text:
    BURKE A. ESCHLER, LORI L. ESCHLER and JAMI G. ESCHLER, individually and as Co-Personal Representatives of the ESTATE OF JAMES P. ESCHLER, Deceased, and SHARON L. ILLE, Plaintiffs and Appellants, v. JANET ETHEL ESCHLER and MUTUAL BENEFIT LIFE INSURANCE COMPANY, a New Jersey Corporation, Defendants and Respondents.
    No. 91-483.
    Submitted on Briefs November 12, 1992.
    Decided March 26, 1993.
    50 St.Rep. 308.
    257 Mont. 360.
    849 P.2d 196.

      For Plaintiff and Appellant: Allen D. Gunderson, Todd D. Gunderson, Gunderson Law Firm, Billings, for Sharon L. Ille; Jerome J. Cate, Cate Law Firm, Whitefish, for Burke A. Eschler, Lori L. Eschler and Jami G. Eschler.
    For Defendant and Respondent: Donald L. Harris, Steven R. Milch, Crowley, Haughey, Hanson, Toole & Dietrich, Billings, for Janet E. Eschler.
   JUSTICE McDONOUGH

delivered the Opinion of the Court.

This is an appeal from the Thirteenth Judicial District Court, County of Yellowstone, of two orders granting summary judgment to the Defendant. We affirm.

The sole issue on appeal is whether the District Courts erred in granting summary judgments in favor of the Defendant Janet Eschler (Defendant).

Janet and James Eschler (Eschler) were divorced in August of 1989 after approximately 16 years of marriage. Although there were no children bom of this marriage, James Eschler had three children from a previous marriage. At the time of his death, October 2, 1989, James Eschler was engaged to be married to Sharon Ille (Ille).

Defendant was the named beneficiary of three of Eschler’s life insurance policies at the time of his death. Two policies were issued by Minnesota Mutual Life Insurance Company (Minnesota Mutual), one dated January 1,1980 for the amount of $50,000 and one dated December 1,1983 for the amount of $100,000. In 1986, he purchased a $75,000 fife insurance policy from Mutual Benefit Life (Mutual Life).

Shortly before Eschler and Defendant’s dissolution was final, Eschler requested a change of beneficiary form for his two Minnesota Mutual insurance policies and the company forwarded the required forms. The forms were sent with specific instructions which stated in part:

Here is the Change of Beneficiary form which you recently requested for the above numbered policy. Please complete, date, and sign this form and return all copies in the envelope provided ... When the form is received in our office, it will be endorsed and a copy will be returned to you for attachment to the above numbered policy.

Eschler filled out part of the forms providing for change of beneficiary. He wrote the names of his children as the new beneficiary under the $50,000 policy and the name of his fianceé, Sharon Ille, as the primary beneficiary and his three children as contingent beneficiaries on the $100,000 policy. However, Eschler did not provide the required addresses and social security numbers of the new beneficiaries nor did he sign or date the forms. They were never mailed to Minnesota Mutual. These forms were found among Eschler’s personal effects after his death.

On August 7, 1989, Eschler purchased a new life insurance policy from Mutual Benefit for $100,000 naming Ille, his fiancee as the primary beneficiary and his children as contingent beneficiaries. On August 8, 1989, Eschler increased the amount of the policy to $250,000 and this change became effective on September 14, 1989. On September 21, 1989, he changed the beneficiary designation. Ille was to receive forty percent of the proceeds of the $250,000 and each of his children was to receive twenty percent of the total proceeds.

Eschler made no changes on his other Mutual Benefit policy, which named Janet Eschler the beneficiary of the policy for $75,000. However, he did not make the premium payment due on this policy on August of 1989.

Eschler’s death from suicide on October 2, 1989 left the payment on these four insurance policies somewhat open to question. Mutual Benefit did not pay on the $250,000 policy because of a suicide exclusion clause. Ille and the Eschler children dispute the claim that Janet Eschler is the beneficiary of the remaining three insurance policies.

“Under Rule 56(c), M.R.Civ.R, summary judgment is proper if the record discloses no genuine issues of material fact, and the moving party is entitled to judgment as a matter of law.” Kaseta v. N. Western Agency of Gr. Falls (1992), 252 Mont. 135, 138, 827 P.2d 804, 806. “[0]ur standard of review relating to conclusions of law ... is whether the tribunal’s interpretation of the law is correct.” Steer Inc. v. Dept. of Revenue (1990), 245 Mont. 470, 474-475, 803 P.2d 601, 603.

Ille and the Eschler children make three arguments as to why they are the beneficiaries of the insurance policies which remain valid. First, they assert the property settlement agreement, incorporated into the decree at the dissolution of Defendant and Eschler’s marriage, terminated Defendant’s rights as the beneficiary of the life insurance policies. Second, they argue that the fact that Eschler filled in the names of the new beneficiaries on the change of beneficiary forms, evidenced an intent by Eschler sufficient to change the beneficiary of the two Minnesota Mutual insurance policies. Third, lile and the Eschler children argue that when Eschler purchased the $75,000 Mutual Life insurance policy, he actually designated himself, the owner as the beneficiary, and not Defendant. If he was the designated beneficiary, the proceeds of the policy would pass through his estate to lile and the Eschler children.

Plaintiffs contend that the trial courts were premature in granting summary judgment in favor of the defendant because the property settlement agreement gives rise to a question of material fact on the issue of who is the rightful beneficiary. They claim that Soha v. West (1981), 196 Mont. 95, 637 P.2d 1185, establishes the rule of law that a general property settlement agreement gives rise to this question of material fact.

In Soha, Frederick Soha and Cynthia West were married and lived together as husband and wife for 79 days. They separated shortly thereafter and executed a property settlement and separation agreement which was later incorporated into their decree of dissolution. The agreement contained a mutual release that stated:

In consideration of the execution of this agreement, and the terms and conditions thereof, each party hereto releases and forever discharges the other party, his or her personal representative, and assigns from any and all right, claims, demands and obligations except as herein specifically provided and each party is forever barred from having or asserting any such right, claim, demand or obligation at any time hereafter for any purpose ...

Soha, 637 P.2d at 1187. The settlement agreement contains a full disclosure provision which states:

Each of the parties hereto represents and warrants to the other as an integral part of this agreement that there has been a full disclosure of assets between parties.

Soha, 637 P.2d at 1187. Frederick Soha never told his wife about the life insurance policy nor did he tell her that she was the primary beneficiary.

Several months later, Frederick Soha died in an accident, leaving behind the life insurance policy naming Cynthia West as the primary beneficiary and Frederick’s parents as contingent beneficiaries. This Court, in reversing the trial court’s grant of summary judgment for Cynthia West, determined that the “intent of the decedent as to the effect of the policy beneficiary designation in the light of the property settlement agreement” is a question of fact. Soha, 637 P.2d at 1187. The Court also stated that Frederick’s failure to reveal the presence of the insurance policy may have been a breach of the full disclosure provision. Therefore, the Court concluded that the trial court needed to conduct further proceedings to determine the nature and extent of the parties’ consents to the property settlement agreement.

The present case differs from Soha in three minor respects. First, the Sohas lived together as husband and wife for only 79 days whereas the Eschlers were married for 16 years. Second, Cynthia West was unaware of an insurance policy naming her as the beneficiary but Janet Eschler was fully aware of the three insurance policies naming her as primary beneficiary.

The third difference is the mutual release clauses in the two settlement agreements. The Sohas had a very general property settlement agreement with a general mutual release clause. The only specific asset listed was the house Frederick Soha purchased before he married Cynthia.

Janet and James Eschler had a very detailed property settlement agreement, plus the general release clauses. The agreement contains an itemized division of real property, automobiles, retirement accounts, debt liability and articles of personal property.

The following are the general release clauses:

5. Waiver of Property Rights. All property and money received by the parties pursuant hereto shall be the separate property of the respective parties, free and clear of any right, interest, or claim of the other party, and each party shall have the right to deal with, and dispose of, his or her separate property, both real and personal, as fully and effectively as if the parties had never been married.
6. Waiver of Support Rights. Except as expressly provided in Paragraph 3 of this Agreement, each party shall be fully released by the other from any obligation for alimony, support, maintenance, attorney’s fees, or court costs, and each party accepts the provisions herein in full satisfaction of all property rights and all obligations for support or otherwise arising out of the marital relationship of the parties. Each party, except with respect to payments accruing hereunder, hereby releases the other party and his or her respective legal representatives, successors, andassigns, from any claim of any kind, and specifically relinquishes any right, title, or interest in or to any earnings, accumulations, future investments, money, or property of the other party.
7. Waiver of Rights to Estate, Etc. Except as set forth herein, each of the parties waives all rights of inheritance in the estate of the other, any right to elect to take against the Will of the other, and the right to act as executor or administrator of the Will or estate of the other party. The Wife expressly waives the right to claim or receive family allowance from the estate of the Husband. Each of the parties waives any additional rights which such party has, or may have, by reason of their marriage, including rights of dower or curtesy, except the rights saved or created by the terms of this Agreement.
9. Mutual Release and Division of Debts. In consideration of the execution of this Agreement and other terms and conditions thereof, each of the parties hereto releases and forever discharges the other party, his or her personal representatives and assigns, from any and all rights, claims, demands, and obligations, except as herein specifically provided; and each party is forever barred from having or asserting any such rights, claims, demands, or obligations at any time for any purpose. It is hereby agreed that the personal obligations hereinabove set forth and the personal obligations hereinafter incurred by the parties shall be and remain their respective obligations, and each party shall pay and hold the other free and harmless from any obligations or bills for merchandise or services subsequent to date of Decree.
15. Entire Agreement. The parties hereto understand and agree that this written Agreement represents the entire agreement between the Wife and Husband; and further, that there are no promises, agreements, under standings, or representations of any kind other than those contained herein.

