author: JUSTICE McDONOUGH JUSTICE SHEEHY,

text:
    JONNIE MUSGROVE DAVIS, Plaintiff and Respondent v. THE CHURCH OF JESUS CHRIST OF LATTER DAY SAINTS; Corporation of the Presiding Bishop of the Church of Jesus Christ of Latter Day Saints; Corporation of the President of the Church of Jesus Christ of Latter Day Saints ; Risk MANAGEMENT DIVISION, KALISPELL STAKE CENTER of the Church of Jesus Christ of Latter Day Saints; and John Does i-x (unknown divisions, Departments, Subsidiaries, Affiliates, Associations, whether incorporated or unincorporated, Agents, Employees, Bishops, Presidents, Assigns, any other Entity or Person Related to any of the Above-Named Defendants), Defendants and Appellants.
    No. 89-466.
    Submitted on Briefs Feb. 9, 1990.
    Decided July 12, 1990.
    796 P.2d 181.

      Kenneth E. O’Brien; Hash, O’Brien & Bartlett, Kalispell, for defendants and appellants.
    Dana L. Christensen & Pamela L. Miller, Murphy, Robinson, Heckathorn & Phillips; Kalispell, for plaintiff and respondent.
   JUSTICE McDONOUGH

delivered the Opinion of the Court.

The defendants (Church) appeal the judgment entered in the District Court, Eleventh Judicial District, Flathead County, awarding Jonnie Musgrove Davis damages for personal injury in the amount of $401,864.28. We affirm the District Court.

The issues raised by the Church are:

1. Whether there was substantial evidence to support the jury verdict.
2. Whether it was error to allow Dr. Alexander McNeill to render an opinion as to degree of slope of the walkway.
3. Whether the District Court erred in giving Davis’ proposed instructions nos. 21, 22, 24, 27, 28 and 30, and refusing the Church’s proposed instructions nos. 35, 36, 42, 43 and 44.

Plaintiff and respondent Jonnie Musgrove Davis (Davis) brought a lawsuit on July 20, 1987 to recover for injuries suffered as a result of a fall on the premises of the Kalispell Stake Center of the Church of Jesus Christ of Latter Day Saints. In her complaint Davis alleged that the Church was negligent in (1) failing to design and construct a reasonably safe sidewalk, (2) failing to erect a handrail, (3) failing to properly maintain the walkway by allowing an unnatural accumulation of ice to be present, and (4) failing to warn of the dangerous condition.

At the time of the accident, Davis was a volunteer youth seminary teacher at the Kalispell Stake Center. On February 25, 1985, she arrived at the Center at approximately 6 a.m. Several inches of snow had fallen during the night; but Davis entered the Center without difficulty.

During Davis’ seminary classes, the Church janitor arrived and shoveled the walkway. Usually he applied salt to prevent ice build up. However, on this occasion none was applied.

Davis completed her classes by 8 a.m., and proceeded to exit the building. As she left, she noted that the walkway had been shoveled, and she started to walk towards her car. The top portion of the walk was nearly level, and Davis had no problem negotiating it. At the midpoint of the walkway however, the slope downward increased. In this four to six foot long span, the sidewalk had been altered to remove two steps which were present in the original construction. The walk was reconstructed to enable elderly and wheelchair-bound church members easier access. As Davis descended this slope she slipped and fell, landing on her head and neck. As a result of her injuries, Davis has undergone five operations to her cervical spine.

Davis filed suit in 1987. In the summer of 1985, subsequent to the accident, the Church redesigned and replaced portions of the walkway due to deterioration. Consequently, no exact measurement of the gradient of the walkway where Davis fell could be determined at trial.

At the close of Davis’ case, the Church moved for a directed verdict. The motion was denied, as was the subsequent motion for new trial. The Church contends now, as then, that no basis exists for a finding of negligence on the part of the Church.

Because this is an appeal from the findings of a jury, we need only determine whether there is substantial evidence in support of the verdict. The appropriate standard of review requires that the findings of a jury shall not be reversed on appeal unless they are not supported by substantial evidence. Kitchen Krafters, Inc. v. Eastside Bank of Montana (Mont. 1990), 789 P.2d 567, 47 St.Rep. 602. Substantial evidence is defined as that evidence that a reasonable mind might accept as adequate to support a conclusion. Although it may be based upon weak and conflicting evidence, in order to rise to the level of substantial evidence it must be greater than trifling or frivolous. Christensen v. Britton, et al (Mont. 1990), 784 P.2d 908, 46 St.Rep. 2223.

The Church maintains that the jury’s verdict is not supported by substantial evidence. In order to address this contention we must review the evidence in a light most favorable to Davis. Wheeler v. City of Bozeman (1988), 232 Mont. 434, 757 P.2d 345.

In her complaint, Davis alleged that the Church was negligent for failing to properly design, construct and maintain the walkway which led to the main doorway of the Kalispell Stake Center. She also alleged that the Church was negligent in failing to warn her of the dangerous condition of this walkway. In order to prove these assertions she must establish:

1) The Church had a duty to construct and maintain the walkway in a reasonably safe condition.
2) The Church breached that duty.
3) The Church’s breach caused Davis to sustain damages.

See Kitchen Krafters, Inc., 789 P.2d at 567.

No one contends that Davis did not sustain an injury after she slipped and fell upon the sidewalk. Therefore,- we need only review the evidence to determine whether there was substantial evidence for the jury to determine that the Church had a duty to provide safe access to the church, whether this duty was breached, and whether that breach caused Davis’ injuries. See Blaskovich v. Noreast Devel opment Corp. (Mont. 1990), [242] Mont. [326,] 790 P.2d 977, 47 St.Rep. 740.

The law is clear that a landowner has a duty to use ordinary care in maintaining his premises in a reasonably safe condition or to warn those legally on the land of any hidden or lurking dangers. Luebeck v. Safeway Stores, Inc. (1968), 152 Mont. 88, 446 P.2d 921. Given this rule of law, it is elementary that the Church had a duty to provide a sidewalk leading to the church which is reasonably safe.

The question then becomes - did the Church breach this duty? At trial, both sides presented testimony concerning the condition of the walkway. Much of this testimony centered around the slope of that portion of the sidewalk which led to the front doors of the church. The slope is important because the Uniform Building Code requires that handrails be provided on any slope greater than ten percent, and in this case no handrails were provided. The Church maintains that the slope did not exceed a gradient of ten percent. Davis on the other hand, contends that the slope ranged from 16 to 25 percent.

Both parties base their slope calculations on testimony presented by witnesses at trial. Davis presented testimony given by Dr. Alex McNeill, an expert in biomechanics. Dr. McNeill testified that the slope of the walkway, where Davis fell, ranged from 16 to 25 percent. Apparently, he based this opinion upon a review of photographs taken of the walk, numerous blueprints prepared in connection with the original church construction, and a review of depositions taken of various witnesses.

Davis also presented testimony of Allan Denning, a long time member of the church. His testimony primarily concerned his memory of the entrance way as it existed at the time of the accident. He testified, that as a child, he would slide down the slanted area. During trial, in response to a request from counsel, he drew a picture to demonstrate the slope of the sidewalk. His picture indicated a slope of approximately 24%.

The Church, in an attempt to discredit the testimony provided by Dr. McNeill and Mr. Denning, presented calculations and testimony to prove its slope percentages, which did not exceed ten percent. They attempted to bolster this evidence through testimony given by Harry Schmautz, a licensed architect and Harold Conat, an experienced cement finisher, who installed the walkway. Both testified that the walkway was not dangerously steep and that no handrail was necessary.

In addition to evidence of the slope of the walkway, the jury heard testimony concerning the slickness of the sidewalk on the day of the accident. In particular, the church janitor, John Reading testified that he shoveled the walk at approximately 7:30 a.m. He further testified that he did not apply any salt to the sidewalk despite the fact that this was regularly done in the past.

Dana Tatum, a young woman who witnessed Davis’ fall, testified that the sidewalk was slick on the day of the accident. Apparently, she had walked the sidewalk shortly before Davis slipped and fell. She testified that because the sidewalk was so slick she made her younger brother accompany her down the ramp. She further stated that at the time she wondered why there was no salt applied to the walkway.

Following submission of all of this testimony, the jury determined that the Church was 76% responsible for the injury and that Davis was 24% responsible. While the testimony was conflicting, it is apparent that there was substantial evidence to support the jury’s findings that the sidewalk was unreasonably dangerous. Where conflicting evidence exists the credibility and weight to be given to the evidence is within the jury’s province. Wheeler, 757 P.2d at 345. The jury found sufficient evidence that the walkway was unsafe and this Court will not overturn its determination by weighing conflicting evidence on appeal. Wheeler, 757 P.2d at 347.

There is also substantial evidence to support a finding that the unreasonably dangerous condition of the sidewalk caused Davis to slip and to sustain injuries. In this regard, we need only point out that Dr. McNeill testified that in his opinion, the slope and the icy condition of the ramp combined to cause Davis to fall. The jury obviously agreed with this testimony, and once again, we will not invade its province.

Our review of the evidence establishes that there is substantial evidence to support the jury’s finding of negligence on the part of the Church. Each of the elements of this cause of action are supported by evidence presented at trial. The findings of the jury are therefore affirmed.

The Church contends that the lower court erred by allowing Dr. McNeill to offer an opinion as to the slope of the sidewalk where the injury occurred. It maintains that Dr. McNeill was only retained for the purpose of rendering testimony on the general dynamics of “how people fall,” not on the slope of the walk. Accordingly, the Church argues that his testimony was improper because they were not adequately prepared to challenge his opinions through cross- examination.

As stated earlier, Dr. McNeill was retained by Davis as an expert in biomechanics. He stated at his deposition and at the time of trial that he looked at many factors to determine what may have caused the fall. During his deposition, Dr. McNeill made numerous references to the slope of the sidewalk and its significance to the formulation of his opinion as to how the fall occurred. He stated that “[essentially the contribution that the slope might — that the slope surface might have made to that fall, that’s principally what I have been asked to look at.” Dr. McNeill made it clear that he was perusing architectural drawings and surveys in an attempt to determine the gradient of slope. It was made clear before trial that Dr. McNeill intended to render an opinion as to the factors contributing to the fall, and that gradient of slope would be one of those factors. The Church’s contention that Davis failed to divulge that Dr. McNeill was an expert witness on the range of slope is not well taken.

