text:
    GEORGE ORLANDO, as Personal Representative of the Estate of Frank A. Donnes, Deceased, Plaintiff and Respondent, v. LEE PREWETT and Barbara Prewett, Husband and Wife, and L.R. Bretz, Defendant and Appellants. L.R. BRETZ, Plaintiff and Appellant, v. GEORGE ORLANDO, as Personal Representative of the Estate of Frank A. Donnes, Deceased, Defendant and Respondent.
    No. 88-419.
    Submitted on Briefs Jan. 12, 1989.
    Decided March 30, 1989.
    771 P.2d 111.
    R.J. Carstensen, Billings, for defendants and appellants.
    R. Russell Plath, Kelly & Halverson, P.C., Sheehy, Finn and Plath, Billings, for plaintiff and respondent.
   MR. JUSTICE HUNT

delivered the Opinion of the Court.

L.R. Bretz appeals from an order of the District Court of the Sixteenth Judicial District, Treasure County, granting summary judgment to George Orlando, Personal Representative of the estate of Frank A. Donnes (Donnes Estate), and denying Bretz’s motion to vacate and set aside a partial summary judgment previously awarded to the Donnes Estate. We affirm.

The following issues are raised on appeal:

1. Does the doctrine of res judicata render a mechanic’s lien null and void when the lien was filed against real property that was the subject of a prior quiet title action against the same parties who filed the lien?

2. May a district court grant summary judgment when the non-moving party has failed to file a brief?

Frank A. Donnes was murdered in the fall of 1982. On November 16, 1982, George Orlando filed the Last Will and Testament of the deceased and a petition for probate with the Treasure County Clerk of Court. The will named Donnes’ two sisters, Helen Carbone and Mabel Orlando, as the sole devisees of the entire estate, which included a 5,000-acre ranch in Treasure County.

On January 8, 1983, Donnes’ niece and her husband, Barbara and Lee Prewett, filed two creditors’ claims against the Estate. The first claim alleged that the Prewetts had entered into an oral agreement with Donnes, in which Donnes agreed to create a will or establish a grantor trust giving the Prewetts one-half of his ranch and the option to purchase the other half from his estate. The second creditors’ claim alleged that Donnes had orally agreed to sell livestock and other personal property to the Prewetts for $12,000 but that title to the property had not passed because the Prewetts owed a remaining balance of $10,515.

On January 19, 1983, the District Court formally admitted the will into probate and appointed George Orlando as Personal Representative of the Donnes Estate. The Personal Representative filed notice of disallowance of the creditors’ claims. He then filed a complaint against the Prewetts, seeking a judgment that the Donnes Estate was entitled to quiet and peaceful possession of the Frank Donnes Ranch and the personal property upon the ranch and a permanent injunction preventing the Prewetts from asserting any adverse claim against the Estate’s title and ownership of Donnes’ real and personal property. In response, the Prewetts counterclaimed, requesting specific performance of the two oral contracts alleged in the creditors’ claims. Later, the Personal Representative amended the complaint to include an additional cause of action against the Prewetts for an accounting. Prior to trial, the District Court bifurcated the causes of action. On November 7, 1983, a bench trial proceeded only upon the Estate’s quiet title actions and the Prewetts’ counterclaims for specific performance of the oral agreements.

On June 4, 1984, the District Court ruled that the Donnes Estate should take nothing under the quiet title actions, and that the Prewetts were entitled to specific performance of both oral agreements. The Estate appealed the decision to this Court. In Orlando v. Prewett (1985), 218 Mont. 5, 705 P.2d 593 (Orlando I), we reversed the District Court, holding that the oral agreement for the transfer of the Donnes Ranch was an unenforceable contract to make a will and that the Donnes Estate was entitled to a judgment quieting title in the ranch. We subsequently issued an order directing the Personal Representative to take immediate possession of the entire Donnes Estate.

On January 6, 1986, after we issued Orlando I, the Prewetts filed a mechanic’s lien against the Donnes Ranch, claiming that they had provided labor from 1981 through 1984 that enhanced the ranch’s value by $376,474.22. On February 6, 1986, the Prewetts assigned their rights under the mechanic’s lien to L.R. Bretz for $1,000.

On July 15, 1986, Bretz filed a complaint against the Donnes Estate, seeking foreclosure of the mechanic’s lien. The Estate’s answer to the complaint alleged several affirmative defenses, including res judicata.

On July 16, 1986, the District Court granted the Personal Representative’s motion to amend the complaint filed against the Prewetts in January, 1983, adding L.R. Bretz as a named defendant and seeking a judgment that the mechanic’s lien was null and void. The Personal Representative also sought an order quieting title in the ranch to the Donnes Estate and enjoining the Prewetts and Bretz from asserting any adverse claim against the real and personal property in the estate.

On November 28, 1986, the Donnes Estate filed a motion for summary judgment on the mechanic’s lien, asking for a judgment that the mechanic’s lien was null and void. At the same time, the Estate filed a brief in support of summary judgment and a notice of hearing on the motion, which set a hearing date of January 2, 1987. On December 31,1986, two days before the hearing, Richard J. Carstensen filed a notice of attorney of record for defendant Bretz and a motion for additional time to respond to the summary judgment.

The hearing was held as planned on January 2, 1987, with neither Bretz nor Carstensen appearing. At the hearing, the Donnes Estate objected to Bretz’s motion for additional time and requested that summary judgment be entered. On January 8, 1987, the District Court granted the Estate’s motion for summary judgment, denied Bretz’s motion for additional time, and .issued judgment quieting title.

On January 27, 1987, Bretz filed a motion to vacate the summary judgment. On the same date, the Estate filed a motion for summary judgment on the complaint filed by Bretz. The District Court consolidated the two actions and held a hearing on the motions on March 6, 1987.

Thereafter, the District Court issued findings of fact, conclusions of law, and an order granting the Estate’s motion for summary judgment and denying Bretz’s motion to vacate the previous summary judgment. From this order, Bretz appeals.

The District Court concluded that res judicata barred the enforcement of the mechanic’s lien. Bretz contests this conclusion, arguing that the previous litigation between the Prewetts and the Donnes Estate as well as our subsequent decision in Orlando I adjudicated only the question of enforceability of the oral agreements entered into between Frank Donnes and the Prewetts. Bretz contends that the mechanic’s lien cannot possibly be barred by res judicata because the lien itself was never considered by the District Court at trial or reviewed by the Supreme Court in Orlando I.

The doctrine of res judicata is grounded in the idea that litigation must at some point come to an end. Thus, a matter fully adjudicated is said to be res judicata and cannot be relitigated by a party who has already had the opportunity to present and plead his case. First Bank v. District Court (Mont. 1987), [226 Mont. 515,] 737 P.2d 1132, 1134, 44 St.Rep. 861, 864. A judgment is “binding and conclusive between all the parties to the suit and their privies and successors in interest, as to all matters adjudicated therein and as to all issues which could have been properly raised irrespective of whether the particular matter was in fact litigated.” Kramer v. Deer Lodge Farms Co. (1944), 116 Mont. 152, 156, 151 P.2d 483, 484.

In January, 1983, the Donnes Estate instituted a quiet title action in which it claimed that the Prewetts and their successors had “no right, title, estate, lien or interest” in the real or personal property of Frank Donnes. The Estate’s pleadings put directly in issue all adverse claims the Prewetts had against the Donnes Ranch. The Prewetts were therefore required by Rule 13(a), M.R.Civ.P., governing compulsory counterclaims, to assert all claims they may have had against the Donnes property. Any counterclaims that were omitted from the action are barred by res judicata from being raised in subsequent litigation. Taggart v. Rutledge (D.Mont. 1987), 657 F.Supp. 1420, 1431.

The mechanic’s lien in question is a claim against the Donnes Ranch and is therefore precisely the type of counterclaim the Prewetts were required to raise in the previous adjudication. By failing to pursue the mechanic’s lien prior to the conclusion of the quiet title action, the Prewetts forever lost the opportunity to litigate its merits; res judicata precludes them from raising it now.

Bretz argues that because the District Court bifurcated the issues and proceeded to trial only on the quiet title actions of the Estate and the specific performance claims of the Prewetts, the action remains open to further litigation on the mechanic’s lien. This is not so. The Prewetts had the opportunity to litigate all claims against the Donnes Ranch in the trial held on the quiet title and specific performance actions. They are not entitled to another chance to litigate issues that should have been put before the District Court previously merely because a wholly independent action for an accounting is still pending.

Res judicata applies to both final judgments and orders that are intended to be final in nature. Lien v. Murphy Corp. (1982), 201 Mont. 488, 493, 656 P.2d 804, 806. Because our opinion in Orlando I finally decided the quiet title action, any additional claims the Prewetts or their successors may have against the Frank Donnes Ranch are barred by res judicata. Therefore, the mechanic’s lien filed after Orlando I is null and void. Bretz, as the assignee of the claim, is precluded by res judicata from foreclosing upon it.

Next, Bretz argues that a summary judgment cannot be granted for a party’s failure to file a brief. We need not consider this question, however, as any error the District Court may have committed in granting the Donnes Estate’s motion for summary judgment on January 8, 1987, for the reason that Bretz had failed to file a brief was rectified when, on March 6, 1987, the court considered both Bretz’s motion to vacate the summary judgment and the Estate’s motion for summary judgment on Bretz’s complaint. The March 6, 1987, hearing gave Bretz an opportunity to present any genuine issues of material fact. He failed to do so. Summary judgment was proper.

