text:
    SHARON POTEAT, Plaintiff and Appellant, v. ST. PAUL MERCURY INS. CO., JOHN DOE I and JOHN DOE II, Defendants and Respondents.
    No. 95-529.
    Submitted on Briefs April 18, 1996.
    Decided June 25, 1996.
    53 St.Rep. 568.
    277 Mont. 117.
    918 P.2d 677.

      For Appellant: John M. Morrison, Meloy & Morrison, Helena.
    For Respondent: Stephen C. Berg, Warden, Christiansen, Johnson & Berg, Kalispell.
   JUSTICE HUNT

delivered the Opinion of the Court.

Sharon Poteat (Poteat) appeals the order of the Twenty-First Judicial District Court, Ravalli County, granting the motion of St. Paul Mercury Insurance Company (St. Paul) to dismiss her complaint for lack of subject matter jurisdiction.

We affirm in part, reverse in part, and remand.

The sole issue on appeal is whether the District Court erred by granting St. Paul’s motion to dismiss Poteat’s complaint for lack of subject matter jurisdiction.

On June 6,1985, Poteat suffered a work-related injury during the course of her employment as a nurse at Marcus Daly Memorial Hospital in Hamilton. In 1990, Poteat filed a petition for a hearing before the Workers’ Compensation Court, asserting that St. Paul, the hospital’s insurer, refused to pay her claim. In 1992, the parties entered into a full and final compromise settlement agreement. By the terms of that agreement, Poteat accepted a lump sum payment but specifically reserved “future medical and hospital benefits.” Subject to that reservation, Poteat accepted the lump sum and released St. Paul “from all further obligations for compensation benefits for this injury under the Workers’ Compensation Act.”

In 1993, Poteat filed suit in the District Court against St. Paul alleging various illegal trade practices. Specifically, Poteat alleged that St. Paul had committed:

Count One: unfair trade practices prior to the settlement agreement;
Count Two: breach of the settlement agreement;
Count Three: unfair trade practices subsequent to the settlement agreement; and
Count Four: actual malice, arising from St. Paul’s alleged refusal to pay medical and pharmaceutical expenses.

St. Paul moved to dismiss the complaint for lack of subject matter jurisdiction, and the District Court granted the motion. In its order, the District Court noted that a complainant is statutorily prohibited from filing an UTPAsuit against an insurer until after the underlying claim has been settled or adjudicated. Since Poteat had expressly reserved medical benefits, the District Court concluded that the settlement agreement was not a final settlement of the underlying claim. The District Court determined that it lacked subject matter jurisdiction to consider Poteat’s unfair trade practices claims until the underlying claim had been adjudicated by the Workers’ Compensation Court or settled entirely, including fixture medical benefits. It accordingly granted St. Paxxl’s motion to dismiss Poteat’s suit. Poteat appeals.

Did the District Court err by granting St. Paul’s motion to dismiss Poteat’s claim for lack of subject matter jurisdiction?

When deciding a motion to dismiss based on lack of subject matter jurisdiction, a district coxirt must determine whether the complaint states facts that, if true, would vest the district court with subject matter jurisdiction. Barthule v. Karman (1994), 268 Mont. 477, 483, 886 P.2d 971, 975 (citing Stanley v. Holms (1994), 267 Mont. 316, 883 P.2d 837). This conclusion is a question of law, and we will review to determine whether the District Court’s interpretation of the law is correct. Barthule, 886 P.2d at 975 (citing In re Marriage of Barnard (1994), 264 Mont. 103, 870 P.2d 91).

The parties agree that Poteat brought her District Court complaint alleging unfair trade practices, breach of contract, and actual malice under the Montana Unfair Trade Practices Act (UTPA), § 33-18-242, MCA. While the UTPA authorizes such suits, it specifically states:

A third-party claimant may not file an action under this section until after the underlying claim has been settled or a judgment entered in favor of the claimant on the underlying claim.

Section 33-18-242(6)(b), MCA. St. Paul argued, and the District Court agreed, that the settlement agreement in this case did not serve to settle the entire underlying claim because future medical benefits were reserved. Since the underlying claim involved workers’ compensation, and since, pursuant to § 39-71-2905, MCA, the Workers’ Compensation Court has exclusive jurisdiction over workers’ compensation claims, the District Court determined that it had no jurisdiction to hear a UTPA case unless and until Poteat obtained a judgment or settlement of the entire underlying claim from the Workers’ Compensation Court.

This conclusion, however, ignores the District Court’s power to sever claims over which it has no jurisdiction, dismiss them, and proceed with those over which it does. Rule 42(b), M.R.Civ.P. Affirmative defenses such as lack of jurisdiction often may present grounds for severance or bifurcation in a multi-claim suit. Britton v. Farmers Ins. Group (1986), 221 Mont. 67, 95, 721 P.2d 303, 321.

The order approving the full and final settlement agreement specified that “[fiurther medical and hospital benefits have been reserved by the claimant.” Later, the order states more specifically that “[fluture medical and hospital benefits have been reserved.” By its terms, the “full and final compromise settlement” encompasses everything except future medical benefits. The rest of Poteat’s claims — compensation and past medical benefits — were settled and the parties were bound to abide by the terms of the ftdl and final settlement.

In contrast, Poteat’s workers’ compensation claim to future medical benefits was specifically exempted from settlement and remains unresolved. Since the underlying claim must be settled or adjudicated before a party is permitted to bring an independent action under UTPA, Poteat cannot proceed with any claim which encompasses unfair trade practices committed after settlement unless or until she obtains a judgment or settlement of the unresolved future medical benefits from the Workers’ Compensation Court. Until such time, the District Court correctly determined that it did not have subject matter jurisdiction over such a claim. However, Poteat’s underlying workers’ compensation claims for compensation and past medical benefits have been fully settled. Those counts of her suit which encompass unfair trade practices committed before settlement have their basis in a valid existing settlement agreement. Since an underlying settlement is in place as mandated by § 33-18-242(6)(b), MCA, Poteat may legitimately pursue a UTPA claim in the District Court regarding pre-settlement unfair trade practices.

Counts one and four of Poteat’s suit allege actual malice and unfair trade practices before the settlement agreement. These allegations are not based on an underlying claim which has not been settled or adjudicated. In contrast, counts two and three allege breach of contract and unfair trade practices after the settlement agreement. These counts concern the issue of future medical benefits, which is a matter not yet settled by the parties nor adjudicated by the Workers’ Compensation Court. Poteat may not proceed with an independent action under UTPA asserting the claims contained in counts two and three until the underlying claim for future medicals is resolved.

The District Court’s determination that it did not have subject matter jurisdiction over counts two and three is affirmed. The District Court’s determination that it did not have subject matter jurisdiction over counts one and four is reversed, and this case is remanded for further proceedings consistent with this opinion.

CHIEF JUSTICE TURNAGE, JUSTICES GRAY, LEAPHART and ERDMANN concur.


source: Caselaw Access Project

license: Public Domain

text:
    IN THE MATTER OF N.K.O. and Z.J.M. YOUTHS IN NEED OF CARE
    No. 95-548.
    Ordered June 25, 1996.
    53 St.Rep. 570.
    277 Mont. 122.
    919 P.2d 394.
   OPINION AND ORDER

Appellant, the natural mother of N.K.O. and Z. J.M. filed an appeal from the order of the Thirteenth Judicial District Court, Yellowstone County, terminating her parental rights. The State responded by moving this Court to dismiss the appeal based on lack of jurisdiction.

On April 19, 1994, the District Court issued its findings of fact, conclusions of law, and order terminating Appellant’s parental rights. At the same time, the District Court also terminated the parental rights of the fathers of N.K.O. and Z. J.M. One of the fathers was named in the order by his correct last name but an incorrect first name. Judgment was entered in favor of the State on this same day.

On April 20,1994, notice of entry of judgment was properly served upon Appellant’s counsel of record and the guardian ad litem of the children.

On April 27,1994, the District Court issued “Amended Findings of Fact, Conclusions of Law, and Order,” which corrected the clerical error, substituting the father’s correct first name for the incorrect first name used in the original findings, conclusions, and order. No other changes were made.

After the issuance of the amended order, the State did not notify Appellant of entry of the amended judgment.

On September 5,1995, seventeen months after the District Court terminated Appellant’s parental rights, Appellant served notice of entry of the amended order upon the State and, on the same day, filed a notice of appeal from the amended order on the basis of Rule 5, M.R.App.R:

[I]n cases where service ofnotice of entry ofjudgmentis required by Rule 77(d) of the Montana Rules of Civil Procedure the time shall be 30 days from the service of notice of entry of judgment; but if the State of Montana, or any political subdivision thereof, or an officer or agency thereof is a party the notice of appeal shall be filed within 60 days from the entry of the judgment or order or 60 days from the service ofnotice of the entry of judgment.

Rule 5(a)(1), M.R.App.P. (emphasis added). Appellant contends that the State never entered the amended judgment and, therefore, the 60-day period in which she might appeal this case did not begin to run until the amended judgment was entered, which was done by her attorney in September of 1995.

In support of her position, she directs the attention of this Court to several decisions where we have held that the time for filing a notice of appeal never begins to rim if the prevailing party never serves notice of entry of the judgment. See El-Ce Storms Trust v. Svetahor (1986), 223 Mont. 113, 724 P.2d 704; Kenney v. Koch (1987), 227 Mont. 155, 737 P.2d 491; In re Marriage of Robertson (1989), 237 Mont. 406, 773 P.2d 1213; Hankinson v. Picotte (1988), 235 Mont. 143, 766 P.2d 242. These decisions are all distinguishable, however, in that each one presented a situation where no notice of entry of judgment was ever filed or, in the alternative, notice of entry of judgment was filed very late and an appeal instituted within the prescribed period thereafter.

In the case at bar, the State properly notified Appellant when judgment was entered, which was done the same day the original order was handed down. One week later, however, the District Court issued an amended order which corrected the mistake regarding the father’s name. Appellant argues that the State was required to enter judgment again after the amended order issued and notify her of the entry of the new judgment. Only after that was done, she argues, did her time to appeal begin to run. Since her attorney entered the amended judgment in September, 1995 and she filed her notice of appeal within sixty days thereof, she argues that this Court should hear her appeal. We disagree.

