author: JUSTICE HUNT

text:
    DONNA TURJAN, Petitioner and Appellant, v. VALLEY VIEW ESTATES, Employer, and ROYAL INSURANCE, Insurer and Respondent.
    No. 94-551.
    Submitted on Briefs April 20, 1995.
    Decided August 4, 1995.
    52 St.Rep. 740.
    272 Mont. 386.
    901 P.2d 76.

      For Appellant: Thomas C. Bulman, Bulman Law Associates, Missoula.
    For Respondent: P. Mars Scott, Mulroney, Delaney & Scott, Missoula.
   JUSTICE HUNT

delivered the Opinion of the Court.

Appellant Donna Turjan appeals from a November 1993 order of the Workers’ Compensation Court denying her claim for failure to report an injury within the time prescribed by statute. We affirm.

Appellant raises the following issue on appeal:

Is the one-year time limit for filing a written workers’ compensation claim under § 39-71-601, MCA (1985), and the 60-day time limit for giving an employer notice of injury under § 39-71-603, MCA (1985), tolled while claimant is receiving benefits under a prior claim?

Appellant was employed at Valley View Estates, a nursing home, from September 1986 through April 1987. On September 16, 1986, appellant injured her lower back and right shoulder while lifting a patient with a co-worker. She reported the injury to her supervisor, Bonnie Hicks. Appellant filled out a Valley View Accident Investigation Report and Valley View filed a workers’ compensation claim on appellant’s behalf. Appellant received treatment for this injury from Dr. Fuhrman. At the time of this workers’ compensation claim, Valley View’s insurer was Industrial Indemnity and its claims were adjusted by Crawford & Company Adjustors. Industrial covered the September 1986 workers’ compensation claim. In January 1987, they began payment of medical costs associated with appellant’s back injury. Beginning January 1, 1987, Valley View’s insurer was Royal Insurance. Royal’s claims were adjusted by General Adjustment Bureau.

On April 21, 1987, appellant was again lifting a patient and felt a sharp pain in her lower back. Appellant claims that she told Connie Strong, an employee at Valley View, about the incident and that she filled out a Valley View accident report for Strong to give to Hicks. Appellant initially claimed that Strong was her supervisor, but later testified that Hicks was her supervisor. Strong disputes appellant’s testimony and testified that she does not remember appellant either telling her anything about the incident, or giving her a completed Valley View accident report for the April 1987 incident. Strong also testified that she was not appellant’s supervisor. Appellant returned to Dr. Fuhrman and he instructed her that she was restricted from any work. He found that she had new symptoms and that she was “worse” in reference to her September 1986 injury. Appellant delivered two doctor’s notes to this effect, dated April and June 1987, to Hicks at Valley View. Appellant failed to tell Hicks of the April 1987 incident, and failed to fill out a Valley View accident report when she twice delivered Dr. Fuhrman’s notes.

After learning that appellant would not be returning to work, Valley View called Industrial to report appellant’s separation from work due to her September 1986 back injury. Since appellant’s injury occurred during Industrial’s coverage period, they were liable. At Industrial’s request, Crawford called appellant on April 30, 1987, to interview her about the circumstances of her September 1986 injury. Crawford called as a result of her April 1987 separation from employment. After discussion of the September 1986 injury, the following dialogue took place:

Crawford: Mmmhmm. Okay. And now it’s [injury] apparently started to cause you more problems recently here?
Appellant: Uh, yea. It was, it’s been coming off and on ever since I injured it, but boy, when she put me back on afternoon shift, she put me on the worse wing that she could have. And that’s when there’s only two girls lifting all those heavy people all night long. Crawford: Mmmhmm.
Appellant: Get em up and then you got [sic] put them on the bed and potty them.
Crawford: Mmmhmm.
Appellant: And that’s, that’s when it really started aching. Crawford: Okay.
Appellant: I got a sharp pain and then uh I went to sit down for a couple of hours in the dining room trying to ease the pain and no matter what I did, I couldn’t get rid of the pain. So I called the doctor [Fuhrman] the next day.
Crawford: Mmhmm.
Appellant: Oh, this was midnight and I called the doctor the next day and I, uh, I, he, he wasn’t in but the nurse was and she ordered me some muscle relaxers to relieve the pain.

Crawford initiated bi-monthly benefits to appellant under the September 1986 workers’ compensation claim under Industrial’s coverage. Royal, the insurance carrier in April 1987, was not notified of an April 1987 injury until April 1993.

Sometime in 1987, appellant retained an attorney. The representation included appellant’s September 1986 workers’ compensation claim and continued until December 1992. Appellant received benefits from Industrial through June 1989. After those benefits ended, she entered into litigation with Industrial concerning her September 1986 claim. The first reference to a separate injury occurring in April 1987 was in the July 1992 deposition of appellant by Industrial. She stated that she filed an incident report, or a workers’ compensation claim, for the April 1987 incident. Her attorney could not find an incident report and was unsure that a workers’ compensation claim was ever filed. Appellant settled with Industrial in December 1992 for the September 1986 injury and for the April 1987 incident and received a lump sum payment. Industrial accepted liability for the September 1986 injury, but disputed liability for the April 1987 incident.

Appellant filed a workers’ compensation claim for the April 1987 incident through her second and current attorney in April 1993. A trial in the Workers’ Compensation Court took place on January 18, 1994. The court refused to toll the statutory time limits requiring notice of an injury to employer within 60 days and requiring the filing of a workers’ compensation claim within one year. Appellant appeals from that judgment.

ISSUE

Is the one-year time limit for filing a written workers’ compensation claim under § 39-71-601, MCA (1985), and the 60-day time limit for giving an employer notice of injury under § 39-71-603, MCA (1985), tolled while claimant is receiving benefits under a prior claim?

We have two jointly employed standards of review for Workers’ Compensation Court decisions. One is a review of the findings of fact to determine if they are supported by substantial credible evidence, and the other is a review of the conclusions of law to determine whether or not the law is interpreted correctly. Caekaert v. State Compensation Mutual Ins. Fund (1994), 268 Mont. 105, 111, 885 P.2d 495, 498.

The controlling statutes require workers’ compensation claims to be filed in writing within 12 months of the date of injury. They authorize employers, insurers, and the division to receive these written claims. Section 39-71-601(1), MCA (1985). An employee is required to give notice to the employer within 60 days of the injury. Section 39-71-603, MCA (1985).

Appellant argues that she was lulled into not filing a second workers’ compensation claim for the April 1987 incident because she began to receive temporary total disability benefits shortly after her conversation with Industrial’s claims adjuster, Crawford. She argues that her telephone conversation with the adjuster should have alerted him that she had a second injury in April 1987. Appellant asserts that Valley View should have known from her conversation with Crawford that a separate workers’ compensation claim needed to be filed for her April 1987 incident. She argues that it was reasonable for her to assume that the proper claim for her April 1987 injury was her 1986 claim because that was the claim under which she began receiving temporary total disability benefits.

Appellant testified that she notified Valley View on the day of the April 1987 injury through Strong. Appellant claimed that she filled out a Valley View Accident Investigation Report and that she gave it to Strong to give to Hicks, appellant’s supervisor. Appellant argues that Valley View had imputed knowledge of a second injury in April 1987 through her conversation with Crawford.

The Workers’ Compensation Court found that appellant was familiar with Valley View’s procedures for filling out accident reports and for filing workers’ compensation claims. She filed a previous workers’ compensation claim for her September 1986 injury. Doctor Fuhrman’s note indicated new symptoms after April 1987, but did not indicate that a new, specific incident had precipitated the new symptoms. He noted that she was “worse,” indicative of a decline in an existing condition. Appellant did not report her April 1987 incident to Strong, or to her supervisor. There was no written accident report filed and Strong had no recollection of appellant telling her of the April 1987 incident. The court further found that appellant, Crawford, and Valley View all operated under the assumption that the April 1987 incident was an aggravation of the September 1986 injury. There was nothing in appellant’s conversation with Crawford that would indicate to them that she had a new and separate injury. The following testimony from appellant’s July 1992 deposition during litigation with Industrial indicates that the April 1987 incident was an aggravation of the existing condition that began in September 1986.

Q. There aren’t any radicular findings in Dr. Fuhrman’s records until after April of 1987. Do you agree with that assessment?
A. Well, the first time I was injured I had a burning sensation.
Q. Okay. Now on April 23, 1987, there is a note from Dr. Fuhrman that you had some new symptoms and new pain radiating down your leg. Would you have told him about new symptoms after the event in April 1987 when you were lifting the other lady?
A. I told him all the symptoms I had, even before.
Q. Okay. You wouldn’t dispute his records that you had some new symptoms in April of 1987 though, would you?
A. I had all the pain from before [April 1987] and I told him.
Q. Uh-huh. Now, you wouldn’t dispute his records, though, would you?
A. With the pains I would.
Q. Okay. Now, the event in April 1987, that involved a change in your condition, didn’t it? It worsened your condition?
A. Yes.

The July 1992 deposition was the first time appellant raised the issue of a new and separate injury. The court further found that medical evidence and appellant’s own testimony failed to establish the April 1987 incident as a separate injury. The first notice Valley View received about the April 1987 incident being a separate injury was in April 1993, when appellant filed a workers’ compensation claim.

