author: JUSTICE GRAY

text:
    JANICE BOWEN, TREASURER, GRANITE COUNTY, MONTANA, Plaintiff and Respondent, v. LEE McDONALD, Defendant and Respondent, and B. DALE FAYRAM, Defendant and Appellant.
    No. 95-193.
    Submitted on Briefs March 14, 1996.
    Decided April 16, 1996.
    53 St.Rep. 343.
    915 P.2d 201.
    276 Mont. 193.

      For Appellant: James A. Rice, Jr.; Jackson & Rice, Helena.
    For Respondent: Nancy K. Moe, Attorney at Law, Missoula; Byron W. Boggs, Attorney at Law, Missoula.
   JUSTICE GRAY

delivered the Opinion of the Court.

B. Dale Fayram (Fayram) appeals from the judgment entered by the Third Judicial District Court, Granite County, on its order granting Lee McDonald’s (McDonald) motion for summary judgment and denying Fayram’s motion to amend his answer to add a cross-claim against McDonald. We affirm.

Fayram raises the following issues on appeal:

1. Did the District Court err in granting McDonald’s motion for summary judgment on the basis that Fayram had no right to redeem the mining properties?

2. Did the District Court abuse its discretion in denying Fayram’s motion to amend his pleadings?

This case involves two parcels of land, known as the Iron Clad Lode # 1982 and the Non Pariel Lode # 2763, located in Granite County, Montana (mining properties). In 1982, Ripple Resources, Inc., a Colorado corporation, became the record owner of the mining properties when it acquired them by quitclaim deed from Boulder Creek, Inc. Ripple Resources, Inc. was a subsidiary of Ripple Resources, Ltd., a Canadian corporation.

The taxes on the mining properties were not paid for the years 1986 and 1987. In December of 1989, McDonald paid the delinquent taxes, penalties, costs and interest and Granite County assigned its tax sale certificate for the mining properties to him.

In May of 1991, McDonald published notice ofthe pending issuance of a tax deed to the mining properties in the local newspaper; the notice listed Ripple Resources, Inc. as the sole interested party. Approximately two months later, Fayram submitted a sworn affidavit to Janice Bowen (Bowen), the Granite County Treasurer, stating that he was a director of Ripple Resources, Inc., and was authorized to redeem the mining properties on behalf of the company. Based on the information in the affidavit, Bowen issued Fayram a certificate of redemption. In August of 1991, McDonald provided documents to Bowen indicating that Ripple Resources, Inc. had been dissolved prior to Fayram’s redemption ofthe mining properties.

Bowen filed a complaint for declaratory relief in October of 1991, requesting the District Court to resolve the controversy between Fayram and McDonald and to direct her regarding the proper disposition of the mining properties. McDonald answered and requested the court to order issuance of the tax deed on the mining properties to him. In January of 1992, Fayram answered and counterclaimed against Bowen, realleging his authority to redeem on behalf of Ripple Resources, Inc. McDonald deposed Fayram in April of 1992; no further discovery took place.

In March of1994, McDonald moved for summary judgment against Fayram on the basis that Fayram had no right to redeem the mining properties; Bowen joined in his motion. Fayram’s brief and affidavit in opposition to McDonald’s motion advanced an entirely different basis for redemption from that asserted in his 1991 sworn affidavit for redemption. In addition, Fayram moved to amend his answer to allege a cross-claim against McDonald for failing to comply with statutory requirements for obtaining a tax deed. His proposed amended pleading continued to affirmatively allege that he “was authorized” to redeem the mining properties on behalf of Ripple Resources, Inc.; Fayram proposed to add, as part of his prayer for relief, a request that the court determine that he had made a proper redemption.

The District Court granted McDonald’s motion for summary judgment and denied Fayram’s motion to amend his pleadings. The court subsequently entered judgment declaring Fayram’s certificate of redemption void and vesting title to the mining properties in McDonald. Fayram appeals.

1. Did the District Court err in granting McDonald’s motion for summary judgment on the basis that Fayram had no right to redeem the mining properties?

Summary judgment is proper when no genuine issues of material fact exist and the moving party is entitled to judgment as a matter of law. Rule 56(c), M.R.Civ.R We review a district court’s grant of summary judgment de novo, applying the same criteria used by that court initially under Rule 56(c), M.R.Civ.P. Brinkman & Lenon v. P &D Land Enterprises (1994), 263 Mont. 238, 241, 867 P.2d 1112, 1114 (citing Minnie v. City of Roundup (1993), 257 Mont. 429, 431, 849 P.2d 212, 214).

The moving party has the initial burden of establishing both the absence of genuine issues of material fact and entitlement to judgment as a matter of law. Brinkman & Lenon, 867 P.2d at 1115. Only where the moving party satisfies its initial burden does the burden shift to the party opposing summary judgment to present evidence raising a genuine issue of material fact. Matter of Estate of Lien (1995), 270 Mont. 295, 298, 892 P.2d 530, 532 (citing Owen v. Ostrum (1993), 259 Mont. 249, 255-56, 855 P.2d 1015, 1019).

The law governing tax liens on real property and tax sales, and redemption of, real property subject to a tax lien is codified in Title 15 of the Montana Code Annotated. In the instant case, no person paid the delinquent taxes on the mining properties when they were offered at a tax sale pursuant to § 15-17-211, MCA, and Granite County acquired a tax sale certificate for the properties under § 15-17-214, MCA. McDonald subsequently paid the delinquent taxes, penalties, interest and costs and Bowen assigned the tax sale certificate to him pursuant to § 15-17-323, MCA. McDonald published a notice of the pending issuance of a tax deed under § 15-18-212, MCA, and Fayram timely asserted an alleged right to redeem the mining properties pursuant to § 15-18-111, MCA.

