author:
JUSTICE GRAY
      JUSTICE TRIEWEILER

text:
    EDWARD L. OLSON, Plaintiff and Appellant, v. JACOB A. PARCHEN, Defendant and Respondent.
    No. 91-112.
    Submitted on briefs June 6, 1991.
    Decided August 1, 1991.
    Rehearing Denied Aug. 26, 1991.
    249 Mont. 342.
    816 P.2d 423.

      Philip J. O’Connell, Thueson Law Office, Helena, for plaintiff and appellant.
    Lon T. Holden, Jardine, Stephenson, Blewett & Weaver, Great Falls, for defendant and respondent.
   JUSTICE GRAY

delivered the Opinion of the Court.

Edward L. Olson appeals from a judgment of the District Court of the Eighth Judicial District, Cascade County, Montana, denying his motion for summary judgment on the issue of liability and granting Parchen’s motion to exclude evidence of certain economic damages suffered in an automobile collision. Olson also appeals from the jury verdict finding him contributorily negligent. We affirm in part and reverse in part.

Olson presents the following issues:

1. Did the District Court err in denying Olson’s motion for summary judgment on the issue of liability?

2. Did the District Court abuse its discretion by allowing the issue of contributory negligence to be submitted to the jury?

3. Did the District Court properly refuse to permit Olson to present evidence at trial of economic damages relating to loss of rental income and loss of profits from the sales of rental property?

On November 14, 1985, at approximately 4:15 p.m., vehicles operated by Edward L. Olson and Jacob A. Parchen collided at the intersection of First Avenue South and 18th Street in Great Falls, Montana. Olson was proceeding south on 18th Street as he approached the intersection, and Parchen was proceeding east on First Avenue South. Parchen failed to heed the yield right of way sign, and his 1977 GMC pickup truck collided with Olson’s 1964 Chevrolet Corvair on the passenger side. Both drivers stated that they were traveling at fifteen miles per horn.

Olson testified that a few moments prior to the collision he observed Parchen’s vehicle approaching from the right, but thought that Parchen was going to stop. Olson looked to the left for traffic. When he glanced back to the right and realized that Parchen’s pickup truck was not going to stop, Olson attempted to brake and turn to the left to avoid a collision, but was unsuccessful.

Parchen said that he did not see Olson’s car until it had entered the intersection moments before the collision. He applied his brakes, but his pickup truck skidded. Parchen also theorized that Olson had been blinded by the setting sun and didn’t see him approaching the intersection. Parchen asserted that Olson did not properly watch for traffic and should have been traveling slowly enough to stop.

The collision extensively damaged the right side of Olson’s Corvair. Olson suffered a bruise over the right collar bone, broken upper dentures, a bruise on the right side of the scalp, and a deep bruise over the outside of his right foot. Olson also claimed economic losses resulting from his alleged inability to complete rental property renovations because of physical injuries sustained in the collision.

Olson moved for partial summary judgment on the issue of liability. The District Court denied that motion, as well as Olson’s subsequent motions for a directed verdict at the close of the evidence and for judgment notwithstanding the verdict. The District Court granted Parchen’s motion in limine to exclude economic damages for losses associated with Olson’s rental property from the jury’s consideration. The District Court denied Olson’s motion for a new trial to consider economic damages.

The jury found that Parchen was eighty per cent negligent and had proximately caused Olson’s damages and injuries. Two thousand dollars in damages were awarded, of which Olson received $1,600.

I.

Did the District Court err in denying Olson’s motion for summary judgment on the issue of liability?

Olson claims that partial summary judgment should have been granted as a matter of law.

When approaching a “yield” sign, the following rule applies:

“[T]he driver of a vehicle approaching the “Yield’ sign shall slow to a speed of not more than 15 miles per hour and yield right-of-way to all vehicles approaching from the right or left on the intersecting roads or streets which are so close as to constitute an immediate hazard. If a driver is involved in a collision at an intersection or interferes with the movement of other vehicles after driving past a “Yield’ sign, such collision or interference shall be deemed evidence of the driver’s failure to yield right-of-way.”

Section 61-8-342, MCA. A driver’s failure to yield the right-of-way is both a “statutorily recognized duty and breach of that duty.” DeVerniero v. Eby (1972), 159 Mont. 146, 151, 496 P.2d 290, 292.

Parchen admitted that he failed to yield the right-of-way to Olson’s vehicle, but argued that he was unable to stop because his vehicle skidded. Parchen also conjectured that Olson may have been unable to see Parchen’s pickup truck because he was blinded by the sun. This argument is irrelevant because Parchen, not Olson, had a duty to yield. In addition, the skidding of Parchen’s vehicle is not a defense; it suggests only that Parchen may have been driving too fast for conditions. As a matter of law, Parchen was negligent under § 61-8-342, MCA.

Nonetheless, Parchen maintains that the District Court properly denied Olson partial summary judgment according to our holding in Reed v. Little (1984), 209 Mont. 199, 680 P.2d 937. He contends that Reed requires the issue of liability to be submitted to the jury if the defense of contributory negligence is asserted in a traffic violation case.

The facts of this case can be distinguished from the facts forming the basis for our holding in Reed. In Reed, the defendant ran into the plaintiff’s car when the plaintiff allegedly made a sudden stop in heavy traffic for no apparent reason. The plaintiff denied the sudden stop. Questions of fact regarding the speed and distances of the vehicles remained for the jury’s determination. Reed, 209 Mont. at 206, 680 P.2d at 940-41. As explained in our discussion below, under the facts of this case Olson could not be found contributorily negligent.

Summary judgment is appropriate where no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Rule 56(c), M.R.Civ.P.; First Security Bank of Bozeman v. Jones (1990), 243 Mont. 301, 303, 794 P.2d 679, 681. Since Parchen was negligent as a matter of law, the court erred by denying partial summary judgment to Olson.

II.

Did the District Court abuse its discretion by allowing the issue of contributory negligence to be submitted to the jury?

Before the question of contributory negligence can be submitted to the jury, evidence must be presented not only showing plaintiff’s negligence, but demonstrating that such negligence proximately caused the accident and resulting injuries. Stephens v. Brown (1972), 160 Mont. 453, 457-58, 503 P.2d 667, 669. No such factual evidence showing contributory negligence existed in this case.

Parchen argues that Olson violated the “basic rule” of § 61-8-303, MCA, by not properly watching for Parchen’s vehicle at the intersection. Section 61-8-303 is entitled “Speed restrictions — basic rule” and provides in part that a driver shall drive “in a careful and prudent manner, and at a rate of speed no greater than is reasonable and proper under the conditions....” According to the evidence, at the time of the collision Olson was traveling in a safe manner well below the speed limit.

In DeVerniero, the defendant alleged that because plaintiff did not properly watch for the other vehicle, he was contributorily negligent. We held that even though the plaintiff may have failed to look, his failure to observe defendant approaching was not the proximate cause of the accident:

“ ‘Had plaintiff looked it would not have affected defendant’s driving or speed. Defendant testified that he never saw plaintiff till defendant was within 100 feet of the intersection. Unless plaintiff had been able to cast some hypnotic spell over defendant his looking earlier would have had no effect on the collision.’ ”

DeVerniero, 159 Mont. at 154, 496 P.2d at 294 (quoting Bates v. Burns (1955), 3 Utah 2d 180, 281 P.2d 209, 213). The proximate cause of the collision was defendant’s breach of his duty to yield right-of-way. Plaintiff could not be contributorily negligent when his actions were not the proximate cause of the accident. DeVerniero, 159 Mont. at 154, 496 P.2d at 294.

The case before us is even clearer than DeVerniero on the issue of contributory negligence because Olson did not violate the basic rule. Parchen, on the other hand, did breach the basic rule by fading to watch for traffic and by failing to drive at a speed allowing him to stop his vehicle in time to avoid the collision. According to Parchen, he did not see Olson’s car in the intersection until moments before the collision. Olson said that he saw Parchen’s pickup truck, but thought Parchen was going to stop and looked away momentarily. A driver of a vehicle traveling on a street protected by a ‘yield’ sign has a right to rely upon the compliance of the driver of a vehicle which must yield with the yield right-of-way statutes. Olson cannot be contributorily negligent because his alleged failure to see Parchen’s vehicle entering the intersection was not the proximate cause of the collision.

Since the question of contributory negligence should not have been submitted to the jury, we reverse the jury’s finding that Olson was twenty per cent negligent and remand to the District Court for entry of judgment accordingly.

III.

Did the District Court properly refuse to permit Olson to present evidence at trial of economic damages relating to loss of rental income and loss of profits from the sales of rental property?

Olson asserts that the District Court abused its discretion in refusing to admit evidence of certain economic losses on the ground that they were speculative. Tort damages are allowed “for all the detriment proximately caused” by the breach “whether [the detriment] could have been anticipated or not.” Section 27-1-317, MCA. Although damages need not be proved with precision, damages which are a matter of mere speculation cannot be the basis of recovery. Bottrell v. American Bank (1989), 237 Mont. 1, 22-23, 773 P.2d 694, 707-708.