Appellant relies on two cases to support her contention that the statute should be tolled for the filing of her workers’ compensation claim for the April 1987 incident. First, she points us to Frost v. Anaconda Company (1982), 198 Mont. 216, 645 P.2d 419. In Frost, the employee was injured on the job and disabled as a result. The employer offered its own compensation program to disabled salaried employees. This program offset workers’ compensation and social security benefits against payment under the company program. The employee went on this program. After a few years of receiving benefits under this program, the insurance company temporarily terminated his benefits. He filed a workers’ compensation claim to avoid having his benefits terminated in the future. The employee filed his claim three and one-half years after the statute tolled. This Court held that the one-year statute of limitations did not toll because the company paid compensation to the employee that was substantially similar to or greater than the benefits he would have received under a workers’ compensation claim. Frost, 645 P.2d at 422. The reasoning behind tolling the statute

is to prevent an employer from lulling a claimant into a false sense of security by apparently acknowledging the validity of the claim, paying remuneration in lieu of compensation, and then invoking the statute after the lapse of one year.

Frost, 645 P.2d at 422 (citing Cupit v. Dancu Chemical Co. (Okla. 1957), 316 P.2d 593 at 595).

Appellant next relies on Jaeger v. Stauffer Chemical Company (1982), 198 Mont. 263, 645 P.2d 942. In Jaeger, the employee injured his back at work. The company had a policy of keeping injured workers on light duty at full salary and the injured employee continued to work in that capacity. The employee was retired involuntarily in 1978 (for reasons unrelated to his injury) and filed for workers’ compensation benefits after his six-month severance pay ended, more than two years after his injury. We held that the statute tolled because the payment of the employee’s full salary amounted to compensation in light of his frequent and lengthy absences from work and his inability to perform his normal job duties. Jaeger, 645 P.2d at 946. We also held that an employer can avoid tolling the statute by notification to the employee of the necessity for filing a workers’ compensation claim. Jaeger, 645 P.2d at 946.

Here, appellant argues that the statute should be tolled because she was receiving actual workers’ compensation benefits under a prior claim, not just benefits that were substantially similar to workers’ compensation benefits, as in Frost and Jaeger. Appellant states that she was lulled into a false sense of security when she began receiving benefits after the April 1987 conversation with Crawford. However, appellant’s situation differs from Frost and Jaeger. Appellant was receiving workers’ compensation benefits, while Frost and Jaeger were receiving compensation from their employers in lieu of workers’ compensation benefits. Additionally, appellant filed a workers’ compensation claim for her September 1986 injury and began to receive workers’ compensation benefits, while Frost and Jaeger never filed a workers’ compensation claim until their employer-paid benefits were terminated. Appellant’s employer did not offer her compensation in lieu of workers’ compensation benefits. When appellant injured her back in September 1986, Valley View filed a workers’ compensation claim and she received medical and temporary total disability benefits through workers’ compensation. Valley View did nothing to lull appellant into a false sense of security. When appellant reported her September 1986 injury, Valley View followed the correct procedure in filing a workers’ compensation claim for appellant and did not offer her an alternative compensation plan.

The time limits of §§ 39-71-601 and -603, MCA (1985), are mandatory. The purpose behind the notice requirement to employers is so the employer is able to investigate claims promptly and is protected from later claims. Larson v. Barry Smith Logging (1994), 267 Mont. 444, 448, 884 P.2d 786, 788-89 (citing Bender v. Roundup Mining Co. (1960), 138 Mont. 306, 312-13, 356 P.2d 469, 472). The burden of reporting injuries for workers’ compensation claims rests on the employee. Grenz v. Fire and Casualty (1993), 260 Mont. 60, 64, 857 P.2d 730, 732. Appellant does not fit the exception of being lulled into failing to file a claim under Frost and Jaeger. Appellant failed to meet the statutory notice and filing requirements.

Appellant argues that Crawford was an ostensible agent of Valley View when it contacted her in April 1987 regarding her September 1986 injury.

The Workers’ Compensation Court found that Crawford was not an agent of Valley View for purposes of workers’ compensation claims. The court also found that Crawford was not an agent of Royal, Valley View’s insurer as of January 1987. Further, Crawford was never employed by Valley View, and Valley View never engaged in any conduct from which appellant could infer that Crawford was its agent.

“An agency is ostensible when the principal intentionally or by want of ordinary care causes a third person to believe another to be his agent.” Section 28-10-103, MCA. This belief must be reasonable. Larson, 884 P.2d at 788 (citing Bogle v. State Compensation Insurance Fund (1994), 264 Mont. 515, 519, 872 P.2d 800, 802).

In the instant case, appellant could not reasonably believe that Crawford was Valley View’s agent for the purpose of giving notice of her alleged 1987 workers’ compensation claim. Crawford’s agent identified himself and began the discussion by specifically asking appellant about her 1986 injury. There was no reason for her to believe that her discussion with him about her 1986 injury, and her 1987 aggravation of the same injury, constituted the required notice for the filing of a second workers’ compensation claim. Appellant had been through Valley View’s process before in September 1986 and understood that a Valley View accident report was the first step to filing a workers’ compensation claim. Valley View did nothing that would have caused appellant to reasonably believe that Crawford was its agent for notification purposes of workers’ compensation claims.

Appellant contends that Valley View should be equitably es-topped from raising the statute of limitations defense because it created circumstances that caused appellant’s failure to file a written workers’ compensation claim within the statutory time limits.

Equitable estoppel applies when the employer or the insurer “has taken some positive action which either prevents claimant from making a claim or leads him to reasonably believe he need not file ... a claim.” Ricks v. Teslow Consolidated (1973), 162 Mont. 469, 481, 512 P.2d 1304, 1313. “[T]he party... to be estopped [must] have knowledge that he is misleading the claimant and an intention to mislead the claimant to his detriment.” Ricks, 512 P.2d at 1313.

The Workers’ Compensation Court found that Valley View did not meet the requirements of equitable estoppel and was entitled to raise the statute of limitations defense. Valley View did nothing to mislead appellant about the proper procedure required to make a workers’ compensation claim. Appellant knew Valley View’s procedure. Appellant had been through the procedure before when she filed her September 1986 claim.

We hold that there is substantial credible evidence to support the Workers’ Compensation Court’s findings and that it interpreted the law correctly.

Affirmed.

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


source: Caselaw Access Project

author: CHIEF JUSTICE TURNAGE JUSTICE HUNT

license: Public Domain

text:
    CLIFFORD CHRISTENOT, DOUGLAS A. CRUMB, FRANK R. C. BRISENDINE, MARK RITTENHOUSE, KEN MACPHERSON, RONALD L. OLSON, DAVID L. COMER, J. ROBERT CARNAHAN, R. BRENT KANDARIAN, JOHN V. MATESKON, CHUCK CONLAN, SAM MATOUSEK, JR., SUSAN WATTS, TOM BASTAS, GAYLA BASTAS, JAMES PRIDEMORE, THADUS ZUPANIK, ELSIE LEE, LESLIE YAEGER, ROMAN HANASZ, HELEN HANASZ, RAYMOND KRAMER, JAMES G. JACKSON, TAMMIE LARAE BONNER, Plaintiffs, Respondents and Cross-Appellants, v. STATE OF MONTANA, DEPARTMENT OF COMMERCE, BOARD OF DENTISTRY, Defendants, Appellants and Cross-Respondents.
    No. 94-539.
    Submitted on Briefs May 25, 1995.
    Decided August 4, 1995.
    52 St.Rep. 749.
    272 Mont. 396.
    901 P.2d 545.

      For Appellant: Robert P. Verdón, Special Assistant Attorney General, Helena.
    For Respondents: James C. Bartlett, Hash, O’Brien & Bartlett, Kalispell.
   CHIEF JUSTICE TURNAGE

delivered the Opinion of Court.

The State of Montana, Department of Commerce, Board of Dentistry (Board), appeals an injunctive order issued by the District Court for the Nineteenth Judicial District, Lincoln County. That court declared invalid three administrative rules adopted by the Board, as improper interpretations of §§ 37-29-402(2) and -403, MCA. The court denied, without prejudice, the plaintiffs’ request for costs and attorney fees. The Board appeals the declaration of invalidity as to Rule 8.17.808, ARM. The plaintiffs cross-appeal. We reverse the District Court’s ruling that Rule 8.17.808, ARM, is invalid.

We do not address all of the issues raised, because of our resolution of the following issues:

1. Is the court’s August 30, 1994 order an appealable order?

2. Did the District Court err in declaring invalid Rule 8.17.808, ARM, and in issuing an injunction barring enforcement of that rule?

In 1984, Montana voters passed Initiative No. 97, the Freedom of Choice in Denture Services Act of 1984 (codified at §§ 37-29-101 through -412, MCA). The Act established a statutory framework allowing the practice of denturitry in Montana. As amended by Montana’s 1987 legislature, it provides that the Board of Dentistry shall adopt rules necessary for the implementation, continuation, and enforcement of the Act. Section 37-29-201, MCA.

