author: MR. JUSTICE MORRISON MR. JUSTICE HARRISON,

text:
    In the MATTER OF THE ADOPTION OF S.T.V.
    No. 86-524.
    Submitted on Briefs Feb. 5, 1987.
    Decided March 4, 1987.
    733 P.2d 841.
    Larrivee Law Offices, Noel K. Larrivee, Missoula, for appellant.
    Terry Wallace, Missoula, for respondent.
   MR. JUSTICE MORRISON

delivered the Opinion of the Court.

The District Court of the Fourth Judicial District denied T.R.P.’s petition to adopt the natural child of his wife. T.R.P. appeals.

S.T.V. is the natural daughter of N.V. (father) and E.P. (mother). They were divorced in 1975 when S.T.V. was approximately 18 months old. The mother was granted custody, with reasonable rights of visitation awarded to the father. The father was ordered to pay $50 a month child support. No monetary child support has ever been paid. The father owed over $6,000 in child support at the time of the hearing.

The mother subsequently married appellant, T.R.P. Appellant wishes to adopt S.T.V. in order to ensure the child’s future financial security. Specifically, appellant and the mother each testified that the petition to adopt was motivated by their desire to guarantee that if “something happened to [appellant],” the mother would receive social security benefits on behalf of S.T.V., and if the mother died, appellant would be able to raise S.T.V.

In addition, both the mother and appellant testified that S.T.V.’s relationship with the natural father was very good, “cordial, warm, affectionate.” The mother also related that she had no intention of altering the natural father’s visitation rights should the petition to adopt be granted.

S.T.V., who was fourteen at the time, testified pursuant to Section 40-8-113, MCA, that she consented to the adoption.

At the close of the hearing on September 8, 1986, the trial judge issued his ruling from the bench:

“. . . My view of this case is that there’s a two-step approach that must be made. First step is to determine whether or not, in this case, the father was able but did not pay child support. I find that he was able and that he did not pay child support during the one year preceding the filing of the petition.
“The second step is for the Court to determine what’s in the best interest of the child. Therein lies the most troubling aspect of this case. There’s been no showing by the Petitioner . . . that the visitation with the father is harmful to [S.T.V.]. In fact, the mother wants this visitation to continue. Unfortunately, the law does not provide for continued visitation in the event that the petition for adoption is granted . . . .”

Tr. p. 101, In. 17-25; p. 102, In. 1-5.

The trial judge thereafter discussed the reasons why the petition to adopt was filed. He concluded that potential social security benefits are not sufficient reason for depriving a parent of parental rights. Further, concerns regarding the care of S.T.V. in the event of her mother’s death are remedied by Section 40-4-221, MCA, which provides that appellant could petition for custody at that time. The judge then concluded that the petition to adopt was not in S.T.V.’s best interests.

T.R.P. filed a notice of appeal ten days later, September 18, 1986. That same day, the trial judge filed his written findings of fact, conclusions of law and order denying the petition to adopt. The trial judge expounded on his reasons for denying the petition:

“Because of the ongoing beneficial, loving, strong relationship between [S.T.V.] and her natural father, her best interests are served by continuing the parent-child relationship between them.” Conclusion of law No. 5.

The timing of the notice of appeal vis-a-vis the written order raises a question as to whether the trial judge had jurisdiction to enter his order. “Except for ancillary matters, once a notice of appeal is filed with this Court,the trial court loses jurisdiction.” Churchhill v. Holly Sugar Corporation (Mont. 1981), 629 P.2d 758, 760, 38 St.Rep. 860, 862, citing Northern Plains Resource Council v. Board of Health and Environmental Sciences (1979), 184 Mont. 466, 603 P.2d 684. In Churchhill, supra, this Court held that the lower court lacked jurisdiction to file supplementary findings of fact and conclusions of law seven days after a notice of appeal was filed as “[i]t is unfair to the appealing party to permit the trial court to clean up the evidentiary and legal record after the notice of appeal has been filed.” 629 P.2d at 760, 38 St.Rep. at 863. However, in this instance the documents were filed on the same day. There was no time for the trial judge to “clean up the evidentiary and legal record.” In fact, the written order reflected the oral order almost exactly.

No time of filing is indicated, but the judge’s findings, conclusions and order are placed ahead of the notice of appeal in the District Court file. We engage the presumption that things which are to be done are done, Section 1-3-220, MCA, and proceed under the assumption that the trial judge’s order was entered prior to the filing of the notice of appeal.

We must next consider whether the trial judge abused his discretion in considering the best interests of S.T.V. after determining that her natural father’s consent for the adoption was not required. We find no abuse of discretion.

Appellant’s assertion that an adoption petition should be granted immediately upon determination that the natural father’s consent is not required has no basis in law. It focuses solely upon the father’s failure to provide financial support and disregards completely the needs of the child. The child’s best interest is one of the most important factors to be considered in determining whether a petition to adopt should be granted. Section 40-8-124(6), MCA. Once the statutory requirements for consent to an adoption are met (Section 40-8-111, MCA), the best interests of the child becomes the paramount consideration. In the Matter of the Adoption of Smigaj (1977), 171 Mont. 537, 560 P.2d 141.

The trial judge acted properly in considering the best interests of S.T.V. His determination that S.T.V.’s interests would be best served by continuing regular contact with her natural father is completely supported by the evidence.

Affirmed.

MR. CHIEF JUSTICE TURNAGE and MR. JUSTICES WEBER, GULBRANDSON and HUNT concur.

MR. JUSTICE HARRISON,

dissenting:

There is an old saying in the law that bad facts make bad law. In my opinion, in this case, good facts have made bad law. We have here a young lady over the age of ten, who has given her personal consent to be adopted by her step-father, and would benefit from his estate. He has given her love and affection far in excess of that she has received from her natural father, yet is denied the final step of having her step-father be declared her father. To me, this is a clear abuse of discretion on the part of the District Court, in view of the good facts of the case.

Following a divorce from the natural father, S.T.V.’s mother remarried when S.T.V. was approximately eighteen months old. The mother was awarded custody, with reasonable visitation rights granted to the natural father. S.T.V.’s natural father was ordered to pay $50 per month child support commencing in 1975. No monetary support has ever been paid. At the time of the petition to adopt, the father owed over $6,000 in child support. The mother, in spite of never receiving any support monies from the father, has allowed the relationship with the child and the natural father to develop into one which is “cordial, warm, [and] affectionate.” The mother testified she had no intention of altering that relationship, or the natural father’s visitation rights, if the petition to adopt was granted. Because she is far more tolerant than most ex-wifes, both she and S.T.V., in my opinion, are being penalized by the decision of the District Court in not allowing the adoption.

The District Court Judge in discussing the reasons why the petition should be denied, concluded that the potential social security benefits of the adoptive father are not sufficient reason for depriving the natural father of his parental rights. In addition, the mother testified she wanted her present husband to care for S.T.V. in the event of her death. In the District Court’s opinion, should this occur, the remedy is found in Section 40-4-221, MCA, which allows the appellant to petition for custody at that time. The District Court Judge concluded, that the petition was not in S.T.V.’s best interest.

In my opinion, if ever a case cried out for a reversal, this case does. First, the child has consented, Section 40-8-113, MCA. Second, the very fact that the natural father has not, for over ten years, although able to do so, paid one dime of support money to the child, deprives him of any legal right to protest the adoption. Section 40-8-lll(a)(v), MCA. Third, S.T.V. should have a right to inherit from her adoptive father, the evidence clearly showing that she would inherit nothing from her natural father. Finally, it would be in her best interest, should there be an emergency in which the mother could not make a decision and the natural father not available, that her step-father should have the legal authority of her father to step in and make a decision as her father. These facts are not sufficient to support a finding it would be in the child’s best interest not to be adopted by appellant.

In my opinion, S.T.V.’s best interests are served by the “natural mother’s desire to obtain the petitioner’s social security benefits in the event of his decline in health.” This is a sufficient cause to terminate the respondent’s parental rights with the daughter, particularly in view of the fact there is absolutely no indication that the natural father has any desire to give the child anything but his “affection.” The natural father appears to be that kind of parent who “seeks the benefits of parental rights but shuns the burden of parental obligations.” We have held that the statute cannot be interpreted in favor of a parent who has done what the father has done in this case. Matter of S.L.R. (1982), 196 Mont. 411, 640 P.2d 886.

I would remand this case to the District Court to grant the petition for adoption.

MR. JUSTICE SHEEHY joins in the foregoing dissent of MR. JUSTICE HARRISON.


source: Caselaw Access Project

author: MR. JUSTICE HUNT

license: Public Domain

text:
    In the Matter of the ESTATE OF JAMES J. WINTER.
    No. 86-332.
    Submitted on Briefs Dec. 31, 1986.
    Decided March 5, 1987.
    734 P.2d 178.

      Mike Greely, Atty. Gen., Helena, Clay R. Smith, Asst. Atty. Gen., Helena, for appellant.
    William M. Kebe, Jr., Butte, for respondent.
   MR. JUSTICE HUNT

delivered the Opinion of the Court.

The Montana Department of Revenue (DOR) appeals the order of the District Court, Second Judicial District, County of Silver Bow, determining the amount of inheritance tax computed upon the estate of James Winter, deceased.

We reverse.

DOR raises two issues on appeal:

1. Whether DOR is barred from issuing an amended certificate of inheritance tax by Section 72-16-402, MCA, laches or estoppel?

2. Whether an inheritance tax is computed based upon the distribution scheme of the probated will or of the will-contest settlement agreements?