Although there were conflicting affidavits from both parties concerning Eschler’s intent in signing the property settlement, there is no mention anywhere in the settlement agreement about any insurance or any of the insurance policies, even though both parties knew the policies to be assets of the marriage. In both this case and Soha, there is no mention of insurance assets.

The parties have also put forward positions relative to the effect of a property settlement agreement on a beneficiary designation as discussed in Sowell v. Teachers’ Retirement System (1984), 214 Mont. 200,693 P.2d 1222, although the action concerned teacher retirement benefits. The decedent’s widow brought an action to declare her rights under retirement and death benefits for an account initiated by the decedent when he was married to his first wife. The Court concluded that the decedent’s ex-wife should receive his retirement benefits because she was nominated by a written designation filed with the retirement board. This conclusion was reached even though she and the decedent executed a property settlement agreement.

The Court noted that the general release language in the agreement did not “specifically cover Carolyn’s inchoate right to acquire property upon the happening of a future event.” Sowell, 693 P.2d at 1224. The Court distinguished Soha because, although the release language was similar in both property settlement agreements, the teacher retirement benefits were to be paid according to a specific statute, which provided that the benefits be paid to the estate or the beneficiary designated by the retirement and death benefit application. The Court also noted that Mr. Sowell had done nothing to indicate an intent to change the beneficiary designation.

The present issue is whether Defendant contracted away her interest as beneficiary on Eschler’s life insurance policies when she entered into the property settlement agreement. Girard v. Pardun (S.D. 1982), 318 N.W.2d 137. Girard cites the general rule in such cases:

In consequence of the fact that ordinarily divorce does not affect the right of the named beneficiary, it follows that where the husband does not change the beneficiary of his policy after having been divorced, the divorced wife is entitled to the proceeds of the policy upon the death of the insured.
The divorced wife may, however, have surrendered her right as beneficiary by a property settlement agreement, which may or may not have been incorporated into the decree of divorce. For example, a divorce decree specifically awarding the husband all insurance policies on his life divested the wife of any interest she might have as a beneficiary under a policy conceded to be community property. Likewise, where the property settlement agreement contemplated a disposition of all property rights and other matters and specifically described a life policy in which the wife was beneficiary and stated that the husband was to receive the policies free and clear of any claims of the wife thereto, the wife waived and relinquished all right to the insurance proceeds of the policy in which she was beneficiary and that divestment was complete when the agreement was executed and incorporated into the divorce decree, notwithstanding that at the time of the insured’s death the wife was still the designated beneficiary.
Moreover, while a settlement agreement may require the beneficiary wife to surrender or ‘turn over’ the policy to the insured, that fact alone does not destroy her right as beneficiary where the insured thereafter did not change her designation as beneficiary.
Whether a property settlement agreement should be deemed to bar the divorced wife is a question of the construction of the agreement itself. Where there is no provision that the effecting of the settlement agreement should deprive her of her rights as named beneficiary and she in fact remains named as beneficiary, the settlement agreement will not be given a broader scope than its express terms specify and she will not be barred from her right as the named beneficiary.

Girard, 318 N.W.2d at 138-139. (Emphasis in original.) (Citation omitted.) The Girard Court continued,

The agreement does not contain a renunciation of her expectancy in the policy and, absent such a specific disclaimer, we will not construe the agreement so as to include a renunciation of her right to take as beneficiary under the policy. It is not the duty of the court to make new contracts for the parties, but merely to interpret the one as written. The agreement has no application to the policy itself.

Girard, 318 N.W.2d at 139. (Emphasis in original.) (Citation omitted.)

Defendant here claims that the property settlement agreement did not divest her of her right to the proceeds of the policies. We agree with the Defendant. As the District Court stated: “No specific mention is made in the settlement agreement of any life insurance of either of the parties or beneficiary designations related to life insurance policies.” We agree with the logic in Girard and conclude that a mutual release, which does not mention insurance, in a property settlement agreement, does not divest a former spouse of the right to the proceeds of insurance policies when the former spouse is the named beneficiary of an insurance policy. As in Sowell, the Defendant did not relinquish her “inchoate right to acquire property upon the happening of a future event.” Sowell, 693 P.2d at 1224.

A cogent statement of the policy reasons for this conclusion is contained in Nunn v. Equitable Life Assur. Society, Etc. (N.D. 1979), 272 N.W.2d 780, which states:

The plaintiff is in this case arguing that in effect the person entitled to the proceeds of the policy is whoever the decedent intended it to be, even if not the named beneficiary. It requires little imagination to envision the mischief that would be caused by the adoption of such a rule. Disputes among friends, relatives, and heirs of the decedent would be a regular occurrence. Insurance companies presumably invariably deposit the proceeds in court because they could not rely on their records. The adoption of such a rule, in the long run, would be detrimental to the administration of justice, just as it would be if permitted in the case of wills or land transfers.
It should also be observed that we are not dealing here with a situation in which the decedent did anything within his power to effectuate his intention. The problem was caused by the decedent’s own carelessness. It would have been a simple matter for him to determine who was, in fact, the beneficiary of the policy. The result may be unfortunate, but that condition alone no more furnishes justification for the Court to intervene than it would in the case of errors of judgment or frustrated expectations in the case of contracts generally.

Nunn, 272 N.W.2d at 781-782. (Emphasis in original.) We find these reasons apply to the present action as well.

Soha is expressly overruled on this point. See also; Prudential Ins. Co. v. Weatherford (Or. 1980), 621 P.2d 83; Nichols v. Nichols (Texas 1987), 727 S.W.2d 303.

Plaintiffs’ second contention is that the fact that Eschler filled in the names of the new beneficiaries on the change of beneficiary forms for the Minnesota Mutual policies evidences an intent sufficient to change the beneficiaries on the two policies.

The view taken by the majority of courts is that a change of beneficiary can be effected without complete compliance with the provisions of the policy regarding notice and endorsement. The courts upholding this view accept substantial compliance as a sufficient standard for determining whether a valid change of beneficiary has been effected .... The test to establish whether substantial compliance has been satisfied has two prongs: There must be evidence that (1) the insured had determined to change the beneficiary, and (2) that the insured had done everything to the best of his ability to effect the change.

IDS Life Ins. Co. v. Estate of Groshong (Idaho 1987), 736 P.2d 1301, 1303 (citations omitted). See also Bell v. Criviansky (1934), 98 Mont. 109, 37 P.2d 673.

In Bell, the Court concluded that the insured had substantially complied with the provisions of the policy to change the beneficiary designation on his insurance policy when he had requested the forms from the insurance company but fell seriously ill and died of a brain tumor before he could complete and retrun the change of beneficiary form. In concluding that he had changed the beneficiary designation, the Court stated:

We think the true rule is that, if the insured has pursued the course pointed out by the laws of the association and has done all in his power, under the facts and circumstances of the case, to change the beneficiary, but before the new certificate is actually issued or the change of beneficiary is indorsed on the old, he dies, a court of equity will decree that to be done which ought to be done, and act as though the certificate had been issued or the indorsement made.

Bell, 37 P.2d at 678. See also', Prudential Ins. Co. of America v. Cooper (D. Idaho 1987), 666 F. Supp. 190, 192; Bergen v. Travelers Ins. Co. of Illinois (Utah App. 1989), 776 P.2d 659,663; IDS Life Ins. Co. v. Estate of Groshong (Idaho 1987), 736 P.2d 1301, 1303; Manhattan Life Insurance Company v. Barnes (9th Cir. 1972), 462 F.2d 629, 631.

Eschler’s actions do not evidence a sufficient determination to change the beneficiary designation, or that he substantially complied with the requirements to change the designation.

Eschler had the change of beneficiary forms in his possession for approximately 6 months. There was no evidence that he was unable to complete the forms and return them to the company unlike the insured in Bell. We conclude that Eschler did not do everything he could have done to change the beneficiaries.

Plaintiffs’ final argument concerns the $75,000 policy for which plaintiffs believe the estate is the beneficiary. Section 8 of the application form requests a beneficiary designation. The potential insured may choose the owner of the policy as beneficiary or may fill in the blank immediately below to name the beneficiary. Also, the applicant may mark an ‘X” in the box next to choice 1, the owner, or the second choice, the blank space filled in by the applicant. In Eschler’s case, he filled in the following in the blank space: “Janet Eschler, wife, if living, if not surviving children share alike.” (This was handwritten by insurance agent Mr. Solie as he recorded Eschler’s answers at the time of the application.)

However, there is an ‘X” in box 1 next to the designation, “the owner”, but no ‘X” next to Eschler’s handwritten designation of Defendant as the primary beneficiary. Defendant provided the affidavit of Robert Solie, the sales agent from Mutual Benefit who sold the policy to Eschler in 1986 to explain the presence of the “X” in box 1. He states that Eschler wished to name his wife Janet Eschler, as the primary beneficiary, and his children as contingent beneficiaries. In addition, the “X” marked in box 1 of the beneficiary designation (for “the owner”) is a clerical error made by Mr. Solie. Eschler did not ask that he be made the beneficiary of the policy nor were the proceeds to go to his estate.

In motions for summary judgment, if the moving party shows the absence of genuine factual issues, the non-moving party must set forth facts demonstrating that a genuine issue exists. Grenz v. Medical Management Northwest (1991), 250 Mont. 58, 62, 817 P.2d 1151, 1154. Defendant brought forth evidence in the form of Mr. Solie’s affidavit, to prove that Defendant was the intended beneficiary of the $75,000 Mutual Benefit policy. The burden then shifted to the plaintiffs to demonstrate that a genuine issue existed concerning the beneficiary of the policy. However, the plaintiffs brought forth no evidence to counter Defendant’s contention and summary judgment was appropriately granted on this issue.

The District Court orders granting Janet Eschler’s motions for summary judgment are affirmed. AFFIRMED.