The plaintiffs in this action are denturists and denture users. They filed this action in 1993, asking the District Court for a declaratory judgment invalidating certain rules adopted by the Board concerning the practice of denturitry. Plaintiffs claimed that the Board has improperly interpreted the statutes and that the challenged rules are unconstitutional under the Montana Constitution’s right to privacy provision and the federal constitution.

Following a hearing, the District Court issued an order granting the injunction requested by the plaintiffs. It determined that enforcement of the three challenged rules “operates to the prejudice of the public in that they do not have the choice to choose a denturist over a dentist, as provided under the Freedom of Denture Services Act.”

The Board appeals as to only one of the three rules declared invalid by the District Court, Rule 8.17.808, ARM. It does not appeal the court’s declaration of invalidity as to Rules 8.17.809 and .810, ARM.

The statute at issue on appeal is § 37-29-403, MCA:

(1) Prior to making and fitting a partial denture, a denturist shall:
(a) formulate a study model of the intended denture;
(b) refer the patient to a dentist, together with the model for tooth cleaning, mouth preparation, and x-rays, as needed; and
(c) make the partial denture and fit it to the existing teeth after the dentist has completed the procedures listed in subsection (l)(b) and in accordance with the dentist’s recommendations.
(2) A denturist may not cut, surgically remove, or surgically reduce any tissue or teeth in the process of fitting a partial denture.
(3) A denturist who makes or fits a partial denture in a manner not consistent with this section is subject to the sanctions provided in 37-29-311.

Rule 8.17.808, ARM, provides:

(1) The board of dentistry interprets 37-29-403(l)(b), MCA, to mean that all partial denture patients shall be referred to a dentist to determine what is needed prior to the denturist starting his services.

As to this rule, the District Court wrote:

[T]he only rational interpretation of § 37-29-403, MCA, is to make referrals to dentists permissive. From the testimony at the trial held on June 21,1994, and the testimony from the administrative hearings on the creation of the administrative regulations (Defendant’s Exhibits A, B, and C), it appears that denturists will make the right choice and refer patients to dentists when needed. There does not appear to be a reasonable explanation for making dentist referrals mandatory except to make the denturist business obsolete.

The Board appeals the court’s ruling as to Rule 8.17.808, ARM.

ISSUE 1

Is the court’s August 30, 1994 order an appealable order?

The plaintiffs argue that no final appealable order has yet been entered because the District Court has not yet made a final ruling upon their motion for attorney fees. They cite cases in which this Court has rejected appeals as premature because the issue of attorney fees was yet to be resolved. See Tigart v. Thompson (1989), 237 Mont. 468, 774 P.2d 401; Boles v. Ler (1984), 213 Mont. 266, 692 P.2d 1; Baer v. Baer (1982), 199 Mont. 21, 647 P.2d 835; Ring v. Hoselton (1982), 197 Mont. 414, 643 P.2d 1165. The plaintiffs urge that this appeal likewise be dismissed as premature.

Rule 1(b), M.RApp.P., allows a party in a civil case to appeal to this Court from

a judgment or order, except when expressly made final by law, in the following cases:
(1) From a final judgment entered in an action or special proceeding commenced in a district court, or brought into a district court from another court or administrative body.
(2) From an order ... granting or dissolving an injunction[.]

As this Court has stated, appeal lies “from a final judgment or order, or an order otherwise provided for” in the various subsections of Rule 1, M.R.App.P. Baer, 647 P.2d at 839-40. All four cases cited by plaintiffs were appeals under Rule 1(b)(1), M.R.App.P. In contrast, the District Court’s August 30, 1994 order is appealable under Rule 1(b)(2), M.RApp.P., as an order granting an injunction. A final order is not necessary for an appeal under that subsection of the rule. The cases cited by the plaintiffs therefore do not control as to this appeal.

We hold that the District Court’s August 30, 1994 order is an appealable order granting an injunction, pursuant to Rule 1(b)(2), M.RApp.P.

ISSUE 2

Did the District Court err in declaring invalid Rule 8.17.808, ARM, and in issuing an injunction barring enforcement of that rule?

An administrative regulation may be overruled as “out of harmony” with the applicable legislative guidelines only upon a clear showing that the regulation adds requirements which are contrary to the statutory language or that it engrafts additional provisions not envisioned by the legislature. Board of Barbers, Etc. v. Big Sky College, Etc. (1981), 192 Mont. 159, 161, 626 P.2d 1269, 1270-71; see also § 2-4-305(5) and (6), MCA. The plaintiffs herein argue, and the District Court ruled, that Rule 8.17.808, ARM, imposes an additional requirement upon denturists in that it makes dentist referrals mandatory.

The question before us is the proper interpretation of § 37-29-403(l)(b), MCA. Plaintiffs argue, and the District Court ruled, that the words “as needed” in that statute allow the denturist to decide whether referral to a dentist is needed for tooth cleaning, mouth preparation, and x-rays.

The plaintiffs point out that the Board’s attorney has admitted that § 37-29-403(1)(b), MCA, is ambiguous. When legislative intent cannot be determined from the plain words of a statute, then the court must examine the legislative history of the statute. Lewis & Clark v. State, Dept. of Commerce (1986), 224 Mont. 223, 226, 728 P.2d 1348, 1350. The plaintiffs contend that this leads us back to an examination of the intent of the Freedom of Choice in Denture Services Act of1984.

However, § 37-29-403, MCA, was not a part of the Freedom of Choice in Denture Services Act of 1984. It was proposed to the 1985 Montana legislature by the Department of Commerce, as part of H.B. 649. The bill, which was adopted by the legislature as Ch. 548, L. 1985, was described by its sponsors as a “compromise bill between the dentists and denturists of Montana” “to clear up some of the problem areas” of the Freedom of Choice in Denture Services Act of 1984. See Minutes of Senate Public Health Committee Hearing on H.B. 649, March 11, 1985. That, therefore, is the purpose for which the statute was enacted.

An administrative agency’s interpretation of a statute under its domain is presumed to be controlling. Norfolk Holdings v. Dept. of Revenue (1991), 249 Mont. 40-44, 813 P.2d 460, 462. In fact, the construction of a statute by the agency responsible for its execution should be followed unless there are compelling indications that the construction is wrong. Red Lion Broadcasting Co. v. FCC (1969), 395 U.S. 367, 381, 89 S.Ct. 1794, 1802, 23 L.Ed.2d 371, 384.

The Board points out, too, that a statute should be read and construed as a whole so as to avoid absurd results and to give effect to the purpose of the statute. Dover Ranch v. County of Yellowstone (1980), 187 Mont. 276, 283-84, 609 P.2d 711, 715. The Board’s position is that the meaning of § 37-29-403(1)(b), MCA, is resolved by reference to the next subsection of the statute, § 37-29-403(1)(c), MCA. Subsection (l)(c) comes into effect “after the dentist has completed the procedures listed in subsection (l)(b) and in accordance with the dentist’s recommendations.” The Board argues that the plaintiffs’ interpretation of subsection (l)(b) would render subsection (l)(c) superfluous and meaningless. The Board therefore maintains that the proper mode of treatment under the statute is that a denturist’s patient must be seen by a dentist before the denturist constructs and fits partial dentures. Rule 8.17.808, ARM, is consistent with that interpretation.

Like the Board, the Attorney General of the State of Montana has interpreted § 37-29-403, MCA, as requiring that a denturist’s patient be seen by a dentist before partial dentures are made. “When section 37-29-403, MCA, is construed in its entirety, it becomes clear that a denturist has no discretion with respect to referral of a patient to a dentist before the making and fitting of partial dentures.” 44 Op. Att’y Gen. No. 36 (1992).

We conclude that plaintiffs have not made a clear showing that Rule 8.17.808, ARM, adds provisions not envisioned by the legislature. We hold that the District Court erred when it declared that rule invalid as an improper interpretation of § 37-29-403, MCA. We therefore reverse the District Court’s determination and vacate the injunction prohibiting enforcement of Rule 8.17.808, ARM.

We make no decision as to plaintiffs’ constitutional argument, which argument the District Court did not reach in rendering its opinion.

JUSTICES GRAY, WEBER and LEAPHART concur.

JUSTICE HUNT

dissenting.

I dissent from the majority opinion.

The majority concludes that the plaintiffs failed to make a clear showing that 8.17.808, ARM, adds provisions not envisioned by the Legislature, and therefore, that 8.17.808, ARM, should stand. However, a party challenging the validity of a regulation is not restricted exclusively to making a clear showing that the regulation adds provisions not envisioned by the Legislature. Under Board of Barbers, and § 2-4-305(5), MCA, an administrative regulation may also be overruled upon a clear showing that the regulation adds requirements which are contrary to the statutory language. At issue is the correct interpretation of the phrase “as needed.” In any manner of construction, “as needed” is an expression of discretion, rather than compulsion. Had the intent of § 37-29-403(l)(b), MCA, been to mandate referring a partial denture patient first to a dentist, “as needed” would have been omitted from subsection (l)(b).

