author: MR. CHIEF JUSTICE TURNAGE

text:
    T.G. HAGGERTY, a/k/a/ Thomas G. Haggerty, R. G. Simkins, a/k/a Robert G. Simkins, and Bridge Village Development Corp., Plaintiffs and Appellants, v. GALLATIN COUNTY; Joy Nash, Ruth Mary Tonn, and Wilbur Visser, as County Commissioners; Bridger Bowl, Inc., et al., Defendants and Respondents.
    No. 85-382.
    Submitted March 26, 1986.
    Decided April 18, 1986.
    717 P.2d 550.

      Morrow, Sedivy & Bennett, Edmund P. Sedivy, Jr. argued, Bozeman, for plaintiffs and appellants.

      A. Michael Salvagni, County Atty., Bozeman, Thomas R. Anacker argued, Deputy County Atty., Moore, Rice, O’Connell & Refling, Christopher Manos argued, Bozeman, for 1st Bank & 1st Trust.
    Gregory O. Morgan, argued, Bozeman, for Bridger Bowl.
   MR. CHIEF JUSTICE TURNAGE

delivered the Opinion of the Court.

Appellants brought this action in the District Court seeking an injunction to prevent respondent Bridger Bowl, Inc., from serving beer and wine. In the alternative, appellants sought a rescission of the contract for transfer of lands from appellants to Bridger Bowl. Appellants, Simkins and Haggerty, along with their wives, organized appellant, Bridger Village Development Corporation to handle their interest in lands located in the vicinity of the Bridger Bowl ski area. Respondents Gallatin County, First Trust Company of Montana and First Bank of Bozeman are parties because of mortgage and lease-back agreements entered into by Bridger Bowl with these parties to finance improvements on the property. After trial, the District Court entered findings of fact and conclusions of law and judgment denying any relief to appellants and awarding attorney fees to respondents. Appellants appeal this judgment.

We considered the following issues on appeal:

1. Whether the District Court erred in concluding there is no binding agreement prohibiting Bridger Bowl from conducting commercial activities in the Base Area Chalet.

2. Whether the District Court erred in concluding that the terms of the June 11, 1971, agreement merged into the deeds of December 15, 1972.

3. Whether the District Court erred in concluding that the commercial use limitation on Bridger Bowl lands was void as an unlawful restraint on trade.

4. Whether the District Court erred in concluding that the conduct of commercial activities by Bridger Bowl on lands other than the parking lot is not a violation of the commercial use limitation in the deed to the parking lot lands.

5. Whether the District Court erred in awarding respondents attorney fees.

Appellant has raised two other issues concerning whether the sale of beer and wine violates the commercial use restriction and whether the county, bank and trust company had notice of the restriction. Our holdings on the other issues makes consideration of these issues unnecessary.

We affirm the District Court’s denial of relief to appellant. However, we reverse the court’s holding which voided the commercial use restriction as an unlawful restraint on trade. We also reverse the award of attorney fees to respondents.

The parties have been fighting over their respective rights in property near the Bridger Bowl Ski Area for over fifteen years. The record of the parties’ previous litigation provides a useful introduction to the current dispute.

The District Court’s opinion in Bridger Bowl v. Simkins and Haggerty, No. 19930, Gallatin County, provides an explanation of the original intentions of the parties. Most valuable are Items 1 & 2 in the District Court’s order dated September 28, 1972, amending its findings of fact and conclusions of law in that case. Those items are as follows:

“1. In view of the evidence at trial to the effect that Simkins and Haggerty at the time of purchasing the land in question intended to provide land for daytime skiing and uphill transportation needs of Bridger Bowl, but to retain the rest of said Neuffer lands for future development and investment and profit to themselves by furnishing overnight accommodations to skiers; and, in keeping with these purposes Simkins and Haggerty have sold and conveyed to Bridger Bowl approximately fifty (50) acres of ski terrain and fifteen (15) acres of parking at their cost of $200.00 per acre, and Bridger Bowl relying on defendants’ assurances to provide lands sufficient to accommodate the needs of daytime skiers and uphill transportation, moved the facilities on to defendants’ lands, and
2. By virtue of the great expansion of Bridger Bowl which has created problems for Bridger Bowl in parking and sewage disposal which had not been anticipated or adequately provided for, but which is within the power of Simkins and Haggerty to assist in resolving consistent with their original intention of benefiting Bridger Bowl and themselves;”

Thus, the District Court in that earlier case envisioned a symbiotic rather than competitive relationship between appellants and Bridger Bowl whereby Bridger Bowl accommodated the daytime needs of skiers thereby drawing customers to the area and thus providing business for overnight accommodations developed or invested in by appellants. Unfortunately, this spirit of cooperation among the parties has not prevailed, and we are faced with the current litigation.

There were a number of transactions, deeds, escrows and conveyances among the parties leading to this litigation. The following highlights only those details important to the outcome of this case, but the scenario remains complicated.

Bridger Bowl, Inc., is a nonprofit corporation organized for operating and maintaining the Bridger Bowl Ski Area near Bozeman, Montana. The corporation primarily provides uphill transportation to skiers, but it also operates chalets at the base of the area and in Deer Park on the mountain as daytime facilities for the comfort and convenience of the skiers. Both appellants, Haggerty and Simkins, served as directors of Bridger Bowl through fiscal year 1971-1972, Haggerty starting in 1955 and Simkins in 1961.

John and Cynthia Neuffer conveyed the tract of land upon which the Deer Park Chalet was subsequently built to Bridger Bowl’s predecessor on July 20, 1961, by warranty deed. No reservations or restrictions are on the deed. Then on September 7, 1966, appellants acquired 170 acres of land located just east at the bottom of the then existing ski area by warranty deed from the Neuffers.

Soon after appellants’ purchase of the Neuffer land, Bridger Bowl developed plans to expand downhill by building a new chair lift and chalet further down the hill and on the land that appellants had purchased. Appellants accommodated these plans by granting respondents a permanent easement over portions of the 170 acres for the new lift, ski runs and a parking lot. In addition, on July 20, 1967, appellants deeded one acre of their land to Bridger Bowl without charge. The Base Area Chalet and Alpine lift terminal are now located on this parcel. The deed to this Base Area Chalet parcel contains no restrictions or reservations, but appellants allege that the deed was subject to an oral agreement that Bridger Bowl would not use the acre for commercial activity. The District Court, however, did not allow testimony on this oral agreement.

In 1969, appellants constructed a building on some of their land adjacent to the Base Area Chalet parcel. The building was known as the St. Bernard and contained a restaurant, lounge and bar. Later they built a ski shop and deli also on the land adjacent to the Base Area Chalet. Beer and wine are served in the deli. It is undisputed that appellants are interested in limiting competition to these facilities and their future developments in the area.

The land that appellants purchased from Neuffers became the subject of a title dispute and two lawsuits between appellants and Bridger Bowl in 1971-72. Appellants charged Bridger Bowl with slander of title and Bridger Bowl charged appellants with breach of fiduciary duty. This Court’s opinion in Simkins v. Jaffe (1974), 165 Mont. 266, 527 P.2d 1195, summarizes the course of the dispute and the litigation. As a result of the dispute and on-going negotiation, appellants entered into an agreement on June 11, 1971, with Bridger Bowl whereby appellants would convey to Bridger Bowl sixty-five acres of the disputed land at the price they had purchased it for. This agreement was subsequently modified by an addendum to include five additional acres for the parking lot area. This addendum was in response to the judge’s order in Bridger Bowl’s action against appellants. The agreement, addendum and deeds were prepared by appellants’ attorneys in consultation with Bridger Bowl’s and deposited in escrow. The deeds were subsequently recorded. Neither the June 11, 1971, agreement nor its addendum have been recorded.

Discrepancies between the agreements and deeds with respect to a commercial use restriction are at the basis of this current litigation. We will now outline those discrepancies.

The June 11,1971, agreement purports to facilitate the conveyance of two parcels of land, Parcel A and Parcel B from appellants to Bridger Bowl. Parcel A includes skiing lands near the base of the ski area described in the agreement as follows:

“All of the sellers’ land situate in the Southeast Quarter of the Southwest Quarter and the Southwest Quarter of the Southeast Quarter of Section 19, Township 1 North, Range 7 East, M.P.M., which are subject to a ski easement as described in Easement No. 3 of the easement recorded in Book 24 of Miscellaneous at Page 108 in the office of the County Clerk and Recorder of Gallatin County, Montana, and as more particularly described in Exhibit “A” hereunto attached and by this reference incorporated herein.”

Exhibit “A” to the agreement then further describes that land:

“SEVi SWí4 and SWÍ4 SEí4 of Section 19, Township 1 North, Range 7 East, M.P.M., Gallatin County, Montana, SAVE and EXCEPT the six (6) tracts described as follows: [Exhibit then describes the six tracts.] And subject to easements as follows: [Exhibit A then lists the easements.]”

This description of Parcel A is interpreted by appellants as including the acre upon which the Base Area Chalet is located because that acre is in the SWí4 of Section 19 and is not within any of the six excepted tracts listed in Exhibit A. However, the Base Area Chalet acre was not “sellers’ ” land at the time of the June 11, 1971, agreement nor was it ever subject to a ski easement as the description requires.

Parcel B in the June 11,1976, agreement consists of fifteen acres of parking lot land at the base of the ski area.

The agreement also sets out the following pertinent miscellaneous provisions:

“D. That no commercial use shall be made nor any building erected on any of the lands herein described, except day ski lodges, ski patrol, ski school and ancillary buildings used in connection with the operation of uphill ski lifts and motor vehicle parking facilities.
“E. In the event of zoning of the lands herein described, the buyer agrees to assign all density ratings to the lands herein described to the sellers for use on their adjacent lands.”

By provision D, then, all of the lands described in the agreement are subject to the commercial use restriction, and appellants’ interpretation of the June 11, 1971, agreement would also subject the Base Area Chalet to the restriction.