The error which necessitated an amended order in this case clearly was clerical in nature. The father had been listed by an incorrect first name, and the amended order rectified this mistake without making any other change to the existing order. It is well-established that a district court may correct a clerical mistake at any time. Rule 60(a), M.R.Civ.P. provides:

Clerical mistakes in judgments, orders or other parts of the record, and in pleadings, and errors therein arising from oversight or omission may be corrected by the court at any time of its own initiative or on the motion of any party and after such notice, if any, as the court orders.

Appellant argues, however, that the proper way to correct such errors is by an order nunc pro tunc, which interlineates the error and notifies the parties to the change made, not by issuance of an “amended” order. Appellant further argues that “in any proceeding to correct a clerical error or to use nunc pro tunc thereon [sic], a motion must be filed requesting this relief, and this must be served on the adverse party who has a right to appear thereon. This just cannot be done in the absence of any notice.” On the contrary, it can.

Rule 60(a), does not require notice or a motion to rectify a clerical error. It provides that a district court may correct the error of its own initiative after such notice, if any, as the district court may order. Further, the order which makes such a correction need not be specifically denominated a nunc pro tunc order. The error may also be corrected by issuance of a new order which does not contain the clerical error and entirely replaces the old order. In re Marriage of Winn (1982), 200 Mont. 402, 412, 651 P.2d 51, 56; In re Marriage of Cannon (1985), 215 Mont. 272, 275, 697 P.2d 901, 902. That is precisely what was done in this case.

This Court has acknowledged that “the District Court has inherent power to correct clerical errors in its own judgments in order to ensure the record ‘speaks the truth’ and reflects what the court actually decided.” In re Marriage of Becker (1990), 244 Mont. 469, 476, 798 P.2d 124, 129 (citation omitted). We have never held that such clarification requires re-entry of judgment or tolls the time in which a party may file an appeal. While we have held that a party’s failure to enter notice of entry of judgment at all may prevent the filing period from running, that was not the situation here.

Appellant was properly notified of entry of judgment in this case. At that time, the time in which she might pursue an appeal began to run. The District Court’s correction of a single clerical error one week later did not require the State to re-enter the judgment in order to keep the appeal clock running. It was incumbent upon Appellant to file a notice of appeal within sixty days of the entry of judgment. Since she failed to do so,

IT IS HEREBY ORDERED that the appeal in this matter is dismissed.

IT IS FURTHER ORDERED that the Clerk of this Court mail a copy of this order to counsel of record.

DATED this 25th day of June, 1996.

/S/J. A. TURNAGE, CHIEF JUSTICE

/S/WILLIAM E. HUNT, SR., JUSTICE

/S/ JAMES C. NELSON, JUSTICE

/S/ TERRY N. TRIEWEILER, JUSTICE

/S/ CHARLES E. ERDMANN, JUSTICE

/S/ KARLA M. GRAY, JUSTICE

/S/W. WILLIAM LEAPHART, JUSTICE


author: CHIEF JUSTICE TURNAGE

text:
    TAX LIEN SERVICES, Plaintiff and Respondent, v. LELAND L. HALL, Defendant and Appellant, and LAKE COUNTY, a political subdivision of the State of Montana, and unknown heirs and the unknown devisees of any defendant who may be deceased, and ALL OTHER PERSONS, claiming or who might claim any right, title, estate, or interest in or lien or encumbrance upon, the real property described in the Complaint, or any part thereof adverse to Plaintiff's possible claim, be it present or contingent, including any claim or possible claim of dower, inchoate or accrued, Defendants.
    No. 95-395.
    Submitted May 21, 1996.
    Decided July 12, 1996.
    53 St.Rep. 614.
    277 Mont. 126.
    919 P.2d 396.

      For Appellant: James C. Bartlett, Hash, O’Brien & Bartlett, Kalispell.

      For Respondents: Keith W. McCurdy, McCurdy Law Firm, Poison; Deborah Kim Christopher, County Attorney, Poison.
    For Intervenor: Hon. Joseph P. Mazurek, Attorney General; Clay R. Smith, Solicitor, Helena.
    For Amici Curiae: J. Cort Harrington, Helena; (Montana County Treasurers Association); John Alke and Stephen M. Frankino, Hughes, Kellner, Sullivan and Alke, Helena (Montana Taxpayers Association).
   CHIEF JUSTICE TURNAGE

delivered the Opinion of the Court.

Leland L. Hall appeals a judgment of the Twentieth Judicial District Court, Lake County. The court ruled that errors in obtaining a tax deed to Hall’s Lake County property were cured by the publication of a Notice of Claim of Tax Title pursuant to § 15-18-413, MCA. We reverse and remand.

The issue is whether the applicant for the tax deed, Tax Lien Services, Inc., may avoid having the tax deed declared null and void by publishing notice required by § 15-18-413, MCA, to cure defects in the notice provided pursuant to § 15-18-212, MCA.

Leland L. Hall failed to pay real property taxes on property he owned in Lake County, Montana, for the years 1989,1990,1991, and 1992. The Lake County Treasurer used the following legal description of the property: Tr in SW 1/4 NW 1/4 Tr 1 COS 4012 4.815 Acres, 3-26-19.

In April 1993, Tax Lien Services, Inc. (TLS), obtained an assignment of a Certificate of Tax Sale from the Lake County Treasurer for the property. TLS mailed and published a notice to all interested parties, including Hall at his Lake County address as it appeared in the records of the Lake County Treasurer. The County Treasurer issued a tax deed to TLS on October 29, 1993.

On November 11 and 18, 1993, TLS caused the Lake County Leader, a newspaper in Lake County, to run a “Corrected Notice of Claim of a Tax Title.” On March 25, 1994, TLS filed this action to quiet title to the real property. Conceding defects in the earlier notice to obtain a tax deed, TLS relied solely on the “Corrected Notice of Claim of a Tax Title” as a basis to obtain quiet title to the real property. The complaint alleged that the “Corrected Notice of Claim of a Tax Title” established that all defects in the tax proceedings and any right of redemption were considered “waived.”

Hall filed an answer and a counterclaim alleging that TLS had failed to comply with the procedures and notice requirements to obtain a tax deed under § 15-18-212, MCA. Both parties moved for summary judgment, Hall also arguing that § 15-18-413, MCA, does not meet due process requirements. The District Court held that errors in obtaining the tax deed were cured by publication of the “Corrected Notice of Claim of a Tax Title” pursuant to § 15-18-413, MCA, which the court ruled did not violate the due process or equal protection clauses of either the United States or the Montana constitution. The court therefore entered judgment that TLS was the owner in fee simple of the subject real property.

DISCUSSION

This action involves portions of Montana Code Annotated Title 15, Chapter 18, “Ownership interests in land sold for taxes.” The statute here at issue, § 15-18-413, MCA, was enacted in 1987 to provide tax deed purchasers with an alternative to the quiet title action described under § 15-18-411, MCA. Section 15-18-413, MCA, provides:

Title conveyed by deed — defects. (1) All deeds executed more than 3 years after the applicable tax sale convey to the grantee absolute title to the property described in the deed as of 3 years following the date of sale of the property interest at the tax sale.
(2) The conveyance includes:
(a) all right, title, interest, estate, lien, claim, and demand of the state of Montana and of the county in and to the property; and
(b) the right, if the tax deed, tax sale, or any of the tax proceedings upon which the deed may be based are attacked and held irregular or void, to recover the unpaid taxes, interest, penalties, and costs that would accrue if the tax proceedings had been regular and it was desired to redeem the property.
(3) The tax deed is free of all encumbrances except as provided in 15-18-214(l)(a) through (l)(c).
(4) A tax deed is prima facie evidence of the right of possession accruing as of the date of the expiration of the redemption period described in 15-18-111.
(5) If any tax deed or deed purporting to be a tax deed is issued more than 3 years and 30 days after the date of the sale of the property interest at the applicable tax sale, the grantee may publish in the official newspaper of the county, once a week for 2 consecutive weeks, a notice entitled “Notice of Claim of a Tax Title”. The notice must:
(a) describe all property claimed to have been acquired by a tax deed;
(b) contain an estimate of the amount due on the property for delinquent taxes, interest, penalties, and costs;
(c) contain a statement that for further specific information, reference must be made to the records in the office of the county treasurer;
(d) list the name and address of record of the person in whose name the property was assessed or taxed; and
(e) contain a statement that demand is made that the person assessed or taxed must, within 30 days after the first publication of the notice, pay to the claimant or to the county treasurer for use by the claimant the amount of taxes, interest, penalties, and costs as the same appear in the records of the county treasurer or bring a suit to quiet the true owner’s title or to set aside the tax deed.
(6) A mistake in the amount or in any name specified in the notice does not invalidate the notice.
(7) (a) If within the 30-day period the taxes, interest, penalties, and costs are not paid or a quiet title action is not brought, all defects in the tax proceedings and any right of redemption is considered waived. Except as provided in subsection (7)(b), after the 30-day period the title to the property described in the notice and in the tax deed is valid and binding, irrespective of any irregularities, defects, omissions, or total failure to observe any of the provisions of the laws of Montana regarding the assessment, levying of taxes, or sale of property for taxes and the giving of notices, whether or not such irregularities, defects, omissions, or failures could void the proceedings.
(b) The proceedings in subsection (7)(a) are void if the taxes were not delinquent or have been paid.

The first question before this Court is whether the above statute violates the due process clauses of the constitutions of the United States and of the State of Montana. As the discussion which follows will demonstrate, the governing standards under the Due Process Clause of the Fourteenth Amendment to the United States Constitution are clear. We therefore conclude that we need not determine whether the due process clause of the Montana Constitution, Article II, Section 17, provides greater protection than its federal counterpart.

Section 15-18-413(5), MCA, provides for notice by publication of the claimed acquisition of property by tax deed to the delinquent taxpayer--the “person assessed.” The statute then allows the “person assessed” an opportunity within the thirty-day period following the first publication of the notice to either reacquire the property through payment of the outstanding taxes, interest, penalties and costs, or to initiate a quiet title action in which the validity of the tax deed may be attacked. Section 15-18-413(5)(e), MCA. The first step in due process analysis is to examine the nature of the opportunities so provided, to determine whether a property interest is involved.

