence of current commercial realities, form forum clauses will control, absent a strong showing it should be set aside, (citation omitted.) For such a contract or clause to be void, it must fall within judicially imposed limits of enforcement. It will not be enforced against the weaker party when it is: (1) not within the reasonable expectations of said party or (2) within the reasonable expectations of the party, but, when considered in its context, is unduly oppressive, unconscionable or against public policy.

Passage, 727 P.2d at 1301-02. While the arbitration agreements in Passage andFinkle were found to be within the investor’s expectation and consistent with public policy, the arbitration provisions in this case were neither. In this regard, the District Court made the following findings, which were supported by substantial evidence:

21. Marlene Chor testified that she understood the purpose of this co-owner account agreement (Chor’s Exhibit No. 4) was to create a joint account.
27. The document, on its face, is called a co-owner account agreement. The “important notice: please read carefully” notice on the front page deals entirely with the type of account. The identification of the name of the account on the front page was printed by someone else.
28. On the third page of the agreement (Chor’s Exhibit No. 4), there appears a paragraph entitled “arbitration:” in the following language:
[Agreement deleted].
29. The insertion of the arbitration provision in the co-owner account agreement alters the stated purpose of the document from a joint account agreement to one establishing a joint account and requiring arbitration of “all controversies which may arise ....”
30. Schultz did not point out or explain what the arbitration clause meant. There is nothing on the front page of the co-owner account agreement which indicates that the document contains an arbitration clause. Nor is there anything on the signature page of the document which indicates that the document contains an arbitration clause.
31. Marlene Chor testified that she thought the effect of the arbitration clause was that if there were a dispute that they would first negotiate it. As a lay person, Marlene Chor interpreted the provision as merely one step in the process prior to court action. She did not understand that it meant she was waiving her right to the courts and a jury trial.
32. Furthermore, the co-owner account agreement does not state anywhere that she waived her right to a jury trial.
33. Holland admitted in testimony that it would take someone with legal training or actual experience with arbitration to discern from the agreement that its effect is to waive due process through the Montana court, including the right to a jury trial. Yet, PJH apparently still expected the customer to sign an agreement containing an arbitration clause.
34. Both PJH’s branch manager, Tom O’Neil, and Chor’s current personal account representative, Mike Holland, testified that they were not attorneys and therefore could not explain how the arbitration clause required waiving the right to a jury trial but that they were aware that through their own experience that is the effect.
35. PJH has stipulated in the record that Chor had no input in drafting the co-owner account agreements she signed. PJH took advantage of their superior bargaining position with regard to Chor in that, as the drafter of the document, PJH knew that the effect of the document was to accomplish more than to set up a joint account. Yet, PJH failed to inform Chor of that effect of the document and now seeks to take advantage to the detriment of Chor of their superior bargaining power and knowledge which was not revealed by either their agent or the document itself. Now, PJH wishes to deny Chor the right to seek relief in the Montana courts.

The District Court clearly found that the result of the arbitration provision, which the maj ority enforced, was not within the reasonable expectations of Marlene Chor. Those findings were supported by substantial evidence. Therefore, according to this Court’s prior authority, the arbitration clause is not enforceable. Even if the clause had been found to be within Marlene Chor’s reasonable expectations, it would not be enforceable under the authority of Finkle and Passage because it was unconscionable and against public policy for the reasons set forth previously.

As a result of the majority’s decision in this case, an unsophisticated member of the consuming public can sign a form agreement prepared by a large corporation with superior bargaining power, assuming that it relates to a limited transaction, and later find that they have lost all future rights of access to Montana’s courts in any future disputes with that corporation, no matter how totally unrelated to the subject of the original contract.

With court dockets being as overcrowded as they are, the rush of the federal judiciary and this Court to embrace arbitration is understandable. However, the majority’s willingness to, in the process, ignore fundamental constitutional rights such as access to our courts and the right to jury trial, is not so understandable. For these reasons I dissent from the majority opinion.

I also conclude that the District Court correctly found that Marlene Chor was induced by constructive fraud to enter into these arbitration agreements, because PJH breached its duty to properly inform her of the consequences of the agreement. However, because I conclude that the arbitration provisions are unenforceable based on the above discussion, I feel it is unnecessary to discuss further that part of the majority opinion.

JUSTICE HUNT joins in the foregoing concurrence and dissent.

       I do not believe that the reference by the District Court or by this Court to the provision at issue as being one of “choice of law” is accurate in the context in which that concept is usually understood.


author: JUSTICE NELSON

text:
    STATE OF MONTANA, Plaintiff and Appellant, v. GARY J. SCHNEIDERHAN, Defendant and Respondent.
    No. 93-041.
    Submitted on Briefs September 9, 1993.
    Decided October 19, 1993.
    50 St.Rep. 1242.
    261 Mont. 161.
    862 P.2d 37.

      For Plaintiff and Appellant: Joseph P. Mazurek, Attorney General, John Paulson, Assistant, Helena; Patrick L. Paul, Cascade County Attorney, Michael L. Fanning, Deputy, Great Falls.
    For Defendant and Respondent: Susan L. Weber, Great Falls.
   JUSTICE NELSON

delivered the Opinion of the Court.