We affirm the District Court.

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


source: Caselaw Access Project

author: MR. JUSTICE HUNT

license: Public Domain

text:
    STATE OF MONTANA, Plaintiff and Respondent, v. JOHN WILLIAM McPHERSON, Defendant and Appellant.
    No. 88-450.
    Submitted on Briefs Feb. 16, 1989.
    Decided March 30, 1989.
    771 P.2d 120.

      Richard J. Carstensen, Billings, for defendant and appellant.
    Marc Racicot, Atty. Gen., John Paulson, Asst. Atty. Gen., Helena, Patrick L. Paul, County Atty., Tammy K. Plubell, Deputy County Atty., Great Falls, for plaintiff and respondent.
   MR. JUSTICE HUNT

delivered the Opinion of the Court.

John W. McPherson, the defendant, entered a plea of guilty under § 45-5-502(1), MCA, to four counts of sexual assault, pursuant to a plea agreement, in the District Court of the Eighth Judicial District, Cascade County. Finding no legal reason why judgment should not be pronounced against McPherson, the District Court sentenced him to the Montana State Prison for a term of 20 years, with five suspended, on each of the four counts, to be served concurrently. He was also designated a dangerous offender for the purposes of parole eligibility. McPherson appeals. We affirm.

The following issues are raised on appeal:

1. Whether the District Court erred in denying McPherson’s motion to continue the sentencing hearing.

2. Whether the District Court properly designated McPherson as a dangerous offender.

3. Whether the sentence was predicated on substantially correct information.

4. Whether the District Court, in imposing sentence, properly considered two mental health evaluations which referred to the report of a lie detector test administered to McPherson.

On February 5, 1988, defendant entered a plea of guilty to four counts of felony sexual assault, in violation of § 45-5-502(1), MCA, pursuant to a plea agreement. Defendant admitted to subjecting his two adopted daughters, ages 7 and 8, and their two friends, ages 7 and 10, to various forms of sexual assault on or about April 22,1987.

Sentencing was originally set for March 11, 1988, but defendant was granted a continuance on March 7, 1988, for the purpose of undergoing further assessment by Dr. Honeyman for the Yellowstone Treatment Center (hereinafter referred to as Yellowstone). Sentencing was reset for March 31, 1988, but again continued to April 21, 1988, due to conflicts in the court’s calendar. On April 21, 1988, defendant made an oral motion to continue the sentencing hearing for two reasons: first, because the results of Dr. Honeyman’s assessment, although completed on April 16, 1988, had not yet been forwarded to Yellowstone which was considering him as a candidate for its program; and second, because the probation officer who prepared the presentence report was absent from the sentencing hearing.

The motion was denied and the District Court sentenced defendant to the Montana State Prison for a term of 20 years, with five suspended, on each of the four counts, to be served concurrently. Defendant was designated a dangerous offender. The District Court based the sentence and the dangerous offender designation on the presentence report which the court had ordered, and on three evaluations submitted by defendant in support of his recommendation for sentencing. Two of the evaluations referred to a polygraph examination.

The first issue raised on appeal is whether the District Court erred in denying defendant’s motion to continue the sentencing hearing.

Section 46-13-202(3), MCA, provides in part:

“(3) All motions for continuance are addressed to the discretion of the trial court and shall be considered in the light of the diligence shown on the part of the movant.”

As noted, the granting of a continuance is not a matter of right but is addressed to the sound discretion of the court. State v. Harris (1984), 209 Mont. 511, 682 P.2d 159; State v. Kirkland (1979), 184 Mont. 229, 602 P.2d 586. As we have previously held, the District Court cannot be overturned on appeal unless an abuse of discretion, which prejudices the movant, is demonstrated. Harris, 682 P.2d at 161; State v. Hankins (1984), 209 Mont. 365, 680 P.2d 958. In accordance with State v. Van Natta (1982), 200 Mont. 312, 651 P.2d 57, the trial court shall consider the diligence shown on the part of the movant when ruling on a. continuance.

In this case, defendant moved for a continuance in the sentencing proceeding on two grounds. First, because the probation officer who prepared the presentence report was absent from the proceeding and second, because defendant’s assessment by Dr. Honeyman had not yet been forwarded to Yellowstone which was considering him as a candidate for its treatment program.

Defendant did not show any effort to obtain the presence of the probation officer, nor, offer any evidence as to what information could be obtained from her, nor did he give any account of what value her testimony would have been to his case. We previously held in State v. Walker (Mont. 1987), [225 Mont. 415,] 733 P.2d 352, 44 St.Rep. 363, citing Harris, 682 P.2d at 161, that

“First, he [the defendant] needed to show that he reasonably searched for his witness. Second, he needed to show that his witness’s testimony could have helped his defense.”

Defendant’s lack of diligence is evidenced by the fact that the record shows no such testimony nor evidence which would satisfy this requirement.

Defendant argues that under State v. Lopez (1980), 185 Mont. 187, 605 P.2d 178, the sentencing hearing is only proper when defendant is allowed to examine the author of the presentence report. However, the Court in Lopez provided that the sentencing hearing is based upon numerous considerations but did not specifically hold that the absence of any one factor would render the hearing improper. In this case, defendant had copies of the presentence report and the three psychological evaluations. He stated that he did not wish to call any witnesses at the sentencing hearing, nor does the record show evidence of an effort by defendant to procure the presence of the probation officer.

The facts demonstrate that defendant had ample time to produce evaluations and witnesses in support of his sentencing recommendation. The presentence report was prepared by the probation officer on February 26, 1988, and filed March 1, 1988. In addition, sentencing was originally set for March 11, 1988, but defendant was granted a continuance on March 7, 1988, in order to undergo further evaluation by Yellowstone. Sentencing was again reset for April 21, 1988. In the meantime, the Yellowstone report had been completed by Dr. Honeyman on April 16, 1988, although not yet forwarded to Yellowstone. Furthermore, the case had been set for sentencing on two previous dates and the presentence report had been completed and filed on March 1, 1988.

Lack of diligence on defendant’s part is demonstrated by the fact that he waited until the day of the hearing to move for the continuance. In State v. Klemann (Mont. 1981), [___ Mont. ___,] 634 P.2d 632, 38 St.Rep. 1627, where the trial had also been set on two previous dates, the Court held that, “Waiting until the day of trial to make such a motion [continuance] does not show diligence on the part of the defendant.”

Also, defendant moved for the continuance in order to allow time for the results of Dr. Honeyman’s evaluation to be forwarded to Yellowstone for assessment. The evaluation had been completed five days before the sentencing hearing. Defendant had nearly six additional weeks from the date of the original hearing to undergo assessments and produce evaluations and witnesses.

The District Court did not abuse its discretion in denying the motion nor is there anything in the record to indicate that defendant was prejudiced by the denial. For the foregoing reasons, the District Court properly denied defendant’s motion for a continuance.

Defendant was designated a dangerous offender in accordance with § 46-18-404, MCA. He contends that the District Court erred in the designation because it failed to articulate the reason for its findings.

Section 46-18-404, MCA, permits the District Court judge to use his discretion to designate a criminal as dangerous for the purpose of parol. However, we held in State v. Miller (Mont. 1988), [231 Mont. 497,] 757 P.2d 1275, 45 St.Rep. 790, that the statute dictates two prerequisites to a nondangerous classification: (1) lack of a felony conviction within the preceding five years; and, (2) a finding that the defendant does not present a substantial danger to society. Hence, although defendant had not committed a felony in the last five years, the District Court must also find that he was not a substantial danger to society before nondangerous classification becomes mandatory.

This Court previously held in In re McFadden (1980), 185 Mont. 120, 605 P.2d 599, that the sentencing court must articulate its reasons for the determination, and that the mere recitation of the statutory language was insufficient. Also, in State v. Camitsch (Mont. 1981), [___ Mont. ___,] 626 P.2d 1250, 38 St.Rep. 563, we provided that the court must present its reasons in order to support the conclusion because without such findings the court could not determine whether there had been an abuse of discretion.

Defendant argues that the District Court designated him a dangerous offender “for the purposes of eligibility for parole” thus, merely reciting the statute. However, in State v. Bell (Mont. 1987), [225 Mont. 83,] 731 P.2d at 336, 344, 44 St.Rep. 56, 66, the District Court set forth a list of its findings in the sentence and we held that this was adequate to meet the articulated reasons requirement. In defendant’s case the District Court also set forth a similar type of list of its findings in the first portion of the sentence as follows:

“1. The seriousness of the offenses and the harm to the victims.

“2. The Defendant has been diagnosed ‘psychosexual disorder — pedophilia and a dependent personality disorder.’

“3. The Defendant is reported by the Helena, Montana Sexual Assault Treatment Program to be a danger and a risk to the community.

“4. That the Defendant’s sado-masochistic tendencies complicate any treatment he will need.

“5. That the reported chances of the Defendant re-offending is ‘quite high.’

“6. That the pedophilia is incurable.”

Although the reasons articulated are set forth in the first portion of the judgment and the dangerous offender designation in the latter portion, we hold that it is all part of the same judgment and, therefore, sufficient.

The court adequately articulated its reasons for finding defendant dangerous in its judgment. We hold that the reasons set forth are sufficient to designate defendant as a dangerous offender.

Next, defendant raises the issue of whether the sentence was predicated on substantially correct information.