Thus, damages for lost profits may be awarded if such loss is shown to be the “natural and direct result of the act of the defendant” and if the loss is not speculative. Hostetter v. Donlan (1986), 221 Mont. 380, 382, 719 P.2d 1243, 1245 (citing Cruse v. Clawson (1960), 137 Mont. 439, 448, 352 P.2d 989, 994). The prohibition against speculative profits does not necessarily apply to uncertainty about the amount of such profits, but applies to uncertainty about “whether the loss of profits is the result of the wrong and whether such profit would have been derived at all.” Stensvad v. Miners and Merchants Bank of Roundup (1982), 196 Mont. 193, 206, 640 P.2d 1303, 1310, cert. denied, 459 U.S. 831, 103 S.Ct. 69, 74 L.Ed.2d 69; Hostetter, 221 Mont. at 382- 83, 719 P.2d at 1245.

Olson did not complete renovations on two rental buildings; they remained unoccupied for two years until he sold the properties. Olson maintained that alleged losses of rental income and alleged losses suffered when the rental properties were sold were attributable to his physical inability, caused by injuries suffered in the collision, to complete renovation of the properties. Less than two per cent of the necessary renovations to the rental properties were finished prior to the collision in which Olson was injured. During part of the time that the rental properties sat empty, Olson worked for Boeing company as an electrician.

All of the theories underlying Olson’s damage claims for loss of rents and profits are speculative. Olson could show only that he intended to restore the properties, that he might have been able to rent the restored properties, and that he might have garnered greater profits on the sale of the restored rental properties. We agree with the District Court that a question arises in Olson’s case about “whether such profit would have been derived at all” and that the profits Olson claimed he would have made are speculative.

Questions of admissibility of evidence are left largely to the discretion of the trial court. Zugg v. Ramage (1989), 239 Mont. 292, 296, 779 P.2d 913, 916. The District Court did not abuse its discretion in excluding evidence of lost profits as speculative.

The District Court shall enter judgment for the plaintiff in the total amount of $2,000, and the judgment is otherwise affirmed.

CHIEF JUSTICE TURNAGE and JUSTICES McDONOUGH and WEBER concur.

JUSTICE TRIEWEILER

concurring in part and dissenting in part:

I concur with that part of the majority’s opinion which relates to issues one and two; holds that plaintiff was entitled to judgment as a matter of law on the issue of liability, and holds that there was no evidence to support a finding of contributory negligence on the part of the plaintiff.

I dissent from that part of the majority’s opinion which affirms the District Court’s refusal to permit the plaintiff to present evidence at trial of economic damage resulting from the loss of rental income and lost profits.

The majority cavalierly dismissed Olson’s damage claim with the following conclusion:

“All of the theories underlying Olson’s damage claims for loss of rents and profits are speculative. Olson could show only that he intended to restore the properties, that he might have been able to rent the restored properties, and that he might have garnered greater profits on the sale of the restored rental properties. We agree with the District Court that a question arises in Olson’s case about ‘whether such profit would have been derived at all’ and that the profits Olson claimed he would have made are speculative.”

To fully understand how inaccurate the majority’s treatment of this issue is, it is necessary to set forth in full the complete text of the evidence plaintiff offered to present, had he been allowed to do so.

In a written offer of proof filed with the District Court prior to trial, plaintiff offered to prove the following facts through the following witnesses:

“1. Edward L. Olson will testify that before the automobile accident, he made a living by purchasing rim down homes and apartments, renovating the same, renting the homes and apartments and selling the renovated buildings at a profit. Olson will testify that he performed virtually all of the renovation work himself, including: carpentry, plumbing, electrical, heating, plastering and painting. By performing the renovations himself, Olson was able to earn a substantial profit by adding value to the homes and apartments.
“2. Olson will testify that before the November 14,1985 automobile accident, he owned the Alcoy Apartments located on 18th Street and a single family residence located at 2526 First Avenue South. Olson will testify that in October, 1985, he gutted the interior of Apartment No. 5 in the Alcoy Apartments and the home at 2526 First Avenue South. Olson intended to completely renovate Apartment No. 5 and the single family home during the winter of 1985-1986. He intended to relet the apartment and home in April, 1986 when the renovations had been completed.
“3. Olson will testify that he anticipated charging a rent of $185 per month for Apartment No. 5 in the Alcoy after the renovations were completed. He will testify that he anticipated charging a rent of at least $375 per month for the single family home.
“4. Olson will testify that as a result of the automobile accident, he was physically unable to complete the renovations to the two rental units. He will testify that he and his physician, Dr. James D. Hinde, expected that he would recover from the injuries suffered in the automobile accident within three to six months after the accident. However, he found that when he attempted to return to work, he suffered prolonged, debilitating pain and muscle spasms when he attempted to do the heavy lifting involved in the renovations.
“5. Olson will testify that for more than two years following the accident, he expected that he would fully recover from his injuries and be able to complete the renovations and rent Apartment No. 5 in the Alcoy and the home at 2526 First Avenue South. His treating physician will also testify that he expected that [sic] Olson to recover from his injuries. However, by December, 1987, it became clear to Olson and Dr. Hinde that Olson would likely continue to suffer from chronic myofascial pain into the indefinite future. Accordingly, Olson decided that he would likely never be able to complete the renovations through his own efforts. Olson sold the rental units at the first opportunity, in the early spring of 1988.
“6. Olson will testify that he sold the Alcoy Apartments to Rick Sowers in April, 1988 for $110,000. At the time of the sale, Apartment No. 5 was gutted, untenantable, and earning no income. The sales price of the Alcoy was reduced accordingly. Olson believes that the sales price was reduced by approximately 10% of the potential value of the Alcoy, or $11,000.
“7. Olson will testify that he sold the single family home at 2526 First Avenue South to Don Bisgard and Mike Holland in June, 1988 for $30,000. Olson will testify that if he had been able to complete the renovations on the home, he would have been able to sell it for approximately $45,000. Additionally, a vacant building lot adjoining the home at 2526 First Avenue South was included in the $30,000 sale to Bisgard and Holland. Olson believes that he would have been able to sell the building lot separate from the home for a profit of between $8,000 and $12,000.
“8. Rick Sowers, the present owner of the Alcoy Apartments will also testify. Sowers will testify that he also makes a living by buying older, run down homes, remodeling them and either renting or selling the homes for a profit. Sowers will testify that he is only able to make a profit remodeling older homes if he does all of the work himself. Sowers will testify that if he is unable to make the renovations himself, he is likely to loose money on a project.
“9. Sowers will testify that after purchasing the Alcoy Apartments from Ed Olson, he completed the renovations on Apartment No. 5. Sowers will testify that he invested between 160 and 200 hours of his time and approximately $2,000 into the renovations. Sowers will testify that after completing the renovations, he immediately rented Apartment No. 5 at a rental of $250 per month. Since first renting the apartment, it has never been vacant even though four separate tenants have lived in the apartment.
“10. Sowers will also testify that he paid $110,000 to purchase the Alcoy Apartments from Ed Olson. He will testify that the Alcoy would clearly have been worth more money had the renovations to Apartment No. 5 been completed, since Apartment No. 5 would then have been generating income which would have improved the cash flow of the building. Sowers will testify that he believes he would have paid $8,000 to $10,000 more for the Alcoy had Apartment No. 5 been fully renovated at the time he purchased it.
“11. Don Bisgard will testify at trial. Bisgard will testify that he purchased the single family residence at 2526 First Avenue South from Ed Olson in the spring of 1988 at a cost of $30,000. Bisgard will testify that he and his partner, Mike Holland, are also in the business of remodeling and selling older homes. Bisgard will also testify that he is only able to make a profit in the remodeling business by doing the work himself. Bisgard will testify that after spending $30,000 to purchase the home at 2526 First Avenue South, he invested approximately $8,860 in materials, $3,200 in labor and approximately $2,900 in miscellaneous costs. Bisgard sold the home at 2526 First Avenue South after completing renovations for $41,900. Additionally, Bisgard split off the adjoining vacant lot and sold that lot separately after building a new house on the lot. For his accounting purposes, Bisgard assigns avalué of $5,000 to the vacant lot, separate and apart from the value of the renovated house.
“12. The foregoing is a brief summary of the evidence to be offered at trial regarding the economic losses suffered by Ed Olson as a consequence of the November 14, 1985 automobile accident.”

Plaintiff was never given an opportunity to offer the above evidence. However, for purposes of our review, we must presume that he was capable of proving what he offered to prove. In that event, there was nothing speculative about his damages. In fact, the proof that he would have offered exceeded all of the prior requirements established by this Court for the proof of lost profits and economic damages.

We held in Cruse v. Clawson (1960), 137 Mont. 439, 448, 352 P.2d 989, 994, that:

“[I]n Montana the rule is that a person may recover for loss of profits where it is shown that such loss is the natural and direct result of the act of the defendant complained of and that such amount is certain and not speculative.”

Plaintiff satisfied the Cruse requirement by offering to prove through his own testimony and the testimony of his physician that he was unable to complete the renovation of his rental properties due to the injury he sustained in his collision with the defendant.

