text:
    ROBERT INMAN, d/b/a B&B Auction Sales and Service, Plaintiff and Respondent, v. FARMERS NATIONAL COMPANY; First Security Bank of Havre; Duane “Bud” Anderson; Jardine, Stephenson, Blewett & Weaver, P.C.; Blaine County, Montana; Pollination Techniques, Inc.; Farmer’s Union Oil Co. of Chinook; Milk River Production Credit Assoc.; Aetna Life Ins. Co.; John Schwarz; General Agriculture Corp.; Montana Agriculture II Limited Partnership; Montana Agriculture III Limited Partnership; Golden Bull Cattle Co., Inc.; and John Does 1 through 20, Defendants and Appellants.
    No. 89-302.
    Submitted on Briefs Nov. 2, 1989.
    Decided Dec. 6, 1989.
    Rehearing Denied Jan. 16, 1990.
    783 P.2d 1328.

      Donald A. Ranstrom, Blaine County Atty., Chinook, for Blaine County.
    Robert G. Michelotti, Jr., Crowley, Haughey, Hanson, Toole & Dietrich, Billings, Glen A. Burbridge; Kutak, Rock & Campbell, Denver, for Aetna Life Ins. Co.
    Greg A. Luinstra, K. Dale Schwanke, Jardine, Stephenson, Blewett & Weaver, Great Falls, for Schwarz; Jardine, et al., Pollination Techniques, Gen. Agriculture Corp., Montana Agriculture, Golden Bull.
    Brian Lilletvedt, James M. Kaze; Boxch, Kuhr, Dugdale, Warner, Martin & Kaze, Havre, for Anderson.
    Gregory G. Murphy, Moulton, Bellingham, Longo & Mather, Billings, for Farmers Nat. Co.
    Chris R. Young, Morrison, Young Law Firm, Havre, Kevin C. Meek, Alexander, Baucus & Linnell, Great Falls, for Milk River Production Credit.
    Dan Johnson, Farmer’s Union, Chinook.
   JUSTICE HARRISON

delivered the Opinion of the Court.

This action arises out of efforts by Blaine County to collect delinquent personal property taxes from respondents, Pollination Technics, Inc.; John Schwarz; General Agriculture Corporation; Montana Agriculture II Limited Partnership; and Golden Bull Cattle Company, Inc. (the Schwarz Group). The Seventeenth Judicial District, Blaine County, granted summary judgment in favor of respondents holding that Blaine County could not claim a tax lien on auction proceeds from an auction of personal property owned by the Schwarz Group. Blaine County and Aetna Life Insurance Company appeals that judgment. We reverse and direct entry of judgment in favor of appellants.

Appellants present essentially one issue for review: Did the District Court err in ruling that Blaine County was not entitled to execute against the “auction proceeds” to satisfy respondents’ delinquent personal property tax obligation.

The material facts in this case are not in dispute. Briefly, the facts are that John Schwarz arranged for Inman to publicly auction certain farm equipment and machinery. At the time of the . auction sale, Schwarz was delinquent in the personal property taxes assessed against some or all of this machinery and equipment for 1985 and subsequent years. The personal property taxes constituted a lien against this property. Farmer’s National Company, receiver named in a foreclosure action brought by Aetna, was notified that John Schwarz had directed Inman to distribute the auction proceeds to Schwarz’s creditors without paying the taxes. The taxes are also a lien on the real property involved in the foreclosure suit.

After learning of Inman’s instructions, Farmer’s National filed for injunctive relief to prevent Inman from distributing the auction sale proceeds to the creditors. The District Court held a hearing on April 7, 1988, wherein the parties agreed to convert the suit to an inter-pleader suit. Blaine County appeared at the hearing with a writ of execution and was prepared to levy upon the auction proceeds. However, Blaine County agreed to postpone the levy as long as it did not lose any of its legal rights. The District Court ordered the action converted to an interpleader action and provided that Blaine County would not lose any of its legal rights. An interpleader complaint was then filed by Inman who also deposited the net auction proceeds with the Clerk of Court. The defendants are the parties with claims on the auction proceeds.

The District Court interpreted the tax collection remedies outlined in § 15-16-113, § 15-16-401 and § 15-17-911, MCA (1987), to require a county to seize and sell at public auction the personal property against which the taxes were assessed. Under those statutes, the District Court reasoned that if a sale is not for the purpose of collecting delinquent property taxes, then the law does not allow a tax lien on the proceeds. Thus, the District Court held that Blaine County’s statutory remedies for collection of personal property taxes did not include the right to claim a prior lien on the auction proceeds. We disagree.

The statutes that specifically define and relate to taxes as judgments or liens and tax lien priority are § 15-16-401 and § 15-16-402(1), MCA (1987), which read as follows;

“15-16-401. Tax due as a judgment or lien. Every tax has the effect of a judgment against the person, and every lien created by this title has the force and effect of an execution duly levied against all personal property in the possession of the person assessed from and after the date the assessment is made. The county treasurer may issue a writ of execution for delinquent personal property taxes and deliver the writ to the sheriff. The sheriff shall thereupon proceed upon the writ in all respects, with like effect, and in the same manner prescribed by law in respect to executions issued against property upon judgments of a court of record and shall be entitled to the fees provided for in 15-17-911. The judgment is not satisfied nor the lien removed until the taxes are paid or the property sold for the payment thereof. (Emphasis added.)
“15-16-402. Tax on personal property lien on realty — separate assessment. (1) Every tax due upon personal property is prior lien upon any or all of such property, which lien shall have precedence over any other lien, claim, or demand upon such property, and except as hereinafter provided, every tax upon personal property is also a lien upon the real property of the owner thereof on and after January 1 of each year.” (Emphasis added.)

The language of these statutes establishes that the county has a right to a tax lien on all personal property of the taxpayer. This lien is inchoate and must be perfected by a levy and seizure of a specific item. The statutes do not restrict tax liens to the specific property against which the tax is assessed. We have previously so held in O’Brien v. Ross (1964), 144 Mont. 115, 394 P.2d 1013. By definition the term personal property includes money. See, § 15-l-101(l)(k)-(m), MCA. Thus tax liens can attach to money.

As well, § 15-16-401, MCA (1987), authorizes the sheriff upon receipt of a writ of execution for delinquent personal property taxes to “proceed upon the writ in all respects, with like effect, and in the same manner prescribed by law in respect to executions issued against property upon judgments of a court of record . . In other words, the statute accords the tax lien the same status as a court judgment and gives to the county the same execution remedies as a judgment creditor. Section 25-13-501, MCA, lists what property may be subject to execution to satisfy a judgment. In pertinent part, § 25-13-501, MCA, states the following:

“All goods, chattels, moneys, and other property, both real and personal, or any interest therein of the judgment debtor, not exempt by law, ... are liable to execution.” (Emphasis added.)

Because the county possesses the same execution remedies as a judgment creditor, the county has the right to execute on the auction proceeds (moneys) to collect delinquent personal property taxes.

The respondents direct our attention to §§ 15-16-113(2), 15-17-911, and 15-16-401, MCA (1987), relied upon by the District Court. All these statutes provide generally for the seizure and sale of personal property as a means of discharging a statutory tax lien. Respondents argue that the District Court correctly interpreted these statutes as limiting the county’s collection remedies to a tax sale of the property assessed. This contention is not only without merit but it is illogical. When the property seized to satisfy the tax is money, no sale is required.

Contrary to respondents’ assertion, as we outlined above, § 15-16-401, MCA (1987), squarely provides a mechanism for the county to perfect the tax lien by levy of execution and seizure just as a judgment creditor has a similar right of execution against a judgment debtor. Those remedies authorized in § 15-16-401, MCA (1987), include executing on cash funds such as the auction proceeds. Therefore, we hold that Blaine County has a right to a tax lien on the auction proceeds. Blaine County can levy the auction proceeds and use those moneys to satisfy Schwarz’s delinquent personal property taxes.

Because of our discussion above, we need not discuss other issues raised by the parties. We reverse the District Court and direct entry of judgment for appellants.

CHIEF JUSTICE TURNAGE and JUSTICES WEBER, BARZ, HUNT, SHEEHY and McDONOUGH concur.


source: Caselaw Access Project

author: JUSTICE McDONOUGH

license: Public Domain

text:
    ARDIS JEROME, Plaintiff and Appellant, v. WILLIAM H. PARDIS, D.C., and Pardis Chiropractic Clinic, P.C., Defendants and Respondents.
    No. 89-323.
    Submitted on Briefs Oct. 25, 1989.
    Decided Dec. 6, 1989.
    Rehearing Denied Jan. 4, 1990.
    783 P.2d 919.

      Joseph C. Engel, III, Great Falls, for plaintiff and appellant.
    J. David Slovak and Neil E. Ugrin, Ugrin, Alexander, Zadick & Slovak, Great Falls, for defendants and respondents.
   JUSTICE McDONOUGH

delivered the Opinion of the Court.

This appeal involves the imposition of sanctions under Rule 37, M.R.Civ.P. for abuses of discovery. Plaintiff Ardis Jerome appeals the order of the Eighth Judicial District Court, Cascade County, granting defendants’, William H. Pardis and Pardis Chiropractic Clinics, P.C., motion to dismiss Jerome’s cause of action with prejudice. We affirm.

Appellant Jerome raises a sole issue on appeal: Did the District Court abuse its discretion by dismissing Jerome’s lawsuit on the grounds that she violated Rule 37, M.R.Civ.P.?

Jerome’s complaint alleges that during treatment in early June of 1984, Dr. Pardis negligently caused a herniation of a disk at the L4/ L5 level of her spine. After filing of the complaint, Pardis served Jerome with several interrogatories and requests for production. The interrogatories requested Jerome to identify all persons who had treated her back condition and to supply information regarding previous or subsequent injuries, illness or problems involving her lower back. The requests required production of all Jerome’s medical records.