We have held that “a defendant is entitled to have his sentence predicated on substantially correct information.” State v. Baldwin (Mont. 1981), [___ Mont. ___,] 629 P.2d 222, 224, 38 St.Rep. 882, 884, citing State v. Olsen (Mont. 1980), 189 Mont. 43, 614 P.2d 1061, 1064, 37 St.Rep. 1313; State v. Knapp (1977), 174 Mont. 373, 379, 570 P.2d 1138, 1141. The Court, however, will not strain at worst-case assumptions in order to find a mistake and we presume the District Court to be correct. State v. Herrera (1982), 197 Mont. 462, 643 P.2d 588.

Here, the District Court based its sentence on a presentence report prepared by defendant’s probation officer, as required by § 46-18-111, MCA, and on three psychological evaluations. We hold that these documents adequately substantiate the court’s rationale and that they come within the purview of substantially correct information as required.

Under State v. Smith (Mont. 1985), [217 Mont. 461,] 705 P.2d 1087, 1093, 42 St.Rep 463, 468, citing State v. Trangsrud (Mont. 1983), 200 Mont. 303, 651 P.2d 37, 39 St.Rep. 1765, we held that the defendant has an affirmative duty to present evidence showing the inaccuracies contained in the report. See also State v. Radi (1979), 185 Mont. 38, 604 P.2d 318. Here, defendant did not persuasively rebut the information or conclusions utilized by the District Court. He did not show that the documents were inaccurate, incomplete nor incorrect. Thus, defendant did not meet this affirmative duty.

Further, under § 46-18-102(3)(b), MCA, the judge shall clearly state for the record his reasons underlying the imposition of any sentence. Here, the district judge has enumerated six reasons for the sentence imposed on defendant. We hold that these reasons are sufficient to support the District Court’s rationale.

In addition, not only may the District Court use its broad discretion to determine the appropriate punishment, State v. Carson (1984), 208 Mont. 320, 322, 677 P.2d 587, 588, but it may also use its discretion in determining the manner and extent of punishment. State v. Petroff (Mont. 1988), [232 Mont. 20,] 757 P.2d 759, 45 St.Rep. 833.

Defendant argues that because his probation officer recommended either a long suspended sentence with requirements for treatment or incarceration at the prison where he would be able to receive treatment, the sentence was erroneous and excessive. We disagree. We held in State v. Stephens (1982), 198 Mont. 140, 146, 645 P.2d 387, 391 that:

“There is no requirement that the sentencing judge adopt the recommendation of the presentence report or that he state reasons for any discrepancy between the recommended sentence and the one actually imposed. The sentencing judge must only specify reasons why the sentence was imposed. Citing State v. Stumpf (Mont. 1980), [187 Mont. 225,] 609 P.2d 298, 37 St.Rep. 673; Cavanaugh v. Crist (Mont. 1980), [189 Mont. 274,] 615 P.2d 890, 37 St.Rep. 1461.”

The District Court’s sentence was based upon accurate information and it properly articulated the reasons for its finding as required. We hold that the sentence is proper.

The last specification of error regards whether the District Court in imposing sentence properly considered two mental health evaluations which referred to the report of a lie detector test administered to defendant.

This Court has long abhorred the use of lie detector evidence and has consistently held it inadmissible. We said in State v. Bashor (1980), 188 Mont. 397, 614 P.2d 470, that the results of polygraph examinations are inadmissible as evidence in a criminal trial. State v. Campbell (1978), 176 Mont. 525, 579 P.2d 1231; see also State v. Hollywood (1960), 138 Mont. 561, 358 P.2d 437. In Bashor, we provided the following:

“ . in many cases where polygraph evidence is admitted, a single person, the polygraphist, will give testimony which will often be the determinative factor as to the guilt or innocence of a defendant in a jury-tried case. This would deprive the defendant of the common sense and collective judgment of his peers, derived after weighing facts and considering the credibility of witnesses, which has been the hallmark of the jury tradition.’ ”

State v. Bashor (1980), 188 Mont. at 414, 614 P.2d at 482, citing United States v. Alexander (8th Cir. 1975), 526 F.2d 161, 168.

However, Bashor addressed the polygraph issue in the trial setting while in defendant’s case the issue was brought up during sentencing.

According to § 46-18-111, MCA, the court must consider the presentence report when imposing a sentence unless it deems the report unnecessary. The judge may also consider a wide variety of information not admitted at trial, United States v. Messer (9th Cir. 1986), 785 F.2d 832, since the sentencing hearing may be conducted by permitting relaxed rules of evidence. State v. Holmes (1983), 207 Mont. 176, 674 P.2d 1076. However, this Court has stated that the Montana Rules of Evidence do not apply to sentencing hearings, Rule 101(c)(3), M.R.Evid. State v. Lamere (1983), 202 Mont. 313, 658 P.2d 376.

Defendant provided the District Court with the three evaluations which were conducted at his request and submitted by him in support of his recommendation for sentencing. The district judge was not required to consider the evaluations but because of the relaxed standards of evidence in a sentencing situation, he was free to do so. In State v. Turley (1974), 164 Mont. 231, 521 P.2d 690, where the defendant also submitted himself to a polygraph examination before sentencing, this Court held that the trial court did not err in refusing to consider evidence of the polygraph at sentencing.

Thus, we continue to hold that the polygraph is inadmissible as evidence at trial but, in this case, the defendant invited the error and cannot now complain that it was in the record. State v. Miller (1977), 173 Mont. 453, 568 P.2d 130.

Affirmed.

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


author: MR. JUSTICE GULBRANDSON

text:
    EMMA JEAN “E.J.” HANDO, Plaintiff and Appellant, v. PPG INDUSTRIES, INC., Spring Creek Coal Company, and NERCO, Inc., jointly and severally, Defendants and Respondents and Cross-Appellants.
    No. 88-539.
    Submitted on Briefs Feb. 3, 1989.
    Decided March 30, 1989.
    Rehearing Denied May 2, 1989.
    771 P.2d 956.

      Nye & Meyer, Jerrold L. Nye, Billings, for plaintiff and appellant.
    Moulton Law Firm, W. Anderson Forsythe, Anderson, Brown, Law Firm, Steven H. Harman, Billings, Pamela L. Jacklin, Stoel, Rives, Boley, Jones & Grey, Portland, Or., for defendants, respondents and cross-appellants.
   MR. JUSTICE GULBRANDSON

delivered the Opinion of the Court.

Emma Jean Hando appeals the grant of summary judgment to NERCO, Inc. (NERCO) by the the Thirteenth Judicial District Court, Yellowstone County. The court granted summary judgment after holding that NERCO, as the parent/grandparent corporation of Spring Creek Coal Company (SCCC), had no duty to provide a safe work place for Hando and the other SCCC employees.

The court also held that the statute of limitations applicable to this action was tolled until a medical diagnosis confirmed the causal connection between appellant’s recurrent ailments and her exposure to the paint used by SCCC. The court therefore denied the motions for summary judgment by PPG Industries, Inc. (PPG) and NERCO and held that the three-year statute of limitations had not run before Hando filed her complaint in this action. NERCO and PPG each filed a cross-appeal from this denial of their motions for summary judgment.

We affirm the District Court’s grant of the first motion and denial of the second.

Appellant presented the following issues upon appeal:

1. Did NERCO, as the parent or grandparent corporation of the wholly-owned SCCC subsidiary, breach its duty to provide a safe work place?

2. Does workers’ compensation insurance obtained by the wholly-owned SCCC subsidiary extend to and protect NERCO, the parent or grandparent corporation, from claims arising from a work-related injury?

NERCO and PPG raised the following issue upon cross-appeal:

1. Are appellant’s claims barred by the running of the statute of limitations?

The parties generally agree to the truth of the following facts for purposes of a discussion of the issues decided by the District Court’s summary judgments. Emma Jean Hando (Hando) was employed by SCCC from March 3, 1980 until May of 1984. SCCC, a Montana corporation, was a wholly-owned subsidiary of NERCO, an Oregon Corporation, during this period. SCCC was formed for the purpose of owning and operating a strip coal mine in southwestern Montana. NERCO generally engaged in the business of developing, mining and selling coal through its ownership of various subsidiary corporations, such as SCCC, which controlled and supervised daily mining operations in the individual coal mines.

In 1981, Hando was assigned the duty of painting various surfaces within the coal processing plant at the Spring Creek Mine (Mine). She believed that the paint used, which was manufactured by PPG, caused her and others to suffer some adverse physical reactions. Hando was exposed to this paint again in April of 1982 when her supervisor at SCCC assigned her the job of painting within the control room at the Mine. The area in which she painted was poorly ventilated, and she briefly lost consciousness while painting. Recognizing that she had suffered an adverse reaction to the paint fumes, an SCCC supervisor contacted the poison control center in Denver, Colorado and arranged for her to have a medical examination in her hometown of Sheridan, Wyoming.

Between 1982 and 1984, Hando saw numerous physicians to determine the cause of numerous emotional, mental and physical problems (including nauseousness, dizziness, diarrhea, fatigue, depression, and recurrent infections). She believed her exposure to the paint caused these problems. Moreover, Hando and SCCC signed a workers’ compensation claim in May of 1982 which stated her problems arose after she was “poisoned” by exposure to “paint vapors.” Physicians at the Mayo Clinic also tested and evaluated her in late 1983 pursuant to arrangements made by SCCC after Hando complained to her employer in February of 1983 that she was unable to work around various chemicals. All these physicians who examined her prior to 1984 denied any causal connection between her continuing ailments and her paint exposure.