James Winter died on March 17, 1983, in Butte, Montana. The personal representative of the estate, Rita Harrington, filed a petition for formal probate of the decedent’s will in the District Court on March 24, 1983. The will, dated February 1, 1983 bequeathed $1,000 to each of the decedent’s four living grandchildren and the remainder of the estate to Mrs. Harrington, decedent’s niece. Objections to the formal probate of the February, 1983 will were filed by Michael Hirschberg, one of the decedent’s grandchildren, and Marie Richardson, a non-relative of the decedent. Mr. Hirschberg and Mrs. Richardson had jointly initiated a probate proceeding in Utah on March 21, 1983, based on a will of the decedent dated March 4, 1978. The 1978 will appointed Mrs. Richardson as personal representative, bequeathed $5,000 to Mrs. Harrington and Mrs. Richardson’s husband, and the remainder of the estate to the decedent’s grandchildren.

On April 15, 1983, the District Court entered an order admitting the 1983 will to probate, finding that this will had not been revoked and was in all respects valid. On that same date, Mrs. Harrington and Mr. Hirschberg executed an agreement whereby Mr. Hirschberg consented to the probate of the 1983 will and Mrs. Harrington agreed to assign and transfer to him one half of her net distributive share due under the 1983 will. A second agreement was entered into between Mrs. Harrington and Mrs. Richardson, whereby Mrs. Richardson was recognized as a joint tenant in three savings accounts of the decedent and whereby she also withdrew her Utah petition for the probate of the 1978 will.

In November, 1983, Mrs. Harrington submitted an application to DOR for a determination of inheritance tax due. The application distributed the shares of the estate according to the terms of the 1983 will and the settlement agreements. A copy of the 1983 will was received by DOR on December 6, 1983. On December 8, a DOR tax examiner called the attorney for the estate and inquired about the difference between the distribution set forth in the will and the distribution set forth in the application. The attorney explained that the application’s distribution scheme was based in part on the settlement agreements, and he thereafter mailed a copy of the Estate of Winter agreements to DOR.

The District Court issued a decree of distribution and an order approving final account of the estate on April 16, 1984. On April 19, the DOR issued a certificate of inheritance tax due based' on the following calculations:

Distributee Distributive Share_ Exemption Net Taxable Share_ Amount of Tax
R. Harrington $50,214.32 $1,000.00 $49,214.32 $2,937.15
M. Hirschberg. 50,214.32 7.000.00 43,214.32 1,278.57
J. Hirschberg 1,000.00 7.000.00
P. Hirschberg 1,000.00 7.000.00
S. Hitchman 1,000.00 7.000.00
M. Richardson 27,080.00 27,080.00 2,332.80
$6,498.52
[sic (exemption amounts)]

On April 20, the estate’s attorney telephoned the DOR tax examiner and objected to the inclusion of the entire amount of Mrs. Richardson’s joint savings account as taxable, adding that the estate would not pay the additional amount of tax. The tax examiner notified her supervisor of this conversation, and the supervisor thoroughly reviewed the files for the estate. This review of the files led the supervisor to believe that the distributive scheme of the will, rather than the distributive scheme of the settlement agreements, should control the incidence of inheritance tax liability. A revised findings for the amount of inheritance tax due was completed, and an amended inheritance tax certificate was issued May 18, 1984. The amended certificate apportioned tax liability as follows:

Distributee Distributive Share_ Exemption Net Taxable Share Amount of Tax
S. Hitchman $ 1,000.00 $1,000.00
M. Hirschberg 1,000.00 1,000.00
J. Hirschberg 1,000.00 1,000.00
P. Hirschberg 1,000.00 1,000.00
M. Richardson 24,380.56 24,380.56 1,950.44
R. Harrington 102,128.08 690.00 $101,438.08 9,230.09
$11,180.53

The estate appealed the amended certificate to the District Court. The court held that DOR was in violation of Section 72-16-402, MCA, which states DOR “shall with reasonable diligence” ascertain the amount of inheritance tax due. By failing to act with reasonable diligence, DOR was estopped from amending its certificate of inheritance tax liability. The court also held that the inheritance tax should be based upon the distributive share actually received, rather than on the share set forth in the 1983 will.

The District Court found DOR’s issuance of the amended tax certificate was barred by laches. The court reasoned that since DOR had in its possession a copy of the settlement agreement since December 9, 1983, its decision to amend the amount of the tax due was not reasonably diligent.

Laches is negligence in the assertion of a right; “it exists when there has been unexplained delay of such duration or character as to render the enforcement of the asserted right inequitable.” Montgomery v. First National Bank of Dillon (1943), 114 Mont. 395, 408-09, 136 P.2d 760, 766, (quoting Riley v. Blacker (1915), 51 Mont. 364, 370, 152 P. 758, 759). We hold that the doctrine of laches is not applicable to the case at bar.

A review of the record discloses an ongoing conflict with the correct determination of inheritance tax. Mrs. Harrington first submitted an application for determination of inheritance tax to DOR in November, 1983. In December, 1983, upon seeing the discrepancy in the distribution under this application and the decedent’s will, DOR requested a copy of the settlement agreement upon which the application’s distribution was based, as well as proof of any contribution made by Mrs. Richardson to the joint savings accounts.

Mrs. Harrington sent DOR an amended application in March, 1984. This amended application revised certain deductions relating to the administration of the estate, but did not revise the distributive shares. At the same time, a deposit of $3,634.20 was made to the county treasurer, who issued a receipt which left blank the final amount of taxes due. On April 16, 1984, the District Court issued a decree approving final account of the estate and finding that all the inheritance tax due had been paid. On April 19, 1984, DOR issued its inheritance tax certificate determining that $6,498.52 was owed, with a balance due of $2,673.05. Upon receipt of the certificate, the attorney for the estate telephoned DOR and stated that the estate would not pay the additional amount of tax due. This telephone call prompted DOR to review and revise its files concerning the estate, and one month later DOR issued its amended inheritance tax certificate.

We do not think that the passage of 30 days between the issuance of the first tax certificate and the amended tax certificate constitutes a lack of reasonable diligence. Upon notification by the attorney for the estate that the estate would challenge DOR’s determination, DOR promptly began a review of its files. This review led to the discovery of an error in calculation of the tax due, and an amended certificate was promptly issued. However, we would caution both parties on remand and in the future to calculate their figures more carefully.

The second issue raised by DOR is whether an inheritance tax is computed according to a probated will or a will-contest settlement agreement. We note that there are two prevailing views in this country. The majority view is that an inheritance tax is based on the manner of distribution provided for in the will, while the minority view holds that the tax is based upon the settlement agreement subsequently entered into among the beneficiaries. See generally, Kidder, State Inheritance Tax and Taxability of Trusts 27-31 (1934); See also, Annot., 36 A.L.R.2d 917, 921-932 (1954). The policy behind the majority view is that taxation based upon the probated will prevents the beneficiaries from conspiring against the state to deprive it of tax monies to which it is entitled by law. The minority view holds that it is more equitable to tax property based upon its actual distribution.

We adopt the majority view. In Montana, an inheritance tax is a tax upon the right to receive property, rather than a tax upon the property itself. In Re Kohr’s Estate (1948), 122 Mont. 145, 151, 199 P.2d 856, 859. The inheritance tax accrues at the same time the interests of the beneficiaries vest, the interests having vested upon the death of the decedent. Id. at 152-57, 199 P.2d at 860-862. All questions concerning tax must therefore be determined as of the date of the decedent’s death. Burr v. Dept. of Revenue (1978), 175 Mont. 473, 475, 575 P.2d 45, 47. The right of the State to an inheritance tax vests immediately upon the decedent’s death. Id. This right cannot be annulled or abridged by any subsequent agreement between the beneficiaries of the estate. Compromise agreements may be entered into by the beneficiaries but such a compromise does not impair the rights of the taxing authorities who are not parties to the agreement. Sections 72-3-131(2) and 72-3-915(1), MCA.

The District Court, in its opinion incorrectly adopting the minority view, relied on In Re Thorson’s Estate (1921), 150 Minn. 464, 185 N.W. 508, 509, where the Minnesota Supreme Court held:

“The legatee who yields up a portion of his legacy in consideration of the settlement and to avoid litigation must be deemed as renouncing his legacy to the extent shown by the settlement, leaving the amount thereof a part of the estate, and those who receive it, whether by formal decree of the court [or] by settlement standing alone, should pay the tax thereon.”

However, the District Court’s analogy of renunciation to settlement agreements is misplaced. The procedure for renunciation in Montana is clearly set forth in Section 72-2-101, MCA, and it provides that the person renouncing his or her interest may not direct to whom the interest will devolve. Renunciation of succession is distinct and separate from will-contest settlement agreements. Renunciation is not controlling in this case since the parties did not follow the procedure set forth under Section 72-2-101, MCA.

The majority view that inheritance tax follows the will rather than the actual distribution of property favors the State as the taxing entity in this case. However, today’s ruling is a double-edged sword which cuts two ways. In the event that a probated will distributes property to individuals or organizations exempt from taxation, a subsequent agreement which distributes property to individuals or organizations subject to taxation will work to the State’s detriment. In order to quell future disagreement on this point, we find it beneficial to adopt the uniform policy that inheritance tax be computed on the basis of the probated will.

The order of the District Court is reversed, and the case is remanded for a final account of inheritance tax due consistent with this opinion.

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

MR. JUSTICE SHEEHY did not participate in this decision.


author: MR. JUSTICE WEBER

text:
    DRUG FAIR NORTHWEST, Plaintiff and Appellant, v. HOOPER ENTERPRISES, INC., a Montana corporation, Collier, Heinz & Associates, and Gateway West Shopping Center Associates, Defendants and Respondents.
    No. 86-445.
    Submitted on Briefs Dec. 11, 1986.
    Decided March 6, 1987.
    733 P.2d 1285.

      Murray, Kaufman, Vidal & Gordon, Daniel W. Hileman, Kalispell, for plaintiff and appellant.
    Church, Harris, Johnson & Williams, Don A. LaBar, Great Falls, Murphy, Robinson, Heckathorn & Phillips, Debra D. Parker, Kalispell, for defendants and respondents.
   MR. JUSTICE WEBER

delivered the Opinion of the Court.

