text:
    NORTHWEST FARM CREDIT SERVICES, ACA, Successor by Merger to INTERSTATE PRODUCTION CREDIT ASSOCIATION, Plaintiff and Respondent, v. DALE G. LUND and YVONNE LUND, Defendants and Appellants.
    No. 92-111.
    Submitted on Briefs August 27, 1992.
    Decided November 5, 1992.
    49 St.Rep. 910.
    255 Mont. 114.
    841 P.2d 490.

      For Defendants and Appellants: Mary L. Zemyan, Wolf Point.
    For Plaintiff and Respondent: A. Lance Tonn, Lucas & Monaghan, Miles City.
    For Amicus Curiae: D. Michael Eakin, Montana Legal Services Assn., Billings.
   JUSTICE HARRISON

delivered the Opinion of the Court.

This is an appeal from the District Court of the Seventeenth Judicial District, Valley County, the Honorable Leonard H. Langen presiding. Appellants Dale and Yvonne Lund (the Lunds) appeal from the Judgment, Decree of Foreclosure and Order of Sale entered against them by default on February 3, 1992. We affirm.

The issues are:

1. Do the provisions of Sec. 25-10-404, MCA, impose a duty on the clerk of court to inform parties that the statute exists?

2. Did the clerk’s failure to inform Dale Lund of the necessity of filing an affidavit in order to proceed in forma pauperis deny the Lunds their opportunity to defend?

3. Should the default judgment be set aside?

Respondent Northwest Farm Credit Services, ACA, (Northwest) is a lending corporation organized under the Federal Farm Loan Act. On April 5, 1990, Northwest loaned $99,923 to the Lunds for operating capital. This note was due and payable on November 1,1990. The Lunds executed a promissory note as evidence of this loan. On March 1, 1991, Northwest loaned $2,500 to the Lunds as operating capital to plant their crops. This note was due on demand. The Lunds executed a second promissory note as evidence of this loan.

As security for the repayment of these loans and previous loans, together with interest and any costs and attorney’s fees Northwest might incur, the Lunds executed and delivered a mortgage on certain lands located in Valley County. The mortgage was dated October, 12, 1988, but it secured future loans within a five year period from that date. As further security, the Lunds executed a security agreement pledging various items of personal property as collateral.

The Lunds failed to repay the promissory notes according to their terms, so on October 15, 1991, Northwest filed its Complaint to Foreclose Real Estate Mortgage and Security Agreement. The Lunds were served with the complaint on October 21, 1991. Dale Lund received help from an attorney, Mr. Martell, in drafting an answer, but Mr. Martell did not sign the answer. He did inform Dale Lund that he could ask the court to waive the filing fee but did not explain the procedure.

Dale Lund attempted to file his answer on November 12, 1991. He did not present the $100 filing fee. As a result, the clerk date-stamped the answer but did not file it. It is unclear from the record exactly what exchange occurred between Dale Lund and the clerk at that time. It appears Mr. Lund neither asked about the procedure for filing as a pauper under Sec. 25-10-404, MCA, nor did the clerk inform him of the procedure. On November 25, 1991, the clerk returned the answer along with a letter stating, “I am returning your Answer forthwith, as I have yet to receive $100.00 for filing the same. Upon receiving the fee, I will at that time file the same.”

On December 9, 1991, the clerk entered the Lunds’ default for failing to plead, answer, or otherwise defend. On January 15, 1992, Northwest filed its Motion for Entry of Judgment, Decree of Foreclosure and Order of Sale and for Award of Attorney’s Fees. Northwest also filed its Notice of Hearing and sent a copy of both documents to the Lunds. Northwest’s attorney, A. Lance Tonn, also enclosed a letter in which he urged the Lunds to seek legal counsel in this matter. Mr. Tonn also spoke with the Lands by telephone on January 30, and once again advised them to seek counsel. He also told them that he would agree to a continuance if the Lunds hired an attorney and wished to put some defenses before the court. The Lunds failed to enlist counsel, however, and the hearing proceeded on February 3, 1992.

At the hearing, Mr. Tonn offered evidence on the legal fees incurred by Northwest in prosecuting this action. The court allowed Mr. Lund to give a statement in which he basically raised his defenses to the initial complaint, although the court refused to reopen the case or accept evidence as to those defenses. Those defenses raised issues as to whether the Lunds had been credited with all their payments and whether they were authorized by Northwest to use proceeds from the sale of two items pledged as security. At best, those defenses, even if valid, would only have gone to reduce the amount the Lunds owed Northwest. Mr. Tonn testified, however, that the foreclosure action would still have proceeded. Even if the statements made by Dale Lund were true, the Lunds would still have been in default on their loans. At the close of the hearing, the Judge signed the Judgment, Decree of Foreclosure and Order of Sale. The court made it clear that Mr. Lund was to have an opportunity to ensure that his account was properly credited. Mr. Tonn assured the court that he would promptly ask that the judgment be amended if there was an error.

I

Do the provisions of Sec. 25-10-404, MCA, impose a duty on the clerk of court to inform parties that the statute exists?

The Lunds argue that Sec. 25-10-404, MCA, imposes a duty on the clerk of court to disclose its existence. That statute reads:

25-10-404. Poor persons not required to prepay fees. Any person, who will file an affidavit stating that he has a good cause of action or defense and that he is unable to pay the costs or procure security to secure the same, may commence and prosecute or defend an action in any of the courts and administrative tribunals of this state; then it is hereby made the duty of the officers of the courts and administrative tribunals to issue all writs and serve the same and perform all services in the action without demanding or receiving their fees in advance.

Although Dale Lund was aware that he could file his answer without paying the fee, it does not appear that he asked Mr. Martell or the clerk how to do so. The functions performed by the clerk must be demanded by law. See Platz v. Hamilton (1982), 201 Mont. 184, 653 P.2d 144; Anderson v. Hinman (1960), 138 Mont. 397, 357 P.2d 895. The only express duty found in this statute requires the clerk to perform all services requested once a party has filed the proper affidavit. This statute does not expressly impose a duty upon the clerk to disclose. Nor, as the Lunds admit, does any other statute impose a duty upon the clerk to disclose the existence of Sec. 25-10-404, MCA. The legislature has not imposed a duty upon clerks to disclose. Although we sympathize with the Lunds and others similarly situated, we are unwilling to impose such a duty. We hold that Sec. 25-10-404, MCA, does not impose a duty on the clerk.

II

Did the clerk’s failure to inform Dale Lund of the necessity of filing an affidavit in order to proceed in forma pauperis deny the Lund’s their opportunity to defend?

As we hold that the clerk had no duty to inform Dale Lund of the necessity of filing an affidavit in order to proceed in forma pauperis, her actions did not deny the Lunds their opportunity to defend. The Lunds must bear responsibility for not defending in this action. In Federal Land Bank of Spokane v. Gallatin County (1929), 84 Mont. 98, 274 P. 288, this Court held that ignorance of the law was no justification for relief from a default judgment. We followed that time-honored principle recently in Donovan v. Graff (1991), 248 Mont. 21, 808 P.2d 491. In Donovan, this Court found that the pro se plaintiffs were not entitled to relief from entry of summary judgment simply because they did not understand the law regarding the filing of papers in support of their motion for summary judgment.

Not only is ignorance of the law not an argument for lack of opportunity to defend, but it was the Lunds’ own inaction that caused them to lose their chance to defend. “Every person is bound to take care of his own rights, and to vindicate them in due season, and in proper order. This is a sound and salutary principle of law.” Federal Land Bank at 111, 274 P. at 291 (quoting Dunne v. Yund (1916), 52 Mont. 24, 33-34, 155 P. 273, 276). We also have a maxim of equity that “the law helps the vigilant before those who sleep on their rights.” Section 1-3-218, MCA. A review of the facts indicates that, aside from ignorance of the law, it was the Lunds’ own inaction that caused them to lose their chance to defend in this action.

As noted above, when the clerk failed to receive the filing fee from the Lunds, she sent a letter on November 25, 1991, stating, “I am returning your Answer forthwith, as I have yet to receive $100.00 for filing the same. Upon receiving the fee, I will at that time file the same.” The Lunds do not deny receiving the letter. However, they did not respond to the letter or take any other action. Two weeks later, on December 9, 1991, the clerk entered their default. The Lunds did nothing in response to the entry of default. When Mr. Tonn sent a copy of his motion and a Notice of Hearing to the Lunds on January 14, 1992, he included a letter in which he urged the Lunds to seek legal advice. Mr. Tonn stated (capitalized in original):

YOU ARE IN GRAVE JEOPARDY OF A JUDGMENT, DECREE OF FORECLOSURE AND ORDER OF SALE BEING ENTERED AGAINST YOU. IF YOUHAVE ANY QUESTIONS ABOUT YOUR LEGAL RIGHTS, YOU SHOULD IMMEDIATELY CONTACT AN ATTORNEY OF YOUR CHOOSING. ONCE AGAIN, IF YOU FAIL TO TAKE ANY ACTION, A JUDGMENT, DECREE OF FORECLOSURE AND ORDER OF SALE WILL BE ENTERED AGAINST YOU.