Following an examination of Hando in early 1984, Dr. Anderson of Billings, Montana stated his belief that her problems may have been caused by her toxic exposure to paint at the Mine. Dr. Anderson referred her to Dr. Randolph in Chicago, Illinois for further tests. Tests conducted in Chicago confirmed that her ailments were due to her sensitivity to petrochemicals and that her exposure to the PPG paint while employed by SCCC most likely triggered this sensitivity. Hando informed SCCC that she was unable to work, even at a receptionist position with the company, due to her chemical hypersensitivity. Consequently, her employment with SCCC ended on May 30, 1984.

On October 25, 1985, Hando filed a complaint against PPG, NERCO and SCCC. She amended this complaint on May 21, 1986 to include a products liability claim against PPG (Count I) and a claim for failure to provide a safe work place against NERCO (Count II). The additional claims against SCCC have since been settled and no issue remains to be tried against SCCC.

NERCO filed its motion for summary judgment on March 21, 1988, contending that it owed no duty as a matter of law to provide SCCC employees with a safe work place. After hearing the motion on May 18, 1988, the District Court granted summary judgment holding that NERCO owed no duty to provide Hando with a safe work place.

PPG also filed a motion for summary judgment, contending that Hando’s claim was barred because the three-year statute of limitations applicable to this action had run prior to the filing of her complaint. On May 12, 1988, PPG asked the court to reconsider its denial of this motion in light of recent case law. NERCO filed a supplemental motion for summary judgment, thereby joining with PPG to argue the statute of limitations had run. The District Court denied these motions for summary judgment holding that the statute of limitations had been tolled until April of 1984 when a physician diagnosed the causal connection between Hando’s ailments and her exposure to the PPG paint. Consequently, the three-year statute of limitations had not expired when Hando filed her complaint in October of 1985.

On October 24, 1988, the District Court entered its final amended judgment, pursuant to Rule 54(b), M.R.Civ.P., on those issues decided by its summary judgment rulings. Hando appealed from the court’s grant of summary judgment on the issue of the lack of duty to provide a safe work place owed by NERCO. PPG and NERCO filed a cross-appeal from the court’s denial of their motions for summary judgment on the issue of the running of the statute of limitations.

The first issue presented for review involves the duty owed by NERCO to provide a safe work place for SCCC employees. Appellant Hando contends that material issues of fact exist about whether NERCO was directly involved in the activities of its wholly-owned SCCC subsidiary and therefore liable, under either an agency or alter ego theory, for employment injuries suffered by SCCC employees due to an unsafe work place. Consequently, Hando argues the District Court erred in granting NERCO’s motion for summary judgment on the issue of a duty owed by NERCO.

The general rule is that summary judgment is proper only if no genuine issue exists as to any material fact and if the moving party is entitled at law to a judgment. Rule 56(c), M.R.Civ.P. Once the moving party has shown that no material issue of fact exists and that she is entitled to judgment as a matter of law, the burden shifts. The opposing party then must come forward with substantial evidence sufficient to raise a factual issue, or the court may grant summary judgment on the matter before the court. D’Agostino v. Schaap (Mont. 1988), [230 Mont. 59,] 748 P.2d 466, 468, 45 St.Rep. 14, 16. NERCO, as the moving party in the present case, had the burden of showing that no factual issues existed which were material to a determination of whether it had a duty to provide a safe work place to SCCC employees. NERCO also had the burden of proving that it was entitled to summary judgment as a matter of law because the SCCC subsidiary was not its agent or alter ego, and that NERCO was therefore a separate corporation entity with no legal duty to provide a safe work place to employees of SCCC. We hold that NERCO met both these burdens.

Employers have a statutory duty' to provide a safe work place for employees. See §§ 50-71-201, -202, MCA. This Court previously has held that this duty generally is owed only by the immediate corporation employer. See, e.g., Shannon v. Howard S. Wright Constr. Co. (1979), 181 Mont. 269, 593 P.2d 438. This limitation upon the duty serves to foster the growth of corporations by protecting the corporate owners, whether shareholders or a parent corporation, from liability for those “obligations incurred in the management of the business of the corporation.” See Barnes v. Smith (1913), 48 Mont. 309, 316, 137 P. 541, 543.

On occasion, however, courts may extend the obligations and resulting liabilities of a subsidiary corporation to a parent or grandparent corporation. This extension of liability is achieved by disregarding the separate corporate entity and treating the subsidiary and parent as one corporation, a process otherwise known as “piercing the corporate veil.” See, e.g., Flemmer v. Ming (Mont. 1980), [190 Mont. 403,] 621 P.2d 1038, 1042, 37 St.Rep. 1916, 1919. Piercing the corporate veil is an equitable remedy used to curb injustices resulting from the improper use of a corporate entity. Because the remedy is equitable, no concrete formula exists under which a court will disregard the separate identity of the corporate entity. Use of this remedy depends entirely upon the circumstances of each case. See Comment, Piercing The Corporate Veil in Montana, 44 Mont.L.Rev. 91, 92-93 (1983). However, this Court has previously required two general factors to be present before a court will disregard the separate and distinct identity of a corporation: (1) The corporation must be a mere agent or alter ego of the parent company; and (2) the corporate cloak must have been used to defeat public convenience, justify wrong, perpetrate fraud, or to defend crime. State ex rel. Monarch Fire Ins. Co. v. Holmes (1942), 113 Mont. 303, 307-08, 124 P.7d 994, 996.

A subsidiary corporation may be the mere agent of a parent company for a particular transaction if the parent company exercises control over the conduct and activities of the subsidiary so that in effect the subsidiary is merely acting on behalf of the parent. State v. Holdren (1963), 143 Mont. 103, 110-11, 387 P.2d 446, 450. On the other hand, a subsidiary is the alter ego of the parent corporation if the corporate aifairs of both are so intertwined that, in effect, each no longer has a separate identity. Holmes, 124 P.2d at 996. Many factors are considered to determine whether a subsidiary is merely the alter ego of a parent corporation. The full ownership of a subsidiary, use of the same people as directors and officers in both corporations, and engagement in the same general business enterprise may all be insufficient to indicate the subsidiary is merely an alter ego. Flemmer, 621 P.2d at 1042. Courts also look at such factors as the same type of day-to-day business activities of each corporation, sharing of the same address or name, the commingling of funds, undercapitalization of the subsidiary and failure to maintain separate business records. See, e.g., Thornock v. Pack River Management Co. (Mont. 1987), [227 Mont. 524,] 740 P.2d 1119, 44 St.Rep. 1284; Flemmer, 621 P.2d 1038; Holdren, 387 P.2d 446; Shaffer v. Buxbaum (1960), 137 Mont. 397, 352 P.2d 83; Wilson v. Milner Motels, Inc. (1944), 116 Mont. 424, 154 P.2d 265; Scott v. Prescott (1924), 69 Mont. 540, 223 P. 490.

The facts asserted by Hando fail to raise a question of fact about whether NERCO controlled the painting activities of SCCC. The District Court did not err in holding that SCCC did not act as the agent of NERCO in regards to this particular transaction. NERCO admitted that it chose the general color scheme for the Mine and that its approval was necessary if SCCC wanted to purchase supplies in an amount over $50,000. Yet, the SCCC plant superintendent had the primary responsibility for making daily work assignments in the plant, including painting assignments, and the SCCC warehouse superintendent was responsible for recommending the paint that would be used. Further, Hando conceded in her deposition that SCCC provided her with the paint, dictated the method used to apply the paint, and chose the places to be painted.

Hando also failed to set forth facts sufficient to raise a question of fact about whether the business activities of SCCC were so intertwined with those of NERCO that SCCC was a mere alter ego of NERCO. The evidence shows that SCCC was a wholly-owned subsidiary of NERCO and that many of the same people served as officers and directors for both corporations. However, both did not share the same name, nor were they located in the same state; NERCO maintained corporate headquarters in Oregon while SCCC was located in Montana. Additionally, although both were engaged in the same general business, that being the mining and sale of coal, NERCO managed the overall operation and development of many coal mining activities in Montana, Wyoming, Indiana and Alabama, while SCCC was engaged in the day-to-day operations of the Spring Creek Mine in Decker, Montana. Further, Hando introduced no evidence indicating that the funds or the records of each corporation were commingled, or that SCCC was undercapitalized and thus incapable of operating as a separate corporate entity.

As a matter of law, we hold that NERCO had no duty to provide a safe work place for SCCC employees; the alleged facts failed to show that SCCC acted as an agent of NERCO in regards to the daily painting and upkeep activities of the Mine or that SCCC was merely an alter ego of NERCO. Moreover, Hando failed to assert any facts indicating SCCC was incorporated to “defeat public convenience, justify wrong, protect fraud, or defend crime.” Holdren, 387 P.2d at 451. We also hold that no genuine material issue of fact exists in relation to the issue of whether an agency or alter ego in fact existed. Hando’s argument that NERCO was actively involved in subsidiary activities is merely a conclusory statement without the support of any new facts, other than those generally discussed above. Hando also failed to allege any facts showing that NERCO had an independent duty, because her employment was directly related to the physical operations of NERCO, to provide Hando with a safe work place. Hando was injured on the SCCC, and not the NERCO, job site while engaged in a job related to the daily upkeep of the SCCC Mine and while using paint purchased and owned by SCCC. Cf. Reynolds v. Burlington Northern, Inc. (1980), [190 Mont. 283,] 621 P.2d 1028, 37 St.Rep. 1883 (holding that a parent corporation owed a duty to provide a safe work place to that subsidiary employee injured by equipment owned by the parent railroad corporation and while working on a job site belonging to the railroad). Consequently, we hold the District Court did not abuse its discretion when it granted summary judgment and held that NERCO did not have a duty to provide Hando with a safe place to work.