The District Court of the Eleventh Judicial District, Flathead County, concluded that a letter between the parties was not an enforceable lease agreement upon which Drug Fair Northwest (Drug Fair) could bring a contract action. Summary judgment was granted to the defendants. Drug Fair appealed. We affirm.

The issue is whether the District Court erred in granting summary judgment.

In February 1973 Gateway West Shopping Center (then known as Sky River Enterprises and herein called Gateway West) negotiated with tenants for rental spaces in a Kalispell shopping center then being constructed. Drug Fair negotiated with Gateway West for two areas, a large lease for its drug store and a smaller lease for a tires, batteries, and accessories (TBA) store. In mid-February a leasing agent for Gateway West wrote a two paragraph letter to Drug Fair which Drug Fair contends is a lease agreement.

Gateway West and Drug Fair executed a written lease agreement of considerable length for the drug store. It contained various provisions appropriate to a shopping center lease. This lease provided for a 20 year term with two 5 year options for renewal at specified rents. For reasons which do not appear in the record, no similar written lease was executed between the parties covering the TBA area. Commencing in 1973 Drug Fair did occupy the TBA area, and paid rent on a monthly basis which was accepted by Gateway West for a period of approximately 10 years. In 1979 Drug Fair leased the TBA area to Hooper Enterprises, Inc. (Hooper Enterprises). In 1983 the managers of Gateway West notified Drug Fair by letter that it did not have a lease on the TBA area and that a month-to-month lease was in effect. The letter also gave Drug Fair a 30-day notice to vacate the TBA premises. A second notice of termination was sent to Drug Fair in February 1984. Thereafter, Gateway West leased the TBA area directly to Hooper Enterprises.

The District Court concluded that the February 1973 letter was not sufficient to constitute a binding and enforceable lease and that any tenancy by Drug Fair was terminated by the 1983 letter from the manager of Gateway West to Drug Fair. As a result, the District Court granted the summary judgment motions of the defendants and dismissed Drug Fair’s suit which was based upon a termination of the lease of the TBA area. Drug Fair appealed.

Did the District Court err in granting summary judgment?

A motion for summary judgment should be granted if there is no genuine issue of a material fact and the moving party is entitled to judgment as a matter of law. Rule 56(c), M.R.Civ.P. This Court has held that:

“In order to determine whether summary judgment was proper, we review the pleadings, affidavits, answers to interrogatories and admissions on file to establish whether any genuine issues of material fact are presented. If there is no genuine issue as to any material fact, then the moving party is entitled to summary judgment as a matter of law.” (Cite omitted.)

Westmont Tractor Company v. Continental I, Inc. (Mont. 1986), [222 Mont. 336,] 731 P.2d 327, 328, 43 St.Rep. 2380, 2381.

Drug Fair contends there were issues of material fact which were decided by the District Court so that the summary judgment was improper. In substance Drug Fair argues that the District Court erred when it entered findings of fact and conclusions of law based upon a summary judgment motion. Because summary judgment is appropriate only where there are no issues of material fact, normally the making of findings of fact would indicate improper procedure on the part of the District Court. In the making of its findings of fact in this case, the District Court pointed out that the facts appeared to be undisputed or admitted. In connection with those facts, Drug Fair argues that the facts alleged in its complaint must be accepted as correct. That is not correct. As pointed out in Mayer Brothers v. Daniel Richard Jewelers, Inc. (Mont. 1986), [223 Mont. 397,] 726 P.2d 815, 43 St.Rep. 1821, a party opposing a motion for summary judgment may not rest upon the mere allegations of pleadings, and has an affirmative duty to respond by affidavits or sworn testimony with specific facts that show there is a genuine issue of fact for trial. We have carefully reviewed the record and conclude that the District Court was correct and that there was not a genuine issue of material fact so that summary judgment was appropriate.

Drug Fair also argues that it had a written, oral, or implied lease agreement with Gateway West. In deposition testimony, the president of Drug Fair testified that the February 1973 letter was the entire basis for its lawsuit. The letter consisted of two paragraphs. The first paragraph pertains to the main drug store lease and is not pertinent. The second paragraph relating to the TBA store provided:

“It is also my understanding the TBA building lease will contain the following basic criteria: 31 ft. by 85 ft. in size, containing 2635 sq. ft. rental to be $.70 per sq. ft. when being used as a TBA and $.84 per sq. ft. when not being used for a TBA, an annual rent of $1844.50 or $153.71 per month. Lease to run for 10 yrs. with four 5 year options. This lease agreement to be drawn as a separate document and as soon as possible.”

The above paragraph set forth several handwritten notations or corrections initialed by the leasing agent for Gateway West and an officer for Drug Fair.

Drug Fair argues that it had a written, oral, or implied lease agreement with Gateway West and that there was a question of fact as to whether the parties intended that the letter be a lease with the result that summary judgment was not appropriate. In its findings of fact, the District Court found that there were a number of terms and conditions required for the TBA lease which were not mentioned in the 1973 letter. These included the commencement date of the lease, and the responsibility of the parties for taxes, insurance, repairs, maintenance and utilities. In addition, and critical to the issue before us, the court found that the 1973 letter did not contain the manner of exercising the four 5 year options described in the letter and the lease price to be paid for each of the 5 year option periods. We agree with the District Court that the essential terms of an option for renewal include not only the manner in which such options for renewal are to be granted, but of critical importance, the exact rental to be paid during each of such option periods. Clearly where there are option periods which total 20 years in length, it is essential that an agreement be reached as to the rent to be paid during each of those periods.

In Riis v. Day (1980), 188 Mont. 253, 613 P.2d 696, we held that as a general rule an agreement must contain all its essential terms in order to be binding. The Riis decision specifically addressed the importance of renewal provisions. In Riis, an action was brought for breach of a renewal provision in a lease. The three views regarding the validity of a renewal provision open to rent negotiation were stated and the “first minority rule” was adopted. This rule states that:

“. . . a renewal provision will be enforced if it expressly contemplates a clear and definite mode for determining future rent. Thus, if a definite mode for renewal rent is provided by the lease agreement or by operation of law, which can be determined at the time of renewal without negotiation, the court is not making a new contract for the parties but merely compelling the parties to do what they plainly contemplated in the beginning.”

Riis, 613 P.2d at 697-98. The Court adopted this standard because:

“[i]t recognizes the business utility of renewal provisions. Such provisions often do provide the inducement for entering the original lease. But, given fluctuating market conditions, the parties cannot fairly determine what would be an adequate rent in the future. At the same time, this standard also adheres to the wisdom of the old rule. It recognizes the danger of courts arbitrarily interpolating provisions into an arm’s length transaction to breathe life into an otherwise invalid agreement.”

Riis, 613 P.2d at 698.

We conclude that the February 1973 letter between Drug Fair and Gateway West was not sufficient to constitute a lease. The letter fails to set forth material and essential terms necessary for the enforcement of the renewal provisions of a lease. Other than the letter, no evidence of such essential terms was submitted by Drug Fair. We conclude that Drug Fair had only a month-to-month lease on the TBA area.

Accordingly, the summary judgment of the District Court is affirmed.

MR. CHIEF JUSTICE TURNAGE and MR. JUSTICES MORRISON, GULBRANDSON and HUNT concur.


text:
    STATE OF MONTANA, Plaintiff and Respondent, v. JERRY ELWIN TIBBITTS, Defendant and Appellant.
    No. 85-198
    Submitted on Briefs Jan. 8, 1987.
    Decided March 10, 1987.
    733 P.2d 1288.

      John Keith, Great Falls, for defendant and appellant.
    Mike Greely, Atty. Gen., Helena, Kimberly Kradolfer, Asst. Atty. Gen., Helena, Patrick L. Paul, Co. Atty., Great Falls, for plaintiff and respondent.
   MR. JUSTICE WEBER

delivered the Opinion of the Court.

Appellant Jerry Tibbitts was found guilty of deliberate homicide by bench trial in the District Court of the Eighth Judicial District, Cascade County. Mr. Tibbitts was then sentenced by the District Court to serve 100 years in the Montana State Prison. We affirm.

The issues are:

1. Did the District Court err when it found that Mr. Tibbitts acted knowingly in causing the death of the decedent?

2. Did the District Court abuse its discretion when sentencing Mr. Tibbitts?

In July 1984, Mr. Tibbitts and several other men worked for three or four hours at a supply store and then purchased some beer and drank it behind a Great Falls grocery store. The decedent joined their group and got in a discussion with Mr. Tibbitts over some beer and cigarettes. An argument ensued and Mr. Tibbitts picked up a bottle and hit the decedent twice with the bottle. Mr. Tibbitts then kicked the decedent and attempted to light his hair while he was stretched out on the ground. Two eye witnesses testified to this assault.

Three Great Falls police officers and an ambulance crew all arrived at the scene within seconds of each other and Mr. Tibbitts was read the Miranda warning. At least four law enforcement officers heard Mr. Tibbitts confess to the killing at the scene and at the hospital where he was taken for a blood-alcohol sample. One of the officers also testified that Mr. Tibbitts specifically stated that he knew what had happened and that he had hit the victim with a beer bottle.

Mr. Tibbitts testified during the bench trial that the decedent began grabbing beer and cigarettes from him and that he became “enraged” and began hitting and kicking the decedent. Mr. Tibbitts testified that he had been previously diagnosed as schizophrenic and that he had previously committed himself to mental institutions. Mr. Tibbitts also testified that he did not act in self defense.

The doctor who performed the autopsy testified that the decedent had bruises and lacerations, a broken nose, and a fractured sternum from a blow to the chest which almost separated the decedent’s breast bone into two pieces. The doctor stated that the cause of death was a laceration to the left atrium which caused bleeding into the pericardium sac surrounding the heart. This laceration was caused by a blunt force blow to the chest, such as the one which fractured the decedent’s sternum.

