author: MR. JUSTICE McDONOUGH

text:
    In re the MARRIAGE OF ANDREW DEVON STEPHENSON, Petitioner and Respondent, and SANDRA MOREY STEPHENSON, Respondent and Appellant.
    No. 87-336.
    Submitted on Briefs Nov. 24, 1987.
    Decided Feb. 29, 1988.
    750 P.2d 1073.

      Smith, Baillie & Walsh, Robert J. Vermillion, Great Falls, for respondent and appellant.
    Michael Smartt, Great Falls, for petitioner and respondent.
   MR. JUSTICE McDONOUGH

delivered the Opinion of the Court.

The parties’ marriage was dissolved by decree of dissolution pursuant to a stipulation in the Court of the Eighth Judicial District, in and for the County of Cascade, on June 19, 1986. At the time of these proceedings the husband, Andrew, was represented by Michael S. Smartt, and the wife, Sandra, acted pro se.

The dissolution decree incorporated by reference a separation agreement entered into by the parties. The agreement provided for joint custody of the parties two children, Devon and Tyler, with Sandra as the domiciliary parent. Andrew received liberal visitation rights. Currently, Devon is four years old and Tyler is two. The issue on appeal concerns the District Court’s modification of the original decree.

On January 8, 1987, Andrew petitioned to modify the joint custody. He alleged that modification of the decree would serve the children’s best interest. After hearing the matter February 2, 1987, the District Court found that the children’s present environment seriously endangered their health, and that their best interest would be served by modifying the decree to designate Andrew as the domiciliary parent.

Sandra petitioned for rehearing, and the District Court granted her petition but told the parties that the issues would be confined to new evidence and to facts showing the environment provided by Andrew’s domicile. However, the transcript shows that evidence of the behavior of both parties prior to the order modifying the original decree was admitted at the rehearing. After the rehearing the lower court found that Sandra failed to show that the children’s present domicile at Andrew’s home seriously endangered their health. The lower court also found that their best interest would be served by continuing Andrew as the domiciliary parent.

The only issue presented by Sandra on appeal is whether substantial evidence supports the lower court’s orders. We reverse the first order and reinstate the custody arrangement from the first decree. Our reversal invalidates the second order, and we remand for proceedings detailed at the end of this opinion.

Andrew’s petition for modification alleged that a change making him the domiciliary parent would serve the children’s best interests because: (1) Sandra had failed to maintain employment, (2) Sandra had assumed a harmful lifestyle resulting in her inability to properly feed and clothe the children, and (3) Sandra boasted of her own use of cocaine.

The petition specified events occurring on the 7th, 14th, 15th, and 21st of November, 1986. On the 7th, according to Andrew, Sandra left Devon even though he had a fever. In the early morning hours of the 14th, and the 15th, according to Andrew who stayed at Sandra’s apartment on these dates, drunken men awoke the household and used the residence to consume illegal drugs. On the 21st, Andrew alleged that Sandra traveled to Bozeman with a stripper and a bouncer for the purpose of either participating in or viewing an exotic dance show.

On the basis of Andrew’s petition and affidavit the District Court granted Andrew’s motion for an order to show cause hearing. The lower court scheduled the hearing for February 2, 1986, and on January 9, 1986, Sandra received notice of the petition and the court’s order scheduling the hearing.

Both parties appeared for the hearing. Andrew was once again represented by Smartt, the attorney who arranged for the original decree, and Sandra came to the hearing with attorney Michael R. Tramelli. Tramelli informed the District Court that Sandra had contacted him on Friday, January 30, 1987, to request his services for the hearing, but that he had informed Sandra that he would not take the case because there was not enough time for him to prepare. He also stated that Sandra had made a diligent effort to obtain an attorney prior to contacting him on January 30, but that no one would take the case pro bono. Tramelli then explained that he was appearing to request a continuance on behalf of Sandra, and Smartt stated that Andrew had no objection to a continuance. The District Court, however, denied the continuance because three witnesses had been subpoenaed and were present to testify for Andrew, and because, “If she can’t get it [representation] in a week’s time, when is she going to get it?” At that point Tramelli, admittedly unprepared, agreed to represent Sandra.

Andrew, the first witness, testified that Sandra had poor housekeeping skills, used drugs, and partied with dangerous characters who came to the house late at night. Andrew also produced photographs of the interior of Sandra’s old apartment which showed piles of dirty laundry.

Two of Sandra’s former roommates testified after Andrew. Both had lived with Sandra for approximately two months during the spring of 1986. The roommates corroborated Andrew’s testimony concerning Sandra’s poor housekeeping skills, partying lifestyle, and undesirable friends. They also believed that Sandra had a hard time holding a job.

Cindy Testerman, the first of the roommates to testify, stated that Sandra favored Tyler over Devon, and that she believed Sandra used illegal drugs but she had not seen Sandra use them. Ms. Testerman also stated that the few times she had seen Andrew with the children they interacted well together.

The other roommate, Jeanne Payseno, added that Sandra kept a mirror for sniffing cocaine, and that she had seen Sandra smoke marijuana on a few occasions. Ms. Payseno also testified that Sandra did not show enough affection for Devon; that sometimes Sandra would let Tyler cry rather than picking him up; and that when Sandra worked a night job and a day job, Ms. Payseno often had to get breakfast for Devon and Tyler. In regard to Sandra’s social life, Ms. Payseno approved of some of Sandra’s friends and disapproved of others. Ms. Payseno also testified that Sandra’s boyfriend and other men had slept in Sandra’s area of the apartment, and that Sandra’s boyfriend helped care for the children.

Andrew’s last witness was Teresa Koyna. Ms. Koyna testified that Sandra could be a good mother, but that Sandra sometimes failed to properly care for the children’s needs. Ms. Koyna also testified that Sandra wrongly blamed Devon for bruises on Tyler’s back, and that the children came to her house hungry on one occasion.

Following Ms. Koyna’s testimony, the lower court told the parties that Andrew had shown that Sandra failed to properly care for the children. The lower court then asked Andrew’s attorney how Andrew would care for the children. Andrew took the stand again and stated that children could not reside at his current domicile, but that if he were the domiciliary custodian he would obtain appropriate housing.

Following Andrew’s concluding testimony, Sandra testified that Andrew and the witnesses called by Andrew spoke half truths in regard to her child rearing abilities; her lifestyle; her housekeeping skills; and her employment capabilities. As to her work skills she stated that she was currently employable as a medical secretary, and that she would be back at work when the hospital that had formerly employed her finished a construction project. She also stated that she had changed jobs because of illness and for career advancement rather than because she could not hold a job.

In regard to her housekeeping skills, she stated that her roommates contributed to the problems in the apartments where she had lived, and that she currently lived alone with her children in a clean environment. She also testified that her old roommates exaggerated the amount of time she spent away from the children; that only one person stayed over night with her during the period of time she lived with Ms. Payseno and Ms. Testerman; and that she no longer used drugs.

Sandra also testified that she loved the children equally but gave more affection to Tyler because Tyler needed it and Devon needed other things; the children received discipline equally; and that she had never physically abused the children. Sandra also admitted that once or twice she had been too drunk to drive the children from the baby-sitter’s so she left them there.

On February 19, 1987, approximately two weeks after the hearing, the lower court ordered that Andrew assume the duty of the domiciliary parent. Sandra’s petition for rehearing followed on February 25, 1987. The petition was amended at the request of the lower court to a petition for remodification, and the lower court heard the issue on May 28, 1987.

Testimony by Sandra and Andrew at the second hearing focused on Andrew’s past and present living situation, and revealed that Andrew had physically abused Sandra in Devon’s presence; Andrew had a drinking problem which once lead to Andrew passing out and leaving one of the children outside during the evening hours; Andrew took the children a few days after the lower court modified custody even though he did not have a home for the children; in addition to having no home for the children, Andrew did not have beds for the children, clothes for the children, or pots and pans to cook for the children; Sandra would not give Andrew the children’s beds because she wanted them for her own visitation; while Andrew saved money to buy the necessities for providing a proper domicile for the children, the children and Andrew stayed with Teresa Koyna, one of Andrew’s witnesses from the previous hearing, and the children slept in Andrew’s bed; Teresa Koyna asked Andrew and the children to leave, and after leaving the Koyna residence the children spent most of their nights with Sandra; Sandra believed that Andrew was drunk recently when he came to get the children.

Andrew responded to Sandra’s allegations with his own testimony and the testimony of an employee in the day care center where Andrew placed the children while working. Andrew did not deny physically abusing Sandra, nor did he deny leaving one of the children out in the cold when he was intoxicated. However, Andrew stated that he did not have a drinking problem. Andrew also stated and he was not drunk when he picked up the children recently, although he admitted to having a few beers at lunch that day. As to having a home for the children, Andrew stated he was unprepared to care for the children at the time of modification because Sandra received all the necessary items for child rearing after the divorce. He also stated that he had acquired a suitable domicile and household items since the time of modification.

The day care worker testified that the children were doing better in day care with Andrew as the domiciliary parent than they had when Sandra was the domiciliary parent. The day care worker believed the improvement was due to the fact that the children had become more familiar with the center’s routine because Andrew brought them to day care on a more regular basis than Sandra.

Testimony at the second hearing also concerned the ability of the parents to take care of the children’s health and clothing needs. Each accused the other of being neglectful in this area. Following the hearing the lower court denied Sandra’s petition on the grounds that Sandra had failed to show a change of circumstances which would justify modifying the already modified decree.

ISSUE

Did the District Court rely on substantial credible evidence in modifying the decree in its first order, and by refusing to modify the decree in its second order?

The lower court found that the present environment provided by Sandra’s domicile seriously endangered the children’s health, and that the harm likely to be caused by a change in the environment was outweighed by its advantages to the children. Sandra argues that this finding is not supported by substantial evidence. Andrew responds that substantial evidence supports the endangerment finding, and that the lower court’s best interest finding is sufficient to support the modification made in the first order even if the endangerment finding was not supported by substantial evidence.

The language in the endangerment finding in the first order mirrors the language in Section 40-4-219(1)(c), MCA. The lower court apparently applied this statute to determine whether or not modification was proper.

Sections 40-4-219(l)(a)-(f), MCA, lists the jurisdictional prerequisites for modification of a sole custody decree. Absent a proper finding of the presence of one of the circumstances listed in Sections 40-4-219(l)(a)-(f), MCA, a district court may not modify a prior award of sole custody.