This is an appeal by the State of Montana (State) from an order of the Eighth Judicial District Court, Cascade County, dismissing a felony sexual assault charge against the defendant on the basis of double jeopardy. We reverse and remand with instructions.

We restate the issues on appeal as follows:

1. Did the Justice Court err in denying the State’s motion to deny acceptance of a written guilty plea?

2. Did the Justice Court err in failing to rule on the State’s praecipe to dismiss prior to sentencing the defendant for misdemeanor domestic abuse?

3. Was the Justice Court divested of jurisdiction upon the filing of an information in District Court for a separate offense arising out of the same transaction?

4. Did the District Court err in holding that misdemeanor domestic abuse is a lesser included offense of felony sexual assault?

We decline to recite the alleged facts in this case, as we are remanding for further proceedings. However, we will discuss the procedural history leading up to this appeal.

Schneiderhan was initially charged in Justice Court with misdemeanor domestic abuse. On September 16,1991, Schneiderhan made his initial appearance before the Justice Court. Although Schneiderhan indicated a desire to plead guilty, the Justice of the Peace advised him that he should consult with an attorney prior to entering a plea. Arraignment was then set for October 30,1991.

On October 24, 1991, Schneiderhan, through his counsel, filed a written plea of guilty to the misdemeanor domestic abuse charge. On October 28, 1991, the State filed an information in District Court charging Schneiderhan with felony sexual assault. That charge arose from the same transaction as the domestic abuse charge. On that same day, the Justice Court set Schneiderhan’s sentencing on the domestic abuse charge for November 7,1991.

On November 5, 1991, the State filed a praecipe to dismiss the domestic abuse charge on the basis that the State had filed a felony charge in District Court. At the same time, the State also filed a motion to deny acceptance of the written guilty plea in the Justice Court. On November 7, 1991, the Justice Court held the sentencing hearing. The State stipulated that the Justice of the Peace could defer ruling on the motion to deny acceptance of the written guilty plea until after the sentencing. The State did not stipulate to a deferral of ruling on the praecipe to dismiss, however.

The Justice of the Peace sentenced Schneiderhan to six months in jail for domestic abuse, all suspended. On December 11, 1991, the Justice of the Peace issued an order denying the State’s motion to deny acceptance of the guilty plea. A review of the Justice Court file indicates that the Justice of the Peace never responded to the State’s praecipe to dismiss the domestic abuse charge.

In the meantime, on November 5, 1991, Schneiderhan plead not guilty to the felony sexual assault charge in District Court. On March 4,1992, Schneiderhan filed a motion to dismiss the felony charge for violation of double jeopardy. Schneiderhan alleged that misdemeanor domestic abuse is a lesser included offense of felony sexual assault and that the conviction in Justice Court precluded the felony action in District court. Ahearing on the double jeopardy issue was held on August 17, 1992, and on October 6, 1992, the District Court issued its order dismissing the case, ruling that misdemeanor domestic abuse was a lesser included offense of felony sexual assault and that double jeopardy attached after the November 7,1991, sentencing in Justice Court. From this order, the State appeals.

Although the State appealed from the District Court order, that order is intricately intertwined with the actions of the Justice Court. The District Court dismissed the felony sexual assault charge on the basis of double jeopardy, which would not have been an issue if the Justice Court had properly dismissed the misdemeanor domestic abuse charge. Therefore, because of the close relationship between the Justice Court and District Court actions, we necessarily must review this case in its entirety. This requires a review of both the procedures leading to the Justice Court domestic abuse conviction and the District Court’s subsequent dismissal of the felony sexual assault charge on double jeopardy grounds.

I — WRITTEN GUILTY PLEA

In the Justice Court action, the State filed a motion to deny the acceptance of the written guilty plea, for the reason that Schneiderhan had not been arraigned as required by § 46-12-201, MCA (arraignment statute), which provides, in pertinent part:

(1) Arraignment must be conducted in open court and must consist of reading the charge to the defendant or stating to the defendant the substance of the charge and calling on the defendant to plead to the charge. ...

That statute then goes on to describe certain inquiries which the court is required to make to determine the defendant’s identity and whether he or she is under any disability. The statute provides that the defendant’s presence in court for arraignment may be satisfied either by his or her physical presence or by means of a two-way electronic audio-visual communication, provided, however, that subsection (5) permits the judge to order the physical presence of the defendant in court at the arraignment.

The last sentence of subsection (5) provides that, “[i]n a felony case, a judge may not accept a plea of guilty from a defendant not physically present in the courtroom.” Thus, reading together the various subsections of § 46-12-201, MCA, it is clear that, at the arraignment, the judge must make certain actual communications with the defendant and that, while a judge may accept a guilty plea from the defendant to a misdemeanor while the defendant is physically present in the courtroom or before the court via a two-way electronic audio-visual communication, a guilty plea in a felony case may be accepted only when the defendant is physically present in court.

Similarly, the State argued that the guilty plea itself was defective, as the Justice of the Peace did not comply with § 46-17-203, MCA (justice court plea statute), which provides, in pertinent part:

Plea of guilty. (1) Before or during trial, a plea of guilty may be accepted when: (a) the defendant enters a plea of guilty in open court; and (b) the court has informed the defendant of the consequences of his plea and of the maximum penalty provided by law which may be imposed upon acceptance of the plea....