A staff psychiatrist at Warm Springs State Hospital who examined Mr. Tibbitts testified that the defendant suffered from paranoid schizophrenia but that he did understand what was happening around him and was capable of assisting in his defense. The psychiatrist also testified that Mr. Tibbitts could become psychotic at times but that in his opinion the defendant’s state of mind did fit within the “knowingly” definition of Section 45-2-101(33), MCA.

The District Court concluded as a matter of law:

“2. That the State did prove beyond a reasonable doubt and to a moral certainty that the defendant committed the crime of Deliberate Homicide, a Felony, under MCA section 45-5-201, by knowingly causing the injuries which caused the death of Kent Blackburn.
“3. That the evidence of the defendant’s mental disease or defect showed that he did have the particular state of mind, that being knowledge under MCA section 45-2-101(33), when the crime occurred.
“4. That the defendant’s mental condition, while not rising to a defense of the crime charged and proved, can be considered at sentencing under MCA section 46-14-311 and section 46-14-312.”

As a result of the initial sentencing order, a question was raised regarding the defendant’s ability to appreciate the criminality of his conduct and to conform his conduct to the requirements of the law at the time of the offense. This Court remanded the case to the District Court with instructions to determine for purposes of sentencing the mental status of Mr. Tibbitts under Sections 46-14-311 and - 312, MCA. The lower court then entered an order clarifying the sentencing order which stated:

“The Court now clarifies the Sentencing Order by stating that, pursuant to Section 46-14-311 MCA, the defendant, at the time of the commission of the offense of which he was convicted (Deliberate Homicide, a felony), was suffering from a mental disease or defect, namely paranoid schizophrenia, blit that said mental disease or defect did not render him unable to appreciate the criminality of his conduct or render him unable to conform his conduct to the requirements of law.”

The District Court sentenced Mr. Tibbitts to 100 years in the Montana State Prison.

I

Did the District Court err when it found that Mr. Tibbitts acted knowingly in causing the death of the decedent?

The standard of review is that set forth in Jackson v. Virginia (1979), 443 U.S. 307, 319, 99 S.Ct. 2781, 2789, 61 L.Ed.2d 560, 573:

“[W]hether, after viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt.” (Emphasis in original.)

This standard was adopted by Montana in State v. Rodriguez (Mont.1981), 628 P.2d 280, 283, 38 St.Rep. 578F, 5781. Using this standard, we consider Mr. Tibbitts’ specific contentions.

First, Mr. Tibbitts maintains that the evidence does not support the District Court’s determination that he acted knowingly in causing the death of the decedent. The deliberate homicide statute, Section 45-5-102, MCA, provides that Mr. Tibbitts must have acted knowingly or purposely to be convicted of deliberate homicide. The District Court found that Mr. Tibbitts had acted knowingly when he caused the death of the decedent. The “knowingly” definition found at Section 45-2-101(33) provides:

“[A] person acts knowingly with respect to conduct or to a circumstance described by a statute defining an offense when he is aware of his conduct or that the circumstance exists. A person acts knowingly with respect to the result of conduct described by a statute defining an offense when he is aware that it is highly probable that such result will be caused by his conduct. When knowledge of the existence of a particular fact is an element of an offense, such knowledge is established if a person is aware of a high probability of its existence. Equivalent terms such as “knowing” or “with knowledge” have the same meaning.”

Mr. Tibbitts argues that he was unable to form the requisite criminal state of mind because he suffered from the mental disease of paranoid schizophrenia and was in a psychotic state at the time of the offense. Finally, Mr. Tibbitts maintains that the District Court’s sentencing order was deficient. This last argument was specifically addressed by this Court when we remanded with instructions to the District Court to clarify its sentencing order. The District Court then wrote a clarification order. As a result, we find no basis for this argument.

The District Court concluded that Mr. Tibbitts met the knowingly requirement of Section 45-2-101(33), MCA, that he was able to appreciate the criminality of his conduct, and that his mental disease or defect did not negate this ability to appreciate the criminality of his conduct. The psychiatrist from Warm Springs State Hospital testified Mr. Tibbitts understood what was happening around him, was capable of assisting in his defense, and that in his opinion Mr. Tibbitts knew that it was highly probable that he would become involved in violent actions if he drank. Finally, the psychiatrist testified that in his opinion Mr. Tibbitts’ state of mind did fit within the “knowingly” definition of Section 45-2-101(33), MCA, when he committed the homicide. In addition, several law enforcement officers who were at the scene of the homicide right after it occurred testified that Mr. Tibbitts confessed to the crime. One officer specifically testified Mr. Tibbitts stated he knew what he had done. The District Court had all the evidence and testimony before it when making the determination that Mr. Tibbitts acted knowingly when he caused the decedent’s death. Using the Jackson test, we find that “any rational trier of fact could have found the essential elements of [deliberate homicide] beyond a reasonable doubt.” We therefore affirm the District Court on this issue.

II

Did the District Court abuse its discretion when sentencing Mr. Tibbitts?

Mr. Tibbitts argues that the District Court abused its discretion when imposing his sentence by failing to properly consider the mental disease or defect at the time of the offense. Relying on Section 46-14-312(2), MCA, and State v. Korell (Mont. 1984), [213 Mont. 316,] 690 P.2d 992, 41 St.Rep. 2141, the defendant maintains that he should be placed in Warm Springs State Hospital due to his mental defect. Although the District Court found that Mr. Tibbitts was suffering from a mental disease or defect at the time of the commission of the offense, it also found that the mental disease or defect “did not render him unable to appreciate the criminality of his conduct or render him unable to conform his conduct to the requirements of the law.” As this Court stated in State v. Doney (Mont. 1981), 636 P.2d 1377, 1385, 38 St.Rep. 1707, 1716:

“Before such commitment (to Warm Springs) will be ordered, defendant must prove to the satisfaction of the sentencing court that ‘at the time of the commission of the offense of which he was convicted he was suffering from a mental disease or defect which rendered him unable to appreciate the criminality of his conduct or to conform his conduct to the requirements of law.’ Sections 46-14-311 and 46-14-312, MCA. The sentencing judge is not limited to a consideration of evidence presented at the trial. A determination of the existence of mental disease or defect under these sections rests within the discretion of the sentencing judge.”

A defendant can be sentenced to imprisonment if the sentencing judge finds that the defendant was able to appreciate the criminality of his conduct or conform his conduct to the requirements of the law. See Korell, 690 P.2d at 996. Mr. Tibbitts argues that the District Court failed to consider his psychotic mental state at the time of the commission of the offense and thus his prison sentence should be vacated with instructions for him to be placed at Warm Springs.

We affirm the District Court’s conclusion that Mr. Tibbitts was able to appreciate the criminality of his conduct or conform his conduct to the requirements of the law at the time of the commission of the offense in accordance with Doney and Korell. A police officer testified that Mr. Tibbitts seemed to understand what was going on around him following the incident. Mr. Tibbitts also testified in a calm and understanding manner of the events leading up to the attack and the examining psychiatrist testified that he believed Mr. Tibbitts fit within the “knowingly” definition of Section 45-2-101(33), MCA, when he committed the homicide. Accordingly the requirements of Sections 46-14-311 and -312, MCA, have been met.

We affirm the District Court.

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


author: MR. JUSTICE HARRISON

text:
    VALORIE CLARK, Plaintiff and Appellant, v. TOM E. NORRIS, M.D., Defendant and Respondent.
    No. 86-30.
    Submitted Nov. 25, 1986.
    Decided March 10, 1987.
    Rehearing Denied April 14, 1987.
    734 P.2d 182.

      John W. Mahan argued, Helena, Overfelt Law Firm; Lee Overfelt argued, Billings, for plaintiff and appellant.
    Boone, Karlberg & Haddon; Randy Cox argued and Sam Haddon argued, Missoula, for defendant and respondent.
   MR. JUSTICE HARRISON

delivered the Opinion of the Court.

This case was tried to a jury in the First Judicial District in and for Lewis and Clark County, Montana. The defendant doctor was found not negligent and the plaintiff patient appeals. We affirm.

Appellant, Valorie Clark, charged defendant, Dr. Tom Norris, with medical negligence due to the perforation of her uterus during the course of a surgical procedure known as a dilation and curettage (D&C), which also resulted in damage to her small intestine. At the time of the incident, December 5, 1979, Clark was a twenty-eight year old mother of two. About six weeks after she was diagnosed as pregnant, the doctor determined the fetus was no longer alive and D & C was necessary to remove the deteriorating tissue from the uterus. This procedure is considered minor and patients are handled as outpatients. As with any surgical procedure, however, there are certain inherent risks. Perforation of the uterus is a risk of this particular procedure. The risks associated with not doing a D&C are continued bleeding, infection, and severe psychological problems.

During the procedure in this case, Norris observed a loop of bowel in the curette and immediately discontinued the curettage. He realized the uterine wall had been perforated and immediately called Dr. Johnson, a general surgeon. The two doctors performed an exploratory laparotomy to examine the small intestine and to repair any areas of damage. While the abdomen was open all remaining degenerated fetal material was removed, and the opening in the uterine wall was repaired. Clark’s recovery was routine. Resection of a portion of the small bowel causes her to have chronic diarrhea which is controlled by medication.

Appellant claims she did not receive a fair trial because of numerous errors made by the District Court. She argues the court should have given her res ipsa loquitur instructions, should have admitted certain evidence, should have taken judicial notice of a so called “conspiracy of silence” among doctors, should not have allowed the defendant, when called as an adverse witness, to be treated as an expert witness, and should not have commented on evidence crucial to one of her theories of liability.

When a jury verdict is appealed to this Court our function is to determine whether there is substantial credible evidence to support the verdict. Holenstein v. Andrews (1975), 166 Mont. 60, 64, 530 P.2d 476, 478. We have repeatedly noted:

“The standard of review is substantial evidence. If substantial evidence supports the case of the prevailing party the verdict will stand. The evidence will be viewed in a light most favorable to the party that prevailed at trial and, if the evidence conflicts, the credibility and weight given to the evidence is the province of the jury and not this Court.”