In regard to joint custody, Section 40-4-224(3), MCA, states that a joint custody decree may be terminated pursuant to Section 40-4-219, MCA. However, a request for simply a different physical custody arrangement calls for application of Section 40-4-224(2), which states in part that

“ ‘joint custody’ means an order awarding custody of the minor child to both parents and providing that the physical custody and residency of the child shall be allotted between the parents in such a way as to assure the child frequent and continuing contact with both parents. The allotment of time between parties shall be as equal as possible; however, each case shall be determined according to its own practicalities with the best interest of the child as the primary consideration.” (Emphasis added.)

In determining whether or not modification serves the child’s best interest, district courts should proceed by making findings on the factors in Section 40-4-212, MCA. See In re the Marriage of Bergner and Owens (Mont. 1986), [222 Mont. 305,] 722 P.2d 1141, 1144, 43 St.Rep. 1285, 1289. And a district court facing a proposed change which may be properly characterized as a modification rather than termination of joint custody may proceed directly to a best interest determination without finding the presence of one of the jurisdictional prerequisites. See In re the Marriage of Paradis (Mont. 1984), [213 Mont. 177,] 689 P.2d 1263, 1265, 41 St.Rep. 2041, 2043.

However, where modification equates to termination of the joint custody, the lower court should proceed according to the requirements of Section 40-4-219, MCA. See In re the Marriage of Gahm and Henson (Mont. 1986), [222 Mont. 300,] 722 P.2d 1138, 1140, 43 St.Rep. 1281, 1283. In Gahm, the petitioner requested an award of permanent custody with limited visitation for the respondent. The District Court concluded that the requested modification amounted to termination of the joint custody and found that the petitioner had failed to satisfy the serious endangerment jurisdictional prerequisite for modifying a custody decree as required by the facts of the case, and by Section 40-4-219(l)(c), MCA. We affirmed. Gahm, 722 P.2d at 1140.

Andrew argues that Paradis applies and that under Paradis the District Court’s endangerment finding is not necessary to support the first modification. Sandra argues that the Gahm rationale applies and thus the endangerment finding was a jurisdictional prerequisite.

We agree with Sandra’s assertion that the lower court’s modification amounted to termination of the parties’ joint custody arrangement. The modified decree awarded physical custody to Andrew and granted Sandra reasonable visitation conditioned on reasonable prior notice and abstention from alcohol. This was a significant change for the children. The original decree granted Sandra physical custody and Andrew received liberal visitation rights. Under the old custody arrangement Andrew had neither integrated the children into his home, nor had he prepared to assume the duties of the children’s physical custodian once modification occurred. Under these circumstances, the lower court’s modification terminates the joint custody established by the first decree because the change amounts to “more than a request for a different physical custody arrangement like the request in Paradis and does not concern the integration standard.” Gahm, 722 P.2d at 1140. And where “one parent seeks to become permanent custodian and to relegate the other parent to limited visitation, the proposed arrangement is no longer joint custody.” Gahm, 722 P.2d at 1141. Thus we hold that Section 40-4-219, MCA, applies, and we reverse for lack of a proper endangerment finding.

The part of Section 40-4-219, MCA, relevant to resolution of this appeal reads:

“Modification. (1) The court may in its discretion modify a prior custody decree if it finds, upon the basis of facts that have arisen since the prior decree or that were unknown to the court at the time of entry of the prior decree, that a change has occurred in the circumstances of the child or his custodian and that the modification is necessary to serve the best interest of the child and if it further finds that:
“(c) the child’s present environment endangers seriously his physical, mental, moral, or emotional health and the harm likely to be caused by a change of environment is outweighed by its advantages to him.”

The lower court’s finding from the first hearing in regard to endangerment of the children is based on the testimony documenting Sandra’s poor housekeeping skills. These findings are supported by substantial evidence, but they concern the environment Sandra provided long prior to the hearing date. The lower court also found Sandra’s lifestyle led to neglect of the children, and their moral decline. Several findings in this regard are not supported by substantial evidence.

The lower court made no findings concerning the adequacy of Sandra’s domicile at the time of the hearing, or the potential for harm to the children posed by Sandra’s current domicile and life style. Andrew presented no evidence showing that the domicile provided by Sandra at the time of the first hearing endangered the children. The only evidence in this regard is Sandra’s testimony that her home was clean and that the children were well cared for.

The lower court also failed to adequately weigh Sandra’s deficiencies against the harm likely to be caused by granting physical custody to a parent who was unprepared to assume domiciliary duties. Under the facts of this case, the language in Section 40-4-219, MCA, mandates findings relevant to these issues.

We will not disturb trial court findings which are based on substantial though conflicting evidence. In re the Marriage of Sarsfield (1983), 206 Mont. 397, 411, 671 P.2d 595, 603. However, the party requesting modification under Section 40-4-219, MCA, bears a heavy burden because the statute’s policy is to “preserve stability and continuity of custody for the children.” Gahm, 722 P.2d at 1140.

In this case, the failure to address the children’s present environment, and failure to adequately consider the harmful effects of a change in this environment, constitutes error. We reverse, reinstate the original decree, and remand for the lower court to consider the issue presented by Andrew’s petition for a second time.

However, in further proceedings the lower court should not apply Section 40-4-219, MCA, if the children have been integrated into Andrew’s home since the first modification. If such is the case, the lower court should proceed to a determination of a joint custody arrangement reflecting the children’s best interest keeping in mind the policies set out in Section 40-4-224(2), MCA, and the factors in Section 40-4-212, MCA. In regard to the parties’ stipulation concerning visitation, we request that the lower court reconsider such stipula tion on remand when it once again has jurisdiction.

MR. CHIEF JUSTICE TURNAGE and MR. JUSTICES HARRI SON, SHEEHY and HUNT concur.


source: Caselaw Access Project

author: MR. JUSTICE GULBRANDSON

license: Public Domain

text:
    STATE OF MONTANA, acting by and through the DEPARTMENT OF AGRICULTURE, Plaintiff and Respondent, v. A.B.N. RANCH, et al., Defendant and Appellant.
    No. 87-463.
    Submitted on Briefs Jan. 14, 1988.
    Decided Feb. 29, 1988.
    750 P.2d 1079.

      Lilly, Andriolo & Schraudner, Michael J. Lilly, Bozeman, for defendant and appellant.
    Timothy J. Meloy, Dept, of Agriculture, Helena.
    Rae V. Kalbfleisch, Shelby, for other respondents.
    Hugh Brown, Chester, for Violett Farms and Charlie Conn.
    Thomas Budewitz, Townsend, for Koenke & Sons.
    Kenneth Frazier, Felt & Martin, P.C., Billings, for Hardin Elevator.
    Donald Hamilton, Great Falls, for Albert Vierheilig.
    Mike Lilly, Bozeman, for Dutton Farmers Elevator, Independent Grain, Dutton Coop and Agri Feeds Service.
    Keith Maristuen, Havre, for Hingham Farmers Elevator and Walker Equipment Co.
    Joseph Mudd, Bridger, for E.H. Walrath & Sons.
    R.W. Heineman, Wibaux, for Wibaux Co-op Elevator.
    Steve Johnson, Great Falls, for John Baker, Springdale Colony, and Milford Colony.
    Dale Keil, Conrad, for Tri-County Elevator.
    L.D. Nybo, Great Falls, for Witt Ranch Co.
    Rodney Peterson, Cut Bank, for Leslie Baker.
   MR. JUSTICE GULBRANDSON

delivered the Opinion of the Court.

This is an appeal of an order distributing bond proceeds made by the First Judicial District Court, Lewis and Clark County, Montana, in its memorandum and order of August 6, 1987. Originally, the State of Montana Department of Agriculture (State), filed an inter-pleader action after receiving bond proceeds from the surety of Coast Trading Company, Inc. (Coast) after Coast declared bankruptcy.

The District Court determined that there were two categories of numerous defendants entitled to receive the proceeds. One category is a group of independent grain dealers (Dealers) who contracted with Coast at its Portland, Oregon, office, through an agent located in Great Falls, Montana. The other category is comprised of a number of farmers (Farmers) who dealt directly with twelve grain elevators located throughout the state of Montana. The court determined that the Farmers were secured under a $195,000 grain dealer and public warehouseman bond and the Dealers were secured under a $20,000 grain merchandiser-track buyer bond. It is from this determination that the Dealers appeal.

We affirm.

The only issue we have before us is whether the District Court properly allocated the bond proceeds held by the State among the various defendants after granting summary judgment. Both parties agree that there is no material issue of fact and therefore this appeal is only to consider whether the District Court erred in adopting the distribution plan suggested by the State.

In 1980, the State determined Coast was conducting two separate and independent grain purchasing businesses. Coast originally applied for two separate licenses in compliance with Montana law.

In July, 1981, Coast renewed its grain purchasing licenses for the 1981-1982 grain year and it was required to execute two bonds. One bond was entitled a grain merchandiser-track buyer bond in the amount of $20,000. The other was entitled a grain dealer-public warehouseman bond in the amount of $195,000.

The grain dealer-public warehouseman bond expressly stated that Coast operated twelve public local warehouses at Agawan, Bainville, Brady, Galata, Geraldine, Great Falls, Lothair, Missoula, Plains, Power, Square Butte, and Tiber, Montana. Farmers sold grain to these twelve elevators pursuant to contracts entered into with Kenneth Branvold, manager for the Montana and North Dakota elevators of Coast. Each elevator manager purchased grain from the Farmers under a grain purchase agreement. Generally, the Farmers would deliver the grain to one of the twelve grain elevators without any freight charge to Coast. Occasionally, Coast would send a tractor-trailer unit to the Farmers to pick up the grain. The local elevator manager would issue a grain sale ticket. If stored at the local elevator a warehouse receipt would be exchanged for the ticket.

Under the grain dealer-public warehouseman transaction, all grain purchased by the Coast elevators was paid for by the local elevator manager with a check drawn upon a Montana bank. Branvold stated in his deposition that he purchased grain out of the Great Falls office under the grain dealer-public warehouseman license and did not purchase grain for the Portland office. He further stated that the local manager was responsible for any lost or spoiled grain at any of the twelve elevators.