McDonald contended in his motion for summary judgment that no genuine issue of material fact existed regarding whether Fayram had a right to redeem the mining properties under § 15-18-111, MCA, and, as a result, that he was entitled to judgment as a matter of law. Under § 15-18-111(1), MCA, redemption of a property tax lien acquired at a tax sale may only be made by “the owner, the holder of an unrecorded or improperly recorded interest, the occupant of the property, or any interested party....”

The right of redemption is wholly statutory and redemption statutes are construed liberally in favor of the redemptioner. Lowery v. Garfield County et al. (1949), 122 Mont. 571, 581, 208 P.2d 478, 484. Notwithstanding the principle of liberal construction, however, Montana law has long required that “the person seeking to redeem must bring himself within [the statutory] provisions.” See State ex rel. Federal Land Bank of Spokane v. Hays (1929), 86 Mont. 58, 63, 282 P. 32, 34; State ex rel. Bell v. McCollough (1929), 85 Mont. 435, 438, 279 P. 246, 247.

In support of his motion for summary judgment, McDonald provided documentation from the State of Colorado indicating that Ripple Resources, Inc. had been involuntarily dissolved in 1989. McDonald also relied on Fayram’s deposition testimony conceding that he only served as a director of Ripple Resources, Inc. from 1982 until 1984 and that Ripple Resources, Inc. had never issued stock. We conclude that McDonald established the absence of any genuine issue of material fact regarding Fayram’s right to redeem the mining properties on the Ripple Resources, Inc.-related basis upon which Fayram originally asserted that right and received the certificate of redemption from Bowen.

McDonald also addressed a different basis for Fayram’s alleged right to redeem which Fayram first referenced during his deposition: that he redeemed the mining properties on behalf of Ripple Resources, Ltd. Both during his deposition and in his response to McDonald’s motion for summary judgment, Fayram contended that Ripple Resources, Ltd. was the true owner of the mining properties and that the references to Ripple Resources, Inc. in the quitclaim deed from Boulder Creek, Inc. and in his sworn affidavit to Bowen were errors. He argued that, as a shareholder of Ripple Resources, Ltd., he was entitled to redeem the mining properties on behalf of that company.

McDonald provided the District Court with a copy of the quitclaim deed in which Boulder Creek, Inc. granted its interest in the mining properties to “Ripple Resources, Inc.” McDonald also submitted a timber purchase agreement under which Fayram, as “Director Ripple Resources, Inc.,” granted Eagle Stud Mill, Inc. the right to conduct logging operations on the mining properties approximately one month after submitting his affidavit to Bowen.

We conclude that McDonald established that no genuine issue of material fact existed regarding ownership of the mining properties by Ripple Resources, Inc. and, therefore, that Fayram could not redeem on behalf of Ripple Resources, Ltd. The burden then shifted to Fayram to present affirmative evidence of a material and substantial nature to raise a genuine issue of material fact; he could not rest on the allegations or denials in his pleadings or on conclusory or speculative statements. See Estate of Lien, 892 P.2d at 532.

Fayram failed to come forward with any evidence whatsoever raising a genuine issue of material fact regarding his originally asserted right to redeem the mining properties on behalf of Ripple Resources, Inc., effectively conceding the issue. He then advanced the unpleaded theory that his right to redeem was premised on his shareholder status in Ripple Resources, Ltd., which he asserted was the true owner of the mining properties. As noted, the underpinnings of this new theory first arose during Fayram’s deposition and, in opposing McDonald’s motion, Fayram submitted his own affidavit stating that he owned stock in Ripple Resources, Ltd. until it was dissolved in approximately 1986. He also submitted an affidavit from Robert Dixon, the former president of both Ripple Resources entities, to the same effect. Fayram argued that, as a shareholder in Ripple Resources, Ltd. when it was dissolved, he is the successor to the true owner of the mining properties and is entitled to redeem them under § 15-18-111(1), MCA, as the holder of an unrecorded or improperly recorded interest.

Fayram’s affidavits and other materials regarding ownership of the mining properties by Ripple Resources, Ltd. and his shareholder status in that company attempt to raise a genuine issue of material fact about his right to redeem by contradicting the sworn affidavit for redemption he submitted to Bowen, his answer and counterclaim, and his proposed amended answer. We view evidence in a summary judgment context in the light most favorable to the party opposing the motion. Kaseta v. Northwestern Agency of Great Falls (1992), 252 Mont. 135, 138, 827 P.2d 804, 806 (citing Lorash v. Epstein (1989), 236 Mont. 21, 24, 767 P.2d 1335, 1337). However, we do not permit parties opposing summary judgment to create genuine issues of material fact by means of sworn statements or testimony totally contradicting their earlier sworn statements:

‘While the district courts must exercise extreme care not to take genuine issues of fact away from juries, ‘(a) party should not be allowed to create issues of credibility by contradicting his own earlier testimony’... Ambiguities and even conflicts in a deponent’s testimony are generally matters for the jury to sort out, but a district court may grant summary [judgment] where a party’s sudden and unexplained revision of testimony creates an issue of fact where none existed before. Otherwise, any party could head off a summary judgment motion by supplementing previous depositions ad hoc with a new affidavit, and no case would ever be appropriate for summary judgment.”

Stott v. Fox (1990), 246 Mont. 301, 309, 805 P.2d 1305, 1309-10 (quoting Wilson v. Westinghouse (8th Cir. 1988), 838 F.2d 286, 289).