The majority adopts the Board’s argument that plaintiffs’interpretation of subsection (l)(b) would render subsection (l)(c) superfluous. The Board asserts that the statute should be read “as a whole to give effect to the purpose of the statute.” However, the only way to reach the Board’s, and the majority’s, conclusion that the phrase “as needed” is compulsory, is to read subsection (l)(c) in isolation. If read in isolation, subsection (l)(c) mandates that the denturist shall make and fit the partial denture after the dentist has completed the procedures listed in subsection (l)(b). If read as a whole, the procedures referred to in subsection (l)(b) by subsection (l)(c) are employed “as needed.” If those procedures are not needed, the denturist will simply make the partial denture and fit it to the existing teeth.

The purpose behind § 37-29-403, MCA, is to provide less expensive denture services for those who seek to avoid the additional expense of involving a dentist in the process of fitting dentures where his or her services are not needed. The phrase “as needed” gives effect to that purpose. The record shows that the plaintiffs’ made a clear and compelling showing that 8.17.808, ARM, adds requirements which are contrary to the statutory language of § 37-29-403, MCA. As a result, I would affirm the District Court’s decision to grant plaintiffs’ request for an injunction barring the enforcement of 8.17.808, ARM.

JUSTICES TRIEWEILER and NELSON join in the foregoing dissenting opinion.


author: JUSTICE GRAY

text:
    STATE OF MONTANA, Plaintiff and Respondent, v. VINCENT M. KALUZA, Defendant and Appellant.
    No. 94-320.
    Submitted on Briefs May 25, 1995.
    Decided August 17, 1995.
    52 St.Rep. 795.
    272 Mont. 404.
    901 P.2d 107.

      For Appellant: Charles E. Petaja, Helena, Montana; Jeannette E. Berry, Bozeman.
    For Respondent: Hon. Joseph P. Mazurek, Attorney General, John Paulson, Assistant Attorney General, Helena; Mike Salvagni, Gallatin County Attorney, Marty Lambert, Deputy Gallatin County Attorney, Bozeman.
   JUSTICE GRAY

delivered the Opinion of the Court.

Vincent M. Kaluza (Kaluza) appeals from the judgment and sentence entered on his conviction for criminal possession of marijuana with intent to sell by the Eighteenth Judicial District Court, Gallatin County. We reverse.

The dispositive issue on appeal is whether the District Court erred in denying Kaluza’s motion to suppress evidence based on a lack of probable cause for the issuance of the search warrant.

On the basis of information indicating that Kaluza was involved with drugs, the Gallatin County Sheriff’s Office applied for a search warrant for two residences leased by Kaluza, one at 1208 West Alderson (Alderson) and one at 300 North Western Drive (Western Drive) in Bozeman, Montana. The search warrant was issued and executed. Thereafter, Kaluza was charged with the felony offense of criminal possession of marijuana with intent to sell.

Kaluza moved to suppress the evidence seized during the searches, alleging that probable cause did not exist for the issuance of the search warrant. The District Court granted Kaluza’s motion with regard to the Alderson residence, and ordered the suppression of evidence seized at that location. The court denied Kaluza’s motion regarding the evidence seized at the Western Drive residence.

The State of Montana (State) appealed the court’s grant of Kaluza’s motion regarding the Alderson residence. We affirmed in State v. Kaluza (1993), 262 Mont. 360, 362, 865 P.2d 263, 264 (Kaluza I). In doing so, we observed that the majority of the information in the application for the search warrant related to the Western Drive residence. Kaluza I, 865 P.2d at 264. We also noted that Kaluza could not appeal the court’s denial of his motion regarding Western Drive at that juncture, and specifically declined to rule on whether probable cause existed to issue the search warrant for that residence. Kaluza I, 865 P.2d at 263-64.

On remand, Kaluza waived his right to a jury trial and the case was tried to the court. The District Court found Kaluza guilty of the offense of criminal possession of marijuana with intent to sell. Kaluza subsequently was sentenced to a term of 15 years in the Montana State Prison, with 7 years suspended on certain conditions. He appealed, and was released on bond pending appeal.

Did the District Court err in denying Kaluza’s motion to suppress evidence seized in the search of the Western Drive residence which was based on a lack of probable cause for the issuance of the search warrant?

A search warrant may be issued upon an application made under oath or affirmation that (1) states facts sufficient to support probable cause that an offense has been committed; (2) states facts supporting probable cause that contraband connected with the offense may be found; (3) describes with particularity the place to be searched; and (4) describes with particularity what is to be seized. Section 46-5-221, MCA. While we have adopted the “totality of the circumstances” test for determining whether probable cause exists for the issuance of a search warrant (State v. Rinehart (1993), 262 Mont. 204, 210, 864 P.2d 1219, 1222 (citations omitted)), it is clear that probable cause must exist for the search of the particular location for which the search warrant is obtained. Kaluza I, 865 P.2d at 264 (citation omitted). Probable cause to believe that an offense has been committed by a suspect is a separate question from whether probable cause exists to search the suspect’s residence. Kaluza I, 865 P.2d at 264.

Here, the District Court concluded that the application setting forth the results of a Bozeman law enforcement investigation which “nearly established probable cause in and of itself,” together with marginally useful information from a reliable informant and others, established probable cause for the search of the Western Drive residence. On that basis, it denied Kaluza’s motion to suppress the evidence seized at that location. Kaluza argues that the District Court erred in denying his motion to suppress because the facts related in the application are insufficient to establish probable cause for the issuance of the search warrant for Western Drive.

Insofar as it pertains to the Western Drive residence, the information contained in the application for the search warrant which resulted from the Bozeman investigation is as follows:

1. Kaluza, an alleged drug dealer, rented the Western Drive residence under the name Bill Martin.
2. Vehicles registered to Kaluza were seen at the Western Drive residence and Kaluza was observed in the vicinity.
3. Kaluza received a shipment at Western Drive from a company which advertises in High Times, a magazine which advocates the use and sale of marijuana and carries advertisements for companies which sell paraphernalia needed to grow marijuana.
4. The affiant, Detective David Reynolds, has received training and is experienced in the investigation of indoor marijuana growing operations. He is aware that lights needed to grow marijuana indoors consume large amounts of electricity, and that researching whether a residence is heated by natural gas, and natural gas consumption, at such a residence may produce evidence that a residence is consuming electricity beyond normal needs.
5. The Western Drive residence is heated with natural gas.
6. According to a utility company employee, the utility consumption records for the Western Drive residence show abnormally high levels of electricity consumption through all seasons during the November 1990 through September 1992 time period, particularly in the summer months.

The application for the search warrant also contains information from an informant in the Hill County vicinity, who had provided reliable information in the past, to the effect that Kaluza had a marijuana grow operation somewhere in Bozeman and that, through intermediaries, his marijuana was sold in the Great Falls and Havre areas. Two persons arrested in Havre for marijuana sales reported similar information about Kaluza.

We begin by reviewing the information in the application for the search warrant which resulted from the Bozeman investigation. As noted above, the District Court concluded that the investigation did not produce sufficient information — on a stand-alone basis — to establish the existence of probable cause to search the Western Drive residence.

The information that Kaluza rented Western Drive under an assumed name connects Kaluza to that location and inferentially creates a suspicion that Kaluza was involved in other than ordinary, lawful activity. While such a suspicion might relate to Kaluza himself and his possible criminal activities, it does not necessarily relate to criminal activities or contraband at the Western Drive location. Moreover, the presence of both Kaluza and his vehicles in the area of the Western Drive residence adds nothing to the probable cause equation, given that Kaluza was the lessee of the residence.

Kaluza’s receipt of a shipment at Western Drive from a High Times advertiser also adds little of a concrete nature to the question of whether probable cause existed to issue the search warrant for Western Drive. There is nothing unlawful or inherently suspicious about a magazine or, indeed, a person advocating the use of marijuana. No showing was made that all companies which advertise in the magazine sell paraphernalia for growing marijuana or even that the company from which the shipment originated advertises such paraphernalia in High Times.

Finally, a portion of the search warrant application relates to electrical consumption at the Western Drive residence. The affiant stated that he had training and experience in investigating indoor marijuana grow operations and was aware that marijuana grow operations consumed large amounts of electricity. He subpoenaed electricity usage records for the Western Drive residence and included in the application a Montana Power Company employee’s opinion that the residence exhibited abnormally high levels of electricity consumption during all seasons, particularly since the residence was heated with natural gas. A graph depicting electricity consumption at Western Drive over approximately two years was attached to the search warrant application.

We recently addressed the use of utility records in the context of a search warrant application. In State v. Hook (1992), 255 Mont. 2, 839 P.2d 1274, the detective stated his experience in investigating twelve marijuana grow operations in the application. The defendant’s power usage records revealed electricity usage two and one-half times greater than that of the previous tenant overall and during the past five months. The average residential electric consumption per month in a residence with an alternative heat source was set forth. Finally, a verified four-day electricity usage of 710 kwh, while the defendant was at the residence, would result in a monthly total nearly seven times the average for a residence with an alternative heat source if the usage continued at that rate. Hook, 839 P.2d at 1275. We observed that the application stated the basis of the detective’s expertise and included detailed information about the defendant’s power usage, “the times of residence by the defendant, previous usage by former occupants, normal residential usage, and comparisons as to these facts both specifically and generally.” Hook, 839 P.2d at 1276. Based largely on the power usage information and relatively detailed information from an anonymous tipster which was confirmed and corroborated during the investigation, we concluded that the application provided a substantial basis for the issuing magistrate’s probable cause determination. Hook, 839 P.2d at 1276-77.