As to the grain merchandiser-track buyer transaction, the grain merchandiser-track buyer bond stated that Coast carried out the business of track buyer in Portland. Kirk Smith, agent and buyer for the Portland office of Coast, also operated out of the same Coast office as Branvold in Great Falls. Smith, however, purchased grain in bulk quantities from commercial grain elevators, Dealers, under what Branvold stated was the track buyer’s license. Smith never purchased grain from any of the Farmers. He never used the grain purchase contracts, scale tickets, settlement sheets or checks drawn on the Montana bank. The grain was delivered outside of Montana, either to Coast in Portland or to Lewiston, Idaho. Coast’s Portland office paid the freight on this grain to out-of-state destinations and also took responsibility for any losses or spoilage. The contract and settlement sheets for Smith’s purchases were all printed and prepared by the Portland office. The Dealers, additionally, received approximately $.10 per bushel more than what the Farmers received. The Dealers were paid by checks drawn on a Portland bank. None of the Dealer’s grain was stored in any of the twelve Montana warehouses.

Between 1981-1982, Coast declared bankruptcy. The State then brought an action against United Pacific Insurance Co., the surety, to recover on the bonds. In February 1985, the State settled the lawsuit for $180,000. It was this money which was distributed pro-rata to the Farmers and Dealers. The Farmers received $163,225 plus accrued interest and the Dealers received $16,745 plus accrued interest.

According to the District Court, the grain dealer-public warehouseman bond was issued in accordance with the Department of Agriculture’s bond schedule for public warehouses. Schedule A, Mont.Admin.R. 4.12.1009 (1980). The grain merchandiser-track buyer bond was issued pursuant to the same regulation. The District Court further held that a contingency fund be established for a number of farmers involved in a separate lawsuit to recover under prior year bonds submitted by the surety companies. The attorneys were also awarded fees and costs to be paid out of the accrued interest.

Dealers argue that the Department of Agriculture originally was in error in issuing the licenses because Coast could not be a “track buyer” under the statutes in place at the time. They argue that the Department of Agriculture should not have treated Coast as a single entity operating in two separate capacities. Dealers claim that the District Court therefore should have combined the entire recovery amount and not made a distinction between the Dealers and the Farmers.

Dealers argue that the following definitions apply to this case and show that Coast should have only executed one bond. Section 80-4-201, MCA (1981), provides the following definitions for “agent”, “broker”, “commission man”, “grain dealer,” and “track buyer”:

“Unless the context requires otherwise, as used in this part, the following definitions apply:
“(1) The terms ‘agent’, ‘broker’, and ‘commission man’ include every person, association, firm, and corporation which engages in the business of negotiating sales or contracts for grain or of making sales or purchases for a commission.
“(4) The term ‘grain dealer’ includes every person, firm, association, and corporation owning, controlling, or operating a truck, tractor-trailer unit, or warehouse, other than a public warehouse, and engaged in the business of buying grain for shipment or milling.
“(8) The term ‘track buyer’ includes every person, firm, association, and corporation which engages in the business of buying grain for shipment or milling and which does not own, control, or operate a warehouse or public warehouse.”

Further, Dealers argue that although “warehouseman” is not defined in the Montana Code Annotated, the State did promulgate a definition of public warehouse and public warehouseman in Mont.Admin.R. 4.12.1008(b), (1980):

“Public Warehouse: Includes any elevator, mill, warehouse, or structure in which grain is received from the public for storage, milling, shipment or handling. The term ‘Public Warehouseman’ shall be held to mean and include every person, association, firm and corporation owning, controlling, or operating any public warehouse in which grain is stored or handled in such a manner that the grain of various owners is mixed together, and the identity of the different lots or parcels is not preserved . . .”

Dealers argue that Section 80-4-201(4) and (8), MCA (1981), both disallow Coast from being classified as a grain dealer or track buyer because Coast owns and operates the twelve public warehouses in Montana. Therefore, Dealers contend, had the Department of Agriculture acted correctly, all parties in this case would be claiming under the same bond in a pro-rata manner. They cite Fidelity Deposit Co. v. State of Montana (9th Cir. 1937), 92 F.2d 693, for the proposition that the statutes of the state should be incorporated into the terms of the bond. By so doing, the Dealers claim, we should conclude that the bonds were issued erroneously and combine all proceeds to be issued pro-rata.

Dealers claim this Court should ignore the labels placed on the bonds and follow Fidelity Deposit Co., supra, and conclude the bond proceeds were to “protect all individuals dealing with” Coast.

Farmers argue, and we agree, that Coast was operating two distinct grain merchandising businesses at the time the licenses and bonds were issued. We have previously recognized that the Department of Agriculture can require different bonds for the same legal entity. Kohles v. St. Paul Fire & Marine Insurance Co. (1964), 144 Mont. 395, 396 P.2d 724.

We recognize the general rule that “[i]f a bond is executed in accordance with a statutory requirement, then such a statute constitutes a part of the bond as if incorporated in it, and the bond must be construed in connection with the statute.” Kohles, 144 Mont. at 398-399, 396 P.2d at 726; see also, General Electric Credit Corporation v. Wolverine Insurance Co. (1984), 420 Mich. 176, 362 N.W.2d 595, 602; American Surety Co. of New York v. Butler (1930), 86 Mont. 584, 591, 284 P. 1011, 1014. However, this rule is not without exception. The statement in Subsection (4) and (8) of Section 80-4-201, MCA (1981), that a grain dealer and track buyer may not own, control or operate a warehouse or public warehouse, should be read with consideration that this section begins “fujnless the context requires otherwise . . .”

Coast purchased the bonds on the same day, from the same agent, to be issued by the same surety. It is clear that the intention of Coast and the Department of Agriculture was, as the District Court noted, to have the grain dealer-public warehouseman bond protect losses by farmers selling grain to one of the twelve public warehouses and have the grain merchandiser-track buyer bond cover losses suffered by commercial dealers selling grain to the Portland office of Coast.

The agent issuing the license for the State may have failed to determine if Coast specifically fit into the definitions under the statute. The bonds do not have an express specific reference to any statute. However, the facts support the decision of the State to require Coast to have two separate surety bonds. By looking at the facts of how Coast was operating, it is clear that they had two separate grain businesses.

We find therefore, under the facts of this case, that the District Court correctly interpreted these bonds under the ambiguous statutes governing grain merchandising and storage, Section 80-4-201 et seq., MCA (1981), and accompanying regulations, by determining the intention of the parties when the bonds were purchased. Those intentions were that the grain merchandiser-track buyer bond in the amount of $20,000 was to cover losses of the Dealers, the grain dealer-public warehouseman bond in the amount of $195,000 was to cover losses of the Farmers.

We further note that the statutes referred to by the Dealers were repealed by the Legislature in 1983. The statement made by the Legislature is as follows:

“WHEREAS, the existing statutes regulating certain aspects of the agricultural industry have become antiquated, as well as being contradictory and illogical in their organization.
“THEREFORE, it is necessary to extensively revise those statutes and adopt them as new sections.”

The statutes were originally drafted in 1921 and amended numerous times thereafter. They were indeed illogical and antiquated and as a result, this case has arisen. Due to the technical nature of this confusing legislation we will not disregard the intentions of the parties who originally entered into the surety bond relationship.

We affirm.

MR. CHIEF JUSTICE TURNAGE and MR. JUSTICES WEBER, SHEEHY and McDONOUGH concur.


author: MR. JUSTICE HUNT

text:
    STATE MEDICAL OXYGEN & SUPPLY, INC., a Montana corp., Plaintiff and Appellant, v. AMERICAN MEDICAL OXYGEN CO., a Montana corp., J.C. Lyndes, Gary Gomez, Ronald Wright, James Link, Lyle Fatz and Anna Tope, Defendants and Respondents.
    No. 87-282.
    Submitted Feb. 11, 1988.
    Decided March 1, 1988.
    750 P.2d 1085.

      Keller & German; Robert S. Keller argued, Kalispell, for plaintiff and appellant.
    Moses Law Firm; Michael Moses argued, Philip McGimpsey argued, Billings, for defendants and respondents.
   MR. JUSTICE HUNT

delivered the Opinion of the Court.

Plaintiff, State Medical Oxygen & Supply, Inc. (State Med.) appeals from an order of the Eighth Judicial District, Cascade County, granting summary judgment in favor of defendants, American Medical Oxygen Co. (American Med.). State Med. brought this action to recover damages from its ex-employee, James Link, and the directors of American Med. for the alleged breach of an employment contract pursuant to Section 1877(b) of the Social Security Act, 42 U.S.C. Section 1395nn. Summary judgment for American Med. was granted on the grounds that a Federal Social Securities Act violation does not give rise to a private civil cause of action.

While we affirm the summary judgment granted on the grounds that a Federal Social Securities Act violation does not give rise to a private civil cause of action in this case we reverse and remand for reasons set forth in this opinion.

Affirmed in part, reversed in part and remanded with instructions.

The main issue presented for our review upon appeal is whether the District Court erred in granting summary judgment in favor of the defendants. Subissues raised by the parties are as follows:

1. Does an alleged violation of Section 1877(b) of the Social Security Act, 42 U.S.C. Section 1395nn give rise to a private cause of action under Section 27-1-202, MCA?

2. Did the court err in deciding the motion for summary judgment prior to receiving the depositions of three material witnesses?

3. Were the restrictive covenants contained in the employment agreement between the defendant, James Link, and plaintiff sufficient to give rise to a claim upon which relief could be granted, or were they void as against public policy, and unenforceable as a matter of law?

Plaintiff (State Med.) and defendant (American Med.) are Montana corporations engaged in the business of supplying oxygen and allied health care to patients in their homes and in hospitals. Defendants Lyndes, Gomez and Wright were the sole directors and stockholders of American Med. Defendants Link, Fatz and Tope were employees of State Med. until August 9, 1985, when they became employees of American Med. Defendants Fatz and Tope were dismissed as parties prior to the filing of this appeal.

State Med.’s principal place of business is Kalispell, but it had offices in Missoula, Billings, Butte, Great Falls, Bozeman and Havre. To deliver supplies to patients, a route driver based out of one of the company’s branch offices, delivers the product along a prescribed route of customers. Typically, within the industry, customers follow the route driver and buy services from the company for which the driver works.