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


source: Caselaw Access Project

author: JUSTICE GRAY

license: Public Domain

text:
    IN RE THE MARRIAGE OF MICHAEL LEONARD McCLAIN, Petitioner and Appellant, and PAMELA LYNN McCLAIN, Respondent and Respondent.
    No. 92-391.
    Submitted on Briefs January 21, 1993.
    Decided March 26, 1993.
    50 St.Rep. 314.
    257 Mont. 371.
    849 P.2d 194.

      For Petitioner and Appellant: John R. Velk, Law Office of John Rayburn Velk, Missoula.
    For Respondent: Douglas G. Skjelset, Missoula.
   JUSTICE GRAY

delivered the Opinion of the Court.

The District Court for the Fourth Judicial District, Missoula County, denied Michael Leonard McClain’s motion to modify custody of his children. We affirm.

The issue is whether the District Court erred in failing to modify child custody so as to place sole custody of the older daughter with Michael Leonard McClain, the father, and to place primary physical custody of the younger daughter with him.

The marriage of the parties was dissolved in February 1990. Under the terms of their custody and property settlement agreement, they shared joint custody of their two daughters, then ages nine and seven, with the mother as the primary residential custodian.

In July 1990, as a result of an investigation concerning charges of abuse and neglect, the Department of Family Services (DFS) removed the children from the mother’s custody. They were placed with their father. In March 1991, after the mother had complied with certain conditions it had imposed, DFS ordered that custody of the children be returned to the mother.

The father then filed a formal motion to terminate joint custody of the parties’ older daughter and award him sole custody. Additionally, he proposed that he be granted primary physical custody of the younger daughter. After a hearing lasting several days and at which numerous witnesses testified for each party, the District Court denied the father’s motion for modification of custody. It ordered that custody should remain with the mother, but required that DFS be more actively involved in supervision and care of the children and submit written reports to the court every six months. The father appeals.

Did the District Court err in denying the father’s motion to modify child custody?

Section 40-4-219, MCA, provides:

(1) The court may in its discretion modify a prior custody decree if it finds, upon the basis of facts that have arisen since the prior decree or that were unknown to the court at the time of entry of the prior decree, that a change has occurred in the circumstances of the child or his custodian and that the modification is necessary to serve the best interest of the child and if it further finds that:
(b) the child has been integrated into the family of the petitioner with consent of the custodian;
(c) the child’s present environment endangers seriously his physical, mental, moral, or emotional health and the harm likely to be caused by a change of environment is outweighed by its advantages to him;
(e) the custodian willfully and consistently:
(i) refuses to allow the child to have any contact with the noncustodial parent; or
(ii) attempts to frustrate or deny the noncustodial parent’s exercise of visitation rights[.]

The father contends on appeal that, just prior to the time of his motion, the girls had been integrated into his family with the mother’s consent as described under § 40-4-219(1)(b), MCA. This contention refers to the time the girls were in his custody during the DFS proceedings. He also contends that the evidence at trial demonstrated serious endangerment of the older daughter, who is physically disabled, justifying a change in her custody pursuant to § 40-4-219(1)(c), MCA. In addition, he argues that a change of custody is justified because of the mother’s attempts to frustrate or deny his exercise of visitation rights as recognized in § 40-4-219(1)(e)(ii), MCA. Finally, he contends that the evidence demonstrated a change of circumstances that would justify modification of the terms of physical custody, within the joint custody arrangement, to serve the best interests of both children.

The mother does not dispute that the record contains serious allegations about her past care of the girls, especially of the older daughter. However, the record also contains extensive evidence supporting the quality of the mother’s care of both girls at the time of trial.

The record documents the mother’s compliance with conditions required by DFS before that agency returned custody of the girls to her in March of 1991. A woman who, at the time of trial, worked in the mother’s home helping to care for the older daughter, testified that she had never seen any abuse in the mother’s home and that she would promptly report any inappropriate or abusive conduct. The DFS social worker assigned to the case at the time of trial testified that her agency would have continuing involvement with the mother’s home. Based on her knowledge of the girls and of both parents, she recommended that the mother remain as the primary custodial parent. The family physician for the girls and their mother testified that he believed, with “no question in my mind,” that the girls would be better off to remain with their mother than to have their custody transferred to their father. The District Court found that “it would be in the best interest of the minor children to have [the mother] be given primary residential custody of [the children] with reasonable rights of visitation to [the father].”

It is for the trier of fact, not this Court, to resolve conflicts in the evidence. In re Custody of Holm (1985), 215 Mont. 413, 418, 698 P.2d 414, 417. When reviewing findings regarding modification of custody, this Court will not reverse the findings unless they are clearly erroneous. In re Marriage of Arbuckle (1990), 243 Mont. 10, 13, 792 P.2d 1123, 1124. A finding is clearly erroneous only if it is not supported by substantial evidence, the trial court has misapprehended the effect of the evidence, or a review of the record leaves this Court with the definite and firm conviction that a mistake has been committed. Interstate Production Credit v. DeSaye (1991), 250 Mont. 320, 323, 820 P.2d 1285, 1287.

Substantial credible evidence supports the finding of the District Court that it would be in the best interest of the minor children for their mother to remain their primary residential custodian. We conclude that the District Court did not misapprehend the effect of the evidence and we are not left with the conviction that a mistake has been committed. The father has failed to establish that “the modification is necessary to serve the best interest of the child[ren]” as required by § 40-4-219(1), MCA. Because the “best interest” test must be met for any modification of child custody under § 40-4-219, MCA, and has not been met here, we need not consider whether additional statutory requirements for modification of custody were met in this case.

Affirmed.

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


text:
    STANLEY DUENSING and DAVID DUENSING, a general partnership, d/b/a THE PARROT CONFECTIONERY, Plaintiffs and Appellants, v. THE TRAVELER’S COMPANIES, a Connecticut corporation, Defendant, Respondent and Cross-Appellant.
    No. 92-203.
    Submitted on Briefs August 13, 1992.
    Decided March 29, 1993.
    50 St.Rep. 316.
    257 Mont. 376.
    849 P.2d 203.

      For Plaintiffs and Appellants: W. William Leaphart, Leaphart Law Firm, Helena.
    For Defendant and Respondent: James R. Walsh and Robert J. Vermillion Smith, Walsh, Clarke & Gregoire, Great Falls.
   JUSTICE GRAY

delivered the Opinion of the Court.

Stanley and David Duensing appeal from an order of the First Judicial District Court, Lewis and Clark County, granting summary judgment in favor of the Travelers Companies. On cross-appeal, the Travelers Companies asserts an alternative basis for the granting of summary judgment in its favor. We reverse and remand.

We state the issues on appeal as follows:

1) Did the District Court err in granting summary judgment in favor of the Travelers Companies based on the contamination exclusion contained in the insurance policy?

2) If the District Court erred in granting summary judgment in favor of the Travelers Companies based on the contamination exclusion, can this Court nonetheless uphold the grant of summary judgment pursuant to the governmental action exclusion?

3) Are the Duensings entitled to entry of summary judgment in their favor?

The facts in this case are relatively straightforward. On August 28, 1990, Stanley and David Duensing (the Duensings), a partnership doing business as the Parrot Confectionery (the Parrot), discovered that a worker had been exposed to Hepatitis A. The Duensings immediately informed the City-County and State Health Departments and their insurance agency, Burlington Insurance Agency (Burlington). The next morning, the Duensings, their attorney, their accountant, Will Selser and Larry Fenster of the Lewis and Clark City-County Health Department (the health department), and an agent from Burlington met to discuss the possible problems associated with the hepatitis exposure. Later that same day, the Montana Department of Health and Environmental Sciences issued a “Notice of Embargo” to the Parrot, which prohibited the movement or sale of any of the Parrot’s candy without permission. Although the Parrot’s inventory had not been tested, the Duensings agreed to destroy voluntarily all existing inventory.

On August 31, 1990, the Duensings destroyed the Parrot’s entire inventory of candy and food. They subsequently submitted a claim on their business owners’ property insurance policy with Travelers for loss of contents and business interruption as a result of the destruction of the inventory. Travelers denied coverage, relying on the “contamination exclusion” and the “governmental action exclusion” contained in the policy.

The Duensings then filed a declaratory action against Travelers for a determination of rights of the parties under the insurance contract, waiver and estoppel. Both parties moved for summary judgment based on the contamination and governmental action exclusions. After briefing and oral argument, the District Court granted summary judgment for Travelers based on the contamination exclusion; it did not address the governmental action exclusion.

Did the District Court err in granting summary judgment in favor of Travelers based on the contamination exclusion contained in the insurance policy?

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.P. Faced with cross motions for summary judgment on the same legal questions, with both parties asserting an absence of factual issues as to those questions, the District Court concluded that Travelers was entitled to summary judgment based on the contamination exclusion.

The contamination exclusion relied on by the District Court reads:

2. We will not pay for loss or damage caused by or resulting from any of the following: ...
d. ... (7) The following causes of losses to personal property: ...
(d) Evaporation, loss of weight, contamination, exposure to light or change in flavor, color, texture or finish. [Emphasis added.]

The District Court determined that the policy did not require scientific findings of contamination and that reasonable belief of such contamination destroyed the business value of the inventory and was sufficient to fall within the exclusion. The District Court also stated that the fact that the contamination was not confirmed through testing was not material for purposes of the insurance contract. The court concluded that, given the common sense, usual meaning of the language, the parties had intended to exclude coverage for loss of the Parrot’s inventory, which was destroyed because of the high probability of contamination. Thus, the contamination exclusion of the policy precluded coverage.

The Duensings contend that the District Court incorrectly concluded that the inventory was contaminated within the language of the contamination exclusion. They argue that the District Court erred by interpreting the contamination exclusion to exclude anything other than actual contamination. They further argue that, contrary to the rule of construing exclusions in insurance policies strictly against the insurer, the District Court enlarged the contamination exclusion to include suspected contamination.