Separate deeds conveyed Parcels A and B. The land description with the deed for Parcel A varies from that in the 1971 agreement in that the deed only utilizes Exhibit A to the agreement as the description. Therefore, the “sellers’ land” and “subject to ski easement” language that appears in the agreement is missing in the deed, and the description includes the land where the Base Area Chalet is located. However, the deed for Parcel A also differs from the agreement because the deed does not mention any commercial use restriction, although it does reserve population density rights. The land description in the deed to Parcel A lists all of the easements that appear in Exhibit A to the agreement.

The deed conveying Parcel B contains a commercial use restriction that varies from the one in the June 11, 1971, agreement. The restriction in the deed is as follows: “The use of above described land is restricted to noncommercial, ski related, service activities.” Parcel B’s deed also reserves population density rights for appellants. The description of Parcel B in the deed only differs from the June 11, 1971, agreement by adding five acres as provided for in the addendum.

Testimony by appellants’ attorney as to why the deed to Parcel A contained no commercial use restriction was not allowed at trial. However, the minutes of a meeting by the directors of Bridger Bowl dated December 12,1972, were admitted as evidence. These minutes were utilized by the District Court to establish that Bridger Bowl agreed to the commercial use restriction in the deed to the parking lot lands but not in the deed to the skiing lands.

Bridger Bowl has made a couple of transactions to finance improvements at the ski area. On October 10, 1967, Bridger Bowl executed and delivered to First Bank Bozeman a mortgage on the Deer Park Chalet and Base Area Chalet properties in order to secure a $300,000 loan from the bank. On March 1, 1979, Bridger Bowl deeded all of its lands, including the lands involved in the present action, to Gallatin County in order to facilitate the issuance of industrial revenue bonds. As part of the procedure for issuance of the bonds, Gallatin County then leased the property back to Bridger Bowl.

Bridger Bowl has always served food in its two chalets. During the 1982-83 ski season, Bridger Bowl began serving beer and wine in the chalets. Appellants brought this action alleging that the sale of beer and wine breached the commercial use restriction in both the unrecorded 1971 agreement and in the recorded deed to the parking lot parcel. After trial, the District Court denied appellants relief on the bases that the terms of the 1971 agreement had merged in the deeds, and, in any event, the commercial use restrictions were void as illegal restraints on trade. This appeal ensued.

I

Appellants claim the District Court erred in concluding there is no binding oral agreement by which Bridger Bowl is prohibited from conducting commercial activities in the Base Area Chalet. Appellants’ primary argument is that the 1971 written agreement of June 11, 1971, subjected the Base Area Chalet to a “negative easement” which restricted use of the property to noncommercial activities. In the alternative, they argue that the 1971 agreement is ambiguous, and therefore the District Court should have allowed evidence of the alleged oral agreement for interpreting the written agreement. Finally, appellants have woven in an argument that the 1971 written agreement satisfies the statute of frauds for the oral agreement so that the evidence of the oral agreement is admissible. We can not agree with these arguments.

The 1971 written agreement does not create a negative easement on the Base Area Chalet because the agreement does not concern the chalet property. The 1971 agreement only contracts to convey property described in the written agreement as “sellers’ land” that had been “subject to a ski easement.” However, the chalet property was conveyed away by appellants to Bridger Bowl in 1967 and had never been subject to the ski easement that was also created for Bridger Bowl in 1967. Since the chalet property did not belong to appellants and was not subject to the easement in 1971, the 1971 agreement had no effect on the Base Area Chalet property. For the same reason, the 1971 agreement cannot satisfy the statute of frauds for any alleged oral agreement that would create a negative easement on the Base Area Chalet land.

The 1971 agreement is not ambiguous with respect to the land it affects. Therefore, the parol evidence rule prevents admission of evidence of an oral agreement to show intent of the parties as to what land was involved. See Section 28-2-905, MCA; See also Larson v. Burnett (1972), 158 Mont. 421, 427, 492 P.2d 922, 925. We conclude that the 1971 agreement does not operate to place a negative easement on the Base Area Chalet property.

II

The next issue we considered was whether the terms of the June 11, 1971 agreement had merged into the deeds of December 15, 1972. Appellants point out that there is no express language in the recorded deeds that the parties intended to merge the restrictive provisions of the 1971 agreement into the deeds. Appellants then argue that the commercial use restrictions in the 1971 agreement still apply, regardless of being left out of the deeds. The argument, however, does not benefit appellants because the 1971 agreement does not concern the Base Area Chalet property. We will consider the merger issue, however, so that the parties are fully appraised of their rights in this property that they have feuded over for years.

The applicable rule is that a valid written contract merges all prior and contemporaneous negotiations on the subject, but distinct agreements may not be merged; whether or not there has been a merger depends on the intention of the parties. Story v. Monforton (1941), 112 Mont. 24, 31, 113 P.2d 507, 508. We applied this principle in Thisted v. County Club Tower Corp. (1965), 146 Mont. 87, 405 P.2d 432, to determine that restrictive covenants contained in an unrecorded contract but not in the subsequent recorded deed were, nevertheless, enforceable. We utilized extrinsic evidence to reach that conclusion and emphasized the following rule, in the opinion:

“The evidence of that intention may exist in or out of the deed. There is no presumption that a party, in giving or accepting a deed, intends to give up the covenants of which the deed is not a performance or satisfaction.”

405 P.2d at 437.

In the case at bar, there is substantial evidence to support the District Court’s conclusion of merger of the contract in the deeds. First of all, the record reflects on-going negotiations between the parties that altered the substance of the 1971 agreement. These negotiations culminated in two deeds — one for the skiing lands and the other for the parking lot lands. The deed to the parking lot lands contains both the commercial use restriction and the density rights reservation from the 1971 agreement. The deed to the skiing lands left out the commercial use restriction, but left in the reservation of density rights and listed all the other easements referred to in the 1971 agreement. Thus, all of the restrictions referred to in the 1971 agreement are included in the deeds; only the commercial use restriction on the skiing lands is omitted. These facts, when coupled with the minutes of Bridger Bowl’s December 12, 1972, meeting showing the intention of Bridger Bowl to remove the commercial use restriction from the skiing lands, provide strong evidence that the deeds contain all of the restrictions on the lands that were intended by the parties, and that the contract had merged in the deeds. We will not reverse a conclusion by the District Court that is supported by substantial evidence. Lacey v. Herndon (Mont. 1983), [205 Mont. 379,] 668 P.2d 251, 40 St.Rep. 1375.

On a related matter, the excluded testimony that appellants contend should have been admitted in order to establish intent would have only provided evidence of unilateral mistake. Unilateral mistake is not sufficient grounds for reforming a written contract. See Section 28-2-1611, MCA. Therefore, any error in excluding the testimony was harmless.

The end result of merging the agreement and deeds is that only the twenty acre parking lot parcel is subject to the commercial use restriction.

Ill

Appellants next allegation of error concerns the District Court’s conclusion that the commercial use limitation on Bridger Bowl land was void as an unlawful restraint on trade. On this point, we agree with appellants. We note, however, that in light of our holding on the previous issues, the restriction applies only to the parking lot land. The outcome of the instant case, therefore, remains the same. We will consider the issue because of its statewide importance and the likelihood of its recurrence.

The applicable statute is Section 28-2-703, MCA. It provides:

“Any contract by which anyone is restrained from exercising a lawful profession, trade, or business of any kind ... is to that extent void.”

We have interpreted this statute under facts similar to the instant case in O'Neil v. Ferraro (1979), 182 Mont. 214, 596 P.2d 197. A restaurant operator’s lease forbade the landlord and owner of the building to permit a competing restaurant from operating in the building. We held that the lease provision was enforceable despite its restraint on trade because, (1) it was partial or restricted in its operation with regard to time and place; (2) it was based upon good consideration; and (3) it was reasonable because it afforded a fair protection to the interest of the party in whose favor it was made, and was not so large in its operation so as to interfere with the interest of the public. In applying this test to the commercial use restriction alleged by appellants, we find that the conditions of the test are met. The restriction is limited to lands conveyed from appellants to Bridger Bowl and the consideration is that Bridger Bowl was able to acquire the property. Appellants have a reasonable interest in preventing competition to their activities by activities on properties they once owned. The public is not adversely affected to a significant degree, because the services that are denied to them on the restricted lands are available or can be made available on other lands in the same locale.

There is additional authority and precedent for not voiding the commercial use restriction. Montana statutes allow for the creation of covenants and easements governing the right to transact business on land. Section 70-17-101(6), MCA. Montana recognizes negative easements. Northwestern Improvement Co. v. Lowry (1937), 104 Mont. 289, 66 P.2d 792. A properly created negative easement can be utilized to restrain the right to do business on a piece of property and such easements are not automatically void under Section 28-2-703, MCA. Reichert v. Weeden (Mont. 1980), 618 P.2d 1216, 1220, 37 St.Rep. 1788, 1792. We therefore reverse the District Court on its holding that the commercial use restriction is void.

Respondents also cite Section 30-14-205, MCA, as applicable. We disagree. That statute deals with antitrust and monopolies. Bridger Bowl is not a monopoly merely because it is the only ski area in Bridger Canyon.

IV

We have determined that there is a commercial use restriction on the parking lot. Appellants argue that the restriction acts to prohibit use of the parking lot by customers who buy beer and wine on other Bridger Bowl lands. We do not believe the restriction acts so broadly.

Appellants cite several cases from other jurisdictions wherein the courts have prohibited the use of property as a parking lot for a business on other property because such use violated a commercial use restriction in the deed to the parking lot property. See, e.g., Bennett v. Consolidated Realty Co. (1928), 226 Ky. 747, 11 S.W.2d 910; Embry-Bosse Funeral Home, Inc. v. Webster (Ky.1953), 261 S.W. 2d 682; Borsvold v. United Dairies (1957), 347 Mich. 672, 81 N.W.2d 378; and H.E. Butt Grocery Co. v. Justice (Tex.Civ.App. 1972), 484 S.W.2d 628. These cases are distinguishable because they involve parking lots that were being utilized primarily by commercial business patrons. In this case, the primary purpose of the parking lot is to provide parking for skiers using the ski hill, and the land was conveyed to respondents for that purpose. We will not construe the fact that skiers using the lot might incidentally buy beer or wine at the ski area chalets as violating the commercial use restriction on the parking lot.

V

The final issue we considered concerns the District Court’s award of statutorily entitled attorney fees to respondents. We find that there are no statutes by which respondents are entitled to attorney fees.