The second issue presented upon appeal questions whether workers’ compensation insurance owned by SCCC would protect NERCO from liability for claims arising because of an unsafe SCCC work place. We need not discuss this issue having held that NERCO had no duty to provide Hando with a safe work place and thus may not be held liable for any injuries arising from the unsafe work place of its subsidiary.

The third issue, raised upon cross-appeal, challenges the District Court’s holding that the statute of limitations was tolled until a medical diagnosis causally connected Hando’s exposure to toxic paint fumes with her various continuing ailments. PPG and NERCO assert that the statute of limitations began to run in April of 1982 after her last on-the-job exposure to the paint which she believed caused her injuries. By statute, Hando had three years from the date of this last injury to file a claim against NERCO and PPG. This three-year period expired in April of 1985, yet Hando did not file her claim until October of 1985. PPG and NERCO therefore assert that Hando’s claims against them are barred.

A three-year statute of limitations does indeed apply to tort claims or products liability claims. Section 27-2-204, MCA. The law sets such statutes of limitations as an equitable measure intended to prevent the litigation of stale claims by requiring that a party file a claim within a reasonable period of time while the evidence supporting the claim is still fresh. E.W. v. D.C.H. (Mont. 1988), [231 Mont. 481,] 754 P.2d 817, 819, 45 St.Rep. 778, 780. The statute of limitations in any given case generally begins to run upon the occurrence of the last wrongful act relevant to the cause of action. The statute of limitations is not tolled until a plaintiff discovers her legal right to bring an action for known injuries. The statute also is not tolled until a plaintiff learns the facts out of which a known cause of action arose. Bennett v. Dow Chemical Co. (1986), 220 Mont. 117, 713 P.2d 992, 994, 43 St.Rep. 221, 224. This Court has, however, tolled the statute of limitations until a plaintiff discovers the injury, or until he should have discovered the injury with the use of due diligence, if the injury is self-concealing. Johnson v. St. Patrick’s Hosp. (1966), 148 Mont. 125, 417 P.2d 469. A statute of limitations has even been tolled until the legal cause of an injury is determined, although the injury itself is apparent, if equity so demands. Hornung v. Richardson-Merrill, Inc. (D.Mont. 1970), 317 F.Supp. 183. In Hornung, the Federal District Court Judge in Billings tolled the statute of limitations until the plaintiff discovered that the drug MER/29 may have caused his cataracts. Id at 185.

The facts in the present case indicate that although Hando was very much aware of those continuing physical, emotional and mental ailments she suffered after her exposure to the paint, she did not know the cause of those injuries until May of 1984. Prior to that time, she and SCCC suspected that her ongoing ailments stemmed from her exposure to the paint manufactured by PPG. She even filed a workers’ compensation claim in May of 1982 based upon this belief. However, the veracity of her belief was not known until May of 1984. Medical tests done in Chicago at that time provided Hando with a medical diagnosis that her continuing problems were due to a “sensitivity to petrochemicals,” a sensitivity most likely triggered by her exposure to the PPG paint while working for SCCC in 1981-82.

Hando’s failure to learn the cause of her ongoing injuries was not due to a lack of diligence on her part. Between 1982 and 1984, Hando saw numerous physicians, including physicians at the renowned Mayo Clinic in Minnesota, to determine the cause of her ongoing problems. No physician who examined Hando during this period attributed her continuing ailments to her exposure to the PPG paint. The facts in this case therefore are dissimilar to those in the E.W. case. In E.W., the plaintiff knew that the sexual molestation by her stepfather was tortious, she knew she suffered from psychological problems as a result of the tortious conduct by her stepfather, yet she failed to file a complaint until thirteen years after she reached the age of majority. See, E.W., 754 P.2d at 818. In contrast, Hando did not know that her exposure to the PPG paint caused her continuing medical problems, nor was her exposure to the paint obviously tortious. Further, she continued to seek a medical diagnosis for her ongoing problems. Consequently, we hold that the facts in the present case are comparable to those in Hornung, and not to those in E.W., and we likewise hold that the three-year statute of limitations did not begin to run until a medical opinion was rendered in April-May of 1984 linking her injuries to her exposure to the PPG paint.

Hando filed her claims against PPG and NERCO in October of 1985, well within the three-year statute of limitations. PPG and NERCO therefore are not entitled to summary judgment on this issue and the District Court did not abuse its discretion when it denied the cross-appellants’ motions for summary judgment.

Affirmed.

MR. CHIEF JUSTICE TURNAGE and MR. JUSTICES HARRISON, HUNT and McDONOUGH concur.


author: MR. JUSTICE SHEEHY MR. JUSTICE WEBER,

text:
    F. CLIFFORD HOBBS, Plaintiff and Appellant, v. PACIFIC HIDE AND FUR DEPOT, a Montana corporation, Defendant and Respondent.
    No. 84-437.
    Submitted May 12, 1988.
    Decided March 31, 1989.
    771 P.2d 125.

      Charles R. Johnson, Marra, Wenz, Johnson & Hopkins, Great Falls, J. Marquis Eastwood, Stephen D. Bell, Dorsey & Whitney, Minneapolis, Minn., for defendant and respondent.
    Tom L. Lewis, Regnier, Lewis & Boland, Kenneth R. Olson, Baiz & Olson, Great Falls, for plaintiff and appellant.
   MR. JUSTICE SHEEHY

delivered the Opinion of the Court.

F. Clifford Hobbs sued Pacific Hide and Fur Depot for his claimed wrongful discharge from employment in the District Court, Eighth Judicial District, Cascade County. His theories of recovery, which were submitted to the jury, included actual fraud, constructive fraud, breach of the implied covenant of good faith and fair dealing, and negligent misrepresentation. The jury verdict found against Hobbs on all of the theories of recovery, and, judgment having been rendered thereon in favor of the .defendant, Hobbs appealed from the judgment to this Court. We reverse and remand for new trial as to the claim for breach of an implied covenant of good faith and fair dealing, and affirm as to all other claims for relief. The reasons follow.

Pacific Hide and Fur Depot is a Montana corporation that recycles scrap iron, copper, brass and aluminum, buys and sells cattle and game hides, fur, and sells steel, farm products and hardware. It has corporate offices in Great Falls, Montana, and 32 operating branches in the states of Montana, Wyoming, Idaho, Washington and Oregon. Its president at the time of the discharge of Hobbs was Joe Thiebes, Jr., who died on May 1,1981, two years before trial. Pacific had 450 employees in 1981. In 1983, Pacific reduced its work force to 350 employees.

Clifford Hobbs began his employment with Pacific in December, 1978. At that time, he had been employed in the retail steel industry for approximately 15 years. He had met Roger Palmer, Pacific’s Billings branch manager and apparently came in the fall of 1978 to Great Falls for an employment interview. Hobbs claims that Palmer represented to him that he would have a bright future and job security with Pacific as long as he competently performed his job. He claims he was promised substantial salary, stock in the company, annual bonuses, and opportunity for advancement. He claims that these promises induced him to leave his employment with Wisconsin Steel, to move his family from Denver to Great Falls and to accept the position of director of corporate purchasing for Pacific.

Hobbs maintains that Palmer made other promises which need not be enumerated here except to say that Hobbs claims he was painted a glowing future.

After Hobbs went to work for Pacific, substantial friction developed between Palmer and Hobbs. Nonetheless, on August 14, 1980, he was promoted and given additional responsibility as manager of Branch 1 Steel in Great Falls. Although he was now holding two management jobs, as director of corporate purchasing, and as manager of Branch 1 Steel, Hobbs contended that his compensation was substantially below other branch managers. He also contends he never received a promised substantial increase in his bonus.

Under his employment, Hobbs was required to report to Palmer, although other employees at the same management level reported directly to the president or vice president of Pacific. Palmer continued to be disruptive, and on one occasion, increased the price of a contract by two percent over a firm price that Hobbs had negotiated. This action resulted in the discipline of Palmer, and his removal as superior of Hobbs, after which Roger Palmer told Cliff Hobbs that Palmer was “going to get him.”

A few months later, however, the executive vice president placed Roger Palmer back over the purchasing department and required Hobbs to report directly to Palmer. By April 15, 1981, the executive vice president and Palmer determined that Hobbs would handle only purchasing, and he would again report to Roger Palmer. Other managers reported having trouble with Palmer.

Hobbs was terminated from his employment on September 15, 1981, without prior notice. The decision to terminate Hobbs was made after a meeting between Thiebes, Vosburg, the executive vice president, and Palmer on September 15, 1981. At the same time, Thiebes circulated a letter to the other managers stating that Hobbs had not worked out as manager of Branch 1, although he had done an excellent job in purchasing. The letter stated it was a “subject lesson” to all managers, and went on to state that the conflicts between Palmer and Hobbs “should now be resolved.”