The interpretation of an insurance contract is a question of law. Truck Ins. Exchange v. Waller (1992), 252 Mont. 328, 331, 828 P.2d 1384, 1386. Therefore, we review whether the District Court correctly interpreted the policy in question. Steer, Inc. v. Department of Revenue (1990), 245 Mont. 470, 475, 803 P.2d 601, 603.

Well-established principles guide our interpretation of insurance contracts. The language of the insurance policy governs if it is clear and explicit. Waller, 252 Mont. at 331, 838 P.2d at 1386. Furthermore, exclusions from coverage will be narrowly and strictly construed because they are contrary to the fundamental protective purpose of an insurance policy. Farmers Union Mut. Ins. Co. v. Oakland (1992), 251 Mont. 352, 356, 825 P.2d 554, 556.

In this case, the contamination exclusion is unambiguous, clear and explicit: Travelers will not pay for loss or damage to personal property caused by or resulting from contamination. The exclusion from coverage requires two elements. First, there must be “contamination;” and second, the contamination must cause loss to personal property. Only if contamination exists does it become necessary to determine whether the contamination caused the loss to personal property.

The District Court concluded that the high probability of contamination and the reasonable belief of contamination were sufficient to exclude coverage. In essence, these conclusions define “contamination” to include suspected contamination. In interpreting insurance contracts, the words of the policy are to be understood in their usual meaning; common sense controls. James v. Prudential Ins. Co. (1957), 131 Mont. 473, 477, 312 P.2d 125, 127 (citations omitted).

In Hi-G, Inc. v. St. Paul Fire and Marine Ins. Co. (1st Cir. 1968), 391 F.2d 924, 925, the First Circuit Court of Appeals defined contamination as the introduction of a foreign substance that injures the usefulness of the object. Similarly, the Fifth Circuit Court of Appeals defined contamination as a condition of impurity resulting from mixture or contact with a foreign substance, and stated that this definition is consistent with the common understanding of contamination. American Casualty Co. of Reading, Pennsylvania v. Myrick (5th Cir. 1962), 304 F.2d 179, 183.

The Court of Appeals of Texas adopted the definition of contamination from Myrick in Auten v. Employers Nat. Ins. Co. (Tex.App. 1987), 722 S.W.2d 468, 469. In Auten, an exterminator sprayed a toxic pesticide inside of Auten’s home, and expert testimony established that the toxin was deposited on surfaces throughout the home. After touching these surfaces, the members of the Auten family absorbed the pesticide through their skin and became ill. Auten, 722 S.W.2d at 469. As in Myrick, the contamination involved the presence of a foreign substance, thus triggering the contamination exclusion.

We adopt the rationale expressed in Hi-G, Myrick and Auten, and conclude that contamination requires the actual presence of a foreign substance. We conclude, therefore, that the plain, ordinary meaning and understanding of “contamination” is actual contamination, not suspected contamination. Absent proof of actual contamination, the contamination exclusion does not bar coverage for the Duensings’ losses.

Accordingly, we examine the record to determine whether it contains any proof of actual contamination. In this case, the candy was destroyed before it was tested, thereby preventing anyone from verifying whether it was actually contaminated by the hepatitis virus. Nonetheless, Travelers urges us to conclude that the candy was contaminated because the health department made a “finding” that the inventory was contaminated. The Duensings assert that the parties did not complete the necessary statutory steps to allow anyone to conclude that the inventory was actually contaminated. The parties base their respective arguments on § 50-31-509, MCA, which reads in pertinent part:

Detainer of adulterated or misbranded articles. (1) If an agent of the department finds or has probable cause to believe that any food, drug, device, or cosmetic is adulterated or so misbranded as to be dangerous or fraudulent within the meaning of this chapter, he shall affix to the article a tag or other appropriate marking giving notice that the article is or is suspected of being adulterated or misbranded and has been detained or embargoed and warning all persons not to remove or dispose of the article by sale or otherwise until permission for removal or disposal is given by the agent or the court.... The owner of an embargoed article or another authorized person and the department may enter into a disposal agreement providing for the disposal, reconditioning, or other disposition of the embargoed article. ...
(2) If an article detained or embargoed under subsection (1) is found by the agent to be adulterated or misbranded and a disposal agreement is not executed as provided in subsection (1), the agent shall petition the justice of peace, city judge, or district court... for an order for condemnation of the article. If the agent finds that an article so detained or embargoed is not adulterated or misbranded, he shall remove the tag or other marking.
(3) If the court finds that a detained or embargoed article is adulterated or misbranded, the article shall, after entry of the decree, be destroyed ....

Travelers notes that § 50-31-509(2), MCA, requires the health department to make a “finding” of contamination before petitioning the court. On the basis of Larry Fenster’s statement to the Duensings that he would petition the court for an order to destroy the inventory if they would not agree to destroy it voluntarily, Travelers argues that Fenster “found” the inventory to be contaminated. We disagree.

Fenster’s affidavit clearly shows that he had made no finding of contamination, but only a finding of probable cause. The affidavit of Larry Fenster reads:

In my handwritten notes of August 30, 1990 ... [I stated that] all of this product must be “considered contaminated.” In making this statement, I was not implying that there was any factual or scientific finding of contamination. There had been no testing of the candy. This statement was merely my finding, on behalf of the Department, that, since a candy maker was diagnosed with jaundice, we had “probable cause to believe” the product was contaminated ....

Similarly, Will Selser, another health department official, explained in his affidavit that:

[a]s of the date of the Aug. 31,1990, destruction of the candy, there had been no laboratory testing of the candy and thus there was no factual determination as to whether or not the candy was, in fact, contaminated.

Furthermore, comparing these facts to the statutory procedure set forth in § 50-31-509, MCA, does not support a conclusion that the health department had made a finding of contamination. Subsection (1) of § 50-31-509, MCA, requires either a finding of adulteration or probable cause to believe an article is adulterated before the health department can issue an embargo order. Under subsection (2), if no disposal agreement is reached and the agent finds that the object is adulterated, the agent can petition the court for an order of condemnation; subsection (2) also is clear that the agent could find at this post-embargo stage of the process that the article is not adulterated. Finally, under subsection (3), the embargoed object can be ordered to be destroyed only after a court finds that it is adulterated. Again, at this third stage of the process, the court could find that the object was not adulterated.

Fenster’s statement that he would petition the court if the parties did not reach a disposal agreement does not require us to conclude that the health department “found” that the inventory was contaminated. The parties here completed subsection (1) of the statutoxy procedure based on a “probable cause” determination and reached a disposal agreement. The parties did not need to proceed through subsections (2) and (3) of § 50-31-509, MCA, to a finding of adulteration.

Given the clear language of § 50-31-509, MCA, and the affidavits of the health department officials, we conclude that no finding of contamination had been made. No other evidence was offered that the inventory actually was contaminated. We hold that the District Court erred as a matter of law in interpreting the contamination exclusion to preclude coverage in this case.

If the District Court erred in granting summary judgment in favor of Travelers based on the contamination exclusion, can this Court nonetheless uphold the grant of summary judgment pursuant to the governmental action exclusion?

On cross-appeal, Travelers asserts that the governmental action exclusion provides an alternative basis for summary judgment in its favor. We have affirmed the correct conclusion of a trial court even though that conclusion may have been arrived at for the wrong reason. See Wolfe v. Webb (1992), 251 Mont. 217, 234, 824 P.2d 240, 250. We cannot do so in this case, however, because we conclude that the governmental action exclusion does not preclude coverage for the Duensings’ losses.

The governmental action exclusion in the Duensings’ policy with Travelers excludes coverage for “loss or damage caused directly or indirectly by ... [s]eizure or destruction of property by order of governmental authority.” Travelers argues that both the seizure and destruction clauses of the governmental action exclusion apply to the facts at hand. Specifically, Travelers argues that the seizure clause bars coverage because the embargo constituted a “constructive seizure,” thus triggering the exclusion. Travelers also asserts, under the destruction clause, that the embargo order (as a governmental order) caused the destruction of the candy. We address each clause in turn.

In support of its contention that the seizure clause bars coverage under these facts, Travelers argues that “constructive seizure” via the embargo satisfies the exclusion. Webster’s Third New International Dictionary defines seizure as the act of taking possession of persons or property by virtue of a warrant or by legal authority.

Here, although the embargo restricted the movement of the inventory, the embargo order did not authorize governmental agents to take possession of the inventory; nor was possession taken. Therefore, no seizure occurred. As discussed above, the rule of strict construction of exclusions from insurance coverage prevents us from expanding the plain language of this exclusion to include constructive seizure. See Oakland, 251 Mont. at 356, 825 P.2d at 556. We hold that the Duensings’ losses are not excluded by the seizure clause of the governmental action exclusion.

Travelers’ reliance on the destruction clause of the governmental action exclusion also is misplaced. For this clause to apply, property must be destroyed by order of governmental authority, and such a destruction then must cause, directly or indirectly, the loss claimed by the insured.

The embargo order only restricts the sale or movement of the property; it does not order or require the destruction of the property, nor could it do so under § 50-31-509, MCA. An embargo pursuant to § 50-31-509, MCA, merely serves as a means of preserving the status quo until further proceedings occur. Indeed, under § 50-31-509(3), a governmental authority can only require the destruction of property after a court finds that the object is adulterated. Thus, it is clear that the inventory was not destroyed by order of governmental authority in this case.

Travelers additionally notes that Will Selser, in describing the embargo order in his first affidavit, stated that the Duensings were required to destroy the inventory. According to Travelers, this demonstrates that the inventory was destroyed pursuant to governmental order. However, Will Selser’s second affidavit controverts Travelers’ argument. He stated:

In my prior affidavit when I stated that the Duensings were “required” to destroy the food, I merely meant that they were being told by me and my staff that if they did not voluntarily destroy the candy, the Department would take the next step and petition the Court for an order to destroy the candy. In fact, no such petition had been filed with the Court. The only governmental order in effect was the Order of Embargo from the Montana Department of Health. The Department had no authority to “require” the Duensings to do anything beyond comply with the embargo. [Emphasis added.]