The general rule is that in the absence of a specific contract provision or statutory grant, the prevailing party is not entitled to an award of attorney fees either as costs of action or elements of damage. Martin v. Crown Life Ins. (1983), 202 Mont. 461, 658 P.2d 1099, 1104, 40 St.Rep. 216, 221. The statutes cited by respondents as authority for attorney fees in this case include Sections 30-14-222, 27-1-316 and 28-3-704, MCA.

Section 30-14-222, MCA, is a provision for damages where there has been an unlawful restraint of trade. Since we have reversed the District Court on the unlawful restraint of trade issue, Section 30-14-222, MCA, is no longer applicable to this case.

Section 27-1-316, MCA, provides the measure of damages for breach of covenants in grants of estates in real property. This statute makes no allowances for attorney fees where the covenantor brings an action for breach of contract against the covenantee as in the case here. Therefore, Section 27-1-316, MCA, is also inapplicable in this case.

Section 28-3-704, MCA, provides for a contractual right to attorney fees. However, this statute is not applicable to the June 11, 1971 agreement that appellants sued on. Section 28-3-704, MCA, provides:

“Whenever by virtue of the provisions of any contract or obligation in the nature of a contract made and entered into at any time after July 1,1971, one party to such contract or obligation has an express right to recover attorney fees from any other party to the contract or obligation in the event the party having that right shall bring an action upon the contract or obligation, then in any action on such contract or obligation all parties to the contract or obligation shall be deemed to have the same right to recover attorney fees and the prevailing party in any such action, whether by virtue of the express contractual right or by virtue of this section, shall be entitled to recover his reasonable attorney fees from the losing party or parties.” (Emphasis added.)

The agreement with the attorney fees provision was entered prior to July 1, 1971, and was found by the District Court to have been merged in the deeds which contain no such provisions. Therefore, this statute does not apply.

Thus, none of the statutes relied upon by respondents entitle them to attorney fees. The District Court is reversed on its award of attorney fees to respondent.

The District Court’s denial of recission and injunction is affirmed. However, we reverse the declaration that the commercial use restriction is void and also the award of attorney fees. We direct entry of judgment in accordance with this decision.

MR. JUSTICES HARRISON, MORRISON, WEBER, SHEEHY, GULBRANDSON and HUNT concur.


source: Caselaw Access Project

author: MR. JUSTICE GULBRANDSON

license: Public Domain

text:
    STATE OF MONTANA, Plaintiff and Respondent, v. DONALD DEAN GRANT, Defendant and Appellant.
    No. 83-285.
    Submitted Jan. 23, 1986.
    Decided April 22, 1986.
    717 P.2d 562.

      Skedd, Ashley, McCabe & Weingartner, J. Mayo Ashley argued, Helena, for defendant and appellant.
    Mike Greely, Atty. Gen., Jim Scheier argued, Asst. Atty. Gen., Helena, John R. Frederick, Co. Atty., Poison, for plaintiff and respondent.
   MR. JUSTICE GULBRANDSON

delivered the Opinion of the Court.

Donald Dean Grant, the defendant, appeals his convictions for deliberate homicide and attempted deliberate homicide following a jury trial. He raises issues concerning the alternate juror’s presence with other jurors after the submission of the case; the conduct of the prosecutor, defense counsel and the District Court Judge; the admissibility of several items of evidence; the adequacy of the information; and the effectiveness of defense counsel's representation. We affirm.

Two out-of-state motorcyclists, Jay Witteman and Carl Warbitsky, arrived in Arlee, Montana, sometime after 3:30 a.m. on July 17, 1982. They stopped at Grant’s Place, a restaurant on Highway 93, to ask a group of people standing in the parking lot where they could find a place to camp. The four people in the group were Latricia Rogers, David Sanchez, Robert Jones, and the defendant. Grant spoke with the eventual victims and directed them to a gravel pit south of Arlee next to Highway 93 as a place to camp.

After the motorcyclists headed south, Grant told Sanchez, and possibly Jones, that they should get a gun and go to the gravel pit where they could shoot and kill the campers and steal the motorcycle. Grant said he had been in the army and knew how to kill people. Sanchez thought he was joking. After this conversation, Jones stated home. Grant asked him to wait. Sanchez then saw Grant and Jones drive south on 93 toward the gravel pit in Grant’s car.

Jones testified concerning the events which occurred after they left the parking lot. They went to Grant’s residence where he lived with his mother and stepfather. Grant got a rifle and five shells and told Jones that he knew where the motorcyclists were camped and that they should go out and find them. Grant took the gun and he and Jones left the residence in Grant’s car and headed toward the gravel pit. When they arrived at the gravel pit, Grant searched for the tent and stopped a short distance away from it. While still in the car, he told Jones, ‘Tm going to kill them.” Jones did not think he meant it. They got out of the car and Grant gave Jones the gun. After Jones refused to fire it, Grant grabbed it from him and fired four shots in rapid succession into the tent. Jones testified he heard sounds coming from the tent: “ow . . . ow.” They got back into the car and returned to Arlee. Sanchez and Rogers both saw Grant’s car drive past them heading north at a high rate of speed.

Grant and Jones then stopped at the Tepee Village Cafe, north of Arlee, where they had coffee. Linda Schlemmer, Grant’s aunt, served them. She testified that she heard some shots while they were in the cafe. After a short time, Grant and Jones left the cafe and returned to the gravel pit. According to Jones, Grant said, “I got one of them. I got to cut the other guy’s throat.” Grant then took a knife and they walked toward the tent. Jones stayed about 60 yards away but Grant moved closer and threw rocks at the tent. He told Jones he saw someone move so Grant and Jones ran across the gravel pit and a field, ending up near Highway 93. Jones refused to return to the gravel pit with Grant to get the car. Grant told Jones to tell the police his car had been stolen. After Jones went home, Grant returned to the cafe and told his aunt that his car had been stolen.

Grant retrieved his car from the gravel pit area the next morning after reporting to one of the investigating officers at the scene that it had been stolen. Grant also gave authorities what later proved to be a substantially false statement concerning the theft of his car and his movements and activities during the early morning hours of July 17, 1982.

Two of the bullets from the .300 Savage rifle fired by Grant struck Witteman. He died as a result of shock and hemorrhage caused by the gunshot wounds. Warbitsky, the other occupant of the tent, had been momentarily awakened by the sound of gunfire and a departing car, but he went back to sleep. Warbitsky later reawoke when the rocks struck the tent. Upon hearing the rocks, he attempted, unsuccessfully, to awaken Witteman. Warbitsky got out of his sleeping bag, put on his boots, and emerged from the tent. He saw two figures some distance from the tent, moving away through the gravel pit. He grabbed his jacket from the tent and chased the two fleeing figures, but was unable to catch them. On his way back to the tent, some people in a van approached Warbitsky. He explained what had happened and received a ride back to the campsite. Upon arriving at the tent, Warbitsky and the others in the van discovered that Witteman was dead, so they contacted the authorities.

The State charged Grant with deliberate homicide (count I) for Witteman’s death and attempted deliberate homicide (count II) for putting Warbitsky in fear of his life. Trial began on November 16, 1982 and concluded on December 7, 1982, with the jury finding Grant guilty on both counts. The District Court sentenced Grant to 100 years on the first count plus 10 years for use of a weapon and 40 years on the second count plus 10 years for use of a weapon, with the terms to run consecutively.

Following sentencing on February 9, 1983, Grant filed a notice of appeal through new counsel, Charles F. Moses. Shortly thereafter, the State filed criminal charges against Grant’s trial counsel, K.M. Bridenstine, for tampering with evidence in Grant’s case because, when handling the murder weapon prior to trial, Bridenstine may have intentionally have obscured fingerprint evidence. Bridenstine also hired Moses to represent him on the charge of tampering with evidence. The State objected to this on the grounds that it represented a conflict of interest for Moses. This Court issued an order disqualifying Moses from representing either client.

On July 10, 1985, at the request of this Court, Judge Thomas Olson held an evidentiary hearing concerning the pretrial responsibilities of the prosecutor, the District Court and Grant’s counsel to inform Grant of the alleged improprieties of Grant’s counsel. After hearing testimony, including that of the District Court Judge, Judge Olson concluded that Bridenstine did not impair himself from defending Grant during trial; Bridenstine acted competently during trial; no conflict of interest affected his performance as defense counsel; Grant received effective assistance of counsel and was not denied due process; the evidence did not show a reasonable likelihood that the jury verdict would have been different absent Bridenstine’s misconduct; and the District Court and the county attorney had no affirmative duty to advise Grant of the possible charges against Bridenstine because they did not contemplate the charges and because Bridenstine’s conduct at trial did not appear impaired or ineffective. After the entry of the order in the above hearing, this Court heard the appeal.

We address ten issues:

(1) Should Grant’s convictions be reversed because an alternate juror was present in the jury room for a brief period of time after the case was submitted to the jury?

(2) Did Grant receive effective assistance of counsel where he was not informed that his counsel mishandled the murder weapon?

(3) Did the District Court properly refuse to give instructions on mitigated deliberate homicide, a lesser included offense of deliberate homicide?

(4) Did the District Court correctly find the chain of custody adequate for the State’s exhibits of bullets, cartridges, and a rifle introduced as the murder weapon?

(5) Did the District Court correctly deny Grant’s motion for a mistrial following a comment by the prosecutor that an armed deputy was “in charge and keeping the defendant?”

(6) Did the amended information properly charge an offense in the language of the statute describing the offense?

(7) Was Grant’s false exculpatory statement properly admitted into evidence?

(8) Were photographs of the victim’s body properly admitted into evidence?

(9) Was the murder weapon improperly seized by law enforcement officers?

(10) Did the overall demeanor of the prosecution and the District Court, along with other errors, deprive Grant of a fair trial?