Clearly, both the arraignment statute and the justice corut plea statute require the defendant to appear in open corut (as that concept is more fully developed in the arraignment statute); that there be actual communication between the judge and the defendant; that the judge first make the requisite inquiries of and provide the mandated information to the defendant; and that the plea, then, be accepted as a part of that actual communicative process.

Importantly, there is no provision in either the arraignment statute or the justice court plea statute that allows the judge to accept a guilty plea from a defendant in either a misdemeanor or felony case through the expedient of the defendant or his counsel simply filing a written plea with the court, as was done in this case.

We take this opportunity to express our disapproval of the practice of courts in Montana accepting written pleas in criminal cases from defendants or their counsel in contravention of the code of criminal procedure. The procedural requirements for arraignment and acceptance of pleas are clearly set forth in the statutes and are not to be disregarded. We admonish the courts and counsel not following the referred-to statutes to, henceforth, strictly comply with those statutory mandates.

We recognize, however, that the procedural safeguards which underpin the statutory requirements discussed above are for the benefit and protection of criminal defendants. Section 46-1-103, MCA, provides, in pertinent part:

(3) Any irregularity in a proceeding specified by this title that does not affect the substantial rights of the accused must be disregarded.

Because Schneiderhan was at all times represented by counsel who, herself, was involved in the written plea, and because his substantive rights were not affected, the Justice Court’s acceptance of the written guilty plea in this case will be allowed to stand.

II — PRAECIPE TO DISMISS

At the time the State filed its motion to deny acceptance of the written guilty plea, it also filed a praecipe to dismiss the misdemeanor domestic abuse charge, on the basis that the State was prosecuting Schneiderhan on a more serious charge in District Court. The Justice of the Peace did not rule on the praecipe at the time it was filed on November 5, 1991, but rather proceeded to sentence Schneiderhan on November 7, 1991. We hold that the Justice of the Peace erred in not ruling on the praecipe to dismiss prior to sentencing.

Section 46-13-401, MCA, provides, in pertinent part:

(1) The court may, either on its own motion or upon the application of the prosecuting attorney and in furtherance of justice, order a complaint, information, or indictment to be dismissed. However, the court may not order a dismissal of a complaint, information, or indictment, charging a felony, unless good cause for dismissal is shown and the reasons for the dismissal are set forth in an order upon the minutes.

Thus, dismissal of misdemeanor charges is allowed on the court’s own motion or on motion of the prosecutor in the furtherance of justice. Because of the nature of prosecutorial discretion, the State is generally given wide latitude when requesting a dismissal of criminal charges. State ex rel. Fletcher v. District Court (Mont. 1993), 859 P.2d 992, 995, 50 St. Rep. 992, 995.

In Montana, a county attorney “not only directs under what conditions a criminal action [is] commenced, but from the time it begins until it ends his supervision and control is complete, limited only by such restrictions as the law imposes.” ... It is not only incumbent upon the county attorney to determine when or when not to prosecute a case, but when the facts of a case support a possible charge of more than one crime, the crime to be charged is a matter of prosecutorial discretion.

Fletcher, _ Mont. at _, 859 P.2d at 995, 50 St. Rep. at 993-94.

Here, the State sought dismissal of the misdemeanor domestic abuse charge in Justice Court in order to pursue the more serious felony sexual assault charge in District Court. While in order to obtain the dismissal of a felony charge under § 46-13-401(1), MCA, the State must show that such dismissal is in the furtherance of justice and for good cause, in moving for dismissal of a misdemeanor charge, the State need only show that the requested dismissal is in the furtherance of justice. Section 46-13-401(1), MCA. Given the State’s request that the misdemeanor charge be dismissed because the State was prosecuting Schneiderhan on a more serious charge in District Court, the “furtherance of justice” requirement was met, and the Justice of the Peace was required to rule on the State’s praecipe to dismiss at the time it was filed. While Fletcher involved the requested dismissal of felony charges and, thus, required the State to demonstrate that dismissal was in the furtherance of justice and for good cause, the rule set forth in that case is, nevertheless, also applicable here, where the State’s only obligation was to demonstrate that the dismissal was in the furtherance of justice. Simply stated, when the State has met the appropriate standard of dismissal, the court may not deny the motion to dismiss. Fletcher, _Mont. at _, 859 P.2d at 996, 50 St. Rep. at 995. Accordingly, the Justice of the Peace erred in proceeding to sentence Schneiderhan with the State’s praecipe to dismiss outstanding. Under the circumstances, in failing to grant the State’s praecipe to dismiss, the Justice Court committed reversible error.

Ill — DIVESTITURE OF JUSTICE COURT JURISDICTION

The State also contends that the Justice Court was automatically divested of jurisdiction after the information was filed in the District Court, because the felony charge was based on the same facts which served as the basis for the misdemeanor charge. We find no support for this contention under any Montana statutory authority, and decline to so hold.