In Vinion v. Wood Yard, Inc. (1988), 232 Mont. 110, 113, 755 P.2d 31, 34, we reaffirmed “[t]hat the owner of property may testify as to its value.” In this case, therefore, plaintiff was qualified to testify to the value of his property, with and without the improvements that he would have made, but for his injury. The District Court abused its discretion by disallowing that testimony. In Vinion, we affirmed a verdict of damages for the plaintiff based solely upon his opinion testimony about the diminution in value of his building which resulted from damage caused by the defendant, even though neither the plaintiff nor defendant’s experts were able to assess the impact of the structural damage on the value of the building. We held that:

‘Wood Yard [defendant] admitted that it caused the damages in this case. If it is reasonably certain that damages were sustained by the wrongful act or breach of the defendant, then reasonable damages rationally supported by the evidence will be upheld. Castillo v. Franks (Mont. 1984), [213 Mont. 232,] 690 P.2d 425, 431, 41 St.Rep. 2071.” Vinion, 232 Mont. at 113, 775 P.2d at 34.

In this case, the plaintiff offered specific opinion evidence regarding the diminution in the value of his building, due to his inability to complete the improvements he had started. He also offered qualified opinion evidence regarding the rental value of the property, had he been permitted to complete it. However, in addition to his own opinion, plaintiff went further than he was required to go by our previous case law when he offered the testimony of the people who purchased his rental properties to corroborate his own opinion testimony. The proof in this case was more than was required by our previous decision in Cremer v. Cremer Rodeo Land & Livestock Co. (1981), 192 Mont. 208, 214, 627 P.2d 1199, 1202, where, when discussing proof of lost profits and rental proceeds, we held that:

“Recovery of damages will not be denied, even if the mathematical precision of the figure is challenged, provided the evidence is sufficient to afford a reasonable basis for determining the specific amount awarded. Accord, Jacqueline’s Washington, Inc. v. Mercantile Stores Co. (1972) 80 Wash.2d 784, 498 P.2d 870.”

In Stensvad v. Miners & Merchants Bank (1982), 196 Mont. 193, 206, 640 P.2d 1303, 1310, when discussing damages for lost profits, we held that:

“Damages for loss of profits may be awarded if not speculative. Silfvast v. Asplund (1935), 99 Mont. 152, 161, 42 P.2d 452, 456. The rule that prohibits speculative profits does not apply to uncertainty as to the amount of such profits, but to uncertainty or speculation as to whether the loss of profits is the result of the wrong and whether such profit would have been derived at all. Tri-Tron Intern. v. Velto (9th Cir. 1975), 525 F.2d 432, 437. Once liability is shown, that is the certainty that the damages are caused by the breach, then loss of profits on a reasonable basis for computation and the best evidence available under the circumstances will support a reasonably close estimate of the loss by a District Court. Smith v. Zepp (1977), 173 Mont. 358, 370, 567 P.2d 923, 930. But no damages are recoverable which are not clearly ascertainable both in nature and origin, and only profits which are reasonably certain may be awarded. Smith v. Fergus County (1934), 98 Mont. 377, 386, 39 P.2d 193, 195.”

The holding of the majority in this case is contrary to all precedent established by this Court during the past ten years for the proof of lost profits. The result of the majority’s opinion is to create an impossible burden for any property owner who is put in the unfortunate position of having to prove the nature and extent of his damage when he is unable to maintain or improve his personal or real property, due to the negligence of another.

As shown by the above offer of proof, there is nothing questionable about plaintiff’s ability to rent his property had he completed its restoration. The subsequent owner did complete the restoration and immediately rented the property. There was nothing questionable about Olson’s opinion that he would have sold the property for a greater profit had the improvements been completed. The purchaser of the property did complete the improvements and offered to testify that the property had a greater value following the completion of those improvements.

I strongly disagree with the majority’s conclusion that “[a]ll of the theories underlying Olson’s damage claims for loss of rents and profits are speculative.” There was absolutely nothing speculative about the evidence that plaintiff sought to present regarding his loss of profits and business income.

For these reasons, I conclude that the District Court abused its discretion by excluding plaintiff’s proof that he was economically damaged by loss of rental income and profits from the sale of rental property. I would reverse the District Court and remand this case for a new trial on the issue of damages.

JUSTICES HARRISON and HUNT concur in the foregoing dissent of JUSTICE TRIEWEILER.


source: Caselaw Access Project

author: JUSTICE McDONOUGH

license: Public Domain

text:
    WAYNE and TERESA AMAZI, et al, Plaintiffs, v. ATLANTIC RICHFIELD COMPANY, a Delaware Corporation, CGG AMERICAN SERVICES, INC., a Colorado Corporation, GRANT-NORPAC, INC., a Corporation. , et al., Defendants. ATLANTIC RICHFIELD COMPANY, Cross-Claimant, Respondent and Cross-Appellant, v. GRANT-NORPAC, INC., Cross-Defendant, Appellant and Cross-Respondent. LONNIE AND PHYLLIS BROOKSHIRE, et al., Plaintiffs, v. ATLANTIC RICHFIELD COMPANY, a Delaware Corporation., CGG AMERICAN SERVICES, a Colorado Corporation, GRANT-NORPAC, INC., et al., Defendants,
    No. 90-627.
    Submitted on briefs June 28, 1991.
    Decided August 9, 1991.
    249 Mont. 355.
    816 P.2d 431.

      Rockwood Brown and Guy W. Rogers, Anderson, Brown, Gerbase, Cebull, Fulton, Harman & Ross, Billings, for appellant.
    James M. Ragain and Kyle A. Gray, Holland and Hart, Billings, for respondent.
   JUSTICE McDONOUGH

delivered the Opinion of the Court.

This appeal involves an indemnification dispute. The parties involved were both defendants in two underlying suits. Appellant and Cross-Defendant Grant-Norpac (GN) appeals the order of the First Judicial District Court, Lewis and Clark County, granting summary judgment to the Respondent and Cross-Claimant Atlantic Richfield Company (ARCO) on its cross-claim for indemnification in the underlying lawsuits. We affirm.

GN raises a sole issue on appeal:

Did the District Court err in granting summary judgment to ARCO on its cross-claim for indemnification, including indemnification for ARCO’s own alleged negligence, based on the language of the contract between the parties?

ARCO also raises an issue on cross-appeal:

Did the District Court err in not awarding ARCO its attorney5s fees expended to prove its cross-claim for indemnification?

This case arose out of seismic exploration in and around the Helena Valley. On January 3, 1983, ARCO entered into an agreement with GN, whereby GN was to conduct seismic testing activities for ARCO for the purpose of mineral and oil exploration. Pursuant to the agreement, ARCO would designate certain services it wanted GN to conduct in locations designated by ARCO, with specific instructions contained in a series of supplementary agreements.

In 1983 and 1984 GN ran shot-lines in the Helena Valley at locations designated by ARCO. Shot-lines consist of a linear series of sticks topped with explosives running in a particular direction. The explosives are detonated simultaneously and the velocities of the resulting shockwaves that pass through the ground provide data that may be indicative of mineral or oil deposits in the area. The contract indicates that the location of the shotlines and the equipment used, as well as specifications for the work, were provided by ARCO.

About this same time two other companies, Geosource, Inc., and CGG American Services, Inc., were also conducting geophysical surveys in the area, setting off similar explosive devices.

These suits arose when the plaintiff landowners sued ARCO, GN, Geosource and CGG alleging that the exploration work of the defendants had damaged their property. The landowners contended that the use of above-ground explosives in the Helena Valley was negligent.

GN and ARCO requested the District Court to interpret the indemnity clause of the contract between the parties. The court ruled that the indemnity provision required GN to indemnify ARCO if the trier of fact determined that both ARCO and GN were negligent to some degree; GN would not have to indemnify ARCO only if the plaintiffs’ injuries arose due to the sole negligence of ARCO. ARCO offered the defense of this matter to GN in October of1986. GN refused to defend. ARCO incurred in defending some $64,000.00 worth of attorney’s fees and costs. GN eventually settled the plaintiffs’ cases and obtained releases for itself and ARCO. ARCO did not contribute to the settlements. ARCO moved for summary judgment requesting that under the contract GN indemnify ARCO for its attorney’s fees and costs. The District Court granted summary judgment ruling that ARCO was entitled to costs and fees expended in defending the underlying claims, but not to the fees expended in proving its contractual right to indemnification. GN appealed from the orders granting ARCO’s indemnity claim and fees. ARCO cross-appealed from the order denying its claim for costs and fees expended in establishing its right to indemnification.

First, we note that this is an appeal from summary judgment. Our standard of review is the same as that of the District Court considering the motion. In order for summary judgment to issue, the movant must demonstrate that there is no genuine issue as to all facts deemed material in light of the substantive principles entitling the movant to judgment as a matter of law. Rule 56(c), M.R.Civ.P.; Frigon v. Morrison-Maierle, Inc. (1988), 233 Mont. 113, 117, 760 P.2d 57, 60; Cerek v. Albertson’s, Inc. (1981), 195 Mont. 409, 411, 637 P.2d 509, 511. If the movant meets this burden, the burden then shifts to the non-moving party to demonstrate a genuine issue of material fact. Frigon, 760 P.2d at 60. “Mere denial or speculation will not suffice, the non-moving party must show facts sufficient to raise a genuine issue.” Frigon, 760 P.2d at 60; Gamble Robinson Co. v. Carousel Properties (1984), 212 Mont. 305, 312, 688 P.2d 283, 287.