In the first issue Grant contends that the return of the alternate juror to the jury room with the jury after the case had been submitted for decision constitutes reversible error. The judge questioned the jury on the effect of the alternate’s presence prior to asking for the verdict and, at a subsequent evidentiary hearing, heard testimony from the twelve jurors individually, the alternate juror and the bailiff. The questioning and testimony indicated that no one on the jury discussed the case with the alternate; that the alternate made no verbal or non-verbal expressions which conveyed his attitude about the case; that the alternate was present in the jury room from three to no more than fifteen minutes; that his presence after the submission of the case did not influence the decision of any juror; that the alternate went to dinner with the other jurors as he had done during trial, and that, pursuant to instructions, no one discussed the case over dinner. One juror indicated the foreman may have been selected when the alternate was in the jury room. After the questioning of the jury which occurred prior to their giving the verdict, the judge asked counsel if they had questions about the alternate’s presence with the jury. Defense counsel stated “seems to be all right, your Honor.” His first objection came twenty-seven days later when he filed a motion for a new trial.

Grant alleges that allowing the alternate into the jury room violates Section 46-16-501, MCA, which requires an officer of the court to prevent outside communication with the jurors during trial and Section 46-16-503(1), MCA, which requires an officer of the court “to keep the jurors together and to prevent conversations between the jurors and others” after the jury retires. Since the questioned conduct occurred after the case was submitted to the jury, we will consider Section 46-16-503(1), MCA, rather than Section 46-16-501, MCA. We find no violation of Section 46-16-503(1), MCA. An alternate, although excluded from deliberating and voting, is in every other respect a juror. The alternate is accepted after voir dire, sits with the jurors through oral argument, and is governed by the admonitions of the district court. The alternate is not discharged until after the verdict. Section 46-16-307, MCA. As such, an alternate would not fall within the statutory ban against conversations with others.

Section 46-16-307(3), MCA, requires discussion as well. It states:

“. . . [A]n alternate juror may not join the jury in its deliberation unless called upon by the court to replace a member of the jury. His conduct during the period in which the jury is considering its verdict shall be regulated by instructions of the trial court. An alternate juror who does not replace a principal juror shall be discharged after the jury arrives at its verdict.”

In State Highway Commission v. Dunks (1975), 166 Mont. 239, 531 P.2d 1316, the alternate juror went into the jury room when the jury began its deliberations. No one established how long she was in the jury room or what went on while she was present. The jury foreman submitted an affidavit stating the alternate sat in for a few minutes, she did not participate in discussion or deliberation, and her presence did not prejudice or “seriously [cause] injustice to the defendants.” Dunks, 166 Mont. at 241, 531 P.2d at 1317. Apparently, she may have been present during some deliberations. This Court observed that the jury foreman’s opinion should not be the deciding factor because he did not know what prejudicial effect her presence had on the other jurors and that the evidence conflicted on how much time the alternate spent in the jury room. This Court then held that the District Court properly granted a new trial. Dunks, 166 Mont, at 244, 531 P.2d at 1318.

Grant asserts that Dunks controls here. However, Dunks is distinguishable from this case in the following respects: (1) In Dunks, no one established how long the alternate was present in the jury room. Here, jury testimony established the alternate’s presence for “a few minutes”, or 3 to 15 minutes maximum. (2) In Dunks, the alternate may have been present during some deliberations. Here, the alternate was not present during deliberations. (3) In Dunks, only the foreman submitted an affidavit on the alternate’s role. No one testified on what was said in the jury room or what effect any communication had. Here, all twelve jurors and the alternate testified under oath that no deliberations began while the alternate was present, no one discussed the case with the alternate either in the jury room or at dinner, he did not take part in any deliberations, and the jurors were not influenced by the alternate’s brief presence in the jury room. In addition, in Dunks there was little evidence on which the District Court could rely for its decision. Here, the District Court held a fully evidentiary hearing on the matter prior to denying Grant’s motion for a new trial. This Court summarized the general rule on jury misconduct in State v. Eagan (1978), 178 Mont. 67, 79, 582 P.2d 1195, 1202:

“. . . [I]f jury misconduct is shown tending to injure the defendant, prejudice to the defendant is presumed; however, the presumption is not absolute and may be rebutted by the use of testimony of the jurors to show facts which prove that prejudice or injury did not or could not occur . . .” [Citations omitted.]

In this case, unlike Dunks, the State produced juror testimony on which the District Court could properly rely to find no prejudice or injury to Grant occurred. We hold that since no deliberations had begun, the State showed no prejudice or injury to Grant. Thus, no reversible error occurred.

In the second issue, Grant asserts that he did not receive effective assistance of counsel where his retained trial counsel mishandled the murder weapon and neither his counsel, the District Court nor the prosecutor informed him of the possible charges against his counsel which could have resulted in a conflict of interest between Grant and Bridenstine. The State submits that this Court should defer to the findings and conclusions made by Judge Olson following the evidentiary hearing on this issue.

The defendant carries a heavy burden in Montana to establish a claim of ineffective assistance of counsel. State v. Henricks (Mont. 1983), 672 P.2d 20, 25, 40 St.Rep. 1786, 1790. He must show that counsel failed to act within the range of competence resulting in prejudice to his defense or rights. Henricks, supra. Thus, to prevail on this claim, Grant must show prejudice, i.e., “that there is a reasonable probability that, but for counsel’s unprofessional errors, the result of the proceeding would have been different.” Strickland v. Washington (1984), 466 U.S. 668, 694, 104 S.Ct. 2052, 2068, 80 L.Ed.2d 674, 698, reh. den. (1984), _ U.S _, 104 S.Ct. 3562, 82 L.Ed.2d 864.

The record and the findings made after the evidentiary hearing may demonstrate improper action on Bridenstine’s part, but they do not demonstrate a conflict of interest at the time of trial. The prosecutor, although upset about the incident, did not initially plan to file charges against Bridenstine. The matter was referred to the Attorney General’s office for investigation only after the discovery of additional evidence. Bridenstine was not aware criminal charges would be filed. No witness at the evidentiary hearing, including the District Court Judge who presided at the trial and Charles F. Moses who briefly represented both Grant and Bridenstine, could refer to any act or omission at trial which would constitute ineffective assistance. Given Bridenstine’s performance at trial, his testimony at the evidentiary hearing that he was not aware of any impending charges, the prosecutor’s decision to not press charges but only refer the matter for investigation and the lack of charges until the trial was completed, we find no conflict of interest existed which hampered Bridenstine’s effectiveness at trial.

In addition, Grant has not demonstrated that any alleged conflict of interest or ineffective representation resulted in prejudice to his rights or defenses. Judge Olson correctly pointed out that the evidence presented at the hearing “does not establish that the jury verdict reached in [this] case would reasonably likely have been different absent the misconduct of defense counsel,” citing Strickland, supra. Any of Grant’s fingerprints on the murder weapon, potentially obscured by Bridenstine’s actions, were not critical at trial because several other people, including a witness and deputies, handled the rifle. Bridenstine showed no reticence when cross-examining the State’s witness about fingerprint evidence and the District Court Judge testified that Bridenstine performed as an aggressive, competent lawyer. Grant has failed to demonstrate prejudice from any misconduct by Bridenstine.

Grant also maintains that the failure to inform him of possible charges against Bridenstine deprived him of his right to counsel. The prosecutor did not complete any investigation into the incident and was not aware of the charges prior to trial. Under these circumstances, neither the District Court nor the prosecutor could have an affirmative duty to advise Grant of the charges. Similarly, Bridenstine was unaware of the charges and could not have informed Grant. Finally, Grant and possibly one of his parents, were present at an omnibus hearing in September 1982 when the matter was called to the attention of the District Court Judge. We hold that Grant was not denied effective assistance of counsel due to either any misconduct of defense counsel or any failure to inform him of the possible charges prior to the completion of trial.

The third issue concerns whether the District Court properly refused to give instructions on mitigated deliberate homicide, a lesser included offense of deliberate homicide. “. . . [T]he district court’s instructions must cover every issue or theory having support in the evidence, and the inquiry of the district court must only be whether or not any evidence exists in the record to warrant an instruction on mitigated deliberate homicide.” (Emphasis in original.) State v. Buckley (1976), 171 Mont. 238, 242, 557 P.2d 283, 285.

Deliberate homicide is mitigated when it is committed under the influence of extreme mental or emotional stress for which there is a reasonable explanation or excuse. Section 45-5-103(1), MCA.

The only potentially mitigating circumstance presented at trial concerned Grant’s use of alcohol on the night in question. Voluntary intoxication, alone, is insufficient to show “extreme mental or emotional stress” which would reduce a charge of deliberate homicide to mitigated deliberate homicide. State v. White (Mont. 1981), 632 P.2d 1118, 1121-22, 38 St.Rep. 1417, 1422. In White, the defendant attempted to withdraw his plea of guilty to deliberate homicide asserting that he did not adequately understand the charge. Apparently, he argued that his voluntary use of alcohol and drugs at the time of the homicide may have been circumstances which would have allowed a jury to find him guilty of the lesser charge of mitigated deliberate homicide. This Court affirmed the District Court’s denial of the defendant’s motion to withdraw his plea and noted no evidence of emotional stress. State v. Azure (1977), 175 Mont. 189, 573 P.2d 179, was distinguished in that the defendant in Azure, “in addition to being under the influence of drugs and alcohol at the time he committed the crime, was said to have been emotionally depressed.” White, 632 P.2d at 1122, 38 St. Rep. at 1422. The evidence presented at this trial does not show Grant was under the influence of emotional stress. One witness described Grant as in a “good mood.” There were references to his having beer cans in his car and his having been in a bar. This evidence shows at most the possibility of the influence of alcohol. It does not show emotional stress which would warrant an instruction on mitigated deliberate homicide.

Grant was not entitled to instructions on mitigated deliberate homicide for a second reason — his main defense at trial was alibi. In State v. Baugh (1977), 174 Mont. 456, 571 P.2d 779, the defendant was convicted of deliberate homicide. His theory at trial was that he did not kill the victim and had no knowledge of who did. This Court held that the District Court judge properly refused to instruct the jury on mitigated deliberate homicide:

“In the instant case there was no evidence in the record to show mitigation as required by section [45-5-103]. In fact, defendant’s theory throughout the trial was that he did not murder the victim. In State v. McDonald, 51 Mont. 1, 16, 149 P. 279, 285 (1915), it was said:
“ . In many instances, however, the evidence is such as to show that the defendant is either guilty of the offense charged or is entitled to any acquittal. In such cases the court may not be put in error for refusing or failing to instruct as to the lower degree or the included offense.’ ”

Baugh, 174 Mont. at 460, 571 P.2d at 781.