Section 15-18-413, MCA, essentially provides the “person assessed” with a right of redemption and a right to bring a quiet title action. This Court long has recognized that redemption generally is “a vested property right ... of which the owner cannot be legally deprived except and only... by the giving of notice.” Lowery v. Garfield County (1949), 122 Mont. 571, 582, 208 P.2d 478, 484. Both the right to redemption and a right to bring a cause of action are property interests protected under the Due Process Clause of the Fourteenth Amendment. Tulsa Professional Collection Services v. Pope (1988), 485 U.S. 478, 108 S.Ct. 1340, 99 L.Ed.2d 565; Logan v. Zimmerman Brush Co. (1982), 455 U.S. 422, 102 S.Ct. 1148, 71 L.Ed.2d 265.

Where, as here, the identity of the property owner is known or otherwise readily ascertainable, the Fourteenth Amendment requires actual rather than constructive notice prior to a proceeding which will adversely affect the liberty or property interests of the party.

[A] ctual notice isa minimum constitutional precondition to a proceeding which will adversely affect the liberty or property interests of any party, whether unlettered or well versed in commercial practice, if its name and address are reasonably ascertainable.

Mennonite Board of Missions v. Adams (1983), 462 U.S. 791, 800, 103 S.Ct. 2706, 2712, 77 L.Ed.2d 180, 188. In Mennonite, the United States Supreme Court voided an Indiana tax sale of real property. The Court held that constructive notice of a pending tax sale by publication must be supplemented by personal service or notice mailed to the last known address of the mortgagee, the name of which was identified in a mortgage which was a public record. Mennonite, 462 U.S. at 798, 103 S.Ct. at 2711.

As discussed above, constructive notice is not constitutionally sufficient when the name and address of a party are reasonably ascertainable. Yet § 15-18-413(5), MCA, provides for constructive notice in all circumstances in which the tax deed is issued more than three years and thirty days after the tax sale. We hold that, to the extent that it deprives delinquent taxpayers whose names and addresses are reasonably ascertainable of repurchase or quiet-title-action filing rights if such rights are not exercised within thirty days of the first notice by publication, § 15-18-413, MCA, is unconstitutional under the Fourteenth Amendment to the United States Constitution.

Section 15-18-413, MCA, was enacted as Section 26 of Chapter 587, Laws of 1987. This legislative package “generally revis[ed] the laws relating to property tax collections, property tax delinquencies, and the tax deeding process.” Title of Ch. 587, L. 1987.

If, when an unconstitutional part of an act is eliminated, the remainder is complete in itself and capable of being executed in accordance with the apparent legislative intent, it must be sustained. Montana Auto. Ass’n v. Greely (1981), 193 Mont. 378, 399, 632 P.2d 300, 311, citing Gullickson v. Mitchell (1942), 113 Mont. 359, 375, 126 P.2d 1106, 1114. In this case, it appears that the remainder of Chapter 587 is complete in itself and capable of being executed absent its Section 26, which has been codified as § 15-18-413, MCA.

The District Court stated that, for purposes of its ruling, it assumed arguendo that there were errors in the tax deed proceeding. In its brief to the District Court on the summary judgment motions, TLS stated: “For purposes of the following argument, [TLS] acknowledges technical defects in the legal description and listing of the taxes, penalty, interest and costs in the Notice of Pending Tax Deed Issuance.” While TLS views these defects as mere technicalities, we conclude they are fatal.

Section 15-18-212, MCA, sets forth the requirements for a notice of an intended issuance of a tax deed to real property. One requirement is that, in disclosing the amount of taxes due, a separate listing must be made of the delinquent taxes, penalties, interest and costs that must be paid for the property tax lien to be liquidated. Section 15-18-212(6)(e), MCA. TLS acknowledges including a cost of $35 twice in its notice and including the sum of $311.28 as a cost, which sum TLS admits may not have been includable. The result of these discrepancies is that TLS’s notice did not accurately reflect the elements which the statute required to be itemized in the listing.

Anotice of an intended issuance of a tax deed to real property must also include “a description of the property on which the taxes are or were delinquent, which must be the same as the description of the property on the tax sale certificate or in the record described in 15-17-214(2)(b).” Section 15-18-212(6)(b), MCA. The instruments prepared by TLS contain an erroneous legal description. In the notice published by TLS, the portion of the legal description of the subject real property which should have read “Tr 1” for “Tract 1,” read instead “Tr/.”

This Court long has held that procedures for obtaining a tax deed require strict statutory compliance. Moran v. Robbin (1993), 261 Mont. 478, 863 P.2d 395, and cases cited therein. The giving of notice is a critical element in the process, and compliance with statutory requirements is essential for jurisdictional purposes.

A critical element in the process of applying for a tax deed requires the giving of notice by the tax deed applicant to the owner of the real property. The giving of notice is jurisdictional; if the legal requirements with respect to notice are not complied with, a comity treasurer may not legally issue a tax deed.

Moran, 863 P.2d at 398.

In this case, the legal requirements for notice were not met in the process of applying for the tax deed. We conclude that sufficient error has been demonstrated to eliminate the need for a hearing on remand on the validity of the tax deed held by TLS. We hold that the tax deed issued to TLS is null and void.

CONCLUSION

We hold that TLS may not avoid having the tax deed declared null and void by publishing notice required by § 15-18-413, MCA, in order to cure defects in the notice provided pursuant to § 15-18-212, MCA. We therefore reverse the decision of the District Court granting summary judgment for TLS. We direct that summary judgment be entered for Hall, and remand for further proceedings consistent with this Opinion.

JUSTICES GRAY, HUNT, NELSON, TRIEWEILER, ERDMANN and LEAPHART concur.


author: JUSTICE TRIEWEILER

text:
    FEDERATED MUTUAL INSURANCE COMPANY, Plaintiff, v. BRENT ANDERSON, d/b/a CONIFER LOGGING, Defendant, Third-Party Plaintiff, and Respondent, v. JONES EQUIPMENT, INC., Third-Party Defendant, and JOHN DEERE INSURANCE COMPANY, Third-Party Defendant and Appellant.
    No. 95-569.
    Submitted on Briefs April 11, 1996.
    Rehearing Denied August 9, 1996.
    Decided July 12, 1996.
    53 St.Rep. 618.
    277 Mont. 134.
    920 P.2d 97.

      For Appellant: Robert J. Phillips and Tammy Wyatt-Shaw, Phillips & Bohyer, Missoula.
    For Respondent: Michael G. Alterowitz and Larry Howell, Connell, Beers & Alterowitz, Missoula.
   JUSTICE TRIEWEILER

delivered the Opinion of the Court.

Federated Mutual Insurance Company filed a complaint in the District Court for the Fourth Judicial District in Missoula County in which it sought to recover from Conifer Logging, Inc., amounts Federated had paid to its insured, Jones Equipment, Inc., for the loss of logging equipment Jones had leased to Conifer. Conifer filed a third-party complaint against John Deere Insurance Company in which it sought indemnity for any amounts which it might owe Federated. John Deere moved the District Court for summary judgment. Conifer filed a cross-motion for summary judgment. After hearing oral arguments, the District Court entered an opinion and order in which it denied John Deere’s motion for summary judgment and granted Conifer’s cross-motion for summary judgment. John Deere appeals the District Court’s order. We affirm the District Court and impose Rule 32 sanctions on John Deere for filing a frivolous appeal.

The issue on appeal is whether the District Court correctly concluded that the newly acquired property provision in Conifer Logging’s insurance policy with John Deere Insurance Company covered logging equipment which was destroyed by fire on July 17, 1991, while in Conifer’s possession.

FACTUAL BACKGROUND

On May 29,1991, Conifer Logging agreed to lease a 1987 Timber-jack feller buncher from Jones Equipment Company. The feller buncher, which is a vehicle that cuts and stacks standing timber, was worth $130,000. The term of the lease was one to six months with an option to purchase the equipment. Before the lease began, Conifer was entitled to a free, one-week trial period without obligation or risk. The one-week trial period was reflected in the original option to purchase, which stated that although delivery was scheduled for June 10, the first rental payment was not due until June 17 and the six-month term of the lease did not expire until six months and one week after delivery on December 17,1991.

Jones was unable to deliver the feller buncher to Conifer’s logging site on June 10, and delayed delivery until June 17. As a result, Jones prepared a revised lease agreement and option to purchase and drafted an equipment rental agreement. The revised documents reflected the fact that Conifer was entitled to a one-week free trial period and stated that the delivery date was June 17, the first payment was due on June 24, and the option had to be exercised or the feller buncher returned to Jones by December 24, 1991.

During the one-week free trial period Conifer had no contractual obligations regarding the feller buncher, and did not assume the risk of loss. Jones was liable for any damage to the equipment during that period. Once the lease commenced, however, Conifer became responsible for any damage to the feller buncher and was obligated to provide insurance coverage for it. The lease commenced on June 24, 1991, when Conifer kept the feller buncher and made its first lease payment.

In June and early July 1991, Conifer discovered serious problems with the feller buncher and decided to terminate the lease. On July 16, 1991, Conifer contacted an equipment hauler to have the feller buncher shipped back to Jones. On July 17,1991, however, the feller buncher caught on fire and was destroyed on Conifer’s logging site. Conifer notified John Deere Insurance Company of the loss on July 18, 1991.

At the time of the lease, Conifer’s logging equipment was insured by John Deere Insurance Company pursuant to the terms of a “contractor’s inland marine policy.” That policy included a “newly acquired property” provision which provided automatic coverage for any similar property acquired by Conifer during the term of its policy provided that Conifer reported the acquisition of such property and paid an additional premium on the property within thirty days from the date on which the property was acquired.

After the destruction of the feller buncher, Federated Mutual Insurance Company paid Jones Equipment for the loss and then sued Conifer Logging for indemnification. In turn, Conifer filed a third-party complaint against John Deere Insurance Company in which it alleged that the feller buncher was insured pursuant to its policy with John Deere. Conifer maintained that pursuant to the newly acquired property provision in that policy John Deere was required to indemnify Conifer for the full amount of any judgment recovered by Federated.

John Deere moved for summary judgment on January 31,1995. In support of its motion, it maintained that the feller buncher was never insured by John Deere because the loss occurred before Conifer had notified John Deere of its acquisition of the property and after the thirty-day notice requirement of the “newly acquired property” provision had expired. Conifer filed a cross-motion for summary judgment in which it asserted three grounds for coverage First, Conifer maintained that using the usual methods of computation of time, the thirty-day grace period began on June 18, the day after Conifer’s receipt of the equipment, and that therefore the fire on July 17 occurred within the thirty-day automatic coverage period. Second, Conifer maintained that because it had a one-week free trial period without obligation or risk, Conifer did not “acquire” the feller buncher pursuant to the newly acquired property clause until June 24, 1991, and its loss on July 17, 1991, was well within the thirty-day period for automatic coverage. Finally, Conifer maintained that John Deere’s inconsistent interpretation of the language of its own newly acquired property clause established the provisions’ ambiguity and required the court to interpret the clause in favor of coverage as a matter of law.