Mountain West Farm Bureau Mutual Ins. v. Girton (Mont. 1985), [215 Mont. 408,] 697 P.2d 1362, 1363, 42 St.Rep. 500, 501.

Clark claims two res ipsa loquitur instructions should have been given the jury.

“Plaintiff’s [Clark’s] Proposed Instruction No.12:

“If you find from the evidence that the Defendant physician caused injury to the part of the patient’s body not directly involved in treatment he was administering, and that part was a healthy part in a remote place from the field of operation, these facts permit you to infer, even without any expert testimony, that the Defendant was negligent.

“Plaintiff’s [Clark’sJ Proposed Instruction No. 13:

“In order to find for the Plaintiff in this case, you must determine from the evidence whether the Defendant has deviated from those standards of skill and care as to which you have been instructed.

“Should you find that he has so deviated in treating Valorie Clark by causing injury to organs other than those being treated, and that this negligence was the cause of the injuries complained of by Valorie Clark, you may find in favor of Valorie Clark.”

The proposed instructions misstate the law. While the doctrine of res ipsa loquitur permits proof of what happened to be made by circumstantial evidence, plaintiff, nonetheless, must make a prima facie case that defendant breached a duty of care before the question goes to the jury. Subject to certain exceptions, there must be expert testimony to establish negligence in a malpractice action. Collins v. Itoh (1972), 160 Mont. 461, 470, 503 P.2d 36, 41. The mere happening of an accident, in itself, is not evidence of negligence in the ordinary negligence action. Nor is the mere fact of injury or the occurrence of a bad result, standing alone. The law does not require that for every injury there must be a recovery of damages, but only imposes liability for a breach of legal duty by defendant, proximately causing injury to the plaintiff. Negaard v. Estate of Feda (1968), 152 Mont. 47, 52, 446 P.2d 436, 439-440. Thus the instructions were properly refused.

We emphasize application of the doctrine of res ipsa loquitur does not permit the jury to presume negligence of the defendant, thus shifting the burden from plaintiff. We point out that use of the terms “inference” and “presumption” interchangeably results in confusion as to their legal significance. If res ipsa loquitur is applicable in a medical malpractice case, there is no presumption of negligence.

The doctrine of res ipsa loquitur, set out in Whitney v. Northwest Greyhound Lines, Inc. (1952), 125 Mont. 528, 533, 242 P.2d 257, 259, has been quoted extensively by this Court:

“ [W]hen an instrumentality which causes injury without any fault of the injured person, is under the exclusive control of the defendant at the time of the injury, and the injury is such as in the ordinary course of things does not occur if one having such control uses proper care, then the law infers negligence on the part of the one in control as the cause of the injury.”

Davis v. Trobough (1961), 139 Mont. 322, 326, 363 P.2d 727, 729. Negaard, supra at 53, 446 P.2d at 440. See also Northwest Airlines, Inc. v. Rowe (8th Cir. 1955), 226 F.2d 365, 369.

In Negaard, supra, we declined to apply the doctrine of res ipsa loquitur because there was no evidence to show the result ordinarily would not have occurred had the defendant exercised due care, or that the result was not to be anticipated. At 51-52, 446 P.2d at 439. In fact, there was much evidence to the contrary, as there is in the case before us. Our holding in Negaard requires essentially the same two part test set forth in Tangora v. Matanky (1964), 231 Cal.App.2d 468, 42 Cal.Rptr. 348, 352. Before the doctrine of res ipsa loquitur can be applied in medical malpractice cases, plaintiff must prove that the result complained of rarely occurs and that it is not an inherent risk of the procedure.

Statistical evidence was introduced showing perforation of the uterus occurs in a significant number of D&C procedures. All the physicians who testified on the subject agreed that perforation of the uterus is a known risk of a D&C, which can and does occur, despite the exercise of proper care. Dr. Gard, Clark’s expert witness, who has far fewer years experience than Dr. Norris, testified he had had the same bad result twice. Yet he said he did not consider himself to have been negligent. He did not testify the bad result would not have occurred if proper care had been used. The District Court properly refused to give Clark’s res ipsa instructions as she did not show perforation of the uterus rarely occurs during a D&C, or that perforation of the uterus is not an inherent risk of a D&C.

Clark claims the District Court should have admitted the report of the liability claim Norris provided to his insurance carrier, and the incident report prepared by St.Peter’s Hospital for its attorneys. Norris argues the liability claim falls within the attorney-client work product exception to discovery pursuant to Rule 26(b)(3), M.R.Civ.P. and Kuiper v. District Court (Mont. 1981), 632 P.2d 694, 38 St.Rep. 1288. Clark argues it is not protected, citing Cantrell v. Henderson (Mont. 1986), [221 Mont. 201,] 718 P.2d 318, 43 St.Rep. 745. Norris’s report of liability claim was filed after Clark had filed her claim with the medical/legal panel. He argues it was filed in anticipation of litigation.

In order to come within the qualified immunity from discovery pursuant to Rule 26(b)(3), M.R.Civ.P., it must be determined whether, in the light of the nature of the document and factual situation in a particular case, the document can fairly be said to have been prepared or obtained because of the prospect of litigation. State ex rel. Corbin v. Weaver (1984), 140 Ariz. 123, 680 P.2d 833, 839; Status Time Corp. Clark, (D.C.N.Y. 1982), 95 F.R.D. 27, 29. A report from the insured to the insurer subsequent to the institution of a suit is within the immunity, when it has been prepared because of the prospect of litigation. Bredice v. Doctor’s Hospital, Inc. (D.C.D.C. 1970), 50 F.R.D. 249, 251, Hickman v. Taylor (1947), 329 U.S. 495, 67 S.Ct. 385, 91 L.Ed. 451.

Section 27-6-301, MCA, of the Montana Medical Legal Panel Act provides:

“Claimants shall submit a case for the consideration of the panel prior to filing a complaint in any district court . . .” (Emphasis added.)

This section makes submission of the case to the Panel mandatory prior to the claimant’s filing a complaint in court. Proceedings before the panel therefore are a condition precedent to and an integral part of the litigation process. Kuiper, supra, at 700, 38 St.Rep. at 1294. There is no doubt that upon submission of a case to the Montana Medical Legal Panel there exists the prospect of litigation; otherwise the proceedings before the Panel would have no meaning.

In this case, claimant Clark filed and submitted her case to the panel prior to the filing by Norris of his report of the malpractice claim with his insurance carrier.

We hold that the report of Norris to his insurance carrier made subsequent to the initiation of the Montana Medical Legal Panel proceedings was in anticipation of litigation and entitled to the qualified protection from discovery pursuant to Rule 26(b)(3), M.R.Civ.P.

It is further noted that Norris answered four separate sets of interrogatories and his deposition was taken. Depositions of numerous physicians and health care personnel connected with the case were taken. There is no evidence indicating the report to the insurance carrier contains statements which are contradictory to any other evidence gathered. Clark had access to Norris’s records, the clinic records, and the hospital medical records.

Next we consider the hospital’s incident report. While there are certain communications between a hospital and its attorney which are protected, the attorney-client relationship does not automatically give rise to immunization of every piece of paper a hospital files with its attorney. A privilege cannot be created in a subject matter merely by transmitting it to an attorney. When a person employed by a corporation is instructed to make a report, the privilege of that report is to be determined by the employer’s purpose in requiring the report. If the employer directs the taking of a report for confidential transmittal to its attorney, the communication may be privileged. Sierra Vista Hospital v. Superior Court (1967), 248 Cal.App.2d 359, 56 Cal.Rptr. 387, 392.

The record is not clear as to the purpose of the report in question. The hospital administrator testified hospital administrative policy required an incident report. The administrator keeps a copy of the report on file “indefinitely” and forwards the report to the hospital’s attorney, regardless of whether litigation on that particular incident ever materializes. We are not persuaded of the requisite confidential nature of the reports necessary to warrant their immunity from discovery afforded an attorney-client relationship. There is no testimony as to their purpose and we cannot read into the record something which is not there. In today’s litigious society, it is too easy to argue everything is done in anticipation of litigation, thereby narrowing the open discovery policy of the Montana Rules of Civil Procedure.

Notwithstanding, any error is harmless in this case. Clark made no showing of “substantial need of the [report] in the preparation of [her] case,” nor did she show that she was “unable without undue hardship to obtain the substantial equivalent of the [report] by other means.” Rule 26(b)(3), M.R.Civ.P. In fact there were a number of alternatives she could have pursued. The scrub nurse who made out the report could have been deposed and called to testify. Norris could have been questioned about whether he had written any comments on the form or whether he had ever seen one of the forms. Any prejudice suffered by Clark is not a result of the District Court’s refusal to allow discovery of the incident report.

Clark predicates error on the District Court’s refusal to take judicial notice of the so-called conspiracy of silence in the medical community. Rule 201(b), M.R.Evid. says:

“[A] fact to be judicially noticed must be one not subject to reasonable dispute in that it is either (1) generally known within the territorial jurisdiction of the trial court or (2) capable of accurate and ready determination by resort to sources whose accuracy cannot be reasonably questioned.”

The statement made by Clark’s counsel does not fall within the category of the type of facts which can be judicially noticed. Examples of the kinds of facts which are generally known and can be judicially noticed found in Montana case law include the fact that wet floors are slippery, Clark v. Worrall (1965), 146 Mont. 374, 380, 406 P.2d 822, 825; “there is a vast difference between profit and gross receipts,” State ex rel. Schultz-Lindsey v. Board of Equalization (1965), 145 Mont. 380, 401, 403 P.2d 635, 646; or that on the death of the governor the lieutenant governor becomes governor. Holtz v. Babcock (1964), 143 Mont. 341, 370, 389 P.2d 869, 884. Whether or not there is a conspiracy of silence in the medical community is a subject of considerable debate.