Hobbs maintains that during the trial it was demonstrated that the problems at Branch 1, a drop in sales, low margin on sales, and a write-off of bad debts were not Hobbs’ fault. No other management level official was terminated. Hobbs also claims that other managers, before and after his termination, had worse records, but were not fired.

Roger Palmer was terminated from the company in May, 1982, apparently because of unresolved intra-company conflicts with other managers.

Other pertinent facts will appear under the issues to which they pertain.

I.

Hobbs’ first attack is upon instructions given to the jury relating to the theory of breach of the implied covenant of good faith and fair dealing. Hobbs contends that the given instructions were inadequate, placed an improper burden of proof upon the plaintiff, and amounted to a directed verdict in favor of the defendant upon the issue. From our examination, we find the instructions inadequate, confusing and misleading, and therefore requiring reversal.

First, a resume of pertinent cases from this Court is in order. In Gates v. Life of Montana Insurance Company (1982), 196 Mont. 178, 638 P.2d 1063 (Gates I), we had an employee who was hired under an oral contract of indefinite duration. After she was employed, the employer issued a handbook, which assured employees that they would be given a hearing before termination. Gates was fired without a hearing. The employer claimed the right to discharge Gates without a hearing because she was an at-will employee. This Court reversed a summary judgment in favor of the employer, saying:

“. . . The circumstances of this case are that the employee entered into an employment contract terminable at the will of either party at any time. The employer later promulgated a handbook of personnel'policies establishing certain procedures with regard to terminations. The employer need not have done so, but presumably sought to secure an orderly, cooperative and loyal work force by establishing uniform policies. The employee, having faith that she would be treated fairly, then developed the peace of mind associated with job security. If the employer has failed to follow its own policies, the peace of mind of its employees is shattered and an injustice is done.

“We hold that a covenant of good faith and fair dealing was implied in the employment contract of the appellant ...”

Gates, 638 P.2d at 1067.

On remand to the District Court, Gates’ case was tried before a jury, which resulted in a verdict in her favor for both compensatory and punitive damages. In Gates v. Life of Montana Insurance Company (1983), 205 Mont. 304, 668 P.2d 213 (Gates II), we sustained the punitive damage award on the grounds that a breach of an implied covenant for good faith and fair dealing in employment constituted a tort.

Dare v. Montana Petroleum Marketing Company was decided by this Court in 1984. 212 Mont. 274, 687 P.2d 1015. The District Court had granted summary judgment against Dare because no handbook existed, such as in Gates. This Court stated:

“. . . We conclude that the District Court construed Gates too narrowly.

“Whether a covenant of good faith and fair dealing is implied in the particular case depends upon objective manifestations by the employer giving rise to the employees’ reasonable belief that he or she has job security and will be treated fairly. Gates, 638 at 1067, 39 St.Rep. at 20. The presence of such facts indicates that the term of employment has gone beyond the indefinite period contemplated in the at will employment statute, § 39-2-503, MCA, and is founded upon some more secure and objective basis. In such cases, the implied covenant protects the investment of the employee who in good faith accepts and maintains employment reasonably believing their job is secure so long as they perform their duties satisfactorily. Such an employee is protected from bad faith or unfair treatment by the employer to which the employee may be subject due to the inherent inequality of bargaining power present in many employment relationships. The implied covenant seeks to strike a balance between the interests of the employer in controlling the work force and the interests of the employee in job security. Gates, 638 P.2d at 1066-67, 39 St.Rep. at 20.

“We hold that an employment handbook as promulgated by the employer in Gates is not essential to a cause of action for breach of the implied covenant of good faith and fair dealing. Implication of the covenant depends upon existence of objective manifestations by the employer giving rise to the employees reasonable belief that he or she has job security and will be treated fairly. (Emphasis supplied.)”

Dare, 687 P.2d at 1020.

In Crenshaw v. Bozeman Deaconess Hospital (1984), 213 Mont. 488, 693 P.2d 487, this Court held that a probationary employee was owed the duty of good faith under Gates I, and that the duty coexisted with the right to terminate an at-will employee. This Court said:

“. . . This requirement of good faith and fair dealing does not conflict with § 39-2-503, MCA, [the at-will employment statute] but merely supplements it. Employers can still terminate untenured employees at-will and without notice. They simply may not do so in bad faith or unfairly without becoming liable for damages.”

Crenshaw, 693 P.2d at 492. See also, Nye v. Montana Livestock Department (1982), 196 Mont. 222, 639 P.2d 498.

The nature of an implied covenant of good faith and fair dealing in a contract was described by this court in Nicholson v. United Pacific Insurance Company (Mont. 1985), 219 Mont. 32, 710 P.2d 1342, 42 St.Rep. 1822. There we said in part:

“. . . but whether performing or breaching, each party has a justifiable expectation that the other will act as a reasonable person. (Citing a case.) The nature and extent of an implied covenant of good faith and fair dealing is measured in a particular contract by the justifiable expectations of the parties. Where one party acts arbitrarily, capriciously, or unreasonably, that conduct exceeds the justifiable expectations of the second party. The second party then should be compensated for damages resulting from the other’s culpable conduct. (Emphasis supplied.)”

710 P.2d at 1348.

The District Court in this case before us gave two instructions that related to the issue of the implied covenant and good faith and fair dealing:

“COURT’S INSTRUCTION NO. 17

“Mr. Hobbs has made claims concerning his dismissal from employment with Pacific Hide and Fur. You should understand that generally an employment contract for an indefinite term or period may be terminated at any time by either party, provided that party gives notice to the other. However, no prior notice is required, so that an employer or employee may tell the other that the employment contract is terminated on the same day notice is given. If you find that Mr. Hobbs and Pacific had an employment contract with no specified term, then Pacific had the right to terminate Mr. Hobbs’s employment at any time and for any reason. That is the general rule. I will now instruct you on the causes of action for breach of the implied covenant of good faith and fair dealing. If you find that Mr. Hobbs has proven by a preponderance of the evidence that the defendant breached the implied covenant of good faith and fair dealing, then you may find for Mr. Hobbs. But if not, then you must apply the general rule that an employment contract can be terminated for any reason or no reason at all. Good cause need not be shown for the termination.

“An employer is entitled to be motivated by and to serve its own legitimate business interests; an employer must have wide latitude in deciding whom it will employ in the face of the uncertainties of the business world; and an employer needs flexibility in the face of changing circumstances.

“COURT’S INSTRUCTION NO. 19

“You are instructed that the defendant Pacific Hide and Fur Depot owed plaintiff Clifford Hobbs an implied-in-law duty of good faith and fair dealing arising out of the employer/employee relationship that existed between the parties. In considering whether the defendant acted in bad faith in the manner in which plaintiff Clifford Hobbs was treated during the employment relationship and at the time the plaintiff was discharged, you should consider all the evidence which tends to establish either good faith or bad faith. If you find that the defendant has violated this obligation imposed by law, the plaintiff is entitled to be compensated for all detriment or injury proximately caused thereby whether that detriment or injury could have been anticipated or not.”

Taken together, the court’s instructions failed to tell the jury the nature and extent of the implied covenant of good faith and fair dealing. The instructions informed the jury that as a matter of law Pacific owed Hobbs an implied in law duty of good faith and fair dealing, but did not tell the jury that the implied covenant is measured in a particular contract by the justifiable expectations of the parties. Nicholson, supra. We therefore hold that the cause must be reversed for the failure to give proper instructions on this issue. A party has a right to have instructions given which are adaptable to his theory of the case. Northwestern Union Trust Company v. Worm (1983), 204 Mont. 184, 663 P.2d 325.

Without binding either counsel or the District Court on retrial, we suggest that instructions to the jury might properly include the following:

“Montana statutory law provides that an employment relationship having no specific duration may be terminated at the will of either party on notice to the other. This is referred to as the at-will employment doctrine.

“However, if there are objective manifestations by the employer giving rise to a reasonable belief on the part of the employee that he has job security and will be treated fairly, the right of the employer to terminate the employee at will is limited by a covenant of good faith and fair dealing which the law implies into the employment relationship. An employer may still terminate an employee at will and without prior notice; however, the implied covenant of good faith and fair dealing requires the employer to have a fair and honest reason for termination, and not to act arbitrarily, capriciously or unreasonably.

“In this case the covenant of good faith and fair dealing is implied into the employment relationship, and you are instructed that a breach of this covenant would render the employer liable to the employee for damages.

“In determining whether the defendant violated the duty of good faith and fair dealing, you must balance the interests of the defendant in controlling its work force with the interest of the plaintiff in job security. An employer such as Pacific is entitled to be motivated by and to serve its own legitimate business interest, and must be given discretion in determining who it will employ and retain in employment.

“Thus, if the employer is motivated to discharge the employee for reasons unfair or not honest, the employee is entitled to recover damages proximately caused by the breach. On the other hand, if the employer was motivated by honest business reasons in discharging the employee, the employer had the right to terminate the employment on the same day as notice is given for the discharge.”

II

Hobbs maintains that the District Court committed reversible error by the manner in which it controlled the discovery and pretrial proceedings in this case.

There are two items of pretrial discovery that ought to be made available to Hobbs before any subsequent retrial.

Prior to the trial in the District Court, Hobbs requested of the defendant corporation that it produce two copies of all federal and state income tax records of the defendant corporation for the years 1979 through 1982. Inasmuch as Thiebes’ letter terminating Hobbs represented that one of the reasons for the termination was difficult economic times adversely affecting his financial standing in the corporation, the income tax records of the corporation were relevant to the reasons stated. Rule 26(b)(1), M.R.Civ.P. It appears that Hobbs was entitled to production of these documents for his pretrial preparation, and for use at the trial as evidence.