Jerome was served with the request for production on July 20, 1987. On December 8, 1987 Jerome produced medical records from various health care providers, including records from Dr. Mark T. Stoebe, D.C., the treating chiropractor who examined Jerome immediately after the visits with Pardis that allegedly caused her injury. Dr. Stoebe’s records included a letter dated October 8, 1986 to Jerome’s counsel, in response to questions by Jerome’s counsel regarding diagnosis of Jerome’s condition and whether Pardis’ treatment was appropriate. This letter produced by Jerome from Stoebe’s records stated:

“The following is a response to your letter dated September 22, 1986. I cannot state with certainty that Dr. Pardis’ treatment did in effect cause the low back condition that Ardis Jerome came to me complaining of, in that I did not see the patient prior to her adjustment on 6-7-84, although the condition that I examined on 6-8-84 was certainly an acute left lateral grade II disc protrusion of the 1*4 intervertebral disc. It is my experience that conditions of this type have some kind of traumatic history and I see no indication of previous trauma in Dr. Pardis notes. Also I note an absence of any orthopedic, neurological, or X-ray findings. Furthermore, the patient indicated on 6-8-84 that she had no previous history of sharp low back pain prior to her visit on 6-7-84.
“If you have any further questions . . . .”

At the September 1, 1988 deposition of Dr. Stoebe, Pardis learned that the letter produced by Jerome’s counsel was an apparent rewrite of Dr. Stoebe’s original letter of October 8, 1986. The longer version omitted the second to the last sentence and also included additional language after the first sentence, damaging to plaintiff’s case:

“. . . First of all a spondylolisthesis implies a congenital malformation of the pars inter articularis. The term applies to an anterior or forward slipping of the the body of the lower lumbar vertebrae relative to the pedicles. Research as of the last six months has pointed to a possible traumatic cause of this condition, although it is still speculative at this point. The reason for this theory is that a spondylolisthesis has never been found in any patient under 5 years of age.
“It appears as though the adjustments employed by Dr. Pardis on 6-7-84 were correct and indicated for his findings . . . (Letter continues with second sentence as quoted above.)

At his deposition Stoebe testified that both letters were in his file and that the entire file was supplied to Jerome’s counsel. Jerome’s counsel claims that the original letter was probably discarded, and did not need to be produced anyway because it supported and confirmed plaintiffs theory of liability and thus was not relevant to defendant’s case.

Jerome also produced only two pages of a handwritten three page history prepared by Jerome when she first visited Dr. Stoebe. The omitted page indicates in Jerome’s own writing that she hurt her back moving and lifting tables about two weeks prior to visiting Stoebe and before she visited Pardis, and that she had back trouble for the last 25 years.

Additionally, after assurances by Jerome’s counsel that full and complete responses to the production requests and interrogatories had been supplied, Jerome failed to identify a number of her past health care providers and subsequent depositions indicated that only a fraction of the medical records were supplied. Jerome also indicated in answering the interrogatories that she had never filed an insurance claim regarding her back problems. A subsequent deposition later revealed that a claim was in fact made in 1979.

On October 6, 1988, Pardis filed his motion for sanctions, alleging that Jerome and her counsel had committed blatant discovery abuses in violation of Rule 37, M.R.Civ.P. In its order of February 10, 1989, the District Court found that the discovery tactics pursued by the plaintiff had caused substantial prejudice to defendants that could not be corrected without defendants incurring considerable expense, particularly in re-deposing physicians who had relied on incomplete medical records. Because of the totality of the circumstances regarding the alleged abuses and the severity of the prejudice suffered by defendants the District Court dismissed Jerome’s claim with prejudice, resulting in this appeal.

This Court has followed the rationale of the United States Supreme Court’s holding in National Hockey League v. Metropolitan Hockey Clubs, Inc. (1976), 427 U.S. 639, 96 S.Ct. 2778, 49 L.Ed.2d 747, in adopting a strict policy of non-leniency toward discovery abusers and of allowing sanctions for deterrence purposes. Owen v. F.A. Buttrey Co. (1981),_Mont.__, 627 P.2d 1233, 38 St.Rep. 714. The authority used by the District Court to dismiss Jerome’s case is found at Rule 37(d), M.R.Civ.P., which is identical to its federal counterpart, and provides:

“Failure of party to attend at own deposition or serve answers to interrogatories or respond to request for inspection. If a party or an officer, director, or managing agent of a party or a person designated under Rule 30(b)(6) or 31(a) to testify on behalf of a party fails (1) to appear before the officer who is to take his deposition, after being served with a proper notice, or (2) to serve answers or objections to interrogatories submitted under Rule 33, after proper service of the interrogatories, or (3) to serve a written response to a request for inspection submitted under Rule 34, after proper service of the request, the court in which the action is pending on motion may make such orders in regard to the failure as are just, and among others it may take any action authorized under paragraphs (A), (B), and (C) of subdivision (b)(2) of this rule . . . .”

Rule 37(d), M.R.Civ.P. The actions authorized by Rule 37(b)(2)(A) - (C) include dismissal. Rule 37(b)(2)(C).

Rule 37(b) provides for sanctions for failure to comply with a court order compelling discovery. State ex rel. Burlington Northern v. District Court (1989), [239 Mont. 207,] 779 P.2d 885, 893, 46 St.Rep. 1625, 1634. Rule 37(d) authorizes the imposition of sanctions for 3 specific failures — 1) failure to attend at one’s own deposition, 2) failure to serve answer’s to interrogatories, or 3) failure to serve a written response to a request for production —without first requiring that the nonresponding party be ordered to comply. No second chance is contemplated. Thus, there is an important distinction between Rule 37(b) and Rule 37(d): under subsection (b) sanctions are not available without a previous court order; under subsection (d) no order is necessary, however, sanctions are only authorized for the three enumerated failures. Burlington Northern, 779 P.2d at 893. We have acknowledged this distinction in several former cases. See First Bank Billings (N.A.) v. Heidema (1986), 219 Mont. 373, 711 P.2d 1384; Dassori v. Roy Stanley Chevrolet Co. (1986), 224 Mont. 178, 728 P.2d 430; Thibodeau v. Uglum (1982), 201 Mont. 260, 653 P.2d 855.

Pardis contends that a prior motion to compel was not necessary in this case because the sanction of dismissal was imposed on the grounds of the abuses enumerated in Rule 37(d), rather than the more usual situation of a partial failure to comply. However, an immediate sanction imposed under Rule 37(d) generally contemplates a complete failure or outright refusal to cooperate. See Crowley, William F., Montana Pleading and Practice Forms, p. 175, 183, (1983). In the case at bar, the abuses complained of do not constitute an outright refusal to comply with discovery rules. Rather, Jerome has simultaneously complied with Pardis’ discovery requests on a partial level while actively withholding relevant information and documents in an attempt to conceal her medical history. Pardis apparently did not move for an order compelling discovery because it was not clear the information was being withheld until depositions were taken and the prejudice and taint of the abuses already complete.

In its order dismissing Jerome’s case, the District Court relied on G.K. Properties v. Redevelopment Agency (9th Cir. 1978), 577 F.2d 645, where the Ninth Circuit Court of Appeals held:

“Where it is determined that counsel or a party has acted willfully or in bad faith in failing to comply with the rules of discovery or with court orders enforcing the rules or in flagrant disregard of those rules or orders, it is within the discretion of the trial court to dismiss the action or to render judgment by default against the party responsible for non-compliance. Fed.R.Civ.P. 37(b).” (Emphasis added.)

577 F.2d at 647. The trial judge based his decision on Rule 37(d), however, the Ninth Circuit’ decision in G.K. Properties is actually based on subdivision (b) of the Rule. As we noted earlier, this case does not involve one of the three complete failures to comply with discovery enumerated in Rule 37(d). Furthermore, we decline to adopt the “bad faith” rationale of G.K. Properties as authority for imposing sanctions under Rule 37(b) without a prior court order in this case. Rather, we affirm the ruling of the District Court on the basis of Rule 26(g), M.R.Civ.P.

In cases where a trial judge sits without a jury and no testimony is taken, the scope of review on appeal is much broader, and this Court is free to make its own examination of the entire case and to make a determination in accordance with its findings. Shimsky v. Valley Credit Union (1984), 208 Mont. 186, 189-190, 676 P.2d 1308, 1310. We will also uphold the result reached below if correct, regardless of the reasons given for the conclusion. Shimsky, supra, Steadman v. Halland (1982), 197 Mont. 45, 52, 641 P.2d 448, 452. The result reached by the District Court is correct on the basis of Rule 26(g), M.R.Civ.P. The Rule was enacted in 1984 along with the amendments to its parallel, Rule 11, M.R.Civ.P., which governs abuses in pleadings and motion practice. Rule 26(g) provides:

“Rule 26(g) Signing of discovery requests, responses, and objections. Every request for discovery or response or objection thereto made by a party represented by an attorney shall be signed by at least one attorney of record in his individual name .... The signature of an attorney or party constitutes a certification that he has read the request, response, or objection, and that to the best of his knowledge, information, and belief formed after a reasonable inquiry it is (1) consistent with these rules and warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law; (2) not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation; and (3) not unreasonable or unduly burdensome or expensive, given the needs of the case, the amount in controversy, and the importance of the issues at stake in the litigation ....
“If a certification is made in violation of this rule, the court, upon motion or upon its own initiative, shall impose upon the person who made the certification, the party on whose behalf the request, response, or objection is made, or both, an appropriate sanction . . . .” (Emphasis added.)

Rule 26(g) M.R.Civ.P. By signing responses to the discovery re-, quested by Pardis, Jerome and her counsel certified that the responses were (1) consistent with the rules of discovery, (2) not interposed for for any improper purpose, and (3) not unreasonable or unduly burdensome. The certification fails on all three counts. The responses attempted to mislead Pardis by concealing information material to his defense. The responses would create an unreasonable burden and increased expense to Pardis in re-deposing witnesses whose prior testimony was given without the benefit of the improperly withheld information. Finally, withholding of this information by the plaintiff is clearly not consistent with the rules and spirit of discovery. Dismissal with prejudice is an appropriate sanction in this case. The District Court did not abuse its discretion.

AFFIRMED.

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


text:
    HOLLAND HUNTER, Henry F. Hunter, Florence Hunter, Deborah Hunter, Alison Hunter Kincade, Margaret S. Reynolds, Tom. H. Reynolds, and James H. Reynolds, Plaintiffs and Appellants, v. ROSEBUD COUNTY, a local government entity located in the State of Montana, et al., Defendants and Respondents.
    No. 89-129.
    Submitted Oct. 19, 1989.
    Decided Dec. 7, 1989.
    783 P.2d 927.