Unless the legislature chooses to enact a statute that would accomplish the result proposed by the State, it will continue to be the responsibility of prosecutors, while at all times keeping in mind the statutory and constitutional proscriptions against double jeopardy, to coordinate and manage the filing and dismissal of criminal charges arising out of the same factual basis and which implicate both a court of limited jurisdiction and a district court.

IV — LESSER INCLUDED OFFENSE

In dismissing the felony sexual assault charge, the District Court held that misdemeanor domestic abuse was a lesser included offense of felony sexual assault, and therefore double jeopardy attached at the time Schneiderhan was sentenced in Justice Court.

As we have ruled above, the misdemeanor domestic abuse charge should have been dismissed by the Justice Court. Accordingly, there would not have been a double jeopardy issue facing the District Court had the Justice Court proceeded in accordance with the law.

The result of this opinion will require the dismissal of the misdemeanor domestic abuse charge and the remand for further proceedings in District Court on the felony sexual assault charge. In rendering the double jeopardy issue moot, we, therefore, decline to rule on the lesser included offense issue.

We remand to the Justice Court for entry of an order vacating the domestic abuse conviction and sentence and dismissing that action pursuant to the praecipe filed by the State. Thereafter, we remand the felony sexual assault charge to the District Court for further proceedings consistent with this opinion.

Reversed and remanded with instructions.

CHIEF JUSTICE TURNAGE, JUSTICES HARRISON, GRAY, WEBER, TRIEWEILER and HUNT concur.


author: JUSTICE GRAY

text:
    OWEN GABRIEL and CHRIS GABRIEL, ROBERT McTAGGART, SUZY MEANS, AMERICAN MINING CO., ALLEN BLANCHARD and DORA BLANCHARD, Plaintiffs and Appellants, v. DAVID F. WOOD, Defendant and Respondent.
    No. 93-135.
    Submitted on Briefs September 9, 1993.
    Decided October 19, 1993.
    50 St.Rep. 1246.
    261 Mont. 170.
    862 P.2d 42.

      For Plaintiffs and Appellants: Carl A. Hatch and John C. Doubek, Small, Hatch, Doubek & Pyfer, Helena.
    For Defendant and Respondent: Ann L. Smoyer, Smoyer Law Firm, Helena.
    For Amicus Black Tower Partnership: P. Keith Keller, Keller, Reynolds, Drake, Johnson & Gillespie, Helena.
   JUSTICE GRAY

delivered the Opinion of the Court.

Owen and Chris Gabriel and Allen and Dona Blanchard appeal from the findings of fact, conclusions of law and order entered by the First Judicial District Court, Lewis and Clark County, declining to enjoin David Wood from maintaining gates across a road leading to their properties. We affirm.

The following issues are raised on appeal:

1. Did the District Court err by declining to enjoin Wood from maintaining gates across the common road?

2. Is Wood entitled to reasonable attorney’s fees on appeal?

Owen and Chris Gabriel (the Gabriels) own several unpatented mining claims in Lewis and Clark County. Owen, who has operated the mining claims for more than forty years, has gained access to them by using a road referred to herein as the common road.

In 1986, Allen and Dona Blanchard (the Blanchards) purchased property from Dwight Capp, Glen Drake and Keith Stokes. As part of the transaction, the Blanchards were also granted access rights for ingress/egress and utilities over other land owned by the three men. The access way extended 30 feet on either side of the center line of the common road.

Later in 1986, David Wood (Wood) purchased property (referred to as the 1986 property) from Capp, Drake and Stokes to pasture horses. The 1986 property, located southeast of the Blanchards’ property, is crossed by the common road from northwest to southeast. Capp, Drake and Stokes reserved a road and utility right-of-way along the common road crossing the 1986 property which corresponded to the access rights they had granted to the Blanchards. Wood constructed a gate across the common road at the 1986 property’s southern boundary.

Wood purchased additional land from Capp, Drake, and Stokes in February of 1988. That land bordered a portion of the 1986 property’s southern boundary. As part of the 1988 transaction, Wood also obtained an access and utility easement over the southeast 1\4 of Section 34 and southwest 1\4 of Section 35, Township 11 North, Range 5 West, M.RM. The easement was described as extending thirty feet on either side of the center line of “the present road” and provided that the right-of-way was to be kept free of gates or other obstructions.

In August of 1988, the Gabriels and other named plaintiffs filed suit against Wood, claiming that they had acquired an easement by prescription across the 1986 property via the common road and seeking damages resulting from Wood’s construction of the gate. They requested a temporary restraining order to prevent Wood from restricting their right of access to the common road and a show cause hearing to determine whether a preliminary injunction should be issued to the same effect during the pendency of the action.

The District Court issued a temporary restraining order and scheduled a show cause hearing for August 31, 1988. On that date, however, the parties discussed possible resolutions of their dispute and stipulated that the temporary restraining order continue in full force and effect until further order of the court.

Efforts to resolve the matter apparently failed. In July of 1992, plaintiffs again requested a show cause hearing to determine whether a preliminary injunction should be issued. At that time, the Blanchards were joined as plaintiffs on the basis that their “easement” rights also had been adversely affected by Wood’s construction of the gate.