Absent a court order under subsection (3) of § 50-31-509, MCA, the health department could not order the destruction of the inventory. No court order for the destruction of the Parrot’s inventory was obtained. We hold, therefore, that the inventory was not destroyed by order of governmental authority and the destruction clause of the governmental action exclusion does not bar coverage in this case.

Are the Duensings entitled to entry of summary judgment in their favor?

Before the trial court, both parties moved for summary judgment as a matter of law on the question of insurance coverage under the contamination and governmental action exclusions of the Travelers’ policy. The parties presented identical legal theories, albeit seeking opposite legal conclusions; both asserted that no genuine issues of material fact existed as to the legal theories propounded. Travelers now argues that factual questions remain “regarding the actions of the Health Department.”

The fact that both parties have moved for summary judgment does not establish, in and of itself, that no genuine issues of material fact exist. A party may assert that there is no remaining factual issue if his legal theory is accepted and still maintain that there is a genuine dispute as to material facts if his opponent’s theory is adopted. Faith Lutheran Retirement Home v. Veis (1970), 156 Mont. 38, 47, 473 P.2d 503, 507. Conversely, if the parties presented identical legal theories to the trial court, while arguing that no issues of fact remain, neither party can then maintain on appeal that factual questions have surfaced on that very same issue. Atrial court has no duty to anticipate such possible proof. Id.

In this case, Travelers has asserted for the first time on appeal that "factual questions remain regarding the actions of the Health Department.” We have stated many times that this Court will not hear on appeal an issue not presented to the trial court. Wyman v. DuBray Land Realty (1988), 231 Mont. 294, 299, 752 P.2d 196, 200. In any event, Travelers cannot rely on speculative, fanciful or conclusory statements to raise a genuine issue of material fact, but must specify the precise facts which are disputed. Sprunk v. First Bank System (1992), 252 Mont. 463, 466, 830 P.2d 103, 105. Travelers’ assertion is conclusory and speculative and does not identify any genuine factual issue in dispute.

This Court has the power to reverse a district court’s grant of summary judgment and direct it to enter summary judgment in favor of the other party only when it is clear that all of the facts bearing on the issues are before the court. Canal Ins. Co. v. Bunday (1991), 249 Mont. 100, 108, 813 P.2d 974, 979. Given the record before us and our determination that the contamination and governmental action exclusions do not preclude coverage for the Duensings’ losses, we conclude that the Duensings are entitled to entry of summary judgment on the issues of coverage under the contamination and governmental action exclusions.

We reverse and remand for entry of summary judgment consistent with this opinion.

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


author: JUSTICE McDONOUGH

text:
    LUTEY CONSTRUCTION-THE CRAFTSMAN, Plaintiff and Appellant, v. THE STATE OF MONTANA, STATE BOARD OF EXAMINERS, and MONTANA DEPARTMENT OF FISH, WILDLIFE AND PARKS, Defendants and Respondents.
    No. 91-479.
    Submitted November 16, 1992.
    Decided March 30, 1993.
    50 St.Rep. 321.
    257 Mont. 387.
    851 P.2d 1037.

      For Plaintiff and Appellant: Gregory O. Morgan, Bozeman.
    For Defendant and Respondent: James M. Scheier, Assistant Attorney General, Helena.
   JUSTICE McDONOUGH

delivered the Opinion of the Court.

This is an appeal from the First Judicial District Court, Lewis and Clark County, of an order granting summary judgment for the defendant, State of Montana (State).

The sole issue on appeal is whether the District Court erred in granting summary judgment in favor of the State on the subissues relative to a construction contract with the State. We affirm in part and reverse in part. The six subissues include:

I. Breach of Contract
II. Constitutionality of Section 18-1-402, MCA
III. Quantum Meruit
IV. Implied Warranty of Plans and Specifications
V. Fraud and Misrepresentation
VI. Breach of the Implied Covenant of Good Faith and Fair Dealing

Each of these subissues will be discussed in turn.

Lutey Construction — The Craftsman (Lutey), a construction contractor, entered into a contract with the State in August of 1984 to renovate the Yellowstone River Trout Hatchery in Big Timber, Montana. Morrison-Maierle, Inc. (Morrison), a firm of consulting engineers, was the architect/engineer on the renovation project.

Various problems occurred relative to the job and on August 12, 1985, the State sent Lutey a letter stating that Lutey was in default of the contract and the State was exercising its option to terminate the contract.

Lutey sent claims for time extensions and additional compensation to Morrison, who responded by letter on October 24,1985. The letter from Morrison recommended that many of Lutey’s claims be denied and requested more information about other claims. There is no evidence of further communication between the parties thereafter. A complaint was filed on August 22, 1989.

‘Under Rule 56(c), M.R.Civ.P., summary judgment is proper if the record discloses no genuine issues of material fact, and the moving party is entitled to judgment as a matter of law.” Kaseta v. N. Western Agency of Gr. Falls (1992), 252 Mont. 135, 138, 827 P.2d 804, 806. “[0]ur standard of review relating to conclusions of law ... is whether the tribunal’s interpretation of the law is correct.” Steer Inc. v. Department of Revenue (1990), 245 Mont. 470, 474-475, 803 P.2d 601, 603.

I. Breach of Contract

The State argues that the District Court was correct in concluding that Lutey’s breach of contract claim was barred by the statute of limitations. Section 18-1-402, MCA, provides that contract actions against the State, where no settlement procedure is provided to resolve conflicts, must be brought within one year after the cause of action arises. The State contends that, according to Kitchen Krafters Inc. v. Eastside Bank (1990), 242 Mont. 155, 163, 789 P.2d 567, 571-572, Lutey’s cause of action accrued when the breach of the contract occurred, which was when he received the letter terminating the contract. Lutey, citing Zook Bros. Construction Company v. State (1976), 171 Mont. 64, 556 P.2d 911, counters that the statute of limitations does not run on his cause of action until he receives a final accounting from the State.

We agree with Lutey. Although we affirm Kitchen Krafters’ proposition that “the statute of limitations runs from the time of the breach and not from the time of injury ....”, we determine that the present case falls under the Zook exception.

In Zook, there were problems in the commencing of a highway construction project and the construction company filed a claim against the State for damages incurred due to the delay. The State rejected the claim so Zook provided documentation of the claim to which the State responded by auditing Zook’s records. Several meetings occurred between both parties and finally, the claim was orally denied by the Director of the State Highway Commission. Thereafter, Zook brought an action in District Court and that court concluded that Zook had suffered damages due to the State’s breach of contract.

On appeal to the Supreme Court, the State argued that Zook’s claim was barred by the statute of limitations because the cause of action arose at the time of the alleged breach, which was when the State ordered the work stoppage at the commencement of the project. This Court concluded that “a claim or dispute ARISES at the time the State submits a final estimate to the contractor for his approval or rejection.” Zook, 556 P.2d at 915. We also stated that the State “led Zook to believe that its claim would receive timely attention and would be reviewed by the State pending an administrative decision on its merits.” Zook, 556 P.2d at 915.

By the same token, Lutey contends that he was led to believe there would be a final accounting of his work on the Fish Hatchery renovation project when he was terminated. A portion of the termination letter read:

According to the terms of the contract, all funds due the contractor according to the contract shall be used to pay for completing the work. Funds remaining after completion of the work shall be paid to the contractor. If additional funds are needed to complete the work, the contractor shall pay the difference.

The letter terminating the contract was dated August 12, 1985, and approximately one month later, Lutey submitted claims for additional compensation to Morrison, the State’s engineer. To date, Lutey has received only one letter, from the State’s engineer, Morrison, stating that its recommendation was to deny most claims and requesting more information on other claims. Lutey has not received any accounting from the State nor any information on his claims for additional compensation.

The argument that Zook completed the project while Lutey was terminated before the Fish Hatchery renovation was completed is immaterial. In the present case, Lutey insists that the State’s actions materially breached the contract, as in Zook, and that Lutey expected a final accounting from the State, as in Zook. The fact that Zook had completed the project and Lutey had not has no bearing on whether Lutey was entitled to a final accounting of the work it performed and any setoffs of the State.

This Court concludes that the trial court was in error when it granted summary judgment for the State on the breach of contract issue because the claim was barred by the statute of limitations. The statute does not begin to run until Lutey is provided with a final accounting from the State.

II. Constitutionality of the Statute

The issue of the constitutionality of § 18-1-402, MCA, is moot. Lutey is not adversely affected by the statute because of our conclusion that his breach of contract claim is not time barred by the statute of limitations. “It is a well-established principle that a party does not have standing to challenge the constitutionality of a statute unless he has been adversely affected by the challenged statute.” Allmaras v. Yellowstone Basin Properties (1991), 248 Mont. 477, 480, 812 P.2d 770, 771.

III. Quantum Meruit

Lutey contends that he furnished extra labor, machinery and materials to the Fish Hatchery renovation project for the benefit of the State. The State replies that Lutey must elect between a remedy in contract or a remedy in quantum meruit, he cannot pursue both. Moreover, the claim in quantum meruit is barred by the statute of limitations.

“Quantum meruit” as an amount of recovery simply means “‘as much as deserved,”’ and measures the recovery under an implied contract to pay compensation as the reasonable value of services rendered.

Kintz v. Read (Wash. App. 1981), 626 P.2d 52, 55. (Emphasis added).

Section 27-2-202(3), MCA, applies to implied contracts and reads:

The period prescribed for the commencement of an action upon an obligation or liability, other than a contract, account, or promise, not founded upon an instrument in writing is within 3 years.