On May 30, 1995, the Fourth Judicial District Court issued an opinion and order. In its order, the court denied John Deere’s motion for summary judgment and granted Conifer’s cross-motion for summary judgment. The court concluded that the feller buncher “was covered by [John] Deere’s policy under each of Conifer’s theories.”

I.

Subsequent to appeal, Conifer Logging filed with this Court a motion to strike a portion of John Deere’s reply brief which Conifer maintains is objectionable because “it refers to alleged evidence that is not part of the record, and also contradicts John Deere’s previous ‘judicial admission’ on a key fact.” It is well-established that this Court will not consider any evidence not contained in the record on appeal. Johnson v. Killingsworth (1995), 271 Mont. 1, 3, 894 P.2d 272, 273. Because we hold that the objectionable passage is purely speculative and is not supported by the record, Conifer’s motion is granted and that portion of John Deere’s brief is stricken.

II.

Did the District Court correctly conclude that the newly acquired property provision of Conifer Logging’s insurance policy with John Deere Insurance Company covered logging equipment which was destroyed by fire on July 17,1991, while in Conifer’s possession?

This Court reviews a district court’s order of summary judgment pursuant to Rule 56, M.R.Civ.P., based on the same criteria applied by the district court. Brinkman & Lenon v. P&D Land Enter. (1994), 263 Mont. 238, 241, 867 P.2d 1112, 1114. We will uphold the court’s grant of summary judgment if there is no genuine issue of material fact and the moving party is entitled to a judgment as a matter of law. Rule 56(c), M.R.Civ.P; State Farm Fire & Casualty Co. v. Powell (1995), [274 Mont. 92], 906 P.2d 198, 200.

On appeal, John Deere maintains that it had not provided insurance coverage for the feller buncher pursuant to the newly acquired property provision of its insurance policy with Conifer because the loss occurred before Conifer notified John Deere of its acquisition of the feller buncher and after the thirty-day notice provisión of the newly acquired property provision of that policy had expired. The newly acquired property provision of Conifer’s policy with John Deere provides:

If the insured acquires during the term of this policy other similar property the provisions of this policy shall apply thereto for the actual cash value of other similar property not exceeding 25% of the aggregate amount of the schedule, PROVIDED the insured reports such additional similar property within 30 days from the date acquired and pays additional premium thereon from the date acquired.

Conifer took possession of the feller buncher pursuant to the terms of its lease with Jones Equipment Company on June 17,1991. At that time, Conifer was entitled to a free, one-week trial period without obligation or risk. The trial period was reflected in both the original and revised lease agreement and option to purchase documents and in the equipment rental agreement executed by Jones Equipment. Those documents provided that the first lease payment was not due until seven days after delivery of the machine and that the six-month term of the lease did not expire until six months and one week after delivery.

In an affidavit submitted by William Jones, president of Jones Equipment, Jones stated that during the one-week free trial period Conifer had no contractual obligations regarding the feller buncher, that Conifer did not assume risk of loss until after that trial period, and that Jones was liable for any damage to the equipment during that period.

Furthermore, although John Deere now refutes that Conifer’s lease of the feller buncher was delayed during the pendency of the one-week free trial period, John Deere’s insurance adjuster who interviewed representatives of both Jones Equipment and Conifer Logging and who reviewed all of the lease documents, stated otherwise. In a letter to Conifer Logging on August 21,1991, the adjuster stated:

[I]t was an agreed intention between the parties to have Conifer Logging try out this machine for a free week or “demo week.” If you felt the machine was suitable to your purposes at the end of that week you would commence a lease arrangement with Jones Equipment .... Originally the machine was to be delivered to you on 6/10/91 and the first rental payment would be due 6/17/91. Due to a delay in preparation of the machine for use Jones Equipment wrote a second lease agreement and option to purchase which showed the delivery date on the machine of 6/17/91 with a rental payment to commence on 6/24/91. Both of these documents reflect the “demo week” previously referenced.
The machine was delivered 6/17/91 and your lease payment would have been for the month commencing on 6/24/91. The fire loss occurred either July 17 or July 16,1991. Your policy requires a 30 day waiting period before anew machine qualifies for coverage and that waiting period would not have been satisfied until 7/24/91.

(Emphasis added.)

The adjuster’s letter unambiguously reflects that John Deere knew that the free trial week delayed the start of Conifer’s lease until June 24. At the time of the adjuster’s letter, John Deere took the position that its newly acquired property provision required a thirty-day “waiting period” before coverage would be provided for new equipment. Its position at that time was that that thirty-day “waiting period” did not expire until thirty days after the lease commenced— on July 24,1991. Now that John Deere has changed its position and asserts that the thirty-day requirement is a “notice period” and not a “waiting period,” it maintains that the lease commenced on June 17 and that the “notice period” expired thirty days thereafter — on July 17, 1991. In light of its prior position, the sincerity of John Deere’s current argument must be questioned.

In addition, John Deere now maintains that even if the free trial week did delay the start of the lease until June 24, Conifer nevertheless “acquired” the feller buncher for proposes of the newly acquired property provision on June 17, when Jones Equipment delivered the machinery. Citing Merriam Webster’s Collegiate Dictionary, 10 (10th ed. 1993), John Deere asserts that the ordinary, usual meaning of “acquire” is “to come into possession or control of.” John Deere maintains that Conifer exercised fall supervision and control over the feller buncher, and thus “acquired” the feller buncher on June 17,1991.

The term “acquire,” however, is susceptible to more than one construction. As the term is generally used, it “implies substantial ownership, something more than a temporary possession.” 1A C.J.S. Acquire at 282 (1985) (citations omitted). In fact, the term “is regularly applied to a permanent acquisition, and some substantial ownership in the property acquired. It usually implies a vesting of interest or title.” 1A C.J.S. Acquire at 283 (1985) (citations omitted). It is well-established that “if the terms of an insurance policy are ambiguous, obscure or open to different constructions, the construction most favorable to the insured or other beneficiary must prevail.” Head v. Central Reserve Life of N. Am. Ins. Co. (1993), 256 Mont. 188, 200, 845 P.2d 735, 742.

A construction of the term “acquire” which requires some vested interest is particularly warranted in a situation such as this where neither party to the lease intended any ownership interest or risk of loss to pass until the free trial week ended and the period of the lease began. In this case, in fact, Conifer did not need insurance during that one-week period since risk of loss remained with Jones Equipment during that period. As the Court of Appeals of Kansas recently noted:

Insurance authorities are generally in accord that the newly acquired coverage clause is offered as a convenience to the insured, and its purpose is to broaden the coverage available under an automobile insurance policy to provide protection at the earliest possible time needed by the insured. See 6B Appleman, Insurance Law and Practice § 4293 (Buckley ed. 1979); 12 Couch on Insurance 2d § 45.184 (rev. ed. 1981).

Northern Assur. Co. v. Farm Bureau Mut. Ins. Co. (Kan. App. 1991), 808 P.2d 911, 915 (emphasis added). Although the Kansas Court’s statement addresses newly acquired vehicle provisions in automobile liability policies, there is no reason the principle should not apply equally to newly acquired property provisions in property liability policies. See, e.g., McNaul v. Kansas Power & Light Co. (Mo. Ct. App. 1989), 770 S.W.2d 259, 262. In this case, Conifer did not contractually assume the risk of loss for the feller buncher until June 24 so that any insurance coverage provided by John Deere prior to that time would have been unnecessary.

In this case, the uncontroverted facts establish that although the feller buncher was delivered on June 17, 1991, Conifer’s lease of the machinery was delayed by the one-week free trial period and did not start until June 24,1991. Because neither Conifer nor Jones intended any ownership interest or risk of loss for the feller buncher to pass to Conifer until the lease commenced, we hold that Conifer did not “acquire” the feller buncher pursuant to the newly acquired property provision of its lease with John Deere until June 24,1991. Therefore, we conclude that the destruction of the feller buncher on July 17, 1991, and Conifer’s notice to John Deere of the loss on July 18,1991, were within the thirty-day period of automatic coverage provided by Conifer’s policy with John Deere. For these reasons, we affirm the District Court’s order which denied John Deere’s motion for summary judgment and granted Conifer’s cross-motion for summary judgment.

III.

As a final matter, Conifer requests that this Court sanction John Deere pursuant to Rule 32, M.R.App.P. Sanctions on appeal are appropriate when this Court “is satisfied from the record and the presentation of the appeal in a civil case that the same was taken without substantial or reasonable grounds.” Rule 32, M.R.App.P.

This Court does not readily impose sanctions upon parties for filing frivolous appeals. However, given the inconsistent and conflicting positions John Deere has taken throughout this matter, its inaccurate citations to authority, and the lack of support for its claims on appeal, we conclude that sanctions are necessary and appropriate in this case.

The District Court granted Conifer’s motion for summary judgment because of its conclusion that the feller buncher was covered by John Deere’s policy based on each of Conifer’s three theories of liability. On appeal, John Deere contests all three conclusions. None of John Deere’s arguments against coverage, however, is supported by substantial or reasonable grounds.

John Deere first contends that no coverage exists because Conifer did not notify John Deere of the loss of the feller buncher within the thirty-day notice period. That position is contrary to the clear majority rule, as set forth by this Court almost thirty years ago in Glacier General Assurance Co. v. State Farm Mutual Auto Insurance Co. (1968), 150 Mont. 452, 436 P.2d 533. In that case, we held that a loss that occurs during a policy’s period of automatic coverage vests at the moment of loss, regardless of when notice was given to the insurer. Glacier General, 150 Mont. at 457, 436 P.2d at 536. Even John Deere recognized the applicability of this rule when, in one of its briefs in support of summary judgment, it conceded that “timely notification is a condition precedent to continued coverage after, not during, the grace period.” On appeal, however, John Deere not only ignores its earlier concession, but urges this Court to disregard the majority rule based on a misleading and selective quotation of authority. John Deere quotes Levy v. Continental Casualty Co. (La. Ct. App. 1973), 284 So. 2d 857, 859, for the proposition that: “To obtain coverage on an item not previously insured, the policy in unambiguous terms requires the insured to report the purchase thereof to the insurance company within thirty days ....” However, the omitted language from the passage concludes: “otherwise all coverage on the item ceases after that period.” Levy, 284 So. 2d at 859 (emphasis added). The Levy case, contrary to John Deere’s selective quotation, actually supports the majority rule adopted by this Court in Glacier General that timely notice is material to continued coverage only for losses that occur after the expiration of the grace period.