Grant claims that Baugh is distinguishable because there the defendant testified that he did not kill the victim and did not know who did, whereas here, Grant did not testify and did not tell his story to the jury. This distinction is meaningless. The defendant in State v. Radi (1978), 176 Mont. 451, 463-64, 578 P.2d 1169, 1177, presented his alibi defense through his witnesses. There, this Court remarked that the nature of the alibi defense was not consistent with presenting the lesser included offense and held that the jury heard no evidence from which it could rationally conclude the defendant was guilty only of the lesser included offense. Similarly here, Grant presented his alibi defense through his aunt. She testified that Grant and Jones were in the Tepee Village Cafe with her when she heard some shots fired. If the jury had believed this testimony, it would have been inconsistent with finding Grant guilty of mitigated deliberate homicide. As in McDonald, and Baugh, supra, the evidence shows that Grant is either guilty of the offense charged or entitled to an acquittal. We find no error in the District Court’s refusal to instruct on the lesser included offense of mitigated deliberate homicide.

The fourth issue involves whether three exhibits, the bullets taken from the body, the four cartridges found at the scene, and the murder weapon, were admitted into evidence without the State establishing a proper chain of evidence. The basic rules which govern the chain of evidence are set forth in State v. Wells (1983), 202 Mont. 337, 356, 658 P.2d 381, 391:

It is not necessary for the State to prove that it would be impossible to tamper with the exhibits . . . Rather, the State need only make a prima facie showing that there has been no substantial change in the evidence . . . After such a showing, the burden of proof shifts to the defendant to show why the evidence should not be admitted . . . Adequacy of the foundation for the admission of evidence is within the discretion of the District Court and its determination of adequacy will not be overturned absent a clear abuse of discretion. [Citations omitted.] [Emphasis in original.]

Each exhibit was properly admitted. With respect to the bullets, the pathologist testified that he removed the bullets from the body and clothing of Jay Mitchell Witteman, placed them in a plastic bottle and gave them to an undersheriff of Lake County. The under-sheriff marked the container, put it in an evidence bag, and locked it up in his office. The State firearms and toolmark examiner testified that he received the bullets from the undersheriff for testing at the crime lab. He initialed the evidence bag and, after he had completed testing, the undersheriff picked up this evidence bag from the crime lab. The undersheriff brought it back to his office where he locked it in a file cabinet. The examiner and the undersheriff both identified this piece of evidence in court. The State established a similar chain of custody for the cartridges found at the scene. Grant’s only complaint about the rifle introduced into evidence related to a letter which contained an incorrect digit in the serial number. The under-sheriff testified that the laboratory reports contained the correct serial number and the incorrect digit in the letter apparently was a clerical error.

Extensive testimony chronicled the labeling, storing, securing, transferring of possession and testing of each exhibit. The State made a prima facie showing that there had been no substantial change in the evidence. Grant produced no evidence to show actual or even potential tampering could have occurred. Even if this Court accepted Grant’s argument that the State inadequately identified the evidence, such a defect would go to the weight rather than the admissibility of the evidence. State v. Zuidema (1971), 157 Mont. 367, 372, 485 P.2d 952, 955. At trial, he vigorously attacked the chain of evidence and argued that the State inadequately marked and identified the evidence. Thus, the jury had an opportunity to weigh this evidence. We hold that the District Court did not abuse its discretion when admitting these items into evidence.

In the fifth issue, Grant contends that the prosecutor’s statement before the jury that an armed deputy was “in charge and keeping the defendant” warrants a new trial. During cross-examination, defense counsel drew the jury’s attention to the fact that the officer guarding the defendant was armed in order to demonstrate that the witness had limited powers of observation. A short time later, the prosecutor made the statement which Grant complains prejudiced him before the jury and which he claims should have been the subject of a cautionary instruction. Obviously, defense counsel drew the jury’s attention to the armed officer. Further, if he thought a cautionary instruction was necessary, he should have offered one. State v. Close (Mont. 1981), 623 P.2d 940, 947, 38 St.Rep. 177, 186. The District Court properly cautioned both counsel and ended the matter. The defendant has failed to show any error which affected his substantial rights or resulted in prejudice. We hold that the District Court did not abuse its discretion when it failed to declare a mistrial.

Grant claims in the sixth issue that the amended information failed to state an offense by not adequately alleging the proper mental state and that therefore the attempted deliberate homicide conviction should be reversed and the amended information dismissed. The portion of the amended information at issue stated:

“That on or about July 17, 1982 in Lake County, Montana the defendant, DONALD DEAN GRANT, performed an act toward the commission of the crime of DELIBERATE HOMICIDE, a Felony, of KARL WARBITSKY with the purpose to commit that offense by shooting repeatedly with a rifle into a certain two-person campers [sic] tent in which the said KARL WARBITSKY and his companion, JAY MITCHELL WITTEMAN, were sleeping.”

An information is sufficient if it properly charges an offense in the language of the statute describing the offense, State ex rel. Glantz v. District Court (1969), 154 Mont. 132, 142, 461 P.2d 193, 198-199, and if it adequately apprises the accused of the crime charged. It need not be perfect. State v. Coleman (1978), 177 Mont. 1, 22, 579 P.2d 732, 745. The test of sufficiency is often expressed as whether a person of common understanding would know what is intended to be charged. State v. Dunn (1970), 155 Mont. 319, 327, 472 P.2d 288, 294. Section 45-4-103(1), MCA, defines the offense charged as follows: “A person commits the offense of attempt when, with the purpose to commit a specific offense [deliberate homicide here], he does any act toward the commission of such offense.” The information charged attempted deliberate homicide using the language of this statute. It apprised Grant of the crime charged using language with which a person of common understanding would know what is intended to be charged. We hold that the information properly stated an offense.

As part of this issue, Grant argues that the instructions compounded the defect in the information. The instructions to the jury correctly reflected the law applicable to the crime charged and, as we held above, no defect existed in the information. Thus, we find this argument unpersuasive.

In the seventh issue, Grant claims that a voluntary statement he gave to a deputy sheriff prior to the time he was a suspect in the homicide should not have been admitted. Grant reported to authorities that his car had been stolen when he returned to the gravel pit after the homicide had been discovered. When a deputy sheriff later questioned him about the theft, Grant gave a statement about his actions and whereabouts at the time of the homicide that later proved to be false. Since he was not a suspect at the time, the deputy sheriff did not give Grant the Miranda warnings. A false exculpatory statement may be used as evidence of “consciousness of guilt and unlawful intent.” State v. Goltz (1982), 197 Mont. 361, 642 P.2d 1079, 1083-84. Grant apparently argues that since the statement was not made regarding the particular crime charged, as in Goltz, supra, it no longer shows “consciousness of guilt and unlawful intent.” We find no merit in this distinction. The suspicious circumstances about which Grant gave a false explanation tended to connect him to the homicide regardless of the reason for the statement. We hold that the statement was properly admitted into evidence.

The eighth issue concerns the admission of photographs of the victim taken at the scene of the crime. In this case, the District Court admitted the photographs into evidence after defense counsel raised issues relating to the locations of the bullet holes in the tent and sleeping bag, the position of the victim’s body in the tent, and the locations of wounds on the body. “The longstanding rule in Montana is that a photograph is admissible if it ‘fairly and accurately represents relevant evidence.’ State v. Jones (1914), 48 Mont. 505, 139 P. 441. It is within the discretion of the trial court to allow into evidence duly verified photographs to aid the jury in its fact-finding process . . .” (Citations omitted.) State v. Mackie (Mont. 1981), 622 P.2d 673, 674, 38 St.Rep. 86, 88. Once relevance is established, photographs should not be excluded only because of potential prejudice. State v. Austad (1982), 197 Mont. 70, 83, 641 P.2d 1373, 1380. The photographs in this case were relevant to the dispute on how the wounds were inflicted and the victim’s position when the shots were fired and aided the jury in its fact-finding on these questions. The District Court correctly determined their probative value outweighed any prejudice to Grant. We hold that the photographs were properly admitted into evidence.

Grant asserts, in the ninth issue, that the rifle used in the homicide “was taken by questionable means.” He expresses no specific legal defect in the seizure of the weapon and acknowledges that he made no suppression motion prior to trial. This issue may not be raised for the first time on appeal. State v. Gallagher (1973), 162 Mont. 155, 167-68, 509 P.2d 852, 859. Therefore, we will not address this issue further.

In the final issue, Grant argues that the overall demeanor of the prosecution and the District Court, together with the other alleged errors set forth above, requires a reversal of his conviction. He articulates no particular comments or remarks and alleges no prejudice to his substantial rights. Montana acknowledges the “cumulative error doctrine.” This refers to the accumulation of errors which prejudice a defendant’s right to a fair trial. State v. McKenzie (1978), 177 Mont. 280, 581 P.2d 1205. Mere allegations of error without proof of prejudice are insufficient to satisfy the cumulative error doctrine. State v. Phelps (Mont. 1985), [215 Mont. 217,] 696 P.2d 447, 454, 42 St.Rep. 305, 313. The resolutions of the prior issues indicate no error meriting reversal. Grant’s allegations in raising this issue are vague and without support in the record. We hold that Grant has failed to carry his burden of showing prejudice and decline to reverse his conviction on this ground.

Grant’s convictions are affirmed.

MR. CHIEF JUSTICE TURNAGE and MR. JUSTICES HARRISON, WEBER, SHEEHY, MORRISON and HUNT concur.


author: MR. JUSTICE GULBRANDSON MR. JUSTICE SHEEHY,

text:
    AETNA LIFE INSURANCE COMPANY, a corporation, Plaintiff and Appellant, v. R.J. McELVAIN, JR., et al. Defendants and Respondents.
    No. 85-08.
    Submitted Nov. 6, 1985.
    Decided April 22, 1986.
    717 P.2d 1081.

      Dorsey & Whitney, James Dorsey argued, Minneapolis, Minn., for plaintiff and appellant.
    Huntley & Eakin, Gene Huntley argued, Baker, for defendant and respondent.
   MR. JUSTICE GULBRANDSON

delivered the Opinion of the Court.