Finally, the Church contends the lower court erred by its admission of a number of Davis’ instructions and the omission of several of the Church’s instructions.

The Church states Davis’ instructions Nos. 21, 22 and 24 incorrectly state the legal standard of causation.

Instruction No. 21 reads:

“Before you can find the defendant liable, you must find the defendant’s negligence was a cause of the plaintiff’s injury.”

Instruction No. 21 is a verbatim transcription of Montana Pattern Instruction (MPI) No. 2.06.

Instruction No. 22 reads:

“The defendant’s conduct is a cause of the injury if it helped produce it and if the injury would not have occurred without it.”

Instruction No. 22 comes directly from MPI 2.08.

Instruction No. 24 states:

“The plaintiff has the burden of proving:
“(1) That the defendant was negligent.
“(2) That the plaintiff was injured.
“(3) That the defendant’s negligence was a cause of the injury to the plaintiff.
“(4) The amount of money that will compensate the plaintiff for her injury.”

The source for No. 24 comes directly from MPI 2.12.

The Church contends that none of the above instructions refer to proximate or legal cause, and are therefore erroneous. The Church offered a modified version of MPI 2.06, which inserted the word “proximate” before cause, and included a paragraph involving intervening superseding cause. The Church’s instruction states as follows:

“Before you can find the Defendant liable, you must find that the Defendant’s negligence was a proximate cause of the Plaintiff’s injury.
“The proximate cause of an injury is that cause which, in a natural and continuous sequence, unbroken by any new and independent cause, produces the injury, and without which it would not have occurred.”

In Kitchen Krafters, Inc., 789 P.2d at 567, we expressly disapproved of MPI 2.08 because it does not adequately instruct the jury on proximate cause. In that case we reversed a jury verdict for the plaintiff because we held that the jury was not adequately instructed on causation. MPI 2.08 is an instruction on cause in fact which is part of a two-tiered analysis that must be applied whenever a causation question is confronted, Kitchen Krafters, 789 P.2d at 574.

After cause-in-fact is established, the plaintiff must prove that the defendant’s actions were the proximate cause of his damages. In order to establish the existence of proximate cause, it must be shown that the consequences of the defendant’s wrongful act were reasonably foreseeable. As stated in earlier cases, “[P]roximate cause is one which in a natural and continuous sequence, unbroken by any new, independent cause, produces injury ...” Young v. Flathead County (1988), 232 Mont. 274, 757 P.2d 772. “New and independent causes,” which are not foreseeable, are generally regarded as superseding intervening events which break the chain of causation and absolve the defendant of liability. Kitchen Krafters, 789 P.2d at 576.

The question of proximate cause is an issue of fact to be decided by the jury. Thayer v. Hicks (1990), [243] Mont. [138,] 47 St.Rep. 1082, 1095, 793 P.2d 784. When addressing this issue, the jury must look forward, through the chain of causation, to determine whether the events which occurred subsequent to the defendant’s act were foreseeable. Kitchen Krafters, 789 P.2d at 575. If events, which were unforeseeable, entered into the chain of causation, and produced the plaintiff’s injury, proximate cause cannot be established and the plaintiff’s actions must fail.

In the case now before us, the lower court did not instruct the jury on proximate cause. This is a negligence action and therefore proximate cause must be established in order for the plaintiff’s allegations to prevail. Therefore, the lower court erred in refusing to offer the Church’s instruction on proximate cause.

However, in order to constitute reversible error, the lower court’s actions must affect the substantial rights of the complaining party. Rollins v. Blair (1989), 235 Mont. 343, 767 P.2d 328. The Church objected to instructions Nos. 21, 22 and 24 on the grounds that they did not give the appropriate definition of proximate cause. We agree with this conclusion, but we fail to see how the Church was prejudiced. In neither its objection to the lower court or in its brief on appeal, does the Church argue that there were any superseding intervening events which broke the chain of causation. Furthermore, there is no evidence of such occurrences. Davis argued, in pertinent part, that the ramp was negligently designed and maintained. As stated earlier, the jury found sufficient evidence to agree with this assumption. There is no evidence that any independent cause interrupted the chain of events between the Church’s wrongful act and Davis’fall. We therefore hold that the lower court’s refusal to instruct on proximate cause was error; however in this case such error was harmless and is not therefore reversible.

The Church assigns error to the District Court in giving Plaintiff’s Proposed Instruction pertaining to premises liability, which reads as follows:

“The defendant has the duty to exercise ordinary care to keep its premises reasonably safe for all persons who foreseeably might come upon them.
“In determining whether premises were reasonably safe, you should consider all of the surrounding circumstances shown by the evidence including, but not limited to, the following matters:
“1. The manner in which the property is used;
“2. The setting, location and physical characteristics of the property;
“3. The type of person who would reasonably be expected to visit the premises; and
“4. The specific type of hazard or unsafe condition alleged.”

The Church maintains that it had no duty to exercise ordinary care to keep the church premises reasonably safe for Davis because a natural accumulation of ice and snow was present. Under their theory, a landowner has no duty to exercise ordinary care to maintain a reasonably safe premises if the dangerous condition is created by a natural accumulation of ice or snow. See Leubeck, 446 P.2d at 921.

The Church’s contention must fail. Davis maintained, throughout trial, that the Church was negligent, not only due to its failure to remedy the icy condition, but also because its sidewalk was too steep and because it failed to provide a handrail. This case involves more than a simple accumulation of ice and snow. This instruction reflects this theory, and was therefore properly

The Church also takes issue with Davis’ instruction No. 28, which states:

“An owner has a duty to warn persons who come upon his property of any temporary unsafe condition:
“1. created by it or its employees; or
“2. caused by negligence on its part.”

The Church contends the above instruction is an incorrect statement of the law and that no facts in the record support a finding that either the Chinch or an employee negligently caused any unsafe conditions to exist. The Church contends that its proposed instruction No. 46 is the proper statement of the law and was erroneously refused. The Church’s instruction No. 46 stated that no duty to warn of a danger exists if it would be reasonable to expect that an ordinary person would observe the danger.

We do not agree. The Church argues it had no duty to warn unless the conditions which caused Davis’ injuries were “hidden or lurking.” See Regedahl v. Safeway Stores, Inc. (1967), 149 Mont. 229, 425 P.2d 335. This assertion carries little weight as the given instruction was a correct statement of the law, which fit Davis’ theory of the case. The court gave several instructions imputing negligence to the plaintiff if she should fail to see or be aware of a condition “universally known to be reasonably dangerous, or [is] obviously so.” The court properly allowed instructions adaptable to the theories of the Church’s case, and refused to give offered instructions where the subject matter was adequately covered by other instructions. Rollins v. Blair (1989), 235 Mont. 343, 767 P.2d 328. The Church cannot contend it was error where the court gave instructions adaptable to both parties’ cases and refused instructions on statements of law already covered.

The Chinch further argues that the District Court erred in giving Plaintiff’s Proposed Instruction No. 30, set forth as follows:

“A property owner may be held hable for falls on accumulations of ice and snow where the hazard created by the natural accumulation is increased or a new hazard is created by an affirmative act of the property owner; even where such a condition is actually known or obvious, a property owner may be held hable if he should have anticipated that injuries would result from the dangerous condition.”

The Church asserts that there are no facts justifying this instruction and that it is inconsistent with Montana law relating to a property owner’s duty with respect to natural accumulations of ice and snow. The Church maintains that the record is devoid of evidence that the Church did anything other than shovel the walkway, and therefore this instruction is not applicable and that it is only applicable where the hazard presented by a natural accumulation of snow has been increased by the acts of the property owner.

We disagree. Instruction No. 30 is the law in Montana relating to accumulations of snow and ice. Cereck v. Albertsons (1981), 195 Mont. 409, 637 P.2d 509. Davis, as part of her case, argued that a sheen of ice was left after the janitor shoveled the walk. Such a condition, combined with the gradient of the walk, rendered the natural accumulation of snow and ice unnatural. The instruction therefore related to an important part of Davis’ theory of the case. It would have been reversible error for the District Court to refuse to instruct the jury on this aspect of her theory.

The Church claims the lower court erred in refusing to give its proposed instructions Nos. 35, 36,42 and 44. Instructions Nos. 35, 36 and 44 are redundant, as they were all adequately addressed in jury instructions Nos. 34, 37 and 45.

The Church’s proposed instruction No. 42 misconstrues the law by stating that a landowner is not negligent solely by the act of removing snow. Whether an affirmative act by the landowner creates or increases a hazard can be question of fact to be determined by the jury. The trial court correctly denied the instruction.

Affirmed.

CHIEF JUSTICE TURNAGE and JUSTICES HARRISON, BARZ, HUNT and WEBER concur.

JUSTICE SHEEHY,

specially concurring:

I concur in the foregoing opinion. I want to speak my admiration of the judicial sleight-of-hand by which the majority reach a proper result in a slip-and-fall-on-snow case without mentioning Restatement (Second) of Torts, § 343(A)(1) (1965), nor Kronen v. Richter (1984), 211 Mont. 208, 683 P.2d 1315, nor Kaiser v. Town of Whitehall (1986), 221 Mont. 322, 718 P.2d 1341, nor Limberhand v. Big Ditch Company (1985), 218 Mont. 132, 706 P.2d 491, nor differentiating Blaskovich v. Noreast Development Corporation, Cause No. 89-117 (Decided April 10, 1990), [242 Mont. 326], [47 St.Rep. 740,] 790 P.2d 977.

The approval by this Court in this Opinion of plaintiff’s instruction No. 30, set out in the Opinion, is an approval of at least a part of §343(A)(1) of the Restatement in the following:

“A possessor of land is not liable to his invitees for physical harm caused to them by any activity or condition on the land whose danger is known or obvious to them, unless the possessor should anticipate the harm despite such knowledge or obviousness.”

Lesson: Aslip and fall case may yet have life, even after Blaskovich.


source: Caselaw Access Project

author: JUSTICE HUNT JUSTICE BARZ,

license: Public Domain

text:
    SIMMONS OIL CORPORATION and Simmons Refining Corporation, Plaintiffs and Appellants, v. HOLLY CORPORATION; Navajo Refining Company; Navajo Northern, Inc.; Wells Fargo Bank, N.A., Defendants and Respondents.
    No. 89-447.
    Submitted Feb. 6, 1990.
    Decided July 19, 1990.
    796 P.2d 189.