      Joseph W. Sabol argued, Bozeman, for plaintiffs and appellants.
    W.H. Bellingham argued, Moulton, Bellingham, Longo & Mather, Billings for True Oil Col, U.S.A. Petro. Corp., Carlson, Lair, Brown & Tesoro Petro. Corp.
    Rodd A. Hamman argued, Calton, Hamman, Calton & Wolff, Billings, for Enfield Energy.
    Thomas A. Ask argued, Ask & Pratt, Roundup, for Kincheloe, Mysse, Nielsen, Hendrix, Jennaway.
    Robert J. Waller, Veeder, Broeder & Michelotti, Billings, for Petro-Lewis Funds, Petro-Lewis Agency Corp., Petro-Lewis Corp.
    William E. Berger, Wilkins & Berger, Lewistown, Ferrell, Rydholm.
    Robert L. Johnson, Lewistown, for Johnson.
    McKinley Anderson, Bozeman, for Orleman.
   JUSTICE McDONOUGH

delivered the Opinion of the Court.

This is an appeal from an action instituted to quiet title to the minerals, mineral interest, and mineral estate previously severed from a parcel of real property located in Rosebud County Montana. Plaintiffs (hereinafter Hunters) appeal from an order granting summary judgment in favor of defendants, Boyd Kincheloe, True Oil Company, Petro-Lewis Funds Inc., et al. (hereinafter Kincheloes). We affirm. •

The issues on appeal are:

1. Whether there was a merger of the mineral estate and the remaining estate.
2. Whether the Hunters’ claims are barred by virtue of the doctrine of laches.

The facts of this case are complicated. On May 22, 1914, the United States issued a patent to the Northern Pacific Railway Company which included the land that is the subject of this cause of action. Northern Pacific owned the land until 1926. On December 17 of that year, it conveyed, by warranty deed, an undivided one-half interest to F.R. Bentley, and to Lena E. Hess and Dorothy A. Hess, an undivided one-quarter interest each. This deed specifically excepted the mineral estate as follows:

“. . . excepting and reserving unto the grantor, its successors and assigns, forever, all minerals of any nature whatsoever, including coal, iron, natural gas and oil upon or in said lands, together with the use of such of the surface as may be necessary for the exploring for and mining or otherwise extracting and carrying away of the same, ...”

Through conveyances the Bentley and Hess interests in the property was acquired by Harry and Hester Hunter on October 14, 1929.

Because taxes for the year 1928 had not been paid, after tax deed proceedings the county treasurer issued to Rosebud County a tax deed to the property. The tax deed was issued on August 15, 1932. At that time Northern Pacific still owned the mineral estate. Therefore, the tax deed only purported a conveyance of real property less the mineral estate. In 1933, the Northern Pacific Railroad quit-claimed its mineral estate “to the owner or owners of the . . . land.” Thereafter the plaintiffs succeeded to the interest of Harry and Hester Hunter.

Rosebud County, on December 3, 1945, quitclaimed its interest in the real property to Art Kincheloe. This deed of conveyance reserved unto the county a six and one-quarter percent (6 Vi %) royalty interest “of all oil, gas and minerals recovered and saved from the lands.”

On April 29, 1950, Art Kincheloe filed an action to quiet title to the property. Subsequently a judgment pursuant to the complaint was entered in favor of Kincheloe finding Kincheloe to be the owner in fee simple absolute of all the interest in the lands subject to the county’s royalty reservation. Art Kincheloe and his successors have remained in possession and use of the property since the conveyance by Rosebud County in 1945.

On January 2, 1978 drilling for oil and gas was commenced by lessees of Kincheloes, and since that time four oil and gas wells have been drilled. As of 1983, over eight million dollars in revenue had been realized from the wells.

In 1982, the Hunters filed a lawsuit against Rosebud County, the Kincheloes, and several oil lessees, seeking title to the mineral estate which included the oil and gas in the property. The only defendant originally served with summons and complaint was Rosebud County who was served during July of 1983. A judgment was filed on June 8, 1984 in favor of the Hunters and against Rosebud County as to the county’s 6V4% royalty interest and such interest is not involved in the present controversy nor was it appealed.

No further action was taken in the case until August of 1985. At that time, the remaining defendants were served. In 1988, the Hunters filed a motion for summary judgment, seeking judgment against the defendants. Subsequently, each of the defendants in this action filed a motion for summary judgment against the Hunters. The court found for the defendants and against the Hunters. This appeal followed.

The trial court ruled that there was a merger of the remaining estate and the mineral estate when the Northern Pacific quit claimed its mineral interest to “the owner or owners of the land.” Therefore, when the county conveyed the land to the Kincheloes, it conveyed the entire estate in the land including all interest in the mineral estate.

The Hunters disagree and maintain that once the mineral estate was severed from the remaining interest they could not merge into a unitary estate. According to the Hunters, mineral estates and the remaining estate are of equal dignity and estates of equal dignity can never merge. In order for a merger to occur there must be estates of greater and lesser dignity. Therefore, in order for Rosebud County to have conveyed the mineral estate to the Kincheloes, it would have been necessary to effect a separate conveyance of the mineral estate. Hunters maintain that the conveyance by the county without mentioning the mineral estate, by way of quitclaim, deed did not effectively transfer the mineral estate. In support of this argument, they rely upon a line of Texas cases. See Humphreys-Mexia Company v. Gammon (Texas 1923), 113 Tex. 247, 254 S.W. 296; Joyner v. R.H. Dearing and Sons (Texas 1937), 112 S.W.2d 1109.

We disagree with Hunters’ argument. Their assertion that the mineral estate and the remaining estate are of equal dignity is not correct. The general rule is that the owner of the mineral estate enjoys the dominant estate and the surface owner of the remaining estate holds the subservient estate. This theory is based upon the realities that accompany mineral exploration and development. Obviously, in order to fully utilize a mineral estate, one usually must have access to the surface. See Lacy, “Conflicting Surface Interests: Shotgun Diplomacy Revisited”, 22 Rocky Mtn. Min.L.Inst., 731 (1976). See also, Western Energy Co. v. Genie Land Co. (1981), 195 Mont. 202, 635 P.2d 1297.

When the Northern Pacific conveyed its previously excepted mineral estate to the owner or owners of the subservient remaining estate, and both estates came together in the same owner, the remaining estate was merged into the mineral estate and there is no reason for further existence as separate estates. Therefore an unrestricted grant by one who claims to be the owner of the remaining estate at the time of the Northern Pacific deed after the merger effected by such deed, conveys all estates in such real property. There is no need to specifically describe such individual estates. At this time Rosebud County claimed to be the owner and had as a minimum, color of title to the land and was the record title owner. It follows that the subsequent conveyance from the county to the Kincheloes transferred the county’s entire estate, including the mineral estate except for the royalty reservation previously noted. It was not necessary for the county to make separate and distinct transfers of the two estates. It has long been recognized that a conveyance of property without reference to the mineral estate carries with it all of the grantor’s interest in the mineral estate. Voyta v. Clonts (1958), 134 Mont. 156, 328 P.2d 655. Based upon this deed, the Kincheloes received at a minimum color of title to the surface and the minerals.

The District Court held that the Hunters were barred under the doctrine of laches from asserting any claim to the land or otherwise contesting the validity of the tax deed, which the Hunters maintain was void. It is argued by the Hunters that they were not required to take any positive steps to protect their interest in the mineral estate until active production began. Once production did begin they actively and promptly moved to protect their right, by filing this action within the five year period of limitation provided by § 70-19-401, MCA. Having met this obligation, they maintain that it cannot now be said that the doctrine of laches applies.

This argument, however, is not valid in light of our holding that a merger occurred between the surface and the mineral estates. Because there was a merger, and the two interests coincided in the Kincheloes, the doctrine of laches, if it applies, will apply to all of the interest in the land including the mineral estate. We must examine the doctrine of laches and apply its tenets to this case in order to determine whether it will bar the Hunters’ claims.

We begin our discussion by reviewing the pertinent elements of laches. There is no statutory defense of laches in Montana, it is a creature of equity. Cremer v. Cremer Rodeo Land and Livestock Company (1979), 181 Mont. 87, 592 P.2d 485. In Montana, there is no absolute rule as to what constitutes laches. In each case, it must be determined according to its own particular circumstances. It is not a mere matter of elapsed time, but rather, is principally a question of the inequity of permitting a claim to be enforced. Matter of Estate of Wallace (1980), 186 Mont. 18, 606 P.2d 136.

In two recent cases, this Court has had the opportunity to examine the doctrine of laches and apply it to circumstances similar to the case at bar. See Richardson v. Richland County (1985), 219 Mont. 48, 711 P.2d 777; Anderson v. Richland County (1985), 219 Mont. 60, 711 P.2d 784. In both Richardson and Anderson, this Court itemized significant factors which it considered in determining the issue of laches. We will apply these factors to this case.

1) The length of time which the present owners have used and occupied the land. “In 1945, Art Kincheloe, the respondents’ predecessor in interest, received a quitclaim deed from Rosebud County, conveying the real property involved in this case. Since that time, the Kincheloes have occupied and used the land. They have paid all real property taxes assessed against the property for almost fifty years.”

2) The length of time during which the plaintiffs and their predecessors abandoned the property and have not claimed any right to the physical possession of the land and have not paid any taxes assessed against the land.

“In 1932, the Hunters’ predecessor in interest and Hunters lost record title to the property due to their failure to pay real property taxes on the land in 1927 and 1928, and since that time neither they nor their successors have attempted to redeem the property by payment of the back taxes. It is clear, therefore, they have had no contact with the land for approximately fifty years.”

3) Whether the property interest claimed has become extremely valuable.

“The subject lands have greatly increased in value since the Kincheloes obtained title. Four oil and gas wells have been discovered yielding revenues of over eight million dollars.”

4) Whether or not the plaintiffs first learned of their claim after the discovery of oil.

“In response to Requests for Admissions propounded by True Oil Company, the Hunters admitted that they first learned of their possible claims after oil was discovered.”

5) Whether reimbursement of royalties will result in undue hardship upon the defendants.

“In this case, the Kincheloes and the oil companies would be responsible for the reimbursement of many thousands of dollars in revenues. In light of the resources put into the drilling and upkeep of the wells over a twelve year period, a reimbursement would work undue and unfair hardship upon the defendants.”

6) Whether or not there are principal parties to the tax deed proceedings who could furnish first hand knowledge of the facts surrounding the proceedings.