I. GN’s Appeal

In its opening brief, GN narrowly defines the issue on appeal:

“We are not concerned with the remedy of contribution, nor with the common law indemnity involving active/passive negligence. This appeal relates solely to whether ARCO has a right of contractual indemnity against Grant-Norpac under the written agreement between those parties. The issue can be narrowed even further by stating that we are not concerned with any claimed sole negligence on the part of ARCO which would allow indemnity in favor of GrantNorpac. The limited question presented in this appeal is whether the indemnity provision of the Basic Agreement allows ARCO to recover attorneys’fees and costs which were expended to defend against claims of ARCO’s own direct negligence. (Emphasis added.)”

For purposes of this appeal, GNhas abandoned its argument below that a genuine issue of material fact existed concerning whether ARCO was solely negligent, which would allow indemnity in favor of GN. Furthermore, GN concedes that it was partially negligent, thereby eliminating questions of fact under the indemnity provision of the contract. The only issue remaining involves the legal interpretation of the indemnity provision in the contract. The provision provides:

“CONTRACTOR shall protect, indemnify, defend and save CLIENT harmless from and against all claims, liabilities, demands, causes of action and judgments (including costs and reasonable attorneys fees) arising in favor of or asserted by third parties on account of personal injury or death or on account of damage to property, which injury, death or damage is the result, in whole or in part, of the negligent acts or omissions or willful misconduct of CONTRACTOR, its employees, agents or subcontractors. CLIENT shall protect, indemnify, defend and save CONTRACTOR harmless from and against all claims, liabilities, demands, causes of action and judgments (including costs and reasonable attorneys fees) arising in favor of or asserted by third parties on account of personal injury or death or on account of damage to property, which injury, death or damage is solely the result of the negligent act or omissions or willful misconduct of CLIENT, its employees and agents. (Emphasis added.)” GN contends that while the provision requires GN to indemnify ARCO for any negligence resulting in whole or in part from GN’s actions, the contract does not indemnify ARCO against its own negligence.

We disagree. In order for a contract to indemnify a party against its own negligence, such indemnification must be expressed in “clear and unequivocal terms.” Sweet v. Colburn School Supply (1982), 196 Mont. 367, 370-71, 639 P.2d 521, 523; Lesofski v. Ravalli County Electric Cooperative (1968), 151 Mont. 104, 108, 439 P.2d 370, 372. In Sweet, this Court held that indemnity language in a lease was not clear and unequivocal, noting that the language in that case was not comparable to the indemnity language in Ryan Mercantile Co. v. Great Northern Railway Company (9th Cir. 1961), 294 F.2d 629. In Ryan, the wife of an employee of Ryan was injured while riding in a car when the car was struck by a boxcar being pushed by a Great Northern locomotive. She only alleged negligence on the part of Great Northern. The Ninth Circuit Court found that Great Northern should be indemnified for its own negligence, stating:

“[I]n order to uphold an indemnification agreement for damages caused by negligent acts of the indemnitee there must be clear and unequivocal terms ... An examination of the indemnity agreement discloses no ambiguity. The phrases used — ‘any and all personal injuries’, ‘of every name and nature which may in any manner arise’, ‘whether due or not due to the negligence of Great Northern’ — demonstrate that Ryan’s indemnity would cover any claim made against Great Northern... and shows that the parties had in mind that the negligence of Great Northern would be no bar to Ryan’s indemnity obligation.”

Ryan, 294 F.2d at 633. While the indemnity provision in this case does not contain language exactly parallel to the language in Ryan — i.e., “whether due or not due to the negligence of ARCO” — when both sentences of the provision are read together it is clear that the provision requires GN to indemnify ARCO “against all claims, liabilities, demands, causes of action and judgments (including costs and reasonable attorneys fees” resulting “in whole or in part” from “the negligent acts or omissions or willful misconduct” of GN, its employees, agents or subcontractors. Under the provision, liability attaches to ARCO only when ARCO is solely negligent. Thus the provision clearly and unequivocally provides that ARCO will not be indemnified against its own sole negligence, but it will be indemnified where an injury is due to concurrent negligence of ARCO and GN in any proportion. We conclude that the District Court did not err in ruling that the indemnity provision allows ARCO to recover attorneys’fees and costs expended to defend against claims of ARCO’s own direct negligence.

II. ARCO’s Cross-Appeal

On cross-appeal, ARCO alleges that the District Court erred in not ruling that the indemnity provision also entitles ARCO to indemnification for its costs and fees incurred proving its right to indemnification. ARCO sought indemnity totaling $70,250.75. $50,449.51 of this requested sum was expended in defending the case. ARCO incurred the remaining $19,801.24 attempting to secure indemnity from GN.

This is an issue of first impression in Montana. The majority rule is that a party is not entitled to its fees and costs incurred in establishing its right to indemnity:

“The general, and virtually unanimous rule appears to limit the allowance of such fees to the defense of the claim indemnified against and not to extend such allowance for services rendered in establishing the right to indemnification. 41 Am.Jur.2d, Indemnity, § 36 (Supp. 1974); 42 C.J.S. Indemnity, § 13d (1944)... [I]n the absence of express contractual terms to the contrary, an indemnitee may not recover legal fees incurred in establishing his right to indemnification.”

Jones v. Strom Construction Co., Inc. (1974), 84 Wash.2d 518, 527 P.2d 1115, 1119. ARCO contends that it should be entitled to recover its fees incurred in establishing indemnification because a contract provision providing for indemnification is similar to a contract of insurance. We disagree. Here the indemnity provision is merely one provision in a contract to perform geophysical exploration bargained between the parties. It is not specifically a contract for insurance. We adopt the majority rule that absent an Appellant and Cross-Respondent.

express contractual term an indemnitee may not recover attorneys’ fees incurred in establishing indemnity.

ARCO argues that Section IX, paragraph 3 of the agreement constitutes such an express term and allows recovery for fees incurred in establishing indemnity. The provision provides:

“If indemnity is required by any of the terms of this Agreement, the responsible party shall defend the other and pay all settlements, judgments, costs, including reasonable attorneys fees, and other related expenses similar or dissimilar to the foregoing.”

ARCO argues that such “related expenses” include attorneys’ fees incurred in establishing its contractual right to indemnification, citing the rule that contracts for indemnification are to be liberally construed in favor of the party intended to be indemnified. See Capital Hill Shopping Center v. Miles (1977), 174 Mont. 222, 231, 570 P.2d 295, 298.

We disagree with this argument. While contracts of indemnity are to be liberally construed in favor of the indemnitee, the provision here is not in and of itself such a contract. Rather it is a contract term allowing for recovery of certain attorneys’ fees. Under the majority rule just adopted, such a term must be express in order for an indemnitee to recover legal fees incurred in establishing its right to indemnification. We conclude that the provision here is not sufficiently express, and affirm the District Court’s adoption of the majority rule regarding such fees.

The order of the District Court is

AFFIRMED.

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


author: CHIEF JUSTICE TURNAGE

text:
    LAURA J. McCANN, Respondent and Appellant, v. TRUSTEES, DODSON SCHOOL DISTRICT, Petitioner and Respondent.
    No. 91-175.
    Submitted on Briefs July 16, 1991.
    Decided Aug. 13, 1991.
    249 Mont. 362.
    816 P.2d 435.

      Emilie Loring, Hilley & Loring, Missoula, for respondent and appellant.
    Catherine Swift, Erdmann Law Office, Helena, for petitioner and respondent.
   CHIEF JUSTICE TURNAGE

delivered the Opinion of the Court.

The District Court for the Seventeenth Judicial District, Phillips County, granted summary judgment for the Trustees of Dodson School District (school district) in this action for attorney fees pursuant to § 49-2-505(4), MCA. Lama J. McCann appeals. We reverse.

The issue is whether the District Court abused its discretion in awarding attorney fees to the school district as the prevailing defendant in the underlying discrimination case filed under the Montana Human Rights Act.

The school district brought this action in District Court to recover from Lama J. McCann (McCann) its attorney fees incmred in defending against her complaint of unlawful discrimination. McCann filed her complaint with the Montana Human Rights Commission in August 1986. She alleged that the school district, her employer, had discriminated against her on the basis of race and sex when she, a Caucasian female, was paid less for her combination teacher/aide position than was a Native American male for his comparable position. The Human Rights Commission hearing examiner, while agreeing that McCann had established a prima facie case of employment discrimination, nevertheless concluded that a basis other than gender and race had been shown to explain the salary differential. The hearing examiner concluded that the school district was justified in paying the male more because he was available to work as an athletic director and coach, for which he was also paid an additional stipend. The Human Rights Commission affirmed the hearing examiner’s decision. McCann did not appeal that final administrative determination.

The school district then initiated a district court action for attorney fees Tinder § 49-2-505(4), MCA:

“The prevailing party in a hearing under this section may bring an action in district court for attorneys’ fees. The court in its discretion may allow the prevailing party reasonable attorneys’ fees ....”