John Deere’s second argument is that Conifer “acquired” the feller buncher, within the meaning of its policy, when it came into possession of the machine on June 17,1991, and not at the expiration of its one-week free trial period on June 24, 1991. John Deere’s rigid interpretation that the term “acquire” means “possess” is not only contrary to its adjuster’s initial position that Conifer “acquired” the machinery on June 24 after the expiration of the one-week trial period, but it is also contrary to the customary meaning of the term. John Deere cites United States v. Harry (N.D. Iowa 1993), 831 F. Supp. 679, 685, for the proposition that: “Even in a broader sense, acquire means ‘to come into possession, control, or power of disposal of, often by some uncertain or unspecified means.’ ” However, once again John Deere has taken language out of context. The two sentences preceding the passage John Deere quotes from Harry contradict its argument that the “ordinary meaning” of acquire is possess:

The term acquired "... is regularly applied to a permanent acquisition, and some substantial ownership in the property acquired. It usually implies a vesting of interest or title ....”

Harry, 831 F. Supp. at 685. Although John Deere cites Harry for the proposition that “acquire” means “possess,” the general language of Harry clearly requires the opposite conclusion.

John Deere’s third argument in support of its position is that no automatic coverage existed because the feller buncher was destroyed thirty-one days after Conifer acquired it. According to John Deere, the day that the feller buncher was delivered must be counted in calculating the thirty-day period of automatic coverage. John Deere’s argument, however, is contrary to the universal rule that, unless a contrary intent is clearly manifested, the first day or the day upon which the act was done or the event occurred is generally excluded in computing periods of time. Even more troubling is the fact that, as part of its effort to urge this Court to adopt a different method of calculation, John Deere cites four cases in support of its position; however, three of those cases actually cite the general rule that the first day should be excluded in calculating the thirty-day grace period in insurance contracts and the fourth case was effectively overruled more than 120 years ago. For example, John Deere cites American National Bank v. Service Life Insurance Co. (7th Cir. 1941), 120 F.2d 579, 582, cert. denied (1941), 314 U.S. 654, 62 S.Ct. 104, 86 L.Ed. 524, to further its argument; however, on the same page to which John Deere cites, the court states: “[W]e think the weight of authority supports the rule of excluding the first day and including the last where no other or different method has been indicated by the parties.” Similarly, in Travelers Insurance Co. v. Leonard (N.J. Ch. 1936), 183 A. 686, 686, which John Deere also cites, the Court of Chancery of New Jersey stated: “The general rule in this state is that in computing a period of time from an event, or from a day, the day of the event, or (in the second case) that day, should not be included.” Furthermore, although Perry v. Provident Insurance & Investment Co. (Mass. 1868), 99 Mass. 162, the fourth case that John Deere cites, actually does state the rule for calculating time that John Deere proposes, that case was effectively overruled by Bemis v. Leonard (Mass. 1875), 118 Mass. 502. In Bemis, the Massachusetts Supreme Court repudiated as dictum the very statement in Perry that John Deere urges this Court to adopt:

The dictum... in [Perry], that “where time is computed from an act done, the general rule is to include the day,” was aside from the decision of the court... and it is supported by none of the authorities cited ....

Bemis, 118 Mass. at 508-09. John Deere’s adhesion to a disfavored method of calculation is particularly questionable in light of the overwhelming weight of authority in support of the majority rule.

Finally, John Deere’s sincerity on appeal must be questioned in light of its inconsistent theories for denial of coverage which have culminated in this meritless appeal. For example, on July 18, 1991, John Deere’s insurance agent wrote on the property loss notice that the policy’s “30 day coverage extension should apply.” On August 21, 1991, however, one of John Deere’s insurance adjusters notified Conifer that John Deere was denying coverage because the thirty-day “waiting period” would not have been satisfied until July 24, 1991. The next month a different adjuster wrote to Conifer and vaguely stated that “[t]his denial is based on [sic] the unit was never scheduled, and would not qualify under [the newly acquired property provision] under your contract of insurance with us.” In April, a third adjuster notified Conifer that John Deere was denying coverage because the newly acquired property provision did not cover leased equipment. It was not until the summary judgment proceedings before the District Court that John Deere set forth its theory that “the loss occurred on the 31st day after Conifer acquired the [feller buncher].” John Deere’s theories for denial of coverage are not only inconsistent with each other, but are inconsistent with its position taken on appeal. Such inconsistent positions, combined with inaccurate citations to authority, underscore the lack of merit in John Deere’s appeal.

Because of John Deere’s meritless appeal, Conifer has incurred unnecessary and substantial legal fees to obtain the coverage to which the District Court determined it was entitled under each of its theories. In addition, Conifer has been caused unnecessary delay during the pendency of this appeal. As we stated in Reilly v. Farm Credit Bank of Spokane (1993), 261 Mont. 532, 535, 863 P.2d 420, 422: “When an appeal is entirely unfounded and causes delay, the respondent is entitled to reasonable costs and attorney’s fees.”

Therefore, on the basis of the inconsistent and conflicting positions John Deere has taken throughout this matter, its baseless claims on appeal, and its inaccurate citations in its appellate brief, we assess sanctions against John Deere pursuant to Rule 32, M.R.App.R, and order it to pay Conifer’s reasonable costs and attorney fees incurred in defending this appeal.

The judgment of the District Court is affirmed. This case is remanded to the District Court for a determination of the costs and fees to which Conifer is entitled pursuant to this opinion.

CHIEF JUSTICE TURNAGE, JUSTICES NELSON, GRAY, HUNT, ERDMANN and LEAPHART concur.


author: JUSTICE HUNT

text:
    ORLAN E. WOOD, Plaintiff and Appellant, v. ROBERT L. DEN HERDER, Defendant and Respondent.
    No. 95-415.
    Submitted on Briefs February 29, 1996.
    Decided July 22, 1996.
    53 St.Rep. 646.
    277 Mont. 147.
    920 P.2d 105.

      For Appellant: John M. Morrison, Meloy & Morrison, Helena.
    For Respondent: Linda M. Deola, Reynolds, Motl and Sherwood, Helena.
   JUSTICE HUNT

delivered the Opinion of the Court.

Orlan Wood, Appellant, filed a complaint against Robert Den Herder, Respondent, in the First Judicial District Court, Lewis and Clark County, for breach of contract. Respondent filed a motion to dismiss which the District Court granted. Appellant appeals.

We reverse and remand.

Appellant raises the following issue:

Does an arbitration clause in a brokerage account agreement preempt a breach of contract action by the client against the broker on a subsequent promissory note that has nothing to do with the brokerage agreement and contains its own dispute resolution language?

FACTS

The facts, as set forth in the complaint, are as follows: Appellant is a resident of Washington. In 1988, he retired from the Boeing Corporation with an investment IRA worth approximately $130,000. In early 1992, he decided to open an account with Respondent, an investment broker and resident of Lewis and Clark County, Montana.

Appellant sent Respondent $130,000 for the purpose of purchasing low-risk, income-producing investments that would provide for Appellant and his wife in their later years. After opening the account with Respondent, Appellant selected four front-load mutual funds and invested $90,000. The remaining $40,000 was placed in a money-market fund.

In March 1992, Respondent advised Appellant that $15,622 from his money-market fund had been invested in Performance Nutrition. Appellant told Respondent that he could not afford any risk, and Respondent assured him that there would be no loss.

In April 1992, without Appellant’s consent, Respondent began to invest money from Appellant’s account in the Remington Financial Group, Inc. Respondent continued to invest in this company through July 1992. The total investment in Remington reached approximately $23,437. After learning of the purchase of the Remington stock, Appellant contacted Respondent and, again, Respondent assured him both verbally and in writing that he would not incur any losses.

By September 1993, the value of the Performance Nutrition position had deteriorated to $2,872, and the value of the Remington position was listed as unavailable.

In October 1993, Respondent confessed to Appellant the loss of approximately $38,927 from his money market fund. According to the complaint, in consideration for Appellant’s continued business and trust, and to avoid criminal and civil prosecution, Respondent signed a promissory note. The note promises Respondent will pay Appellant $38,927 plus interest and reasonable attorney fees and costs. The due date for final payment on the note was set for January 1,1995.

Appellant filed this complaint for breach of contract in April 1995, after Respondent had failed to pay all or any portion of the obligation assumed in the promissory note. Appellant requested the following in damages:

(1) $38,927, plus interest at 12%, calculated from October 2,1993;
(2) Attorney's fees;
(3) Costs;
(4) For any such other relief as [the] court may deem just and proper.

In response to Appellant’s complaint, Respondent filed a motion to dismiss. In the brief supporting the motion, Respondent alleged that in April 1994, Appellant had filed a claim with the National Association of Securities Dealers, Inc. (NASD). Respondent argues that by filing that claim, Appellant had agreed to “submit the present matter in controversy” to NASD for arbitration.

Respondent attached a copy of the 1994 NASD arbitration agreement to his motion to dismiss. According to the agreement, the named respondents include Terrence Murphy, Del Mar Securities, Cowles Sabol & Co., Inc., and Respondent. The matter in controversy was then described by Appellant in a “Statement of the Claim,” which requested the following relief:

(1) $40,000 returned for investments in high risk stock of Performance Nutrition and Remington Financial, (plus 12% interest beginning June 1992),
(2) $7,000 returned for Specialized Mobil Radio Station license in Reno, Nevada due to high risk, (plus 12% interest beginning January 1993),
(3) [This amount was paid by Schneider Securities, not a party to this action in order to avoid arbitration],
(4) $10,000 or, whatever is required for attorney and expert witness fees,
(5) $20,000 compensatory award for mental anguish of stress and worry created by these investments which had lead [sic] to depressed feelings, nervousness and an effect on my quality of life,
(6) Return of the NASD filing fee of $650.00.

Respondent contends that when Appellant agreed to submit his claim to arbitration, he agreed to submit all matters relating to his account, including the promissory note.