Although the Lunds received this letter, they did not respond or take any action.

Also, Mr. Tonn spoke with Dale Lund on the telephone on January 30,1992. During that conversation he encouraged Mr. Lund at least three times to contact an attorney because he felt the court world enter the decree. Mr. Tonn offered, however, to stipulate to a continuance if the Lunds hired an attorney and wished to put forth some defenses. Mr. Lund did nothing in response to this offer either. Under these facts, the Lunds were clearly aware of the realities of the situation and were given an opportunity to defend should they choose to. The Lunds, not the clerk, must bear responsibility for losing their opportunity to defend. We hold the clerk’s failure to inform the Lunds was not error.

Ill

Should the default judgment be set aside?

The Lunds neither requested the District Court to set aside the default under Rule 55(c), M.R.Civ.P., nor made a motion for relief from the default judgment under Rule 60(b), M.R.Civ.P. We need only determine whether the District Cotut acted properly when it initially entered the default judgment under Rule 55(b). See Johnson v. Murray (1982), 201 Mont. 495, 656 P.2d 170. Rule 55(b), M.R.Civ.P. governs the entry of a default judgment by the court. In pertinent part it reads:

Rule 55(b). Judgment. Judgment by default may be entered as follows:
(2) By the court. In all other cases the party entitled to a judgment by default shall apply to the court therefor;... If the party against whom judgment by default is sought has appeared in the action, the party (or, if appearing by representative, the party’s representative) shall be served with written notice of the application for judgment at least 3 days prior to the hearing on such application. If, in order to enable the court to enter judgment or to carry it into effect, it is necessary to take an account or to determine the amount of damages or to establish the truth of any averment by evidence or to make an investigation of any other matter, the court may conduct such hearings or order such references as it deems necessary and proper and shall accord a right of trial by jury to the parties when and as required by any statute of the state of Montana.

In this case, the clerk entered the Lunds’ default on December 9,1991. On January 15,1992, Mr. Tonn filed his Motion for Entry of Judgment, Decree of Foreclosure and Order of Sale and For Award of Attorney’s Fees. At that time he also sent proper notice to the Lunds that he would bring his motion on February 3,1992. This is far more advance notice than the three required days. The court held a hearing at which it took evidence from Mr. Tonn on the legal fees incurred by Northwest. It also gave Dale Lund an opportunity to make a statement. He did not dispute the amount of attorney’s fees and costs testified to by Mr. Tonn.

We note that in order to make a prima facie case for foreclosure Northwest was required to show three elements: (1) the debt of the borrowers; (2) nonpayment of the debt; and (3) present ownership of the debt by the lender. First National Bank of Albuquerque v. Quinta Land & Cattle Co. (1989), 238 Mont. 335, 339, 779 P.2d 48, 50. In support of its motion, Northwest submitted the affidavit of Wayne Erlenbush, an authorized agent of Northwest, as evidence of the foregoing. Based on this and a sufficient showing of attorney’s fees, the District Court entered a Judgment, Decree of Foreclosure, and Order of Sale in favor of Northwest.

We hold that the District Court properly entered a default judgment against the Lunds.

Affirmed.

JUSTICES HUNT, GRAY, McDONOUGH and WEBER concur.


source: Caselaw Access Project

author: JUSTICE GRAY

license: Public Domain

text:
    SAMUEL J. GRENZ, Claimant and Appellant, v. FIRE AND CASUALTY OF CONNECTICUT, Defendant and Respondent.
    No. 92-286.
    Submitted on Briefs October 22, 1992.
    Decided November 5, 1992.
    49 St.Rep. 917.
    255 Mont. 121.
    841 P.2d 494.
    For Appellant: Samuel J. Grenz, pro se, Stevensville.

      For Defendant and Respondent: Terry G. Spear, Matovich, Addy & Keller, Billings.
   JUSTICE GRAY

delivered the Opinion of the Court.

Claimant Samuel J. Grenz appeals from a May 14, 1992, order of the Workers’ Compensation Court dismissing with prejudice consolidated cause WCC No. 9202-6378 on res judicata grounds. We reverse.

Samuel Grenz injured his right elbow while working for the American Stud Company in Flathead County, Montana, on August 22,1984. That accident and related claims have resulted in eight prior appeals by Grenz to this Court, three in 1991 alone. In each case, we affirmed the district court’s or Workers’ Compensation Court’s action rejecting Grenz’s claims.

Subsequent to our last decision, Grenz filed new claims. These claims were consolidated as cause WCC No. 9202-6378. The claim specifically at issue here is Grenz’s assertion that his current degenerative arthritis was caused by work-related micro-trauma separate and apart from, and subsequent to, the August 1984 injury. Fire and Casualty of Connecticut (the insurer) denied liability on the basis that the claim was not filed timely and later moved the Workers’ Compensation Court to dismiss Grenz’s petition with prejudice.

The insurer asserted two arguments in its motion to dismiss: first, that the micro-trauma claim was barred by res judicata; and second, that the claims were barred because not filed timely. The Workers’ Compensation Court applied res judicata in granting the motion to dismiss. It did not address whether the claims are time barred.

The sole issue we address is whether the Workers’ Compensation Court erred in concluding that res judicata bars the micro-trauma claim.

The corut correctly set forth the four substantive criteria which must be met for the doctrine,of res judicata to apply: (1) the parties or their privies must be the same; (2) the subject matter of the action must be the same; (3) the issues must be the same and relate to the same subject matter; and (4) the capacities of the persons must be the same in reference to the subject matter and to the issues. Whirry v. Swanson (Mont. 1992), 836 P.2d 1227, 49 St.Rep. 764; Phelan v. Lee Blaine Enterprises (1986), 220 Mont. 296, 716 P.2d 601. Applying the elements to the claim before it, the Workers’ Compensation Corut determined that the lack of causal connection between claimant’s current condition and his work has been adjudicated previously and finally in Grenz v. Fire and Cas. of Connecticut (1991), 250 Mont. 373, 820 P.2d 742. We disagree.

The issue in Grenz was whether the Workers’ Compensation Court erred in ruling that claimant was not permanently totally disabled “as a result of his August 22, 1984, right elbow injury.” 250 Mont. at 378, 820 P.2d at 745. Our holding was specific:

After reviewing the entire record in this case, we hold that there is substantial credible evidence to support the Workers’ Compensation Court’s finding that the claimant failed to establish a causal connection between his current physical condition and his 1984 right elbow injury.... [A] causal connection between the claimant’s current physical problems and his 1984 right elbow injury is not present.

Id. at 380, 820 P.2d at 746 (emphasis added). On the basis of this lack of causal connection to the injury on which Grenz’s claim was grounded, we determined that “the Workers’ Compensation Court correctly concluded that the claimant is not permanently totally disabled.” Id. Thus, while Grenz finally and conclusively determined the lack of causal connection between the 1984 injury and claimant’s current condition, it did not address or determine the question of causal connection between his condition and any alleged compensable event or events occurring subsequent to that time.

Claimant did attempt to raise the micro-trauma issue on appeal in Grenz. The insurer argued that Grenz was asserting a different theory on appeal than was presented to the Workers’ Compensation Court. We agreed, stating “[o]ur review of the record shows that the claimant admitted at trial that the sole basis for his claim to benefits in that proceeding was his 1984 injury.” Id. at 379, 820 P.2d at 746 (emphasis added). We then refused to address the micro-trauma theory, stating:

[O]n appeal, we will consider only whether the Workers’ Compensation Court properly determined that the claimant failed to establish a causal connection between his current physical condition and his August 22, 1984, right elbow injury and, therefore, was not permanently totally disabled as a result of the 1984 injury.

Id. at 379-80, 820 P.2d at 746.

Grenz does not support the Workers’ Compensation Court’s determination that lack of causal connection between claimant’s current condition and any and all work-related events was established therein. The criteria necessary for application of res judicata not being met, we conclude that the Workers’ Compensation Court erred in dismissing Grenz’s micro-trauma claim on the basis of res judicata.

It is appropriate to note here that we sympathize with the frustration and expense these proceedings have caused all involved. Indeed, we previously have expressed our concern over the multiplicity of claimant’s proceedings and the overall “cost” of those proceedings to the finite resources of the judicial system. See Grenz v. Medical Management Northwest (1991), 250 Mont. 58, 64, 817 P.2d 1151, 1155. We reiterate that concern here; it has not lessened. We must be ever vigilant, however, in ensuring that human propensities to frustration over seemingly endless litigation do not result in less than the full and fair consideration on legal principles to which litigants are entitled in Montana’s courts.

Reversed and remanded with instructions to the Workers’ Compensation Court to proceed to a determination of the insurer’s alternative basis for its motion to dismiss, namely, that Grenz’s latest claims are time barred.