The parties filed and briefed cross-motions for summary judgment. Concluding that “there is a lack of supporting evidence here, [Mc-Cann] carried on her litigation too long, and her action was not reasonable,” and that “[plublic policy is advanced by discouraging claims of limited merit,” the District Court granted the school district’s motion for summary judgment. The parties stipulated to the amount of attorney fees, just under $5,000. McCann appeals.

Did the District Court abuse its discretion in awarding attorney fees to the school district as the prevailing defendant in the underlying discrimination case filed under the Montana Human Rights Act?

Until now, no standard has been authoritatively set forth to guide a district court’s discretion in deciding whether attorney fees should be awarded to a successful defendant in an action filed under the Montana Human Rights Act. However, this Court has affirmed a denial of attorney fees to a prevailing defendant based on the district court’s determination that the case was not “frivolous or factually baseless.’’ Breese v. Steel Mountain Enterprises, Inc. (1986), 220 Mont. 454, 458, 716 P.2d 214, 216.

This Court has stated that the Montana Human Rights Act “is closely modeled after Title VII, and reference to pertinent federal case law is both useful and appropriate.” Snell v. Montana-Dakota Utilities Co. (1982), 198 Mont. 56, 62, 643 P.2d 841, 844. Here, the parties and the District Court cite the standard set forth in Christiansburg Garment Co. v. EEOC (1978), 434 U.S. 412, 98 S.Ct. 694, 54 L.Ed.2d 648, as appropriate in deciding whether a successful defendant in a Human Rights Act case is entitled to attorney fees. Christiansburg addressed the question of when attorney fees should be awarded to a successful defendant in a Title VII action.

The Christiansburg standard is that

“a plaintiff should not be assessed his opponent’s attorney’s fees unless a court finds that his claim was frivolous, unreasonable, or groundless, or that the plaintiff continued to litigate after it clearly became so.”

Christiansburg, 434 U.S. at 422, 98 S.Ct. at 701.

The reasons for the above limitation on the allowance of attorney fees to successful defendants in Title VII actions are also present in cases decided under the Montana Human Rights Act. The right to be free from discrimination because of race, creed, religion, color, sex, physical or mental handicap, age, or national origin is a civil right specifically recognized by law. Section 49-1-102, MCA. Civil rights acts depend upon private individuals to uphold the public policy set forth in the law. To avoid discouraging the filing of meritorious claims under the Montana Human Rights Act, we adopt the standard set forth in Christiansburg as the measure for whether attorney fees should be granted to prevailing defendants under § 49-2-505(4), MCA.

Both parties cite federal circuit court cases decided under Christiansburg. However, as they acknowledge, none of those cases control and all are factually distinguishable. We do note that, in contrast to most cases in which this Court defers to a trial court’s discretion on the grounds that the trial court has the unique opportunity to observe the demeanor of the parties and witnesses, this action was decided on summary judgment after administrative action. Therefore, the District Court did not have the opportunity to observe the demeanor of the parties or witnesses.

We conclude that the Christiansburg standard has not been met here. Based primarily on the hearing examiner’s finding that McCann made a prima facie case, we disagree with the District Court’s statement that there is a lack of supporting evidence and that McCann’s action was not reasonable. “If the plaintiff established a prima facie case ... this will generally defeat a prevailing defendant’s request for fees.” Larson, Employment Discrimination, vol. 3, § 58.12, pp. 11-104 through 11-106.1 (1990). Additionally, we do not accept the District Court’s reasoning that McCann’s case is “of limited merit.” There is nothing in the record to indicate that McCann’s case was filed or pursued in bad faith. The school board points to McCann’s parallel pursuit of separate federal administrative proceedings, her eventual loss of this case, and her apparent refusal of a compromise offer from the school district. But we are unwiHing to hold that the pursuit of administrative remedies is grounds for a ruling of unreasonableness. McCann did not further pursue the action after being unsuccessful in the administrative proceedings. Despite the school district’s protestation that it is a small entity and that the attorney fees incurred in defending this case present a hardship to it, we conclude that, in light of the strong public policy of encouraging possibly meritorious claims filed under the Montana Human Rights Act, the school district must pay its own attorney fees.

Reversed.

JUSTICES HARRISON, TRIEWEILER, GRAY, HUNT, McDONOUGH and WEBER concur.


author: JUSTICE TRIEWEILER

text:
    STATE OF MONTANA, Plaintiff and Respondent, v. GERALD RAYMOND HALL, Defendant and Appellant.
    No. 90-503.
    Submitted on briefs May 30, 1991.
    Decided August 20, 1991.
    249 Mont. 366.
    816 P.2d 438.

      Julie A. Macek, Great Falls, for defendant and appellant.
    Marc Racicot, Atty. Gen., Elizabeth L. Griffing, Asst. Atty. Gen., Helena, Patrick L. Paul, Cascade County Atty., Kim Schulke, Deputy Cascade County Atty., Great Falls, for plaintiff and respondent.
   JUSTICE TRIEWEILER

delivered the opinion of the Court.

Gerald Hall appeals the judgment of the District Court of the Eighth Judicial District for Cascade County, finding the defendant guilty of criminal possession of dangerous drugs with intent to sell. We affirm the District Court.

The issues on appeal are:

1. Whether the defendant’s probation officer had reasonable cause to conduct a warrantless search of defendant’s home.

2. Whether the defendant’s constitutional rights were violated by his inability to question a police informant at his trial.

3. Whether there was sufficient evidence to support defendant’s conviction.

Gerald Hall was placed on parole on February 20, 1986, following convictions of felony theft and criminal mischief. As a condition of his parole, Hall agreed to submit to searches by his parole officer of his person, automobile, or premises at any time with or without a warrant upon reasonable cause. He was also prohibited from possessing drugs and agreed to submit to drug testing at the request of his parole officer.

In January 1990, the Great Falls Police Department was advised by an informant, William Smith, that drugs could be purchased from Wayne Davis.

On January 9, 1990, Detective Brian Lockerby of the Great Falls Police Department purchased one-quarter pound of marijuana from Davis and observed Davis obtain the marijuana from Hall’s residence in Great Falls. The detective was informed that the seller, a man named Charlie, lived in the house with another man named Gerald.

At a briefing the next day, Lockerby discovered that a parolee named Gerald Hall lived at the residence. Lockerby contacted Hall’s parole officer, Michael Redpath, and informed him of the situation. No search was conducted at that time because Lockerby wished to conduct further investigation concerning the possible sale of explosives and automatic weapons from the residence. A second attempt at purchasing drugs was unsuccessful, and a third was planned when Lockerby learned that the man identified as Charlie was in jail.

Lockerby informed Redpath that the investigation had ended. Redpath decided that a search of Hall’s residence was in order. On January 23, 1990, Redpath and two detectives from the Great Falls Police Department went to the residence, advised Hall that they intended to search the house, and read him his rights. The officers found drug paraphernalia throughout the house, some of which was similar to items commonly used in drug transactions.

In the closet of Hall’s bedroom, the officers found a duffle bag containing four “baggies” of marijuana and various containers commonly used to transport and sell marijuana. At the conclusion of the search, Hall was shown the duffle bag containing the marijuana and he stated to the officers that the bag and the marijuana inside were his. Hall later claimed that he made the statement to protect his wife from being charged, and that the bag and its contents actually belonged to Charlie Devito, his incarcerated houseguest.

Hall was arrested and charged with criminal possession of dangerous drugs with intent to sell. He pled not guilty and filed a motion to suppress the evidence found and statements made at his residence on the grounds that his parole officer lacked reasonable grounds to search his home. A hearing was held, and Hall’s motion was denied.

A jury trial commenced on June 5, 1990. The jury returned a verdict of guilty, and Hall was subsequently sentenced to serve ten years, with an additional consecutive five years added because of his designation as a persistent felony offender. Hall appeals from this judgment.

I.

Hall maintains that his probation officer, Michael Redpath, did not have reasonable cause to conduct a search of his home without a warrant and that all evidence obtained should have been suppressed.

In State v. Burke (1988), 235 Mont. 165, 766 P.2d 254, this Court, following Griffin v. Wisconsin (1987), 483 U.S. 868, 107 S.Ct. 3164, 97 L.Ed.2d 709 (1987) set forth the standard for probationary searches. In adopting Griffin’s reasonable grounds standard, which is less stringent than the Fourth Amendment probable cause standard, this Court stated:

“Restrictions on a probationer are meant to assure that the probation serves as a period of genuine rehabilitation and that the community is not harmed by the probationer’s conditional liberty status.
“In conjunction with the need for supervision, a degree of flexibility must also be accorded the probation officer. The probation officer acts upon a continued experience with the probationer, with knowledge of the original offense, and with the probationer’s welfare in mind. Because of his expertise, we view the probation officer in a far superior position to determine the degree of supervision necessary in each case.
“This expertise would be rendered meaningless if a warrant requirement were imposed prior to a probationary search. The independent magistrate, rather than the probation officer, would ultimately make supervisory decisions. In addition, the delay associated with obtaining a warrant plus the greater evidentiary burden would, we believe, substantially inhibit the effectiveness of the probation system.”

Burke, 235 Mont. at 169, 766 P.2d 254.