“At least two of the principal parties to the tax deed proceedings are now deceased. Art Kincheloe, the defendants’ predecessor in interest is dead, as is the chairman of the Board of County Commissioners who executed the 1945 deed. In view of the time which has elapsed, it appears unlikely that anyone who was involved with the tax deed proceedings or the delinquencies of the tax payments are still alive.”

7) Whether the plaintiffs have demonstrated any reason for the unexplained delay in claiming their asserted rights between the time of the tax deed, quit claim of minerals estate by Northern Pacific, and the filing of the complaint.

“In this case, no testimony of any kind has been introduced either orally or in documentary form to account for such delay. During oral argument, the attorney for the Hunters maintained that they did not do anything to protect their interest between the time of the tax deed until the filing of the complaint because they did not have to act until actual extraction began. However, we note that during this time period of approximately fifty years the Hunters made no effort to remain in contact with the property. As a result of this neglect, they failed to respond to a quiet title action brought by the Kincheloes in 1950, despite the fact that they were named as defendants and were served by publication. This action resulted in a decree quieting title in the name of the Kincheloes in fee simple absolute, which necessarily carries with it all interests in the minerals. It is presumed that a person stays in contact with his property. The fact that the Hunters did not respond to the quiet title action and did not remain in contact with the land for approximately fifty years leads to the conclusion that any claim they may have had comes within the doctrine of laches.”

8) Whether the plaintiffs sought to redeem the property and assert their title at any time.

“Neither the plaintiffs nor their predecessors in interest have paid any of the real property taxes levied against the property since 1927. None of the foregoing parties have ever sought to redeem the property from the tax sale. This is especially pertinent in view of our holding there was a merger of title. They have not acted in any way which would assert that they were the “owners” at the time the Northern Pacific executed its quit claim deed in 1933, except this belated quiet title action.”

It is clear that all of the significant factors which this Court considered in the Richardson and Anderson cases have been answered in favor of the Kincheloes and against the Hunters. Hunters attempt to distinguish the instant case from Richardson and Anderson, by pointing out that this case does not involve royalty interests held by a county. Therefore, unlike those two cases, a ruling in favor of the Hunters will not deprive the county of revenue nor overburden the taxpayer by forcing reimbursement of the royalties. We note, however, that a decision in favor of the Hunters would create a significant hardship upon the Kincheloes and the leaseholders by not only eliminating their interests in the mineral and leasehold estates and all its ramifications and loss of investment, but by also requiring payment of thousands of dollars in royalties. The doctrine of laches was created to avoid such inequitable results. We therefore hold that the Hunters are barred by laches from contesting the validity of the tax deed. Moreover, because we have also held that a merger occurred between the remaining estate and mineral estate, it follows that the Hunters are similarly barred from contesting the Kincheloes title to the mineral estate.

In view of our holding that the doctrine of laches applies to the Hunters it is not necessary to discuss issues relating to adverse possession and res judicata. The District Court in granting judgment for the defendants is affirmed.

CHIEF JUSTICE and JUSTICES BARZ, WEBER, HARRISON and HUNT and the HONORABLE PETER L. RAPKOCH, District Judge, sitting for JUSTICE SHEEHY, concur.


author: CHIEF JUSTICE TURNAGE

text:
    STATE OF MONTANA, Plaintiff and Respondent, v. DUANE ROBERT LARSON, Defendant and Appellant.
    No. 88-577.
    Submitted on Briefs Oct. 25, 1989.
    Decided Dec. 8, 1989.
    783 P.2d 416.

      Charles M. Joslyn, Choteau, for defendant and appellant.
    Marc Racicot, Atty. Gen., James Yellowtail, Asst. Atty. Gen., Helena, Russell R. Andrews, Teton County Atty., Choteau, for plaintiff and respondent.
   CHIEF JUSTICE TURNAGE

delivered the Opinion of the Court.

Duane Robert Larson appeals from his conviction of burglary and theft (misdemeanor) in a jury trial in the District Court for the Ninth Judicial District, Teton County. We affirm.

The issues are:

1. Did the District Court err by converting Count II from a charge of felony theft to a charge of misdemeanor theft?
2. Was sufficient proof of ownership of the property presented?
3. Was the jury properly instructed on the offense of theft?
4. Was the jury properly instructed on accomplice testimony?

In October 1985 a quonset shed on the Luinstra farm was broken into and a Craftsman tool chest, battery charger, and various tools were stolen. The crime remained unsolved until, two years later, Larson’s wife and teenage stepson reported to a county deputy sheriff that Larson and the stepson had stolen a tool chest out of the Luinstra’s shed. Larson was charged with the offense in February 1988.

At trial, the stepson recanted his statement to the deputy sheriff. He said he had lied because he was angry with Larson. However, Larson’s wife’s uncle testified that sometime in 1986, Larson had sold him a Craftsman tool chest, some tools, and a battery charger. These items were placed into evidence. The uncle testified that Larson had told him that he got the tool chest from his father, that he had found the tools in various places, and that he bought the battery charger from a pawnshop. Mike Luinstra identified the tool chest as the farm’s. Sam Luinstra identified several of the tools and the battery charger as identical to those which had been stolen.

At the end of trial, the judge reduced the theft charge from felony to misdemeanor, based on the evidence concerning the value of the items stolen. The jury returned a verdict of guilty on both counts. Larson was sentenced to a term of ten years, based in part upon his previous criminal record.

I

Did the District Court err by converting Count II from a charge of felony theft to a charge of misdemeanor theft?

As stated above, the court reduced this charge after receiving evidence of the value of the items taken. Larson argues that after it reduced the theft charge to a misdemeanor, the court was no longer within its jurisdiction because the statute of limitations for a misdemeanor is one year under § 45-l-205(2)(b), MCA. The crime occurred in October 1985 and the information was filed against Larson on February 17, 1988.

As a general rule, a defendant may not be convicted of a lesser included offense when the statute of limitations has run on that offense but not on the larger offense charged. See, Criminal Law Commission Comments, § 45-1-205, MCA. However, in this case, no objection was made in the lower court to reduction of the theft charge to a misdemeanor, nor was objection made to the instruction on misdemeanor theft. The question then becomes whether it is too late for Larson to bring this claim. The State points out that this Court has categorized statutes of limitation as a defense which is waived if not raised before conviction. State v. Atlas (1926), 75 Mont. 547, 244 P. 477. But, this Court has more recently held that the statute of limitations is a jurisdictional issue. Milanovich v. Milanovich (1982), 201 Mont. 332, 334, 655 P.2d 963, 964, aff’d after remand, 215 Mont. 367, 697 P.2d 927. Therefore, § 46-20-701(2), MCA, governs.

“(2) Any error, defect, irregularity, or variance which does not affect substantial rights shall be disregarded. No claim alleging an error affecting jurisdictional or constitutional rights may be noticed on appeal, if the alleged error was not objected to as provided in 46-20-104, unless the defendant establishes that the error was prejudicial as to his guilt or punishment and that:

“(a) the right asserted in the claim did not exist at the time of the trial and has been determined to be retroactive in its application;
“(b) the prosecutor, the judge, or a law enforcement agency suppressed evidence from the defendant or his attorney that prevented the claim from being raised and disposed of; or “(c) material and controlling facts upon which the claim is predicated were not known to the defendant or his attorney and could not have been ascertained by the exercise of reasonable diligence.”

The statute requires both that the error was prejudicial to defendant’s guilt or punishment and that condition (a), (b), or (c) was met. Larson has not presented any argument that his claim qualifies under (a), (b), or (c) as one not required to have been raised at trial. We conclude that this claim is precluded because it is raised for the first time on appeal.

II

Was sufficient proof of ownership of the property presented?

Larson contends that ownership was not sufficiently proven because of the sloppiness of the State’s proof on whether the stolen items belonged to Mike Luinstra, Sam Luinstra (Mike’s father), or the corporation, Sam Luinstra & Sons, Inc. The State argues that proof of possession was sufficient.

“In Montana, proof of possession suffices to prove ownership for purposes of theft. [Citations omitted.] This is true whether an individual or a corporation is the owner of the property.”

State v. Johnson (1982), 199 Mont. 211, 217, 646 P.2d 507, 511. We hold that sufficient proof of ownership of the stolen property was made in the testimony of Sam and Mike Luinstra that the stolen property was possessed by them at their farm.

III

Was the jury properly instructed on the offense of theft?

Larson objects to Instruction No. 15:

“To convict the defendant of the charge of theft, the State must prove the following elements:
“First: That Sam Luinstra and Mike Luinstra were the owner or owners of the Craftsman 10-drawer toolbox, with numerous tools, 6 gallons Tru-Value antifreeze, one (1) Hi-Lift Jack, and one (1) Black and Decker Vfe” drill in questions [sic]; and
Second: That the defendant purposely or knowingly obtained or exerted unauthorized control over the property just described; and
“Third: That the defendant had the purpose of depriving Sam Luinstra and Mike Luinstra of the property;
“If you find from your consideration of all the evidence that each of these elements has been proved beyond a reasonable doubt, then you should find the defendant guilty of misdemeanor theft.
“If, on the other hand, you find from your consideration of all the evidence that any of these elements has not been proved beyond a reasonable doubt, then you should find the defendant not guilty.” Larson’s objection is that the instruction is a comment on the evidence in that it assumes Sam and Mike Luinstra were the owners of the property and that the State proved that specific property had been taken.

Larson’s argument is without merit. The sentence after “First” in Instruction No. 15 gave the jury the task of determining whether the State had proven that Sam and Mike Luinstra were the owners of the property. The sentence after “Second” gave the jury the task of determining whether the State had proven that the specific property had been taken. The next-to-last sentence set forth the requirement that the State must prove each element of its case beyond a reasonable doubt. We hold that the court did not err in giving Instruction No. 15.

IV

Was the jury properly instructed on accomplice testimony?

argues that the jury was not adequately instructed on what corroboration is and what is required for corroboration of an accomplice’s testimony. The jury was given the following instruction regarding the testimony of the accomplice, Larson’s stepson:

presented that witness, Travis McLaughlin, may be an accomplice in this case. In this respect, you are to be guided by the following rules of law:
is one who knowingly and voluntarily, with common intent with the principal offender, unites in the commission of a crime. One may become an accomplice by being present and joining the criminal act, by aiding and abetting, with criminal intent, another in its commission or in being present by advising and encouraging its commission, but knowledge and voluntary action are essential in order to impute guilt.
“2) It is a question of fact for the jury to determine from the evidence and from the law as given you by the Court, whether or not, in this particular case, witness, Travis McLaughlin, was or was not an accomplice within the meaning of the law.
“3) The testimony of an accomplice ought to be viewed with distrust.
“4) A conviction cannot be had on the testimony of an accomplice unless he is corroborated by other evidence which in itself, and without the aid of the testimony of the accomplice, tends to connect the Defendant with the commission of the offense, and the corroboration is not sufficient if it merely shows the commission of the offense or the circumstances thereof.”