The search warrant application presently before us contains power usage information decidedly inferior to that in Hook both qualitatively and quantitatively. Here, no basis is provided for the affiant’s conclusory statement concerning his training and experience in investigating marijuana grow operations. Moreover, the utility records information is depicted in a mere graph format, together with the utility employee’s opinion that electrical consumption at the Western Drive residence was abnormally high given the natural gas heat source. Unlike the situation before us in Hook, no basis — via detailed comparisons with average and previous resident’s usage — is provided in support and explanation of the opinion. Indeed, the conclusory statements regarding power us.age in the search warrant application presently before us more closely resemble those in State v. Wilson (1992), 254 Mont. 317, 319-20, 837 P.2d 1346, 1347-48, where we held that “[c]onclusory statements will not provide substantial basis to conclude that probable cause existed to issue a search warrant.”

We conclude, as did the District Court, that the Bozeman investigation-related information in the search warrant application does not establish probable cause for the issuance of a search warrant for the Western Drive residence under the “totality of the circumstances” test. See Rinehart, 864 P.2d at 1222. Therefore, we turn our attention to the portion of the search warrant application containing information provided by informant AI-6 and the Havre arrestees, through the Hill County Drug Task Force (Hill Task Force), to determine whether it adds sufficient new information to — or corroborates the results of — the Bozeman investigation to establish probable cause to search the Western Drive residence. (See Rinehart, 864 P.2d at 1223.) In this regard, we observe at the outset that the information relates to Kaluza’s suspected criminal activity and not specifically to the Western Drive residence.

“The veracity, reliability and basis of knowledge of informants remain highly relevant factors in determining probable cause under the totality of the circumstances test.” Rinehart, 864 P.2d at 1222 (citation omitted). Regarding informant AI-6’s veracity and reliability, we have determined that an officer’s sworn statement that an informant has been reliable and provided accurate information on other occasions is sufficient to establish that the informant is reliable. Rinehart, 864 P.2d at 1223-24 (citations omitted). Furthermore, we have concluded that the affiant need not possess personal knowledge of the informant’s veracity and reliability, but “may rely on information obtained from other law enforcement officers in an affidavit supporting an application for a search warrant.” Rinehart, 864 P.2d at 1224 (citation omitted). Here, the affiant stated that, according to officers with the Hill Task Force, AI-6 had provided reliable and accurate information in the past. This information is sufficient to establish AI-6’s veracity and reliability; we require nothing more.

The search warrant application, however, contains no statements regarding the veracity and reliability of the two arrestees who provided information regarding Kaluza to the Hill Task Force. The affiant does not state, based on either his own personal knowledge or information from the Hill Task Force, that these individuals are truthful or reliable. While we do not require more than the swearing officer’s statement that an informant is trustworthy, a showing of veracity and reliability is required. See Rinehart, 864 P.2d at 1223-24.

In addition to veracity and reliability, we also look to the basis of the informants’ knowledge in determining whether the application establishes probable cause for issuance of the search warrant. Rinehart, 864 P.2d at 1222. “We have previously held that information of a criminal activity known from observation by a previously reliable informant ... is sufficient to establish the probability of criminal activity without outside investigation and verification of the reported information.” State v. Walston (1989), 236 Mont. 218, 223, 768 P.2d 1387, 1390 (citation omitted). Here, the search warrant application contains no information regarding personal observation or personal knowledge as the basis for AI-6’s statements; nor is any such basis provided for the arrestees’ statement.

In summary, the search warrant application before us fails to establish the veracity and reliability of the arrestee informants and, in addition, fails to indicate the basis for any of the informants’ knowledge regarding Kaluza’s activities. Moreover, as noted above, none of the information provided relates specifically to the Western Drive residence; thus, the information cannot be said to corroborate or verily the Bozeman information with regard to Western Drive. We conclude, therefore, that the information provided by AI-6 and the Havre arrestees is of no value in establishing probable cause for the issuance of the search warrant for Western Drive.

The court issuing the search warrant is required to make a common-sense determination of whether, given the circumstances set forth in the search warrant application, a fair probability exists that contraband or evidence related to a crime will be found in a particular place. State v. Crowder (1991), 248 Mont. 169, 173, 810 P.2d 299, 302. Looking at the totality of the circumstances presently before us, the search warrant application contains insufficiently detailed information regarding power usage at Western Drive, as well as information that Kaluza received a shipment at Western Drive from a company which advertises in a magazine advocating, the use and sale of marijuana. The application also contains statements of informants who, with the exception of AI-6, are of unknown veracity and reliability and the basis of whose knowledge, without exception, also is unknown.

We conclude that the search warrant application did not establish the existence of a fair probability that evidence related to a crime would be found at the Western Drive residence. As a result, we further conclude that the issuing court did not have a substantial basis for its conclusion that probable cause existed for the search of that location. We hold, therefore, that the District Court erred in denying Kaluza’s motion to suppress evidence obtained during the execution of the search warrant at Western Drive.

Reversed.

CHIEF JUSTICE TURNAGE, JUSTICES HUNT, TRIEWEILER and LEAPHART concur.


author: JUSTICE GRAY JUSTICE WEBER

text:
    AgAMERICA, FCB, a corporation, successor in interest to The Bank of Spokane, Plaintiff and Respondent, v. GARY G. ROBSON and DONA ROBSON, husband and Wife, Defendants and Appellants.
    No. 94-438.
    Submitted on Briefs April 6, 1995.
    Decided August 17, 1995.
    52 St.Rep. 800.
    272 Mont. 413.
    901 P.2d 100.

      For Appellants: A. Clifford Edwards, Roger W. Frickle; Edwards Law Firm, Billings.
    For Respondent: A. Lance Tonn; Lucas and Monaghan, Billings.
   JUSTICE GRAY

delivered the Opinion of the Court.

Gary G. Robson and Dona C. Robson (Robsons) appeal from an order of the Fourteenth Judicial District Court, Musselshell County, granting summary judgment in favor of AgAmerica, FCB (AgAmerica) and denying their motion to compel discovery, and from the subsequent Judgment, Decree of Foreclosure and Order of Sale. We reverse in part, vacate in part and remand.

The issues presented on appeal are:

1. Did the District Court err in granting summary judgment to /AgAmerica on the Robsons’ affirmative defense and AgAmeriea’s foreclosure action?
2. Did the District Court err in granting summary judgment to AgAmerica on the Robsons’ counterclaim?
3. Did the District Court err in denying the Robsons’ motion to compel discovery?

The Robsons borrowed $131,000 from AgAmerica’s predecessor in interest (hereafter also referred to as AgAmerica) to purchase real property in 1976. They executed and delivered to AgAmerica a promissory note evidencing the loan. As security for repayment of the loan, the Robsons also executed, filed and recorded a mortgage covering the subject property. The mortgage incorporated the provisions of the Farm Credit Act of 1971 and amendments thereto, including the loan restructuring provisions of the Agricultural Credit Act of 1987 (collectively, the Act).

The terms of the loan required the Robsons to make annual installment payments. The Robsons made only a partial payment of the 1985 installment and did not pay any of the installments due in 1986 through 1988. In 1989, the Robsons and AgAmerica entered into a restructure agreement regarding the loan. After the Robsons failed to make required payments on the restructured loan, AgAmerica advised them that their loan “may be a distressed loan” pursuant to the Act and sent them an application for a second restructuring.

In August 1990, the Robsons submitted the second restructure application to AgAmerica. AgAmerica denied the application for a number of reasons, including insufficient income to repay the first restructured loan and the lack of additional collateral being offered for the second restructuring. The Robsons requested review of the decision by AgAmerica’s Credit Review Committee. The Credit Review Committee upheld the denial of the Robsons’ second application to restructure their loan.

AgAmerica filed, and later amended, a complaint to foreclose on the Robsons’mortgage. The Robsons answered, denying AgAmerica’s allegations regarding default and acceleration. The Robsons alleged, as an affirmative defense, that AgAmerica had failed to comply with the loan restructuring provisions of the Act and counterclaimed for damages based on AgAmerica’s alleged breach of fiduciary duty. After AgAmerica refused to respond to discovery requests relating to their affirmative defense, the Robsons filed a motion to compel discovery.

AgAmerica moved for summary judgment on the Robsons’ affirmative defense and counterclaim and on its foreclosure complaint; it also moved for protective orders regarding discovery sought by the Robsons. The District Court granted AgAmerica’s motions for summary judgment and for protective orders, denied the Robsons’ motion to compel discovery, and subsequently entered its Judgment, Decree of Foreclosure and Order. The Robsons appeal.

1. Did the District Court err in granting summary judgment to AgAmerica on the Robsons’ affirmative defense and AgAmerica’s foreclosure action?

Summary judgment is 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.R The party moving for summary judgment bears the initial burden of establishing both the absence of genuine issues of material fact and entitlement to judgment as a matter of law. Brinkman & Lenon v. P & D Land Enterprises (1994), 263 Mont. 238, 242, 867 P.2d 1112, 1115. The same rules apply to a party seeking summary judgment on an opposing party’s affirmative defense. Brinkman & Lenon, 867 P.2d at 1115.