Link, Fatz and Tope were unhappy with their jobs with State Med. Link contacted American Med. about quitting his job with State Med. and starting employment with American Med. On August 9, 1985, the three State Med. employees quit their jobs and immediately began work for American Med. When Link left State Med.’s employ and went to work for American Med., he memorized his customer route. He offered his customers an opportunity to switch to American Med. and most of his regular patients switched from State to American Med. as their health care provider. Prior to that time, American Med. did not have an office in Great Falls, with few patients in that area.

The testimony showed that the American Med. directors met with Link, Tope and Fatz prior to their job switch to plan the opening of an American Med. office in Great Falls. Fatz and Link, the State Med. route drivers, estimated the necessary equipment which would be needed by American Med. in Great Falls to open an office which could accommodate their State Med. patients’ needs, assuming the patients would transfer their health care to American Med.

On Friday morning, August 9, 1986, at 8:00 a.m., Link and Fatz quit their jobs with State Med. Tope had given prior notice of her intent to quit. All three immediately went to work for American Med. at American Med.’s newly opened Great Falls office. Link testified that although he had just begun working for American Med., on August 9,1985, he followed by memory the same patient route as he had driven while employed by State Med. On his first day on the job for American Med., he asked his former patients whether they wanted to go with American Med. as their health care provider. He took along forms for them to sign. Link testified that he also had an advertisement placed in the local paper requesting that former patients of his (and the other former State Med. employees) contact them at the new, American Med. office. A large number of State Med.’s former patients switched to American Med. as their health care provider as a result of this employee job switch.

To determine if summary judgment was properly granted, we will first discuss appellant’s contention that respondents violated Section 27-1-202, MCA, by violating Section 1877(b) of the Social Security Act.

Section 27-1-202, MCA, states that “[e]very person who suffers detriment from the unlawful act or omission of another may recover from the person in fault a compensation therefor in money, which is called damages.” Section 1877(b) of the Social Security Act, 42 U.S.C. Section 1395nn states in relevant part:

“(b)(1) Whoever knowingly and willfully solicits or receives any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind —
“(A) In return for referring an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under this title, “. . . shall be guilty of a felony . . .
“(2) Whoever knowingly and willfully offers or pays any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind to any person to induce such person
“(A) to refer an individual to a person for the furnishings or arranging for the furnishing of any item or service for which payment may be made in whole or in part under this subchapter,
“. . . shall be guilty of a felony . . .
“(3) Paragraphs (1) and (2) shall not apply to —
“(A) . . .
“(B) any amount paid by an employer to an employee (who has a bona fide employment relationship with such employer) for employment in the provision of covered items or services.” (Emphasis added.)

Appellant contends that when a route driver in this business asks a competitor for a job, he is impliedly offering patients to that competitor, and when a competitor offers a job to a route driver, he is offering to buy patients. Further, appellant asserts that the offer of the job is the “remuneration” found in the Social Security Act. See U.S. v. Greber (3d Cir. 1985), 760 F.2d 68, 71-72.

Since a large number of the Great Falls area State Med. customers are Medicare and/or Medicaid patients, appellant claims that this business practice falls within the Social Security statute. Appellant then extends its argument, stating that a civil complaint for damages can be based on an alleged violation of a criminal section in the federal Social Security statutes, citing Conway v. Monidah Trust Co. (1913), 47 Mont. 269, 132 P. 26.

In summary, appellant claims that it is not asserting a federal claim, but a claim under Section 27-1-202, MCA, and that a breach of a federal statute comes within the context of the Montana statute.

We cannot agree with this argument.

The Social Security Act, 42 U.S.C. Section 1395nn, was enacted for the benefit of recipients of medical care benefits, not for the benefit of a health care provider. See Home Health Care Services, Inc. v. Currie (D. S.C. 1982), 531 F.Supp. 476. Further, a private cause of action is not available to appellant through an alleged violation of a federal statute unless certain criteria are met:

“First, is the plaintiff ‘one of the class for whose especial benefit the statute was enacted,’ . . . that is, does the statute create a federal right in favor of the plaintiff? Second, is there any indication of legislative intent, explicit or implicit, either to create such a remedy or to deny one? . . . Third, is it consistent with the underlying purposes of the legislative scheme to imply such a remedy for the plaintiff? . . . And finally, is the cause of action one traditionally relegated to state law, in an area basically the concern of the States, so that it would be inappropriate to infer a cause of action based solely on federal law?”

Cort v. Ash (1975), 422 U.S. 66, 78, 95 S.Ct. 2080, 2088, 45 L.Ed.2d 26, 36. We conclude that the plaintiff is not of the class for whom this act was enacted and therefore hold that, as to the issue of a violation of the Social Security Act giving rise to a private cause of action pursuant to Section 27-1-202, MCA, summary judgment was properly granted in favor of respondents.

We now turn to the issue of whether the District Court erred in granting American Med.’s motion for summary judgment prior to receiving the depositions of three material witnesses.

The depositions of Link, Fatz and Tope were taken either on the morning of, or the morning before the hearing for summary judgment on the issue addressed above. At that point, the depositions had not been transcribed for the court’s review. Counsel for appellant State Med. agreed at that hearing that he did not need more discovery, but did not waive the introduction and consideration of those depositions as relevant to the issue of summary judgment.

As to the issue of the applicability of the federal statute, the depositions were not relevant. However, they are relevant in consideration of a claim of tortious interference. Upon reviewing the transcript of this hearing, we note the following conversation between counsel for appellant and the court.

“THE COURT: You are maintaining your action — civil action on that statute alone? [Federal statute]
“MR. KELLER: No, but I don’t want to be done with that.
“THE COURT: I know that. What was your other basis?
“MR. KELLER: We think there is a tortious interference rationale in the interference with the contractual relationship that these employees have with State Medical. We think there is a breach of a covenant of good faith and fair dealing of existing employment relationship that was by the employees that made their plans over a period of time with the defendant corporation and its officers —
“THE COURT: Even if he were successful in that interpretation of the statute, you still wouldn’t be out, you’d still have that action based on the covenant of good faith and fair dealing.
“MR. KELLER: That we clearly have.
“MR. MOSES: Not against the corporation or the directors.
“MR. KELLER: There would be the tortious interference.
“MR. MOSES: Tortious interference has not been pled or alleged against the corporation or the three directors.
“THE COURT: It’s alleged against these employees?
“MR. KELLER: As against the employees we have alleged a breach of the federal statute, and we have alleged a breach of covenant of good faith and fair dealing.
“As against the corporation and its directors, we have alleged solely a breach of the federal statute.”

Although counsel for appellants makes this comment, an examination of the complaint shows that appellants did plead the elements of tortious interference against all of the defendants. Furthermore, the record shows disputed issues of material fact which may prove tortious interference by the corporation, American Med. and its directors.

This court agreeing with the Restatement (Second) of Torts Section 767 defined the tort of intentional interference in Bolz v. Myers (1982), 200 Mont. 286, 651 P.2d 606. The court said that the factors to be considered are:

“. . . (a) the nature of the actor’s conduct;(b) the actor’s motive; (c) the interests of the other with which the actor’s conduct interferes; (d) the interest sought to be advanced by the actor; (e) the social interests in protecting the freedom of action of the actor and the contractual interest of the other; (f) the proximity or remoteness of the actor’s conduct to the interference; and (g) the relations between the parties.
“In order to establish a prima facie case of interference with contractual or business relations, it must be shown that the acts (1) were intentional and willful, (2) were calculated to cause damage to the plaintiff in his or her business, (3) were done with the unlawful purpose of causing damage or loss, without right or justifiable cause on the part of the actor, and (4) that the actual damages and loss resulted.” (Citation omitted.)

Bolz, 651 P.2d at 610-611.

Montana Rules of Civil Procedure provide for liberal interpretation of pleadings. Rule 8, M.R.Civ.P.:

“Rule 8(a). Claims for relief. A pleading which sets forth a claim for relief, whether an original claim, counterclaim, cross-claim or third-party claim, shall contain (1) a short and plain statement of the claim showing that the pleader is entitled to relief, and (2) a demand for judgment for the relief to which he deems himself entitled. Relief in the alternative or of several different types may be demanded.
“Rule 8(e). Pleading to be concise and direct consistency. (1) Each averment of a pleading shall be simple, concise and direct. No technical forms of pleadings or motion are required.
“Rule 8(f). Construction of pleadings. All pleadings shall be so construed as to do substantial justice.”

As we said in Morse v. Espeland (Mont. 1985), [215 Mont. 148,] 696 P.2d 428, 430, 42 St.Rep. 251, 253:

“Montana no longer requires strict compliance with terms of art and legal phraseology when pleading a cause of action. The archaic rules of code pleading have been replaced by our new rules of civil procedure, which place the spirit of the law above strict compliance with the letter of the law ....
“Assuming appellant’s position to be true, which for purposes of reviewing this summary judgment we must, we then proceed to determine whether an action at law is cognizable. We find the essence of a claim has been pleaded though not artfully described.”

Morse, 696 P.2d at 430. See also, Fode v. Farmers Ins. Exchange (Mont. 1986), [221 Mont. 282,] 719 P.2d 414, 416, 43 St. Rep. 814, 816-817.

Rule 15(a) and 15(b) of the Montana Rules of Civil Procedure also require liberality in the allowance of amended pleadings “when justice so requires.”

We hold that the court should have considered the depositions of the three material witnesses before granting summary judgment on all issues. We reverse with leave to appellant to amend or supplement its pleadings.

The last issue raised by defendant Link which pertains to the restrictive covenant contained in Link’s employment contract with State Med. has not been ruled upon by the District Court and need not be addressed by this Court at this time.

Affirmed in part, reversed in part and remanded for further proceedings in accordance with this opinion.

MR. CHIEF JUSTICE TURNAGE and MR. JUSTICES HARRISON, WEBER, GULBRANDSON, SHEEHY and McDONOUGH concur.


author: MR. JUSTICE WEBER

text:
    In re the CUSTODY OF DONALD D. ZIER, JR.
    No. 87-431.
    Submitted on Briefs Jan. 14, 1988.
    Decided March 1, 1988.
    750 P.2d 1083.
    Michael G. Majerus, Billings, for appellant.
    D. Michael Eakin, Montana Legal Services, Billings, for appellant.
   MR. JUSTICE WEBER

delivered the Opinion of the Court.