In this case, Hall’s probation officer knew that Hall had tested positive for marijuana several times during his probation. In March 1989, Hall was arrested for violating the terms of his parole when his urinalysis detected marijuana use. Rather than revoke Hall’s probation, an intervention program was instituted. Less than ten months later, Hall’s probation officer was informed that drug sales were being conducted out of Hall’s residence. In light of that information, we conclude that Hall’s probation officer had reasonable grounds to conduct a warrantless search of the premises. We conclude that the District Court did not abuse its discretion in denying the motion to suppress evidence gathered during the search.

II.

Hall contends that he was denied the right to confront and cross examine William Smith, the unavailable informant whose statements led to the investigation of Wayne Davis, and that any reference during trial to out-of-court statements made by Smith violated his right to confront witnesses and was prejudicial.

Smith’s statements did not form any basis for Hall’s conviction. They were merely foundational to explain why Lockerby happened to be where he was when he observed the drug transaction at Hall’s residence.

Furthermore, the reliability of the informant is not an issue in this case. Smith’s statements were not the basis for the search of Hall’s residence. His statements implicated Charles Devito, not Hall. Pursuant to the information, Detective Lockerby conducted an undercover buy of narcotics. Lockerby personally witnessed the sale of drugs from Hall’s residence. It was that observation, and Hall’s past drug use while on parole, that were the basis for the search of Hall’s home. Therefore, the veracity of Smith’s statements was never at issue, and Hall has failed to demonstrate the denial or invasion of a substantial right from which the law imputes prejudice. State v. Miller (1988), 231 Mont. 497, 507, 757 P.2d 1275, 1281.

III.

Hall contends that there was insufficient evidence to find that the State had proven the essential elements of the crime charged beyond a reasonable doubt. Specifically, Hall maintains that the State did not establish his possession of the drugs nor his intent to sell drugs.

Hall maintains that the State failed to prove that he had constructive possession of the marijuana. Hall contends that the marijuana was found in a duffle bag belonging to Charles Devito, and that the State neither proved that Hall maintained dominion and control over the drugs nor knew of their existence.

Section 45-9-103(1), MCA, requires proof that a defendant knowingly possessed dangerous drugs with an intent to sell. “Possession” is defined as “the knowing control of anything for a sufficient time to be able to terminate control.” Section 45-2-101(52), MCA. Knowledge, therefore, is an element of possession. Although knowledge cannot be inferred from mere possession alone, knowledge may be proven by evidence of acts, declarations, or conduct of the accused from which an inference may be drawn. State v. Krum (1989), 238 Mont. 359, 777 P.2d 889, 891.

Hall stated after the search of his home that the marijuana in the duffle bag was his. The bag was found in Hall’s bedroom closet. Where a controlled substance is found in a place subject to the joint dominion and control of two persons, possession may be imputed to either or both persons. State v. Scheffelman (1987), 225 Mont. 408, 733 P.2d 348, 352. Given the evidence, the trier of fact made a factual determination that Hall maintained constructive possession of the marijuana. State v. Smith (1983), 203 Mont. 346, 661 P.2d 463, 466. We conclude that there is sufficient evidence to support the jury’s finding of possession.

Hall contends that there was insufficient evidence to find intent to sell. This Court has noted the difficulty of proving criminal intent on numerous occasions. Because it is seldom subject to direct proof, intent must be inferred from the acts of the accused and the facts and circumstances of the offense. State v. Crumley (1986), 223 Mont. 224, 725 P.2d 214. In this case, Hall’s household contained numerous articles commonly used in drug transactions, including scales, containers, and other packaging materials. Furthermore, the drugs were individually packaged in a maimer to indicate readiness for piecemeal distribution. The presence of the drugs in combination with other items consistent with sales activities and inconsistent with personal use may be used to infer an intent to sell. State v. Garberding (Mont. 1990), [245 Mont. 356,] 801 P.2d 583, 587, 47 St.Rep 2157. We conclude that there was sufficient evidence to support the jury’s verdict. Hall’s conviction and the sentence imposed are, therefore, affirmed.

JUSTICES HARRISON, HUNT, GRAY, and WEBER concur.


author: JUSTICE WEBER JUSTICE McDONOUGH

text:
    GARY W. MANNIX, Plaintiff and Appellant, v. THE BUTTE WATER COMPANY, a New Jersey Corp., and DENNIS WASHINGTON, Defendants and Respondents.
    No. 91-150.
    Submitted May 8, 1991.
    Decided August 20, 1991.
    249 Mont. 372.
    816 P.2d 441.

      Frank B. Morrison, John M. Morrison argued, Morrison Law Offices, Helena, for plaintiff and appellant.
    Ronald B. MacDonald argued, Datsopoulos, MacDonald & Lind, Missoula, for defendants and respondents.
   JUSTICE WEBER

delivered the Opinion of the Court.

This is an action for wrongful discharge. Plaintiff Gary W. Mannix appeals an order of the Second Judicial District, Silver Bow County, granting summary judgment for defendant Dennis Washington on all claims except a “corporate veil” claim. We affirm.

The issue is whether a genuine issue of material fact has been demonstrated as to whether Washington acted in retaliation in removing Mannix from office, so that Washington can be held personally liable for Mannix’s discharge as president of the Butte Water Company.

Plaintiff Gary W. Mannix (Mannix) was an employee of the Butte Water Company (Water Company) from 1973 until December 1985. From 1983 until the end of his tenure, he was president of the Water Company.

From the 1960’s until December 1985, the Water Company was owned by the Atlantic Richfield Company (ARCO), and its various predecessors in title. In September of 1985, defendant Dennis Washington (Washington) and ARCO entered a letter agreement that Washington would purchase from ARCO a Butte mine, some 35,000 acres of property around Georgetown Lake, and the Water Company.

At the time of the September 1985 negotiations between ARCO and Washington, the Water Company carried, and had carried for some years, a note payable to ARCO for approximately $4.5 million. Part of the initial agreement between Washington and ARCO was that the $4.5 million debt would be erased and that Washington would receive the Water Company free and clear.

Dorn Parkinson was the president of Washington Corporations and also, an employee of Washington. On behalf of Washington, Parkinson met with Mannix several times in the fall of 1985 prior to the closing of the sale. Due at least in part to what he learned at those meetings, Parkinson determined that it would not be beneficial for the Water Company to be debt free. Washington arranged to use a personal line of credit at a Minnesota bank to get a $2 million loan for the Water Company and to personally guarantee the loan. ARCO and Washington agreed to modify the sale agreement to reflect a debt of $2 million on the Water Company. Washington and ARCO agreed that the $2 million obtained from the Minnesota bank would be paid to ARCO, and Washington’s purchase price for the package would be reduced by $2 million. The $4.5 million debt of the Water Company would be released as originally agreed, and Washington would own 100% of the stock in the Water Company.

On December 13,1985, the ARCO legal division asked Mannix, as the president of the Water Company, to call a meeting of the Board of Directors to authorize the execution of a $2 million six month promissory note. Mannix consulted several board members and a rate analyst at the Public Service Commission, but he did not call a board meeting. He refused to execute the note on grounds that to do so was not in the interest of the Water Company. In his view, the note represented an increased debt for the Water Company, with no concomitant benefit, compared to the debt-free status the company would have enj oyed under the terms of the deal tentatively negotiated in September.

After Mannix refused to sign the promissory note, ARCO officials ordered him to do so or face personal liability if the deal fell through. Washington testified that, between December 13 and 18,1985, while he was in the offices of Gene Tidball, ARCO’s corporate legal counsel, he overheard a phone conversation between Tidball and Mannix from which he gathered that “[t]hey were having some problems with him ... he didn’t want to sign something.”

Mannix and another board member eventually signed a resolution authorizing Frank Gardner, another board member, to execute the note on behalf of the Water Company. Gardner executed the note and the closing of the deal between ARCO and Washington was held on December 18, 1985.

On December 18,1985, after the closing, Washington, through his corporate counsel John Thiebes, asked for the resignation of all members of the Board of Directors of the Water Company, effective immediately. The next day, Washington, as the sole shareholder in the Water Company, elected a new board of directors, consisting of himself, Parkinson, and Thiebes. At a directors’ meeting immediately thereafter, Parkinson was instructed to meet with Mannix to determine whether he should be retained as president of the Water Company.

Parkinson met with Mannix on December 20, 1985, in Butte, Montana. According to Parkinson’s deposition, he had been authorized by the new board of directors “to take whatever action I felt was necessary, including a termination.” Parkinson stated that, by the end of their conversation, Mannix agreed that he could no longer work for the company. In his deposition, Mannix stated that Parkinson told him that the new board of directors did not feel that they could work with him and that, therefore, he was terminated.

Mannix’s complaint for wrongful discharge and a violation of an implied covenant of good faith and fair dealing was originally filed against ARCO, Anaconda Minerals Company, the Water Company, Washington Corporations, and Washington. All claims have been dismissed against ARCO, Anaconda Minerals Company, and Washington Corporations. In the order from which appeal is taken, all claims against Washington were dismissed except a claim based on a “piercing the corporate veil” theory.