Respondent further argued that, in 1991, Appellant signed a brokerage-account agreement that contained arbitration disclosures. Respondent alleges that Appellant waived his right to proceed with an action in court when he signed that agreement.

The District Court granted Respondent’s motion to dismiss in August 1995. In doing so, the court concluded that it was

evident from the pleadings and briefs that both actions are based on the same investments and the same amount of money. To permit both actions would enable the Plaintiff [Appellant] to recover twice for the same loss.

Appellant appeals.

DISCUSSION

On appeal, Appellant has framed the issue as to whether or not an arbitration clause in a brokerage-account agreement preempts a breach of contract action by the client against the broker on a subsequent promissory note that has nothing to do with the brokerage agreement and contains its own dispute resolution language. It is apparent, however, that the issue, as stated by Appellant, does not directly address the propriety of the District Court’s dismissal of the action. We therefore restate the issue on appeal as whether the District Court erred in dismissing Appellant’s complaint.

Respondent’s motion to dismiss does not specify which of the enumerated defenses contained in Rule 12(b), M.R.Civ.P, he is claiming as grounds for dismissal. Nevertheless, since none of the other defenses apply in this case, it appears that the motion was presented for failure to state a claim, under Rule 12(b)(6), M.R.Civ.P.

Ordinarily, we would review an appeal from a district court’s order granting a motion to dismiss based on the sufficiency of the complaint. Busch v. Kammerer (1982), 200 Mont. 130, 132, 649 P.2d 1339, 1340 (citing Conley v. Gibson (1957), 355 U.S. 41, 45, 78 S.Ct. 99, 101-02,2 L.Ed.2d 80, 84). However, the court order concluded that it was evident from the “pleadings and briefs” that the promissory note and the arbitration actions were the same. In order to come to this conclusion, the District Court must have relied on allegations of arbitration found outside of the complaint. There is no mention in appellant’s complaint of the arbitration agreement, and the agreement itself was submitted to the court attached to Respondent’s brief. If a court considers matters outside of the pleadings on a Rule 12(b)(6) motion to dismiss, that motion is constructively converted into a motion for summary judgment. See Rule 12(b), M.R.Civ.P.

This Court reviews a district court’s grant of summary judgment decision de novo, and summary judgment is only proper when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Rule 56(c), M.R.Civ.P.; Eatinger v. Johnson (1994), 269 Mont. 99, 887 P.2d 231.

The facts, as alleged by the Appellant, are that Respondent signed a promissory note in 1993 in consideration for Appellant’s continued business and trust, and to avoid criminal and/or civil prosecution. This promissory note came due in January 1995, and Respondent has failed to pay any portion of the assumed obligation.

On appeal, Respondent does not contest the validity of the promissory note. Instead, he argues that the 1994 agreement to arbitrate necessarily includes any claim for breach of contract on the promissory note. Therefore, Respondent asserts that it would be inappropriate to allow Appellant to file the “same action” in two separate forums.

We do not agree. The arbitration claim is expressly based upon allegations that Respondent ignored the Appellant’s investment objectives and misled him while acting as his security broker. The arbitration claim requests the return of the money given to Respondent for investment and for attorney fees and experts required in the securities arbitration and $20,000 for mental anguish, stress and worry. He also requests the return of the NASD filing fee.

The action before us is not here on the arbitration claim but rather is based on a promissory note. Respondent agreed to pay Appellant a certain amount of money with interest and costs in an action to recover on the note. The complaint alleges the promissory note was a contract between the parties. These allegations were not controverted by Respondent. In his complaint, Appellant seeks the amounts that were expressly assumed by the Respondent on the promissory note.

The note has nothing to do with whether Respondent or anyone else committed any improprieties prior to the execution of the promissory note which is a matter to be dealt with in the arbitration case. The brokerage agreement was signed July 18,1991, and the promissory note was signed October 2,1993, more than two years after the brokerage account agreement.

Therefore, the arbitration matter in Washington state and the breach of contract on the promissory note in Montana are separate and distinct actions. As Appellant claims, the promissory note case here is a simple contract action which turns upon the question of whether the October 2, 1993 promissory note is an enforceable contract.

Accordingly, we conclude that, as the moving party, Respondent was not entitled to dismissal as a matter of law pursuant to Rule 56(c), M.R.Civ.P. To the extent that any damages awarded in the Montana contract action and in the Washington arbitration matter are duplicative, double recovery can be avoided through an offset.

We take this opportunity to again remind the District Court that prior to converting a motion to dismiss into a motion for summary judgment, it is incumbent upon the District Court to notify the parties of the court’s intent. Rule 12(b), M.R.Civ.P. This step is imperative to guarantee that the non-moving party appreciates the consequences of the conversion. After notifying the parties, the non-moving party has the option of coming forward with affidavits to show that there are genuine issues for trial. Gebhardt v. D.A. Davidson & Co. (1983), 203 Mont. 384, 391, 661 P.2d 855, 858.

Here, the District Court did not notify the parties of its intent to convert the motion to dismiss into a motion for summary judgment. Consequently, the appropriate procedures for a judgment for dismiss-, al were not followed for either Rule 12(b)(6) or Rule 56, M.R.Civ.P.

Summary judgment was not appropriate in this case because the Respondent was not entitled to the ruling as a matter of law. We reverse and remand for proceedings consistent with this opinion.

Reversed and remanded.

CHIEF JUSTICE TURNAGE, JUSTICES GRAY, NELSON, ERDMANN, TRIEWEILER and LEAPHART concur.


text:
    CHRIS SCHULTZ, Plaintiff and Appellant, v. STILLWATER MINING COMPANY, Defendant and Respondent.
    No. 96-004.
    Submitted on Briefs June 13, 1996.
    Decided July 23, 1996.
    53 St.Rep. 662.
    277 Mont. 154.
    920 P.2d 486.

      For Appellant: Scot Schermerhom, Freeman & Schermerhom, Billings.
    For Respondent: Jeanne M. Bender, Holland & Hart, Billings.
   CHIEF JUSTICE TURNAGE

delivered the Opinion of the Court.

Chris Schultz appeals from a summary judgment entered by the Thirteenth Judicial District Court, Stillwater County. The court granted judgment in favor of defendant Stillwater Mining Company on Schultz’s claim of wrongful discharge. We vacate and remand.

We find dispositive the issue of whether Schultz’s claim is exempt from Montana’s Wrongful Discharge from Employment Act under § 39-2-912, MCA, because he also filed a complaint with the United States Department of Labor Mine Safety and Health Administration to recover damages for retaliatory discharge based on disparate treatment.

In March of 1995, Chris Schultz, then an employee of Stillwater Mining Company, was involved in a fist fight with another employee on company property. Schultz reported the incident to his supervisor and asserted that he was merely attempting to defend himself. Both Schultz and the other employee were fired as a result of the fist fight.

Schultz filed a complaint with the Mine Safety and Health Administration, alleging that he was discharged in retaliation for reporting a safety concern. The agency made a determination that the discharge did not constitute a violation of the Federal Mine Safety and Health Act (FMSHA) and therefore would not pursue a complaint against Stillwater. Schultz appealed the agency’s determination. In January of 1996, an administrative law judge determined that the discharge did not violate FMSHA because “hitting another miner, even when one was hit first, is not the type of activity that is protected under the Act.”

Schultz also filed this claim in District Court, alleging violation of Montana’s Wrongful Discharge from Employment Act, §§ 39-2-901 through -915, MCA. Stillwater moved for summary judgment, arguing that because both Schultz’s FMSHA claim and his claim in District Court arose out of a single discharge, the District Court did not have jurisdiction to hear the wrongful discharge claim.

In granting Stillwater’s motion for summary judgment, the court relied upon § 39-2-912, MCA. That statute provides:

Exemptions. This part does not apply to a discharge: (1) that is subject to any other state or federal statute that provides a procedure or remedy for contesting the dispute. Such statutes include those that prohibit discharge for filing complaints, charges, or claims with administrative bodies or that prohibit unlawful discrimination based on race, national origin ...

The court reasoned that Schultz has only one actionable dispute with Stillwater, and that his choice to pursue his grievance under the federal statute precluded a Montana court from entertaining his cause of action.

Is Schultz’s claim exempt from Montana’s Wrongful Discharge from Employment Act under § 39-2-912, MCA, because he also filed a complaint with the Mine Safety and Health Administration to recover damages for retaliatory discharge based on disparate treatment?

The District Court ruled that no material issues of fact exist and that Stillwater is entitled to summary judgment as a matter of law because Schultz chose to pursue his grievance under a federal statute that provides a procedure or remedy for contesting his discharge. Our standard of review is the same as the standard used by the District Court — whether, pursuant to Rule 56(c), M.R.Civ.R, material issues of fact exist and whether Stillwater is entitled to judgment as a matter of law. Motarie v. N. Mont. Joint Refuse Disposal (1995), 274 Mont. 239, 242, 907 P.2d 154, 156.

In this case, the arguments on appeal are legal arguments not relating to issues of fact. Schultz contends that his state law claims are independent from his federal cause of action, and that, therefore, exemption under § 39-2-912, MCA, does not apply.

It appears that the language of § 39-2-912, MCA, is unique to Montana, so that case law from other jurisdictions is not particularly helpful to us. Although the parties have cited a number of Montana cases which bear tangentially on the question before us, we find the language of the statute itself and its interpretation in Tonack v. Montana Bank of Billings (1993), 258 Mont. 247, 854 P.2d 326, decisive.

In Tonack, the defendant bank argued that § 39-2-912, MCA, prohibited Tonack from recovering under both the Wrongful Discharge Act and the federal Age Discrimination in Employment Act (ADEA). In evaluating that claim, Justice McDonough wrote for this Court:

Whether a discharge will ultimately be “subject to any other state or federal statute that provides a procedure or remedy for contesting the dispute” is not immediately known when a claim is filed. This must be determined before it is known whether the Wrongful Discharge Act may be applied. It is established only when a finder of fact has made that determination or when judgment on the claim has otherwise been entered. Therefore, we conclude that claims may be filed concurrently under the Wrongful Discharge Act and other state or federal statutes described in § 39-2-912, MCA, but if an affirmative determination of the claim is obtained under such other statutes, the Wrongful Discharge Act may no longer be applied.

Tonack, 854 P.2d at 331. Because the district court had made a factual determination that the ADEA applied to Tonack’s discharge from employment, this Court held that she was not entitled to recover damages under the Wrongful Discharge Act. Tonack, 854 P.2d at 331.