The complaint, filed on August 22, 1989, came approximately four years after the cause of action for the claim in quantum meruit accrued and therefore, is barred by the statute of limitations.

IV. Implied Warranty

Lutey argues that the State breached the implied warranty of suitability and accuracy in the contract. It further contends the warranty is implied in the existence of the written contract and under Certain-Teed Products Corporation v. Bell (Texas 1968), 422 S.W.2d 719, it “is as much a part of the writing as the express terms of the contract....” Certain-Teed, 422 S.W.2d at 721. Lutey claims that the breach of implied warranty is governed by § 27-2-202(1), MCA, which states that “[t]he period prescribed for the commencement of an action upon any contract, obligation, or liability founded upon an instrument in writing is within 8 years.” The State agrees with the logic of Certain-Teed but states that the breach of implied warranty is governed by § 18-1-402, MCA, and a one-year statute of limitations applies.

The Certain-Teed court concluded “that a warranty which the law implies from the existence of a written contract is as much a part of the writing as the express terms of the contract, and the action to enforce such a warranty is governed by the statute pertaining to written contracts.” Certain-Teed, 422 S.W.2d at 721. In the present case, Lutey claims that the State “impliedly warranted that the plans and specifications [we]re accurate and suitable for the project....” The complaint also states that

... they failed to specify the terms for construction of the clay seal, failed to convey to the bidders the State of Montana’s true intention regarding the use of superplasticizer and were misleading as to the amount of underground water and underground obstacles which the State of Montana knew to be on the site.

However, the law in Montana establishes “that a contractor can rely on the plans and specifications and need not... verify them .... [T]he owner, here the State, warrants and is responsible for the accuracy of the descriptions in the plans and specifications of the contract that are issued.” Sornsin Const. Co. v. State (1978), 180 Mont. 248, 254-255, 590 P.2d 125, 129. The contract impliedly warrants that the plans and specifications are suitable and accurate. This implied warranty is as much a part of the contract as the express terms. As part of the contract, it is usually governed by the statute of limitations for written contracts, which is § 27-2-202(1) MCA, or as here, it is governed by § 18-1-402, MCA, the one year statute.

We conclude that the implied warranty action arises out of the contract and is treated as part of the contract. The statute of limitations applicable to the breach of contract claim against the State applies here too. Therefore, the State has yet to provide Lutey with a final accounting and so, § 18-1-402, MCA, applies. The statute of limitations has yet to begin and the breach of warranty claim is not barred. The trial court was in error when it granted summary judgment on this issue.

V. Fraud and Misrepresentation

We conclude that this claim is without merit. Lutey’s own pleadings belie its argument that it was not aware until discovery that the State acted fraudulently and made misrepresentations. Lutey provides no evidence that it could not have known of the alleged fraud at the time it occurred, nor did it provide any evidence that there were any affirmative acts by the State to prevent Lutey from discovering the fraud as required to commence the statute of limitations. We also note in passing that the claim of fraud in the complaint does not meet the requirements of Rule 9(b), M.R.Civ.P., that “[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity ....”

VI. Breach of the Implied Covenant of Good Faith and Fair Dealing

Lutey claims a breach of the implied covenant of good faith and fair dealing and contends that the statute of limitations for contract actions applies. In Story v. City of Bozeman (1990), 242 Mont. 436, 791 P.2d 767, this Court stated that “[a] breach of the covenant is a breach of the contract.” Story, 242 Mont. at 450, 791 P.2d at 775. This claim, as with the implied warranty claim, is as much a part of the contract as its express terms, and therefore, is governed by the statute of limitations for State contract actions. See conclusion relative to the implied warranty. The trial court erred in granting summary judgment on this issue.

AFFIRMED in part and REVERSED in part.

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


author: JUSTICE McDONOUGH JUSTICE HUNT

text:
    JAMES B. HETHERINGTON, SUSAN K. SPILMAN, and ANITA EDDINGS, Co-Personal Representatives of the Estate of KATHRYN E. HETHERINGTON, Deceased, Plaintiffs and Respondents and Cross-Appellants, v. FORD MOTOR COMPANY, a Delaware Corporation, Defendant and Appellant and Cross-Respondent.
    No. 91-602.
    Argued November 19, 1992.
    Submitted February 17, 1993.
    Rehearing Denied May 5, 1993.
    Decided March 30, 1993.
    50 St.Rep. 325.
    257 Mont. 395.
    849 P.2d 1039.

      JUSTICE HUNT issued a dissenting opinion.
    For Appellants: John D. Stephenson, Jr. (argued), Jardine, Stephenson, Blewett & Weaver, Great Falls; John M. Thomas, Office of the General Counsel Ford Motor Company, Dearborn, Michigan, Of Counsel for Ford Motor Company.
    For Plaintiffs and Respondents and Cross-appellants: Erik B. Thueson, Thueson Law Office, Helena.
   JUSTICE McDONOUGH

delivered the Opinion of the Court.

Ford Motor Company (Ford) appeals from a judgment rendered by the District Court of the Eleventh Judicial District in favor of respondents, the husband and children (Hetheringtons) of the deceased Kathryn Hetherington. We reverse.

In May of 1987 Kathryn Hetherington was severely injured when she was run over by her own automobile, and as a result of these injuries she subsequently died. Hetheringtons retained counsel to represent them against the manufacturer of the car, Ford Motor Company, and against the dealer which sold them the vehicle, Ronan Auto Body Sales (Ronan). Settlement negotiations went on for over two years. Finally, in August of 1989, it appeared as if a settlement agreement had been reached. Ford offered to pay Hetheringtons $175,000 and Ronan offered to pay $10,000. This offer was in exchange for a full and final release of all claims by the Hetheringtons. Hetheringtons met with their counsel and agreed to the offer and gave him authority to accept. Immediately after this meeting counsel for the Hetheringtons sent the following letter to the agent negotiating on behalf of Ford and Ronan:

Please be advised that my clients have decided to accept your clients’ combined offer of settlement in the amount of $185,000. Of the total amount, $10,000 will be contributed by Ronan Auto Body and $175,000 will be contributed by Ford Motor Company .... [E]ach of you will be sending me settlement drafts and the appropriate releases.

Counsel for Hetheringtons asked for “drafts and settlement documents within 10 days.” Four days after their counsel sent this letter the Hetheringtons wrote a letter to their counsel indicating that they were discharging him and his firm. Hetheringtons further indicated that they were not interested in the settlement which had been offered and did not wish him to negotiate further on their behalf. Hetheringtons retained different counsel and later a suit was filed by them against Ford. Hetheringtons also sued Ronan, however Ronan settled prior to trial and is not a party to this appeal. Hetheringtons contend it was their understanding that “our right to bring the claim ... would not be lost until that written settlement agreement was formally approved and executed.”

Ford alleged as an affirmative defense that Hetheringtons had agreed to compromise and settle their claims with Ford prior to filing the action. Ford also asserted a counterclaim seeking specific performance of the alleged settlement agreement. Prior to trial Ford moved for summary judgment on its affirmative defense and counterclaim. The District Court denied Ford’s motion for summary judgment on the basis that there remained a question of fact as to whether the parties intended to be bound in the absence of a written signed agreement. Hetheringtons also filed a motion for summary judgment which was denied.

Ford’s counterclaim was bifurcated from the main wrongful death suit and tried first. During this trial the District Court indicated there was not a question of fact as to the parties’ intention to be bound, but did direct a verdict in favor of the Hetheringtons on the basis that no meeting of the minds had occurred concerning what an “appropriate release” provision in the settlement agreement would have included. The District Court certified the judgment as final pursuant to Rule 54(b), M.R.Civ.P., allowing Ford to appeal from the directed verdict.

Ford raises two issues for consideration on appeal:

1. Did the District Court err in refusing to grant Ford’s motion for summary judgment on the basis that a question of fact existed as to whether the parties intended to be bound prior to the execution of a signed written agreement?

2. Did the District Court err in granting a directed verdict in favor of Hetheringtons on the grounds that there was no meeting of the minds concerning what constituted an “appropriate release”?

Hetheringtons brought a cross-appeal addressing an additional issue:

3. Whether the District Court should have granted summary judgment in favor of Hetheringtons because the facts showed an incomplete accord and satisfaction?

I

Ford asserts the District Court erred in not granting its motion for summary judgment. The District Court was of the opinion there was a question of fact as to whether the parties intended to be bound prior to signing of a written agreement.

The court based its denial on the affidavit of Susan Spilman, one of the Hetherington children, that it was their understanding and intent that their right to bring a claim would not be lost until a written agreement was reviewed, agreed upon and signed. The court originally felt this created a question of fact as to the intent of the parties to be immediately bound.

An agreement is binding if made by an unconditional offer, and accepted unconditionally. Here the attorney’s letter, and the conference between the Hetheringtons and their attorney, disclosed no conditions or manifestations of conditional intent.

The alleged intentions of the plaintiffs to be bound only by a written agreement were not disclosed to their attorney or to the other parties. Restatement (Second) of Contracts, § 21 is applicable:

Neither real nor apparent intention that a promise be legally binding is essential to the formation of a contract, but a manifestation of intention that a promise shall not affect legal relations may prevent the formation of a contract.

The intentions of the parties are those disclosed and agreed to in the course of negotiations. A party’s latent intention not to be bound does not prevent the formation of a binding contract. Such a condition, that it will not be effective until signed, must be part of the agreement between the parties. See Hanson v. Oljar (1988), 231 Mont. 272, 277, 752 P.2d 187, 190; Hunt v. S Y Cattle Co. (1926), 75 Mont. 594, 606, 609, 244 P. 480.

We conclude there was not a question of fact as to whether the parties intended to be bound only by a written agreement, reviewed and signed by the Hetheringtons. Summary judgment should have been granted on this issue.