Mr. Zier filed a petition for modification of child custody in the District Court for Yellowstone County. The respondent moved to dismiss the petition on grounds that the Crow Tribal Court was a more appropriate forum. The District Court granted this motion and deferred jurisdiction to the Tribal Court. We affirm. Mr. Zier presents one issue on appeal:

Did the District Court abuse its discretion by dismissing the petition for modification of custody, thereby deferring to the jurisdiction of the Crow Tribal Court?

Petitioner Donald Zier and respondent Meredith Hogan were married in 1983 at Crow Agency, Montana. Donald, Jr., was born to the couple in December of that year. In 1984 Mr. Zier petitioned the District Court of the Thirteenth Judicial District for a legal separation. Ms. Hogan responded by requesting dissolution, which was granted in March 1985. The parties were granted joint legal custody over Donald, Jr., with Ms. Hogan as primary custodian.

In August of 1985 Ms. Hogan and Mr. Zier agreed that he would have physical custody of the boy. Mr. Zier petitioned the Crow Tribal Court for guardianship, and the tribal court, in October 1985, placed the child in the custody of his father for a period of six months at which time another hearing was to be held to determine permanent custody. Evidently that hearing was not held. Mr. Zier moved to Billings in April 1986. In October 1986 he filed a petition in District Court seeking modification of that court’s 1985 custody award and asking for full legal custody of Donald, Jr.

Later, the tribal court held an evidentiary hearing concerning custody of the boy and continued the matter until completion of a home study by Court Services of the Thirteenth Judicial District. In February 1987, Ms. Hogan filed a motion to dismiss the petition for modification of custody in the District Court on grounds that the Crow Tribal Court was a more appropriate forum. On July 29, 1987, the District Court deferred jurisdiction of the custody matter to the Crow Tribal Court and dismissed Mr. Zier’s petition for modification of custody. This is the order from which Mr. Zier appeals.

Did the District Court abuse its discretion by dismissing the petition for modification of custody, thereby deferring to the jurisdiction of the Crow Tribal Court?

Mr. Zier argues that the District Court, not the Crow Tribal Court, was the “most appropriate forum for handling this custody dispute.” Section 40-7-108, MCA, provides in pertinent part as follows:

“A court which has jurisdiction under this chapter to make an initial or modification decree may decline to exercise its jurisdiction any time before making a decree if it finds that it is an inconvenient forum to make a custody determination under the circumstances of the case and that a court of another state is a more appropriate forum.
“(2) A finding of inconvenient forum may be made upon the court’s own motion or upon motion of a party or a guardian ad litem or other representative of the child.
“(3) In determining if it is an inconvenient forum, the court shall consider if it is in the interest of the child that another state assume jurisdiction. For this purpose it may take into account the following factors, among others:
“(a) if another state is or recently was the child’s home state;
“(b) if another state has a closer connection with the child and his family or with the child and one or more of the contestants;
“(c) if substantial evidence concerning the child’s present or future care, protection, training, and personal relationships is more readily available in another state;
“(d) if the parties have agreed on another forum which is no less appropriate; and
“(e) if the exercise of jurisdiction by a court of this state would contravene any of the purposes stated in 40-7-102.”

This statute should be considered in the district court’s determination whether to exercise jurisdiction or defer to the tribal court in a child custody matter. In re Bertelson (1980), 189 Mont. 524, 540, 617 P.2d 121, 130. However, in Bertelson we outlined other factors, in addition to the statute, which the District Court must consider in deciding the jurisdiction question. We will not overturn the District Court’s judgment in the absence of clear abuse of discretion. Both parties argue to this Court facts which simply are not a part of the record on appeal. In addition, they have appended to their briefs documents which were not before the District Court and therefore will not be considered by this Court.

The District Court in its order referred to a March hearing, yet the appellant has not filed a transcript of that hearing with this Court. What we do have is the following list of stipulated facts which was before the District Court:

“1. Petitioner got actual physical custody of the parties’ child in August 1985.
“2. Petitioner moved from the Crow Reservation to Billings in the last part of April of 1986.
“3. Respondent has been a student and attending school in Nevada during the last year. Her permanent residence has always been on the Crow Reservation.
“4. Respondent currently resides on the Crow Reservation.
“5. Both the maternal and paternal grandparents of the child reside on the reservation.
“6. An evidentiary hearing was held in the Crow Tribal Court. Before completion of the evidentiary hearing, the trial judge continued the matter until the completion of a home study by Court Services. The tribal court is awaiting that report before proceeding.” These facts together with the rest of the record on appeal present no basis for seriously questioning the District Court’s discretion. On the contrary, we commend both the District Court and the Crow Tribal Court for the obvious spirit of cooperation between them. The District Court’s decision to defer to the Tribal Court’s jurisdiction avoids competition and conflict between the courts, promotes the purposes of the Uniform Child Custody Jurisdiction Act as set forth in Section 40-7-102, MCA, and discourages continuing battles for custody. Because Mr. Zier has failed to show an abuse of discretion, we affirm the District Court’s deference to the jurisdiction of the Tribal Court and its dismissal of the petition for modification of custody. Affirmed.

MR. JUSTICES HARRISON, SHEEHY, HUNT and McDON-OUGH concur.


author: MR. JUSTICE SHEEHY MR. JUSTICE GULBRANDSON,

text:
    GREG J. STARK, Plaintiff and Respondent, v. The CIRCLE K CORPORATION, Defendant and Appellant.
    No. 86-543.
    Submitted Oct. 21, 1987.
    Decided March 1, 1988.
    751 P.2d 162.

      Milodragovich, Dale & Dye, Kim L. Ritter, Missoula, Streich, Lang, Weeks & Cardón, Lawrence A. Katz argued, Phoenix, Ariz., for defendant and appellant.
    Lynch & Best, John F. Lynch argued, Great Falls, for plaintiff and respondent.
   MR. JUSTICE SHEEHY

delivered the Opinion of the Court.

Circle K Corporation appeals from a jury verdict from the Second Judicial District, Silver Bow County. The jury awarded Greg Stark (Stark) $200,000 compensatory and $70,000 punitive damages for breach of the implied covenant of good faith and fair dealing relating to his termination. We affirm.

Circle K presents the following issues for our review:

1. Was there sufficient credible evidence to support a jury verdict finding a breach of the covenant of good faith and fair dealing in the termination of Stark’s employment?

2. Was there substantial credible evidence for the jury to properly award $200,000 of compensatory damages?

3. Did the District Court improperly allow the economic damages summary to be submitted into evidence after settlement of instructions?

4. Was there sufficient credible evidence to support the award of punitive damages?

Stark graduated from Butte High School in 1973. He had no other vocational or educational training. Following two years of military service, Stark held several jobs, including two in the retail grocery business.

On December 22, 1981, Stark applied for a job with Circle K in Butte. The application provided:

“I further understand and agree that. . . subsequent to being employed, I may be dismissed with or without cause.”

Circle K subsequently hired Stark at minimum wage as a clerk on December 29, 1981. Circle K’s opinion of Stark’s ability was manifested by a number of promotions and salary increases. On April 24, 1982, he was promoted to assistant manager in Butte and received a wage increase. On June 14, 1982, he received another wage increase because he “[worked] hard on the job and is an asset to the company.” On July 19, 1982, he was promoted from assistant manager to acting manager in Butte and later, Anaconda. He was promoted to “exempt” status manager and given another raise to $1,000 per month on November 1, 1982, because Stark had been “doing a good job” and had “good inventory.” Positive job evaluations resulted in continued pay increases until he was promoted to zone manager on November 1, 1983.

As a zone manager, Stark was responsible for supervising eight stores located in Butte, Helena, Townsend, and Anaconda. He held the position of zone manager up to the date of his termination from Circle K on August 22, 1984. His earnings had increased to approximately $17,000 per year at that time. In addition, Stark also received a company car which he valued at approximately $3,000 per year.

During the course of Stark’s employment, his job performance was regularly evaluated. He was consistently rated as very good to superior in the company’s performance review appraisals. Stark’s rating as the number one zone manager in the district reflected his abilities and achievements.

On April 1,1984, Don Herring was promoted from zone manager to district manager of the Great Falls district. As such, he supervised four zone managers and was responsible for 25 stores. Herring performed the evaluations of his zone managers. He rated Stark as his best zone manager.

However, Herring soon became alarmed about inventory shortages reported by the district stores. During conferences in Great Falls with the four zone managers, inventory control was discussed. Herring also brought in, at some point, a new inventory person he had formerly worked with in Oregon.

Preliminary inventory data for the month of August indicated a significant inventory loss at three Butte stores in Stark’s zone. Herring requested that Stark meet him in Helena on August 14, 1984. Prior to the meeting, Herring prepared a written document entitled “Employee Counseling Report.” This document, dated August 15, 1984, stated:

“Your inventory’s [sic] in three stores are over $4,000 short, this is totally unacceptable. You are being put on 30 day probation, during this time I would expect you to make every effort to correct the situation.”

Herring had Stark read the report and requested that he sign. Stark refused to sign because he felt the report was unfair and inaccurate. Stark stated the report was inaccurate because the new inventory person brought in by Herring was not conducting the inventories properly. Stark also informed Herring that the report was unfair because other managers in the district had similar shortages and were not written up. Herring indicated he would look into the matter. The meeting ended at this point.

A few days later, Stark attended the usual manager’s meeting in Great Falls. Herring did not mention the report or the inventory shortage at this time. On August 22, 1984, Herring and Stark again met in Helena and Herring once more offered the report to Stark to sign. Stark again refused and was terminated for insubordination relating to his refusal to accept responsibility for the inventory shortage.

The parties disagree as to whether Herring had planned, prior to the refusal on August 22,1984, to fire Stark. Herring testified he had no intention of firing Stark unless Stark refused to sign the report the second time. The evidence showed that Herring had Stark’s final pay check with him. In addition, Herring brought another zone manager with him from Great Falls to drive Stark’s company vehicle. The other zone manager was dropped off at a near-by coffee shop just prior to the Stark-Herring meeting.

At trial, the amount of inventory shortage was strongly contested. Although Herring had indicated at the August 14, 1982, meeting, that he would check into the figures, he failed to do so. Stark indicated at trial that he had rechecked the figures and found significant discrepancies. Large inventory overages in the three Butte stores for September tend to support Stark’s allegation.