      James H. Goetz, argued, Goetz, Madden & Dunn, Bozeman, Charles J. Wisch, argued, Weissburg & Aronson, Inc., San Francisco, Cal., H. Charles Stahmer, Bozeman, for plaintiffs and appellants.
    Sheldon Oliensis argued, Kaye, Scholer, Fierman, Hays & Handler, New York City, Richard F. Gallagher, Church, Harris, Johnson & Williams, Great Falls, for Holly Corp.
    Steve M. Perry, argued, Munger, Tolies & Olson, Los Angeles, Cal., John D. Stephenson, Jr., Jardine, Stephenson, Blewett & Weaver, Great Falls, for Wells Fargo.
   JUSTICE HUNT

delivered the Opinion of the Court.

Plaintiffs Simmons Oil Corporation and Simmons Refining Corporation appeal from an order of the Eighth Judicial District Court, Cascade County, dismissing their complaint against defendants Holly Corporation and Wells Fargo Bank, N.A., for lack of personal jurisdiction. We reverse.

The following issues are raised on appeal:

1. Whether sufficient minimum contacts exist with the state of Montana to subject defendant Wells Fargo to personal jurisdiction.
2. Whether sufficient minimum contacts exist with the state of Montana to subject defendant Holly to personal jurisdiction.

Plaintiff Simmons Oil Corporation (SOC) is an Arizona corporation with a principal place of business in that state. Plaintiff Simmons Refining Corporation (SRC), a wholly-owned subsidiary of SOC, is a Delaware corporation that appears from the discovery documents to have a principal place of business in Arizona although it alleges in the complaint that its principal place of business is in Montana. (Hereafter, the plaintiffs will be referred to collectively as “Simmons” unless the need arises to differentiate between the two entities.)

Defendant Holly is a Delaware corporation with a principal place of business in Texas. It is not registered to do business in Montana, does not maintain offices, representatives or agents in this state and does not solicit business in this state.

Defendant Navajo Refining Company is a wholly owned subsidiary of Holly and Holly’s wholly owned subsidiary, Navajo Corporation. It is a Delaware corporation, headquartered in New Mexico. Defendant Navajo Northern, Incorporated, a Nevada corporation, is wholly owned by Navajo Refining.

Defendant Wells Fargo is a national banking association with a principal place of business in California. It is not registered to do business in Montana and does not maintain any subsidiaries, offices, branches, employees, agents or representatives in this state.

Beginning in 1980, Wells Fargo provided SOC, and later SRC and related entities, a line of credit. In early 1982, Simmons purchased, and SRC began to operate, the Black Eagle Refinery located in Cascade County near Great Falls. Prior to the purchase, Wells Fargo agreed to extend Simmons an additional $18-million line of credit to be used for working capital and acquisition of inventory for the refinery. Simmons pledged all of its accounts receivable and inventory to secure the loan.

In 1983, Wells Fargo filed in four Montana counties at least 10 UCC financial statements, constituting security interests in Simmons’ inventory, equipment, fixtures, accounts receivable and other personal property located in these counties. In that same year, Simmons gave Wells Fargo a mortgage on the refinery, which Wells Fargo recorded in Montana.

In 1983 and 1984, Simmons encountered financial difficulties and Wells Fargo took control of the refinery’s operation. During this time, Wells Fargo urged Simmons to search for a partner to operate and provide capital for the refinery.

In 1984, Simmons, Wells Fargo, Holly, Navajo Refining and Navajo Northern entered into a Master Agreement, which authorized the formation of Montana Refining Company, a limited partnership organized under the laws of Montana. Pursuant to the terms of the agreement, the refinery was transferred to Montana Refining. Navajo Northern became the sole general partner and took control of the refinery. SRC became the sole limited partner and assumed a passive role in the refinery’s operation.

The formation of Montana Refining entailed a series of debt transactions between the parties. In one transaction, Montana Refining assumed $5 million of Simmons’ debt to Wells Fargo. The loan assumption and accompanying security agreement were deemed to have been made in Montana and governed by Montana laws. Wells Fargo agreed to venue in Montana and waived the right to object to venue or assert the doctrine of forum non conveniens.

Holly guaranteed this debt on behalf of Montana Refining. The guaranty was deemed a Montana agreement, governed by Montana laws. The agreement provided that jurisdiction and venue would be in Montana.

In collateral agreements, Simmons executed a $6.5-million replacement credit note in favor of Wells Fargo, which reduced Simmons’ existing $21.8 million debt. The replacement credit note, which was secured by a mortgage on the refinery, was to be paid by 100 percent of the share of Simmons’ cash flow from Montana Refining up to the first $700,000 each fiscal year. The agreement also provided that Wells Fargo would be entitled to 100 percent of Simmons’ share of the Montana Refining partnership property in the event of liquidation of the company. The agreement recited that it was made, executed and entered into within the state of Montana and governed by Montana laws.

In another agreement, Simmons pledged all of its right, title and interest in Montana Refining to Wells Fargo, including its right to receive distributions of money and property other than money from Montana Refining. In addition, Simmons sold, assigned and transferred to Wells Fargo “as outright owner” all distributions of money or other property made by Montana Refining to Simmons. This agreement was governed by the laws of California.

In 1985, Wells Fargo and Simmons restructured Simmons’ total debt. In conjunction with the restructuring, Wells Fargo agreed to release Jerry Simmons, SOC’s sole shareholder, from his personal guarantee of Simmons’ indebtedness. In return, Jerry Simmons and SOC, but not SRC, agreed to release Wells Fargo from “any and all debts, claims, demands, liabilities, obligations, cause or causes of action, known or unknown ...” that arose prior to the date of the release. The restructuring agreement provided for the application of California law.

A condition of the $5-million loan assumption by Montana Refining required the company to obtain the express written approval of Wells Fargo before making any plant or fixed capital expenditure or before purchasing any real or personal property in excess of $200,000. Pursuant to this provision, Wells Fargo approved Montana Refining’s 1985 and 1986 budgets and, in 1987, it approved the funding for a capital expenditure project, a project that was financed by Holly. In 1985 and 1986, two employees from Wells Fargo traveled to Montana to meet with refinery officials and local bankers concerning future production of the refinery.

On January 1, 1988, Holly and Wells Fargo negotiated, outside of the state of Montana, the sale of the Simmons’ debt and the $5- million Montana Refining debt. Holly purchased the debt for approximately $2.5-million cash plus a promise to pay up to $2.8-million from Montana Refining’s future cash flow. As part of the agreement, Wells Fargo transferred to Holly all of its security interest in the refinery, the refinery’s inventory and other real property belonging to the Simmons entities located in Montana. Holly recorded the security interests in Montana.

Simmons filed this action in the Cascade County District Court, alleging that Holly and Wells Fargo wrongfully refused to allow it to purchase the debt on the same terms given to Holly. Simmons sought damages from Holly for breach of fiduciary duty, bad faith and conversion and from Wells Fargo for breach of fiduciary duty and bad faith. It also claimed that each of the defendants had conspired to deprive Simmons of the benefit of the various agreements they had entered into with Simmons.

Holly and Wells Fargo both moved to dismiss for lack of personal jurisdiction. (The remaining two defendants, Navajo Refining and Navajo Northern, did not contest jurisdiction.) After a hearing, the District Court granted the motion and dismissed the actions against Holly and Wells Fargo. The court denied Simmons’ subsequent motion for reconsideration, but certified the dismissal for immediate appeal.

I. PRELIMINARY DISCUSSION

In Simmons v. State, 206 Mont. 264, 271, 670 P.2d 1372, 1376 (1983), we noted that the determination of whether jurisdiction may be exercised over a nonresident defendant involves a two-part analysis. The court must first examine the long-arm statute to ascertain whether the defendant’s activities fall within the provisions of the statute. If the defendant’s activities comply with the long-arm statute, the court must then discern whether the exercise of jurisdiction comports with the traditional notions of fair play and substantial justice embodied in the due process clause. Simmons, 206 Mont. at 271, 670 P.2d at 1376.

Montana’s long-arm statute is codified at Rule 4B(1), M.R.Civ.P., which provides:

“All persons found within the state of Montana are subject to the jurisdiction of the courts of this state. In addition, any person is subject to the jurisdiction of the courts of this state as to any claim for relief arising from the doing personally, through an employee, or through an agent, of any of the following acts:
“(a) the transaction of any business within this state;
“(b) the commission of any act which results in the accrual within this state of a tort action;
“(c) the ownership, use or possession of any property, or of any interest therein, situated within this state;
“(d) contracting to insure any person, property or risk located within this state at the time of contracting;
“(e) entering into a contract for services to be rendered or for materials to be furnished in this state by such person; or
“(f) acting as director, manager, trustee, or other officer of any corporation organized under the laws of, or having its principal place of business within this state, or as personal representative of any estate within this state.”

Rule 4B(1), M.R.Civ.P, incorporates the principles of both general and specific jurisdiction. The first sentence deals with the question of general jurisdiction, that is, whether the party can be “found within” the state. A party is “found within” the state if he or she is physically present in the state or if his or her contacts with the state are so pervasive that he or she may be deemed to be physically present there. A nonresident defendant that maintains “substantial” or “continuous and systematic” contacts with the forum state is found within the state and may be subject to that state’s jurisdiction even if the cause of action is unrelated to the defendant’s activities within the forum. Simmons, 206 Mont. at 276, 670 P.2d at 1378 (quoting Data Disc, Inc. v. Systems Tech. Assoc., Inc., 557 F.2d 1280, 1287 (9th Cir. 1977)).

The remainder of Rule 4B(1), M.R.Civ.P addresses the concept of specific jurisdiction. Under this theory, jurisdiction may be established even though a defendant maintains minimum contacts with the forum as long as the plaintiffs cause of action arises from any of the activities enumerated in Rule 4B(1), M.R.Civ.P. and the exercise of jurisdiction does not offend due process. Simmons, 206 Mont. at 276, 670 P.2d at 1378 (1983).

II. GENERAL JURISDICTION

After examining the pleadings, affidavits and discovery documents on record, we hold that Simmons has not established that the contacts of either Holly or Wells Fargo are so substantial that they may be found within the state of Montana for purposes of general jurisdiction. Neither Holly nor Wells Fargo is registered to do business in the state. Neither maintains bank accounts, offices, employees or agents in the state. Neither solicits business in the state. With the exception of UCC filings recorded by Wells Fargo in the early 1970s, neither Wells Fargo nor Holly have had any contacts with Montana other than through their involvement with the Black Eagle Refinery.