Aetna Life Insurance Company (Aetna) appeals the lower court’s order in this case originally brought by Aetna to foreclose on its first mortgage on certain Montana farmland. The Fallon County District Court ruled that Aetna could foreclose but held that Aetna had defrauded respondents Shepherds, the second mortgagees. The court awarded Shepherds the first $149,821.19 (plus $40,000 for attorney’s fees) from the foreclosure sale of the ranch. This appeal raises issues of whether a South Dakota district court judgment collaterally es-tops Shepherds from successfully relitigating the issue of Aetna’s alleged fraud; whether Shepherds had actual or constructive notice of the fraudulent scheme, which precludes them from recovering for fraud; whether Western Farm Management Company (Western Farm), a loan broker, was the agent of Aetna and, if so, whether the fraudulent acts of Western Farm are imputable to Aetna. We conclude that Shepherds cannot successfully allege fraud on Aetna’s part because the South Dakota judgment collaterally estops then from relitigating this issue and because Shepherds had imputed knowledge of the fraudulent scheme. Thus, we reverse the District Court and remand this case for the entry of judgment in Aetna’s favor.

In 1979, Shepherds owned the Box Elder Ranch, which lies at the juncture of Montana, South Dakota and North Dakota and includes land in all three states. Shepherds, desiring to sell the ranch, listed it for sale with Ranch Mart, a realty agency, and employed Ranch Mart to find a buyer. In May 1979, McElvains agreed to buy the ranch and signed a buy/sell agreement. The agreement was contingent upon McElvains securing financing from Aetna for the purchase. The total sales price agreed upon was $1,385,000; $1,235,000 as payment for the ranch and $150,000 as payment for ranch machinery. Under the agreement, McElvains were to pay $1,100,000 in cash at the closing after securing a loan from Aetna in that amount. Shepherds agreed that Aetna would have the first mortgage (from McElvains) on the ranch with the understanding that Aetna’s loan to McElvains would be for $1,100,000 and would not exceed that amount. The balance of the purchase price was to be secured by a second mortgage on the ranch from McElvains to Shepherds. Shepherds would not have entered this transaction if they had known that Aetna’s loan to McElvains (and resulting mortgage) would be for an amount well in excess of $1,100,000.

R.J. McElvain, Jr., one of the prospective buyers of the ranch, worked for Western Farm. Western Farm was a loan broker, helping people to arrange loans. R.J. McElvain, Jr., sought the help of a fellow Western Farm employee in arranging financing for McElvains’ purchase of the ranch. Western Farm agents contacted Shepherds at the ranch to inspect and appraise the property. Western Farm, through its agents and McElvains, knew that the agreed upon sales price was $1,385,000 and that the sale was contingent upon an Aetna loan to McElvains for $1,100,000.

The mortgage loan application to Aetna, submitted in McElvains’ name through Western Farm, stated that the total sales price for the ranch was $2,185,000. The application requested a loan from Aetna of $1,555,000. A forged buy/sell agreement was also submitted to Aetna through Western Farm. Shepherds’ signatures were forged on the agreement. The agreement stated that the total sales price was $2,185,000. R.J. McElvain, Jr., who had worked for Western Farm, stated at deposition that the forged buy/sell agreement was seen in the offices of Western Farm. Aetna approved a loan in the total amount of $1,555,000. The effect of the loan was that Aetna would have a first mortgage for $1,555,000 on a ranch valued at approximately $1,235,000. Thus, Shepherds’ second mortgage for $135,000 was rendered essentially worthless.

On July 6, 1979, McElvains and Shepherds closed the sale of the ranch. McElvains executed a promissory note to Shepherds for $135,000, secured by three separate second mortgages on ranch property in the three states. The documents were backdated to June 29, 1979. The closing took place after Ranch Mart, Shepherds’ agent, received notice that Aetna had approved the loan to McElvains. At his deposition, Wallace Mading, owner of Ranch Mart, produced a copy of a letter received by Ranch Mart. The letter, from Western Farm to R.J. McElvain, Jr., stated that the Aetna loan had been approved for $1,550,000. The letter was dated June 7, 1979. Mading stated at deposition that neither he, his secretary, nor the closing agent knew when the letter was received by Ranch Mart. Ranch Mart received the letter in response to its request to Western Farm to notify Ranch Mart of the approval of the loan. Mading agreed that, in terms of Ranch Mart’s normal practice, Ranch Mart had received the letter before the closing on July 6, 1979.

Mading testified at deposition:

“. . . I am sure that I was aware that Aetna Life Insurance Company was going to be in a million and a half dollar mortgage position, but I did not know what all on ... I knew that this property was certainly a part of it.
“Q. You did know then that they were going to have a mortgage in excess of a million and a half dollars, and that their mortgage would be superior to the second mortgage of the Shepherds?
“A. Yes, I am sure that I would have, I would have been aware of it just the way you said it.”

Ranch Mart apparently did not tell Shepherds about the size of Aetna’s loan to McElvains.

On August 2, 1979, Aetna closed its loan to McElvains for $1,555,000. McElvains executed three promissory notes totaling that amount and three mortgages (to secure the notes) in Aetna’s favor. The transaction required three mortgages and three notes so that a mortgage could be recorded in each one of the three states in which the ranch is located. These first mortgages were recorded August 2, 1979, in the appropriate office of the respective counties and states.

Shepherds recorded the three second mortgages as follows: on November 29,1979, in Fallon County, Montana; on November 30,1979, in Bowman County, North Dakota; and on December 3, 1979, in Harding County, South Dakota. These mortgages explicitly recited that they were subordinate to Aetna’s first mortgages. On January 24, 1980, Shepherds filed a satisfaction of mortgage for each of the three mortgages given to Shepherds by McElvains, although the underlying debt had not been paid. Shepherds filed the satisfactions of mortgage on the request of their realtor, Wallace Mading. Ronald Shepherd testified that Mading’s reason for this was that Shepherds had mistakenly filed their mortgages ahead of Aetna and “they had to have it reversed.” This reasoning apparently reflects that (1) part of Aetna’s loan to McElvains was not to be disbursed until on or before February 28, 1980 (Shepherds’ mortgages having been recorded in November and December of 1979); and (2) Aetna sought to amend its mortgages to show this disbursement (although this was not shown at trial). In any event, Shepherds filed three satisfactions of mortgage and then, in March 1980, filed three new second mortgages (otherwise identical to their prior mortgages) on the ranch land in the three states. These new second mortgages also explicitly recited that they were junior and subordinate to Aetna’s first mortgage.

McElvains were in default under the terms of the second mortgage as soon as the first payment became due. Upon McElvains’ default on the second mortgage to Shepherds, Shepherds foreclosed the mortgage on the Montana property and purchased the Montana property at a sheriffs sale. Shepherds’ received a sheriffs deed to this property after the period of redemption had passed.

McElvains also defaulted on the three senior mortgages to Aetna. On July 10,1981, Aetna filed this foreclosure action in Montana District Court, Fallon County, on the Montana mortgage. In August 1981, Aetna filed a foreclosure action in South Dakota on the South Dakota mortgage. Aetna filed a similar action in North Dakota on the North Dakota property. The North Dakota court entered summary judgment by default against Shepherds in October 1983. In July 1984, the North Dakota Supreme Court dismissed Shepherds’ appeal of the summary judgment order.

In the South Dakota action, Shepherds raised a defense alleging that Western Farm was the agent of Aetna and, as such, induced Shepherds to sell the ranch through fraudulent misrepresentations that Aetna would loan McElvains $1,100,000 and take a mortgage for that amount. Shepherds asserted that because Aetna loaned McElvains $1,555,000 and got a first mortgage in that amount, when the value of the ranch was substantially less than the amount of the first mortgage, Aetna fraudulently rendered Shepherds’ second mortgage valueless. Shepherds also claimed that Western Farm defrauded them by submitting a forged buy/sell agreement to Aetna which inflated the true sales price and caused Aetna to make an inflated loan and take an inflated mortgage on the ranch. Thus, Shepherds’ second mortgage was rendered valueless. Shepherds based their defense on the contention that Western Farm was an agent of Aetna and its fraud should be imputed to Aetna.

On September 20, 1983, the South Dakota district court issued a memorandum decision finding that there was no merit to Shepherds’ allegations of fraud. The court held that: (1) Ranch Mart acted at all relevant times as the exclusive agent of Shepherds; (2) Shepherds, through their agent Ranch Mart, had actual knowledge of Aetna’s loan commitment to Shepherds prior to accepting the second mortgage from McElvains on June 29, 1979; (3) Shepherds had constructive knowledge of the amount of Aetna’s mortgage as of August 2,1979, when it was recorded, and prior to Shepherds’ recordation of their second mortgage; and (4) Shepherds’ second mortgage states the priority of Aetna’s first mortgage, which precludes Shepherds from denying the existence and priority of the first mortgage as a matter of law. The South Dakota court issued its findings of fact and conclusions of law on December 5, 1983, repeating the above findings. The court granted summary judgment to Aetna on December 5, 1983. The South Dakota Supreme Court affirmed this decision in February 1985 stating that:

“We conclude that Shepherds had both actual and constructive notice of the amount of the loan and the extent of the mortgage, thus precluding any reliance on fraud or misrepresentations. Therefore, the trial court did not err in its grant of summary judgment.”

Aetna Life Ins. Co. v. McElvain (S.D. 1985), 363 N.W.2d 186, 190.

Aetna’s foreclosure action on the Montana portion of Box Elder Ranch went to trial December 7, 1983. As a defense to the action, Shepherds again raised the issue of fraud. Shepherds alleged that Aetna, through its agents, knew of the fraud practiced upon Shepherds; the fraud being the representations made to Shepherds that Aetna’s loan to McElvains would not exceed $1,100,000.

At trial on December 7, 1983, Aetna introduced into evidence the South Dakota judgment from December 5, 1983, and the other South Dakota court documents. Aetna argued that the South Dakota judgment was res judicata as to Shepherds’ defense of fraud.