Relying upon Tonack, Stillwater argues that any judgment by the Mine Safety and Health Administration provides Schultz with a procedure or remedy for contesting his dispute. We disagree.

In this case, no affirmative determination of the claim has been obtained under the FMSHA. Instead, a negative determination has been obtained, both at the agency level and before the administrative law judge, that the activity which led to Schultz’s discharge was “not the type of activity that is protected under the [FMSHA].” Therefore, Schultz has not been provided a procedure or remedy for contesting his dispute.

Section 39-2-912, MCA, provides an exemption for discharges “subject to any other state or federal statute.” The determination that the activity which led to Schultz’s discharge was “not the type of activity that is protected under the [FMSHA]” amounts to a determination that his discharge was not subject to the FMSHA. We conclude that § 39-2-912, MCA, does not preclude application of the Wrongful Discharge Act under these circumstances.

We hold that the District Court erred as a matter of law in granting Stillwater’s motion for summary judgment. We therefore vacate that judgment and remand for further proceedings consistent with this Opinion.

JUSTICES GRAY, HUNT, LEAPHART and ERDMANN concur.


author: JUSTICE GRAY JUSTICE ERDMANN

text:
    DAN KLEINHESSELINK, Plaintiff and Appellant, v. CHEVRON, U.S.A., THE PITTSBURG & MIDWAY COAL MINING COMPANY, MANVILLE MINING and STILLWATER MINING COMPANY, Defendants and Respondents.
    No. 95-524.
    Submitted on Briefs April 25, 1996.
    Decided July 24, 1996.
    53 St.Rep. 668.
    277 Mont. 158.
    920 P.2d 108.

      JUSTICE ERDMANN dissenting, joined by CHIEF JUSTICE TURNAGE.

      For Appellant: Donald W. Molloy; Molloy Law Offices, Billings; Adele P. Kinunel; Trial Lawyers for Public Justice, Washington, D.C.
    For Respondents: Jeanne M. Bender, Patricia D. Peterman; Holland & Hart, Billings.
   JUSTICE GRAY

delivered the Opinion of Court.

Dan Kleinhesselink (Kleinhesselink) appeals from an order of the Thirteenth Judicial District Court, Stillwater County, dismissing his complaint for failure to state a claim upon which relief can be granted. We reverse and remand.

The issue on appeal is whether the District Court erred in dismissing Kleinhesselink’s complaint pursuant to Rule 12(b)(6), M.R.Civ.R, on the basis that the exclusivity clause of the Workers’ Compensation Act bars his claims.

Kleinhesselink was employed by the Stillwater Mining Company at the Stillwater Mine near Nye, Montana. He held various safety positions, including Safety Coordinator. Kleinhesselink alleges that, during his employment, employees of the Stillwater Mining Company negligently disregarded safety and that such disregard resulted in deaths and injuries at the mine. According to Kleinhesselink, those deaths and injuries could have been avoided if his safety recommendations had been followed.

Kleinhesselink further alleges that, due to the deaths and injuries at the mine, he experienced guilt and suffered from depression, chronic fatigue, insomnia, nausea, headaches, muscle spasms and digestive problems. His request for Workers’ Compensation benefits was denied.

Kleinhesselink subsequently filed a complaint alleging two counts of negligence against Chevron U.S.A., the Pittsburg & Midway Coal Mining Company, Manville Mining and the Stillwater Mining Company. All four defendants ultimately moved to dismiss Kleinhesselink’s complaint for failure to state a claim upon which relief could be granted. Hereafter, we refer to the defendants collectively as Chevron and consider the separate motions to dismiss as one motion.

Chevron based its motion to dismiss solely on the exclusivity clause of the Workers’ Compensation Act (the Act), § 39-71-411, MCA, arguing that “Montana law clearly holds that Kleinhesselink cannot maintain negligence claims against his employer if his employer has secured workers’ compensation insurance.” The District Court agreed that the entirety of Kleinhesselink’s negligence action was barred by § 39-71-411, MCA, and dismissed his complaint for failure to state a claim upon which relief could be granted. Kleinhesselink appeals.

Did the District Court err in dismissing Kleinhesselink’s complaint pursuant to Rule 12(b)(6), M.R.Civ.R, on the basis that the exclusivity clause of the Workers’ Compensation Act bars his claims?

In reviewing a Rule 12(b)(6), M.R.Civ.R, motion to dismiss, courts are required to construe the complaint in a light most favorable to the plaintiff. Loney v. Milodragovich, Dale & Dye, P.C. (1995), 273 Mont. 506, 509, 905 P.2d 158, 160. Such a motion has the effect of admitting as true all of the well-pleaded allegations of fact in the complaint. Mogan v. City of Harlem (1987), 227 Mont. 435, 437, 739 P.2d 491, 493. A complaint should not be dismissed pursuant to Rule 12(b)(6), M.R.Civ.R, unless it appears certain that the plaintiff will be unable to recover under any set of facts which could be proven in support of his claim. Mogan, 739 P.2d at 492-93. Rule 12(b)(6), M.R.Civ.R, motions to dismiss are viewed with disfavor and a complaint should be dismissed only if the allegations in the complaint clearly demonstrate that the plaintiff does not have a claim. Buttrell v. McBride Land & Livestock (1976), 170 Mont. 296, 298, 553 P.2d 407, 408 (quoting Wheeler v. Moe (1973), 163 Mont. 154, 160, 515 P.2d 679, 683).

In granting Chevron’s motion, the District Court correctly noted that “purely mental or emotional injuries” are not compensable under the Act. See § 39-71-119(3), MCA; Stratemeyer v. Lincoln County (1993), 259 Mont. 147, 855 P.2d 506 (Stratemeyer 7). It then concluded that “[t]he exclusivity clause [set forth at § 39-71-411, MCA] provides an employer is not liable for a covered employment unless held liable under the Act.” On those bases, the court concluded that Kleinhesselink could neither recover under the Act nor sue in tort and dismissed his complaint for failure to state a claim upon which relief could be granted.

The District Court’s determination that Kleinhesselink’s complaint failed to state a claim upon which relief could be granted as a result of the Act’s exclusivity provision is a conclusion of law. See Loney, 905 P.2d at 161. We review a district court’s conclusion of law to determine if the interpretation of the law is correct. Loney, 905 P.2d at 161 (citation omitted).

Section 39-71-411, MCA, provides in pertinent part:

For all employments covered under the Workers’ Compensation Act or for which an election has been made for coverage tinder this chapter, the provisions of this chapter are exclusive. Except as provided in part 5 of this chapter for uninsured employers and except as otherwise provided in the Workers’ Compensation Act, an employer is not subject to any liability whatever for the death of or personal injury to an employee covered by the Workers’ Compensation Act or for any claims for contribution or indemnity asserted by a third person from whom damages are sought on account of such injuries or death.

Approximately five months after the District Court dismissed Kleinhesselink’s complaint and Kleinhesselink filed his notice of appeal, we decided Stratemeyer v. Lincoln County (1996), [276 Mont. 67], 915 P.2d 175, (Stratemeyer II), wherein we interpreted the foregoing statute in the context of injuries excluded from coverage under the Act. We give retroactive effect to judicial decisions. Porter v. Galarneau (1996), [275 Mont. 174], 911 P.2d 1143, 1150. Therefore, Stratemeyer II is applicable to this case even though it was not available to the District Court in addressing Chevron’s motion to dismiss Kleinhesselink’s complaint.

The plaintiff in Stratemeyer II sued his employer in tort for a mental injury excluded from coverage under the Act. See § 39-71-119(3)(a), MCA; Stratemeyer II, 915 P.2d at 177. The district court dismissed his complaint based, in part, on the exclusivity provision of the Act, § 39-71-411, MCA. Stratemeyer II, 915 P.2d at 176.

On appeal, we reviewed the history of the Act, emphasizing that it was a compromise between industry and labor pursuant to which workers received guaranteed no-fault recovery and industry was relieved of the possibility of large damage awards in the tort system. Stratemeyer II, 915 P.2d at 179 (citation omitted).

The quid pro quo between employers and employees is central to the Act; thus, it is axiomatic that there must be some possibility of recovery by the employee for the compromise to hold. The scope of immunity from tort [liability] relates to the definition of injury under § 39-71-119, MCA.

Stratemeyer II, 915 P.2d at 179. Thus, injuries expressly excluded from coverage under the Act by § 39-71-119, MCA, are also excluded from the shield against tort liability provided to employers by the exclusivity clause in § 39-71-411, MCA. See Stratemeyer II, 915 P.2d at 181. Because the plaintiff’s “mental-mental” injury was excluded from coverage by § 39-71-119(3)(a), MCA, we concluded that the plaintiff was entitled to sue his employer in tort. Stratemeyer II, 915 P.2d at 182.

We note that the plaintiff’s alleged injuries in Stratemeyer II and Kleinhesselink’s alleged injuries in this case are not identical. In Stratemeyer II, the plaintiff suffered a “mental-mental” injury which, in statutory terms, is a mental injury arising from emotional or mental stress. See Stratemeyer II, 915 P.2d at 180; § 39-71-119(3)(a), MCA. Here, Kleinhesselink alleges both “mental-mental” and “mental-physical” injuries; in other words, Kleinhesselink alleges mental, emotional and physical injuries arising from emotional or mental stress caused by deaths and injuries at the mine.

Section 39-71-119(3)(a), MCA, excludes both physical and mental conditions arising from emotional or mental stress from coverage under the Act. Thus, Kleinhesselink is clearly precluded from recovery under the Act for his alleged injuries. As a result, our holding in Stratemeyer II that tort remedies are available to an employee whose injuries are excluded from coverage under the Act pursuant to § 39-71-119, MCA, is equally applicable here. See Stratemeyer II, 915 P.2d at 181-82. Accordingly, we hold that the District Court erred in concluding that the Act’s exclusive remedy provision barred Kleinhesselink’s negligence action in its entirety and in dismissing his complaint under Rule 12(b)(6), M.R.Civ.P., on that basis.

Reversed and remanded.

JUSTICES NELSON, HUNT, TRIEWEILER and LEAPHART concur.

JUSTICE ERDMANN

dissenting.

I respectfully dissent from the majority opinion consistent with my dissent in Stratemeyer v. Lincoln County (1996), [276 Mont. 67], 915 P.2d 175.