III. SPECIFIC JURISDICTION

Jurisdiction Over Wells Fargo.. Although we hold that the contacts that Wells Fargo maintained with the state of Montana were not substantial enough to justify the exercise of general jurisdiction, we do hold that specific jurisdiction is warranted. Wells Fargo maintained minimum contacts from which the causes of action alleged by Simmons arose, making the exercise of specific jurisdiction reasonable.

In Columbia Falls Aluminum Co. v. Hindin / Owen / Engelke, Inc., 224 Mont. 202, 728 P.2d 1342 (1986), we held that jurisdiction could be properly exercised over a nonresident bank because the defendant transacted business in the state within the meaning of Rule 4B(1)(a), M.R.Civ.P. The defendant in Columbia Falls was an investment banking firm incorporated in the state of California, with offices in California. It was approached in California by the plaintiff, a California resident, regarding the plaintiff’s attempt to locate a lender to provide an operating loan for an aluminum reduction facility located in Columbia Falls, Montana. The collateral for the loan was to be the Columbia Falls plant itself. By contract executed in California, the defendant agreed to attempt to locate a lender for the venture. On two occasions, an officer of the defendant traveled from California to Montana to assist prospective lenders in their examination of the Columbia Falls plant.

Likewise, we hold that Wells Fargo’s ventures into and affecting the state of Montana constitute the transaction of business within the meaning of Rule 4B(l)(a), M.R.Civ.P. In 1982, Wells Fargo provided Simmons with an $ 18-million line of credit to be used specifically for working capital and acquisition of inventory for the Black Eagle Refinery. It secured its loan to Simmons by taking security interests in the refinery property and recording those interests in Montana. In 1983 and 1984, it exercised financial control over the refinery. Subsequently, it engaged in a series of debt transactions with Simmons, Holly and Montana Refining, all of which pertained to and affected the Black Eagle Refinery and many of which were deemed to be Montana agreements, governed by Montana law and subject to Montana venue. Through these transactions, Wells Fargo became the “outright owner” of Simmons’ share of the distributions from the Montana refinery. It also acquired the authority to approve and actually did approve the refinery’s capital budget and expenditures in excess of $200,000. On at least four occasions, it sent employees to Montana to discuss the future of the refinery.

Because we have found that Wells Fargo engaged in one of the activities enumerated in Rule 4B(1), M.R.Civ.P., we must now decide whether the exercise of jurisdiction over Wells Fargo would offend traditional due process notions of fair play and substantial justice. In Simmons, 206 Mont. at 276, 670 P.2d at 1378, we adopted the Ninth Circuit test for determining whether the exercise of jurisdiction comports with due process:

“(1) The nonresident defendant must do some act or consummate some transaction with the forum or perform some act by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking its laws.
“(2) The claim must be one which arises out of or results from the defendant’s forum-related activities.
“(3) The exercise of jurisdiction must be reasonable.”

The plaintiff need not demonstrate each of the above three elements to establish jurisdiction. Once the plaintiff shows that the defendant has purposefully availed itself of the privilege of conducting activities in the forum, a presumption of reasonableness arises, which the defendant can overcome only by “presenting a compelling case that jurisdiction would be unreasonable.” Brand v. Menlove Dodge, 796 F.2d 1070, 1074 (9th Cir. 1986). On the other hand, jurisdiction may be established where the defendant has not purposefully directed its activities toward the forum but “has created sufficient contacts to allow the state to exercise personal jurisdiction if such exercise is sufficiently reasonable.” Brand, 796 F.2d at 1074.

A nonresident defendant purposefully avails itself of the benefits and protections of the laws of the forum state when it takes voluntary action designed to have an effect in the forum. Boit v. Emmco Ins. Co., 271 F.Supp. 366, 369 (D. Mont. 1967). See also Farmers Ins. Exch. v. Portage La Prairie Mutual Ins. Co., 907 F.2d 911 (9th Cir. 1990). Conversely, a defendant does not purposefully avail itself of the forum’s laws when its only contacts with the forum are random, fortuitous, or attenuated or due to the unilateral activity of a third party. Brand, 796 F.2d at 1074. The defendant that invokes the laws of the forum state by purposefully availing itself of the privilege of conducting activities within the forum should reasonably anticipate being haled into court in the forum state. Therefore, the exercise of jurisdiction over such a defendant is fundamentally fair.

Generally, a creditor’s minimal entry into the forum to protect its interests does not constitute a voluntary effort to do business in the state. Occidental Fire & Casualty Co. of North Carolina v. Continental Illinois Nat’l Bank and Trust Co. of Chicago, 689 F.Supp. 564, 567 (E.D.N.C. 1988). In the present case, however, Wells Fargo’s entry into the state of Montana cannot be described as minimal. Its affiliation with Simmons, an affiliation that substantially affected property in Montana, extended far beyond that of the simple creditor-debtor relationship. Wells Fargo loaned Simmons large sums of money, knowing these funds were destined for Montana. It protected its interests by exercising financial control over the refinery, retaining the authority to approve expenditures of the refinery and becoming the outright owner of Simmons’ profits from the refinery. Moreover, in many of the agreements it undertook with Simmons it specifically agreed to the application of Montana law. In short, Wells Fargo purposefully availed itself of the privilege of conducting activities in this state when it voluntarily engaged in affirmative conduct directed toward this state.

Since we have found that Wells Fargo satisfied the first prong of the due process analysis, we must move on to the second prong of the test, that is, whether the claims arose out of or resulted from Wells Fargo’s forum-related activities. Wells Fargo argues that the claims in the present case arose out of the 1988 sale of Simmons’ debt by Wells Fargo to Holly, a sale that was negotiated outside of the state of Montana.

Wells Fargo’s argument focuses too narrowly on the 1988 transaction and ignores the forum-related activities it engaged in that culminated in Simmons’ claims against it. To ascertain whether a cause of action arises out of a defendant’s forum-related activity, this Court reviews the entire chain of events leading up to the final act upon which the claim accrued. See Nelson v. San Joaquin Helicopters, 228 Mont. 267, 742 P.2d 447 (1987). Accord United States Ry. Equip. Co. v. Port Huron and Detroit R.R. Co., 495 F.2d 1127, 1129 (7th Cir. 1974); Consolidated Laboratories, Inc. v. Shandon Scientific Co., 384 F.2d 797, 801 (7th Cir. 1967).

Simmons’ claims against Wells Fargo for breach of fiduciary duty and bad faith arose out of the parties’ course of dealing concerning the Black Eagle Refinery. This course of dealing establishes Simmons’ claims, if any, against Wells Fargo, including acts that demonstrate Simmons’ rights, Wells Fargo’s duties and Wells Fargo’s breach of duty. The sale of debt, the act that constituted Wells Fargo’s alleged breach of duty, was merely the final act in the chain.

Wells Fargo further argues that Simmons cannot allege any claims against it relating to actions performed by Wells Fargo prior to 1985 because the restructuring agreement entered into by the parties in that year released Wells Fargo from all “debts, claims, demands, liabilities, obligations [and] cause or causes of action . . . .” We note, however, that only SOC agreed to release Wells Fargo from liability. SRC did not so agree. Furthermore, the claims in this action did not accrue until 1988, the time of the alleged breach. The fact that SOC released Wells Fargo from liability for claims accruing prior to 1985, does not prevent us from examining the chain of events leading up to the causes of action that accrued after 1985 in order to determine whether, for jurisdictional purposes, Simmons’ claims arise out of Wells Fargo’s forum-related activity.

The third prong of the due process analysis requires that the exercise of jurisdiction must be reasonable. In Jackson v. Kroll, Pomerantz and Cameron, 223 Mont. 161, 166, 724 P.2d 717, 721 (1986), we enumerated several factors to be considered when examining the reasonableness of jurisdiction:

“1. The extent of defendant’s purposeful interjection into Montana;
“2. The burden on defendant of defending in Montana;
“3. The extent of the conflict with the sovereignty of defendant’s state;
“4. Montana’s interest in adjudicating the dispute;
“5. The most efficient resolution of the controversy;
“6. The importance of Montana to plaintiff’s interest in convenient and effective relief; and
“7. The existence of an alternative forum.”

The above factors are not mandatory tests, each of which the plaintiff must pass in order for the court to assume jurisdiction. Rather, the factors simply illustrate the concept of fundamental fairness, which must be considered in each jurisdictional analysis. Gates Learjet Corp. v. Jensen, 743 F.2d 1325, 1332 (9th Cir. 1984), cert. denied, 471 U.S. 1066, 105 S.Ct. 2143, 85 L.Ed.2d 500 (1985).

Furthermore, because Simmons has demonstrated that Wells Fargo purposefully directed its activities toward this state, a presumption that the exercise of jurisdiction is reasonable has arisen. Wells Fargo must therefore present a compelling case establishing that jurisdiction is unreasonable. Brand, 796 F.2d at 1074. Wells Fargo has failed to meet its burden.

First, as we have already noted, Wells Fargo engaged in extensive activity directed toward this state. It loaned Simmons large sums of money to be used in the operation of a Montana refinery, exercised control of the refinery, executed agreements invoking Montana law and received Simmons’ share of the distributions from the refinery. Considering the extent of these contacts, we hold that Wells Fargo purposefully interjected itself into this state and is subject to Montana’s long-arm jurisdiction.

Second, Wells Fargo will not be greatly burdened by defending this action in Montana. It appears that Simmons could have properly brought this case in either California or Texas, in addition to Montana. Therefore, even if Montana were to reject jurisdiction, Wells Fargo might very well be forced to defend the case outside of its state of residence and its burden of defending the action would not be any less.

Third, Montana can provide as efficient a resolution of the controversy as either of the alternate forums. It appears that the witnesses and evidence are spread among the states of Montana, Texas, Arizona, California and New Mexico. Thus, it is hard to definitively state that jurisdiction would be most efficiently exercised in any one particular state. Fourth, Wells Fargo has failed to allege any conflict with the sovereignty of California, its state of residence.

Finally, Montana has an interest in adjudicating the dispute because the outcome of the litigation may have an impact on the ownership of a refinery located within the state. Furthermore, Montana is interested in protecting and regulating the conduct of parties who do business within the state, even if the parties are not residents of the state.