In Stott, we refused to allow the plaintiff to create “a material issue of fact... through the use of his own contradictory testimony.” Stott, 805 P.2d at 1310. We followed Stott in Kaseta, where we again determined that summary judgment was proper because the nonmoving parties attempted “to make a material issue of fact through the use of their own contradictory testimony.” Kaseta, 827 P.2d at 806.

Here, Fayram swore in the affidavit which formed the basis for Bowen’s certificate of redemption that he was a director of Ripple Resources, Inc. — the record owner of the mining properties — and authorized by its directors and shareholders to redeem on its behalf. His original pleading and his proposed amended pleading both affirmatively alleged that same basis for his right to redeem. On the same day he filed his motion to amend and proposed amended pleading, however, Fayram filed his brief and materials in opposition to McDonald’s motion for summary judgment, wherein he asserted that he actually redeemed as a shareholder of Ripple Resources, Ltd., which he asserted was the true owner of the mining properties. By this means, Fayram tried to create a genuine issue of fact by contradicting his earlier sworn statements. Under Stott and Kaseta, he is not permitted to do so.

McDonald highlighted the contradictions and inconsistencies in Fayram’s various statements in the District Court and the court noted that Fayram was merely trying “to advance a theory that might allow him to recover.” While the District Court did not base its determination that Fayram had failed to raise a genuine issue of material fact regarding his right to redeem on the Stott/Kaseta principle, we conclude that it properly could have done so on this record. We will affirm a district court’s decision which reaches the correct result regardless of the court’s reasoning. See Farmers Union Cent. Exch., Inc. v. Department of Revenue (1995), 272 Mont. 471, 475, 901 P.2d 561, 563; Bohmer v. Uninsured Employer’s Fund (1994), 266 Mont. 289, 291, 880 P.2d 816, 817.

We conclude that Fayram failed to raise a genuine issue of material fact regarding his right to redeem. Accordingly, we hold that the District Court did not err in granting McDonald’s motion for summary judgment on the basis that Fayram does not have a right to redeem the mining properties pursuant to § 15-18-111, MCA.

2. Did the District Court abuse its discretion in denying Fayram’s motion to amend his pleadings?

As set forth above, Fayram’s motion to amend his pleadings to state a cross-claim against McDonald was filed contemporaneously with his response to McDonald’s motion for summary judgment. The proposed cross-claim, specifically premised on Fayram’s asserted right to redeem on behalf of Ripple Resources, Inc., alleged that the tax deed process McDonald initiated did not comply with statutory requirements. As discussed in issue one, the District Court granted McDonald’s motion for summary judgment, concluding that Fayram had no right to redeem. The court then denied Fayram’s motion to amend on the basis that, lacking a right to redeem, Fayram did not have standing to challenge the procedures used.

Rule 15(a), M.R.Civ.P., provides, insofar as is relevant here, that “a party may amend the party’s pleading only by leave of court ... and leave shall be freely given when justice so requires.” However, while leave should be freely given, a motion for leave to amend pleadings is properly denied if amendment would be futile. See Mogan v. City of Harlem (1989), 238 Mont. 1, 8, 775 P.2d 686, 690. We review a district court’s denial of a motion to amend pleadings to determine if the court abused its discretion. See Richland Nat’l Bank & Trust v. Swenson (1991), 249 Mont. 410, 421, 816 P.2d 1045, 1052; Predice Lumber Co., Inc. v. Hukill et al. (1972), 161 Mont. 8, 17, 504 P.2d 277, 282.

Legal principles relating to standing are well-established. That we are seldom called upon to apply those principles is more a function of the ordinarily direct and personal nature of the disputes which become legal actions than of significant disagreement about the content of the principles themselves. “At the threshold of every case, especially those where a statutory or constitutional violation is claimed to have occurred, is the requirement that the plaintiff allege ‘... a personal stake in the outcome of the controversy ....’ ” Olson v. Department of Revenue (1986), 223 Mont. 464, 469, 726 P.2d 1162, 1166 (quoting Baker v. Carr (1962), 369 U.S. 186, 204, 82 S.Ct. 691, 703, 7 L.Ed.2d 663, 678). This principle is referred to as standing to sue and it rests on both a constitutional basis and a judicial self-restraint basis. Olson, 726 P.2d at 1166. Standing relates not to the merits of the underlying claim, but to whether the plaintiff has “alleged a personal injury that is a prerequisite to an adjudication on the merits.” Olson, 726 P.2d at 1166.

In Olson, we addressed the standing prerequisite in the context of the appellants’ challenge to the constitutionality of statutes requiring county residency to run for county office or obtain a hunting or fishing license. Olson, 726 P.2d at 1166. The record reflected that the appellants had alleged neither an attempt to run for office or obtain hunting or fishing licenses nor a denial of entitlement to do so via operation of the statutes. We stated that “[i]t is not enough that appellants allege an injury which others may have suffered ... [,] [t]hey must allege an injury personal to themselves ....” Olson, 726 P.2d at 1166. We held that the appellants had not alleged a personal injury that is a prerequisite to an adjudication on the merits and, in the absence of standing, declined to address their constitutional argument. Olson, 726 P.2d at 1166-67.

Stewart v. Board of County Comm’rs of Big Horn County (1977), 175 Mont. 197, 573 P.2d 184, involved facts similar to those in the present case in the context of a standing issue. There, the plaintiffs sued to have tax deed sales declared null and void and to exercise their alleged statutory preferential right of repurchase. Stewart, 573 P.2d at 185. We set forth the minimum criteria to establish standing: 1) an allegation of past, present or threatened injury to a property or civil right; and 2) that the alleged injury be distinguishable from that to the general public, although not necessarily exclusive to the plaintiff. Stewart, 573 P.2d at 186. We determined that the statutory preferential rights on which the plaintiffs based their action did not exist — that is, the plaintiffs were not entitled to exercise those rights; as a result, the plaintiffs had alleged no injury to a property or civil right. We held, on that basis, that the plaintiffs lacked standing to sue for alleged improper procedure in the tax deed sales. Stewart, 573 P.2d at 187.