II

Did the District Court err in granting a directed verdict in favor of Hetheringtons on the grounds there was no meeting of the minds as to what constituted an “appropriate release” as set forth in Hetherington’s attorney’s letter to Ford?

Testimony was taken as to the meaning of those two words. Ford’s agent testified he intended it to mean a standard release and he did not know for sure whether a confidentiality clause would be inserted. Hetheringtons introduced evidence of a release which Ford would have requested, containing an indemnification claim and a clause that claims were doubtful. The clause concerning doubtful claims was particularly repugnant to the Hetheringtons. No release was ever prepared or rejected.

The District Court ruled that the two parties did not reach an understanding as to what was considered an “appropriate release,” and could not enforce a contract based solely upon the language “appropriate release.” The court therefore entered a directed verdict in favor of Hetheringtons.

Section 28-3-201, MCA, provides:

A contract must receive such an interpretation as will make it lawful, operative, definite, reasonable, and capable of being carried into effect if it can be done without violating the intention of the parties.

The material elements of this settlement agreement were two:

1. The amount of settlement, $185,000; and
2. The release of all claims.

Ford and Ronan offered to pay $185,000 for a “full and final release of all claims.” Hetheringtons accepted and asked for the “appropriate release.” Such material elements are capable of being carried into effect and will not violate the intentions of the parties.

We stated in Van Atta v. Schillinger (1981), 191 Mont. 472, 625 P.2d 73:

Matters which are subsidiary, collateral, or which do not go to the performance of the contract, are not essential and do not have to be expressed in the contract. Steen v. Rustad (1957), 132 Mont. 95, 313 P.2d 1014, 1020.
It is true that the plaintiffs had no right to obtain a warranty deed, and they had no right to obtain the signature of defendant’s wife on the deed. But we do not regard this demand as a fatal variance from the terms of the option agreement. The option agreement did not specify the kind of deed, and in such case, it is presumed that a fee simple is intended to pass. See, section 70-20-301, MCA. In Morris v. Goldthorp (1945), 390 Ill. 186, 60 N.E.2d 857, the court held that the demand for a warranty deed, where one was not specified in the agreement, was a material variance of an option agreement. This may be true in a particular case, but we do not adopt such a hard and fast rule here. When defendant Schillinger responded on December 7, he did not object to plaintiffs’ demand for a warrant deed. Although the court could not order that plaintiffs get a warranty deed, we have no doubt that a court of equity can properly grant specific performance by ordering only that a deed passing the fee simple estate, without the warranties, pass by the terms of the option agreement.

Van Atta, 191 Mont. at 477, 625 P.2d 73.

Similarly here the instrument to be signed by the Hetheringtons need only give Ford a release of all claims. The court acting as a court in equity can grant specific performance by ruling that a simple release of all Hetherington’s claims be executed, the form of which it would approve, and dismiss the lawsuit with prejudice. Ford does not have the right to add conditions such as confidentiality of the settlement, indemnification, or doubtfulness of claim, nor do the Hetheringtons have the right to impose such a condition as acknowledgement of liability. The wording of a release under these circumstances is a matter of law.

We conclude the District Court erred in granting the directed verdict on the grounds there was no meeting of the minds as to what constituted an appropriate release.

Ill

The cross-appeal brought forward the issue of whether or not the District Court should have granted summary judgment in favor of Hetheringtons because the facts showed an incomplete accord and satisfaction.

This issue raises the question of whether the settlement agreement is an executory accord or a substituted contract. An executory accord is a contract which provides for the acceptance in the future of a stated performance and satisfaction of the antecedent claim. In this case the stated performance in the future would be the payment of $185,000 which would satisfy the claim of Hetheringtons.

However, if the agreement arrived at by the parties is itself accepted as a substitution for an extinguishment of the antecedent claim, then the agreement is a new substituted contract, and the old claim is extinguished and recovery is limited to rights under the substituted contract. See Clark v. Elza (Md. 1979), 406 A.2d 922; 6 Corbin on Contracts, Section 1268, p. 71 (1962).

Hetheringtons contend the settlement was not a binding settlement because it was an incomplete accord and satisfaction and therefore an executory accord and is not a legally binding contract until payment is actually made.

This contention does not comply with our statute. Section 28-1-1401, MCA, provides:

Accord — definition and effect. An accord is an agreement to accept in extinction of an obligation something different from or less than that to which the person agreeing to accept is entitled. Though the parties to an accord are bound to execute it, yet it does not extinguish the obligation until it is fully executed.

Here the parties are bound to execute but the obligation of Ford under the claim is not extinguished until the accord is completed. An executory accord is an interim agreement and if it is not executed the original obligation remains.

The difference between an executory accord and a substituted contract is in the remedies available upon breach of the contract. In this case if Ford had breached interim contract and did not pay the money, and if it was considered to be an executory accord, Hetheringtons could rescind the contract and continue with their original tort claim; or they could have enforced the interim contract and asked for contract damages. If it were a substituted contract, Hetheringtons could only bring an action for contract damages. See Clark v. Elza, supra, and Warner v. Rossignol (1st Cir. 1975), 513 F.2d 678, 94 A.L.R.2d, p. 516-522.

Usually, the question of whether the agreement is an executory accord or a substituted contract depends on the intention of the parties. However, under the uncontested facts here it does not make any difference because it was the Hetheringtons who breached the interim agreement four days after it was reached, by informing their attorney they were not going through with the agreement. Due to this breach, whether the interim agreement is an executory accord or a substituted agreement is moot because it is Ford which has the option of suing for damages or, as it has done, to ask for specific performance of the contract. We conclude the interim agreement is enforceable and not an incomplete accord and satisfaction.

For reasons stated above in discussing Issues I and II, we find the interim contract is specifically enforceable and that judgment should be granted to Ford on the counterclaim. The District Court is reversed and the cause remanded to the District Court for entry of judgment in favor of Ford, and any further proceedings in conformance with this opinion.

CHIEF JUSTICE TURNAGE, JUSTICES GRAY, HARRISON, WEBER and DISTRICT JUDGE MIZNER (sitting in place of JUSTICE TRIEWEILER) concur.

JUSTICE HUNT

dissenting.

I dissent. It is clear from testimony of the witnesses and the exhibits that there was not a meeting of the minds regarding the release, and therefore, as the District Judge who was present in court clearly found, no contract existed. It is incredible for the majority to hold that confidentiality, indemnification, and doubtfulness of claims provisions contained in standard releases are not material. At the time of the alleged contract, Ford Motor Company was responsible for drafting the release. Ford’s claims adjuster, Martin Simmonsen, the only person who negotiated with the Hetheringtons, admitted that the provisions contained in the release were material to Ford and that the settlement agreement would not be completed until the parties read and understood the agreement, agreed to the terms, and executed the agreement. This was also the Hetheringtons’ understanding, as sworn to by Susan Spilman. Finally, the sample release submitted by Ford during discovery would had to have been amended to include a confidentiality agreement to make it consistent with what Ford intended in August 1989.

I would affirm the District Court and deny the motion for summary judgment. I would also affirm the court’s granting of a directed verdict in favor of the Hetheringtons.


author: JUSTICE HARRISON JUSTICE HUNT

text:
    WILLIAM A. MANLEY and MARGARET H. MANLEY, Plaintiffs and Respondents, v. WILLIAM GRIMES and HILDRETH GRIMES, and R. V. BOTTOMLY and IRENE BOTTOMLY, Defendants and Appellants.
    No. 92-119.
    Submitted on Briefs January 28, 1993.
    Decided March 30, 1993.
    50 St.Rep. 330.
    257 Mont. 404.
    849 P.2d 215.

      JUSTICE HUNT issued a dissenting opinion.
    For Defendants and Appellants: Monte D. Beck, Bozeman; and Donald Ostrem, Graybill, Ostrem, Warner & Crotty, Great Falls.
    For Plaintiffs and Respondents: Robert J. Sewell, Jr., Smith Law Firm, Helena.
   JUSTICE HARRISON

delivered the Opinion of the Court.

This is an action for the partition of recreational property located near the community of Lincoln, Montana. Appeal is taken from a December 13, 1991 order of the District Court for the First Judicial District, Lewis and Clark County. We dismiss the appeal because we conclude that the order from which appeal is taken is not an appeal-able order.

In view of our holding that the December 13,1991 order is not an appealable order under Rule 1, M.R.App.P., we will not discuss the other issues raised.

The record evidences a dispute between former friends and neighbors who had been co-tenants on a tract of land for over thirty years. R.V. and Irene Bottomly initially owned the entire parcel. They conveyed an undivided one-half interest to William and Margaret Manley in 1958 and, in 1980, a one-half of their undivided half interest to William and Hildreth Grimes. A cabin located on the property was jointly utilized by all the parties over a number of years.

In May 1986, the Manleys filed this action to enjoin the Grimeses from building another cabin on the property and for partition of the property. The matter was set for trial in November of 1987. Immediately before trial, the parties met outside the court and discussed a resolution of the case.

Counsel advised the court that a settlement had been reached and that appropriate papers would be filed at a later date. Although the specifics of the agreement were not entered into the court record, the trial was vacated. Despite numerous efforts since that time, the parties have never submitted to the court a settlement agreement signed by all of them.

On May 3,1991, the Bottomlys and the Grimeses filed a “Petition for an Order” in which they asserted that judgment should be entered pursuant to an attached “Stipulation for entry of judgment and decree of partition” based on the oral agreement reached by the parties in November 1987. The stipulation was executed by the Bottomlys and the Grimeses and their counsel but not by the Manleys or their counsel.

Argument on the “Petition for an Order” was heard by the District Court on September 5,1991. After receiving briefs, the District Court entered its decision on December 13, 1991, ordering as follows:

IT IS HEREBY ORDERED that the motion to enforce the oral settlement agreement and to enter a decree of partition is DENIED. The parties are hereby given until January 31, 1992, to resolve the controversy. If this Court does not receive a notice of settlement by that date, partition proceedings will be ordered in accordance with Title 70, Chapter 29, of the Montana Code Annotated.