In sum, we hold that the state of Montana may properly exercise jurisdiction over Wells Fargo. It is not unreasonable to subject Wells Fargo to the jurisdiction of this state in light of the fact that Wells Fargo purposefully availed itself of the benefits and protections of Montana laws by transacting business in the state and the fact that the claims alleged by Simmons arose from Wells Fargo’s transaction of business here.

Jurisdiction Over Holly. We now trun to the question of jurisdiction over Holly. Like Wells Fargo, we hold that Holly may properly be subject to the jurisdiction of the courts of this state under the theory of specific jurisdiction.

Holly transacted business in the state within the meaning of Rule 4B(1)(a), M.R.Civ.P. Holly entered into an agreement to create Montana Refining, a Montana partnership; loaned money directly to Montana Refining; and guaranteed loans on behalf of Montana Refining. All of these transactions were agreed to be governed by Montana law and subject to venue in Montana. Pursuant to its loan agreements with Montana Refining, Holly filed UCC financial statements in Montana.

The partnership agreement and the loan agreement provided Holly with the right to monitor, at least on a limited basis, the operations of Montana Refining. Specifically, the partnership agreement gave Holly the discretion to determine when certain process supplies could be used for production and the loan agreement gave Holly the power to authorize plant or fixed capital expenditures in excess of $200,000. In addition, Holly directly intervened on Montana Refining’s behalf on at least one occasion when, in 1987, it contacted Wells Fargo to obtain approval for a capital expenditure project.

Following the 1988 sale of Simmons’ debt, Wells Fargo transferred its security interests in Montana Refining property to Holly and Holly recorded those interests in Montana. After the 1988 debt transaction, Holly represented in its financial statements that it “effectively acquired the limited partner’s [SRC’s] 50% interest in Montana Refining for the foreseeable future.”

Holly’s contacts with Montana constitute the transaction of business within the meaning of Rule 4B(1)(a), M.R.Civ.P. They also demonstrate that Holly purposefully availed itself of the benefits and protections of Montana law. Holly voluntarily stepped outside of the protection of its own jurisdiction and took affirmative steps to conduct business affecting Montana. It also invoked the laws of Montana to protect its own interests. In light of these actions, Holly should reasonably have anticipated being haled into court in this state.

For the reasons we stated in our analysis concerning Wells Fargo, the causes of action alleged by Simmons arise out of Holly’s forum-related activities. Simmons’ claims rest upon allegations of bad faith and breach of fiduciary duty. In order to determine the validity of these claims, the relationship between Simmons and Holly must be examined. Because the relationship between the parties centers upon their involvement in the Black Eagle Refinery, the claims of bad faith and breach of fiduciary duty arise out of Holly’s forum-related activities.

Again for the same reasons as those used in our earlier discussion concerning Wells Fargo, jurisdiction over Holly would be reasonable in this case. Even if we decline to exercise jurisdiction, Holly may have to travel outside of Texas, its state of residence, to California to defend this action. Considering the convenience of modem travel, it is no more burdensome on Holly to litigate this action in Montana than it is to litigate in California.

As we have already stated, Montana can provide as efficient a resolution to this controversy as the alternate jurisdictions. Furthermore, Montana has an interest in litigating disputes between parties conducting business in the state when that dispute affects property located in this state.

Holly has failed to present a compelling case that subjecting it to jurisdiction for causes of action arising from business tranacted in this state would be unreasonable. Due process will not be offended by the exercise of jurisdiction over this defendant.

Reversed and remanded for further proceedings consistent with this Opinion

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

JUSTICE BARZ,

dissenting.

I respectfully dissent from the majority opinion. I would affirm the District Court’s conclusion that there is no general or specific jurisdiction over Wells Fargo and Holly in Montana. Now the Eighth Judicial District Court is faced with yet another complex case to handle in an inadequately funded and overburdened system involving an out-of-state corporate plaintiff and two out-of-state corporate defendants.

The plaintiffs’ complaint is predicated on the defendants’ alleged tortious acts resulting from a 1988 purchase agreement wherein Wells Fargo sold the plaintiffs’ debt of over $24 million to Holly. Wells Fargo is a California bank and Holly is a Texas corporation. The contract was negotiated and executed in Texas. Prior to the debt purchase, the plaintiffs were involved in discussions in Arizona.

At the time the complaint was filed, Wells Fargo had no assets, property, offices, agents, representatives or employees in Montana. Furthermore, at the time of filing of the complaint all of their recorded security interests had been transferred. The plaintiffs cannot satisfy the requirements of Rule 4B and do not satisfy the three-part due process analysis of Simmons v. State (1983), 206 Mont. 264, 271, 670 P.2d 1372, 1376.

As the Court noted in Simmons, 670 P.2d at 1380:

“Interstate communication is an almost inevitable accompaniment to doing business in the modern world, and cannot by itself be considered a ‘contact’ for justifying the exercise of personal jurisdiction.”

The few phone contacts and mailings of Wells Fargo after 1985 do not provide crucial minimum contacts. The claims of the plaintiffs in its complaint do not arise out of Wells Fargo’s Montana contacts. The complaint alleges that defendant Wells Fargo refused to provide the plaintiffs with an opportunity to repurchase the debt on the same terms as Holly. The rationale that these claims purportedly arose while Wells Fargo “controlled” the Montana refinery in 1983 and 1984 is irrelevant. Finally, it is the plaintiffs’ burden to demonstrate that jurisdiction over Wells Fargo is reasonable. According to the assertion of Wells Fargo there is not one witness in Montana, all witnesses are located elsewhere.

The Montana courts also do not have specific jurisdiction over Holly in light of the plaintiffs’ complaint. The complaint does not establish that any of the claims arose out of Holly doing business in Montana, fails to allege any tort that Holly committed accrued in Montana and fails to establish that Holly itself owns any Montana property. Finally, this action filed by the plaintiffs has a strong suggestion of forum-shopping for a friendly Montana jury receptive to its claims and should not be allowed to proceed in the courts of this State.


author: JUSTICE HARRISON

text:
    WALEN F. LILLY, Plaintiff and Respondent, v. FRED TERWILLIGER, Clara Terwilliger, James Bonnett, and Deborah Bonnett, Defendants and Appellants. James Bonnett and Deborah Bonnett, Defendants and Counter-Plaintiffs, Appellants v. WALEN F. LILLY, Counter-Defendant/Respondent.
    No. 90-099.
    Submitted on Briefs June 7, 1990.
    Decided July 24, 1990.
    796 P.2d 199.

      Pierre L. Bacheller, Billings, for defendants and appellants.
    Donald E. White, bozeman, for plaintiff and respondent.
   JUSTICE HARRISON

delivered the Opinion of the Court.

James and Deborah Bonnett, defendants and counter-plaintiffs below, appeal the judgment issued by Judge Frank Davis, sitting in the Eighteenth Judicial District, Gallatin County. The District Court held that plaintiff and counter-defendant Walen “Bud” Lilly’s sale of repossessed property was commercially reasonable and Lilly was entitled to a deficiency judgment, but, because Lilly’s notice of the sale to the Bonnetts did not comply with the strict requirements of foreclosure on collateral statutes, the District Court effected an adjustment by way of set off as to the deficiency judgment. We affirm.

Three issues are presented for review:

1. Did the trial court err in concluding that the Notice of Repossession was defective?
2. Did the trial court err in concluding that the sale of repossessed collateral was commercially reasonable?
3. Did the trial court err in calculating the dollar amount to which Lilly was entitled by judgment?

In 1952, Walen “Bud” Lilly started a fishing shop in West Yellowstone, Montana. Over the years “Bud Lilly’s Trout Shop” became known nationally and internationally. With this reputation the business prospered, grossing over $600,000 in 1981. In January of 1982, Bud Lilly and his family sold the shop to two couples, Fred and Clara Terwilliger and James and Deborah Bonnett, for $275,000, allocated as follows:

1. Inventory $93,767.00

2. Fixtures and Physical Assets $30,539.10

3. Covenants not to compete $ 5,000.00

4. Guide deposits $ 200.00

5. Accounts receivable $ 493.90

6. Goodwill, consisting of Bud Lilly’s Trout Shop, all guide licenses, all outfitters’ licenses, all special use permits for the State of Montana, State of Idaho and Yellowstone National Park and the 1982 mailing list $ 145.000.00

TOTAL $ 275.000.00

Each couple contributed $25,000 for a total down payment of $50,000. The balance of the purchase price of $225,000 plus interest at the rate of 12% per annum was to be paid over a twenty-year period in monthly installments of $2,477.52. An addendum to the contract raised the monthly payments to $2,599.62 to account for the interest accrued from the date the parties entered the agreement to the date of the first payment. The Terwilligers and Bonnetts executed a promissory note for the balance of the contract along with a security agreement and financing statements. The financing statements were filed with the Secretary of State and subsequently the statements were continued.

Within a few months, the Terwilligers and Bonnetts experienced management differences. In October 1982, the Terwilligers bought out the Bonnetts’ interest in the business for $34,100. James Bonnett testified that the decision to sell out was purely monetary because the business could not support both the Bonnetts and Terwilligers. At the time that the Terwilligers bought them out, the Bonnetts attempted to obtain a release of liability from Lilly. Lilly refused to grant the Bonnetts a release from liability without a pledge by the Terwilligers of additional collateral or provision of an alternative means of securing the unpaid balance on the promissory note.

Terwilligers stopped making payments in the fall of 1986. Lilly sent Notice of Default on December 9,1986 and Notice of Acceleration on January 27,1987 to both the Bonnetts and Terwilligers. Additionally Bud’s son, Michael Lilly, a Montana attorney, wrote the Bonnetts a letter on February 2, 1987 stating that Fred Terwilliger had not responded to either notice and reminding the Bonnetts they had not been released from their obligation to Bud Lilly.

Bud Lilly took the business back in March, 1987. On March 30, 1987, Lilly sent a Notice of Repossession to both couples, informing them that a sale of “inventory, fixtures, and equipment” to James Criner for $60,000 was contemplated. Neither party made objection to the sale. However, the notice made no mention of the sale of the name “Bud Lilly’s Trout Shop, Inc.,” the goodwill, the covenant not to compete, the mailing list, and the outfitter’s and guide’s licenses. Lilly sold the business to Criner for $60,000. Lilly then filed a complaint on May 26, 1987 in an effort to collect the amount remaining unpaid by the Bonnetts’ and Terwilligers’ breach of contract. The defendants answered, asserting as an affirmative defense that Lilly’s sale to Criner was commercially unreasonable because proper notice was not given that all assets would be sold, and Lilly was therefore not entitled to a deficiency judgment.