In the same vein, Clark’s claim the District Court’s comment on certain testimony destroyed her theory likewise is without merit. Clark called Norris as an adverse witness. During his testimony the court permitted him to “answer fully,” or explain his answer, because he was an expert. “[A] trial judge’s determination of the qualifications of a witness is conclusive unless shown to be an abuse of discretion or a clear error of law.” Soo Line Railroad Co. v. Freuhauf Corp. (8th Cir. 1977), 547 F.2d 1365, 1374. Clark argues Norris was not called as an expert, and as an adverse witness he should not be allowed to explain his answers because she, then, had no control over her main witness. In at least one previous Montana case, a doctor who also was a defendant, testified as an expert witness. Maki v. Murray Hospital (1932), 91 Mont. 251, 266, 7 P.2d 228, 232.

Rule 702, M.R.Evid. permits “a witness qualified as an expert by knowledge, skill, experience, training, or education [to] testify . . . in the form of an opinion or otherwise” if this “specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue[.]”

“Except perhaps in the most blatant case the jury would become helplessly mired without the aid of expert medical testimony. A physician would normally be in the best position to explain . . . Undoubtedly this would be of great benefit to the jury.”

Hunsaker v. Bozeman Deaconess Foundation (1978), 179 Mont. 305, 322, 588 P.2d 493, 503.

Clark claims Norris had a chance to explain and re-explain his justification for doing what he did, thus emphasizing his defense theory and destroying her circumstantial evidence. A careful reading of the transcript convinces us this is not so. The question in the specific incident complained of was unanswerable without an explanation, because it was inartfully framed. There is no mutual exclusivity in being both an expert and the defendant. While examination of the witness may not have proceeded exactly as Clark would have preferred, there is no evidence she could not illicit from Norris those facts she considered relevant.

Although Norris did not offer opinion testimony, even had he rendered an opinion, it was not conclusive of the issue and the jury was free to accept or reject it. Richardson v. Ford Motor Co. (1973), 163 Mont. 347, 353, 516 P.2d 1153, 1156. It does not appear to have prejudiced Clark’s case to have Norris explain his answers. We find no reason to preclude him from doing so.

Clark claims the District Court commented on the evidence in violation of Rule 614(b), M.R.Evid. While it is true the District Court cannot comment on the evidence, State v. Fuller (1906), 34 Mont. 12, 26, 85 P.369, 374, it also is true that failure to object waives a claim of error unless a substantial right of the party is affected. Halldorson v. Halldorson (1977), 175 Mont. 170, 173, 573 P.2d 169, 172, Rule 103(a)(1), M.R.Evid. Objection to the comment was not raised at trial or in chambers, although Clark had an opportunity to do so either time. Because there is no evidence this failure affected her right to a fair trial, we will not consider this alleged error.

The jury verdict is affirmed.

MR. CHIEF JUSTICE TURNAGE and MR. JUSTICES SHEEHY, WEBER, GULBRANDSON and HUNT and HONORABLE DOUGLAS C. HARKIN, District Judge, sitting for MR. JUSTICE MORRISON, concur.


author: MR. JUSTICE SHEEHY MR. JUSTICE WEBER, MR. JUSTICE SHEEHY: MR. JUSTICE WEBER,

text:
    FIRST STATE BANK OF FORSYTH; a Montana corp., Beneficiary, and William F. Meisburger, Trustee, Plaintiffs and Appellants, v. THOMAS J. CHUNKAPURA and Cicily Chunkapura, husband and wife, Defendants and Respondents.
    No. 86-216.
    Submitted Feb. 10, 1987.
    Decided March 10, 1987.
    Rehearing Denied April 17, 1987.
    734 P.2d 1203.
    William F. Meisburger argued, Forsyth, for plaintiffs and appellants.
    John Houtz argued, Forsyth, for defendants and respondents.

      William F. Conklin argued, Great Falls, amicus curiae for Concerned Citizens.
    George T. Bennett, Helena, amicus curiae for Montana Bankers Association.
    David J. Dietrich, Missoula, amicus curie, for First Interstate Bank of Missoula.
    John Paul, Great Falls, amicus curiae, United Sav. Bank.
    George Goodrich, Missoula, amicus curiae, for First Bank & Western Bank.
   MR. JUSTICE SHEEHY

delivered the Opinion of the Court.

We hold in this case that a lender, electing to foreclose on its security under a trust deed by judicial procedure, is not entitled to remedies inconsistent with the Small Tract Financing Act of Montana, Title 71, Chapter 1, Part 3, MCA. Specifically, the lender (mortgagee) may not recover a deficiency judgment against the borrower (mortgagor), and the borrower has no right of redemption as is accorded borrowers in judicial foreclosures of conventional mortgages.

First State Bank of Forsyth and William F. Meisburger appealed from an order of the District Court, Sixteenth Judicial District, Rosebud County, the Honorable C. B. Sande, District Judge, presiding, that Section 71-1-317, MCA, prohibits the Bank from recovering a deficiency judgment on judicial foreclosure. No final judgment has been entered in the cause pending this appeal, and the cause has been properly certified to us for appeal under Rule 54(b), Montana Rules of Civil Procedure.

On October 20, 1980, the Chunkapuras executed a promissory note to the First State Bank of Forsyth in the amount of $17,000 with interest on the unpaid principal thereon accruing at the rate of 14% per annum to be paid by the Chunkapuras in monthly payments. The note was secured by a deed of trust executed the same day from the Chunkapuras to First Montana Title Insurance Company as trustee, naming the Bank as beneficiary, covering Lots 17 and 18 in Block 54 of the original town, now city, of Forsyth, Montana.

Under the terms of the note the Chunkapuras would have paid to the Bank $226.40 per month until October 20, 1995 to pay off the note, and under the terms of the deed of trust, were to provide such additional sums monthly as would be sufficient to pay taxes, assessments, insurance premiums, and other charges.

William S. Meisburger succeeded First Montana Title Insurance Company as trustee under the deed of trust. He appears in this action as a plaintiff trustee, and as attorney for the Bank and himself as plaintiffs. (He has also made the return of sheriff’s sale but no point is made in this appeal as to the validity of the return. See Section 25-13-404, MCA.)

The Chunkapuras made payments under the note and deed of trust to the Bank until April 20, 1985, at which time they went into default, the principal of the indebtedness having been reduced to $14,957.02. On September 11, 1985, the plaintiffs filed an action in the District Court to foreclose judicially the security interest of the Bank. Their complaint was amended on October 4, 1985. Under the amended complaint plaintiffs prayed for judgment against the defendants for the unpaid principal, accrued interest and other costs, for a sale of the real estate premises by the sheriff of Rosebud County, and for a deficiency judgment against the defendants after applying all the proceeds of the sale of the premises.

By stipulation, the parties agreed that the District Court could enter judgment, issue an order for a sheriff’s sale, and proceed with the sheriff’s sale, reserving until a later time the question of whether a deficiency judgment could be recovered. At the sheriff’s sale, the Bank, being the only bidder, bid on the property in the sum of $10,000.00 which after deducting sheriff’s fees and attorneys fees, left a net sum of $8,965.50. Thereupon the plaintiffs sought a deficiency judgment in the amount of $8,556.93.

Following this activity in the action, the matter was briefed before District Judge Sande and on January 6, 1986, District Judge Sande entered his order as aforesaid, determining that Section 71-1-317, MCA, prohibited the plaintiffs from recovering a deficiency judgment. Upon certification under Rule 54(b), M.R.Civ.P. by the Honorable Alfred B. Coate, District Judge, the cause came to us on appeal.

I.

The issues in this case involve interpretation of the Small Tract Financing Act of Montana, enacted in 1963.The history of the legislative adoption of that Act,not unknown to some members of this Court, needs telling at this point for perspective.

Prior to 1963, Montana was a “one action” state with respect to foreclosures of mortgages. Our statute provided that there was but one action for the recovery of debt, or the enforcement of any rights incurred by mortgage upon real estate, which action had to be in accordance with the foreclosure provisions of our statutes. Section 71-1-222, MCA (formerly Section 93-6001, R.C.M. (1947)). Whereas in other states with differing statutes the lender had the option of suing on the promissory note, or suing to foreclose the mortgage securing the note, our “one action” statute was construed by us to mean that a creditor could not waive the mortgage and sue on the debt but was limited to foreclosure of the mortgage indebtedness. Barth v. Ely (1929), 85 Mont. 310, 278 P.2d 1002. A mortgage instrument could and still may contain a power of sale provision to which the mortgagee could resort for foreclosure without judicial proceedings. Section 71-1-223, MCA. No provision however is made in our statutes for a deficiency judgment where foreclosure under power of sale occurs. In a judicial foreclosure, after the court entered judgment that the mortgagor had defaulted on his obligations and that the mortgagee was entitled to the benefit of his security, the court could and still can order sale of the secured premises by the sheriff of the county involved. If the proceeds from the sheriff’s sale are insufficient and a balance still remains due, a deficiency judgment can then be docketed against the defendant or defendants personally liable for the debt which becomes a lien upon the real estate of the judgment debtors. Section 71-1-222, MCA.

Two legal consequences attended, and still attend a judicial foreclosure of mortgaged real property. The judgment debtor has the right to redeem the property from the purchaser at the sheriff’s sale any time within one year after the sale. Section 25-13-802, MCA. The purchaser was not and is not now entitled to the possession of the real property as against the judgment debtor during the period of redemption while the debtor personally occupied the land as a home for himself and his family. Section 25-13-821, MCA.

The banking and lending industry came to the legislature in 1963, contending that the “one action” rule and the attendant right of redemption and right of possession rules hampered the financing of improvements on small tracts in Montana because banks and investors were unwilling to invest in mortgages when on default their funds would be tied up during the period of redemption. A quid pro quo was proposed to the legislature: the lenders would give up their deficiency judgment rights on default, if the borrowers would give up their rights of possession and redemption. The result was the adoption by the legislature of the Small Tract Financing Act of Montana, originally limited to tracts of three acres, but now may involve tracts as large as fifteen acres.