Following the order granting summary judgment, a motion for substitution of judge was filed and the Honorable James E. Purcell assumed jurisdiction over the case. Two days later, the Honorable Leonard Langen, who had granted the summary judgment, filed a memorandum opinion in support of his ruling. Because Judge Purcell had already assumed jurisdiction when it was filed, we have not considered the memorandum opinion in reaching our decision.

Is there a genuine issue of material fact as to whether Washington acted in retaliation in removing Mannix from office?

Summary judgment is proper only if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there are no genuine issues of material fact and that the moving party is entitled to judgment as a matter of law. Rule 56(c), M.R.Civ.P. This Court’s standard ofreviewis the same as that employed by the district court. McCracken v. City of Chinook (1990), 242 Mont. 21, 24, 788 P.2d 892, 894.

Mannix argues that Washington can be held personally liable, as a member of the board of directors of the Water Company, in connection with Mannix’s discharge as president of the Water Company if Washington’s actions were against the best interests of the corporation, were for his own pecuniary benefit, or were undertaken with the intent to harm Mannix. Phillips v. Montana Ed. Ass’n (1980), 187 Mont. 419, 425, 610 P.2d 154, 158.

Mannix argues that it was against the best interests of the Water Company to discharge him because of his good work record with the company. He asserts that he was following his own corporate bylaws and honoring the wishes of his board of directors in refusing to sign the $2 million note.

It is clear that the disagreement about whether it was in the Water Company’s best interests to sign the $2 million note was actually between Mannix and ARCO, because the Water Company was controlled by ARCO at that time. Moreover, Mannix has failed to present any facts supporting the argument that signing the note was against the best interests of the Water Company. The record on summary judgment demonstrates that as a result of the purchase by Washington, the Water Company debt was reduced from approximately $4.5 million to $2 million. In addition, five months after the purchase, Washington personally paid off the note, leaving the Water Company free of debt.

Mannix stated in his deposition that he did not know what he would do if faced with another situation in which he did not agree with the board of directors as to whether a particular action would be in the best interests of the Water Company. In contrast, Parkinson’s deposition established that the corporation needed “team players.”

We conclude that Mannix has failed to present facts which support the argument that his employment termination was against the best interests of the Water Company. Further, nothing in the summary judgment record supports an argument that Washington terminated the employment of Mannix for his own pecuniary benefit. The remaining question is whether Washington is personally liable for Mannix’s termination because it was his personal act of retaliation for Mannix’s refusal to sign the $2 million note on behalf of the Water Company.

In support of the argument that Washington is personally liable on these grounds, Mannix cites Washington’s apparent absolute control of the new board of directors. However, in the absence of a factual demonstration of retaliation, Mannix fails to demonstrate how that control is relevant.

According to the depositions, Washington and Mannix had met only once before Mannix was terminated. In his deposition, Washington stated that, when he overheard the argument between Tidball and Mannix, his reaction was “I thought he had a lot of balls.” Both Washington and Parkinson testified by deposition that the decision of whether Mannix should remain as president of the Water Company was left to Parkinson. Mannix points to a statement by Parkinson, in a deposition taken for another case but included in this record, that the Directors of the Water Company made the decision to terminate Mannix’s employ. However, that statement was explained in Parkinson’s deposition for this case, in which he stated that the termination of Mannix’s employ was empowered by and subsequently approved by the board of directors, but that the decision of whether to terminate Mannix was left to him. These facts do not demonstrate a retaliatory discharge on the part of Washington.

Mannix argues that the new board of directors was unlawful because it only had three members and because the secretary of the Water Company was not present at the board meeting. He relies upon Article VII, Section 2 of the By-Laws of the Water Company:

“In case of a vacancy in the Board the remaining Directors shall continue to act; but if at any time their number be reduced to less than four, it shall be the duty of the remaining Directors to forthwith fill the vacancies.”

However, Article V, Section 4 of the same By-Laws provided that

“[t]hree Directors assembled together at any meeting shall constitute a quorum competent to transact business ...”

We conclude that a quorum of three directors was authorized to take action, under the By-Laws. As to the presence of the secretary of the Water Company, John Thiebes took notes as “acting secretary.” We conclude that was sufficient in a corporation newly acquired by one shareholder.

As the First Circuit Court of Appeals has noted

“State of mind is difficult to prove and great circumspection is required where summary judgment is sought on an issue involving state of mind. ... But that does not mean that a party against whom summary judgment is sought is entitled to a trial simply because he has asserted a cause of action to which state of mind is a material element. There must be some indication that he can produce the requisite quantum of evidence to enable him to reach the jury with his claim.”

Hahn v. Sargent (1st Cir. 1975), 523 F.2d 461, 468, cert. denied, 425 U.S. 904, 96 S.Ct. 1495, 47 L.Ed.2d 754. Although he has made an extensive argument, Mannix simply has not brought out any facts to support his position that Washington personally terminated Mannix’s employment with the Water Company in retaliation for his refusal to sign the $2 million note. We hold that the District Court did not err in granting summary judgment for Washington on all claims but the “corporate veil” claim.

Affirmed.

CHIEF JUSTICE TURNAGE and JUSTICES HARRISON and GRAY concur.

JUSTICE McDONOUGH

respectfully dissents.

In order for summary judgment to issue, the party moving for summary judgment has the burden of showing a complete absence of genuine issues as to all facts deemed material. All reasonable inferences that may be drawn from the offered proof are to be drawn in favor of the party opposing summary judgment. Cereck v. Albertson’s Inc. (1981), 195 Mont. 409, 411, 637 P.2d 509, 511.

The above last sentence is especially appropriate in this case. The question here involves more than whether there is a genuine issue of objective material facts. It involves the ultimate fact of intent and motive of Mr. Washington. When different ultimate inferences or determinations can be drawn from an admitted set of facts (as here), such determination is a question of fact for the jury.

Mr. Washington had proposed that the sale of the Butte Water Company be accomplished not by his putting up all of the $4 million to buy the stock, but by his putting up $2 million and the Butte Water Company borrowing $2 million. The ostensible purpose of the creation of the debt was that a utility could obtain more favorable rates from the Public Service Commission if the utility had a significant debt.

It can also be deduced that Mr. Washington, even though he personally guaranteed the loan, had to come up with less money to buy the Company at the time of closing.

Either on the day of closing or the day before, Mr. Washington overheard the heated telephone conversation between Mr. Tidball, an attorney for ARCO, and Mr. Mannix. Mr. Tidball was angry and called the plaintiff insubordinate. The plaintiff’s action in refusing to sign the note was an obstacle to the closing of the transaction. Mr. Washington wished to complete the sale.

The attitude of the plaintiff and ARCO’s problem with Mannix, was discussed by Mr. Washington and Mr. Parkinson while flying back to Montana. Shortly after returning to Montana, Mr. Parkinson had a meeting with Mr. Mannix and Mannix was discharged.

As stated in Phillips v. Montana Education Assoc. (1980), 187 Mont. 419, 425, 610 P.2d 154, 158, one reason a director of a corporation can be held personally liable for his alleged tortious acts is if such acts are done with the intent to harm the plaintiff.

The plaintiff asserts his termination was wrongful and Washington got rid of him in retaliation for his actions with ARCO in refusing to sign the note. Mr. Washington asserts there was no intent to harm the plaintiff and the plaintiff’s own statements led to his discharge.

For purposes of summary judgment, the issue for consideration is: whether on these facts, a reasonable inference can be made that Mr. Washington retaliated and intended to punish or harm the plaintiff for his actions in placing an obstacle in the path of the closing of the sale.

This essentially requires a determination of Mr. Washington’s state of mind. When motivation is involved and credibility becomes of critical importance, or when essential facts are solely within the control of the moving party, summary judgment generally is inappropriate. Mazaleski v. Treusdell (D.C.Cir. 1977), 562 F.2d 701, 717; Poller v. Columbia Broadcasting System, Inc. (1962), 368 U.S. 464, 473, 82 S.Ct. 486, 491, 7 L.Ed.2d 458, 464; see also Egger v. Phillips (7th Cir. 1982), 669 F.2d 497. Here motivation is involved. Evidence from pertinent witnesses is oral and credibility is of critical importance. The essential facts are solely within the control of the defendant. All three of the criteria fit. A determination involving a party’s state of mind is seldom susceptible to direct proof, but must be inferred from circumstantial evidence. If improper motive can reasonably be inferred from the evidence, sworn denial does not entitle a defendant to summary judgment. Conrad v. Delta Airlines (7th Cir. 1974), 494 F.2d 914, 918. Egger v. Phillips, supra.

After drawing all reasonable inferences in favor of the plaintiff from the above admitted facts, a jury can reasonably infer that Mr. Washington’s motive was improper and he intended to harm the plaintiff. The motion for summary judgment should have been denied and the intent and motive of Mr. Washington should be an ultimate fact to be resolved by a jury.

I would reverse on this issue and direct the District Cotut to vacate its order of summary judgment.

JUSTICES HUNT and TRIEWEILER concur in the foregoing dissent of JUSTICE McDONOUGH.


author: JUSTICE HUNT

text:
    BLAINE BANK OF MONTANA, a Montana Corporation, Plaintiff and Appellant, v. RUSSELL HAUGEN, Donn R. Haugen, and Dell Haugen, d/b/a QUALITY ENTERPRISES, a Montana partnership and Doris Haugen, Defendants and Respondents.
    No. 90-583.
    Submitted on briefs May 16, 1991.
    Decided August 20, 1991.
    Rehearing Denied Sept 24, 1991.
    249 Mont. 381.
    816 P.2d 447.