The District Court treated the show cause hearing held on July 30, 1992, as a hearing on the merits of the parties’ claims. The Gabriels and Blanchards were the only plaintiffs to appear. The court issued findings of fact, conclusions of law and judgment, determining that the construction of the gate violated the easement restrictions contained in Wood’s 1988 deed. It ordered the removal of all gates that obstructed the common road at the 1986 property’s southern boundary.

The District Court denied Wood’s subsequent motion to amend its findings, conclusions and order but scheduled a second evidentiary hearing to be held in January of 1993. The court issued superseding findings of fact, conclusions of law, and judgment in February of1993. It determined that the Gabriels and Blanchards (referred to collectively as appellants) had a right to use the common road, but that Wood was entitled to maintain gates across it provided appellants retained reasonable access. The court dismissed the remaining plaintiffs, who again did not appear, with prejudice. The Gabriels and Blanchards appeal.

Did the District Court err in declining to enjoin Wood from maintaining gates across the common road?

Following the initial evidentiary hearing, the District Court found that the road referred to in the 1988 deed was the common road. Because the 1988 deed specifically prohibited Wood from constructing gates across it, the court determined that Wood was illegally restricting appellants’ access to the common road and ordered Wood to remove the gate.

No certificate of survey or other evidence was presented at the initial hearing showing the location of the property and access rights at issue. After such evidence was submitted at the second evidentiary hearing, the District Court found that the road referred to in the 1988 deed was not the common road and, therefore, that the restriction against constructing gates did not apply to that road. Although the court determined that appellants had a right to use the common road, it concluded that Wood was entitled to maintain gates across it so long as appellants had reasonable access. The court also required Wood to meet certain standards to ensure reasonable access and, on that basis, denied appellants’ request to enjoin Wood from maintaining a gate across the common road.

The grant or denial of an injunction is within the discretion of the district court; we will not reverse the court’s denial of an injunction unless an abuse of discretion is shown. Curran v. Department of Highways (1993), [258 Mont. 105], 852 P.2d 544, 545, 50 St.Rep. 450, 451.

Appellants first contend that they were entitled to an injunction because the presence of a gate across the common road changed the nature of their easement from “prescriptive” to “permissive,” relying on Finley v. Rutherford (1968), 151 Mont. 488, 444 P.2d 306; Cope v. Cope (1971), 158 Mont. 388, 493 P.2d 336; and Larson v. Burnett (1972), 158 Mont. 421, 492 P.2d 921.

At issue in Finley, Cope, and Larson was the existence of an easement by prescription. To establish such an easement, open, notorious, exclusive, adverse, continuous and uninterrupted use of the right-of-way for the statutory period must be proven. Public Lands v. Boone and Crockett (Mont. 1993), 856 P.2d 525, 527, 50 St.Rep. 794, 795. Adverse use is presumed, however, if all other elements of the claim are established. Parker v. Elder (1988), 233 Mont. 75, 78, 758 P.2d 292, 294. In the context of an alleged prescriptive easement, the presence of a gate across a road is evidence of permissive use, rebutting the presumption of adverse use. Parker, 758 P.2d at 294.

These well-established principles regarding prescriptive easements do not apply here, however, as neither the Gabriels’ nor the Blanchards’ access right was established by prescriptive use. While the Gabriels’ complaint alleged the existence of such an easement, they presented no evidence to support that claim. The District Court determined that their right to use the common road was obtained via an agreement with Wood under § 82-2-203, MCA, which allows owners of certain mining claims to obtain a right-of-way by agreement with property owners and sets forth a remedy if an agreement cannot be reached. The Blanchards’ right to use the common road also was not established by prescriptive use, but by express grant in their deed. There is no basis, therefore, for appellants’ argument that the presence of a gate in any way diminished their right to use the common road.

Appellants also contend that the road mentioned in the 1988 deed was the common road and, therefore, that Wood was required to keep the road free of gates pursuant to the restrictions in the deed. Wood contends that the 1988 deed does not refer to the common road.

Substantial evidence supports the District Court’s determination that the easement restriction prohibiting gates in the 1988 deed does not apply to the common road. The easement contained in the 1988 deed crosses “the SE 1/4 of Section 34 and the SW 1/4 of Section 35 ... said easement being 30 feet on each side of the centerline of the present road.” Both Defendant’s Exhibit B, a certificate of survey pertaining to the properties purchased by Wood, and Exhibit D, a detailed map drawn by Wood, indicate that the common road does not cross the southeast 1/4 of Section 34. Thus, the easement description contained in the 1988 deed does not match the location of the common road. Furthermore, Wood testified that the 1988 deed referred to a road he built in 1988 to access the property purchased that year. He located that road on Exhibit D; its location corresponds to the legal description of the easement set forth in the 1988 deed. We conclude that the District Court did not err in determining that the restriction contained in the 1988 deed does not apply to the common road.

Finally, appellants assert that their right of access to the common road was intended to be clear, unqualified and unobstructed. This characterization apparently is based on the absence of any provision in the deeds indicating that gates could be placed across the common road. Absent proof that the easement specifically allows the placement of gates, appellants contend that they are entitled to an injunction, relying on Flynn v. Siren (1986), 219 Mont. 359, 711 P.2d 1371, and Stamm v. Kehrer (1986), 222 Mont. 167, 720 P.2d 1194.