CHIEF JUSTICE TURNAGE joins in the foregoing dissenting opinion.


author: CHIEF JUSTICE TURNAGE JUSTICE NELSON

text:
    IN THE MATTER OF D.D., Respondent and Appellant.
    No. 95-472.
    Submitted on Briefs April 25, 1996.
    Decided June 28, 1996.
    53 St.Rep. 587.
    277 Mont. 164.
    920 P.2d 973.

      For Appellant: Terry L. Seiffert, Billings.
    For Respondent: Honorable Joseph P. Mazurek, Attorney General; Cregg W. Coughlin, Assistant Attorney General, Helena; Dennis Paxinos, County Attorney, Billings.
   CHIEF JUSTICE TURNAGE

delivered the Opinion of the Court.

D.D. was committed to the Montana State Hospital at Warm Springs by order of the Thirteenth Judicial District Court, Yellowstone County. D.D. appeals. We affirm.

The issues are:

1. Was there sufficient evidence of an overt act to find D.D. seriously mentally ill?

2. Did the District Court err in entering an order of commitment without making findings of fact and conclusions of law?

In June 1995, D.D. asked officers from the Billings, Montana police department to come to his apartment because of his concerns about other people in his apartment building. When the officers arrived at D.D.’s apartment, they found papers in the oven, the timer for the oven turned on, and the smoke detector in the kitchen turned off or disabled. D.D. objected to inspection of his stove and apartment by the local fire department. A police officer took D.D. to a hospital emergency room for psychiatric evaluation.

In the emergency room, it was determined that D.D. was suffering from delusions and hallucinations. D.D. was examined by Dr. Paul Gordon, a Billings psychiatrist. Dr. Gordon diagnosed D.D. as a chronic paranoid schizophrenic.

D.D. told Dr. Gordon that a gang leader, whom he was unable to further identify, wanted D.D. to be “his wife and his whore” and was going to force D.D. to do that. D.D. told Dr. Gordon that the gang leader would beat D.D. in the head with a hammer until D.D. was dead or became the gang leader’s wife. D.D. opined to Dr. Gordon that the gang leader “should be treated like a rabid dog.” D.D. also told Dr. Gordon that he heard an unseen couple in his apartment building saying they were going to rape him.

Dr. Gordon testified at D.D.’s commitment hearing that D.D. is a potential danger to himself and others. He stated that D.D. could attack somebody because D.D. believes he is about to be attacked. D.D. has a history of mental illness, and an attempt to treat him locally a year before had not worked out. D.D. had refused to take medication prescribed to control his delusions. Dr. Gordon recommended that D.D. be committed for treatment and that the state hospital be authorized to administer medications to D.D. even against his will, if the hospital deemed it necessary.

D.D. also testified at his commitment hearing. He stated that he had placed papers relating to an herbal weight loss product in his oven because he believed his apartment had been entered without him knowing it. He testified:

Most thieves wouldn’t think a weight loss product or a pill would be in an oven.
... I told Dr. Gordon and the police, and I told you, I was trying to identify a psychotic or psychopathic killer in our community. I wasn’t doing anything wrong. I wasn’t acting in an irrational manner. I stood there. I was talking to the officer. Sure I was nervous. There were five firemen over there accusing me of trying to start fire or being incompetent to the point where I accidentally started a fire, which I don’t think was true. I had that stuff in that oven for more than a week, and in my own logical observation of myself, knowing what I’m doing is why I called the police about this person and the people in the apartment building.
I also told Officer Cunningham, who brought me to the hospital, I told him I was having problems with somebody who was attacking me right there in my house.
I tried to identify the person, even tell him his name. For all I know he might be using my name, and I tried to bring my Montana State ID card with me, but it wasn’t in my fanny pack that I carried to the hospital, so I couldn’t find it, but the person that I’m talking about, who has been attacking me, will attack others either with guns or other material that will hurt them or even kill them.

D.D. further testified:

I haven’t gone out looking for this person to attack him. I have been kind of halfway keeping an eye out for him to catch him in an act like I have been describing so I can help the police apprehend him.

In its order of commitment, the District Court found that D.D. had received the benefit of all applicable statutory and constitutional rights and was seriously mentally ill and in need of further evaluation and treatment. The court stated its finding was supported by Dr. Gordon’s written report, which was attached to the order. The court ordered D.D. committed to the Montana State Hospital for treatment and evaluation for not more than three months unless extended pursuant to § 53-21-128, MCA (1991).

Issue 1

Was there sufficient evidence of an overt act to find D.D. seriously mentally ill?

In an involuntary commitment proceeding, the State must prove its case beyond a reasonable doubt with respect to any physical fact or evidence, and by clear and convincing evidence as to all other matters. Section 53-21-126(2), MCA. Our standard of review requires that we evaluate the evidence in a light most favorable to the prevailing party. Matter of R.J.W. (1987), 226 Mont. 419, 423, 736 P.2d 110, 112.

“Seriously mentally ill” is defined at § 53-21-102(15), MCA, as suffering from a mental disorder which has resulted in self-inflicted injury or injury to others or the imminent threat of injury or which has deprived the person afflicted of the ability to protect the person’s life or health. For this purpose, injury means physical injury.

Evidence of actual violence or physical harm is not required to satisfy the provision “imminent threat of injury.” Matter of F.B. (1980), 189 Mont. 229, 235, 615 P.2d 867, 870. However, imminent threat of self-inflicted injury or injury to others must be evidenced by overt acts sufficiently recent as to be material and relevant to the person’s present condition. Section 53-21-126(2), MCA.

D.D. argues that there was no evidence of any overt act in which he was violent, threatening toward anyone, or suicidal. He contends that the only basis for his commitment were the papers he had placed in his oven.

While the danger must be fairly immediate, an overt act need not be a completed act; an attempt or threat, or even a failure to act, may suffice. F.B., 615 P.2d at 869. Police officers were summoned to the hotel in which F.B. lived because he was ‘loud and abusive and throwing food.” F.B., 615 P.2d at 870. F.B. sat on his bed wielding a baseball bat and argued with the officers for several minutes before agreeing to go with them. This Court upheld F.B .’s commitment based upon these “overt acts.” F.B., 615 P.2d at 870.

A threat to kill qualifies as an overt act. In re Mental Health of E.M. (1994), 265 Mont. 211, 213, 875 P.2d 355, 356. E.M., a fifty-seven-year-old widow, was involuntarily committed after she told mental health professionals that she planned to buy a gun and then shoot her neighbor and herself. On appeal to this Court, E.M. argued that a physical act was needed to establish an overt act. This Court affirmed E.M.’s commitment based upon her verbal threats to kill herself and her neighbor.

In his written report to the Court, Dr. Gordon recounted that, during his conversations with D.D., D.D. came to the conclusion that Dr. Gordon was a pimp and that “there were political reasons for [Dr. Gordon’s] going to court to have [D.D.] committed for treatment.” Dr. Gordon stated that D.D. could “very easily” attack someone out of fear, anticipating that they were about to attack him. In the opinion of Dr. Gordon, a mental health professional, D.D. is a danger to himself and others in that he may attack someone due to his fear and paranoia that he is about to be attacked. We conclude that D.D.’s statements to Dr. Gordon, including his statement that the gang leader “should be treated like a rabid dog,” constituted “overt acts.”

Viewing the evidence in the light most favorable to the prevailing party, we conclude that the record contains clear and convincing evidence that D.D. was suffering from a mental disorder demonstrated by an overt act resulting in an imminent threat of injury to himself or others.

Issue 2

Did the District Court err in entering an order of commitment without making findings of fact and conclusions of law?

Rule 52(a), M.R.Civ.P., requires that in all actions tried upon the facts without a jury “the court shall find the facts specifically and state separately its conclusions of law thereon.” D.D. points out that the District Court merely found that he was seriously mentally ill and incorporated by reference the two-page letter from Dr. Gordon as the factual basis therefor.

The State’s first response to this issue is that D.D. did not give the District Court notice that he desired more from the court in the way of findings of fact. Where the district court has not been given an opportunity to correct its error, this Court will not reverse on appeal. In re Marriage of Laster (1982), 197 Mont. 470, 481, 643 P.2d 597, 603.

Additionally, where the record as a whole establishes that a person’s mental disorder has resulted in an imminent threat to the person and others, a district court’s error in failing to set forth a detailed statement of the facts may constitute harmless error. R. J. W., 736 P.2d at 113. Although we do not recommend the shortcut method used by the District Court in this case, such is the case here. The record as a whole establishes that D.D.’s mental disorder resulted in an imminent threat to himself and to others, and supports the action taken by the District Court.

Affirmed.

JUSTICES ERDMANN and LEAPHART concur.

JUSTICE NELSON

specially concurring.

I concur in our discussion of issue one and concur in our discussion of issue two to the extent that we should not consider this issue because no exceptions were made by D.D. to the manner in which the court made its findings. I do not agree that simply incorporating a doctor’s report by reference fulfills the trial court’s obligation under Rule 52(a), M.R.Civ.R, to “find the facts specially.” Unfortunately decisions like this and Matter of R.J.W. (1987), 226 Mont. 419, 736 P.2d 110, establish exceptions that soon swallow the rule.

JUSTICE TRIEWEILER dissenting.

I dissent from the majority’s conclusion that there was clear and convincing evidence that D.D. was seriously mentally ill. Proof of serious mental illness requires proof that a person is an imminent threat of injury to himself or others. Section 53-21-102(15) MCA. “Imminent threat of self-inflicted injury or injury to others shall be evidenced by overt acts, sufficiently recent in time as to be material and relevant as to the respondent’s present condition.” Section 53-21-126(2), MCA.

While we have held in Mental Health of E.M. (1994), 265 Mont. 211, 875 P.2d 355, that a direct threat to kill another satisfies the overt act requirement, the majority’s conclusion in this case simply stretches the “overt act” requirement beyond the point that it has any meaning.

There was nothing about referring to Dr. Gordon as a pimp, or the fact that disparaging remarks were made about a gang leader that suggested that D.D. was an imminent threat of harm to himself or others. Rush Limbaugh and G. Gordon Liddy say worse things to millions of listeners every day.

While there may be a strong public policy argument that an overt act should not be required before concluding that a person presents an imminent threat of harm to himself or others, that public policy decision has been made by the Legislature and should be amended by the Legislature. For all practical purposes, § 53-21-126(2), MCA, has been amended by this decision.

For these reasons, I dissent from the majority opinion.