The parties also contest whether the termination was in accord with Circle K policy. At the time in question, Circle K had published a pamphlet setting forth company policy entitled “Zone Manager’s Guide.” The guide required, inter alia, consistent discipline, progressive discipline, and written rules which are well-known to the employees. This type of discipline was designed to “provide guidelines for conduct and a set of expectations which an employee may rely upon.” Punishment should “accurately reflect the nature and seriousness of the proven offense and the employee’s prior record.”

Herring admitted the policy guide also applied to a district manager disciplining a zone manager. Concerning termination, the guide provides:

“Termination and the Issue of ‘Just Cause’
“Unemployment compensation is often rewarded because the employer has failed to produce evidence of ‘just cause’. That is, was this employee terminated for a reason related to misconduct, negligence on his or her part, which despite efforts by the employer could not be corrected?
“When you have decided to terminate the employee, consider the following question:
“* Was the employee informed in writing of the rule or policy related to this offense?
“* Has the employee been warned previously?
“* Was this warning in writing?
“* Do I have all the facts?
“* Was a final warning issued?
“* Should I check with the District Manager before taking action?
“* Have all employees guilty of this violation received the same penalty?
“Documentation
“Employees are legally entitled to fair treatment. In the event of an arbitration dispute, it is frequently the employer who must present evidence to support their actions. This evidence comes in the form of written warnings, reviews, and/or termination reports. Without written support, judgments frequently are rendered in the employee’s favor.
“Make certain that you document any disciplinary actions taken or problems experienced with your employees. Be specific. ‘Failure to follow company policy’ is not sufficient. What policy? Was the employee warned? Are your warnings signed by the employee as well as the Zone Manager?
“Be thorough; be fair, and be professional. Disciplining for results is a skilled activity.”

Although Herring indicated that he had counseled Stark on prior occasions, the August 15,1984 employee counseling report indicates that it was the initial counseling session. Stark denied that there was prior counseling.

Herring also testified that an employee does not have the right to refuse to sign a counseling report he or she deems incorrect. Stark indicated that company policy allowed an employee to refuse to sign an inaccurate or unfair report. The testimony of Alan Brown, Circle K’s personnel expert, and Jim Estes, a Circle K employee and Stark’s former supervisor, tends to support Stark’s position.

Stark also testified that other zone managers had inventory shortages in excess of $2,000 for two or more months without receiving an employee counseling report. The evidence confirmed Stark’s testimony. Those managers were also located within the Great Falls District.

Near the end of Stark’s case in chief, Joseph Kasperick, a business and economics professor at Montana Tech, testified concerning Stark’s damages. Professor Kasperick testified, inter alia, that his calculations were based on national and state data concerning average work life, interest rates, price increases, and cost of living increases; that he had interviewed Stark; that he had examined Stark’s tax records and pay slips; that his calculations were based on the assumption that Stark would live to the end of his expected work life and that he would have held a job with similar pay; that the present value of the future difference between what Stark would have made and what he would make based on his current earnings is approximately $146,000; that Stark had suffered approximately $40,000 in foregone income to date; and that economic predictions were not exact. Counsel for Circle K did not object to Professor Kasperick’s conclusions. Professor Kasperick was cross-examined by counsel and damages were argued during closing argument. Stark also presented an employment expert who testified similar jobs were not available in the Butte area.

Following the adverse jury verdict, Circle K moved for a judgment notwithstanding the verdict and a new trial. Both motions were denied. This appeal followed.

Circle K contends that there was insufficient evidence to support a finding of breach of the implied covenant of good faith and fair dealing. Thus, it is alleged the District Court improperly denied the motion for a judgment notwithstanding the verdict.

The standard of review is stringent. “The courts will exercise the greatest self-restraint in interfering with the constitutionally mandated processes of jury decision.” Barmeyer v. Montana Power Co. (1983), 202 Mont. 185, 191, 657 P.2d 594, 597. A judgment notwithstanding the verdict is proper only where the evidence presented demonstrates a complete absence of proof in support of the prevailing party. Jacques v. Montana National Guard, (1982), 199 Mont. 493, 504, 649 P.2d 1319, 1325. When examining the sufficiency of the evidence, the evidence and all inferences therefrom will be considered in a light most favorable to the prevailing party. Kukuchka v. Ziemet (Mont. 1985), [219 Mont. 155,] 710 P.2d 1361, 1363, 42 St.Rep. 1916, 1917. A court will not substitute its judgment for that of the jury. Evidence may be inherently weak and still be sufficient to uphold the jury verdict. Anderson v. Jacqueth (1983), 205 Mont. 493, 668 P.2d 1063, 1064, 40 St.Rep. 1451, 1453.

Circle K contends the contractual provision providing that Stark could be terminated “with or without cause” overcomes this heavy burden and precludes a finding of breach of good faith and fair dealing. It is alleged that the written contractual provision allowing termination without cause cannot be modified by oral representations which would give rise to a reasonable expectation of anything but “at will” employment. Circle K misunderstands the nature of good faith and fair dealing.

In Gates v. Life of Montana Insurance Co. (1982), 196 Mont. 178, 638 P.2d 1063 (Gates I), we recognized that the covenant of good faith and fair dealing is applicable to employment contracts. The covenant is implied as a matter of law based on the public policy of this State. It does not depend on contractual terms for its existence, nor is the covenant of good faith and fair dealing subject to contractual waiver, express or implied. See Section 28-2-701(2), MCA. “The duty arises out of the employment relationship yet the duty exists apart from, and in addition to, any terms agreed to by the parties.” Gates v. Life of Montana Insurance Co. (Mont. 1983), 205 Mont. 304, 668 P.2d 213, 214, 40 St.Rep. 1287, 1289 (Gates II). Despite the express contract, the question of whether the “covenant of good faith and fair dealing is implied in a particular case depends upon objective manifestations by the employer giving rise to the employee’s reasonable belief that he or she has job security and will be treated fairly.” Dare v. Montana Petroleum Marketing Co. (Mont. 1984), [212 Mont. 274,] 687 P.2d 1015, 1020, 41 St.Rep. 1735, 1739.

The record demonstrates Stark experienced objective manifestations reasonably giving rise to a belief of job security. Circle K repeatedly acknowledged Stark’s positive input to the company. Stark received several promotions; his wages increased from minimum wage to $20,000 per year including benefits; he consistently received positive job evaluations; he was deemed “an asset to the company”; the company guide book indicated that generally employees should be terminated only after attempts to correct deficiencies; and Alan Brown indicated that Stark was a permanent employee. We find the evidence considerably more than sufficient for the jury to find that Stark had an objectively reasonable belief that he would be fired only for good cause.

In the alternative, Circle K argues that good cause did exist to fire Stark. Implicit in Circle K’s argument is the contention that an employer’s determination of “good cause” is not subject to review by the jury. Circle K argues that the jury cannot decide “whether Herring’s instructions [were] fair or unfair, necessary or unnecessary;” that Stark must blindly obey the commands of a superior. We disagree.

The implied covenant of good faith and fair dealing is designed to prevent the abuses of unfettered discretion inherent in a situation of unequal bargaining power. Dare, 687 P.2d at 1020, 41 St.Rep. at 1740. An employee is not required to leap at his masters every command. See Delaney v. Taco Time International (1984), 297 Or. 10, 681 P.2d 114 (employee wrongfully terminated for refusal to sign false report concerning fellow employee); Wagenseller v. Scottsdale Memorial Hospital (1985), 147 Ariz. 370, 710 P.2d 1025 (hospital employee stated cause of action following discharge for refusal to take part in skit in which buttocks are exposed); Tameny v. Atlantic Richfield Co. (1980), 27 Cal.3d 167, 164 Cal.Rptr. 839, 610 P.2d 1330 (employee who refused to participate in gasoline price-fixing wrongfully discharged); O’Sullivan v. Mallon (1978), 160 N.J.Super. 416, 390 A.2d 149 (X-ray technician cannot be discharged for refusal to perform catheterizations when the law requires such procedures be performed by a registered nurse or doctor); Trombetta v. Detroit, Toledo & Ironton R. Co. (1978), 81 Mich.App. 489, 265 N.W.2d 385 (recognizing potential cause of action for wrongful discharge resulting from refusal to falsify pollution control reports); and Peterman v. International Brotherhood of Teamsters (1959), 174 Cal.App.2d 184, 344 P.2d 25 (employee cannot lawfully be discharged for refusal to commit perjury). We will not require an employee to sign a written statement he believes to be false so that an employer can later justify termination. An “employee is entitled to some protection from injustice.” Gates I, 196 Mont. at 184, 638 P.2d at 1067. Although an employer is entitled to latitude in making business decisions, that latitude cannot be used as a facade to justify a breach of the covenant good faith and fair dealing. To rebut Stark’s allegation, Circle K need only have shown a fair and honest reason for termination. Flanigan v. Prudential Federal Savings and Loan Assoc. (Mont. 1986), [221 Mont. 419,] 720 P.2d 257, 43 St.Rep. 941.

Circle K apparently failed to do so, however. Contrary to Circle K’s assertion, the jury, as the trier of fact, does determine whether good cause existed. Flanigan, 720 P.2d at 261, 43 St.Rep. at 946, Dare, 687 P.2d at 1019, 41 St.Rep. at 1739. The jury is not bound by the employers explanation. See Flanigan, supra (employee allegedly terminated as part of reduction in force); Crenshaw v. Bozeman Deaconess Hospital (Mont. 1984), [213 Mont. 488,] 693 P.2d 487, 41 St.Rep. 2251 (employee allegedly terminated for disrupting continuity of care, continually getting in the way of patient care, disorderly conduct, breach of confidentiality, etc.); Dare, supra (employee allegedly terminated for refusing to clean designated areas, having men hang around the station, closing the station early, coming in late, and lack of responsibility). The cases above indicate that the proffered reason does not always conform to the evidence.

In the instant case, Herring’s apparent lack of candor may have caused the jury to disbelieve Circle K’s entire explanation. The record demonstrates that Herring was impeached on several matters, that his testimony conflicted with prior testimony given at an unemployment compensation hearing, and that his testimony conflicted with the documentary evidence. This situation led Judge Davis to comment:

“[Herring] was not a very good witness. I was restless and twisting in my chair at the way he responded. I am wondering how that may have affected the jury.”