Also prior to the trial in the District Court, Hobbs requested of the defendant corporation information as to the salary and annual bonuses paid to all of the branch managers of the corporation during 1979, 1980 and 1981. The court granted, after objection, the motion as to the salary and annual bonuses paid to the branch managers of Branches 1, 2 and 40, and as to the other five branch managers of branches that sold steel in 1979, 1980 and 1981, those who received the highest salary and annual bonuses in said years.

During the trial, counsel for Pacific, in cross-examining Mr. Carestía, Hobbs’ financial expert, used information relating to the salaries and bonuses of branch managers for the additional years of 1982 and 1983. An argument ensued between counsel before the court in chambers as to whether the information relating to the years 1982 and 1983 had improperly been withheld from Hobbs’ counsel so that it was impossible to advise Carestia, prior to the trial, of such information in the preparation of his testimony. The record is not clear to us as to which counsel was correct with respect to whether the information had been requested or supplied in time. In any future retrial of this cause, we direct that upon a proper request for discovery, information that may be used by either party in direct or cross-examination of witnesses must be supplied in accordance with the request for production.

In this case, the District Court permitted the corporation’s counsel to cross-examine Carestia on information which had not been supplied to the expert. The court felt that the jury was aware of the fact that the witness did not have the information that he was being questioned about and that on redirect examination by Hobbs’ counsel, the jury would be made well aware of it. On that basis, the District Court permitted the cross-examination over objection. It is probable that the District Court was unable, as we are unable, to determine which of the parties was right as to the extent of the request for the production of documents. In any event, this issue can be obviated on retrial if, on proper request for production, information is exchanged as to documents that will be used either for direct or cross-examination of either parties’ witnesses on retrial. The objective of the District Court in controlling and regulating discovery is to insure a fair trial to all concerned, neither according one party an unfair advantage nor placing the other at a disadvantage. Massaro v. Dunham (1979), 184 Mont. 400, 603 P.2d 249; Lindberg v. Leatham Bros., Inc. (1985), 215 Mont. 11, 693 P.2d 1234.

We find no merit in other issues raised by Hobbs as to discovery as regulated by the District Court, and it is unnecessary to set them forth here.

Ill

At the time of the trial in this cause in the District Court, the corporation president involved in terminating Hobbs had died. In the course of the trial, through several witnesses, statements made by the deceased Thiebes to those witnesses were permitted into evidence. Hobbs raises a general objection to this kind of evidence, claiming hearsay.

At issue in this case, as indicated in the proposed instructions foregoing, is whether the employer was motivated to discharge the employee for reasons unfair or not honest, as a breach of the implied covenant of good faith and fair dealing. Therefore, the facts relating to the method used by the deceased Thiebes in deciding to terminate Hobbs were relevant to those issues. Thus, it may be that statements made by Thiebes to others relating to the discharge of Hobbs would be indicative of the facts considered by him in making the discharge, as to whether he was acting fairly and honestly.

Whether a witness is available or not, under Rule 803(3), M.R.Evid., statements are not excluded by the hearsay rule if those statements indicate the then existing mental, emotional or physical condition of the declarant. When a declarant is unavailable as a witness, as for reason of death, Rule 804(a)(4), his statements are not excluded by the hearsay rule if there are comparable circumstantial guarantees of trustworthiness. Rule 804(a)(b)(5), M.R.Evid. Whether there are circumstantial guarantees of trustworthiness is a matter for determination by the District Court in the first instance which will be upheld in this Court absent an abuse of discretion.

In any retrial of this case, those rules should guide the District Court in considering whether to admit such statements.

IV

Hobbs objects to an instruction given by the District Court on the subject of constructive fraud on the ground that it was repetitious and misleading. The District Court submitted the issue of constructive fraud to the jury in a special interrogatory and the jury responded that the defendant had not committed constructive fraud which was the proximate cause of the damages to Hobbs.

We do not comment on the instruction given by the District Court in this case for the reason that we find plaintiff’s theory or basis for constructive fraud is not properly conceived in this case. Statements were made by Palmer to Hobbs before his employment that Pacific was a “gold mine,” that Palmer was offering to Hobbs the “opportunity of a lifetime,” and that Hobbs would be reporting directly to the president or executive vice president of the company and not to Palmer. Such statements are not the source of plaintiff’s problems in this case nor are they demonstrably false. The statements may arguably have given rise to justifiable expectations in Hobbs about his employment, but they do not constitute a basis for constructive fraud. It is true that defendant’s fraudulent intent is not a necessary element in an action against it for constructive fraud, § 28-2-406(1), MCA, nor must there exist a fiduciary or confidential relationship between the plaintiff and the defendant, Mends v. Dykstra (1981), 195 Mont. 440, 449-50, 637 P.2d 502, 507-08. Here, however, given the statements made, their nature, and the circumstances existing between the parties at the time the statements were made, Hobbs can show no duty imposed on Palmer or any other officer of Pacific “to speak out on the circumstances,” indicating that the statements were false or misleading and should not be relied on. Palmer seems only to have expressed his opinion, belief or judgment on the matters stated and not necessarily statements of positive fact. See Restatement (Second) of Torts § 538A Comments a-g (1977). These statements do not have in them the elements of concealment or falsity that characterize the statements or representations which led to the contract in McGregor v. Mommer (Mont. 1986), 220 Mont. 98, 714 P.2d 536, 43 St.Rep. 206, upon which case Hobbs relies on appeal.

V

Accordingly, the judgment of the District Court in this case is reversed, and the cause remanded for retrial in accordance with this Opinion. Costs to plaintiff.

MR. CHIEF JUSTICE TURNAGE and MR. JUSTICES HARRISON, McDONOUGH and HUNT concur.

MR. JUSTICE WEBER,

dissenting:

The majority concludes that reversal is required in this case because the instructions did not tell the jury that the implied covenant is measured by the justifiable expectations of the parties. This conclusion is based upon Nicholson v. United Pacific Insurance Company (1985), 219 Mont. 32, 710 P.2d 1342, 42 St.Rep. 1822. It seems inappropriate to apply a legal theory which had not yet been stated by this Court. In the present case, the jury instructions were given on May 1, 1984, nearly one year prior to the 1985 Nicholson decision. I conclude there is no reversible error, and I would affirm the jury verdict and judgment for the defendant.

The facts stated in the majority opinion present a very favorable picture of the plaintiff’s claim. No facts are presented which suggest a basis for the jury verdict for the defendant. However, the record demonstrates there were approximately 30 witnesses who testified in behalf of the defendant during a month long trial. I believe it appropriate to set forth some of the facts which support the jury’s verdict.

When plaintiff first went to work for Pacific Hide and Fur Depot (Pacific), Mr. Palmer testified that Mr. Thiebes authorized him to offer plaintiff a $32,000 per year salary plus an unknown bonus. There is no testimony from Pacific that anyone represented to plaintiff that he would receive any higher salary. Furthermore, plaintiff himself testified that he realized any bonus he might receive would be discretionary with Mr. Thiebes and would have to be approved by Mr. Thiebes prior to receipt. Mr. Palmer also testified that plaintiff said he was anxious to leave Colorado and move to Montana. This testimony is relevant in considering the argument that the plaintiff was enticed to move his family from Denver to Great Falls based upon Pacific’s representations of a “glowing future.”

Several Pacific employees testified as to the dissension between plaintiff and Mr. Palmer and the disruptive effect it had on the purchasing department under plaintiff’s supervision. The Vice-president of Pacific testified that plaintiff had an obsession with Mr. Palmer’s interference with the purchasing department. An agent within the department testified to the effect that plaintiff was very candid about his dislike of Mr. Palmer and his disapproval of Mr. Palmer’s ideas and the way he did things. Another purchasing agent testified that employees within the department found plaintiff to be harsh and abusive, and that under his supervision, the department had experienced a considerable loss of morale. The agent testified that he had considered resigning due to the pressure of having to work for plaintiff and had expressed that inclination to Mr. Thiebes. Plaintiff agreed that the problems he had with Mr. Palmer created confusion within the corporation and that the confusion spilled over into other corporate branches.

Witnesses testified that the plaintiff frequently complained about his immediate supervisor to individuals outside the company. These complaints were expressed to one individual who testified that because of plaintiff’s statements, he formed a negative opinion of Mr. Palmer, and he believed that plaintiff’s statements were destructive to the interests of Pacific. Another individual unrelated to the company testified that plaintiff’s preoccupation with Mr. Palmer and his constant talk about the inner workings of Pacific demonstrated a lack of professionalism. At one point, plaintiff told this individual about an “ultimatum” which he had given Mr. Thiebes a few months prior to his termination, indicating that “the situation was unworkable” and that “it will either be Roger or him, and that was the way he wanted to resolve it”.

The record contains substantial evidence that the plaintiff had been advised of the need to cooperate with Mr. Palmer, his superior, and that if his performance did not improve, the plaintiff could be terminated. The evidence further demonstrated that shortly thereafter, the plaintiff contacted another steel company concerning alternative employment, and this contact was made prior to his termination by Pacific.