The District Court granted summary judgment to AgAmerica on the Robsons’ affirmative defense and counterclaim and on AgAmerica’s foreclosure complaint. We review an order granting summary judgment by applying the same criteria as the district court. Minnie v. City of Roundup (1993), 257 Mont. 429, 431, 849 P.2d 212, 214.

We begin by examining the court’s grant of summary judgment in AgAmerica’s favor on the Robsons’ affirmative defense. The Robsons’ affirmative defense is based on allegations that, in considering their application to restructure, the Act required AgAmerica: (1) to consider whether the cost to the lender of restructuring the loan is equal to, or less than, the cost of foreclosure; (2) to perform specified computations in determining the cost of foreclosure; (3) to perform certain computations in determining the cost of restructuring; and (4) to restructure a loan if the potential cost of restructuring is less than, or equal to, the potential cost of foreclosing. The Robsons alleged that AgAmerica did not perform the computations necessary to determine the cost of foreclosure or the cost of restructuring and, therefore, that AgAmerica did not determine whether the cost of restructuring was equal to, or less than, the cost of foreclosure, all in violation of the requirements of the Act.

Comparing the Robsons’ affirmative defense allegations to the Act itself reveals that the allegations are nearly verbatim quotes of 12 U.S.C. §§ 2202a(d)(l)(A), (a)(2), (e)(2), and (e)(1). Thus, the clear and unequivocal crux of the allegations is that AgAmerica failed to comply with the Act in certain specified regards. The District Court determined at the outset of its analysis, however, that the crux of the affirmative defense is a contention that, while AgAmerica complied with the substantive provisions of the Act, its evaluation of the second restructure application was flawed. The court’s determination is a misreading of the affirmative defense as pled by the Robsons.

We recently resolved the issue of whether an affirmative defense to a mortgage foreclosure action may be predicated on a lender’s failure to comply with the requirements of the Act. In Farm Credit Bk. of Spokane v. District Court (1994), 267 Mont. 1, 24, 881 P.2d 594, 608, we held that, where the parties’mortgage incorporates the loan restructuring provisions of the Act, an affirmative defense based on the lender’s failure to comply with the Act is available. While Farm Credit Bk. of Spokane was decided after the District Court’s decision in this case, the general rule is that an appellate court must apply the law in effect at the time it renders its decision. Haines Pipeline v. MPC (1991), 251 Mont. 422, 433, 830 P.2d 1230, 1238. Thus, we examine the case presently before us under Farm Credit Bk. of Spokane.

Here, it is undisputed that the mortgage at issue incorporated the loan restructuring provisions of the Act. As set forth above, it is clear that the Robsons alleged AgAmerica’s failure to comply with those provisions as an affirmative defense. Thus, AgAmerica is entitled to summary judgment on the Robsons’ affirmative defense only if it established the absence of genuine fact issues regarding its compliance with the Act’s least cost analysis requirements, as contained in 12 U.S.C. §§ 2202a(d)(l)(A), (a)(2), (e)(2) and (e)(1).

In this regard, the District Court made several determinations. It first determined that the Robsons “tacitly admit” that AgAmerica complied with all of the procedural requirements of the Act. This determination is incorrect; it also impermissibly shifts the burden on summary judgment. The court based this determination on an erroneous reading of a portion of the Robsons’ brief opposing summary judgment which, in turn, relied on Gary Robson’s deposition. In fact, while the Robsons admit that AgAmerica “complied with at least a portion of the Act’s mandated provision[s],” their brief did not admit compliance by AgAmerica with all of the Act’s requirements. Conspicuously absent from the admitted compliance list are the very requirements the Robsons allege were not met by AgAmerica and which form the basis for their affirmative defense; namely, compliance with the requirement that the lender consider the least cost factor when determining whether to accept a restructure application, perform computations to determine the costs of foreclosure and restructuring, and restructure the loan where the cost of restructuring is less than, or equal to, the cost of foreclosure.

Moreover, because the court had not determined that AgAmerica established the absence of a genuine issue of material fact regarding its compliance with the Act, the District Court’s determination also impermissibly shifted the initial burden on summary judgment from AgAmerica to the Robsons. The nonmoving party need not establish the existence of a material factual issue unless and until the moving party has met its initial burden. See Brinkman & Lenon, 867 P.2d at 1115. Thus, the Robsons were entitled to rest on the allegations of their affirmative defense until AgAmerica established the absence of genuine issues of material fact regarding its compliance with 12 U.S.C. §§ 2202a(d)(l)(A), (a)(2), (e)(2), and (e)(1).

The District Court also determined that the Act’s least cost analysis requirements are “but one of a number of factors to be considered in determining whether a restructure application represents a sound credit decision.” This determination is not altogether correct, given the requirement of the Act that a lender “shall restructure” a loan if it determines that the potential cost “of restructuring the loan in accordance with a proposed restructuring plan is less than or equal to the potential cost of foreclosure ....” 12 U.S.C. § 2202a(e)(l). In any event, however, the court’s determination should have led the court logically and inexorably to the very question raised by the Robsons’ affirmative defense: did AgAmerica consider the least cost factor as required by the Act? The District Court did not require AgAmerica to come forward with evidence establishing that it had considered the least cost factor as the Act requires. Instead, the court determined that AgAmerica denied the Robsons’ restructure application for other reasons. That determination simply begs the question and does not establish the absence of any genuine issue of material fact regarding the Robsons’ affirmative defense.

The effect of the District Court’s decision is to allow AgAmerica to select the parts of the Act with which it chooses to comply. The Act, by its terms, does not permit such unfettered discretion in a lender, and neither will this Court, where the mortgage at issue incorporates the Act into the mortgage contract.

We conclude that the District Court erred in determining that AgAmerica established the absence of any genuine issue of material fact regarding the Robsons’ affirmative defense. On that basis, we further conclude that the court erred in granting summary judgment to AgAmerica on the Robsons’ affirmative defense. Because the affirmative defense remains to be adjudicated, we hold that the District Court also erred in granting summary judgment to AgAmerica on its foreclosure action.

2. Did the District Court err in granting summary judgment to AgAmerica on the Robsons’ counterclaim?

After granting summary judgment to AgAmerica on the Robsons’ affirmative defense, the District Court granted summary judgment on the Robsons’ counterclaim. The Robsons contend that the court erred.

The Robsons’ counterclaim begins by incorporating the allegations of their affirmative defense. In addition to the affirmative defense allegations summarized above, the allegations relate to the Robsons’ first application to restructure their loan in 1988 and AgAmerica’s failure to comply with the Act in permitting the first restructure. The counterclaim then alleges a breach of fiduciary duty by AgAmerica relating to the first restructure.

In ruling on AgAmerica’s motion for summary judgment on the counterclaim, the District Court first stated that the counterclaim was largely disposed of by its ruling on the affirmative defense. Notwithstanding the court’s error in the affirmative defense determinations, this determination by the court does not take into account the substantial difference between an affirmative defense to foreclosure based on failure to comply with the Act in considering the second restructure application and a tort claim for breach of fiduciary duty relating to the first restructure application. The combination of these two errors prevented the District Court from properly addressing the Robsons’ counterclaim in the context of AgAmerica’s motion for summary judgment. Moreover, neither the Robsons nor AgAmerica analyzes the counterclaim separately from the affirmative defense on appeal.

We recognized in Farm Credit Bk. of Spokane that, where the parties’ mortgage incorporates the Act, a party may enforce the terms of the Act via a breach of contract claim in the same manner as other contract terms are enforceable. Farm Credit Bk. of Spokane, 881 P.2d at 602. Here, however, the Robsons have not alleged a breach of contract counterclaim against AgAmerica. Thus, Farm Credit Bk. of Spokane is not directly applicable with regard to the Robsons’ counterclaim as alleged, and the parties have not cited to any authority bearing directly on this issue.

Given our conclusion above that the District Court erred in granting summary judgment on the Robsons’ affirmative defense, the consequent necessity of remanding this case for further proceedings and the lack of adequate briefing on the counterclaim issue, we conclude that it is appropriate to vacate the District Court’s order granting summary judgment to AgAmerica on the Robsons’ counterclaim and allow the parties and the court to consider the matter further on remand.

3. Did the District Court err in denying the Robsons’ motion to compel discovery?

In its memorandum accompanying the order denying the Robsons’ motion to compel discovery, the District Comb concluded that:

AgAmerica’s “least cost calculations” and other data relating to its decision to deny Mr. and Mrs. Robsons’ second Restructure Application is [sic] not relevant evidence and will not lead to the discovery of relevant evidence.

Our standard in reviewing a district court’s ruling relating to discovery is whether the court abused its discretion. McKamey v. State (1994), 268 Mont. 137, 145, 885 P.2d 515, 520 (citation omitted).