Under the Small Tract Financing Act, instead of mortgages, trust indentures (sometimes called “deeds of trust” or “trust deeds”) are authorized. Such instruments have the effect of transferring the title of the borrower to a private trustee to be held by the trustee to secure the performance of the obligation by the borrower. A power of sale is by the law granted to the trustee to be exercised after a breach of the obligation for which the trust transfer is security. Section 71-1-304(2), MCA. The trust indenture is considered to be a mortgage on real property, Section 71-1-305, MCA, and provisions are made in the law for the method whereby a trustee may foreclose a trust indenture by advertisement and sale. Section 71-1-313, MCA. It is certain that when a trustee conducts a foreclosure sale, a deficiency judgment is not allowed, Section 71-1-317, MCA, and the purchaser at the trustee sale is entitled to possession of the property on the tenth day following the sale. Section 71-1-319, MCA.

It may be safely said, although it does not appear in this record, that in the time since the enactment of the Small Tract Financing Act, the use of trust deeds for security purposes has become nearly exclusive in this state.

II.

The issues in this cause arise out of certain provisions of the Small Tract Financing Act which are subject to judicial interpretation. Section 71-1-304(3), MCA, provides that a trust indenture may be foreclosed by an advertisement and sale through the trustee, or at the option of the beneficiary (lender) by judicial procedure as provided by law for the foreclosure of mortgages on real property. The foreclosure of a trust indenture by advertisement and sale or by judicial procedure is limited to the times provided by law for the foreclosure of a mortgage on real property. Section 71-1-311, MCA. The provision prohibiting deficiency judgment states:

“Deficiency judgment not allowed. When a trust indenture executed in conformity with this part is foreclosed by advertisement and sale, no other or further action, suit, or proceedings shall be taken or judgment entered for any deficiency against the grantor or his surety, guarantor, or successor in interest, if any, on the note, bond, or other obligation secured by the trust indenture or against any other person obligated on such note, bond, or other obligation.”

Section 71-1-317, MCA.

With respect to possession, the Act provides:

“Possession. The purchaser at the trustee’s sale shall be entitled to possession of the property on the 10th day following the sale, and any persons remaining in possession after that date under any interest, except one prior to the trust indenture, shall be deemed to be tenants at will.”

Section 71-1-319, MCA.

The First State Bank of Forsyth contends that under the Act, it has the option of either foreclosing on the security by means of a trustee sale, or by resorting to judicial foreclosure. It further contends that when it elects to proceed by judicial foreclosure, it then becomes entitled to the legal consequences that follow the judicial foreclosure of a conventional mortgage, that is, the right to a deficiency judgment. It admits that if it is entitled to a deficiency judgment, the borrower also then becomes entitled to the right of redemption granted in the foreclosure of conventional mortgages.

The Chunkapuras on the other hand, contend that because the lender chose to finance this obligation under the Small Tract Financing Act, it thereupon elected the benefits conferred upon lending institutions by the Act, the immediate transfer of title in exchange for no deficiency judgment, and that these results apply whether the lender elects to proceed by trustee sale on default, or by judicial foreclosure. The Chunkapuras rely especially on Section 71-1-305, MCA, which provides:

“Trust indenture considered to be a mortgage on real property. A trust indenture is deemed to be a mortgage on real property and is subject to all laws relating to mortgages on real property except to the extent that such laws are inconsistent with the provisions of this part, in which event the provisions of this part shall control. For the purpose of applying the mortgage laws, the grantor in a trust indenture is deemed the mortgagor and the beneficiary is deemed the mortgagee.”

They point also to the provisions of Section 71-1-317, MCA, which we have quoted above, contending that whether a trustee sale occurs or a judicial foreclosure is utilized, the trust indenture is foreclosed “by advertisement and sale” in either case, and under Section 71-1-317, a deficiency judgment is not allowed. To grant a deficiency judgment, the Chunkapuras contend, would be in effect giving life to a provision of the judicial foreclosure statutes which is inconsistent with the provisions of the Small Tract Financing Act under Section 71-1-305.

III.

This Court is confronted in this case with a statutory situation wherein it is clear that in cases of trustee sales under trust deeds, there is no right of redemption given to the borrower, and the borrower must surrender possession within ten days; and the lender under a trustee sale has no right to a deficiency judgment. The provisions of the Small Tract Financing Act, permitting an election to the lender to resort to judicial foreclosure, Section 71-1-304(3), MCA, and setting out time limitations, Section 71-1-311, MCA, do not clearly provide that under judicial foreclosures, the legal consequences of redemption and deficiency judgment follow. It become a matter of judicial interpretation whether the sense and intent of the legislature, in adopting the Small Tract Financing Act, and permitting judicial foreclosure, was also to permit deficiency judgments to the lenders and the rights of redemption to the borrowers.

In resolving these issues we have not only the briefs of the parties to the action, but amici briefs presented by the Montana Bankers Association, the First Bank (N.A.) — Western Montana Missoula, First Interstate Bank of Missoula, N.A., and United Savings Bank, F.A. in support of the First State Bank of Forsyth. Supporting the Chunkapuras is an amicus brief from the Concerned Citizens’ Coalition. We have found the briefs helpful, because they illuminate the importance of this case and the gravity of the issues involved.

We are directed to the case law of other states. The State of Washington has a Deeds of Trust Act, similar to our Small Tract Financing Act. Wash. Rev. Code Section 61.24.010 —.24.130 (1985). The Washington Act provides for foreclosure either by advertisement by the trustee, or by judicial proceedings. Wash. Rev. Code Section 61.24.100 (1985). The Washington Court of Appeals has held in Helbling Brothers, Inc. v. Turner (1975), 14 Wash.App. 494, 542 P.2d 1257, 1259, that if the lender elects to proceed by judicial foreclosure, the lender is not precluded from obtaining a deficiency judgment.

We are told that the California Supreme Court allows the lender a choice of remedies, either no deficiency judgment and no right of redemption on one hand, or a deficiency judgment with the right of redemption on the other hand. Roseleaf Corp. v. Chierighino (1963), 59 Cal.2d 35, 27 Cal.Rptr. 873, 378 P.2d 97, 102; Cornelison v. Kornbluth (1975), 15 Cal.3d 590, 125 Cal.Rptr. 981, 542 P.2d 981, 989.

Even so, there are ameliorating effects for the borrower under the California and Washington laws that do not accrue to a borrower in Montana if the full consequences of judicial foreclosure are applied. In California, no deficiency judgment is recoverable if the property securing a trust deed or mortgage is for a loan which the financier intends to be used to pay all or part of a purchase price. Cal. Civ. Proc. Code Section 580(b) (West 1976); Union Bank v. Wendland (1976), 54 Cal.App.3d 393, 126 Cal.Rptr. 549, 554.

Furthermore, under California law, special provisions are applied to sales under judicial foreclosure. A deficiency judgment is limited to the difference between the fair market value of the secured property at the time of the foreclosure sale, regardless of a lesser amount realized at the sale, and the outstanding debt for which the property was secured. Goodyear v. Mack (1984), 159 Cal.App.3d 654, 205 Cal.Rptr. 702, 704. “Fair value” is the intrinsic value of the real property at the time of sale under judicial foreclosure, without consideration of the impact of the foreclosure proceedings on the fair market value. Rainer Mortgage v. Silverwood Ltd. (1985), 163 Cal.App.3d 359, 209 Cal.Rptr. 294, 298.

We have examined the pertinent statutes of other states. Under Oregon law, where trust deeds are used to secure indebtedness, foreclosure sale may be made by the trustee “or under judicial foreclosure.” Or. Rev. Stat. Section 86.770(2) (1985). However, no deficiency can be recovered for the indebtedness of a noncommercial trust deed.

In the State of Washington, it is true, as amici has informed us, that deficiency judgments may be obtained on judicial foreclosure. There is however, an “upset” provision in the Washington statutes which applies. Thus, Washington law provides that there can be no deficiency judgment if there is a trustee sale, but that the indebtedness may be foreclosed as a mortgage. Wash. Rev. Code Section 61.24.100 (1985). However, in a judicial proceeding, the court may set an “upset price” to be determined by the court, based on fair value, and the upset price must be credited to the debt if the amount recovered in the foreclosure sale is less than the upset price. Wash. Rev. Code Section 61.12.060 (1985).

In Arizona, no deficiency judgment is allowed on tracts of two and a half acres or less where sales occur under deeds of trust. If judicial foreclosure is followed the fair market value of the property at time of sale determines the amount of deficiency. Ariz. Rev. Stat. Ann. Section 33-814 (1974).

In Utah, in “any” sale of property under a trust deed a deficiency is allowed, but not for more than the amount that the unpaid debt exceeds the fair market value of the property at the time of the sale. Utah Code Ann. Section 57-1-32 (1986). In Nevada, a lender may apply for a deficiency judgment no matter how the property is sold. Nev. Rev. Stat. Section 40-455 (1986). The deficiency however is limited to the fair market value or the amount received on the sale, whichever results in the smaller deficiency judgment.

Only Alaska, whose statutes apparently are similar to Montana, seems to grant the result sought here by First State Bank of Forsyth. In Alaska there is no deficiency if the trustee sells the property. Alaska Stat. Section 34.20.100 (1985). However the Alaska Supreme Court has held that the provision against deficiency judgment does not apply if judicial foreclosure is pursued. Hull v. Alaska Federal Savings & Loan Ass’n. (Alaska 1983), 658 P.2d 122, 124.

In Idaho, the deficiency judgment on judicial foreclosure is limited by the fair market value of the property at the time of the foreclosure sale. Idaho Code Section 45-1512 (1977).