Mr. Thiebes ultimately made the decision to terminate the plaintiff. Because Mr. Thiebes died prior to trial, we are not able to ascertain all of his reasons for the termination. The record does establish that Mr. Thiebes was well aware of the problems between the plaintiff and Mr. Palmer. He had also been told that the purchasing department was experiencing morale problems and that an employee was considering resignation. Supervisory employees of Pacific had indicated to Mr. Thiebes that if Pacific had to choose between the plaintiff and Mr. Palmer, it would be wise to terminate the plaintiff and retain Mr. Palmer. Mr. Palmer was described by several other Pacific employees as being more knowledgeable of the steel business and more dedicated to that business than was the plaintiff.

Other key employees testified that the plaintiff experienced a lack of effort when he was managing branch I of the steel business as well corporate purchasing. Mr. Thiebes’ letter of termination stated that the economic times and the plaintiff’s inability to manage branch I along with his purchasing duties were the primary causes for his termination.

Such evidence supports the contention of the defendant that its decision to terminate the plaintiff was a sound business decision. The jury accepted that idea, as demonstrated by the following question presented to it:

“Do you find that defendant Pacific Hide and Fur breached an implied covenant of good faith and fair dealing to the plaintiff, which was a proximate cause of damages to plaintiff Clifford Hobbs?”

To that question the jury answered, “No.” There is clearly substantial evidence to support the conclusion of the jury. I do not find a factual basis for trial reversal. In ordering a retrial, I note that almost 8 years have passed since the date of termination and 5 years since the trial. We are posing a difficult trial problem for all parties by the present reversal.

The basic reason for reversal stated in part I of the majority opinion is that the instructions were inadequate. The problem instructions were 17 and 19. Instruction 19 stated:

“You are instructed that the defendant Pacific Hide and Fur Depot owed plaintiff Clifford Hobbs an implied-in-law duty of good faith and fair dealing arising out of the employer/employee relationship that existed between the parties. In considering whether the defendant acted in bad faith in the manner in which plaintiff Clifford Hobbs was treated during the employment relationship and at the time the plaintiff was discharged, you should consider all the evidence which tends to establish either good faith or bad faith. If you find that the defendant has violated this obligation imposed by law, the plaintiff is entitled to be compensated for all detriment or injury proximately caused thereby whether that detriment or injury could have been anticipated or not.”

The instruction stated that the District Court concluded that the duty of good faith and fair dealing did arise in the present contract. As a result there was no need to require the jury to weigh any circumstances to determine if such a covenant was appropriate. The majority refers to Gates I, pointing to the circumstances under which a covenant of good faith and fair dealing may be implied. That does not appear relevant where the District Court already concluded that the covenant did arise in the present contract. In a similar manner, the majority refers to Dare with emphasis upon the objective manifestations by an employer from which the covenant may be implied. Again, that does not appear relevant where the trial court had already reached that conclusion.

As previously mentioned, that “measurement” of the justifiable expectations of the parties had not been enunciated by this Court at the time of trial. While the Nicholson wording was not used in the present case, it seems to me that instruction 19 contains a good explanation of the duty. That instruction stated that in considering whether the defendant acted in bad faith, the jury may consider the manner in which the Plaintiff was treated during the employment relationship and at the time the plaintiff was discharged. The instruction further emphasizes that the jury should consider all the evidence which tends to establish either good or bad faith. It ends with the statement that if the jury finds the defendant has violated this obligation, the plaintiff is entitled to compensation for all injury proximately caused by that violation. I conclude this is a fair statement of the law as it existed and was available to the trial judge and attorneys during the 1984 trial.

The jury was also instructed on the nature of the at-will employment contract and how the cause of action for breach of the implied covenant interplays with that relationship in instruction 17 which states in part that:

“If you find that Mr. Hobbs has proven by a preponderance of the evidence that the defendant breached the implied covenant of good faith and fair dealing, then you must find for Mr. Hobbs. But if not, then you must apply the general rule that an employment contract can be terminated for any reason or no reason at all.”

I conclude there is no basis for reversal because of the wording of jury instructions 17 and 19.

I would affirm the verdict of the jury and the judgment of the District Court.

MR. JUSTICE GULBRANDSON concurs in the foregoing dissent.


author: MR. JUSTICE HARRISON

text:
    CITY OF BILLINGS, Plaintiff and Respondent, v. LESLIE LINDELL, Defendant and Appellant.
    No. 88-391.
    Submitted on Briefs Feb. 23, 1989.
    Decided March 31, 1989.
    771 P.2d 134.

      Robert L. Stephens, Jr., Billings, for defendant and appellant.
    Marc Racicot, Atty. Gen., Helena, Dorothy McCarter, Asst. Atty. Gen., Helena, Russell Fagg, City Atty., Billings, for plaintiff and respondent.
   MR. JUSTICE HARRISON

delivered the Opinion of the Court.

This case comes on appeal from a judgment in the Thirteenth Judicial District, Yellowstone County, the Honorable Russell Fillner presiding. The lower court found the appellant, Leslie Lindell, guilty of the offense of Speeding and Driving While License Suspended. We affirm.

On May 21, 1987, Billings police officers stopped appellant’s vehicle for exceeding the posted speed limit. Officer John Carpani requested that appellant produce his driver’s license. Appellant could not do so, but assured the officer he indeed possessed a license. Officer Carpani radioed for a license check through the State bureau. However, because the system was not operating correctly, Officer Carpani received a “negative” response. Appellant was issued a speeding citation and released. Later, the dispatcher reported that appellant’s license was suspended. The officers proceeded to appellant’s residence where they issued a second citation for driving while license suspended.

At trial, the City of Billings offered into evidence a certified abstract of driving history and a certified copy of a letter notifying appellant that his driver’s license suspension had been extended through September 4, 1987. The extended suspension was due to a January 6, 1987 conviction for Driving While License Suspended. Appellant challenged the exhibits’ admissibility, contending the documents violated hearsay prohibitions and the best evidence rule. The trial judge admitted the evidence over appellant’s objections, and took the case under advisement pending receipt of briefs. Thereafter, appellant failed to file a brief in support of his arguments. On May 31, 1988, deeming the matter submitted pursuant to the evidence, the District Court found Leslie Lindell guilty of the offenses of Speeding and Driving While License Suspended.

Appellant presents two issues for our review:

1. Were the certified abstract of driving history and the certified copy of the suspension notification letter properly admitted as evidence?

2. Was the evidence presented sufficient to sustain a conviction?

The Division of Motor Vehicles has the duty of maintaining records of license convictions. Section 61-11-102(1), MCA; Lancaster v. Department of Justice (1985), 218 Mont. 97, 706 P.2d 126, 42 St.Rep. 1425. However, we recognize the inherent difficulty in requiring the custodian to be present in court each time the records become necessary in a trial. To meet practical concerns, the Legislature developed a number of instances in which authenticity is taken as established for purposes of admissibility without extrinsic evidence. Section 61-11-102(6), MCA, is one such instance:

“A reproduction of the information placed on a computer storage devise is an original of the record for all purposes and is admissible in evidence without further foundation in all courts or administrative agencies when the following certification by a custodian of the record appears on each page:

“The individual named below, being a duly designated custodian of the driver records of the department of justice, motor vehicle division, certifies this document as a true reproduction, in accordance with 61-11-102(6), of the information contained in a computer storage device of the department of justice, motor vehicle division.

“Signed:_

(Print Full Name)

(Emphasis added)”

The statute is abundantly clear; once properly certified, the exhibit is admissible without additional foundation. In the instant case, the abstract of driving was certified by a duly appointed custodian of the records. We need not examine this point any further.

The copy of the suspension notification letter, dated February 18, 1987, likewise included a certificate from the custodian of the files and records of the motor vehicle division, certifying that the information was a true and correct copy of the original. As a public document kept in accordance with the statutory mandate, the letter falls within the class of self-authenticating documents. Rule 902(4), M.R.Evid. In addition, contents of an official document authorized to be filed may be proven by a copy “ [certified as correct in accordance with Rule 902 . . .” and meet the requirements of the best evidence rule. Rule 1005, M.R.Evid. Finally, the exhibit falls within Rule 803(8), the public document exception to the hearsay rule. We find the letter was properly admitted by the District Court.

Appellant asserts that he did not receive the letter extending his suspension period and in fact, believed his driving privileges had been fully restored. However, we presume that “[a] letter duly directed and mailed was received in the regular course of the mail.” Section 26-1-602(24), MCA. Nor does positive testimony by the addressee of nonreceipt nullify the presumption. General Mills, Inc. v. Zerbe Bros., Inc. (1983), 207 Mont. 19, 672 P.2d 1109. Instead, the determination of nonreceipt is left to the factfinder to give weight to the presumption he believes it is entitled. In the instant case, appellant presented no additional evidence, apart from his own testimony, to prove the letter was not received. On the other hand, the letter contained a certificate of mailing, dated and signed by an officer of the department, and sent to appellant’s home address, the same address testified to as correct during the trial.

Finally, appellant contends the evidence was insufficient to sustain the conviction. His argument, in large part, relies upon contentions already disposed of earlier in our opinion.

Our review of the record, in the light most favorable to the City, indicates there exists substantial evidence upon which a reasonable mind could find appellant guilty. State v. Wilson (Mont. 1981), [___ Mont. ___,] 631 P.2d 1273, 38 St.Rep. 1040. Specifically, the abstract of driving history, letter of suspension, and Officer Carpani’s testimony collectively constitute substantial evidence on which to base the verdict.

Affirmed.

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