CHIEF JUSTICE TURNAGE, JUSTICES WEBER, HUNT and McDonough concur.


author: JUSTICE McDONOUGH JUSTICE WEBER

text:
    GREAT FALLS TRIBUNE COMPANY, INC., a Montana corporation, Petitioner and Appellant, v. GREAT FALLS PUBLIC SCHOOLS, BOARD OF TRUSTEES, CASCADE COUNTY, MONTANA, Respondent and Respondent.
    No. 91-474.
    Submitted May 21, 1992.
    Decided November 12, 1992.
    49 St.Rep. 944.
    255 Mont. 125.
    841 P.2d 502.

      For Petitioner and Appellant: Peter Michael Meloy argued, Meloy Law Firm, Helena.
    For Respondent: Leslie S. Waite, III argued, James, Gray & McCafferty, Great Falls.
    For Amicus Curiae: Kimberly A. Kradolfer, Assistant Attorney General, Agency Legal Services Bureau (Department of Labor & Industry, and Bruce W. Moerer, General Counsel, Montana School Boards Association, Helena.
   JUSTICE McDONOUGH

delivered the Opinion of the Court.

This is an appeal from an order and declaratory judgment of the Eighth Judicial District, Cascade County. The District Court ruled that the collective bargaining strategy exception to the open meeting law, Sec. 2-3-203(4), MCA, is constitutional. We reverse.

We address the following issue:

Is Sec. 2-3-203(4), MCA, the collective bargaining strategy exception to the open meeting law, constitutional under Article II, Section 9, of the Montana Constitution?

Appellant raises an additional issue regarding the District Corut’s refusal to compel discovery of the subject matter of closed meetings. Because we determine the collective bargaining strategy exception to be unconstitutional, the motion to compel need not be addressed.

This action stems from labor negotiations between the respondent, Great Falls Public Schools, Board of Trustees (the Board) and a bargaining unit of teacher’s aides and library aides. The Board engaged a fact-finder to conduct a hearing and make a report and recommendation to the Board in regard to the negotiations for a new bargaining agreement. After the fact-finder entered a written report, dated July 17, 1990, the Board issued an agenda in which it announced that on September 10,1990, a closed meeting would be held to discuss matters related to the fact-finder’s report. The appellant, Great Falls Tribune Company (the Tribune) contacted the Board and, pursuant to the open meeting law, requested the meeting be open. The Board agreed to conduct the meeting in open session.

At the September 10,1990 meeting, there were neither discussions nor deliberations with respect to the report. Instead, the Board moved that the report be rejected, a vote was taken and nothing further in regard to the report took place. There is a factual dispute regarding whether or not the Board conducted discussions relating to the fact-finder’s report outside of and prior to the September 10, 1990 meeting. The Tribune alleges that discussions between members of the Board were held privately, specifically to avoid the requirements of the open meeting law. The Board denies such meetings occurred, suggesting that any discussions that may have taken place prior to the September 10, 1990 meeting were not “meetings” within the meaning of the applicable law. Further, it argues that any meetings that may have taken place were entitled to be secret because they pertained to collective bargaining strategy.

The Tribune initially filed this action against the Board alleging violation of the open meeting laws and the “right to know” provision of Sec. 2-3-203, MCA, and Article II, Section 9, of the Montana Constitution. The Board filed a counterclaim requesting declaratory judgment that meetings held by the Board were lawful and proper and that the collective bargaining strategy exception to the open meeting law, Sec. 2-3-203(4), MCA, is constitutional. The court granted the Board’s motion for summary judgment on its counterclaim holding that the collective bargaining strategy exception is constitutional and was properly invoked. This appeal followed.

Section 2-3-203(4), MCA provides:

Meetings of public agencies and certain associations of public agencies to be open to the public - exceptions.
(4) However, a meeting may be closed to discuss a strategy to be followed with respect to collective bargaining or litigation when an open meeting would have a detrimental effect on the bargaining or litigating position of the public agency.

The constitutionality of a legislative enactment is prima facie presumed, and every intendment in its favor will be presumed, unless its unconstitutionality appears beyond a reasonable doubt. Fallon County v. State (1988), 231 Mont. 443, 445, 753 P.2d 338, 339.

The Tribune contends that the collective bargaining strategy exception is constitutionally infirm because it expands on the limited exception allowed under Article II, Section 9, of the Montana Constitution. Article II, Section 9, of the Montana Constitution provides:

Right to Enow. No person shall be deprived of the right to examine documents or to observe the deliberations of all public bodies or agencies of state government and its subdivisions, except in cases in which the demand of individual privacy clearly exceeds the merits of public disclosure.

Essentially, the Tribune argues that under Article II, Section 9, a public agency may close meetings for the sole purpose of protecting individual privacy. The Tribune contends, and we agree, that the instant case does not involve a matter of individual privacy but instead involves a public agency desiring privacy.

To determine the meaning of a constitutional provision we employ the same rules of construction employed to construe statutes. Keller v. Smith (1976), 170 Mont. 399, 553 P.2d 1002. The intent of the framers of a constitutional provision is controlling. The intent should be determined from the plain meaning of the words used. If that is possible, we apply no other means of interpretation. State v. Cardwell (1980), 187 Mont. 370, 609 P.2d 1230.

The Board argues that Article II, Section 9, of the Montana Constitution is ambiguous because the word “deliberations” is not clearly defined. The plain meaning of “deliberations” allegedly fails to clearly provide the intended scope of Article II, Section 9, and therefore, the Board argues, it is appropriate to resort to extrinsic aids and rules of construction. The dispositive issue is whether Article II, Section 9, requires a balancing of the right to know with other constitutional provisions and policy considerations or whether individual privacy is the only matter against which the right to know should be balanced.

We have clearly held that Article II, Section 9, of the Montana Constitution is unambiguous and capable of interpretation from the language of the provision alone. Great Falls Tribune v. District Court (1980), 186 Mont. 433, 437, 608 P.2d 116. Associated Press v. Board of Education (1991), 246 Mont. 386, 804 P.2d 376. In Associated Press, we noted Article II, Section 9, to be “unique, clear and unequivocal” and held that:

We are precluded, by general principles of constitutional construction, from resorting to extrinsic methods of interpretation.

Associated Press, 246 Mont. at 391, 804 P.2d at 379. We decline the Board’s invitation to revisit the already settled question of whether we will use extrinsic aids or rules of construction to interpret Article II, Section 9, of the Montana Constitution. We conclude that Article II, Section 9, is clear and unambiguous and does not require extrinsic aids or rules of construction to ascertain its intent that all meetings shall be open except when individual privacy matters are implicated.

Article II, Section 9, clearly instructs that when the demand for individual privacy exceeds the merits of public disclosure, the public’s right to know may be limited. The right to know provision was designed to provide the public information to enable citizens to determine the propriety of governmental actions. Mountain States v. Department of Pub. Serv. Reg. (1981), 194 Mont. 277, 285, 634 P.2d 181, 186-187.

The Board argues that Article II, Section 9, is subject to balancing against other constitutional provisions. Specifically, the Board argues Article X, Section 8, of the Montana Constitution, among others, provides school boards supervision and control of schools in their district. Supervision and control is argued to include a duty to bargain effectively and to spend monies in an effective and responsible manner. The Board urges this Court to make a policy determination whereby the duty to supervise the school district is balanced against the right to know provision of the Constitution.

We are not persuaded by the Board’s argument. First, Article II, Section 9, is not necessarily in conflict with the other constitutional provision as the Board asserts. The Board’s duty to supervise and control its district is not necessarily thwarted by opening its collective bargaining strategy sessions. Second, the Board fails to present a matter of individual privacy as mandated by the Constitution to create an exception to the open meeting law. Third, despite the mandate of power given the local boards to control their schools, Article X, Section 8, does not confer on school boards the power to act in violation of express guarantees contained in the Constitution. For example, school boards must comply with Article II, Section 13, the right of suffrage, etc. of the Constitution. The reasoning applied in Associated Press at 391, 804 P.2d at 379, applies here. We stated as follows:

First and foremost, is the realization that the Constitution is the supreme law of this State. Its mandate must be followed by each of the three branches of government. Therefore, while this Court is authorized to adopt rules governing the practice of law, it may not enact any rule which violates express guarantees contained in the Constitution.

Such reasoning would be applicable if we adopted a procedural rule which violated the due process clause.

The Board relies on Mountain States for the proposition that this Court has engaged in a balancing of competing rights and interests when interpreting Article II, Section 9. In Mountain States, we determined that a corporation’s trade secrets were a matter of individual privacy and that because trade secrets are constitutionally protected property rights, on balance, they exceeded the merits of full public disclosure. Our ruling in Mountain States recognized and fulfilled the mandate of the public’s right to know while simultaneously protecting Mountain States property/privacy interest in trade secrets. We interpreted the section relative to a specific matter as to whether it was encompassed within the meaning of the demands of individual privacy and to the extent the privacy would be protected. Here there is a lack of any individual privacy being involved.

We conclude that pursuant to the clear language of Article II, Section 9, meetings may be closed only when the need for individual privacy exceeds the merits of public disclosure. The collective bargaining strategy exception is an impermissible attempt by the Legislature to extend the grounds upon which a meeting may be closed. We conclude that Sec. 2-3-203(4), MCA, is unconstitutional and the District Court is reversed.