Here, Fayram’s effort to assert a cross-claim against McDonald was premised on his alleged statutory right to redeem on behalf of Ripple Resources, Inc. The effect of the District Court’s proper grant of summary judgment to McDonald on that issue is that Fayram is not entitled to exercise the statutory right to redeem; in other words, as to Fayram, the statutory right to redeem does not exist. Fayram did not allege any other injury. Therefore, like the plaintiffs in Stewart, he does not meet even the first Stewart criterion. See Stewart, 573 P.2d at 186.

Fayram relies on Hudson v. McDonald (1987), 229 Mont. 426, 430, 747 P.2d 221, 223, for the proposition that “the time for redemption continues indefinitely” if the published notice of a pending tax deed issuance is defective. Fayram’s reliance on Hudson is misplaced.

Hudson was a quiet title action brought by the owner/seasonal occupant of the property at issue against the tax sale purchaser. The plaintiff was clearly entitled to redeem and did so after the tax deed had been issued to the defendant purchaser; the District Court ratified the redemption. See Hudson, 747 P.2d at 222. The applicable notice statute required service on both the owner and the occupant of the property. The purchaser notified the owner of his intent to apply for a tax deed via certified mail which the owner never received; notwithstanding the purchaser’s admission that he knew that the property was occupied, no notice was given to the occupant. Hudson, 747 P.2d at 222.

We noted that the statutory requirement that both the owner and the occupant be served “maximizes the probability that the delinquent taxpayer will receive notice.” Hudson, 747 P.2d at 223. On that basis, we held that if the required notice was not given to the persons statutorily entitled to it, “then the time for redemption continues indefinitely.” Hudson, 747 P.2d at 223 (emphasis added).

No standing issue was addressed in Hudson, perhaps because the plaintiff’s right to redeem and his right to notice were both undisputed. Thus, Hudson was decided against the backdrop of a clear right to redeem not timely asserted due to a clear failure to comply with statutorily-required notice provisions. It cannot be read to disregard the requirements for standing which are at issue in the present case. Here, unlike the complaining party in Hudson, no right to redeem exists in Fayram.

Fayram also relies on Kahle v. Smithers (1987), 225 Mont. 452, 733 P.2d 844, which, like Hudson, involved a challenge to the procedures used in obtaining a tax deed after the redemption period had expired and the tax deed had been obtained; in Kahle, however, the tax deed had been procured through a default judgment against the owner in a court action under then-existing (and subsequently repealed) statutes. The District Court granted the tax deed holder’s motion for summary judgment against the owner on the basis of res judicata. Kahle, 733 P.2d at 845. On appeal, we concluded that the tax deed purchaser’s affidavit for publication of summons was deficient and, therefore, the service of process upon the owner of the property at issue was insufficient for the court to obtain jurisdiction over her. Kahle, 733 P.2d at 846. On that basis, we held that the owner could collaterally attack the earlier judgment issuing the tax deed. Kahle, 733 P.2d at 846.

Neither the factual nor the procedural context in which we decided Kahle bears any similarity to the present case. Kahle involved the record owner of the property; Fayram is not only not the record owner of the property, it has been determined that he had no right to redeem. Procedurally, this is not a collateral attack on an earlier judgment in which a question of proper service in the earlier proceeding is raised; conversely, Kahle did not involve a standing issue. As a result of these and other significant differences between Kahle and the present case, our conclusions in Kahle are both irrelevant and inapplicable to the present case.

As discussed above, Fayram does not meet the first Stewart criterion for standing. We conclude, therefore, that Fayram does not have standing to assert a cross-claim against McDonald for alleged failures to comply with statutory requirements regarding the procedures used in this case. Absent standing, Fayram is not entitled to an adjudication of his underlying claim on the merits. See Olson, 726 P.2d at 1166. We further conclude, therefore, that amendment of Fayram’s pleadings to include the proposed cross-claim against McDonald alleging failure to comply with statutory requirements would be futile. On that basis, we hold that the District Court did not abuse its discretion in denying Fayram’s motion for leave to amend his pleadings.

Affirmed.

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


source: Caselaw Access Project

author: CHIEF JUSTICE TURNAGE

license: Public Domain

text:
    McCANN RANCH, INC., a Montana corporation, Plaintiff and Respondent, v. SHARON QUIGLEY-McCANN, Defendant and Appellant.
    No. 95-416.
    Submitted on Briefs February 29, 1996.
    Decided April 18, 1996.
    53 St.Rep. 349.
    915 P.2d 239.
    276 Mont. 205.

      For Appellant: K. Dale Schwanke and Francis X. Clinch, Jardine, Stephenson, Blewett & Weaver, Great Falls.
    For Respondent: Patrick M. Sullivan, Poore, Roth & Robinson, Butte.
   CHIEF JUSTICE TURNAGE

delivered the Opinion of the Court.

Sharon Quigley-McCann (Sharon) appeals the valuation of her stock in McCann Ranch, Inc. (MRI), by the Fifteenth Judicial District Court, Roosevelt County. We affirm.

Sharon raises the following issues on appeal:

1. Did the District Court err in applying a 25 percent minority discount in determining the value of Sharon’s 600 shares of MRI stock?