From this order, the Bottomlys and the Grimeses appeal.

Is the District Court’s December 13, 1991 order appealable under Rule 1, M.RApp.P.?

Rule 1, M.R.App.P., provides in part:

(b) In civil cases a party aggrieved may appeal from a judgment or order, except when expressly made final by law, in the following cases:
(1) From a final judgment....
(2) ... from such interlocutory judgments or orders, in actions for partition as determine the rights and interests of the respective parties and direct partition to be made.

In this case, the December 13,1991 order of the District Court is not a final judgment. Nor is it an interlocutory judgment or order which determines the rights of the parties and directs partition to be made. The Bottomlys and the Grimeses illogically assert that the order determines the rights of the parties because it rejects their offered stipulation. The court’s order merely gives the parties an extension of time “to resolve the controversy.” The court stated that, if the matter was not resolved within the time allowed, then the court would order partition proceedings. Partition will not occur until after the referees file their report with the court and the court decides to confirm, modify, or set aside the report or to appoint new referees. Section 70-29-212, MCA. We hold that the December 13, 1991 order is not appealable.

The Bottomlys and the Grimeses claim that the issue of the appealability of the December 13, 1991 order is moot because of this Court’s previous denial of the Manleys’ motion to dismiss this appeal. An issue is moot when it has ceased to exist. This Court’s summary order denying the motion to dismiss did not obliterate this issue; it merely postponed our consideration of it until a full review of the record was made.

IT IS ORDERED that this matter is dismissed and shall be returned to the District Court for further proceedings in compliance with that court’s December 13,1991 order.

JUSTICES GRAY, McDONOUGH and WEBER concur.

JUSTICE HUNT

dissenting.

I dissent. If the oral agreement in Hetherington v. Ford Motor Company (1993), Montana Supreme Court Cause No. 91-602, was a binding contract, as concluded by the majority, then the stipulation agreed to by the parties in this case is even more of a binding contract because all of the parties were present at the time the stipulation was made, and all of the parties orally agreed to execute the contract. In Hetherington, it was the attorneys who spoke for the plaintiffs and agreed to a contract that, in my opinion, was not fully determined, while here, it was clear that the parties reached an oral agreement in each other’s presence, which was subsequently reduced to writing by the Manleys’ attorney. The document was executed by the Bottomlys and Grimeses, but not by the Manleys. The District Court order does determine the rights of the parties because the Bottomlys and Grimeses are entitled to enforce their contract with the Manleys for the partition of the property, based on the rationale in Hetherington. I would hold that the order was final and appealable and I would reverse the District Court.


author: JUSTICE TRIEWEILER

text:
    PETER MERKES, Plaintiff and Appellant, v. GRAY MAPSTON, Defendant and Respondent.
    No. 92-324.
    Submitted on Briefs October 14, 1992.
    Decided March 30, 1993.
    50 St.Rep. 332.
    257 Mont. 408.
    849 P.2d 210.
    For Plaintiff and Appellant: David N. Hull, Helena.
    For Defendant and Respondent: Victor F. Valgenti, Missoula.
   JUSTICE TRIEWEILER

delivered the Opinion of the Court.

Plaintiff Peter Merkes appeals from an order of the Fourth Judicial District Court, Missoula County, ordering Merkes to accept the return of a 1972 Peterbilt truck, in lieu of $5454.26 in monetary damages, as compensation for defendant Mapston’s breach of contract. We reverse and remand to the District Court.

The sole issue on appeal is:

Did the District Court err when it ordered Merkes to accept the return of the 1972 Peterbilt truck from Mapston and denied an award of monetary damages to Merkes?

In September 1989, Mapston purchased a 1972 Peterbilt truck from Merkes for $5500. On about October 5, 1989, Mapston entered into a subsequent agreement with Merkes to purchase “as is” a 1979 Freightliner truck and a 1972 Fruehauf log trailer for $29,500. The purchase agreement for the truck and trailer provided that Mapston would (1) pay Merkes $24,000 in cash, and (2) return to Merkes the 1972 Peterbilt truck (that Mapston purchased in September) as consideration for the balance due.

Mapston paid Merkes $24,000 in cash. However, he did not return the 1972 Peterbilt truck to Merkes as promised. On December 1, 1989, Merkes sent a letter to Mapston notifying him that he had five calendar days to return the Peterbilt truck or felony theft charges would be filed against him. Mapston did not return the truck.

On April 25,1990, Merkes commenced a lawsuit against Mapston. The complaint sought damages of $5500, plus interest at 10 percent per annum, from and after October 5, 1989, for Mapston’s breach of contract. On January 4, 1991, Mapston filed an answer and counterclaim in which he alleged Merkes induced him to purchase the 1979 Freightliner truck and the 1972 Fruehauf log trailer by misrepresenting and warranting that the vehicles were “road ready.” Mapston asserted that the truck, trailer, and related equipment were defective and that he was entitled to the $5000 in repair costs that he incurred to fix the truck, trailer, and related equipment.

On February 18,1992, the District Court issued its findings of fact, conclusions of law, and judgment. The court concluded that: (1) the parties entered into a binding contract for the purchase of the 1979 Freightliner and the 1972 Fruehauf log trailer for a sum of $29,500; (2) Mapston breached the contract because he never returned the Peterbilt truck to Merkes as promised; and (3) Mapston owed Merkes damages for the breach. The court determined Merkes was entitled to $5500 in damages, less repair costs for a balance of $4422.46. The court added to the $4422.46 balance $1031.80 in interest for a total damage amount of $5454.26.

In his complaint, Merkes sought monetary damages. However, in its judgment, the District Court ordered Merkes to retrieve the 1972 Peterbilt truck in Mapston’s possession in lieu of monetary damages. The court reasoned that the truck had a current value of less than $5500 because it had been sitting outside for two years; and therefore, the vehicle’s current value offset the $5454.26 that Mapston owed to Merkes. The court determined that the return of the truck, not monetary damages, compensated Merkes for Mapston’s breach of contract.

On appeal, Merkes asserts that the District Court erred when: (1) it valued the 1972 Peterbilt truck as equivalent in value to the debt Mapston owed to Merkes; and (2) it ordered that Merkes accept the return of the 1972 Peterbilt truck instead of the monetary damages he requested in his complaint. Our disposition of Merkes’ appeal is based on his second contention. Therefore, we need not discuss Merkes’ first contention.

Merkes asserts that there is no legal authority to support the court’s decision to require Merkes to accept property in lieu of monetary damages. Merkes contends that § 27-1-311, MCA, requires that a nonbreaching party be compensated by an award of strictly monetary damages. Therefore, Merkes maintains, he is entitled to $5454.26 in monetary damages. He argues that neither party sought rescission of the contract. Furthermore, he did not initiate an action for claim and delivery for return of personal property, nor did he request specific performance. He asserts that the court’s order to return the property was an inappropriate remedy and that only monetary damages will compensate him.

We agree with Merkes’ second argument that the court acted without legal authority when it ordered Merkes to accept the truck, in lieu of monetary damages, as compensation for Mapston’s breach of contract. We conclude that the court erroneously ordered the performance of the original sales agreement when monetary compensation was the only appropriate remedy under the circumstances.

The controlling statute in Montana for damages in a breach of contract is § 27-1-311, MCA, which provides:

For the breach of an obligation arising from contract, the measure of damages, except when otherwise expressly provided by this code, is the amount which will compensate the party aggrieved for all the detriment which was proximately caused thereby or in the ordinary course of things would be likely to result therefrom. Damages which are not clearly ascertainable in both their nature and origin cannot be recovered for a breach of contract. [Emphasis added.]

In construing § 27-1-311, MCA, our Court has emphasized that the purpose behind § 27-1-311, MCA, is:

to compensate an aggrieved party for the loss he has sustained .... [T]he nonbreaching party should receive a sum which will give him an economic status identical to that which he would have enjoyed had the contract been performed. [Emphasis added.]

Como v. Rhines (1982), 198 Mont. 279, 286, 645 P.2d 948, 952; Wyatt v. School Dist. No. 104, Fergus County (1966), 148 Mont. 83, 89, 417 P.2d 221, 224.

When the District Court denied monetary damages and ordered the return of the Peterbilt truck to compensate Merkes for Mapston’s breach, the court erroneously relied on the specific relief statutes, found at §§ 27-1-401 to -433, MCA, and §§ 28-2-1601 to -1716, MCA. Specific relief or specific performance is an appropriate remedy for breach of contract in certain circumstances; however, this case is not one of them.

Section 27-1-401, MCA, is clear that specific relief may only be given in the cases specified therein and in no others. Section 27-1-411, MCA, provides:

Except as otherwise provided in this part and Title 28, chapter 2, parts 16 and 17, the specific performance of an obligation may be compelled when: (1) the act to be done is in the performance, wholly or partly, of an express trust; (2) the act to be done is such that pecuniary compensation for its nonperformance would not afford adequate relief; (3) it would be extremely difficult to ascertain the actual damage caused by the nonperformance of the act to be done; or (4) it has been expressly agreed in writing, between the parties to the contract, that specific performance thereof may be required by either party or that damages shall not be considered adequate relief.

Neither the circumstances provided for in §§ 27-1-401 or -411, MCA, are present in this case.

When it ordered the return of the truck and refused to award monetary damages to Merkes, the court failed to act in accordance with the law of damages for breach of contract as provided in § 27-1-311, MCA. Further, the court erroneously ordered specific relief and specific performance in contravention of the preliminary requirements stated in §§ 27-1-401 and -411, MCA.

We reverse and remand this District Court decision and direct the lower court to award monetary damages to Merkes in accordance with § 27-1-311, MCA. Merkes is entitled to receive $5454.26 in damages as compensation for Mapston’s breach of contract.

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