We have been presented with arguments as to the potential hazards of creating an uneven playing field in the statutorily provided collective bargaining arena. However, our decision is governed by the facts and issues of the case before us. The Legislature and the citizens of Montana have the plenary power to take actions necessary to alleviate or eliminate any problems which may be present, or level the playing field, all within the constraints of the Constitution. Reversed.

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

JUSTICE WEBER

dissenting.

Although it is carefully written, the majority opinion has stopped short in its failure to consider the impact of its ruling. The majority has concluded that all meetings of the Board of Trustees of the Great Falls public schools (School Board), must be open to the media, public and the unions with which the School Board is negotiating — even though the meetings cover the strategizing or planning for collective bargaining. The majority simply states that school board meetings may be closed only when the needs of individual privacy exceed the merits of public disclosure — which means that the exception can never apply to the School Board because it has no right of individual privacy. The majority concludes that Sec. 2-3-203(4), MCA, is unconstitutional as an impermissible attempt to extend the grounds upon which a school board meeting may be closed.

I strongly dissent from the majority opinion. It has effectively destroyed the use of collective bargaining between school boards and unions. Instead of holding with the majority, I suggest there is precedent for balancing the interests of the parties and reaching a conclusion that the statute is constitutional. The tragedy of the majority opinion is that it has sent the following messages:

(1) To the School Board: You must do your bargaining planning in public. If that destroys your ability to bargain, seek relief by new laws from the legislature or constitutional amendment from the people.
(2) To the unions and other in Great Falls: You may no longer effectively use collective bargaining to settle issues between your School Board and the various unions.
(3) To the taxpayers of Great Falls and all of Montana: While the annual budgeted labor cost of the Great Falls districts is approximately $24.8 million, this Court is not required to consider the impact on your labor costs which may result from the elimination of collective bargaining between unions and the school districts.

I conclude that this Court should consider the impact of its decision. I suggest that we should balance the two different constitutional provisions which apply in this case:

Article II, Section 9: Right to know. No person shall be deprived of the right ... to observe the deliberation of all public bodies or agencies of state government and its subdivisions, except in cases in which the demand of individual privacy clearly exceeds the merits of public disclosure.
Article X, Section 8: School district trustees. The supervision and control of schools in each school district shall be vested in a board of trustees to be elected as provided by law.

Considering the Article X requirement that a school board shall have supervision and control of schools, the legislature has enacted many laws with regard to the obligations of school district trustees to properly manage and expend funds. In addition, Montana has adopted a great number of statutes which establish the manner in which collective bargaining shall be used by school districts as well as other public employers. The controlling policy on such public employer collective bargaining laws is stated as follows:

Policy. In order to promote public business by removing certain recognized sources of strife and unrest, it is the policy of the state of Montana to encourage the practice and procedure of collective bargaining to arrive at friendly adjustment of all disputes between public employers and their employees.

Section 39-31-101, MCA. I conclude that the unplanned result of the majority opinion is the elimination of friendly adjustment of disputes by means of collective bargaining.

The collective bargaining statutes define public employers to include school districts and also specifically protect public employees in the right of self organization. Under Sec. 39-31-305, MCA, school districts are required to bargain collectively upon the following matters:

Duty to bargain collectively — good faith. (1) The public employer and the exclusive representative, through appropriate officials or their representatives, shall have the authority and the duty to bargain collectively. This duty extends to the obligation to bargain collectively in good faith as set forth in subsection (2) of this section.
(2) For the purpose of this chapter, to bargain collectively is the performance of the mutual obligation of the public employer... and the representatives of the exclusive representative to meet at reasonable times and negotiate in good faith with respect to wages, hours, fringe benefits, and other conditions of employment...

Sections 39-31-305(1X2), MCA.

Under both the Constitution and statutes of Montana the School Board has supervision and control over the schools; and as a part of that supervision and control, the School Board is required to bargain collectively on wages, hours, fringe benefits, and other conditions of employment.

I will now review two Montana Supreme Court cases which I believe lead to a conclusion different than that of the majority opinion. These cases establish that invasion of a right of privacy is not the only exception which requires consideration under Article II, Section 9. In State ex rel. Smith v. District Court (1982), 201 Mont. 376, 383-385, 654 P.2d 982, 986-987, the right to know was balanced against a criminal defendant’s right to a fair trial. In pertinent part that opinion stated:

... Whether the basis for the press and public’s right of access be the First and Fourteenth Amendments to the United States Constitution or the “Right to Know” provision of the Montana Constitution, the guarantee is not absolute. It can be properly circumscribed when the right or interest against which it competes is weighty or compelling. Doubtlessly, the right of a criminal defendant to a trial by an impartial jury is such a right.
Based upon the Right to Know provision of the Montana Constitution and the right of access recognized under the First and Fourteenth Amendments to the United States Constitution, we hold that the public and press may be excluded from a pretrial suppression hearing only if dissemination of information acquired at the hearing would create a clear and present danger to the fairness of defendant’s trial and no reasonable alternative means can be utilized ... (Emphasis supplied.)

The key point as underscored is that the Right to Know constitutional provision is not absolute and it can be circumscribed “when the right or interest against which it competes is weighty or compelling.” The Court then concluded that the right to a trial by an impartial jury was such a right. That of course has nothing to do with the right of privacy. While a criminal case is not directly comparable to the present case, it demonstrates that the narrow holding of the present case is not consistent with State ex rel. Smith. The conclusion of that case is that the right to a fair trial for a criminal defendant may properly be considered even though it has no relationship to the right of privacy.

The Right to Know provision of our Constitution was further considered in Mountain States Tel. & Tel. Co. v. Department of Pub. Serv. Regulation (1981), 194 Mont. 277, 634 P.2d 181, where the public was denied access to a telephone company’s trade secrets in a Public Service Commission hearing. The PSC and the district court had required complete disclosure of all information to any citizen. In pertinent part this Court stated:

... The District Court and the PSC concluded that such compelled disclosure was required under the right to know and right to inspect constitutional and statutory provisions of Montana.
Here, neither the District Court nor the PSC balanced the competing public and private interests presented in this case. Rather, they determined that if the data was necessary for the determination by the PSC, that fact alone made it necessary to disclose all of the information to all of the parties, including persons not necessarily interested in the rate making process. Such a construction may lead in this case to the destruction of a property right based on materiality rather than on a consideration of whether full public disclosure is based upon a reasonable and rational means to achieve the purpose inherent in the right to know provisions ... (Emphasis supplied.)

Mountain States Tel. & Tel., 634 P.2d at 186-87. The Court further considered the potential destruction of a property right and concluded that certain limitations on the right to know were appropriate so far as the public was concerned. The Court stated:

... We have thus balanced the rights that all citizens acquired under the right to know provision of the state constitution with the purpose and function for which our laws compel disclosure by utilities of trade secrets. The right to know provision was designed to prevent the elevation of a state czar or oligarchy; it was not designed for, nor will we substitute, the tyranny of a proletariat. (Emphasis supplied.)

Mountain States Tel. & Tel., 634 P.2d at 189.

The conclusion reached in the foregoing case was that it was proper to balance the property right of a party against the Right to Know provision of the Constitution. This is the type of balancing which the majority opinion has refused to apply in the present case. Mountain States Tel. & Tel. Co. balanced the rights of citizens -under the Right to Know provision against the trade secret property interest of the telephone company and placed specific limits on the right to know. This is again an interest significantly different than the right of privacy specifically described in Article II, Section 9. It is this type of balancing which the majority has refused to use in the present case. I conclude that such a balancing of opposing interests is essential to a just determination of the issues before us.

Here the majority opinion found Section 2-3-203(4), MCA, unconstitutional. Sec. 2-3-203(4), MCA, provides:

Meetings of public agencies and certain associations of public agencies to be open to public — exceptions. (1) All meetings of public or governmental bodies, boards ... must be open to the public.
(4) However, a meeting may be closed to discuss a strategy to be followed with respect to collective bargaining or litigation when an open meeting would have a detrimental effect on the bargaining or litigating position of the public agency.

In arriving at its conclusion that Sec. 2-3-203(4), MCA, is unconstitutional, the majority referred to the arguments by the parties as follows:

The Board argues that Article II, Section 9, is subject to balancing against other constitutional provisions. Specifically, the Board argues Article X, Section 8, of the Montana Constitution, among others, provides school boards supervision and control of schools in their district. Supervision and control is argued to include a duty to bargain effectively and to spend monies in an effective and responsible manner. The Board urges this Court to make a policy determination whereby the duty to supervise the school district is balanced against the right to know provision of the Constitution.

Considering that argument, the majority then concluded:

We are not persuaded by the Board’s argument. First, Article II, Section 9, is not necessarily in conflict with the other constitutional provision as the Board asserts. The Board’s duty to supervise and control its district is not necessarily thwarted by opening its collective bargaining strategy sessions. Second, the Board fails to present a matter of individual privacy as mandated by the Constitution to create an exception to the open meeting law. Third, despite the mandate of power given the local boards to control their schools, Article X, Section 8 does not confer on school boards the power to act in violation of express guarantees contained in the Constitution. (Emphasis supplied.)