In Flynn and Stamm, we recognized that the owner of land subject to an easement could not interfere with the use and rights reserved to the dominant estate:

The owner of the servient tenement may make use of the land in any lawful manner that he chooses, which use is not inconsistent with and does not interfere with the use and right reserved to the dominant tenement or estate.

Flynn, 711 P.2d at 1372, and Stamm, 720 P.2d at 1196. Applying this principle, we affirmed district court determinations that the construction of a gate across an easement in those cases interfered with plaintiffs’ use of the easement.

Our holdings in those cases, however, were fact-specific. In Flynn, we relied on uncontradicted evidence indicating that the gate created a traffic hazard, obstructed farm machinery, and prevented potential clients from reaching plaintiffs’ businesses to substantiate the district court’s determination that the gate interfered with the easement. 711 P.2d at 1373. In Stamm, plaintiff had acquired an easement by prescription to access her lawn and garage. We agreed with the court that the gate interfered with access to the property based on her testimony that the gate was difficult to maneuver and that the adjoining fence precluded access to her yard. 720 P.2d at 1196. Neither Flynn nor Stamm stand for the proposition that the construction of a gate across an easement interferes with the use of a right-of-way as a matter of law.

Furthermore, we disagree with the thrust of appellants’ argument that the absence of an express authorization to gate the common road prevents Wood from placing a gate across it. The District Court relied on Strahan v. Bush (1989), 237 Mont. 265, 773 P.2d 718, to determine that Wood was entitled to maintain gates across the common road so long as appellants continued to have reasonable access. There, we stated that when an easement is not specifically defined by the terms of the grant, the easement “need only be such as is reasonably necessary and convenient for the purpose for which it was created.” Strahan, 773 P.2d at 720, citing 25 Am. Jur. 2d, Easements and Licenses, § 73, at 479. What may be considered reasonable is determined in light of the situation of the property and the surrounding circumstances. Strahan, 773 P.2d at 720.

Strahan is in accord with other jurisdictions which have held that where the placement of a gate is not expressly prohibited by the grant of an easement or impliedly prohibited by the surrounding circumstances, a gate maybe constructed across the easement if it is necessary for the reasonable use of the servient estate and does not interfere with reasonable use of the right-of-way. Tanaka v. Sheehan (D.C. App. 1991), 589 A.2d 391, 395; Gamburg v. Cooper (Ariz. App. 1982), 642 P.2d 890, 891; Ericsson v. Braukman(Or.App. 1992), 824 P.2d 1174, 1178; Thomas v. Mitchell (S.C. App. 1985), 336 S.E.2d 154, 155.

Thus, we examine the surrounding circumstances in the case before us to determine whether the District Court erred in determining that Wood is entitled to construct a gate across the common road pursuant to Strahan. We first address whether the maintenance of a locked gate across the common road was reasonably necessary for Wood’s enjoyment of his property. Wood used his property primarily to pasture horses. Wood and his wife testified that the confinement of the horses to only a portion of the 1986 property resulted in injury to the horses and presented difficulties in watering and feeding them. Furthermore, the horses could not be confined to the 1986 property by placing cattleguards across the common road. Wood and Dr. Sidney Erickson, a veterinarian specializing in large animals, testified that horses are frequently injured attempting to cross them.

Wood’s testimony also reflects the necessity of a locked gate to prevent vandalism and theft. Initially, the gate Wood placed across the common road was unlocked. According to his testimony, the unlocked gate did not prevent people from entering onto the 1986 property frequently to hold keggers or cut down trees. He also testified that trespassers had caused property damage amounting to several thousand dollars, including the burning of a corral. We conclude that a locked gate across the common road is reasonably necessary for the enjoyment of Wood’s property.

We next focus on whether the maintenance of a locked gate unreasonably interferes with appellants’ use of the common road. Neither the Blanchards nor the Gabriels use the easement to any significant extent. The Woods testified that the Blanchards used the common road once in the spring to transport horses to summer pasture, two or three times during the summer to check on the horses, and once in the fall to retrieve the horses for hunting season. They also testified that the Gabriels used the common road only once a year in order to perform annual assessment work on their mining claims. This testimony was unrefuted.

Moreover, we observe that the District Court set forth certain standards regarding Wood’s gates in order to ensure the Blanchards’ and Gabriels’ reasonable access. If the gate is equipped -with locks, appellants must be given keys or the combination to the lock; the lock, as well as the gate, must be reasonably easy to use. We conclude that a gate conforming to these standards does not unreasonably interfere with the Blanchards’ and Gabriels’ access rights to the common road.

We hold that the District Court did not abuse its discretion in denying appellants’ request to enj oin Wood from maintaining a locked gate across the common road.

Is David Wood entitled to reasonable attorney’s fees on appeal?

Wood has requested an award of reasonable attorney’s fees incurred in this appeal, asserting that the issues raised by appellants are without merit. He fails to cite any legal authority whatsoever in support of such an award. We decline to consider Wood’s request in the complete absence of any cited authority for an award of attorney’s fees.

As a final matter, we observe that Wood has asserted a number of issues not raised by appellants. A respondent must file a notice of cross-appeal, however, to preserve issues not raised by appellant; failure to do so is fatal to respondent’s claims. Neumann v. Rogstad (1988), 232 Mont. 24, 29-30, 757 P.2d 761, 765. Because Wood did not cross-appeal, we do not review these issues.