Trial was had before Judge Davis, sitting without a jury. The Terwilligers, who filed for relief under Chapter 7 of the U.S. Bankruptcy Code, were dismissed from the suit by stipulation. The trial court found that Lilly’s sale to Criner was commercially reasonable although flawed by a procedural technicality of proper notice. The trial court concluded Lilly was entitled to a judgment of $217,000 less an offset of $145,000 for the value of the business’ goodwill, for an aggregate judgment of $72,000 with interest.

Defendants James and Deborah Bonnett now appeal from this judgment.

Issue 1: Did the trial court err in concluding that the notice of repossession was defective?

Lilly, in accordance with the terms of the sales agreement, sent Notice of Default to both the Bonnetts and Terwilligers after they missed two monthly payments in the fall of 1986. When neither of the buyers cured the default, Lilly, again according to terms of the agreement, sent them both a Notice of Acceleration which provided the Terwilligers and Bonnetts fifteen days to pay the entire balance owing of $220,700.85. Receiving no response to either the Notice of Default or the Notice of Acceleration, Lilly finally sent each buyer a Notice of Repossession which stated:

“PLEASE TAKE NOTICE and you are hereby notified that on the 21st day of March, 1987, the undersigned took possession of all inventory, fixtures and equipment conveyed by that certain Sales Agreement dated the 30th day of January, 1982, wherein The Trout Shop, Inc. is named as seller and you are named as buyer, and pursuant to Section 30-9-502 MCA.
“The sale of said inventory, fixtures, and equipment is contemplated by the undersigned pursuant to Section 30-9-504 MCA. James Krinner [sic] has offered to purchase said property for the sum of $60,000.00. You are requested to notify the undersigned’s counsel, Michael J. Lilly, at 222 East Main Street, Suite 301, Bozeman, Montana, 59715, of your objection to said purchase of inventory, fixtures and equipment within five (5) days of the date of this notice.
“DATED this 30th day of March, 1987.
7s__”
“ WALEN E LILLY’

The Bonnetts contend that they made no objection to the proposed sale because the Notice of Repossession made no mention of the proposed sale to Criner of the covenant not to compete, the goodwill, the name “Bud Lilly’s Trout Shop, Inc.,” licenses, and mailing list. The notice advised only that Lilly contemplated a sale of the “inventory, fixtures and equipment” for $60,000.00.

The trial court found that:

“Lilly made little or no effort to find a buyer other than Criner, but he advised Bonnett as to that potential, e.g., a sale of only the ‘inventory, fixtures and equipment.’ There was no evidence that Bonnett would have objected to the proposed sale as being commercially unreasonable, or any inquiry as to what was to be done with the principal asset — the goodwill, valued in 1982 by both seller and buyers, at $145,000!! Bonnett knew of his potential liability for a deficiency. It was incumbent upon him to at the very least make an inquiry about a $145,000 asset.”

The Uniform Commercial Code addresses notice requirements for a sale at § 30-9-504(3)(a), MCA:

“Disposition of the collateral may be by public or private proceedings . . . reasonable notification of the time after which any private sale or other intended disposition is to be made shall be sent by the seemed party to the debtor.”

This Court, quoting from the official U.C.C. comment to § 30-9-504, MCA, previously recognized that the purpose of the notice requirement is to ensure that “[pjersons entitled to receive will have sufficient time to take appropriate steps to protect their interests by taking part in the sale or other disposition if they so desire.” Wippert v. Blackfeet Tribe (1985), 215 Mont. 85, 89, 695 P.2d 461, 464.

The notice that Lilly sent to the Bonnetts met all the requirements of § 30-9-504, MCA, giving the Bonnetts reasonable notification of the time after which the private sale was to have been made. In fact, the notice went beyond the statutory requirements by including the name of the prospective buyer and the intended selling price. Moreover, the notice met its stated purpose, that is, to give the Bonnetts an opportunity to protect their interests by taking part in the sale if they so desired. As the trial court noted, Bonnetts knew of their potential liability for a deficiency and should have inquired about the $145,000 goodwill asset when they received the Notice of Repossession.

The promissory note executed by the Bonnetts and Terwilligers was secured by a security agreement. The security agreement listed inventory, fixtures and equipment as the collateral pledged. The financing statement filed with the Secretary of State listed the covered collateral as “All inventory and fixtures, and additions thereto.” Nowhere in either the security agreement or financing statement were the licenses, covenant not to compete, mailing list, goodwill, or the name “Bud Lilly’s Trout Shop” listed as collateral.

The trial court agreed that the licenses, covenant not to compete, mailing list, goodwill and name were not specifically secured by the security agreement and financing statement. The trial court did find, however, that such property was secured collateral under the Sales Agreement.

The Uniform Commercial Code specifies the conditions necessary to a security interest:

“(1)... a security interest is not enforceable against the debtor or third parties with respect to the collateral and does not attach unless:
“(a) the collateral is in the possession of the secured party pursuant to agreement or the debtor has signed a security agreement which contains a description of the collateral. . .
“(b) value has been given; and
“(c) the debtor has rights in the collateral.”

Section 30-9-203(1), MCA.

Because the Sales Agreement does not contain a description of the licenses, covenant not to compete, mailing list, goodwill, or name as collateral it fails to meet the requirements of subsection (l)(a), of § 30-9-203, MCA, for creating a security interest. A provision in the Sales Agreement clearly identifies Lilly’s security as the seller:

“9. Seller’s Security. It is understood and agreed that Buyer shall execute a promissory note and Security Agreement in favor of Seller and its assigns for the unpaid balance of the purchase price. Said Security Agreement shall designate the inventory and fixtures, and any additions thereto, as collateral for the unpaid purchase price . . .” (Emphasis added.)

The licenses, covenant not to compete, mailing list, goodwill, and name “Bud Lilly’s Trout Shop” are not collateral -under the U.C. C. and are, therefore, not subject to the notice requirements of § 30-9-504(3)(a), MCA.

We find that the Notice of Repossession was not defective. The trial court’s finding that the notice was flawed was erroneous. In light of the fact that Lilly does not contest the trial court’s decision to effect an adjustment by way of a setoff, the error was harmless.

Issue 2: Did the trial court err in concluding that the sale of repossessed collateral was commercially unreasonable?

The trial court found that the Bonnetts’ evidence that the Criner sale was not commercially reasonable was not persuasive. The Bonnetts presented two owners of fly fishing businesses in West Yellowstone who gave their expert opinions that the Bud Lilly Trout Shop was worth more than the $60,000 Criner paid for it. Lilly presented testimony from his son, Gregory, who operates a similar business in Bozeman. Gregory testified that although he had earlier expressed an interest in the business, at the time his father repossessed Bud Lilly’s Trout Shop it was in such a state that Gregory thought $60,000 was too much to pay. The trial court noted neither of Bonnetts’ experts knew the distressed state of Bud Lilly’s Trout Shop in April, 1987; only Lilly and Criner knew that in less than six years the business, through bad management and nonmanagement, had declined from a $600,000 annual gross income business to a point where the buyers could not even make relatively modest payments. The court found that under the circumstances the sale to Criner was commercially reasonable.

Lilly, as the secured party, carries the burden of proving that his disposition of the collateral was commercially reasonable. Bank of Sheridan v. Devers (1985), 217 Mont. 173, 176, 702 P.2d 1388, 1390 (quoting Farmers State Bank v. Mobile Homes Unlimited (1979), 181 Mont. 342, 347, 593 P.2d 734, 737). However, this Court will not disturb the findings of the trial court unless such findings are “clearly erroneous.” Rule 52, M.R.Civ.P.; Farmers State Bank, at 350, 593 P.2d at 738.

Bonnetts argue that the sale was commercially unreasonable because Lilly held a private rather than a public sale, Lilly did not advertise the sale or solicit bids, Lilly did not have the business appraised, and the $60,000 sale price was inadequate. Bonnetts were apprised of the private sale, including the identity of the buyer and the purchase price, well in advance of the sale. Bonnetts made no objection to the private sale after receiving the notice.

The U.C.C. dictates that every aspect of the disposition of collateral, including the method, manner, time, place and terms must be commercially reasonable. Section 30-9-504(3), MCA. The fact that a better price could have been obtained by a sale at a different time or in a different method does not in itself establish that the sale was commercially unreasonable. Section 30-9-507(2), MCA.

This Court has previously interpreted these two sections to mean that the “reasonableness of the sale is not determined by price but the manner in which the sale was conducted. In other words if the sale is considered commercially reasonable, then the price is reasonable.” Dulan v. Montana Nat’l Bank of Roundup (1983), 203 Mont. 177, 185, 661 P.2d 28, 32.

After some discussion the Dulan Court went on to state that a discrepancy in price can nonetheless be considered to be within the parameters of § 30-9-504(3), MCA, and that the burden of proving that the price received was less than the fair market value of the collateral falls on the complaining party. Dulan at 186, 661 P.2d at 32.

The evidence of the complaining party herein falls short of its burden. The Bonnetts were advised of the private sale yet made no objection. As to Lilly’s failure to advertise, solicit bids, or secure an appraisal, testimony indicated that because the fishing season was imminent, it was important for Lilly to act quickly. Finally, as to the price Lilly received for the business, as the trial court noted, the state of business was such that the Terwilligers could not even make relatively modest payments. In light of this evidence, the $60,000 price Criner paid is reasonable.

We agree with the trial court that Bonnetts’ evidence that the Criner sale was not commercially reasonable was not persuasive. We hold that the Bonnetts did not prove that the sale was conducted in a commercially unreasonable manner pursuant to § 30-9-504(3), MCA. There is substantial evidence to support the trial court’s conclusion that Bonnett did not meet his burden of establishing that Bud Lilly’s Trout Shop at the time of sale to Criner was worth more than the price for which it was sold.

Issue 3: Did the trial court err in calculating the amount to which Lilly was entitled by judgment.

The trial court concluded that the amou of deficiency judgment should be determined as follows

Amount due on unpaid portion of promissory note: $ 217,000

Less offset for price of goodwill: ($145.000)

Total amount of defciency judgement: $ 72,000

Bonnetts take issue with the trial court’s calculations in two respects. First, Bonnetts assert that the amount remaining unpaid on the promissory note as reflected in the escrow ledger is $214,000 rather than $217,000. Secondly, Bonnetts suggest that the court failed to credit them for the amount Lilly received for resale of the assets to Criner.