I will discuss conclusions First, Second and Third from the above paragraph in that order.

I disagree with conclusion “First” which states that Article II, Section 9, is not necessarily in conflict with other constitutional provisions — I do not believe that is an appropriate test. The analysis should have considered whether or not there are other constitutional provisions and other rights which must be balanced against the Right to Know provision as was done in the above cited cases of State ex rel. Smith and Mountain States Tel. & Tel. Co. I strongly disagree with the conclusion that the Board’s duty to supervise and control is “not necessarily thwarted by opening its collective bargaining strategy sessions.” As I will discuss further, I believe collective bargaining has been eliminated by the majority opinion and that does “thwart” the Board’s duty to supervise and control the district.

In conclusion “Second,” the majority stated that the Board failed to present a matter of individual privacy in order to create an exception to the Open Meeting Law. Because the Board has no individual privacy rights, there is no basis for closure of a school board meeting. In contrast, I conclude that under State ex rel. Smith and Mountain States Tel. & Tel. Co., we are required to balance the opposing constitutional rights of the parties and to consider the impact of the decision. This the majority has failed to do.

Conclusion “Third” emphasizes that Article X, Section 8, does not give school boards the power to violate express guarantees in the Constitution. Again, I do not believe that is a correct statement of the applicable standard. I believe we are required to balance the applicable claims and rights of the parties. Such a balancing does not suggest that school boards must have the power to violate the Constitution.

There is no factual debate in this case as to the impact of the majority opinion. The uncontradicted affidavit of the Superintendent of the defendant School District stated:

The Board of Trustees must have the ability to close public meetings to discuss collective bargaining strategy when an open meeting would be detrimental to the Board’s collective bargaining position.
During the 1989 29-day teachers strike, the Board met in closed session to discuss whether to operate the schools in the face of the teachers strike. This discussion could not have been held in public without revealing our strengths and weaknesses.
There are serious problems in public strategizing. If the Board cannot privately strategize as a group about bargaining parameters, assessment of the parties’ positions, bargaining tactics, and similar related matters, it would lose the only effective way it has to have full and frank discussions and to formulate and decide its strategy together. The resulting loss would interfere with and harm the Board’s ability to effectively decide collective bargaining matters ...

The Trustees of the School Board also submitted extensive testimony — again uncontradicted. The Trustees’ testimony established that the holding of meetings open to the public would eliminate the Board’s opportunity to strategize and set parameters or authority limits for negotiations. One trustee testified that bargaining would be very difficult if one side must strategize publicly while the other does not, and pointed out there is no room for compromise and negotiation if the school board’s maximum position has already been expressed publicly. In considering the manner in which the trustees must meet, it is essential to keep in mind the following statutory constraints which apply to the School Board. Sec. 20-3-301, MCA, requires the trustees to act at meetings and provides in pertinent part:

Election and term of office ....
(2) The trustees shall be composed of the number of trustee positions prescribed for a district.... When exercising the power and performing the duties of trustees, the members shall act collectively and only at a regular or properly called special meeting .... (Emphasis supplied.)

In a similar manner, with regard to meetings, Sec. 20-3-322, MCA, provides in pertinent part:

Meetings and quorum ....
(4) Business may not be transacted by the trustees of a district unless it is transacted at a regular meeting or a properly called special meeting. A quorum for any meeting is a majority of the trustees’ membership. All trustee meetings must be public meetings, as prescribed by 2-3-201, except that the trustees may recess to an executive session under the provisions of 2-3-203. (Emphasis supplied.)

The foregoing statutes clearly eliminate the possibility of School Board members meeting separately or privately in connection with labor negotiations. They are required to act at either regular or special meetings and are specifically prohibited from transacting business at any place other than a regular meeting.

The School Board also emphasizes its responsibilities as the representatives of the voter taxpayers in order to see that their tax dollars are expended wisely. Again, there are many statutory requirements for the proper discharge of these duties.

The majority opinion forces us to the following conclusions: First, all collective bargaining sessions including strategy sessions by the School Board must take place at regular meetings open to the public and to the negotiating unions. Second, effective collective bargaining as contemplated by our extensive public bargaining code sections will be eliminated between school boards and unions. Where a union has total access to the thinking, strategy and plans of the school board, there is no possibility for collective bargaining as we have known it. Negotiations are eliminated when one party has total knowledge of the thinking on the part of the other.

I suggest the majority opinion will have a devastating impact on labor negotiations between the more than five hundred school districts of Montana and the various unions with whom they deal. Collective bargaining as presently required under our statutes will be eliminated.

While such a result was not the plan of the majority opinion, its result is to eliminate the use of collective bargaining to arrive at friendly adjustments of disputes between school boards (and other public employers) and the unions representing their employees. The impact will be great upon the taxpayers, voters, students, employees and labor unions.

Clearly the majority opinion requires the school boards of Montana to carefully analyze their available means to settle issues and disputes with the unions. It requires a similar analysis on the part of all unions who have learned to function effectively for the benefit of their members and the public through the collective bargaining statutes in Montana. Last, it requires the legislature to commence a prompt review of its statutory requirements of collective bargaining to determine if there is some way in which some aspects of collective bargaining can be maintained.

I will not write a detailed analysis of the holding which I believe should be adopted by the majority opinion. Under Article X, Section 8, of the Montana Constitution and the various statutory provisions which apply to school districts, the trustees of a school district are required to supervise and control the expenditure of funds in their respective districts. It is common knowledge that labor costs constitute a majority of the expenditures by the trustees of school districts. I suggest that a proper balancing here would result in the conclusion that the interests of the school district trustees and the public whom they represent in effective collective bargaining, when balanced against the Right to Know provision of our Constitution, justifies the limitation set forth in Sec. 39-31-305, MCA. Such a balancing requires a conclusion that it is proper to close a school board meeting where there is collective bargaining or litigation when an open meeting would have a detrimental affect on that bargaining. Such a balancing makes good common sense. Such a balancing would allow collective bargaining to continue in the future.


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    MICHAEL R. BROWN, Plaintiff and Appellant, v. WES EHLERT, Defendant and Respondent.
    No. 91-472.
    Submitted on Briefs February 6, 1992.
    Decided November 12, 1992.
    Rehearing Denied December 10, 1992.
    49 St.Rep. 940.
    255 Mont. 140.
    841 P.2d 510.

      For Plaintiff and Appellant: Torger S. Oaas, Lewistown.
    For Defendant and Respondent: Robert L. Johnson, Lewistown.
   JUSTICE GRAY

delivered the Opinion of the Court.

This is an appeal from an Order of the Tenth Judicial District Court, Fergus County, granting respondent’s motion for a new trial. We reverse.

The issue before us is whether the District Court abused its discretion in granting a new trial. Resolution of the issue necessitates a determination of whether workers’ compensation exclusivity and co-employee immunity are affirmative defenses or matters of subject matter jurisdiction.

Appellant Michael Brown (Brown) brought a negligence claim against respondent Wes Ehlert (Ehlert) seeking compensation for personal injury and property damage sustained in a two car automobile collision. The point of impact in the February 1989 accident was near the center of a narrow mountain road approximately one mile from the Blue Range Mining Company mine where both Brown and Ehlert were employed.

Brown filed a complaint against Ehlert seeking damages for Ehlert’s negligence. Ehlert generally denied the allegations of negligence and raised the affirmative defense of comparative negligence. He raised no other affirmative defenses either in his pleadings, at the pretrial conference, or in the pretrial order; he counterclaimed for property damage.

On June 18, 1991, following Brown’s case-in-chief, Ehlert moved to strike Brown’s personal injury claim based on the exclusivity of the Montana Workers’ Compensation Act (the Act). He asserted that Brown’s own evidence established that both he and Brown were within the course and scope of their employment at the time of the collision, that the Act constituted the exclusive remedy for Brown’s personal injury claim and, consequently, that the District Court was without subject matter jurisdiction over that claim. He argued that it was Brown’s obligation to state his personal injury claim in such a manner as to bring it within one of the exceptions to the exclusive provisions of the Act; according to Ehlert, Brown’s failure to do so excused any duty on his own part to plead the Act as an affirmative defense. Brown responded that applicability of the Act is an affirmative defense which is waived if not raised timely. The court did not rule immediately, but subsequently denied Ehlert’s motion.

The jury returned a verdict in Brown’s favor on June 19, 1991. Ehlert moved for judgment notwithstanding the verdict, asserting a variety of arguments relating to the exclusivity of the Act and plaintiff’s burden to plead himself into the court’s jurisdiction by alleging facts removing his personal injury claim from application of the Act. Brown again responded that exclusivity and co-employee immunity under the Act do not relate to subject matter jurisdiction, but are affirmative defenses similar to other avoidance defenses such as comparative negligence and statutes of limitation which must be pleaded affirmatively. The District Court denied Ehlert’s motion and entered judgment for Brown.

Ehlert subsequently moved for a new trial on a number of alternative bases, including the court’s error of law in rejecting his subject matter jurisdiction argument. On September 9, 1991, the court granted Ehlert’s motion for a new trial, citing Massey v. Selensky (1984), 212 Mont. 68, 685 P.2d 938 (Massey I), and Massey v. Selensky (1987), 225 Mont. 101, 731 P.2d 906 (Massey II). This appeal followed.