This instruction is virtually identical to Instruction No. 1-012, Montana Criminal Jury Instructions. Paragraph 4 addresses the definition of corroboration. It accurately reflects the law as summarized in State v. Case (1980), 190 Mont. 450, 455-56, 621 P.2d 1066, 1070. We hold that the jury was adequately instructed on accomplice testimony.

Affirmed.

JUSTICES HARRISON, HUNT, McDONOUGH and WEBER concur.


author: JUSTICE HUNT

text:
    In re the MARRIAGE OF LINDA WINSTON McFARLAND, Petitioner and Appellant, and WILLIS LEE McFARLAND, Respondent and Respondent.
    No. 89-103.
    Submitted on Briefs Oct. 13, 1989.
    Decided Dec. 8, 1989.
    783 P.2d 409.

      Ralph T. Randono, Great Falls, for petitioner and appellant.
    Richard L. Beatty, Anderson, Beatty & Buyske, Shelby, for respondent and respondent.
   JUSTICE HUNT

delivered the Opinion of the Court.

Linda McFarland, petitioner and appellant, appeals from the property division and award of child support mandated in the judgment entered by the District Court of the Ninth Judicial District, Pondera County. We affirm in part and reverse and remand in part for a modification of child support and equitable division of stock consistent with this Opinion.

The issues raised on appeal are:

1. Whether the District Court properly excluded husband’s share of McFarland and Sons stock as a marital asset.
2. Whether the District Court properly divided West Star stock between the parties.
3. Whether the District Court properly ruled that husband had complied with the full disclosure of his financial situation.
4. Whether the District Court properly assessed child support amounts in accordance with the Uniform District Court Guidelines on Child Support.

Linda and Willis McFarland were married on April 21, 1979. Two children were born of the marriage, ages six and eight. Willis adopted Linda’s daughter from a former marriage, age seventeen. Prior to the marriage, Linda was working as a registered nurse. Also prior to the marriage, Willis was gifted 1214 percent of stock on his parents’ family farm. The farm was incorporated under the name of McFarland and Sons with the parents retaining 51 percent of the stock and gifting 1214 percent to each of four sons. Until 1986 when the corporation was restructured, McFarland and Sons provided Willis with a furnished house, food, utilities, vehicles, gasoline, insurance, and paid him a salary of $700 per month. Linda also worked for McFarland and Sons and was paid accordingly.

parties separated in March of 1986. At about the same time, McFarland and Sons restructured the corporation. As a consequence of the restructuring, Willis formed a corporation under the name of West Star Farm, Incorporated. Willis owned 100 percent of the stock of West Star and he and his accountant comprised the board of directors. West Star borrowed in excess of $115,000 to finance the newly organized corporation. With the loan, West Star purchased machinery, summer fallow, the farm home that he and Linda lived in, and approximately twenty acres of land from McFarland and Sons. Also, West Star rented a portion of land from McFarland and Sons under a cash payment which, at the time of the hearing, was in excess of $54,000 per year to be negotiated yearly.

Since West Star’s incorporation, Willis is no longer an employee of McFarland and Sons. West Star now provides Willis housing, groceries, utilities, vehicles, gasoline, insurance, various other living expenses, and pays him a salary of $400 per month. The net effect of Willis’s salary and benefits is approximately $17,280 per year.

Linda is working as a surgical nurse with an income of $21,000 to $22,000 per year. She resides, with the three children, in a rented home.

A dissolution hearing was held on July 5, 1988. The District Court entered its findings of fact and conclusions of law on September 2, 1988, and its judgment on September 14, 1988. During the hearing, Willis submitted the balance sheets of McFarland and Sons which reflected his financial situation with the corporation. Linda objected to the balance sheets as insufficient and argued a lack of full disclosure because financial statements were not produced.

The District Court ordered that Willis pay child support in the amount of $400 per month total for the three children and that Linda was entitled to claim the children as tax deductions. It also found that the McFarland and Sons stock would not be included in the marital estate since Linda did not contribute to the facilitation or maintenance of the stock during the marriage. The court ordered that Linda receive $2,500 as her share of stockholder equity in West Star and that Willis retain the West Star stock. Stockholder equity in West Star was valued at $31,600, subject to yearly fluctuations.

The first issue raised on appeal is whether the District Court properly excluded husband’s share of McFarland and Sons stock from the marital estate.

In the mid-70’s, Willis acquired 1214 percent stock in McFarland and Sons, as did his three brothers, by virtue of a gift from his parents. While Willis’s parents gifted each son 1214 percent stock, only two sons, including Willis, worked the farm and were compensated for their services. Willis’s parents retained controlling stock in the corporation.

During the parties’ marriage, Linda worked for McFarland and Sons and was duly compensated. Linda brought no assets into the marriage. She argues that Willis’s interest in McFarland and Sons should have been included in the marital estate and that the District Court erred in not including it. We disagree.

Under § 40-4-202(1) (b), MCA, the District Court shall consider the contributions of the non-acquiring spouse and the extent that the contributions facilitated the maintenance of the property. Under In re the Marriage of Herron (1980), 186 Mont. 396, 404, 608 P.2d 97, 101, we stated that the District Court must consider all property, including that received by gift, but that:

“If none of the value of the property is a product of contribution from the marital effort, the District Court can justifiably find that the non-acquiring spouse has no interest in the property.”

Here, the District Court specifically found that the value of the stock decreased during the last few years of the marriage and that Linda did nothing to contribute to the facilitation or maintenance of the stock during the marriage. In fact, Linda was monetarily compensated for any work performed for McFarland and Sons. Where a spouse does not contribute, the District Court may exclude the asset from the marital estate. See In re the Marriage of Luisi (Mont. 1988), [232 Mont. 243,] 756 P.2d 456, 458, 45 St.Rep. 1023, 1025. The District Court exercised proper discretion in excluding the stock from the marital estate.

The second issue raised on appeal is whether the District Court properly divided West Star stock between Linda and Willis.

Here, the District Court awarded Linda $2,500 as her share of stockholder equity in West Star and ordered that Willis retain the stock. Stockholder equity was valued at approximately $31,600, subject to yearly fluctuations. Linda argues that the division is inequitable. We agree.

The standard of review to be applied in a distribution case is that where the District Court based its distribution of marital assets on substantial credible evidence, it will not be overturned absent a clear abuse of discretion. In re the Marriage of Johns (Mont. 1989), [238 Mont. 256,] 776 P.2d 839, 840, 46 St.Rep. 1249, 1251. See also In re the Marriage of Stewart (Mont. 1988), [232 Mont. 40,] 757 P.2d 765, 767, 45 St.Rep. 850, 852; In re the Marriage of Watson (Mont. 1987), [227 Mont. 383,] 739 P.2d 951, 954, 44 St.Rep. 1167, 1170. We will reverse the District Court upon a showing of abuse of discretion. Johns, 776 P.2d at 840.

In this case, Willis incorporated West Star Farm at approximately the same time the parties separated. West Star accumulated approximately $31,600 in equity. The court in its findings stated that Linda did contribute to West Star and that her nonmonetary contributions as a homemaker did facilitate the maintenance and operation of the corporation. Thus, Linda was entitled under § 40-4-202(l)(b), MCA, to a share of the corporate equity. In light of the above facts, the District Court did abuse its discretion in awarding Linda a mere $2,500. We reverse on this issue and remand to the District Court for an equitable distribution of the stock as valued at the time of the District Court’s decree to be consistent with this Opinion.

The third issue raised on appeal is whether the District Court properly ruled that Willis had complied with the full disclosure of his financial situation.

In Fautsch v. Fautsch (1975), 166 Mont. 98, 102-103, 530 P.2d 1172, 1175, we stated that the parties must completely disclose money and assets accumulated during the marriage. In the present case, Linda claims that Willis failed to disclose financial information regarding McFarland and Sons stock because he did not provide her with the books of. the corporation. The record, however, indicates that Willis did provide her with the balance sheets of the corporation.

The District Court relied on the balance sheets to determine McFarland and Sons stock value. We hold that the balance sheets provided sufficient financial information regarding McFarland and Sons stock.

The last issue raised on appeal is whether the District Court properly based child support amounts in accordance with the Uniform District Court Guidelines on Child Support.

The court ordered that Willis pay Linda $400 per month child support for their three minor children. Linda argues that the court abused its discretion in setting the amount because the guideline amount she offered established that an amount of $263 a month per child or a total of $789 a month. Willis did not submit a guideline form.

An award of child support is governed by § 40-4-204, MCA, which presently provides in pertinent part and applies to this modification as:

“(b) the financial resources of the custodial parent;
“(3) (a) Whenever a court issues or modifies an order concerning child support, the court shall determine the child support obligation by applying the standards in this section and the uniform child support guidelines adopted by the department of social and rehabilitation services pursuant to 40-5-209, unless the court finds by clear and convincing evidence that the. application of the standards and guidelines is unjust to the child or to any of the parties or is inappropriate in that particular case.
“(b) If the court does not apply these standards and guidelines to determine child support, it shall state its reasons for finding that the application of such standards and guidelines is unjust to the child or a party or is inappropriate in that particular case.” (Emphasis added.)

The District Court will be reversed on appeal only where there has been a “clear abuse of discretion resulting in substantial injustice.” In re the Marriage of Hoffmaster (Mont. 1989), [239 Mont. 84,] 780 P.2d 177, 46 St.Rep. 1531. See also In re the Marriage of Alt (1985), 218 Mont. 327, 333, 708 P.2d 258, 261.

As the court stated in its findings, Willis’s living arrangement gave him a monthly imputed income of $1,040 plus a monthly salary of $400 for a total yearly annualized income of $17,280. In the court’s conclusions of law it notes, “This amount [$400] is reasonable as determined according to the Supreme Court Child Support Guidelines.” The amount of child support awarded, when taking Willis’s annualized income into consideration, results in substantial injustice.