2. Did the District Court err in refusing to award Sharon attorney fees and costs?

MRI is a Montana corporation, originally incorporated in 1965. MRI owns agricultural real estate and improvements in Roosevelt County, Montana. In 1992, Thomas McCann owned 1200 of the 2400 shares of MRI stock. In that year, Thomas and Sharon McCann divorced after a thirty-seven-year marriage. Pursuant to their Colorado divorce decree, Sharon was awarded one-half of Thomas’s MRI stock.

Shortly after the McCanns’ 1992 divorce, MRI, acting through its board of directors, decided to pay off two outstanding debts to Florian and Virginia McCann. The directors in turn determined that MRI would stop paying dividends to MRI shareholders as it had done in the past.

The shareholders then reincorporated MRI to make it a Montana statutory close corporation, which designation carries with it a restriction on the alienability of corporate stock. Sharon, as a shareholder of MRI, voted against the amended articles of incorporation. Sharon was not notified by MRI that she was entitled to assert dissenter’s rights as required by § 35-9-103, MCA.

MRI had leased its land and improvements to Robert Anderson since 1978. The initial lease was for seven years. Before the first lease expired, MRI renewed the lease for an additional ten years. In 1993, after the filing of this lawsuit, but prior to the final disposition in District Court, MRI again renewed the Anderson lease for an additional ten years. When the lease was renewed in 1993, approximately ten months remained on the existing lease.

Following a brief and unsuccessful series of negotiations between MRI and Sharon concerning MRI’s purchase of Sharon’s shares, MRI instituted this lawsuit pursuant to the Montana Declaratory Judgment Act. MRI asked the District Court to determine the value of Sharon’s 600 shares of MRI stock and compel the sale of said stock to MRI. Sharon and MRI stipulated to allow the District Court, sitting in equity, to determine the value of Sharon’s shares. Sharon agreed to transfer her shares of stock to MRI upon MRI’s payment to her of the court-determined value of her stock. The stipulation read, in part:

Subject to the parties’ right to appeal the amount of the Court’s valuation determination and any evidentiary irregularities occurring during the conduct of the trial, the parties agree and stipulate as follows:
1. The Court may exercise its equitable powers to grant equitable relief by declaring the value of Sharon Quigley-McCann’s shares and ordering the sale of the shares to occur;
2. Sharon Quigley-McCann agrees to sell and McCann Ranch agrees to purchase Sharon Quigley-McCann’s 600 shares in McCann Ranch in the amount determined by the Court to be the value of the shares;
3. The Court’s valuation of Sharon Quigley-McCann’s shares shall be binding on the parties [.]

Following a two-day trial, the District Court determined the value of Sharon’s shares to be $162,144. This valuation was established by applying a 25 percent minority discount to Sharon’s interest in MRI. The court refused to grant either party attorney fees. The court did, however, add MRI’s litigation expenses to the value of the corporation prior to calculating Sharon’s share of the corporate assets, under the rationale that Sharon, as a quarter owner of MRI, should not be required to pay for MRI’s litigation expenses.

Section 3-2-204(5), MCA, sets forth this Court’s standard for reviewing equitable cases.

In equity cases and in matters and proceedings of an equitable nature, the supreme court shall review all questions of fact arising upon the evidence presented in the record, whether the same be presented by specifications of particulars in which the evidence is alleged to be insufficient or not, and determine the same, as well as questions of law, unless for good cause a new trial or the taking of further evidence in the court below be ordered.

We have determined that

review of findings of fact in an equitable case must comply with not only § 3-2-204(5), MCA, but also with Rule 52(a), M.R.Civ.P., which requires that findings of fact be upheld unless they are clearly erroneous.

Westfall v. Anderson (1990), 244 Mont. 113, 115, 795 P.2d 976, 977 (citing Rase v. Castle Mountain Ranch, Inc. (1981), 193 Mont. 209, 216, 631 P.2d 680, 684). A finding is clearly erroneous if it is not supported by substantial evidence, if the district court misapprehended the effect of the evidence, or if this Court is left with the definite and firm conviction that a mistake has been made. Interstate Production Credit v. DeSaye (1991), 250 Mont. 320, 323, 820 P.2d 1285, 1287.

Issue 1

Did the District Court err in applying a 25 percent minority interest discount in determining the value of Sharon’s 600 shares of MRI stock?

Sharon argues that the District Court should not have applied a 25 percent discount in calculating the value of her shares. She argues that pursuant to § 35-9-501, MCA, a shareholder may petition the court for relief if the actions of a Montana statutory close corporation were illegal, oppressive, fraudulent, or unfairly prejudicial. The relief available includes the purchase of the petitioner’s shares at “fair value.” Section 35-9-503(2), MCA. Sharon maintains that MRI’s conduct was illegal, oppressive, fraudulent and unfairly prejudicial and she is therefore entitled to “fair value” which she further maintains is the value of the stock without application of the 25 percent discount.

Sharon also contends that the court erred in applying the 25 percent discount to the value of her stock by refusing to apply the dissenter’s rights provisions of Montana’s codes. Section 35-9-103(2), MCA, states that when a corporation reincorporates to become a statutory close corporation, any individual voting against close corporation status may assert dissenter’s rights pursuant to §§ 35-1-826 through -839, MCA. Section 35-1-827, MCA, states that when a shareholder dissents, the shareholder may obtain “fair value” of his or her shares from the corporation. Section 35-1-829(1), MCA, provides that when a shareholder will be entitled to dissenter’s rights, the corporation must notify the shareholder that he or she may assert dissenter’s rights prior to the vote of the shareholders. MRI did not notify Sharon of her right to assert dissenter’s rights. Sharon argues that the District Court sitting in equity should have afforded her “fair value” for her shares of the corporation. Again, Sharon asserts that “fair value” means the value of her shares without application of the 25 percent discount.