We will not reverse a district court’s grant or denial of a new trial absent a manifest abuse of discretion. Tappan v. Higgins (1989), 240 Mont. 158, 783 P.2d 396. We note at the outset that the court’s order does not comply fully with Rule 59(f), M.R.Civ.P. We need not remand for entry of findings sufficient for our review in this case, however, because it is apparent from the parties’ arguments to the District Court and from the court’s citation to the Massey cases that the order granting a new trial could have been based only on the court’s acceptance of Ehlert’s subject matter jurisdiction argument. Thus, we must determine whether workers’ compensation exclusivity and co-employee immunity under the Act are matters which go to the district court’s subject matter jurisdiction or, alternatively, whether they are affirmative defenses which are waived if not raised timely.

Given the District Court’s reliance, a brief review of the Massey cases is appropriate before we turn to the resolution of the specific issue before us. We begin by noting that, while applicability of the Act to a negligence claim against a co-worker was involved in both Massey cases, neither case addressed the issue presently before us.

The Massey cases arose from an accident in which plaintiff Massey was injured after being struck by defendant Selensky’s unoccupied truck. Both parties were employees of the Anaconda Company at the time and had ridden to work together in Selensky’s truck. The injury occurred after their arrival at Anaconda’s property but before their shift began. Massey filed for, and received, workers’ compensation benefits as a result of his injuries. Massey then sued Selensky, alleging negligence. In Massey I, Selensky moved for summary judgment after a period of discovery, alleging that he was immune from suit because the injury was compensable under the Workers’ Compensation Act. Summary judgment was entered in Selensky’s favor on the grounds that Selensky was within the course and scope of his employment at the time of the injury.

On appeal, we noted that it is “well settled in Montana that a co-employee is immune from liability for negligent acts resulting in injuries which are compensable under the Workers’ Compensation Act.” Massey I, 685 P.2d at 940. We went on, however, to state specifically that “the simple fact that two persons have the same employer would not necessarily cause this rule to apply.” Id. In reversing the summary judgment and remanding for further proceedings, we set forth the proper test to be used by the district courts in determining whether the co-worker was acting within the course and scope of employment at the time the negligent act occurred, noting that, if so, the co-worker is immune from suit. Massey I did not address the issue of when and how co-employee immunity must be raised.

Massey II was the appeal after remand of Massey I. On remand, the district court entered partial summary judgment for plaintiff Massey on the issue of co-employee immunity, applying the “going and coming” rule. On appeal, we noted that “[c]o-employee immunity is essential to the integrity of the Act,” and again reversed, determining that the premises rule, rather than the going and coming rule, was appropriate to the facts of the case. Massey II, 731 P.2d at 907. We found that Selensky was protected by co-employee immunity from common law liability. Again, however, the issue of when and how co-employee immunity under the Act must be raised was not before us in Massey II.

Ehlert is correct in asserting that if exclusivity and co-employee immunity under the Act are questions of subject matter jurisdiction, they can be raised at any time under Rule 12(h), M.R.Civ.P. Ehlert asserts that Sec. 39-71-2905, MCA, grants exclusive authority to make workers’ compensation determinations to the Workers’ Compensation Court and that Sec. 27-1-703, MCA, makes it clear that a district court cannot consider negligence on the part of an injured worker’s co-employee to the extent the co-employee has tort immunity under the Act. Ehlert argues that these correct statements of law establish the District Court’s lack of subject matter jurisdiction over Brown’s personal injury claim. We disagree.

Section 39-71-2905, MCA, is not applicable here. No dispute under Chapter 71 of Title 39 is presented here and the District Court has not been requested to make a workers’ compensation determination. Further, Sec. 27-1-703, MCA, provides that to the extent a co-employee has immunity from liability under the Act, a trier of fact cannot consider or determine negligence by the co-employee. The wording of the statute itself suggests that the existence of such immunity must be determined by the District Court. Indeed, we specifically stated in Massey I what the legislature implied in Sec. 27-1-703(4), MCA:

[T]he trial court must expressly address the issue of whether the fellow worker was a co-employee for purposes of the immunity statute.

Massey I, 685 P.2d at 941. If the court finds that co-employee immunity exists, the immunity is a bar to common law negligence liability for personal injuries; if no immunity exists, the action can proceed. Thus, while Massey I makes it clear that a district court must make the immunity determination, it also assumes that the issue has been raised timely as was the case therein. Subject matter jurisdiction was not the issue.

Acceptance of Ehlert’s subject matter jurisdiction contention would radically alter our modern rules of civil practice and procedure. Plaintiffs bringing common law negligence actions could no longer make “a short and plain statement of the claim showing that the pleader is entitled to relief.” Rule 8(a), M.R.Civ.P. Instead, they would be required to allege that neither exclusivity nor co-employee immunity under the Workers’ Compensation Act was applicable to their claim in order to plead their way into the court’s jurisdiction. Presumably, it also would be incumbent on such plaintiffs to allege the inapplicability of all other irmmmities and bars to their action. In the event of a general denial by the defendant, one assumes the plaintiff would be put to her or his proof on all such matters. Such a result is not only contrary to our procedural rules, it is also contrary to our most fundamental notions of the pleading and proof burdens of the respective parties to a lawsuit. Nothing in the Act, the Montana Rules of Civil Procedure or our cases supports such a result.

Ehlert relied at the District Court on Mitchell v. Banking Corporation of Montana (1929), 83 Mont. 581, 273 P. 1055, as support for his subject matter jurisdiction argument. In Mitchell, the plaintiffs brought suit against the stockholders of a banking corporation to enforce a specific statutory liability; the statute created both the right and the remedy and contained a time limit for bringing the action. This Court held that, under such circumstances, “[allegations of fact showing that the action was commenced within time are, therefore, a necessary part of the complaint...” Mitchell, 273 P. at 1057. Mitchell does not mandate a conclusion here that Brown must allege inapplicability of the Act.

The case before us is nearly the reverse of Mitchell. There, the action was premised in its entirety on a statutory right and remedy; our conclusion specifically was based on the fact that the action did not exist at common law and that, therefore, the plaintiffs had to meet each and every statutory requirement in setting forth their claim. Here, Brown’s action for personal injuries is a common law negligence claim.

The jurisdiction of Montana’s district courts over common law personal injury claims cannot be disputed. See Sec. 3-5-302, MCA. In addition to alleging the facts of the claim, Brown further alleged that the accident occurred in Fergus County, bringing the matter under the jurisdiction of the Tenth Judicial District Court. Thus, Brown met his pleading burden under Rule 8, M.R.Civ.P No statute or rule requires pleading the inapplicability of the Workers’ Compensation Act.

On the other hand, Rule 8(b), M.R.Civ.R, requires a party to state her or his defenses to each claim asserted. In addition, Rule 8(c) requires a party to set forth affirmatively all matters constituting avoidance or affirmative defenses. The rationale for requiring that these defenses be affirmatively pleaded is simple: the same principles of fairness and notice which require a plaintiff to set forth the basis of the claim require a defendant to shoulder a corresponding duty to set out not merely general denials as appropriate, but also those specific defenses not raised by general denials by which a defendant seeks to avoid liability, rather than merely to controvert plaintiff’s factual allegations.

The essence of affirmative defenses is to concede that while the plaintiff otherwise may have a good cause of action, the cause of action no longer exists because some statute or rule permits defendant to avoid liability for the acts alleged. Under these principles, exclusivity and co-employee immunity under the Workers’ Compensation Act clearly constitute affirmative defenses. They do not go to the merits of Brown’s personal injury complaint; rather, they assert that the Act protects Ehlert from liability for the very acts alleged by Brown. As such, they are similar to legislative immunity under Sec. 2-9-111, MCA, and to other affirmative defenses such as statutes of limitations and the statute of frauds. We conclude that Workers’ Compensation exclusivity and co-employee immunity are matters of avoidance which, pursuant to Rule 8(c), M.R.Civ.P., must be pleaded affirmatively.

Furthermore, it is well settled in Montana that affirmative defenses are waived if not raised timely. See Chandler v. Madsen (1982), 197 Mont. 234, 642 P.2d 1028. Here, Ehlert did not raise exclusivity or co-employee immunity under the Act in his initial pleadings, after opportunity for discovery, or at the pretrial conference. The matters were raised only after Brown’s case-in-chief. This is far too late to provide appropriate notice to Brown and to apprise the District Court that the issues were before it for consideration under the Massey I test or otherwise. We hold that Ehlert waived the affirmative defenses of Workers’ Compensation Act exclusivity and co-employee immunity.