Lilly notes that he does not agree with the offset for goodwill, but elected not to appeal that issue .

Amount of the deficiency judgment appears to have been arrived at as follows:

Amount due 01-27-87 $220,700.85

Amount Due on 04-13-87 (date of first Criner payment) (108 days) 220,700.85 + (108 /365) ($220,700.85) (.12) $228,573.24

Credit for First Criner Payment ($20,000.00) (20.000.001

Amount Due on 10-01-87 (date of second Criner payment) (170days) $208,573.24 + (170/365) ($208,573.24) (.12) 220,230.48

Credit for Second Criner Payment ($10,000.00) (10.000.00)

Amount Due on 10-01-88 (date of third Criner payment) (365 days) $210,230.48 + (365/365) ($210,230.48) (.12) 235.458.13

Credit for Third Criner Payment ($30,000.00) (30.000.00)

Total Due After Third & Final Criner Payment 205.458.13

Total Due on 04-21-89 (171 days) $205,458.13 + (171/365) ($205,458.13) (.12) 217,088.81

Thus, the price paid by Criner has been credited and $217,000 is the correct starting figure. We find no error in the trial court’s calculations.

We affirm.

JUSTICES McDONOUGH, SHEEHY, WEBER and BARZ concur.


author: JUSTICE BARZ

text:
    GAR L. AMUNDSON, Plaintiff and Respondent, v. RICHARD A. WORTMAN, Defendant and Appellant.
    No. 90-059.
    Submitted on Briefs May 30, 1990.
    Decided July 30, 1990.
    796 P.2d 205.
    Richard A. Wortman, Bozeman, for defendant and appellant.
    Richard Nellen, Drysdale, McLean, Nellen & Nellen; Bozeman, for plaintiff and respondent.
   JUSTICE BARZ

delivered the Opinion of the Court.

Richard A. Wortman, defendant, appeals the decision of the District Court of the Eighteenth Judicial District, Gallatin County, finding that the homestead exemption filed by Wortman on September 6, 1989 was invalid as a result of the District Court’s October 11, 1988 order. We affirm.

On April 7, 1987, Gar L. Amundson and Richard A. Wortman entered into an agreement whereby Wortman agreed to purchase from Amundson a business known as “Direct School Marketing Program.” The agreement specifically provided that:

“1. The selling price shall be eighteen thousand dollars ($18,000) to be paid as follows: two thousand dollars ($2,000) down payment on this date receipt of which is hereby acknowledged; and eight thousand dollars ($8,000) to be paid on the 15th day of September, 1987, and eight thousand dollars ($8,000) together with simple interest thereon at a rate of six percent (6%) on the 15th day of September, 1988.”

Wortman paid the two thousand dollars down payment on April 7, 1987, but failed to pay the eight thousand dollars due on September 15, 1987 despite Amundson’s written demand for the money. On October 21,1987, Amundson filed a complaint, requesting that Wort-man pay all monies owed under the April 7,1987 agreement and also requesting reasonable attorney fees and costs as provided under the agreement.

After a bench trial, the District Court entered judgment for Amundson on August 17, 1988, finding that Wortman breached his part of the agreement. The District Court also found that under the agreement, Amundson should receive reasonable attorney fees and costs. Wortman then filed a Notice of Appeal. On August 31, 1988, Amundson filed a petition requiring Wortman to file a bond or provide other security to insure payment of costs on appeal pursuant to Rule 6(b), M.R.App.P. On September 7, 1988, Wortman filed a motion to stay execution and approve security other than a supersedeas bond. The District Court stayed the execution and accepted the following real estate owned by Wortman as security:

“Lot 1 in Block 7 of Figgins Addition (Fourth Phase) to Bozeman, Montana, according to the official plat thereof on file and of record in the office of the County Clerk and Recorder in and for Gallatin County, Montana.”

In his motion to stay execution, Wortman stated that “[tjhis motion is made on the grounds and for the reason that said real estate as hereinabove described is valued at in excess of the sum of $85,000.00, and is free of all liens and encumbrances . . .”

In its October 11,1988 order approving the real estate as security, the court stated:

“IT IS FURTHER HEREBY ORDERED that [Wortman] upon acceptance of said real estate as security other than supersedeas bond will not permit any liens and/or incumbrances to be placed as against said real estate, pending appeal to the Montana Supreme Court.
“IT IS FURTHER HEREBY ORDERED that [Wortman] will not file as against said real estate as hereinabove specifically described any ‘homestead exemption’ or other similar type exemption which will in any way diminish the value of said real estate as security on appeal.”

On July 18, 1989, the Montana Supreme Court affirmed the District Court’s judgment but remanded for further proceedings as to attorney fees. See Amundson v. Wortman (1989), 238 Mont. 207, 777 P.2d 315. Wortman then filed a Declaration of Homestead in the office of the Clerk and Recorder of Gallatin County on September 6, 1989. On November 16, 1989, a Writ of Execution was issued by the Clerk of the District Court of the Eighteenth Judicial District. The writ ordered the sheriff’s department to satisfy the judgment from the real property that Wortman had requested to be used as security and upon which Wortman had then filed a homestead exemption.

On November 30, 1989, Amundson filed a petition to invalidate Wortman’s homestead exemption. After a hearing, the District Court determined that the homestead exemption was invalid as far as the August 17, 1988 judgment was concerned and ordered the sheriff’s sale to go forward. On December 28,1989, the property on which the homestead exemption was filed was sold at a sheriff’s sale after the proper notice and procedures were followed. Wortman, appearing pro se, then filed a Notice of Appeal to this Court.

We determine that the essential issue raised on appeal is whether Wortman could file a homestead exemption after the District Court specifically ordered Wortman not to file a homestead exemption or other similar type exemption which would in any way diminish the value of the real property on appeal because of Wortman’s request to use the property in question as security for the appeal pursuant to Rule 7(b), M.R.App.P.

Wortman argues that under the 1972 Montana Constitution he has a constitutional right to a homestead exemption and therefore the District Court erred when it ordered that Wortman could not avail himself of the homestead exemption in the October 11, 1988 order and then subsequently found Wortman’s declaration of homestead invalid. The 1972 Montana Constitution provides that “[t]he Legislature shall enact liberal homestead exemption laws.” Mont. Const., Art. XIII, § 5. The establishment of the homestead and their exemptions, executions and abandonment are addressed in §§ 70-32-101 through -303, MCA.

In the present case, Wortman filed a motion with the District Court requesting the court to allow him to post security, as required by Rule 7(b), M.R.App.P., other than a supersedeas bond. In particular, Wort-man specifically requested that he use his real estate property. At the October 3, 1988 hearing, Wortman’s attorney stated that “Mr. Wort-man would abide by whatever order this Court issues with respect to keeping the property free and clear of all liens and encumbrances pending the appeal in this matter.” The court therefore granted his motion and allowed him to post his real estate property as security, with the corresponding order that Wortman would not permit any liens or incumbrances to be placed on the property nor would he file a homestead exemption on the property. Wortman was represented by counsel throughout these proceedings. Wortman nonetheless filed a homestead exemption on the real property in question on September 6, 1989.

In the present case, Amundson petitioned the District Court to invalidate Wortman’s homestead exemption in light of the previous October 11,1988 order. Although none of the provisions enumerated in § 70-32-202, MCA, are applicable to the present set of facts, Wortman nonetheless specifically waived any right he had to a homestead exemption.

We hold that the District Court properly invalidated Wortman’s homestead exemption as it applied to the August 17, 1988 judgment lien. Furthermore, Amundson requests that this Court remand this case to the District Court for the determination of attorney fees and costs as a result of this appeal. The underlying contract states that “[i]n the event either party is required to bring suit for any reason under this Agreement, the prevailing party in such litigation shall be entitled to full recovery of all attorney’s fees, costs and expenses incurred as a consequence of such suit.” In light of the underlying agreement, we remand the case to the District Court for a determination of the attorney fees and costs that were incurred by Amundson as a result of this appeal.

Affirmed and remanded.

JUSTICES HUNT, SHEEHY, McDONOUGH and WEBER concur.


author: JUSTICE McDONOUGH

text:
    THE MONTANA POWER COMPANY, a Montana Corporation, Plaintiff and Respondent, v. ROBERTA WAX, as Personal Representative of the Estate of Theodore Solomon, deceased, Roberta Wax, as Guardian of Roseabelle Dix Solomon, also known as Rose Solomon, incompetent; Barbara Wallace; and Clayton E. Devoe, Defendants and Appellants.
    No. 90-027.
    Submitted on Briefs June 14, 1990.
    Decided Aug. 6, 1990.
    796 P.2d 565.

      George C. DeVoe, Missoula, for defendants and appellants.
    William Evan Jones, Paul C. Meismer, Garlington, Lohn & Robinson, Missoula, for plaintiff and respondent.
   JUSTICE McDONOUGH

delivered the Opinion of the Court.

This is an appeal from a condemnation proceeding in the Fourth Judicial District, Ravalli County. Following the order of condemnation of a powerline easement, a hearing was held in order to determine compensation due the appellant, Clayton E. DeVoe. The District Court awarded damages in the sum of $5,000.00. We affirm.

The sole issue on appeal is:

Whether the District Court erred in striking and limiting certain witness testimony presented by the appellant.

The respondent, Montana Power Company (MPC) sought to construct a three wire electrical transmission line from a substation in Missoula, Montana to a substation at Hamilton Heights in Ravalli County, Montana. This proposed powerline was to run immediately adjacent to an existing powerline which ran along the same route. In order to construct the powerline, MPC needed to obtain an easement through private property. Suit was brought to acquire the necessary easement. The District Court issued findings of fact and the Preliminary Condemnation Order, establishing the necessity for the taking.

The appellant, Clayton E. DeVoe (DeVoe), filed an answer seeking compensation in excess of $56,000.00. MPC submitted an Offer of Entry of Judgment in the sum of $5,000.00. The parties failed to reach an agreement concerning fair compensation due Mr. DeVoe and consequently a non-jury trial was set.

Before trial MPC submitted interrogatories seeking information concerning the witnesses that DeVoe was planning to call. These interrogatories requested information concerning identification of all expert witnesses expected to be called, the substance of their testimony and a summary of the grounds for their opinion.