It may be stated therefore, as a broad general policy in the western states, with Alaska the sole exception, the lender has the option of proceeding by trustee sale under trust instruments, or by judicial foreclosure under the mortgage statutes; but if the latter procedure is elected, the deficiency judgment provisions of those statutes limit the deficiency judgment to the difference between the amount of the indebtedness sought and the fair market value of the property at the time of the sale, or the amount realized at the sale, whichever figure results in the lesser deficiency. Montana statutes on judicial foreclosure do not have a “fair market value” provision. A consideration of those provisions brings us to the crux of the problem in this case.

IV.

Generally, since 1963, with the exception of the last few years, real estate values in Montana have been subjected to the same inflationary pressures that existed elsewhere in the nation. At or about the time that the Chunkapuras borrowed on their property in this case, inflation had reached its highest stage. But Montana, since 1981, has been enduring a depressed economy of sorts, which has resulted in a marked depreciation in the values of real property. In the past five to six years foreclosures because of defaulted debts on farms, businesses, and homes have increased notably in this state. In this case, the Bank was the only bidder for the Chunkapura property. Its bid of $10,000 may represent the fair market value of the property at the time of the sheriff’s sale, or it may be an opportunistic bid which takes advantage of the circumstances so that later the Bank may sell the property for a sum in excess of $10,000. In the meantime the deficiency judgment of $8,556.93, plus accrued interest and costs, if allowed would become a lien on any other real estate the Chunkapuras now own or may own during the period that the judgment lien is in effect. The right of possession of their home which the Chunkapuras would have for one year might have some value, but the right of redemption is valueless, because if the Chunkapuras redeemed, the deficiency judgment lien would immediately adhere to the redeemed property. This result is not the quid pro quo which the legislature intended when it acceded to the lending industries’ urging and adopted the Small Tract Financing Act in 1963.

We therefore determine and hold that District Judge Sande was correct when he determined that under Section 71-1-317, MCA, a deficiency judgment may not be allowed when trust indentures are executed in conformity with the Act, and are foreclosed by advertisement and sale, whether through the trustee or by judicial proceedings; and that to allow a deficiency judgment would be inconsistent with the provisions of the Small Tract Financing Act of Montana and accordingly forbidden by Section 71-1-305, MCA.

The decision in the District Court therefore that no deficiency judgment may be obtained against the Chunkapuras is affirmed. It should go without saying that in like manner, the Chunkapuras are not entitled either to a right of possession after ten days from the sale, or to a right of redemption for a period of one year.

V.

We are mindful that there may be other cases pending or decided in Montana where lenders have resorted to judicial foreclosure of indebtedness secured by trust deeds. To ensure finality, and the safety of real estate titles, we order that the effect of this Opinion shall be prospective only, except as to the Chunkapuras, and that deficiency judgments in judicial foreclosures under trust deeds which have been entered and docketed on or prior to the date of this Opinion are hereby held to be valid and legal; but that deficiency judgments under such proceedings entered and docketed from and after this date are invalid and of no effect.

We are also mindful that the Opinion relates to a subject which is deserving of the immediate attention of the legislature which is now sitting in session in our capitol city. We therefore direct the Clerk of this Court to send forthwith a copy of this Opinion to the Honorable Ted Schwinden, Governor of the State of Montana, to the Honorable Robert Marks, Speaker of the House of Representatives, and to the Honorable William Norman, President of the State Senate, for their attention and consideration.

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

MR. JUSTICE WEBER,

dissenting:

The majority opinion demonstrates a genuine concern for Montana borrowers who have executed trust indentures in the purchase of their homes. Unfortunately, a similar concern has not been demonstrated for the lenders. I conclude that the majority opinion is unjust in its disregard of the contracts between lenders and borrowers.

The issue before us can be determined by the text of the controlling statutes. If the meaning of the statutes can be determined from the plain meaning of the words in the statutes, this Court may not go further and apply other means of interpretation. State ex rel. Sol v. Bakker (1982), 199 Mont. 385, 390, 649 P.2d 456, 459.

“Section 71-1-304(3), MCA, states:

“A trust indenture executed in conformity with this part may be foreclosed by advertisement and sale in the manner hereinafter provided or, at the option of the beneficiary, by judicial procedure as provided by law for the foreclosure of mortgages on real property

This statute clearly provides two options for foreclosure: (1) advertisement and sale “in the manner hereinafter provided,” and (2) judicial procedure as provided by law for the foreclosure of mortgages on real property.

The statute prohibiting deficiency judgments, Section 71-1-317, MCA, applies “[w]hen a trust indenture executed in conformity with this part is foreclosed by advertisement and sale” (Emphasis supplied). Under the plain meaning of the words of the statute, Section 71-1-317, MCA, does not prohibit a deficiency judgment when the lender elects the second option, that being judicial procedure for the foreclosure of mortgages on real property. I therefore conclude that the statutory prohibition of deficiency judgments does not apply in the present case and the District Court incorrectly ruled to the contrary.

I find no inconsistency between foreclosure by advertisement and sale under the Small Tract Financing Act of Montana (Act) and the judicial procedure for the foreclosure of mortgages on real property. The two are alternative remedies available to the lender after the borrower fails to pay according to the provisions of his note. Judicial mortgage foreclosure allows the lender to obtain a deficiency judgment against the borrower, and also allows the borrower a one year period in which to redeem. In contrast, foreclosure under the Act does not allow the lender to obtain a deficiency judgment. It eliminates the one year right of redemption for the borrower, while giving to the borrower a right to pay up all delinquencies and reinstate the obligation without payment of the entire balance of principal and interest as may be required following default under a normal note and real estate mortgage. I find the proceedings under the two types of foreclosure to be both logical and consistent.

The majority opinion points out that in various western states, protection is given to borrowers by fair market provisions which set mínimums which the lenders must bid on foreclosures. Some states also have various types of prohibitions against judicial foreclosure. These protections are contained in the statutes of the various western states. As I review the majority opinion I conclude that it contains an excellent argument for legislative modification of the Act. If I were in the legislature, I would tend to support such legislative modification. However, our obligation is to construe the statutes as now in existence.

We must recognize that the Act and in particular Section 71-1-304, MCA, with its provision for foreclosure by either judicial procedure or advertisement and sale, certainly was considered by the lenders of Montana as a part of all trust indenture financing. The Act plainly granted alternative foreclosure rights. The effect of the majority opinion is to modify all of the contracts between lenders and borrowers who have used trust indentures. This Court would not presume to eliminate a written remedy contained in an existing contract between a borrower and a lender. That would clearly be unjust. It is no more appropriate to eliminate judicial foreclosure and a right to a deficiency judgment when those were conditions in existence at the time of the making of the contracts. The majority igñores the reality of the promise to pay on the part of borrowers. The majority in effect has modified that promise by adding a provision which releases the borrowers from having to pay any more money where the value of the property has dropped below the balance due on the note. All of Montana is concerned with the losses taking place because of the reduction in the values of homes and land in Montana. However, I can find no basis for requiring the lenders to assume all of that loss without some appropriate prior warning.

In eliminating the statutory right of judicial foreclosure with its companion right to a default judgment, the majority opinion has decreed an unjust taking of a valuable property right from every lender in Montana who has used trust indentures. This Court should enforce the plain meaning of the statutes and leave to the legislature changes in the Act. I would reverse the District Court.

MR. JUSTICE GULBRANDSON joins in the foregoing dissent.

ORDER ON REHEARING

MR. JUSTICE SHEEHY:

First State Bank of Forsyth, the principal party-lender in this case has petitioned for rehearing, and its petition for rehearing, and its petition for rehearing has been joined in by First Interstate Bank of Missoula, NA, and the Montana Bankers’ Association, as amici curiae. Counsel for Chunkapura opposes the petition, as does amicus Concerned Citizens Coalition.

The briefs of amici for the Bank point out that the prospective effect of our decision could adversely affect lenders and investors who have financed loans in commercial lending or investment settings and who have used trust indentures to secure all or part of those loans or investments.

The rationale of our decision in Chunkapura is based upon the “quid pro quo” suggested to the legislature to secure passage of the Small Tract Financing Act. that is the giving up of a deficiency judgment on the one hand by the lenders in exchange for the giving up by the borrowers of the right of possession to the property for one year and the right of redemption after foreclosure sale. Such quid pro quo does not apply to loans made in commercial settings, nor to trust deeds secured by residential or other property which are only part of larger, more complex loans for commercial or agricultural purposes.

In Chunkapura, we have before us only a trust deed related to an occupied, single family residential property. It is suggested by amicus First Interstate Bank of Missoula that our opinion should be limited in effect to the kind of security before us in Chunkapura and similar cases involving residential property. We agree.

Our opinion in this cause is limited to the Chunkapura property, and is to be considered as precedent only for trust property. We keep in effect our determination that to insure finality and the safety of real estate titles, that the effect of this opinion shall be prospective only except to the Chunkapuras and that deficiency judgments in judicial foreclosures under trust deeds which have been entered and docketed prior to the date of our opinion, and which relate to occupied,single family residential property are hereby held to be valid and legal; and that deficiency judgments under such proceedings for likely property entered and docketed after the date of our opinion (March 10, 1987) are invalid and of no effect.

As so modified, our original opinion is affirmed. Let remittitur issue.

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

MR. JUSTICE WEBER,

dissenting:

In my dissent to the original option, I concluded that in its elimination of the statutory right of judicial foreclosure with its companion right to a default judgment, the majority had decreed an unjust taking of a valuable property right from every lender in Montana who had used trust indentures. I then concluded that this Court should enforce the plain meaning of the statute and leave to the legislature any changes in the Small Tract Financing Act. I reaffirm that position.

I do approve the action of the majority in at least limiting the adverse effect of the majority opinion in the matter set forth in the Order on Rehearing. As I again review the statutes, I am unable to find any statutory justification for the distinction between trust indentures on occupied, single-family residential property, and trust indentures on other types of real property.

I encourage the Montana Legislature to review the Small Tract Financing Act and the effect of the present opinion. In doing so they properly can consider a modification to include fair market value provisions.

I would still reverse the District Court.

MR. JUSTICE GULBRANDSON joins the foregoing dissent.