Our results here are consistent with those reached in other jurisdictions. In Doney v. Tambouratgis (Cal. 1979), 587 P.2d 1160, the defendant attempted to raise the exclusivity defense in a motion for nonsuit after the plaintiff’s case-in-chief and again in motions for judgment notwithstanding the verdict and for new trial. The Supreme Court of California rejected a subject matter jurisdiction argument, concluding that the trial court’s common law jurisdiction continued unless and until coverage under the workers’ compensation statute was demonstrated; such coverage could be shown by allegations of fact by plaintiff in the complaint or “by the defendant through setting up the affirmative defense of coverage in responsive pleadings and proceeding to prove the existence of the requisite conditions.” Doney, 587 P.2d at 1164. Similarly, in Bendar v. Rosen (N.J.Super.A.D. 1991), 588 A.2d 1264, a co-worker was sued for personal injuries caused by an automobile accident. The defendant’s attorney did not raise co-employee immunity until after the jury was empaneled. The New Jersey court held that, under the applicable procedural rules, co-employee immunity was waived if not raised by motion before trial or as an affirmative defense. Bendar, 588 A.2d at 1267. While we recognize that the cited cases are distinguishable in part because the workers’ compensation acts in California and New Jersey are not identical to Montana’s Act, the driving force in those cases and in the case before us relates to pleading rules and principles, rather than to the specifics of each state’s statutory workers’ compensation acts.

In conclusion, the District Court based its grant of a new trial on an erroneous interpretation of our Massey cases. Because exclusivity and co-employee immunity under the Workers’ Compensation Act are affirmative defenses which are waived if not raised timely, we hold that the District Court manifestly abused its discretion in granting a new trial.

We note that Ehlert attempts to raise the issue of improper injection of the fact of liability insurance as an alternative basis on which this Court should uphold the District Court’s grant of a new trial. Following a mention of insurance by Brown’s counsel in closing argument, Ehlert moved for a mistrial; the motion was denied. Ehlert also raised this issue as one of the grounds for his motion for a new trial. The District Court did not address the issue in its grant of a new trial. Ehlert did not cross-appeal the District Court’s denial of his motion for mistrial or its failure to grant a new trial on this basis. Because this is a matter separate and distinct from that for which Brown seeks our review, and absent a cross-appeal, we are precluded from reviewing this issue on appeal. Rouse v. Anaconda-Deer Lodge County (1991), 250 Mont. 1, 817 P.2d 690.

Reversed with instructions to reinstate the jury verdict and enter judgment accordingly.

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


text:
    KENNETH NYQUIST and KATHLEEN NYQUIST, husband and wife, Plaintiffs and Respondents, v. THOMAS NYQUIST and VIRGINIA NYQUIST, RONALD PRESTON, EARL BRADFORD and ALICE BRADFORD, and CRYSTAL SPRINGS TROUT COMPANY, a Montana corporation, Defendants and Appellants.
    No. 91-127.
    Submitted on Briefs December 4, 1991.
    Decided November 12, 1992.
    Rehearing Denied December 17, 1992.
    49 St.Rep. 927.
    255 Mont. 149.
    841 P.2d 515.

      For Defendants and Appellants: Lon J. Dale, Milodragovich, Dale & Dye, Missoula.
    For Plaintiffs and Respondents: Peter S. Lineberger, Lineberger, Walsh & McKenna PC., Bozeman.
   JUSTICE GRAY

delivered the Opinion of the Court.

This is an appeal from a judgment entered by the Eighteenth Judicial District Court, Gallatin County, in October of 1990. The judgment settled obligations between the parties and determined entitlement to monies from a prior judgment award entered in Crystal Springs v. First State Bank of Froid (1987), 225 Mont. 122, 732 P.2d 819. We affirm and remand.

Appellants raise the following issues on appeal:

1. Did the District Court err in concluding that the February 13, 1982, agreement was not a loan agreement?

2. Did the District Court err in determining that Ron Preston must repay loans made by Ken Nyquist from Preston’s individual share of the judgment award?

3. Did the District Court err in declining to award attorney’s fees to appellants?

4. Did the District Court err in failing to determine that the repayment of advanced litigation expenses should come first from the corporation’s share of the judgment award?

5. Does Section 28-1-1302, MCA, result in a waiver by Ken and Kathleen Nyquist of interest accrued since the date of appellants’ post-judgment motion for partial release of trust funds?

6. Did the District Court err in imposing on the Bradfords an obligation to repay advanced litigation expenses pursuant to the February 13, 1982, agreement?

All parties to this appeal were successful plaintiffs in previous litigation in Broadwater County. In the original action, the Crystal Springs Trout Company and its shareholders brought a damage action against First State Bank of Froid (First Bank) and its agent. Judgment for the plaintiffs in that action was entered in June of 1985. After appeal and remand for further damage calculations, the court entered an Order Clarifying Amounts on August 20,1987. That order directed First Bank to tender to all plaintiffs one check in the amount of $413,170, reflecting the total amount due all of the plaintiffs, offset by money Ken and Kathleen Nyquist owed First Bank. The 1987 order was not appealed. The judgment award was paid by First Bank to plaintiffs’ attorney, Ron Waterman, who held the money in trust for plaintiffs. When the shareholders could not agree as to disbursal of the money, Waterman put the money in an interest-bearing account. Interest has raised the balance in the account to approximately $425,000 at the time of trial. Waterman has refused to release any of the monies without a court order due to dissension among the parties regarding amounts due each of them from the judgment award.

The dissension arises in large part from differing interpretations of a February 13, 1982, agreement (1982 agreement) between Ken and Kathleen Nyquist, the Crystal Springs Trout Company (CSTC), and CSTC’s other shareholders except Earl and Alice Bradford. Under the 1982 agreement, Ken and Kathleen agreed to continue to advance litigation expenses for the First Bank lawsuit because the other parties had no source of funds to pursue the action. These expenses, plus 20% interest on amounts advanced “per annum from the date such advance was made to the date of actual recoupment... ” are to be recovered by Ken and Kathleen from any judgment award arising from the First Bank litigation. Ken and Kathleen Nyquist filed the current action to enforce what they view as unfulfilled obligations under the February 13, 1982, agreement. They also seek repayment of promissory notes executed by Ron Preston and Tom and Virginia Nyquist. In response, Tom and Virginia Nyquist, Ron Preston and CSTC raised Ken and Kathleen’s failure to pay a deficit sum to the judgment fund and usury under the 1982 agreement and sought, inter alia, a penalty against Ken and Kathleen for usurious interest and attorney’s fees. As discussed below, the Bradfords did not join in the response by the other defendants.

Following trial of this action, the District Court determined the specific obligations between and among the various parties and the appropriate sums owed each party from the judgment award in the original action. In its October, 1990, Findings of Fact, Conclusions of Law and Judgment, the court determined that, pursuant to the 1982 agreement, Ken and Kathleen were entitled to the litigation monies they had advanced plus interest, but were not entitled to funds they alleged to be due them as a result of tax consequences in funding the litigation; the court further determined that nothing in the agreement entitled Ken and Kathleen to reimbursement for the accounting fees they claimed to have incurred in such funding. The court found that Ron Preston and Tom Nyquist defaulted on their promissory notes. Finally, the District Court determined that the 1982 agreement was not a loan and, therefore, no usury issue existed under that agreement.

Ron Preston, Tom and Virginia Nyquist and CSTC, appellants herein, moved the court to amend its Findings of Fact, Conclusions of Law and Judgment. The motion was deemed denied by operation of law when the District Court did not rule within 45 days. Appellants also filed a motion for partial release of trust funds. Before a ruling on the motion or expiration of the 45-day limit, notice of appeal was filed.

We will not set aside a district court’s findings of fact unless the findings are clearly erroneous. Klose v. Klose (1990), 243 Mont. 211, 793 P.2d 1311. We review a court’s conclusions of law to determine whether they are correct. Steer, Inc. v. Dept. of Revenue (1990), 245 Mont. 470, 803 P.2d 601.

I.

Did the District Court err in concluding that the February 13, 1982, agreement was not a loan agreement?

The District Court concluded that the 1982 agreement was not a loan agreement because it did not contain an unconditional obligation to repay; on that basis, it determined that no usury issue existed. Appellants contend that the 1982 agreement was a loan which they had an absolute duty to repay. As such, according to appellants, the 20% interest rate contained in the agreement is usurious pursuant to Sec. 31-1-107(1), MCA, in that the appropriate ceiling interest rate on the date of the agreement was 16%.

If an obligation is based on “a certain condition which may or may not happen or occur, the transaction is not a loan.” Rae v. Cameron (1941), 112 Mont. 159, 167, 114 P.2d 1060, 1064. The February 13, 1982, agreement provides:

Kenneth and Kathleen Nyquist shall be entitled to recoup and recover from any awards and proceeds arising out of such court action prior to the distribution thereof to any of the other parties in this Agreement all of such funds so advanced by them .... [Emphasis added.]

The plain wording of the agreement establishes that Ken and Kathleen Nyquist are entitled to recoupment only from any proceeds arising out of the First Bank litigation. Thus, a judgment award of damages in plaintiffs’ favor in the First Bank action was a condition precedent to any obligation of CSTC and the other shareholders to repay the advanced litigation expenses; in other words, it was a condition which “may or may not happen.” No certainty ever existed that the plaintiffs in that litigation would prevail and receive a damage award.