Sharon’s arguments fail for several reasons. First, in regard to her arguments under § 35-9-501, MCA, a review of the record reveals that the corporation’s actions were not illegal, oppressive, fraudulent or unfairly prejudicial. The District Court correctly noted that debts MRI paid to Florian and Virginia McCann were legally binding debts which the corporation had an obligation to pay. Paying the debts did not adversely affect Sharon’s distribution from MRI because payment of the debts served to reduce the indebtedness of the corporation which otherwise would have been deducted from the total value of the corporation in determining the corporation’s net value.

Nor did MRI’s decision to cease paying shareholder dividends violate § 35-9-501, MCA. MRI properly accounted for all monies which would have been paid as dividends. Elimination of dividends again increased MRI’s net worth, which was reflected in the value of Sharon’s stock.

Renewal of the Anderson lease was clearly a business decision and not a fraudulent or oppressive act. MRI’s agricultural holdings had been leased to Anderson for nearly two decades at the time of the lease renewal. The Anderson lease did not decrease the value of MRI’s holdings, but instead provided financial security for MRI’s shareholders. Renewal of such a lease cannot be viewed as oppressive or fraudulent. A careful review of the record does not support these or any other contentions that MRI acted illegally, oppressively, fraudulently or with unfair prejudice toward Sharon.

Secondly, Sharon did not institute an action pursuant to § 35-9-501, MCA. This section provides that a shareholder “may petition the district court for any of the relief described in 35-9-502 through 35-9-504[.]” This action was not commenced by a petition by Sharon seeking relief as an oppressed shareholder. Rather, this action is a declaratory judgment action commenced by MRI. In the course of litigating MRI’s declaratory judgment action, the parties entered into a stipulation by which the court was to determine the value of Sharon’s 600 shares of MRI stock. Sharon agreed to sell and MRI agreed to purchase said shares of MRI stock at the value established by the District Court. Therefore, the subject litigation was confined to these stipulated topics, and not the relief provided in § 35-9-501, MCA, et. seq.

Sharon likewise did not assert her dissenter’s rights nor did she institute proceedings to challenge MRI’s failure to notify her of such dissenter’s rights. Rather, Sharon stipulated to exchange her shares of MRI stock for a price established by the District Court.

Alternatively, Sharon has not established to the satisfaction of this Court that “fair value” necessarily excludes an application of a minority discount. Section 35-1-826(4), MCA, states:

“Fair value,” with respect to a dissenter’s shares, means the value of the shares immediately before the effectuation of the corporate action to which the dissenter objects, excluding any appreciation or depreciation in anticipation of the corporate action unless exclusion would be inequitable. [Emphasis added.]

While the corporate conduct which led to the dissenter’s suit should not be considered, nothing in this section prohibits considering a minority shareholder’s lack of control and the lack of marketability for minority shares when establishing “fair value.” Thus, the value of Sharon’s 600 shares prior to the complained of conduct may still be less than one-fourth of the total assets of MRI as a whole.

We have determined that minority discounts are appropriate under certain circumstances. In approving a 25 percent minority discount, we concluded:

A discount for a minority interest is appropriate when the minority shareholder has no ability to control salaries, dividends, profit distributions and day-to-day corporate operations.

In re Marriage of Milesnick (1988), 235 Mont. 88, 97, 765 P.2d 751, 757 (citing In re Marriage of Jorgensen (1979), 180 Mont. 294, 300, 590 P.2d 606, 610). In valuing Sharon’s shares, the District Court applied the specific methodology recommended by Sharon’s own expert share appraiser. The District Court correctly noted in its findings of fact:

The stock held by defendant is insufficient to control the activities of the corporation. While minority shareholders in a corporation must be treated fairly, especially those in a closely held corporation, the lack of control makes such shares less valuable. This is a known fact, which is reasonably contemplated by every person who holds a minority interest in a small corporation.

We agree with the District Court’s findings in these regards.

We conclude that the District Court did not err in applying a minority discount in calculating the value of Sharon’s 600 shares of MRI stock. Sharon has not established that those in control of MRI acted in an illegal, oppressive, fraudulent or unfairly prejudicial manner. She has not established any prejudice to her from the corporation’s failure to notify her of her dissenter’s rights, because all she was entitled to, in any event, was the “fair value” of her shares. Further, she has not established that “fair value” precludes the application of a minority discount. We hold that the court’s findings of fact were not clearly erroneous.

Issue 2

Did the District Court err in refusing to award Sharon attorney fees and costs?

Sharon argues that the court erred in refusing to award her attorney fees and costs, again basing her arguments on §§ 35-9-501 and 35-1-826 through -839, MCA. We reiterate that this is not a dissenter’s right action or an oppressed shareholder petition. Regardless, the above statutory provisions vest the District Court with discretion concerning an award of attorney fees. If not otherwise specified by statute, an award of costs is left to the sound discretion of the court. Section 25-10-103, MCA.

The record reveals that the District Court did not abuse its discretion in requiring Sharon and MRI to bear their respective costs of litigation. This action was of a declaratory nature, with both parties stipulating to the scope of the litigation. Neither party can be considered the “prevailing” party in this equitable proceeding.

Sharon also challenges the District Court’s calculations of MRI’s direct litigation expenses, these costs being added to the corporation’s assets prior to determining the value of Sharon’s 600 shares. Sharon maintains that MRI’s costs and fees were $22,550, rather than the $15,846 established by the court. However, Sharon’s valuation of MRI’s costs and fees spent as a direct result of litigation is based on speculative trial testimony and unsupported by the record.