Generally, parties may obtain discovery regarding any unprivileged information relevant to the subject matter of the action, including information which “relates to the claim or defense of the party seeking discovery... .” Rule 26(b)(1), M.R.Civ.R Here, the Rob-sons’ motion to compel sought information regarding the least cost calculations performed by AgAmerica while processing the Robsons’ second application to restructure their loan. As discussed above, this information is both the crux of the Robsons’ affirmative defense to the foreclosure action and a mandatory consideration in AgAmerica’s processing of their second application to restructure. The allegations that AgAmerica failed to consider the least cost factor and perform the computations necessary for that consideration, all as required by 12 U.S.C. § 2202a, constitute a cognizable affirmative defense to a foreclosure action. See Farm Credit Bk. of Spokane, 881 P.2d at 608. Thus, the Robsons’ motion to compel discovery clearly sought information relevant to the “claim or defense of the party seeking discovery.” See Rule 26(b)( 1), M.R.Civ.R Accordingly, we conclude that the District Court abused its discretion in denying the Robsons’ motion to compel discovery and in granting AgAmerica’s related motions for protective orders.

The District Court’s order granting summary judgment to AgAmerica on the Robsons’ affirmative defense and its foreclosure action are reversed, the order granting summary judgment to AgAmerica on the Robsons’ counterclaim is vacated, and the orders denying the Robsons’ motion to compel discovery and granting AgAmerica’s motions for protective orders are reversed. This case is remanded for further proceedings consistent with this opinion.

JUSTICES TRIEWEILER, HUNT, NELSON andLEAPHART concur.

JUSTICE WEBER

dissents as follows:

I respectfully dissent from the majority opinion. Once again we are called upon to decide whether a lender has appropriately failed to restructure a distressed farm loan.

The majority holds that the lender must consider the least cost analysis for restructuring. The federal statute at issue provides a list of five considerations that a lender is required to make when called upon to decide whether to foreclose on a party’s farm loan or to restructure the loan. The statute requires a lender to determine whether or not to restructure based upon:

1. whether the cost to the lender of restructuring a loan is equal to or less than the cost of foreclosure;

2. whether the borrower is applying all income over and above necessary and reasonable living and operating expenses to the payment of primary obligations;

3. whether the borrower has the financial capacity and the management skills to protect the collateral from diversion, dissipation or deterioration;

4. whether the borrower is capable of working out existing financial difficulties, reestablishing a viable operation and repaying the loan on a rescheduled basis; and

5. in the case of a distressed loan that is not delinquent, whether restructuring consistent with sound lending practices may be taken to reasonably ensure that the loan will not become a loan that is necessary to place in nonaccrual status. 12 U.S.C. § 2202a(d)(l)(A-E).

Here, the lender gave the following reasons for its denial of the second restructuring application — insufficient farm income to repay the loan, the Robsons did not provide the needed information on past operating history, the Robsons did not provide accurate projections and figures for the restructuring plan they supplied, the figures that were supplied did not match with former figures supplied to the agency, Farm Home had indicated that they would accelerate their loan because of large delinquencies and the Robson’s plan did not deal with this at all, no documents supporting part of their projected income had been presented, and no additional collateral had been offered as security despite the fact that the Robson’s plan called for an entire year lag time before a payment would be due.

This list shows that the lender did not arrive at this decision without thought. I note with interest that the Robsons had not paid a single payment on the first restructured loan, yet they expected the lender to consider a second restructure plan. The second plan included a “zero” figure for yearly interest and did not take into account the $34,765 payment owed to FCB yearly. Thus, the Robsons, in offering this plan, admitted that they had no intent to repay this or any other loan, such as the Farm Home loan that was badly delinquent.

The Robsons’ plan did not contain accurate figures and in certain pivotal areas, contained no figures. A lender cannot make a “least cost” analysis if it does not have the appropriate information. The Robsons were informed that they could provide documentation for their figures to the credit review committee.

The majority would have all lenders in all situations make the “least cost” analysis involving foreclosure v. restructuring even if the lender, as in this case, has not been provided with the appropriate figures upon which it could make that decision. The majority would have all lenders do this far-from-simple task even if common sense and past performance have indicated that the farmers in question are without the sufficient ability to make the venture pay in any way.

The record of this case shows that AgAmerica made its own figures and set them beside the figures of the Robsons. The lender’s figures, while not giving the “least cost” analysis, showed clearly that the Robsons were not able to make this farm pay. The law specifically directs lenders to consider the borrower’s repayment capacity when making a “cost of foreclosure” figure. 12 U.S.C. § 2202a(a)(2)(A). The lender determined that there was no repayment capacity here. Why does the majority believe that returning this case to the District Court is going to have any affect at all on the outcome of the Robsons repayment capacity? The only thing accomplished by sending this case back is that the original $131,000 amount that was borrowed and is now close to $300,000 will be $400,000 by the time the case is settled.

There is nothing within the applicable legislation that indicates in any way that if the cost of restructuring is less than the cost of foreclosure the lender must restructure even if it is painfully obvious, as here, that the farmer cannot make the venture pay or repay his escalating loan. The wording of the law merely states that the lender must consider this along with the other four factors. But if the lender determines that the farmers do not have the capacity to repay the loan, all the restructuring in the world is not going to repay the lender. And putting a monetary figure on restructuring when that is not a plausible alternative, accomplishes nothing.

If the restructuring plan itself is flawed as here, the lender cannot make the ‘least cost” analysis in any meaningful way. Such a set of circumstances means that the lender must look to the other four concerns of the federal law because the lack of repayment capacity has shown that they are needed for analysis — such criteria as whether the persons involved have the ability to handle a farm enterprise become the determining factor behind the decision.

I submit that the lender in this situation made the proper determination and that the District Court correctly analyzed the law and the lender’s requirements under it.

The courts do not belong in the middle of these restructuring decisions because we do not have the practical sense needed to evaluate the workings of the parties involved in the decision-making. That is why the federal scheme provided for a credit review committee to review the lender’s decision and not the courts. Such a credit review committee here affirmed denial of restructuring.

The majority’s harangue against the “unfettered discretion” of the lender in this case is unwarranted. The lender used common sense when interpreting the rules provided it by the legislature and did not do anything in opposition to legislative directive.

I strongly disagree with the majority opinion and would vote to affirm the District Court.

CHIEF JUSTICE TURNAGE concurs in the foregoing dissent.


author: JUSTICE TRIEWEILER

text:
    RYAN FANDRICH and CATHY AVARD FANDRICH, Plaintiffs and Appellants, v. CAPITAL FORD LINCOLN MERCURY, a Montana corporation; MARK RENNERFELDT, an individual; DUGAN ANDERSON, an individual; and DOES 1 through 5, inclusive, Defendants and Respondents.
    No. 94-451.
    Submitted on Briefs March 9, 1995
    Decided August 17, 1995.
    52 St.Rep. 806.
    272 Mont. 425.
    901 P.2d 112.

      For Appellants: Dale F. Myers, Attorney at Law, Helena.
    For Respondents: R. J. “Jim” Sewell, Jr., Smith Law Firm, Helena; Karl R. Lindegren and Robert V. Schnitz, Fisher & Phillips, Newport Beach, California (for Capital Ford and Dugan Anderson); John F. Sullivan, Hughes, Kellner, Sullivan & Alke, Helena (for Mark Rennerfeldt).
   JUSTICE TRIEWEILER

delivered the Opinion of the Court.

The plaintiffs, Ryan and Cathy Fandrich, filed a second amended complaint in the District Court for the First Judicial District in Lewis and Clark County in which they alleged that they were wrongfully discharged from their employment, and that Cathy had been sexually harassed and assaulted, and that her basic personal rights had been violated. The District Court dismissed the second amended complaint, based on its conclusion that the Montana Human Rights Act provided the Fandrichs’ exclusive remedy. The Fandrichs appeal from the judgment entered pursuant to the order dismissing their complaint. We affirm the District Court.

The issues raised on appeal are:

1. Did the District Court err when it dismissed Cathy Fandrich’s claims based on the exclusive remedy provision of the Montana Human Rights Act?

2. Did the District Court err when it dismissed Ryan Fandrich’s claim for wrongful discharge based on its conclusion that it was barred by the exclusive remedy provision of the Montana Human Rights Act?

FACTUAL BACKGROUND

Cathy Fandrich worked for defendant Capital Ford Lincoln Mercury (Capital) as a warranty clerk and cashier until March 16,1993, when she resigned. Ryan Fandrich worked for Capital as a body shop lineman and body shop manager until July 1,1993, when he resigned.

Mark Rennerfeldt was, during the time complained of, employed by Capital as its service manager, and in that capacity supervised the work of both Cathy and Ryan. Dugan Anderson was a principal owner and stockholder of Capital who supervised Rennerfeldt, as well as the Fandrichs.

Cathy alleged that she was forced to quit working at Capital because Rennerfeldt sexually harassed her and Capital failed to do anything about it. Ryan alleged that he was ultimately forced to quit working for Capital because he was demoted for objecting to Rennerfeldt’s harassment of Cathy.

Neither Cathy nor Ryan filed a timely claim with the Montana Human Rights Commission. On July 20, 1993, the Fandrichs filed their original complaint in the District Court. On July 21,1993, they filed their amended complaint. On November 22, 1993, the District Court questioned whether it had jurisdiction to consider the amended complaint, or whether the Montana Human Rights Act found at §§ 49-1-101 through 49-4-511, MCA, was the Fandrichs’ exclusive remedy pursuant to § 49-2-509(7), MCA. In response to those concerns, the Fandrichs filed a second amended complaint on May 16,1994.