The Montana District Court, in its judgment of October 29, 1984, conceded that Shepherds pleaded affirmative defenses in the foreign court foreclosure actions which were “essentially the same as the affirmative defenses they have pleaded in this action.” (Emphasis added.) The Montana court acknowledged that the South Dakota court entered judgment on the merits. The Montana court apparently rejected the res judicata effect of the foreign judgment because the judgment was on appeal.

The Montana trial court ruled that: (1) Shepherds were defrauded by R.J. McElvain, Jr., and other employees of Western Farm in that Shepherds’ second mortgage was rendered valueless; (2) McElvain and Western Farm were the agents of Aetna; (3) therefore, Aetna defrauded Shepherds; (4) Ranch Mart, Shepherds’ agent, did not have notice of the size of the Aetna loan before the closing of the ranch sale; (5) even if Ranch Mart had notice, that notice would not be imputed to Shepherds under these circumstances because Aetna did not exercise good faith; and (6) Shepherds’ constructive notice of Aetna’s prior recorded mortgage could not relieve Aetna of responsibility for its fraudulent acts. The court ruled that Aetna was entitled to foreclose its mortgage but imposed a lien in Shepherds’ favor, superior to Aetna’s, on the ranch. The amount of the lien was the unpaid balance McElvains owed to Shepherds on the sale of the ranch, with interest, plus $40,000 as attorney’s fees. This appeal followed.

The first issue is whether the trial court erred in failing to give collateral estoppel effect to the South Dakota judgment. Aetna asserts that the South Dakota decision, holding that Aetna did not defraud Shepherds, is entitled to full faith and credit in Montana and conclusively defeats the fraud allegations. This issue raises only questions of law and, therefore, the standard of review is clear. This Court is not bound by the determinations of the trial court on questions of law and we are free to draw our own conclusions from the evidence presented. Sharp v. Hoerner Waldorf Corporation (1978), 178 Mont. 419, 584 P.2d 1298.

The United States Constitution provides that “Full Faith and Credit shall be given in each State to the public Acts, Records, and judicial Proceedings of every other State.” U.S. Const., art. IV, Section 1. The federal statutory codification of this constitutional guarantee, 28 U.S.C. Section 1738, requires that,

“. . . Acts, records and judicial proceedings . . . shall have the same full faith and credit in every court within the United States ... as they have by law or usage in the courts of such State . . . from which they are taken.”

Finally, Montana law provides:

The effect of a judicial record of a sister state is the same in this state as in the state where it was made, except that it can only be enforced here by an action or special proceeding . . .”

Section 26-3-203, MCA.

The Fallon County District Court apparently declined full faith and credit to the South Dakota judgment because that decision, at the time of the Montana trial, was on appeal to the South Dakota Supreme Court. That approach ignores the fact that, in South Dakota, a judgment on appeal can have collateral estoppel or res judicata effect. See, e.g., Black Hills Jewelry Mfg. v. Felco Jewel Ind. (S.D. 1983), 336 N.W. 2d 153, 157 (“The doctrine of res judicata serves as claim preclusion to prevent relitigation of an issue actually litigated or which could have been properly raised and determined in a prior action ... Of course, the earlier court must have had jurisdiction and its decision must be final and unreversed.” (Citations omitted.)); Arcon Const. v. South Dakota Dept. of Transp. (S.D. 1985), 365 N.W.2d 866, 868 (“There must, however, be a final unreversed judgment or decree of a court of competent jurisdiction before the doctrines of res judicata, collateral estoppel, or issue preclusion apply” (Citations omitted; emphasis added.)). The rule consistently declared by the United States Supreme Court is that, “ ‘the judgment of a state court should have the same credit, validity, and effect, in every other court of the United States, which it had in the state where it was pronounced.’ ” (Citations omitted.) Underwriters Assur. Co. v. N.C. Guaranty Assn. (1982), 455 U.S. 691, 704, 102 S.Ct. 1357, 1365, 71 L.Ed.2d 558, 570. Given that the South Dakota judgment, although on appeal, would be entitled to collateral estoppel effect in South Dakota, that judgment is entitled to the same effect in Montana if the other requirements for collateral estoppel are met.

In Montana, the test to determine the applicability of collateral estoppel is a three part inquiry:

“(1) Was the issue decided in the prior adjudication identical with the one presented in the action in question? (2) Was there a final judgment on the merits? (3) Was the party against whom the plea is asserted a party or in privity with a party to the prior adjudication?”

In Re Marriage of Stout (Mont. 1985), [216 Mont. 342,] 701 P.2d 729, 733-734, 42 St.Rep. 856, 861, quoting Aetna Life and Casualty Insurance Company v. Johnson (Mont. 1984), [207 Mont. 409,] 673 P.2d 1277, 1279, 41 St.Rep. 40, 42. At the trial court level, Aetna introduced into evidence the South Dakota district court judgment, findings of fact and conclusions of law, memorandum decision, and pleadings. These documents show that the second and third requirements of the collateral estoppel test are undoubtedly met. In the prior South Dakota adjudication, there was a final judgment on the merits of the fraud issue and the party in this action is identical to the party there. The only real question then is whether the remaining requirement of the test is met; i.e. whether the issue decided in the South Dakota action is identical to the issue here.

After evaluating and comparing the pleadings, evidence and circumstances of the South Dakota action and the case at bar, we make the following observations. Both cases arise from the sale of one ranch, which sale, although requiring the use of three mortgages and three notes, was conducted as one transaction. The misrepresentations which Shepherds complained of in South Dakota are exactly those misrepresentations which they complain of in the instant case. In this regard, we note that Shepherds’ answer (in which they raised the fraud defense) to the South Dakota complaint is an identical, word for word copy of their amended answer in the Montana action. We also note that the Montana trial court agreed that Shepherds raised essentially the same defenses in Montana as they had raised in South Dakota. The South Dakota judgment and Supreme Court decision rely on much of the same, crucial evidence that was admitted in the Montana action. The foreign court looked at the exact same evidence as the Montana court in determining whether Shepherds had actual or constructive notice of the fraudulent scheme. We conclude that the issue resolved in South Dakota, whether Shepherds’ actual and constructive notice of the fraudulent scheme defeated their fraud defense, is identical to the issue presented in the instant case. Therefore, we hold that the South Dakota judgment is entitled to full faith and credit in Montana and that judgment collaterally estops Shepherds from successfully raising their fraud defense.

Shepherds argue that giving the South Dakota judgment full faith and credit in Montana impermissibly invests the foreign court with in rem jurisdiction over Montana real property. This argument is without merit. Given in personam jurisdiction, a court may adjudicate the rights and equities of parties in reference to real property in a foreign jurisdiction. That is not an impermissible exercise of in rem jurisdiction. A court may not act directly upon the title to real property in a foreign jurisdiction. In Gammon v. Gammon (Mont. 1984), [210 Mont. 463,] 684 P.2d 1081, 41 St.Rep. 1161, Mr. Justice Weber made that distinction abundantly clear. In Gammon, this Court refused to enforce that part of an Oregon divorce decree which purported to directly transfer Montana property. The Court did enforce the Oregon decree insofar as it determined the equities of the parties in the Montana land. Here, conceding full faith and credit to the South Dakota judgment would honor the foreign court’s determination of the rights and equities between the parties but would not impermissibly allow the foreign court to act directly upon the title to Montana real property.

An alternative ground for our holding in this case arises from our resolution of the second issue addressed here. This issue requires a two part inquiry: (1) Did Shepherds have imputed notice of the fraudulent scheme? and (2) If so, does such notice defeat their claim of fraud? The lower court answered both of these questions in the negative, ruling that Shepherds did not have notice imputed to them through Ranch Mart, and even if Shepherds had such notice, that would not “serve as a shield for unfair dealing by” Aetna.

This Court will not disturb findings of fact and conclusions of law that are based on substantial, credible evidence.

“[We] will view the evidence in the light most favorable to the prevailing party and will not overturn the findings and conclusions based on such evidence unless there is a clear preponderance of evidence against them.”

Napier v. Adkison (Mont. 1984), [209 Mont. 163,] 678 P.2d 1143, 1144, 41 St.Rep. 619A, citing Cameron v. Cameron (1978), 179 Mont. 219, 228, 587 P.2d 939, 945.

Ranch Mart, the realty agency, was indisputably the agent of Shepherds. The evidence introduced at trial showed that Ranch Mart had notice, before the consummation of the sale, of the size of the Aetna loan and resulting first mortgage. Wallace Mading, the owner of Ranch Mart, testified by deposition. Mading produced a letter received by Ranch Mart which stated that the Aetna loan had been approved for $1,550,000. The letter was dated June 7, 1979, and Mading agreed that Ranch Mart had received the letter before the closing of the ranch sale on July 6, 1979. Although Mading denied that he knew the contents of the letter prior to the closing, he testified that:

“I am sure that I was aware that Aetna Life Insurance Company was going to be in a million and a half dollar mortgage position, but I did not know what all on .... I knew that this property was certainly a part of it.
“Q. You did know then that they were going to have a mortgage in excess of a million and a half dollars, and that their mortgage would be superior to the second mortgage of the Shepherds?
“A. Yes, I am sure that I would have, I would have been aware of it just the way you said it.”

Thus, Ranch Mart had notice of the size of the Aetna loan and resulting first mortgage. This notice is imputed to Shepherds under Section 28-10-604, MCA, which provides:

“As against a principal, both principal and agent are deemed to have notice of whatever either has notice of and ought, in good faith and the exercise of ordinary care and diligence, to communicate to the other.”

Mading, knowing that Aetna’s first mortgage on the land should have been $1,100,000, should have communicated to Shepherds the actual amount ($1,555,000) of Aetna’s first mortgage. Therefore, we hold that Shepherds had imputed notice of the actual amount of the first mortgage prior to their closing the sale.

Contrary to the lower court’s ruling, the imputed knowledge of Shepherds defeats their claim of fraud. The rule in Montana is that,

“When it appears that a party, who claims to have been deceived to his prejudice, has investigated for himself or that the means were at hand to ascertain the truth ... of any representations made to him, his reliance upon such representations made to him, however false they may have been, affords no ground of complaint. (Citations omitted.) (Emphasis in original.)