Affirmed.

JUSTICES HARRISON, WEBER, NELSON and HUNT concur.


author: JUSTICE TRIEWEILER

text:
    IN RE THE MARRIAGE OF GAIL L. BOYER, Petitioner and Appellant, and THOMAS M. BOYER, Respondent and Respondent, and IN RE THE MARRIAGE OF STANLEY SCOTT OVERMAN, Co-Petitioner and Appellant, and KARLEEN GRAMER OVERMAN, Co-Petitioner and Respondent.
    Nos. 92-541 and 92-542.
    Submitted on Briefs April 30, 1993.
    Decided October 21, 1993.
    50 St.Rep. 1277.
    261 Mont. 179.
    862 P.2d 384.

      For Appellants: Mark Bauer, Great Falls.
    For Respondents: Daniel L. Falcon, Matteucci, Falcon, Squires & Lester, Great Falls.
   JUSTICE TRIEWEILER

delivered the Opinion of the Court.

Gail Boyer, petitioner in Cascade County Cause No. CDR 87-264, and Stanley Overman, petitioner in Cascade County Cause No. CDR 87-455, moved the District Court for the Eighth Judicial District in Cascade County to modify visitation in their respective dissolution proceedings. The motions were first consolidated and then denied by the District Court. Petitioners appeal the denial of their motions. We affirm the District Court.

There are three issues on appeal.

1. Did the District Court abuse its discretion when it denied appellants’ request to modify the existing visitation plans?

2. Did the District Court err when it adopted respondents’ proposed findings of fact, conclusions of law, and order?

3. Did the District Court err when it awarded attorney fees to respondents?

Gail Boyer and Thomas Boyer were married on August 7, 1981. They had two children together during their marriage. Their marriage was dissolved on April 20,1988. In the final dissolution decree, the District Court granted joint custody of the Boyer children to Gail and Tom. Gail was awarded primary physical custody and Tom was allowed reasonable visitation at the times specified in the parties’ separation agreement.

According to the District Court order, Tom’s visitation with his children included six weeks in the summer, alternating weekends, and alternating legal holidays. During Tom’s summer visitation, Gail was allowed to visit with the children on two weekends.

Karleen Overman and Stanley Overman were married on September 19,1982. Karleen and Stanley also had two children during their marriage. Their marriage was dissolved on September 16, 1987. In the final dissolution decree, the District Court awarded joint custody of the Overman children to Karleen and Stanley, gave Karleen primary physical custody, and allowed Stanley reasonable visitation. Pursuant to the District Court order, Stanley’s visitation included, but was not limited to, alternating weekends of each month, alternating Christmas and Thanksgiving holidays, and one month per summer (if both Karleen and Stanley reside within the same state) or the entire summer (if Stanley resides within a separate state or is stationed overseas).

After entry of the final dissolution decrees in each case, Gail Boyer, now known as Gail Overman, married Stanley Overman. Karleen Overman, now known as Karleen Boyer, married Tom Boyer. Pursuant to the dissolution decrees in each case, the Boyer children and the Overman children began residing with their mothers dining the week and visited with their fathers at the times specified in the respective District Court orders. Eventually, the parties worked out an arrangement whereby the four children would spend the weekends together: one weekend the Overman children would go to the Boyer home, and the next weekend all four children would go back to the Overman home.

On May 8,1992, five years after the existing visitation plans had been implemented, Stanley and Gail each filed a motion and a plan to modify visitation between the children of each family and their fathers to provide similar and equal visitation. In supporting affidavits, Stanley and Gail contended that the variations in the fathers’ visitation schedules were causing problems with the Overman children. Specifically, Stanley and Gail were concerned about the different summer visitation schedules. They asserted that the Overman children could not understand why they were not allowed to see their father as much as the Boyer children were allowed to see theirs.

The District Court heard arguments on the motions to modify visitation in both cases at a consolidated hearing on July 7,1992. At the hearing, Stanley and Gail proposed a modified three-year visitation plan that differed from the plan that they suggested when they filed their motion. Stanley testified that the primary purpose behind the proposed plan was to equalize the amount of time the children visited with their fathers, and to allow Stanley to have time with his children independent from the Boyer children.

The proposed plan provided that each father would have four weeks of summer visitation. At the hearing, Stanley admitted that the proposed plan would reduce the six weeks of visitation time that Tom was entitled to under his existing visitation schedule. Tom and Karleen did not oppose equal visitation but objected to the proposed plan because it required Tom to relinquish visitation time.

Tom and Karleen testified that it would not be in the children’s best interests to modify the existing visitation plans. They asserted that the current schedules, which had been in effect for five years, worked well because they were stable plans and they were understandable to the children. Tom and Karleen testified, and Stanley and Gail conceded, that the parties have accommodated in the past each other’s requests to alter the existing summer visitation schedules to meet their respective needs.

After the hearing, the District Court denied Stanley and Gail’s motion to modify visitation. The court adopted verbatim Tom and Karleen’s proposed findings of fact, conclusions of law, and order, and made the findings and conclusions applicable to both cases.