Circle K contends that the inconsistencies in Herring’s testimony were only matters of opinion and not fabrication. We need not reach the issue. The jury as trier of fact, determines the credibility of a witness and the reason for termination. Flanigan, 720 P.2d at 261, 43 St.Rep. at 946. Herring’s “apparent” lack of credibility is sufficient for the jury to find Circle K did not have a “fair and honest reason for termination.” Flanigan, supra. The jury also could have found that Circle K failed to follow company policy as set forth in the Zone Managers Guide. We hold there is sufficient credible evidence to support the jury verdict.

Circle K also contends the award of compensatory damages is excessive and speculative because Professor Kasperick and the jury improperly assumed Stark would have remained with Circle K the remainder of his work life. We disagree.

The standard of review for reversal requires a finding that the jury award is so grossly out of proportion as to shock the conscience. Frisnegger v. Gibson (1979), 183 Mont. 57, 598 P.2d 574. Where it appears that the jury did not act arbitrarily or capriciously, its decision on the amount of damages must stand. The litigants agree that the jury determined the amount of damages based on the testimony of Professor Kasperick. We do not find such a method of determination to be arbitrary or capricious.

Section 27-1-203, MCA, provides that “damages may be awarded ... for detriment. . . certain to result in the future.” However, no person can foretell the future. In Frisnegger, we construed Section 27-1-203 to require that damages need only he reasonably certain.

“While no case in Montana has construed this statute, it has always been the practice in Montana to instruct juries that future damages need only be reasonably certain, and not absolutely certain as the statute seems to imply. In holding, as we do, that future damages need only be reasonably certain under the evidence, it must be granted that in determining an award for future damages, a jury, or an expert testifying on the subject, must to some degree engage in conjecture and speculation. When the conjecture and speculation is based upon reasonably certain human experience as to future events, the jury or trier of fact is entitled to rely on that degree of reasonable certainty in fixing and awarding future damages.”

183 Mont. at 71, 598 P.2d at 582.

The record demonstrates that compensatory damages, as awarded by the jury, were “reasonably certain” within the meaning of Frisnegger. Professor Kasperick properly relied upon state and national data, Stark’s records and interviews with Stark to derive input for his calculations. See Rule 703, M.R.Evid. (expert may base opinion upon facts or data made known to him at or before the hearing). Professor Kasperick then stated his conclusions and engaged in an exhaustive explanation of his methodology. The fact that Professor Kasperick relied upon Stark’s hearsay statement that he planned to stay with Circle K is not dispositive. See Azure v. City of Billings (1979), 182 Mont. 234, 596 P.2d 460 (expert may rely upon facts that would not be admissible by themselves because they constituted hearsay). It is not unusual for a person who has found success in a chosen profession to remain with a company until retirement. The jury, as trier of fact, apparently agreed.

Circle K argues, in effect, that an award of 28 years lost income is per se excessive. We disagree. It is self-evident that the purpose of damages is to make an injured party whole. Stark presented evidence that similar work was not available in the Butte area and the amount of income he had lost as a result. Stark’s evidence went substantially unrebutted.

Circle K did not object to Professor Kasperick’s conclusion nor did it present its own expert on damages or employment opportunity. Circle K had the opportunity to cross-examine Professor Kasperick and to argue the amount of damages in closing argument. Jury instructions 7, 25 and 26 informed the jury they were not to speculate and should only award reasonable damages. Under these circumstances, we do not find 28 years to be per se excessive. Stark presented sufficient credible evidence for the jury to find he would not be able to find comparable employment in Butte. We will not substitute our judgment for that of the jury. As the District Court indicated, “it would be the height of judicial arrogance [for the court] to substitute its own findings and beliefs for those [of the] tried and true women of the jury.”

The third issue before the Court concerns the admission into evidence of an economic damages summary. Following settlement of instructions, counsel for Stark moved to reopen his case-in-chief and offered an economic damages summary into evidence. The document was admitted over Circle K’s objection that testimony had closed.

It has long been the rule in Montana that the propriety of a motion to reopen the case is left to the sound discretion of the trial court. Alderson v. Marshall (1888), 7 Mont. 288, 16 P. 576; Cole v. Helena Light & Railway Co. (1914), 49 Mont. 443, 143 P. 974; Brange v. Bowen (1920), 57 Mont. 77, 186 P. 680. No rigid nor fixed formula can or should be employed to determine when a motion to reopen is proper. The trial court, which has a feel for the case, can best determine what is necessary and appropriate to achieve substantial justice. Absent a clear abuse of discretion, the determination of the trial court will he upheld. Alderson, supra.

In the instant case, the material contained within the economic damages summary had been thoroughly presented during Stark’s case-in-chief. Circle K was not unduly surprised by its contents. We find no abuse of discretion. See Brange, supra.

Finally, Circle K contends there is an absence of proof to support a verdict granting Stark punitive damages against Circle K and therefore a judgment notwithstanding the verdict should have been granted. We find there is sufficient credible evidence to uphold the jury verdict.

At the time in question, Section 27-1-221, MCA, (1983), provided that punitive damages may be awarded where the defendant has been guilty of oppression, fraud, or malice, actual or presumed . . .” In Flanigan, we recognized that the jury can infer malice from a lack of candor on the part of the employer. 720 P.2d at 265, 43 St.Rep. at 951. The apparent lack of candor on the part of Herring is sufficient for the jury to have inferred malice.

The judgment of the District Court is affirmed.

MR. JUSTICES WEBER, HUNT and McDONOUGH concur.

MR. JUSTICE GULBRANDSON,

dissenting:

I respectfully dissent.

The majority, in affirming the award of $200,000 compensatory damages to include 28 years of lost income in the future, and $70,000 punitive seems to rely mainly on (a) objective manifestations of job security for Stark, (b) evidence of inaccurate inventory figures used by Herring, and (c) lack of candor by Herring to infer malice sufficient to justify the punitive damage award.

Any objective manifestations of job security given Stark by way of positive write-ups, promotions and salary increases were prior to the inventory shortages arising in the spring of 1984. From that time, until termination on August 22, 1984, there were no positive write-ups, commendations, or salary increases for Stark, but there were meetings, counselings, and discussions regarding the serious matter of major inventory shortages in the district. The inventory shortages supplied to Herring, as District Manager, indicated that Stark had the worst inventory shortages of any zone manager in Herring’s district. The actual inventory figures, for Stark’s zone, supplied to Herring were: April — $3,469.19 short; May — $608.70 overage; June — $1,340.44 short; July — $3,244 short; and preliminary August figures — $6,750 short. The September overages obviously were not available until after Stark’s refusal to sign the employee counseling report and subsequent termination on August 22. The majority opinion overlooks the fact that Stark was present during the inventories, made no objection to the figures, signed the inventories, and failed to implement the control inventory procedure if he thought the inventory figures were incorrect, even though he had participated in twenty-three inventories as a manager. The manner in which Stark was discharged, in my opinion, did not indicate any basis to submit the issue of punitive damages to the jury. The record is clear that both meetings between Herring and Stark took place in a private, secluded place with no other persons present. The discussions were limited to control of inventories and the request that Stark sign the counseling report. Herring testified that no other Circle K employee or manager had ever refused his request to sign the counseling report and the evidence is clear that Stark drafted similar reports and required that his subordinates sign them. The fact that Herring had Stark’s final paycheck with him at the second meeting cannot, in my opinion, be used to infer malice justifying punitive damages. Herring testified that had Stark signed the counseling report upon the second request, Stark would not have been terminated, but, in anticipation that Stark might again refuse to sign, he had the check prepared because he thought he had to deliver an employee’s final check within 24 hours. Section 39-3-205(2), MCA, is as follows:

“(2) When an employee is separated for cause from employment by the employer, all the unpaid wages of the employee shall become due and payable immediately upon such separation.”

Section 39-3-206, MCA, provides the following penalties for failure to comply with Section 39-3-205:

“Any employer, as such employer is defined in this part, who fails to pay any of his employees as provided in this part or violates any other provision of this part shall be guilty of a misdemeanor. A penalty shall also be assessed against and paid by such employer and become due such employee as follows: a sum equivalent to the fixed amount of 5% of the wages due and unpaid shall he assessed for each day, except Sundays and legal holidays, upon which such failure continues after the day upon which such wages were due, except that such failure shall not be deemed to continue more than 20 days after the date such wages were due.”

It seems that a Catch-22 situation has been created when an employer, attempting to comply with a statute to avoid a misdemeanor conviction and a doubling of wages due an employee, can have evidence of said attempts at payment used against him to justify an award of punitive damages.

The transcript of the final oral argument of plaintiffs counsel includes the following:

“[L]ike Mr. Milodragovich said, you’ve got to send a message to Phoenix, you’ve got to tell these people that in Butte, Montana, you’ve got to follow your policies because that is what the law says. These people only understand money. That is all they understand is money. That is the bottom line. That is why they are in business. There is an exhibit in here that says that the gross sales of Circle K Corporation is 1.6 Billion Dollars. Big, big company. It says here that the net worth is 122 Million Dollars. Now, I would think that if a Million dollars was had to be paid by this company that they would get it right the next time. That they wouldn’t push people around. That they would admit that they did things wrong. That is the only way that you are ever going to teach these people what they are doing. It’s like sending a message to Phoenix just like Mr. Milodragovich said.
“You know what the crowning glory is in this case? It’s that Cheryl Wellnitz came down from Great Falls with Mr. Herring on the 22nd to drive Greg Stark’s car back. He knew he was going to terminate Greg Stark on the 22nd. It wasn’t that he gave him another opportunity to sign that report. He was getting rid of him. He didn’t want to check into any information. He was getting rid of him. His final pay check was made out. He had that with him. If he didn’t intend to fire him, what did he have the final pay check for? . . .”

In my opinion, the issue of punitive damages should not have been allowed, over objection, to be considered by the jury, and the trial judge should have so ruled, based upon the evidence presented.

The failure of the trial judge to dismiss the punitive damages claim, and the subsequent refusal to enter judgment n.o.v., or to grant a new trial, in my view, constitutes reversible error.

By allowing evidence of the defendant’s company’s gross sales of over 1.5 billion dollars and a net worth of over 122 million dollars, the entire trial was contaminated with highly prejudicial, but wholly irrelevant, evidence.