The District Court’s findings of fact were supported by substantial evidence, the court did not misapprehend the effect of the evidence, and we are not left with the definite and firm conviction that a mistake has been committed. We hold that the court did not err in its determination concerning attorney fees and costs.

We affirm the decision of the District Court.

JUSTICES HUNT, NELSON, ERDMANN and LEAPHART concur.


author: JUSTICE ERDMANN JUSTICE TRIEWEILER

text:
    WILL GOYEN and BONNIE GOYEN, Plaintiffs and Appellants, v. CITY OF TROY, MONTANA, a body politic and corporate; the CITY COUNCIL thereof; and ROD JOHNSON, Mayor; JIM HAMMONS, LORETTA JONES, RON PIERCE, and LAURA SCHRADER, in the official capacity as City Council members, Defendants and Respondents.
    No. 95-491.
    Submitted on Briefs March 14, 1996.
    Rehearing Denied May 23, 1996.
    Decided April 22, 1996.
    53 St.Rep. 353.
    915 P.2d 824.
    276 Mont. 213.

      For Appellants: Michael H. Keedy, Atherton & Keedy, Kalispell.
    For Respondents: Thomas R. Bostock, Warden, Christiansen, Johnson & Berg, Kalispell.
   JUSTICE ERDMANN

delivered the Opinion of the Court.

This is an appeal from an order of the Nineteenth Judicial District Court, Lincoln County, denying Will and Bonnie Goyens’petition and quashing their application for alternative writs of mandamus and prohibition. We affirm.

The dispositive issues are as follows:

1. Did the District Court err in concluding there was no violation of the open meeting law in regard to the May 10, 1995, meeting?

2. Did the District Court err in concluding there was no violation of the open meeting law in regard to the August 16, 1995, hearing?

3. Did the District Court err in quashing the writs of mandamus and prohibition?

FACTS

Will Goyen was the Chief of Police in Troy. At the May 10, 1995, city council meeting, a number of citizens showed up to question the mayor concerning Goyen’s involvement in an incident locally known as “gravel-gate.” The gravel-gate incident involved the removal of a significant quantity of gravel from a city gravel pile by both Goyen and another individual. Apparently Goyen had permission from a council member to use a city vehicle and remove the gravel. However, while Goyen was removing the gravel, another private citizen was also at the gravel pile and removed approximately seventy yards of gravel without any authority to do so. Goyen took no action to stop or to report the violation.

The gravel-gate incident was not on the May 10 agenda and the mayor and city council were not aware that it would be raised prior to the meeting. Goyen was not present at the meeting. When the issue was raised at the meeting, the mayor stated that the matter was a personal problem and would not be handled at a public meeting. Following the meeting, the council went into executive session to discuss the allegations against Goyen. Goyen was not notified that the council would be closing the meeting to discuss matters that impacted on his individual privacy rights.

Before the council went into executive session, Crystal Denton, a local woman, asked the mayor that she be permitted to speak privately to the council. The mayor testified that he did not know what she wanted to talk about. Denton informed the council that she and Goyen had engaged in several voluntary acts of sexual intercourse in or near the city patrol car while Goyen was on duty and in uniform. The mayor and the council listened to these allegations and informed Denton that she needed to file a sworn statement before any action could be taken. Denton later filed a sworn statement and the mayor confronted Goyen with the allegations. Goyen denied the content of her allegations.

Members of the community raised a number of additional allegations in regard to Goyen and as a result the mayor suspended Goyen for five days. On August 1,1995, a letter was prepared recommending discharge and a pre-termination discharge hearing was scheduled for August 16, 1995.

The August 16 hearing was held in open session and Goyen and his attorney were given the right to cross-examine all witnesses. At Denton’s request, the meeting was closed during her testimony although Goyen and his attorney were allowed to remain. During Denton’s testimony, the council was informed that another witness, Sharon Anderson, needed to testify at that time due to her work schedule. Since the council did not have subpoena power, they interrupted Denton’s testimony and allowed Anderson to testify. The mayor was aware that Anderson’s testimony concerned the relationship between Denton and Goyen and therefore kept the meeting closed. Goyen did not object to this closure. Anderson testified as to her observations of physical contact between Denton and Goyen while Goyen was on duty and in uniform. Following Anderson’s testimony, Denton continued with her testimony in closed session.

The hearing took a total of nine and one-half hours and the council conducted their deliberations in open session. The council voted unanimously to fire Goyen, finding that he had not been truthful in his response to the gravel issue and that a preponderance of the evidence indicated that he had sexual intercourse with Denton on at least two occasions while he was on duty, in uniform, and using the patrol car. The council also found that Goyen had wrongfully removed beer from the city police evidence locker and that he had improperly handled a traffic arrest by permitting an obviously intoxicated minor to drive an uninsured vehicle which resulted in damage to the vehicle.

Following his discharge, Goyen and his wife filed a petition to void the city council’s decision pursuant to the open meeting law and also filed writs of mandamus and prohibition. These claims were combined in a single action. The court initially issued the alternative writs but following a hearing on a motion to quash, subsequently quashed the writs and dismissed the petition. From the court’s denial of the Goyens’ petition and writs, they appeal.

ISSUE 1

Did the District Court err in concluding there was no violation of the open meeting law in regard to the May 10, 1995, meeting?

Section 2-3-203, MCA, provides that all meetings of governmental bodies be open with the following exception:

[T]he presiding officer of any meeting may close the meeting during the time the discussion relates to a matter of individual privacy and then if and only if the presiding officer determines that the demands of individual privacy clearly exceed the merits of public disclosure. The right of individual privacy may be waived by the individual about whom the discussion pertains and, in that event, the meeting must be open.