The second amended complaint contained four counts. In Count 1, Ryan alleged that he was wrongfully discharged from employment by Capital because he had reported Rennerfeldt’s alleged behavior to Anderson. He alleged that instead of correcting the problem, Anderson and Rennerfeldt complained about his work, decreased his duties, and reduced his hours to the extent that he could not afford to work at Capital. In Count 2, Cathy alleged that Rennerfeldt’s conduct violated her personal rights. In Count 3, Cathy alleged that Rennerfeldt sexually harassed her. In Count 4, Cathy alleged that Rennerfeldt assaulted her.

As a result of the alleged conduct, Ryan and Cathy claimed they were forced to quit working at Capital. On July 15,1994, the District Court dismissed the Fandrichs’ claims based on its conclusion that the Montana Human Rights Act provided their exclusive remedy.

ISSUE 1

Did the District Court err when it dismissed Cathy Fandrich’s claims based on the exclusive remedy provision of the Montana Human Rights Act?

The Fandrichs’ claims were dismissed pursuant to Rule 12(b), M.R.Civ.R, for failure to state a claim for which relief can be granted. A claim should only be dismissed on that basis when it appears, based on the pleadings, that the plaintiff cannot prove any-set of facts in support of his or her claim which would entitle the plaintiff to relief. Boreen v. Christensen (1994), 267 Mont. 405, 884 P.2d 761, 762 (citing Willson v. Taylor (1981), 194 Mont. 123, 634 P.2d 1180). The complaint should be construed in the light most favorable to the plaintiff and all factual allegations in a complaint are assumed to be true. Boreen, 884 P.2d at 762. The District Court’s determination that the Fandrichs’ second amended complaint failed to state a claim is a legal question which we review to determine whether the court’s interpretation of the law was correct. In re Marriage of Barnard (1994), 264 Mont. 103, 106, 870 P.2d 91, 93 (citing in re Marriage of Burris (1993), 258 Mont. 265, 269, 852 P.2d 616, 619).

The District Court concluded that, because Cathy’s allegations, if true, constituted sexual harassment at her workplace, the Montana Human Rights Act provided her exclusive remedy. See § 49-2-509(7), MCA; Harrison v. Chance (1990), 244 Mont. 215, 221, 797 P.2d 200, 204.

We have previously held that sexual harassment is the equivalent of sexual discrimination which is prohibited by the Montana Human Rights Act. Harrison, 797 P.2d at 204. Section 49-2-509(7), MCA, indicates that the Montana Human Rights Act provides the exclusive remedy for sexual discrimination in the workplace. That provision states:

The provisions of this chapter establish the exclusive remedy for acts constituting an alleged violation of this chapter, including acts that may otherwise also constitute a violation of the discrimination provisions of Article II, section 4, of the Montana constitution or 49-1-102. No other claim or request for relief based upon such acts may be entertained by a district court other than by the procedures specified in this chapter.

In this case, Cathy pled sexual harassment, violation of her personal rights, and assault based on Rennerfeldt’s alleged conduct. The plaintiff in Harrison also pled a variety of torts including tortious battery, intentional infliction of emotional distress, outrage, wrongful discharge, and breach of the implied covenant of good faith and fair dealing. In Harrison, we concluded that the “gravamen of the appellant’s claim [was] sexual harassment” because each of her claims arose from allegations of forceful kissing, sexually explicit innuendos and offers, and sexual harassment committed by her employer that made working conditions intolerable. Harrison, 797 P.2d at 205. We recognized that a claim based on sexual harassment may be framed in terms of numerous tort theories. However, this Court stated that the Legislature intended that the Human Rights Act be the exclusive remedy for such conduct when it enacted § 49-2-509(7), MCA. Harrison, 797 P.2d at 205.

Harrison did not involve a claim based on sexual harassment committed by one employee against another. Therefore, Cathy contends that it is inapplicable and that the scope of § 49-2-509(7), MCA, is limited to direct acts by the employer.

However, in 1993, the definition of “employer,” as used in the Act, was amended to provide that:

As used in this chapter, unless the context requires otherwise, the following definitions apply:
(8) “Employer” means an employer of one or more persons or an agent of the employer but does not include a fraternal, charitable, or religious association or corporation if the association or corporation is not organized either for private profit or to provide accommodations or services that are available on a nonmember-ship basis.

Section 49-2-101, MCA (1993) (emphasis added). For purposes of this appeal, the parties have relied on the 1993 version of § 49-2-101(8), MCA. Therefore, without further analysis, we will assume its applicability.

When we construe this language, we must first look to the plain language of the statute. See Boegli v. Glacier Mountain Cheese Co. (1989), 238 Mont. 426, 429, 777 P.2d 1303, 1305. The Legislature added the word “agent” without specifying which employees are to be considered agents. As a result of the Legislature’s failure to specify the meaning of agent, we adopt the ordinary meaning of the word “agent.”

A servant or employee is an agent who is employed by a master or employer whose physical conduct is subject to control or right to control by the master or employer. State ex rel. Eccleston v. Third Judicial Dist. Court (1989), 240 Mont. 44, 51-52, 783 P.2d 363, 368 (citing Restatement (Second) of Agency § 2). Thus, the ordinary meaning of agent includes employees who are subject to an employer’s control while performing their job duties. As a result of its failure to define agent otherwise, it appears that the Legislature intended, for purposes of the Human Rights Act, to include an employee in the definition of employer.

Legislative history also supports this conclusion. In 1993, the Montana Human Rights Commission proposed House Bill 561 as an amendment to include agent in the definition of employer. Part of the motivation behind the bill was to allow the Commission to redress situations where an employee is sexually harassed by another employee. The example provided in support of the amendment was a case involving a woman who was sexually harassed by her manager who was also a co-employee. The woman sought redress from the Montana Human Rights Commission. However, because the sexual harassment was committed by her manager and co-employee, the Commission concluded that it was not empowered to hear her claim. The Commission’s goal was to have the ability to assign liability to the individual responsible for the discriminatory conduct in addition to or in place of the employer. Hearings on HB 561 Before the House Judiciary Committee, 53rd Legislature, Regular Sess. p.4 and Exhibit 1 (1993) (statement of Anne MacIntyre, Administrator, State Human Rights Commission).

Based on the addition of agent to the definition of employer in the Montana Human Rights Act, we conclude that the Montana Human Rights Act provides Cathy’s exclusive remedy for Rennerfeldt’s alleged sexual harassment.

Cathy next claims that the District Court’s decision violated Article II, Section 16, of the Montana Constitution because she was denied her ability to seek judicial redress. However, that issue was not raised in the District Court and we will not consider it for the first time on appeal. We affirm the District Court’s dismissal of Cathy’s claims and the judgment entered pursuant to that order.

ISSUE 2

Did the District Court err when it dismissed Ryan Fandrich’s claim for wrongful discharge based on its conclusion that it was barred by the exclusive remedy provision of the Montana Human Rights Act?

In Count 1 of the second amended complaint, Ryan alleged that while he was dating Cathy he discovered that Rennerfeldt was sexually harassing, intimidating, and assaulting her. Ryan claimed that he complained to Anderson about the alleged conduct and informed Anderson that Ryan and Cathy were engaged. Ryan added that Anderson and Rennerfeldt then began to harass and intimidate Cathy, reassigned her to a cashier’s position, and ultimately forced her to resign. Ryan alleged that he complained again, and his employer falsely accused him of incompetent work, demoted him, and eventually decreased his hours. He claimed that he was constructively discharged by Capital because his employer created and allowed a work environment which a reasonable person would find intolerable. Ryan further alleged that the constructive discharge was in retaliation for his threats to report Rennerfeldt’s alleged conduct to state and federal authorities. As a result, Ryan claimed that his employer violated § 39-2-904(2), MCA.

The District Court concluded that if Ryan’s allegations were true, Capital violated § 49-2-301, MCA, of Montana’s Human Rights Act, and that the Act’s provisions were, therefore, his exclusive remedy.

As stated previously, the Montana Human Rights Act applies to discrimination by the employer and the employer’s agents. The Montana Human Rights Act prohibits retaliation against an employee who opposes discrimination in the workplace. Section 49-2-301, MCA, states:

It is an unlawful discriminatory practice for a person, educational institution, financial institution, or governmental entity or agency to discharge, expel, blacklist, or otherwise discriminate against an individual because he has opposed any practices forbidden under this chapter or because he has filed a complaint, testified, assisted, or participated in any manner in an investigation or proceeding under this chapter.

Sexual harassment is the equivalent of discrimination in the workplace. Harrison, 797 P.2d at 204. Ryan claims he was terminated because he opposed alleged conduct which is prohibited by the Act. Therefore, Ryan is barred from bringing his claim pursuant to the Montana Wrongful Discharge From Employment Act because the Human Rights Act provides his exclusive remedy. Section 49-2-509(7), MCA (1987). We conclude that the District Court correctly dismissed Ryan’s claim.

We affirm the judgment of the District Court.

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