I would therefore reverse the judgment entered and would remand for a new trial on the issue of breach of the covenant of good faith and compensatory damages, if any.

MR. CHIEF JUSTICE TURNAGE and MR. JUSTICE HARRISON concur in the foregoing dissent of MR. JUSTICE GULBRANDSON.


author: MR. CHIEF JUSTICE TURNAGE

text:
    SHELBY KUENNING, Claimant and Appellant, v. BIG SKY OF MONTANA, Employer, and State Compensation Insurance Fund, Defendant and Respondent.
    No. 87-229.
    Submitted on Briefs Jan. 28, 1988.
    Decided March 1, 1988.
    750 P.2d 1091.

      Ugrin, Alexander, Zadick & Slovak; J. David Slovak, Great Falls, for claimant and appellant.
    Mike Gfeely, Atty. Gen., Helena, Norman C. Peterson, Asst. Atty. Gen., Helena, for defendant and respondent.
   MR. CHIEF JUSTICE TURNAGE

delivered the Opinion of-the Court.

Claimant Kuenning appeals the May 21, 1987, decision of the Workers’ Compensation Court. The decision denied Kuenning’s petition for additional permanent partial disability benefits. We affirm.

Kuenning presents two issues for our review:

1. Did the court abuse its discretion in concluding that Kuenning had failed to prove an actual loss of earning capacity as required by Section 39-71-703, MCA (1985), for partial disability benefits?

2. Does substantial evidence support the court’s decision?

Kuenning is thirty-eight years old. He has a college degree in television production. Since 1973, Kuenning has worked as a carpenter during the summer and fall months. In late 1982, Kuenning began working as a ski patrolman for Big Sky of Montana (Big Sky) during the winter months.

While working for Big Sky on April 25, 1983, Kuenning injured his right knee when his snowmobile rolled on him. After completing an exercise program to restore strength to the knee, Kuenning returned to work as a ski patrolman for the 1983-1984 season. In September 1984, exploratory surgery on the right knee revealed a partial tear of the anterior cruciate ligament and spontaneous healing of a cartilage tear. However, no surgical repair was made on the knee. Kuenning resumed ski patrolling for the 1984-1985 season.

On January 22, 1985, Kuenning tore the medial collateral ligament in his left knee while skiing. The ligament was surgically reattached with a staple. Kuenning has returned to work as a ski patrolman with no subsequent injuries. Both knee injuries have reached maximum healing. The parties agree that both knee injuries occurred in the course and scope of Kuenning’s employment with Big Sky.

Big Sky was enrolled under the State Compensation Insurance Fund. Big Sky accepted liability and paid medical benefits, temporary total disability benefits and an indemnity.

On July 17, 1986, Kuenning petitioned for additional permanent partial disability benefits under Section 39-71-703(1), (1985) MCA, which states: “Weekly-compensation benefits for injury producing partial disability shall be 66%% of the actual diminution in the worker’s earning capacity measured in dollars . . .” (Emphasis added.) We note that Section 39-71-703, MCA (1985), was extensively amended by the 1987 Legislature. We will limit our opinion to the 1985 statute.

After trial on November 24, 1986, the Workers’ Compensation Court ruled that Kuenning was not entitled to any permanent partial disability benefits beyond those already paid by Big Sky. The court noted that Kuenning had not presented any probative evidence of lost earning capacity as a carpenter and ski patrolman. The court stated: “Even if the Court were to accept the unsubstantiated testimony of the claimant as to his loss of earnings as a carpenter, claimant still has not met his burden of proof.”

More importantly, the court noted that Kuenning had not presented any evidence of his earning capacity in the open labor market. The court stated: “Claimant is an educated, physically fit, and relatively young man with obvious capabilities. Claimant cannot justify his entitlement to permanent partial disability simply by his limiting, personal preference for a particular field of employment.”

The Workers’ Compensation Court concluded:.

“While claimant has not met his burden as to a 703 case, this does not preclude the possibility that claimant may be able, in the future, to demonstrate a loss of earning capacity. Claimant may also, if not now then in the future, be able to demonstrate disability sufficient to carry a 705 case . . . .”

Issue 1. Loss of Earning Capacity

Kuenning contends that the two knee injuries have significantly reduced his earning capacity because he now works in pain. Kuenning asserts that he cannot work efficiently as a roofing and framing carpenter and must limit himself to “finish” carpentry. Kuenning also asserts that his ability to perform his duties as a ski patrolman have been “slightly” impaired and his stamina has decreased.

On review of this issue, we note the general rule that the claimant bears the burden of establishing a right to compensation. Gierke v. Billings Gazette (Mont. 1986), [224 mont. 446,] 730 P.2d 1143, 1148, 43 St.Rep. 2322, 2329. In order to prevail under Section 39-71-703, MCA (1985), a claimant must show an actual diminution in present earning capacity and such a loss must be measured on the open labor market. Dunn v. Champion International Corp. (Mont. 1986), [222 Mont. 142,] 720 P.2d 1186, 1191, 43 St.Rep. 1124, 1129.

A claimant’s earning capacity consists of the market demand for labor and claimant’s ability to supply such labor. This ability must be defined by the claimant’s age, education, background, work experience and qualifications. Holton v. F.H. Stolze Land & Lumber Co. (1981), 195 Mont. 263, 266, 637 P.2d 10, 12. Simply put, the more labor skills a claimant possesses, the larger his labor market.

Kuenning’s skills gave him solid ability to earn in the open labor market. He has Cardio-Pulmonary Resuscitation and Emergency Medical Technician certifications. He has one college degree and is one quarter away from having two additional college degrees in photography and English literature.

However, throughout these proceedings Kuenning made no attempt to quantify his earning capacity on the open market. He ignored repeated requests by the State Compensation Fund to document his loss of earning capacity. Instead, Kuenning continually restricted his focus to ski patrol and carpentry. Within this limited market, Kuenning’s primary evidence consisted merely of his unsubstantiated testimony about decreased efficiency.

We note that Kuenning retained his ski patrol job. Furthermore, Kuenning presented no objective evidence that he lost any carpentry jobs for which he had applied. His own testimony undercuts his contention of lost earning capacity:

“Q. So you haven’t lost any carpentry employment because of your knee injuries; is that correct?
“A. Actual employment, no.”

Kuenning’s only support came from the deposition of his expert, a rehabilitation counselor. However, the counselor restricted his evaluation to carpentry and ski patrol. The counselor concluded that Kuenning works at an 80 percent post-injury efficiency.

The counselor’s testimony was effectively rebutted by Big Sky’s expert, a vocational evaluation coordinator. The coordinator looked at the open labor market and placed Kuenning in a much better position than the average rehabilitation client. The coordinator found numerous occupational categories in which Kuenning would have transferable skills, especially in the areas of television and radio communications. These categories were matched to employers in the Bozeman area. The coordinator testified that Kuenning, with his educational background, was “almost overqualified” to work as a ski patrolman and carpenter. The coordinator concluded that Kuenning had many job opportunities and had not suffered any earning loss.

In summary, we note that the purpose of workers’ compensation is to protect the worker against economic loss. Hafer v. Anaconda Aluminum Company (Mont. 1984), [211 Mont. 345,] 684 P.2d 1114, 1116, 41 St.Rep. 1403, 1405. However, we will not allow the compensation fund to subsidize a claimant’s pursuit of specialized employment when other work is available. Section 39-71-703, MCA (1985), tailors compensation to the actual damage a claimant suffers to his earning capacity. Kuenning’s evidence of loss of earning capacity in ski patrol and carpentry is marginal at best. His evidence of loss in the open market is nil. We hold that the Workers’ Compensation Court properly concluded that Kuenning did not meet his burden of proof under Section 39-71-703, MCA (1985).

Issue 2. Substantial Evidence.

The evidence before the court consisted largely of oral testimony by Kuenning and deposition testimony by two rehabilitation experts and two orthopedic surgeons. Kuenning contends that the evidence does not support the decision of the Workers’ Compensation Court.

On appellate review, we will defer to the Workers’ Compensation Court’s judgment as to the weight and credibility of conflicting evidence. Nelson v. ASARCO, Inc. (Mont. 1987), [227 Mont. 272,] 739 P.2d 943, 945, 44 St.Rep. 1074, 1077. Our review is confined to determining whether substantial evidence supports the findings. Shupert v. Anaconda Aluminum Co. (Mont. 1985), [215 Mont. 182,] 696 P.2d 436, 439, 42 St.Rep. 277, 281.

The primary evidence was the medical testimony. Kuenning’s treating physician, Dr. Frank Humberger, assigned a 5 percent impairment of the whole man for the right knee injury and a 6 percent impairment of the whole man for the left knee injury. Dr. Humberger testified that any instability was mild and that exercise had compensated for the injuries. Dr. Humberger further stated that Kuenning’s condition does not prevent him from returning to work in both of his usual occupations without any limitations or restrictions. Dr. Humberger testified:

“Q. Given your evaluations of Mr. Kuenning, for both his right and left knees, would you find that there would be any medical reason why Mr. Kuenning, if he chose to, could not do that [roofing] type of work?
“A. I see none.”

Dr. Humberger’s opinion was supported by Dr. Lowell Anderson, who examined Kuenning’s left knee. Regarding Kuenning’s physical ability, Dr. Anderson testified: “I did not put any restrictions on his activity because he had already stated that he was back to full activity and he was tolerating this quite well.”

The lower court also based its decision on Kuenning’s oral testimony. Kuenning admitted that he had not lost any carpentry jobs in the Bozeman area due to his injuries. Kuenning testified he continued to work as a ski patrolman with no income loss, medical restrictions or job modification. In his own words, his performance as a ski patrolman has only been “slightly” affected by the knee injuries.

Kuenning’s claim for an increase in permanent partial disability must be supported “by a preponderance of medical evidence.” Section 39-71-116(12), MCA (1985). When the medical testimony and Kuenning’s testimony are combined with Kuenning’s failure to prove loss of earnings on the open market, Kuenning’s claim fails. We hold that the evidence supports the decision of the Workers’ Compensation Court.

Affirmed.

MR. JUSTICES HARRISON, WEBER, SHEEHY, McDON-OUGH, GULBRANDSON and HUNT concur.