Affirmed in part and reversed and remanded for a modification of child support and equitable division of stock consistent with this Opinion.

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


author: CHIEF JUSTICE TURNAGE JUSTICE HUNT,

text:
    STATE OF MONTANA, Plaintiff and Respondent, v. SAMUEL MARK DOWNING, Defendant and Appellant.
    No. 89-155.
    Submitted on Briefs Oct. 20, 1989.
    Decided Dec. 8, 1989.
    783 P.2d 412.
    JUSTICE HUNT concurred in result with a statement.

      Martin John Elison, Missoula, for defendant and appellant.
    Marc Racicot, Atty. Gen., James Yellowtail, Asst. Atty. Gen., Helena, John W. Robinson, Ravalli County Atty., Margaret Tonan, Deputy County Atty., Hamilton, for plaintiff and respondent.
   CHIEF JUSTICE TURNAGE

delivered the Opinion of the Court.

Samuel Downing appeals his conviction of accountability in the sale of dangerous drugs, methamphetamine, following a jury trial in the Fourth Judicial District Court, Ravalli County. We affirm.

The appellant raises the following issues:

1. Did the District Court err by failing to grant the defendant’s motion for a directed verdict following the State’s case-in-chief?
2. Does the record contain sufficient evidence to support the jury verdict?

The facts are not in dispute. The State’s case-in-chief relied on the testimony of Agents Mark Brady and Robert Fairchild of the Montana Criminal Investigation Bureau. They testified that together with an unidentified informant, they formed an undercover team which attempted to purchase illicit drugs in Hamilton, Montana. The informant identified potential sellers and Agent Brady made contact. Agent Fairchild acted as backup officer monitoring and taping the conversations through a “wire” worn by Brady.

The informant introduced Brady to the appellant as a possible source of drugs. When Brady asked the appellant if he could buy some “crank” or methamphetamine, Downing indicated that he had none, but arranged a meeting between Brady and Earl Ohl. Ohl also had no crank, but expected to receive a shipment that evening.

The following day while in route to Ohl’s house to purchase the drugs, Agent Brady and the informant came across the appellant. Downing accompanied the party to Ohl’s home where Ohl introduced Brady to Mark Huskins. Huskins sold Brady one gram of methamphetamine for $110. Brady, Downing, Ohl, and Huskins were all present during the sale. On their way out, Brady passed $10 to Downing.

The defense consisted of testimony by appellant Downing and his girlfriend, Julie Phelps. They corroborated most of the facts as given by Agents Brady and Fairchild, but emphasized the inadequacy of the connection between Downing’s assistance and Huskins’ drug sale. Downing admitted that he helped set up a deal between Brady and Ohl, but testified that he was not aware that Huskins would actually make the sale. He testified that he did not introduce Brady to Huskins, did not encourage the sale, and took no part in the transaction.

The issues presented are whether the record contains sufficient evidence to sustain the trial court’s refusal to grant the defendant’s motion for a directed verdict and to sustain the jury’s verdict. The decision to grant or refuse a directed verdict is within the trial court’s discretion. State v. Miller (Mont. 1988), [231 Mont. 497,] 757 P.2d 1275, 1282, 45 St.Rep. 790, 798. Whether a defendant is an accomplice, however, is a question for the jury. State v. Gonyea (1987), 225 Mont. 56, 59, 730 P.2d 424, 426. The trial court’s standard in considering a directed verdict, and this Court’s standard in reviewing the trial court decision, gives full consideration to the jury’s role.

“The relevant question is whether after viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt.”

Miller, 757 P.2d at 1283, 45 St.Rep. at 798. (Citation and emphasis deleted.)

This is the same standard for this Court in determining whether the evidence was sufficient to warrant the jury’s verdict. Miller, 757 P.2d at 1286, 45 St.Rep. at 803. We must determine whether a reasonable jury could have found the essential elements of accountability following the State’s case-in-chief and following the defendant’s case-in-chief.

The relevant accountability section incorporates the essential elements.

“A person is legally accountable for the conduct of another when:
“[1] either before or during [2] the commission of an offense [3] with the purpose to promote or facilitate such commission, [4] he solicits, aids, abets, agrees, or attempts to aid such other person in the planning or commission of the offense.”

Section 45-2-302(3), MCA. (Enumeration added.)

The first element is not in dispute. The appellant does not contend that evidence fails to show that Downing’s actions occurred prior to or during the underlying offense.

The second element requires that accountability be predicated upon a separate, underlying offense. See Matter of B.D.C. (1984), 211 Mont. 216, 221, 687 P.2d 655, 657 (holding that accountability is not a separate offense). According to the information filed against Downing, the underlying offense was Huskins’ sale of methamphetamine. The parties do not dispute that the underlying crime actually occurred, but they apparently have some contentions as to its parameters for accountability purposes. Downing’s accountability is predicated only upon Huskins’ sale of drugs. It does not attach to any illegal acts by Earl Ohl. Nor does it attach to Agent Brady’s purchase of drugs. See State v. Stokoe (1986), 224 Mont. 461, 464-65, 730 P.2d 415, 417 (holding that the sale and purchase of drugs are distinct crimes). The question, then, is limited to whether Downing assisted Mark Huskins in selling drugs.

The third element goes to the defendant’s mental state. The statute requires only that the defendant purposely abetted the crime. This Court, however, also requires the accomplice to act “knowingly, voluntarily and with common intent with the principal offender . . . .” Gonyea, 225 Mont., at 58, 730 P.2d at 426; State v. Nordahl (1984), 208 Mont. 513, 517, 679 P.2d 241, 243. “Purposely” is defined as having the conscious objective to engage in the criminal act or cause the criminal act. Section 45-2-101(58), MCA. “Knowingly” is defined as aware that it is highly probable that the criminal act will result. Section 45-2-101(33), MCA.

Regardless of whether the “purposely” or “knowingly” standard is applied, we, like the jury, are faced with the same decisive question: what criminal act did Downing intend to abet? Downing admittedly intended to abet Agent Brady in purchasing crank. In so doing, the appellant necessarily intended to aid someone in selling the drugs. The appellant argues that he intended only to facilitate a sale by Earl Ohl. He asserts that he did not envision a sale by Mark Hus-kins and therefore is not accountable for that sale. The District Court and the jury found this interpretation of the evidence to be much too narrow and we agree.

During the State’s case-in-chief, Agent Brady testified as follows:

“Q. What happened once you . . . made contact with the defendant? What then happened?
“A. There were conversations between myself, the informant, and Mr. Downing about the availability of dangerous drugs.
“Q. What did you ask specifically? Do you recall?
“A. At one point in time, Mr. Downing asked what type of drug we were looking for and I mentioned crank.
“Q. Once that made known [sic] to the defendant, what then happened?
“A. Mr. Downing told the informant and myself that he did not currently have any but that an individual by the name of Earl may have some, and he would have to check with Earl.”

Agent Brady also testified about a conversation between himself and Downing following the drug sale at Earl Ohl’s residence:

“Q. Was there any conversation after the $10.00 was transferred to the defendant?
“A . . . Asked if he knew of anything else in the area. At that time he didn’t know but he told us to — if that — if we needed anything at a later date and time to go ahead and contact him and he would see what was available.”

Viewing this evidence in the light most favorable to the prosecution, a reasonable jury could have found that the appellant intended to aid in a drug sale by whomever had the drugs available. Downing’s intent was not necessarily limited to a sale by Earl Ohl. Brady initiated an open invitation to purchase drugs from whomever Downing could contact. On the testimony presented, the fact that Ohl happened to be the most accessible dealer, would not preclude a jury from finding that the appellant intended to abet a drug sale by some other individual.

An open-ended intent does not conflict with the requirement that the accomplice have a common intent with the principal offender. The ’two parties may move independently toward accomplishing the same goal. The accomplice need not know all the details of the underlying crime. The evidence is undisputed that both Downing and Huskins intended to accomplish a sale of drugs to Agent Brady. We hold that the District Court did not abuse its discretion in refusing to grant the appellant a directed verdict.

The evidence that the appellant intended to aid an open-ended drug sale became even stronger with Downing’s own testimony. Downing indicated that he would begin his search for drugs with Earl Ohl but also indicated that he did not intend to limit his search to Earl Ohl. Downing testified,

“[T]he informant, asked me if I knew where to get any speed, and I said I didn’t have any but Earl would probably be as good a place to start as any.”

We hold the record contained sufficient evidence to support the jury’s determination that the appellant intended to aid in the sale of dangerous drugs which was accomplished by Mark Huskins.

The fourth element goes to the unlawful acts committed by the defendant. We have repeatedly stated the rules on what acts give rise to accountability and will not unnecessarily repeat them here. We do note that both the appellant and the State offered evidence and now debate whether the sale would have taken place without Downing’s assistance. The “but for” test is not decisive in accountability. The accountability statute allows for attempts to aid in the underlying crime. The Montana statute permits conviction of a defendant who tried but failed to abet a crime so long as the underlying crime succeeded. Thus, the question under this element is not whether the defendant’s acts were a prerequisite to the underlying crime, but whether the defendant acted to abet the crime.

The record is sufficient to support both the refusal of a directed verdict and the jury verdict on this element. By directing Brady to Ohl, the appellant set in motion a chain of events which eventually led to the Huskins sale.

Appellant Downing shares responsibility for this drug sale. He set up the transaction and participated at every stage. He would have us overturn his conviction on the grounds that he failed to foresee every detail. The District Court and the jury correctly refused to exonerate Downing simply because Huskins, rather than Ohl, handed the drugs to Agent Brady.

Affirmed.

JUSTICES HARRISON, SHEEHY and McDONOUGH con'cur.

JUSTICE HUNT,

concurring in the result:

I concur in the result but not in all that is said.


text:
    JAMES A. QUINN, JR., Claimant and Respondent, v. BUILDERS TRANSPORT, INC., Employer, and EBI/Orion Group, Inc., Defendant and Appellant.
    No. 89-377.
    Submitted Nov. 2, 1989.
    Decided Dec. 8, 1989.
    783 P.2d 406.

      Kelly M. Wills, Garlington, Lohn & Robinson, Missoula, for defendant and appellant.
    Kurt M. Jackson, Hoyt & Blewett, Great Falls, for claimant and respondent.
   JUSTICE HUNT

delivered the Opinion of the Court.