      Ward E. Taleff, Alexander, Baucus & Linnell, Great Falls, for plaintiff and appellant.
    Chris R. Young, Morrison, Young, Melcher & Brown, Havre, for defendants and respondents.
   JUSTICE HUNT

delivered the opinion of the Court.

The Seventeenth Judicial District Court, Blaine County, granted an order relieving defendants and respondents, Russell, Donn R., and Doris Haugen, from a deficiency judgment obtained by plaintiff and appellant, Blaine Bank of Montana. The Bank appeals. We reverse.

The sole issue on appeal is whether the District Court erred in granting the Haugens’ motion for relief from final judgment.

On May 1,1981, the Haugens entered into a contract for deed with the S-M Corporation, the predecessor in interest to Henry O. and Betty L. Erickson, for the purchase of the Shanty Motel in Havre. That same day, the Haugens executed a quitclaim deed (Haugen-toS-M Corporation deed) to be used in the event the Haugens defaulted on the contract for deed. Both the contract and the deed were placed in escrow.

Later, in May 1984, the Haugens borrowed money from the Blaine Bank of Montana, by way of a promissory note, to finance a separate transaction. To secure the loan, the Haugens granted the Bank a security interest in certain items of personal property. They also assigned to the Bank as security their vendees’ interest in the motel, and at the same time, executed a quitclaim deed to the motel property in favor of the Bank (Haugen-to-Bank deed). The assignment agreement provided that if the Haugens defaulted on the note the Bank had the option of either foreclosing on the motel as a mortgage or filing the quitclaim deed. The assignment was recorded with the Hill County Clerk and Recorder, and it, along with the quitclaim deed, was transmitted to the escrow agent holding the contract for deed and other related documents pertaining to the original motel purchase.

The Haugens failed to pay taxes on the motel for the years 1985 through 1988. Pursuant to the terms of the contract for deed, on September 14, 1989, the Ericksons notified the Haugens that they were in default. The Haugens did not cure the default within 30 days as allowed by the contract. They relinquished possession of the property to the Ericksons, although the record is unclear as to the date on which the relinquishment occurred. The escrow agent delivered the documents held in escrow, which included the Haugento-S-M Corporation deed and the Haugen-to-Bank deed, to the Ericksons’ attorney on January 4, 1990.

In the meantime, the Bank commenced a foreclosure action against the Haugens for their default on the promissory note. On November 16, 1989, a jury returned a verdict in favor of the Bank. Judgment was entered on January 17,1990. The judgment purported to foreclose the Haugens’ interest in the contract for deed, as well as their interest in the personal property in which the Bank held a security interest. The judgment directed the Haugens to pay any deficiency remaining after application of the proceeds from the sale of the secured property. The Haugens did not appeal from the judgment.

On April 18, 1990, the Bank conducted a sheriff’s sale of the Haugens’ interest in the motel property. The Bank was the successful bidder for an amount less than the judgment debt and a deficiency occurred.

By a separate agreement, entered into prior to the sheriff’s sale, the Bank and the Ericksons agreed upon possession and management responsibilities of the motel, as well as payment of the contract for deed. In conjunction with the agreement, the Ericksons executed a quitclaim deed in favor of the Bank for the motel property (Erickson-to-Bank deed). In June 1990, all of the documents obtained from the escrow agent by the Ericksons’ attorney were delivered to the Bank. The Bank recorded the documents, including the Haugen-to-S-M Corporation and the Haugen-to-Bank deeds, with the Hill County Clerk and Recorder. The Bank also recorded the Erickson-to-Bank deed.

In October 1990, upon learning that the Bank had recorded the quitclaim deeds, the Haugens filed a motion for relief from judgment. At the hearing on the motion, the Haugens maintained that the assignment provided that the Bank could either foreclose on the property or file the quitclaim deed it had received from the Haugens. The Haugens argued that once the Bank chose to file the deed, it was precluded from collecting any deficiency. The court agreed and entered an order granting the Haugens relief from judgment and prohibiting the Bank from recovering any deficiency after application of the proceeds from the sale of the motel. From this order, the Bank appeals.

The Bank contends that the recording of the Haugen-to-Bank quitclaim deed could not preclude a deficiency judgment. The Haugens contend that the law of mortgages provides that recording a deed from the mortgagor eliminates the mortgagee’s right to a deficiency judgment and the mortgagor’s equity of redemption.

Upon examining the record, we agree with the conclusion reached by the Bank. In this case, the filing of the Haugen-to-Bank quitclaim deed did not legally preclude a deficiency judgment.

Both parties concentrate on the Bank’s foreclosure of the Haugens’ interest in the contract for deed, the ensuing sheriff’s sale of the motel property, and the subsequent recording of the Haugen-to-Bank quitclaim deed. They ignore the fact that prior to the occurrence of these events, the Haugen-to-S-M Corporation deed had already been delivered by the escrow agent to the attorney for the Ericksons. The Haugens had previously defaulted on the contract for deed to the motel, failed to cure the default after notice, and relinquished possession of the property to the Ericksons. Therefore, by the time the District Court entered judgment foreclosing the Haugens’ interest in the contract for deed, the Haugens did not possess any interest to foreclose. By their failure to cure the default after notice, the Haugens forfeited all their rights in the property subject to the contract for deed.

With the cancellation of the contract for deed, the Haugens gave up their rights to the motel property and no longer held any right of redemption. Because the Haugens no longer had an interest in the property, the Haugen-to-Bank quitclaim deed conveyed nothing to the Bank. Therefore, the subsequent delivery of the quitclaim deed to the Bank and recording of that deed had no legal effect.

The District Court erred in holding that the recording of the quitclaim deed prohibited the Bank from collecting any deficiency. For the reasons stated above, the fifing of the deed did not eliminate the Bank’s right to a deficiency judgment.

Reversed and remanded for further proceedings consistent with this opinion.

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


text:
    STATE OF MONTANA, Plaintiff and Respondent, v. TERRY ALLEN LANGFORD, Defendant and Appellant.
    No. 89-370.
    Decided July 1, 1991.
    249 Mont. 385.
    819 P.2d 151.
    See also 248 Mont. 420 and 813 P.2d 936.
   OPINION AND ORDER.

On July 6,1989, Terry Allen Langford (Langford), represented by counsel C. F. MacKay (MacKay), filed with this Court a petition for post-conviction relief wherein he alleges that the District Court of the Third Judicial District, Powell County, erred in sentencing him to death on the ground that the death penalty sentence was unconstitutional as a matter of law. On August 3, 1989, this Court stayed this post-conviction proceeding pending the completion of Langford’s appeal in Cause No. 89-055 and ordered briefs to be filed. On August 31, 1989, Langford dismissed MacKay and Michael Donahoe (Donahoe) was substituted as his counsel. Donahoe filed the appellant’s brief on October 3, 1990.

On June 4, 1991, Langford’s appeal in Cause No. 89-055 was decided. State v. Langford (Mont. 1991), [248 Mont. 420,] 813 P.2d 936, 48 St.Rep. 492 (Langford). In Langford, this Court upheld the constitutionality of Montana’s death penalty statutes. Langford, 48 St.Rep. at 502, 813 P.2d at 952.

After reviewing the petition for post-conviction relief following our decision in Langford, we note that Langford’s memorandum in support of petition for post-conviction relief additionally cites Adamson v. Ricketts (9th Cir. 1988) 865 F.2d 1011, cert. denied, 110 S.Ct. 3287 (1990). In Adamson, the Ninth Circuit Court of Appeals held that Arizona’s death penalty statutes were unconstitutional. Adamson, 865 F.2d at 1044-45. Langford argues that Adamson is controlling because the statutory language of Arizona’s death penalty statutes is similar to Montana’s.

In the briefs filed and in the oral argument in Langford, Donahoe did not cite or rely on Adamson. In the United States Supreme Court’s recent decision in Walton v. Arizona (1990), _U.S._, 110 S.Ct. 3047, 111 L.Ed.2d 511, the Court upheld the constitutionality of Arizona’s death penalty statutes. See also, Nichols v. McCormick (9th Cir. 1991), 929 F.2d 507, 509, n. 3, where the Ninth Circuit Court of Appeals discusses the impact of Walton on its prior ruling in Adamson. We therefore hold that Adamson is not controlling. As we have previously held in Langford, Montana’s death penalty statutes are constitutional.

IT IS ORDERED:

1. The petition for post-conviction relief is denied.

2. The Clerk of this Court is directed to mail a true copy hereof to the Attorney General, to the Powell County Attorney, to counsel for petitioner and to petitioner personally.

DATED this 1st day of July, 1991.

s/ J. A. Tumage. Chief Justice

s/ Karla M. Cray. Justice

s/ William E. Hunt. Sr.. Justice

s/ Fred J. Weber. Justice

s/ R. C. McDonough. Justice

s/ Terry Trieweiler. Justice