The interrogatories were answered. At trial DeVoe called five witnesses on his behalf, including himself, Helen Hudson Rude, a local realtor, and Wayne Stephens a local landowner who had experience as a real estate developer, owner and supervisor of appraisers.

As stated above, Ms. Rude is a local realtor who has lived in the Missoula area for a substantial number of years. She testified that she had considerable experience conducting market analysis of properties for prospective purchasers, as well as some appraising experience. For purposes of this trial, she did not prepare any type of appraisal showing a before-taking and after-taking evaluation of DeVoe’s property, however. When she attempted to testify concerning just compensation, MPC objected, and argued that DeVoe failed to provide foundational information on grounds which would support her opinion. The objection was sustained and Ms. Rude’s testimony on this issue was stricken from the record.

After Ms. Rude testified, Wayne Stephens was called. Mr. Stephens was personally acquainted with the property due to the fact that he once considered making an offer on separate parcels of the land for residential development. When Mr. Stephens attempted to offer testimony concerning value of the land, MPC once again objected on the grounds that a proper foundation was not laid in the interrogatories concerning his ability to testify on value and just compensation. This objection was also sustained.

Following trial, the District Court concluded that DeVoe was entitled to just compensation in the amount of $5,000.00, plus interest. This appeal followed.

DeVoe maintains that the District Court erred in striking Ms. Rude’s testimony and in disallowing the testimony of Mr. Stephens. According to DeVoe, both of these witnesses were familiar with the subject property and therefore were entitled to render opinions concerning the market value of the property, as either lay or expert witnesses. DeVoe’s argument is not valid when applied to the facts now before us.

MPC’s objection to the testimony of Stephens and Rude was primarily premised on the fact that DeVoe did not provide any foundational information in the interrogatories which would provide the basis of their opinions. The trial court sustained this objection. In making this ruling the District Court did not abuse its discretion and the answers provided by DeVoe read as follows:

“INTERROGATORY NO. 1: Identify each expert from who defendant or anyone acting on defendant’s behalf has requested any advice, opinion, study, or report regarding the subject property since a time beginning 3 years prior to the filing of the complaint herein and continuing up to the present time including, but not limited to, surveyors, appraisers, real estate people, bankers or other lenders, developers, government officials, and experts whom defendant expects to call as witnesses at trial.
“ANSWER NO. 1: In addition to himself:
“2) Helen M. Hudson, of Stevensville, Montana, a real estate broker in the area who lived adjacent to the subject property and is familiar with the sale of comparable properties in the area.
“3) Wayne Stephens, of Missoula, Montana, formerly the director of planning support for the Department of Interior, Bureau of Indian Affairs; Superintendent of the Standing Rock Indian Reservation in South Dakota, and a real estate purchaser for his own account, who has purchased, developed, and sold a number of similar properties.
* * *
“INTERROGATORY NO. 2: For each person identified in Interrogatory No. 1, state the nature and subject matter of the advice, opinion, study, or report requested, including whether the person was retained or specially employed in anticipation of litigation or preparation for trial and state the date of the request.
* * *
“2) Helen M. Hudson will render opinions as to the highest and best use of the subject property, the value of the property and the diminution of value of the properties not actually taken by eminent domain.
“3) Wayne Stephens will render opinions on the same subjects as Helen M. Hudson.
“INTERROGATORY NO. 3: Name each person identified in the answer to Interrogatory No. 1 whom the defendant expects to call as an expert witness at trial, and ‘state the subject matter on which the expert is expected to testify, and * * * the substance of the facts and opinions to which the expert is expected to testify and a summary of the grounds for each opinion.’Rule 26(b)(4)(A). For expert appraisers, state the conclusions of value, methods of appraisal used, and include a complete description of improvements, type of property, zoning at the time of sale, description of metes and bounds, and street address. Note: Each person not named in the answer to this Interrogatory who was named in the answer to Interrogatory No. 1 will be considered as an expert who is not expected to be called as a witness at trial.
“ANSWER NO. 3: All of the experts and persons named in answer to interrogatory No. 1 are expected to testify at trial. Their general subject will be as stated in the forgoing answers. The substance of the anticipated testimony is that the highest and best use of the property affected was rural residential tracts, that the value of the property actually taken was approximately $1,000.00 per acre and that the diminution in value of the affected property not actually taken was at least one-half of the value of the property prior to construction of the subject power line.”

As is evident from these interrogatories, MPC sought information concerning the identity of witnesses and the basis for their opinions, which would be rendered at trial. The basis for the opinions was not set forth in the answers supplied by DeVoe. From the answers given there is no indication of how these witnesses arrived at their conclusion that DeVoe suffered a diminution in the value of his property as a result of the power line. MPC maintains in its brief, and we agree, that this failure severely limited its ability to cross-examine DeVoe’s witnesses.

Normally, the determination regarding the ability of a witness to testify is in the sound discretion of the trial court. State Highway Comm’n v. Bennett (1973), 162 Mont. 386, 513 P.2d 5. Its determination will not be disturbed on appeal unless the appellant shows an abuse of discretion. State v. Smith (1986), 220 Mont. 364, 715 P.2d 1301. This policy is especially applicable in cases of this kind, where it may be necessary to prevent the abuse of surprise on the part of the proponent and to prevent the opponent from lying in wait to object at time of trial.

DeVoe has not come forth with any facts which make such a showing of abuse. The answers to the interrogatories clearly do not reveal any basis for the witnesses’ valuation of just compensation. Nor do they offer any insight into how these witnesses would arrive at before-taking and after-taking valuation of the properties. The trial court could therefore exclude the testimony without abusing its discretion. The ruling of the District Court is therefore affirmed.

CHIEF JUSTICE TURNAGE and JUSTICES HARRISON, SHEEHY and HUNT concur.


author: CHIEF JUSTICE TURNAGE

text:
    MICHAEL WESTFALL, Plaintiff and Respondent, v. RODNEY E. ANDERSON and Jerry South, Defendants and Appellants.
    No. 90-074.
    Submitted on Briefs June 7, 1990.
    Decided July 30, 1990.
    795 P.2d 976.

      Larry Jent, McKinley Anderson, Bozeman, for defendants and appellants.
    Michael J. Lilly, Berg, Lilly, Stokes, Andriolo, Tollefsen & Schraudner, Bozeman, for plaintiff and respondent.
   CHIEF JUSTICE TURNAGE

delivered the Opinion of the Court.

The District Court for the Eighteenth Judicial District, Gallatin County, entered judgment for plaintiff Westfall in this suit for repayment of capital contributions to a dissolved partnership. Defendants South and Anderson appeal. We affirm.

The issue is whether the District Court erred in ordering South and Anderson to repay Westfall’s capital contribution without first deducting partnership liabilities.

In April 1984, Westfall, Anderson, and South formed a partnership, by oral agreement, for the purpose of developing a subdivision on certain real property in Gallatin County, Montana. The partnership entered a contract to purchase the property for $125,000. Westfall and South each contributed $5,100 toward a down payment on the land. Anderson’s contribution was to be his efforts at selling lots for the partnership.

The partners made improvements to the property including foundations on several lots and a well and a septic system on one lot. Westfall and South each paid half the costs of improvements.

In the fall of 1984, an understanding was reached that Westfall would withdraw from the partnership. Beginning on September 28, 1984, all checks for the partnership were drawn on a bank account entitled “South and Anderson Builders.” The signatures of both South and Anderson appeared on each check; Westfall signed none. On December 18, 1984, Westfall deeded his interest in the partnership’s land to South and Anderson.

Almost four years later, Westfall filed this action to recover his capital investment in the partnership. At trial, Westfall testified that when he deeded his interest in the partnership property to South and Anderson, they agreed to reimburse him for his down payment on the land and for the costs he paid for improvements to the property. South and Anderson, on the other hand, testified that no such agreement had been made and that Westfall should share responsibility for debts incurred for improvements on the land up until December 18, 1984. They contended that Westfall owed them money. The court, sitting without a jury, found for Westfall and entered judgment in the amount of $9,576.80 plus costs.

Did the District Court err in ordering South and Anderson to repay Westfall’s capital contribution without first deducting partnership liabilities?

South and Anderson initially argue that the standard of review in an equitable proceeding such as this one is de novo review, under § 3-2-204(5), MCA. That statute provides that in an equitable proceeding, this Court must review all questions of fact arising upon the evidence presented in the record. This Court has recognized that review of findings of fact in an equitable case must comply with not only § 3-2-204(5), MCA, but also with Rule 52(a), M.R.Civ.P., which requires that findings of fact be upheld unless they are clearly erroneous. Rase v. Castle Mountain Ranch, Inc. (Mont. 1981), 631 P.2d 680, 684, 38 St.Rep. 992, 996. In equity cases, where the issues are close, a degree of deference will be accorded the findings of the trial court, which is in a better position to make decisions of fact. Rase, 631 P.2d at 684.

South and Anderson assert that the District Court erred in finding that the partnership was dissolved on or before September 28, 1984, when Westfall ceased partnership activities. They contend that the partnership was not dissolved until December 18, 1984, when Westfall deeded his interest in the property to them.

The District Court quoted § 35-10-601, MCA, which defines the dissolution of a partnership as the change caused by “any partner ceasing to be associated in the carrying on as distinguished from the winding up of the business.” The record supports the court’s finding that Westfall completely ceased participation in the partnership as of September 1984. We conclude that the court was correct in concluding that the dissolution of the partnership occurred in September 1984.

South and Anderson further argue that regardless of the date of dissolution of the partnership, each partner must contribute toward the partnership losses from his share of the profits. They rely upon § 35-10-401(1), MCA. That section states that

“[e]ach partner shall be repaid his contributions whether by way of capital or advances to the partnership property and share equally in the profits and surplus remaining after all liabilities, including those to partners, are satisfied and must contribute toward the losses, whether of capital or otherwise, sustained by the partnership according to his share in the profits.”

However, as Westfall points out, the introduction to the above subsection states that “[t]he rights and duties of the partners in relation to the partnership shall be determined, subject to any agreement between them, by the following rules:...” (Emphasis supplied.) Westfall testified that the partners had an agreement between them that South and Anderson would repay him for his capital investments to the partnership as of September 1984. Additionally, the record supports the finding that in September 1984 there were no creditors of the partnership other than the original mortgagor. We conclude that the court did not err in concluding that Westfall was entitled to $9,576.80, the amount of his contribution to the partnership.

Affirmed.

JUSTICES HARRISON, SHEEHY, BARZ and HUNT concur.