In its order, the court found that Stanley and Gail failed to demonstrate that modification of the existing visitation plans was in the children’s best interests. The court found that adoption of the proposed visitation schedule would require Tom to relinquish time with his children, and that this would be detrimental to Tom’s children. The court also found that Tom and Karleen had accommodated Gail and Stanley’s requests to alter the visitation plans in the past and a new visitation schedule would not make the parties cooperate any more with one another than they have in the past. The court determined that the visitation plans in existence were workable and reasonable, even though there were minor differences.

Finally, the court awarded attorney fees to Tom and Karleen for successfully responding to the motions for modification. The court based its decision upon a clause in Tom and Gail’s separation agreement. The court also indicated that it had the power to award attorney fees pursuant to §§ 40-4-110 and 37-61-421, MCA.

Gail and Stanley filed a motion to reconsider the visitation issue. When the District Court failed to rule on their motion, Stanley and Gail filed a notice of appeal in both cases.

I

Did the District Court abuse its discretion when it denied appellants’ request to modify the existing visitation plans?

On appeal, Stanley and Gail (appellants) assert that the District Court abused its discretion when it denied their motion to modify and equalize the visitation schedules. They contend that it is in the best interests of all four children involved to provide a similar and equal visitation schedule between the fathers and their children. Appellants assert that Tom and Karleen (respondents) do not object to equalized visitation.

Respondents assert that the appellants’ proposed visitation plan is unacceptable for several reasons. First, they contend that appellants’ proposal would have forced Tom to give up time with his children. Second, it would have altered a plan for upcoming Christmas visitation that was previously agreed upon among the parties. Third, it was more confusing than the existing plan, and therefore, it would have been detrimental to the children. Finally, it was not in the best interests of the children to alter a stable plan that has worked well for five years.

The standard of review for custody and visitation is whether substantial credible evidence supports the district court’s judgment. In re Marriage of Nash (1992), 254 Mont. 231, 234, 836 P.2d 598, 600. The findings will be sustained unless they are clearly erroneous. In re Marriage of Susen (1990), 242 Mont. 10, 13-14, 788 P.2d 332, 334. We will overturn a trial court’s custody decision only when there is a clear showing of an abuse of discretion. In re Marriage of Rolfe (1985), 216 Mont. 39, 44, 699 P.2d 79, 82.

Section 40-4-217(3), MCA, provides that a court may modify a visitation order “whenever modification would serve the best interest of the child....” Strong v. Weaver (1984), 211 Mont. 320, 683 P.2d 1330. In this case, the District Corut determined that it was not in the best interests of the children to modify the existing visitation plans between the fathers and their children.

Our review of the record reveals that there is substantial credible evidence to support the District Corut’s findings and conclusions. The District Court established the visitation schedules in the original decrees based on the children’s best interests. Appellants admitted at the hearing on their motion to modify that their proposed plan to equalize visitation would require Tom to relinquish summer visitation time that he has had with his children for five years. The record reveals that appellants failed to show how reducing Tom’s time with his children would serve the Boyer children’s best interests. Accordingly, we hold that the court did not abuse its discretion when it denied appellants’ request to modify the existing visitation plans.

II

Did the District Court err when it adopted respondents’ proposed findings of fact, conclusions of law, and order?

Appellants assert that the District Court erred when it adopted respondents’ proposed findings, conclusions, and order verbatim. They assert that the adopted findings and conclusions are unsupported by the evidence.

A court’s verbatim adoption of the prevailing party’s proposed findings, conclusions, and judgment is not prohibited. Wolfe v. Webb (1992), 251 Mont. 217, 229, 824 P.2d 240, 247. “[W]e have approved the verbatim adoption of findings and conclusions where they are comprehensive and detailed and supported by the evidence.” Wolfe, 824 P.2d at 247.

Upon review of the record in this case, and the trial court’s findings and conclusions, we hold that the District Court did not err in adopting respondents’ proposed findings, conclusions, and order. The findings and conclusions are supported by the evidence.

Ill

Did the District Court err when it awarded attorney fees to respondents?

The separation agreement between Tom and Gail provided:

Should any action be commenced to enforce, modify or interpret any provisions contained herein, the Court, as a cost of suit, shall award a reasonable attorney fee to the successful party.

We conclude that the attorney fee provision in Tom and Gail’s separation agreement is binding. The provision is clear that, should any action be commenced to modify any provision in the separation agreement, the prevailing party shall receive attorney fees. Respondents are the successful parties in this case, and therefore, they are entitled to attorney fees.

Both parties request attorney fees on appeal. This Court has awarded attorney fees on appeal when the parties’ separation agreement provides for such. In re Marriage of Bolstad (1983), 203 Mont. 131, 660 P.2d 95. Pursuant to Tom and Gail’s separation agreement, the prevailing party is entitled to reasonable attorney fees. Accordingly, since respondents are the successful parties in this case, they are also entitled to reasonable attorney fees incurred to respond to this appeal.

We remand this case to the District Court to determine reasonable costs and attorney fees incurred by respondents on appeal.

The judgment of the District Court is affirmed.

JUSTICES HARRISON, GRAY, HUNT and WEBER concur.