Builders Transport and EBI/Orion Group, defendants and appellants, appeal from the findings of fact and conclusions of law and judgment of the Workers’ Compensation Court which found James Quinn, Jr., claimant and respondent, permanently partially disabled and entitled to 500 weeks of benefits at $143 per week with a lump sum advancement. We affirm.

The following issues are raised on appeal:

1. Whether the Workers’ Compensation Court based its finding that claimant was incapable of maintaining full-time employment on substantial credible evidence.
2. Whether the Workers’ Compensation Court properly calculated claimants’ post-injury earning capacity.

On January 5, 1985, Quinn sustained a herniated disc in his lower back while attempting to shift the load on his truck. At the time of the accident, he was working in the course and scope of his employment as a truck driver for Builders Transport. Quinn reached a medically stable condition in February of 1985. Two months after his accident, Quinn returned to Builders Transport to work as a truck dispatcher. Quinn worked as a dispatcher for 15 months but was terminated on April 18, 1986, due to chronic back pain.

Quinn attended pain clinics in Missoula, Montana, and Portland, Oregon. The Portland pain center released a discharge summary on September 25, 1987, which stated that Quinn would be unable to return to his former employment as a truck driver.

Defendants paid Quinn temporary total disability benefits and certain medical benefits until February 19, 1988. It then informed him that his benefits would be reduced to permanent partial disability benefits at $143 per week.

On October 19, 1988, a trial was conducted before the Workers’ Compensation hearing examiner in Great Falls. The hearing examiner found that Quinn’s pre-injury earning capacity was $8.53 per hour for 45 hours per week, that his post-injury earning capacity was $6.55 per hour for a maximum of 20 hours per week, and that he was incapable of full-time employment. Quinn was also found to be permanently partially disabled under § 39-71-703, MCA. On April 11, 1989, the Workers’ Compensation judge entered an order adopting the hearings examiner’s findings of fact and conclusions of law and entered judgment for 500 weeks of permanent partial disability benefits at $143 per week. The court ordered that Quinn receive a $15,553 lump sum advance on his compensation benefits and that defendants be entitled to an appropriate reduction. Quinn was also awarded reasonable costs and attorney fees pursuant to § 39-71-612, MCA.

On April 28, 1989, defendants filed a motion with the court to amend judgment or for an order granting a new trial based on erroneous findings. On June 13, 1989, the court ordered that the motion be denied and found that the findings and conclusions were not clearly erroneous as would be required to grant the motion. From the order defendants appeal.

The first issue defendants raise on appeal is whether the Workers’ Compensation Court based its finding that Quinn was incapable of full-time employment on substantial credible evidence.

Defendants correctly note that decisions of the Workers’ Compensation Court must be based on substantial credible evidence. Snyder v. San Francisco Feed and Grain (Mont. 1987), [230 Mont. 16,] 748 P.2d 924, 929, 44 St.Rep. 2216, 2224. This Court’s function, upon review of the Workers’ Compensation Court, is to determine whether such evidence exists to support the court’s findings of fact and conclusions of law. Hartman v. Staley Continental (Mont. 1989), [236 Mont. 141,] 768 P.2d 1380, 1384, 46 St.Rep. 248, 253. However, this Court does not determine whether there is sufficient evidence to support contrary findings. Davis v. Jones (1985), 216 Mont. 300, 303, 701 P.2d 351, 353. See Jones v. St.Regis Paper Company (1981), 196 Mont. 138, 639 P.2d 1140; and Little v. Structural Systems (1980), 188 Mont. 482, 614 P.2d 516.

Here, the court found that Quinn reached medical stability in February of 1985 at which time he returned to work for Builders Transport as a truck dispatcher. He worked as a dispatcher for 15 months but was terminated due to complications associated with chronic back pain.

The medical evidence supports the conclusion that Quinn suffered a herniated disc in his lower back which resulted in chronic pain. Quinn was initially treated for the injury by an orthopedic surgeon who concluded that Quinn did not require surgery. He was then evaluated by the Missoula pain clinic and also attended a pain center in Portland, Oregon. At the Portland center, he was diagnosed as suffering from chronic low back pain. Subsequently, Quinn was treated by a general practitioner in Spokane, Washington, who prescribed a pain medication for his back.

The court considered Quinn’s physical impairment as well as the factors set forth in Beck v. Flathead County (Mont. 1988), [230 Mont. 294,] 749 P.2d 527, 45 St.Rep. 215, which included age, occupational skills, education, previous health, remaining number of productive years and degree of physical or mental impairment. In its findings, the court specifically noted that Quinn was 46 years old at the time of the trial; that his employment history for the past 22 years had been primarily in the trucking business, including 15 months as a truck dispatcher; that he had a high school education; and that upon his release from the Portland pain center, he was diagnosed as suffering from chronic low back pain. The court also noted that Quinn attempted to return to full-time employment as a dispatcher but was unable to do so because of chronic back pain. The Workers’ Compensation Court found that, upon review of the evidence, Quinn’s earning capacity was reduced to that of a part-time truck dispatcher as a result of his injury. Based on the foregoing, the Workers’ Compensation Court’s finding that Quinn was incapable of full-time employment was based on substantial credible evidence.

Defendants also raise the issue of whether the Workers’ Compensation Court properly calculated Quinn’s post-injury earning capacity.

On October 19, 1988, a trial was conducted by the Workers’ Compensation hearing examiner who found that Quinn’s pre-injury earning capacity was $8.53 per hour for 45 hours per week and that his post-injury earning capacity was $6.55 per hour for a maximum of 20 hours per week. Based on his loss of earning capacity, Quinn was awarded $143 per week for 500 weeks pursuant to § 39-71-703, MCA. Defendants argue that. the court ignored evidence that Quinn’s earning capacity ranged from $6.25 to $11.45 per hour as a dispatcher and from $7.50 to $9.36 as a clerical worker and, thus, inflated the sum due Quinn. We disagree.

Loss of earning capacity has been defined as, “a loss of ability to earn in the open labor market.” Beck, 749 P.2d at 529. See also Hurley v. Dupuis (Mont. 1988), [233 Mont. 242,] 759 P.2d 996, 45 St.Rep. 1457.

Here, Quinn testified that in 1984, the last full year of his employment, he earned $14,378.27 for nine months of work. Based on a 45 hour work week, Quinn averaged $8.53 per hour. The figures were substantiated by Quinn’s 1984 W-2 form and the testimony of a vocational expert. When working as a truck dispatcher, Quinn averaged $6.55 per hour.

Nonetheless, the difference between pre-injury and post-injury wages are but one factor to consider when determining earning capacity. As discussed earlier, the factors of age, occupational skills, education, previous health, remaining number of productive years, and degree of physical or mental impairment must be considered. Beck, 749 P.2d at 529. The Workers’ Compensation Court considered those factors and emphasized the fact that although Quinn was actively seeking employment, he was unsuccessful because of his physical limitations due to chronic back pain. The court properly calculated Quinn’s post-injury earning capacity.

Affirmed.

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


text:
    COLES DEPARTMENT STORE, Plaintiff and Appellant, v. FIRST BANK (N.A.) — BILLINGS and First Bank System, Inc., Defendants and Respondents.
    No. 89-239.
    Submitted on Briefs Sept. 27, 1989.
    Decided Dec. 12, 1989.
    783 P.2d 932.

      JUSTICE HUNT dissented and filed an opinion.
    A. Clifford Edwards, Anderson, Edwards & Molloy, Billings, for plaintiff-appellant.
    Gerald B. Murphy and T. Thomas Singer, Moulton, Bellingham, Longo & Mather, Billings, for defendants-respondents.
   CHIEF JUSTICE TURNAGE

delivered the Opinion of the Court.

Coles Department Store (Coles) appeals from summary judgment granted to defendants First Bank (N.A.) — Billings and First Bank System, Inc. The District Court for the Thirteenth Judicial District, Yellowstone County, ruled that Coles had failed to make a case that the defendants’ actions, which Coles claimed led to the closing of the store, were wrongful under any theory pled. We affirm.

The issues are:

1. Did the District Court err in granting judgment to defendants on Coles’ claim that defendants breached a fiduciary duty they owed to Coles?
2. Did the District Court err when it found that defendants’ actions did not amount to actual or constructive fraud?
3. Did the District Court err in entering judgment in favor of defendants on Coles’ claim of breach of the statutory obligation of good faith and fair dealing?
4. Did the District Court err in granting judgment in favor of defendants on Coles’ claim of breach of the implied covenant of good faith and fair dealing?

Plaintiff Coles was a corporation owned by two brothers, Ron and Bruce Simon, and, before that, by their father. The corporation operated a retail clothing store in downtown Billings for approximately fifty years. During all that time, Coles banked with defendants or their predecessor.

For a number of years, Coles’ account at defendant bank was handled by Tom Chakos, an old fraternity brother of Ron Simon. Coles’ practice for some time had been to execute a separate ninety-day note each time it needed to finance operating expenses. Thus, it would often have several notes outstanding with defendants. In the fall of 1984, Chakos suggested that, instead, one master note establishing a line of credit be used. Ron and Bruce Simon executed a $450,000 line of credit note with a due date of March 31, 1985. At the same time, the Simons had discussions with Chakos about the need to reduce the expenses of Coles. The store had lost money in six of the last eight years, losing in excess of $53,000 in fiscal year 1983 and $81,000 in fiscal year 1984.

In March or early April 1985, Ron Simon, who was on the Board of Directors of the defendant bank, learned that Chakos was being transferred to another bank and would no longer be handling Coles’ credit. Ron Simon requested that Greg Lovell, a commercial loan officer, be assigned to the account.

Coles’ financial report for the fiscal year ending January 1985 became available in March. It showed losses for that year in excess of $152,000, which reduced the shareholders’ equity to $131,000. On April 9, 1985, Greg Lovell and Ron Simon met to discuss Coles’ credit. The meeting lasted for several hours. Lovell advised Ron Simon that he did not feel that the bank would continue financing Coles beyond September of 1985 unless additional capital was invested in the corporation or additional collateral, including mortgages on Ron and Bruce Simon’s homes, was provided. In spite of Ron Simon’s insistence that the bank’s valuation of the store’s assets was too low and that the Simons were implementing steps to strengthen the store’s financial position, Lovell also suggested that the best thing might be to liquidate Coles.