Turley v. Turley (1982), 199 Mont. 265, 649 P.2d 434, 439, 39 St.Rep. 1336, 1343; citing, among others, Van Ettinger v. Pappin (1978), 180 Mont. 1, 588 P.2d 988, 994. The means were at hand for Shepherds to ascertain the truth of the false representations and they cannot, as a matter of law, rely on those representations in claiming fraud. Shepherds’ fraud defense is therefore defeated, as the hearer’s reliance on the representation and the hearer’s right to rely on the representation are critical elements of a prima facie showing of fraud. Turley, 649 P.2d at 438.

We hold that the lower court erred in ruling that Aetna defrauded Shepherds. We do not consider the issues of whether Western Farm, the loan broker, was the agent of Aetna or whether the fraudulent acts of Western Farm are imputable to Aetna. We reverse the District Court and remand this cause for the entry of an unqualified judgment in Aetna’s favor.

MR. CHIEF JUSTICE TURNAGE and MR. JUSTICES HARRISON and WEBER concur.

MR. JUSTICE SHEEHY,

dissenting:

I dissent.

The majority opinion proceeds on two premises: that the Shepherds’ fraud claim against Aetna is precluded by collateral estoppel by reason of the South Dakota decision; and alternatively, that Shepherds’ agent had actual notice of the fraudulent scheme and therefore Shepherds had imputed notice of the scheme.

We should not extend full faith and credit to the South Dakota decision in this case for two reasons: 1) South Dakota’s opinion as to the operation of a release is against the public policy of this state; and 2) it is not clear from the South Dakota decision that the precise issue of fraud raised by the Shepherds was considered by the South Dakota court.

South Dakota denied the Shepherds’ claim of fraud against Aetna on two grounds, that their agent had notice of the fraudulent act, and that the release given by the Shepherds to McElvains operated to relieve Aetna of any fraudulent claim from the Shepherds. As to the second ground, at least equal weight was given by South Dakota to its determination that the release and satisfaction by the Shepherds operated to merge Shepherds’ mortgage lien in the title and thereby precluded any claim of the Shepherds against Aetna on the grounds of fraud.

However, the release given by the Shepherds to the McElvains in return for a quitclaim deed on the South Dakota land expressly released only the McElvains and expressly provided that “[n]o other persons, firms, or entities other than those expressly mentioned above are in any way released by this document.”

It has been the law in this state since Black v. Martin (1930), 88 Mont. 256, 292 P. 577, that a plaintiff may release a joint tortfeasor and still preserve a cause of action against another joint tortfeasor if there is language to that effect in the written release. See also McCloskey v. Porter (1973), 161 Mont. 307, 506 P.2d 845.

When the law enunciated by a court of a sister state is against the public policy of the forum state, the decision of the court of the sister state is not entitled to full faith and credit. In In Re Anderson’s Estate (1948), 121 Mont. 515, 524, 194 P.2d 621, 626, we stated:

“Unless the public policy of the state would prevent the recognition of the decree or such recognition would be injurious to the best interests of the state we must recognize the force and effect of the decrees of our sister states . . .” (Emphasis added.)

Further, contrary to what is said in the majority opinion, it cannot be determined from the South Dakota opinion what was Shepherds’ precise claim of fraud against Aetna. There is no mention in the South Dakota opinion that Aetna’s agent, McElvain, forged a buy-sell agreement to show a sales price of $2,185,000 instead of the true agreement of $1,385,000. Knowledge of the true nature of McElvain’s fraud is necessary to determine whether the knowledge acquired by Ranch Mart and imputed to the Shepherds by both the South Dakota Court and this Court constitutes notice that fraud was afoot. Both South Dakota and this Court decide that point against the Shepherds by a selective reading of the testimony of Mading, the Ranch Mart agent. The full pertinent testimony of Mading follows:

“A. I wasn’t that aware of the amounts, Mr. Huntley. If McElvain was borrowing a million five hundred thousand dollars, it wasn’t readily obvious to me as to what he was going to do with it. He was in the process of improving the land, and also had properties of his own, and I did not know how that tied in with a million five hundred thousand dollars.
“Q. I am sure that is the case, but is it your testimony that you did not know that Aetna Life Insurance Company was going to be in a first mortgage position on this property with a mortgage in excess of a million and a half dollars? A. State your question one more time.
“Q. Okay. Maybe it would be just as handy if I read it back. I think . . . (Last question repeated by reporter.) A. That is not my testimony. I am sure that I was aware that Aetna Life Insurance Company was going to be in a million and a half dollar mortgage position, but I did not know what all on [sic] is what I am telling you.
“Q. Okay. A. (Continuing.) I knew that this property was certainly a part of it.
“Q. You did know then that they were going to have a mortgage in excess of a million and a half dollars, and that their mortgage would be superior to the second mortgage of the Shepherds? A. Yes, I am sure that I would have, I would have been aware of it just the way you said it.
“Q. And when were you aware of that? A. I don’t know that I was blatantly aware of it at any time, Mr. Huntley. It wasn’t a glaring thing in that the McElvains, we knew were in a position of improving the property, and, you know, we did not know even to what extent they had improved it by the time that we closed the agreement. We also knew that the money to be advanced on it was evidently being advanced in different stages, or at least we had been told that.
“Q. Well, did you ever tell the Shepherds, or either one of them, that the Aetna position was going to be first mortgage of in excess of a million and a half dollars? A. No, sir.
“Q. Would you explain why you did not tell them that? A. It was not our business to tell them that, in that we did not know what all the funds were being used for.” (Emphasis added.)

The full testimony of Mading puts a quite different light on his knowledge of the amount of the mortgage, and the reasons why he did not convey the information to the Shepherds.

While I accede that the recorded documents constituted constructive notice to the Shepherds of the contents of the mortgages, yet the circumstances of the recording in this case led to the ability of McElvain to deceive the Shepherds. The mortgages were recorded in three different states, in three different amounts in such manner that if the Shepherds went to the three different courthouses, they could determine the total amount but not otherwise. The Fallon County mortgage was for $664,000; the Harding County, South Dakota mortgage was for $751,000 and the Bowman County, North Dakota mortgage was for $140,000. This circumstance of separate recording of the instruments has made it possible for Aetna’s agent, McElvain, to hide the true total amount of the mortgages against the Shepherds’ property.

Under these circumstances, I would agree with the District Court and hold that the Shepherds lien was entitled to preference ahead of Aetna on the Montana property and affirm the District Court.

MR. JUSTICE HUNT and MR. JUSTICE MORRISON join in the dissent of MR. JUSTICE SHEEHY.


author: MR. JUSTICE WEBER

text:
    LEE McDONALD, Plaintiff/Cross-Defendant and Appellant, v. UNIREX, INC., Defendant/Cross-Claimant and Respondent, and Exeter Exploration Co., McAlester Fuel Company and Western Crude Oil, Inc., Defendants.
    No. 85-119.
    Submitted on Briefs Dec. 3, 1985.
    Decided Feb. 20, 1986.
    721 P.2d 302.
    Lee McDonald, pro se.
    Crowley Law Firm, Norman Hanson, Billings, for defendant/cross-claimant and respondent.
   MR. JUSTICE WEBER

delivered the Opinion of the Court.

Mr. McDonald appeals from a partial final judgment entered against him by the District Court for the Fourteenth Judicial District, Musselshell County. In reviewing the record, we conclude that we must dismiss this appeal because it has not been certified under Rule 54(b), M.R.Civ.P.

The defendants hold an interest in mineral rights in Musselshell County. They failed to pay a county tax for the year 1975 on their “mineral reservation right of entry.” The law allowing that tax, Section 15-6-102, MCA (1978), has since been modified so that the “right of entry” is now exempt from taxation under Section 15-6-201, MCA. Mr. McDonald obtained a tax deed to defendants’ “right of entry,” and then brought this quiet title action against defendants. One of his contentions was that “right of entry” gave him an interest in the underlying mineral rights. Defendant Unirex moved for partial summary judgment on that issue. The parties submitted briefs, and a hearing was conducted. The District Court then issued a partial final judgment in which it held that a tax deed to a “mineral reservation right of entry” does not include or imply an interest in the underlying mineral rights. Mr. McDonald appeals.

We do not reach this issue on appeal. An adjudication of less than all of the claims in an action involving multiple claims lacks finality, and the right of an appeal from such a judgment is governed by Rule 54(b), M.R.Civ.P. Roy v. Neibauer (1980), 188 Mont. 81, 83, 610 P.2d 1185, 1187. The order which we are asked to review disposes of only one issue in a multi-claim action. Rule 54(b) applies.

We have stated that:

“[r]ule 54(b) requires that before a certification can be made the trial court must find that there be ‘no just reason for delay.’ A proper exercise of discretion under this rule requires the trial court to do more than merely recite the magic words that there is ‘no just reason for delay.’ The trial court must clearly articulate the reasons and factors underlying its decision to order a Rule 54(b) certification.”

Neibauer, 610 P.2d at 1189. We dismissed the appeal in Neibauer because no attempt was made to comply with the certification requirements of Rule 54(b). In that case, as an aid to practitioners, we set out the factors which we will consider in reviewing a Rule 54(b) certification. Neibauer, 610 P.2d at 1189. Since that time, we have refused to consider several appeals in which the certification requirements were partially, but not adequately, met. See Reidy v. Anaconda-Deer Lodge County (1981), 196 Mont. 127, 637 P.2d 1196; Taylor Rental Corporation v. Ted Godwin Leasing, Inc. (1982), 199 Mont. 280, 648 P.2d 1168. Montana practitioners are held on notice that the Rule 54(b) certification requirement is not viewed by this Court as a mere formality, but as a necessary and valuable tool for preventing piecemeal litigation and waste of the resources of both litigants and the courts.

The partial final judgment of the District Court in this case contains the language “[t]here is no just reason for delay in entering this judgment as a Final Judgment.” Other than that, there is nothing in the record to indicate that Mr. McDonald sought or obtained certification of this matter for appeal. Because of Mr. McDonald’s failure to comply even minimally with the certification requirement, we dismiss this appeal, without prejudice.

MR. JUSTICES HARRISON, MORRISON, SHEEHY and GULBRANDSON concur.