We conclude that the 1982 agreement contains a conditional, rather than an unconditional, obligation to repay. We hold that the District Court did not err in concluding that the February 13, 1982, agreement was not a loan agreement.

II.

Did the District Court err in determining that Ron Preston must repay loans made by Ken Nyquist from Preston’s individual share of the judgment award?

Via Exhibit Ato its October, 1990, Findings and Conclusions, the District Comb determined that seven loans made by Ken Nyquist to Ron Preston were to be paid from Preston’s individual share, rather than from CSTC’s share, of the judgment award. Appellants argue that the loans were made for expenses incurred by Preston while he was involved in corporate business pertaining to the First Bank litigation. On this basis, appellants argue that the corporation, rather than Ron Preston individually, should be obligated to repay Ken Nyquist. Respondents claim that the loans to Preston were made for Preston’s personal business.

Whatever the reasons for the loans, the record clearly establishes the source of repayment of Preston’s loans. Preston specifically assigned his share of any proceeds from the First Bank litigation to Ken Nyquist to the extent of the loan amounts owing:

Assignor hereby transfers, assigns and sets over to Assignee, to the extent of all amounts owing to Assignor under the Promissory Note described below, all of Assignor’s right, title, and interest, legal and equitable, in and to all proceeds and other credits in favor of Assignor arising and of that cause of action entitled Crystal Springs Trout Company, a Montana corporation, Thomas Nyquist and Virginia Nyquist, husband and wife, Kenneth Nyquist and Kathleen Nyquist, husband and wife, Ronald E. Preston, Robert Moore and Peggy Moore, husband and wife; and Earl Bradford and Alice Bradford, husband and wife. vs. First State Bank of Froid, a banking corporation, and JerryB. Wallander.... [Emphasis added.]

A separate assignment relating to each of the seven loans, and containing the referenced language, was executed by Preston. The assignments establish that Preston’s share of the judgment proceeds is to be the source of repayment.

The record contains substantial evidence to support the District Court’s determination that Preston’s loans were to be repaid from Preston’s individual share of the judgment award. The District Court did not err.

III.

Did the District Court err in declining to award attorney’s fees to appellants?

The District Court determined that neither party could be considered the prevailing party and, thus, neither was entitled to attorney’s fees. Appellants contend that they are the prevailing party because Ken and Kathleen’s failure to restore a $50,767.11 deficit sum to the judgment fund is a breach of the 1982 agreement. Further, appellants argue that they prevailed on the issue of Ken and Kathleen’s request for monies for tax liabilities and accounting fees. Respondents point out that the District Court determined that they must restore the deficit sum to the judgment fund, but did not conclude that the failure to do so constituted a breach of the agreement. Respondents assert that since the obligation to restore the deficit amount resulted from the District Court’s 1987 Order Clarifying Amounts, it was not a contractual obligation which could form the basis for a breach and attorney’s fees under the agreement.

Ken and Kathleen’s complaint was based primarily on the 1982 agreement. That agreement contains an express provision for attorney’s fees to be awarded against the “defaulting party.” Appellants contend that the reciprocity provisions of Sec. 28-3-704, MCA, entitle them to attorney’s fees because they are the non-defaulting, “prevailing party” in this litigation.

The District Court determined, and the record establishes, that Ken and Kathleen’s obligation to restore approximately $50,000 to the judgment fund resulted from the 1987 Order Clarifying Amounts Due Under June 18,1985, Judgment. It did not arise under the 1982 agreement and, therefore, Ken and Kathleen did not breach the 1982 agreement. Absent such breach or default by Ken and Kathleen under the agreement, neither the agreement’s attorney’s fees provision nor the reciprocity provision of Sec. 28-3-704, MCA, provides a basis for an award of attorney’s fees to appellants.

Further, the District Court determined that neither party was the prevailing party for purposes of awarding attorney’s fees. Appellants prevailed on Ken and Kathleen’s claims of reimbursement for tax and accounting fees pursuant to the agreement. On the other hand, they defaulted on their promissory notes and did not reimburse Ken and Kathleen for advanced litigation expenses. Nor are Ken and Kathleen the prevailing party, according to the court, because their failure to restore the deficit sum to the judgment fund and tax and accounting fee claims contributed to causing the lawsuit.

There are cases where, at the close of litigation, there is no actual “prevailing party” entitled to attorney’s fees because both parties gain a victory but also suffer a loss. Lauderdale v. Grauman (1986), 223 Mont. 357, 359, 725 P.2d 1199, 1201. Here, even though all parties prevailed in part and are entitled to part of the judgment award, none prevailed on all issues or recovered the total of what was individually sought. We hold, therefore, that the District Court did not err in concluding that appellants were not entitled to attorney’s fees.

IV.

Did the District Court err in failing to determine that the repayment of advanced litigation expenses should come first from the corporation’s share of the judgment award?

The District Court attributed part of the repayment of advanced litigation expenses to the shareholders’ individual shares of the judgment award and part to the corporate entity’s share. Appellants argue that minutes of a corporate or shareholder meeting, in which the corporation decided to continue litigation against First Bank, indicate a clear intent that repayment of advanced litigation expenses would be made from the corporate entity’s share of the judgment award first. They argue that individual shareholders should not be compelled to repay the litigation expenses from their own individual portions of the award unless the corporation’s share of the judgment award is insufficient to cover the repayment.

The minutes are not nearly as clear as appellants suggest. In addition, to the extent the minutes could be ihterpreted in accordance with appellants’ assertion, they conflict with the 1982 agreement.

The agreement itself is clear. The individual shareholders and the corporate entity were parties to the agreement. The agreement recites that the purpose of the First Bank litigation is to recover for wrongful actions by First Bank and its agent which were “causing damage to all the parties to this Agreement.” The parties agreed that “it is essential to their individual and mutual benefit to pursue such litigation....” Finally, the agreement provides that Ken and Kathleen Nyquist will have a claim to the proceeds before any other “parties” to the agreement.

This wording is clear and unambiguous. When wording of a contract is clear, the court merely must enforce it. Morning Star Enterprises, Inc. v. R.H. Grover, Inc. (1991), 247 Mont. 105, 805 P.2d 553. Meeting minutes could not and did not alter the agreement; indeed, to the extent the minutes are at all probative, they reflect ratification of the agreement. The District Court correctly attributed responsibility for the repayment of the advanced litigation expenses to all parties to the agreement, both individual shareholders and the corporate entity. We hold that the District Court did not err in failing to determine that repayment of advanced litigation expenses should come first from the corporation’s share of the judgment award.

V.

Does Section 28-1-1302, MCA, result in a waiver of interest accrued since the date of appellants’ post-judgment motion for partial release of trust funds?

In early December, 1990, while their motion to amend the judgment was pending before the District Court, appellants submitted a proposed stipulation to Ken and Kathleen for partial release of trust funds; their intent was to release funds in payment of some, but not all, of their obligations to Ken and Kathleen under the October, 1990, judgment, thereby preventing accrual of additional interest on those amounts. The stipulation was not executed.

Appellants subsequently moved the court for partial release of the trust funds. The motion was neither ruled upon by the District Court nor deemed denied by operation of law prior to appellants’ filing of a notice of appeal on January 21, 1991.

Appellants argue that, pursuant to Sec. 28-1-1302, MCA, Ken and Kathleen have waived their right to continued accrual of interest by their refusal to accept partial payment of trust funds after trial. Their post-trial motion for partial release of trust funds did not cite or rely on Sec. 28-1-1302, MCA. In any event, the District Court did not have an opportunity to address appellants’ motion on this issue and we decline to do so.

VI.

Did the District Court err in imposing on the Bradfords an obligation to repay advanced litigation expenses pursuant to the February 13, 1982, agreement?

In its 1990 Findings, Conclusions, and Judgment, the court determined that Earl and Alice Bradford were responsible for repaying their determined share of the litigation expenses advanced by Ken and Kathleen Nyquist. Appellants assert that the Bradfords are not responsible for any part of the litigation expense repayment to the Nyquists because they did not sign the 1982 agreement. Respondents argue that the Bradfords are not before this Court on appeal.

On November 27,1987, Earl and Alice Bradford moved the District Court to dismiss the action against them on the basis that the complaint failed to state a claim. The court denied their motion on December 23,1987, and gave them 20 days to plead further. No formal default was entered and the court proceeded to determine their obligations in its October, 1990, Findings, Conclusions and Judgment.

Neither of the Bradfords joined in the appeal to this Court. Appellants’ attorney did not represent the Bradfords in the District Court and designates himself as counsel on appeal for CSTC and its shareholders Thomas Nyquist, Virginia Nyquist and Ronald Preston; no attempt has been made to include the Bradfords as appellants. Therefore, we will not consider the propriety of the District Court’s determinations regarding the Bradfords.

Finally, we note that the record suggests that the trustee of the interest-bearing account will not release any monies without a court order. Therefore, we remand this case to the District Court with instructions to issue an order for release of trust account funds in accordance with the court’s October, 1990, Findings, Conclusions and Judgment, and for any further proceedings which may be appropriate and which are not inconsistent with this opinion.

Affirmed and remanded with instructions.

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