The day after the meeting, which he stated in a deposition left him “devastated,” Ron Simon went on a scheduled buying trip to California. When he returned, Coles entered into a promissory note with defendants on a $360,000 line of credit due September 10, 1985. Coles also began liquidating its assets. By August, the defendants had been paid off and Coles’ name, fixtures, inventory, and accounts had been sold.

This action was filed in July 1987. During discovery, the Simons learned of the existence of an “Action Plan,” dated February 1985 and prepared by Tom Chakos. The “Action Plan” set out a time frame for the liquidation of Coles by September 1985. Coles has alleged breach of the implied covenant of good faith and fair dealing, breach of fiduciary duty, negligence, breach of the obligation of good faith under the Uniform Commercial Code, fraud and constructive fraud. Defendants each moved separately for summary judgment. After a hearing, the District Court granted both motions with an order and extensive memorandum.

I

Did the District Court err in granting judgment to defendants on Coles’ claim that defendants breached a fiduciary duty they owed to Coles?

This Court has set forth the following standard which determines whether a fiduciary duty may be said to exist between a bank and its debtor:

“A fiduciary relationship exists between a bank and its debtor only if special circumstances indicate exclusive and repeated dealings with the Bank. Pulse v. North American Land Title Co. of Montana (1985), 218 Mont. 275, 707 P.2d 1105, 42 St.Rep. 1578. This Court has recently interpreted the Pulse case as requiring a bank to act as a financial advisor in some capacity, other than that common in the usual arms-length debtor/creditor relationship, in addition to requiring a long history of dealings with the bank, to establish a fiduciary relationship. Simmons v. Jenkins (Mont. 1988), [230 Mont. 429,] 750 P.2d 1067, 1070, 45 St.Rep. 328, 331.”

First Bank (N.A.) Billings v. Clark (Mont. 1989), [236 Mont. 195,] 771 P.2d 84, 92, 45 St.Rep. 2294, 2302-03.

In the present case, the District Court conceded that there existed a long-term relationship between Coles and defendants. But it found no evidence that the bank acted as a financial advisor “in some capacity other than that common to a usual arms-length debtor/creditor relationship.” Coles argues on appeal that Tom Chakos acted as a financial advisor to the Simons when he suggested that Coles use one master note for its borrowing rather than a series of notes. Coles also points out that it was not represented by attorneys during Ron Simon’s discussion with defendant bank regarding the operation of the store.

The depositions on file reveal that both Ron and Bruce Simon possess advanced degrees in management and business. The brothers had managed Coles well in excess of ten years. The depositions also indicate that, during that entire time, decisions about the financial management of Coles were theirs with nominal, if any, input from bank representatives. The only time the bank could be said to have stepped in on financial management of Coles is when it stated its intent to cut off Coles’ credit. Even then, though, the timing and manner of liquidation of the store was controlled by the Simons, not by the bank. We conclude that the District Court did not err in granting judgment to defendants on the claim of breach of a fiduciary duty.

II

Did the District Court err when it found that defendants’ actions did not amount to actual or constructive fraud?

The nine elements of fraud are:

1. a representation;
2. its falsity;
3. its materiality;
4. the speaker’s knowledge of its falsity or ignorance of its truth;
5. the speaker’s intent that it should be relied upon;
6. the hearer’s ignorance of the falsity of the representation;
7. the hearer’s reliance upon the representation;
8. the hearer’s right to rely upon the representation; and
9. consequent and proximate injury caused by reliance upon the representation.

McGregor v. Mommer (1986), 220 Mont. 98, 105, 714 P.2d 536, 540.

Coles claims that defendants’ failure to disclose the “Action Plan” was fraudulent. But as defendants point out, the Simons were aware that their store was losing money and had talked to Tom Chakos about the need to cut costs. It would be poor banking practice if the bank had not been concerned about Coles’ losses. As a member of the bank’s Board of Directors, Ron Simon was aware of proper banking practice. The essential element of the “Action Plan” — that the bank no longer wished to extend credit to Coles without additional security — was disclosed to Ron Simon in the April 9, 1985, meeting with Greg Lovell. We conclude that there is no evidence of a false material representation relating to the alleged failure to disclose the “Action Plan.”

Coles claims that Greg Lovell’s statements at the April 9,1985, meeting with Ron Simon were fraudulent. There were certainly representations made at that time, but Coles has produced nothing to indicate that Greg Lovell’s representations about the bank’s reluctance to continue financing Coles were false. Because the element “falsity of the representation” has not been shown, Coles has failed to show that Lovell’s statements at that meeting were fraudulent.

Coles also asserts that defendants’ failure to disclose the “Action Plan” to the Simon brothers constituted constructive fraud because of the special and fiduciary relationship between the parties. As discussed under Issue I, Coles did not present adequate evidence to show a fiduciary relationship. We conclude that Coles has not shown a special relationship between the parties which would have required earlier disclosure of defendants’ internal memorandum (the “Action Plan”). We hold that the bank had no duty to disclose to Coles any more any sooner than it did.

In sum, we conclude that the District Court did not err when it found that defendant’s actions did not amount to actual or constructive fraud.

Ill

Did the District Court err in entering judgment in favor of defendants on Coles’ claim of breach of the statutory obligation of good faith and fair dealing?

The claim of breach of a statutory duty of good faith and fair dealing is made under § 30-1-203, MCA, which is part of the Uniform Commercial Code (UCC). That statute provides:

Obligation of good faith. Every contract or duty within this code imposes an obligation of good faith in its performance or enforcement.”

It is undisputed that Coles’ promissory notes to defendants are controlled by the UCC.

The UCC defines good faith as “honesty in fact.” Section 30-1-201(19), MCA. This Court has defined the obligation of good faith under the UCC as faithfully carrying out the terms of the agreement. Shiplet v. First Sec. Bank of Livingston (Mont. 1988), [234 Mont. 166,] 762 P.2d 242, 246, 45 St.Rep. 1816, 1820.

Coles argues that defendants’ failure to disclose the “Action Plan” breached the terms of defendants’ agreements with Coles. However, the agreements between the parties which are covered by the UCC are the written promissory notes. There has been no allegation that defendants have failed to faithfully carry out the terms of those notes. That was the obligation of good faith under the UCC. We conclude that the District Court did not err in entering judgment for defendants on Coles’ claim of breach of the statutory obligation of good faith and fair dealing.

IV

Did the District Court err in granting judgment in favor of defendants on Coles’ claim of breach of the implied covenant of good faith and fair dealing?

The District Court held that “the tort of breach of the implied covenant of good faith and fair dealing is related to an underlying breach of contract without which, it does not exist . . . Here, the Court has determined that the covenant did not exist because there was no breach of an underlying contract.” This Court has held that where the relationship between the parties is entirely contractual, there must be an initial finding of breach of contract before a claim of breach of the covenant of good faith and fair dealing may be considered. Montana Bank of Circle v. Meyers & Son (Mont. 1989), [236 Mont. 236,] 769 P.2d 1208, 1214, 46 St.Rep. 324, 330-31; Nordlund v. School Dist. No. 14. (1987), 227 Mont. 402, 406, 738 P.2d 1299, 1302, [6 Ed.Law 179]. Coles, however, argues that in this case the existence of the tort is an independent factual question which does not require an initial claim of breach of contract, so that summary judgment on this issue was improper.

A breach of the implied covenant of good faith and fair dealing requires the breaching party to arbitrarily or capriciously engage in an impermissible activity. Blome v. First Nat. Bank of Miles City (Mont. 1989), [238 Mont. 181,] 776 P.2d 525, 529, 46 St.Rep. 1186, 1191. The nature and extent of the covenant is “measured in a particular contract by the justifiable expectations of the parties.” Nicholson v. United Pacific Ins. Co. (1985), 219 Mont. 32, 41-42, 710 P.2d 1342, 1348.

The Simon brothers were well aware of the declining financial position of Coles, and in fact had discussed the need to make changes with Tom Chakos prior to February of 1985. We conclude that they had no justifiable expectation that defendants would continue to loan money to Coles indefinitely. Nor has Coles shown that defendants acted arbitrarily or capriciously. The development of the “Action Plan” was nothing less than prudent banking policy in light of the accelerating financial deterioration of the borrower over a period of several years. Moreover, defendants gave notice to Coles almost six months in advance of the date they intended to stop extending credit to the store. In the absence of a claim of breach of contract we conclude that no claim of breach of the implied covenant of good faith and fair dealing lies.

The closing of Coles was undoubtedly a blow to the Simons and to downtown Billings. However, we agree with the District Court that Coles has not presented a case under which defendants may be held responsible for that event. We therefore affirm the summary judgment for defendants.

JUSTICES HARRISON, WEBER and McDONOUGH concur.

JUSTICE HUNT,

dissenting:

I dissent. The District Court incorrectly concluded that a breach of the implied covenant of good faith and fair dealing depends on the existence of an underlying breach of contract. This is not so. The existence of the tort of bad faith is a question separate and independent from the question of breach of contract. As this Court pointed out in Nicholson v. United Pacific Insurance Co. (1985), 219 Mont. 32, 41-42, 710 P.2d 1342, 1348:

“But whether performing or breaching, each party has a justifiable expectation that the other will act as a reasonable person. [Citation omitted.] The nature and extent of an implied covenant of good faith and fair dealing is measured in a particular contract by the justifiable expectations of the parties. Where one Party acts arbitrarily, capriciously or unreasonably, that conduct exceeds the justifiable expectations of the second party. The second party then should be compensated for damages resulting from the others culpable conduct.”

In Shiplet v. First Sec. Bank (Mont. 1988), [234 Mont. 166,] 762 P.2d 242, 246, 45 St.Rep. 1816, 1821, we reaffirmed this rule, noting that a breach of contract is not a prerequisite to breach of the covenant of good faith and fair dealing.

While the existence of a duty to act in good faith is a question of law which may be determined by a district court on summary judgment, the existence of a breach of the duty is a question of fact and is not properly decided on summary judgment. Simmons v. Jenkins (Mont. 1988), [230 Mont. 429,] 750 P.2d 1067, 1071, 45 St.Rep. 328, 332. In this case, defendants had an obligation to act reasonably and in good faith to its long-standing customer, Coles Department Store. Material questions of fact indicate that this duty may have been breached. Summary judgment was improper.

I would reverse the District Court.