Section 2-3-203(3), MCA.

In its conclusions of law, the District Court determined that The closure of the May 10 meeting to the public by the Mayor was made for the individual privacy of Will Goyen, and the Mayor had made a determination that the demands of individual privacy clearly exceeded the merits of public disclosure; the continued closure while Crystal Denton addressed the council still involved the individual privacy of Will Goyen, and it also included Denton’s right to privacy, apart from the fact that there was no one else there anyhow; and, nothing was done by the council, so there is nothing to void.

While the District Court’s conclusion upheld a discretionary decision to close the meeting on May 10, our review is based upon the District Court’s interpretation of § 2-3-203, MCA, and so we will review the court’s conclusion for correctness of law. See Day v. Child Support Enforcement Div. (1995), 272 Mont. 170, 175, 900 P.2d 296, 299.

Goyen asserts he did not attend the May 10 meeting because he had no notice that he was going to be discussed. Without notice, Goyen argues he was in no position to either assert or waive his right of individual privacy. Therefore, he claims any discussion pertaining to him should have transpired in open session pursuant to § 2-3-203, MCA, so that the public could adequately evaluate whether the resulting action by the council — Goyen’s discharge — was fair and appropriate. Goyen contends his discharge should be void as a result of the council’s violation in closing the May 10 meeting.

As noted, § 2-3-203, MCA, allows an individual about whom the discussion pertains to waive his or her right of individual privacy. That right is ineffectual where the individual had no notice of the closure. A right granted is presumed to include whatever rights are essential to its use. Section 1-3-213, MCA. Therefore, the statutory right to waive individual privacy implies that notice must be given to the individual discussed so that he or she has the opportunity to waive this right.

In the present case, the council discussed the allegations against Goyen concerning gravel-gate in executive session because the mayor, as the presiding officer, determined the demands of Goyen’s privacy interests clearly exceeded the merits of public disclosure. Once the demands of individual privacy were found to predominate, the council was obligated to notify Goyen so that he could exercise his right to waive that interest. Goyen was not notified. As a result, the council’s discussion of Goyen’s privacy interest in executive session violated § 2-3-203, MCA, of the open meeting statutes.

It must be noted, however, that once the mayor determined that Goyen’s privacy interest outweighed the public’s right to know, the council could not discuss the matter in open session without subjecting themselves to a potential action for invasion of Goyen’s privacy. In these situations, public bodies subject to the open meeting law should simply defer any discussion of the issue until the individual whose privacy interest is involved is notified and is given the opportunity to attend the meeting and/or waive his or her right of privacy and have the meeting conducted in open session. Thus, without notice to Goyen the discussion of the gravel-gate incident during an open meeting on that date would have been inappropriate as well.

As for the May 10 Denton allegations, Goyen’s privacy interest was again the topic of discussion. Consequently, Goyen had a right to be notified of that discussion, regardless of whether Denton’s assertion of her own privacy interest was reason enough to close the meeting. While the council asserts they took no action in executive session other than to recommend to Denton that she provide them with a sworn statement, the meeting was still subject to the open meeting laws set forth in §§ 2-3-201 through -221, MCA. In State v. Conrad (1982), 197 Mont. 406, 643 P.2d 239, we reviewed the legislative history of the open meeting law and said, “while the original section [now § 2-3-203, MCA] required that meetings at which action was taken be open, the section as amended required that all public meetings be open, whether action was taken or not.” Conrad, 643 P.2d at 242. Accordingly, the May 10 meeting was subject to the requirements for open meetings regardless of whether any action was taken.

Nevertheless, no adverse action was taken against Goyen at the May 10 meeting and the subsequent hearing on August 16 provided Goyen with notice and the opportunity to confront those testifying against him and to observe, in open session, the council's deliberations before any action was taken. We have held that a meeting in violation of § 2-3-203, MCA, will not result in the voidance of a final decision where that final decision was not based upon actions taken at the illegal meeting. Common Cause v. Statutory Committee (1994), 263 Mont. 324, 333-34, 868 P.2d 604, 609 (comparing a governor’s appointment which considered but was not bound by a list of candidates developed at a meeting held in violation of § 2-3-203, MCA, with the Board of Trustees v. Board of County Commissioners (1980), 186 Mont. 148, 606 P.2d 1069, where the Court voided a decision based solely upon a meeting held in violation of § 2-3-203, MCA.) The council took no action at the May 10 meeting and the decision to discharge Goyen was based upon testimony and evidence presented at the August 16 hearing. Under this factual situation the illegal May 10 meeting did not taint the August 16 hearing and the council’s ultimate decision cannot be voided for the earlier violations.

While the District Court erred in concluding that the May 10 meeting did not violate the open meeting law, we have determined this error is harmless given the subsequent events of August 16. We have stated that “a district court’s decision will not be reversed or remanded when the eventual result of the case would be the same without the error.” In re S.C. (1994), 264 Mont. 24, 30, 869 P.2d 266, 269. We therefore conclude the District Court did not commit reversible error when it determined there was no violation of the open meeting law in regard to the May 10 meeting.

ISSUE 2

Did the District Court err in concluding there was no violation of the open meeting law in regard to the August 16, 1995, hearing?

Goyen was provided notice of the August 16 meeting and he waived his privacy interest in favor of an open meeting. Denton, however, requested closure of the meeting during her testimony. Anderson’s testimony pertained to Denton and the council continued its closed meeting throughout her testimony as well.

In its conclusions of law, the District Court determined the council did not violate § 2-3-203, MCA, due to the fact that

[t]here was a specific request by Denton for a closed meeting on August 16, 1995, and again, the demand for individual privacy of Denton clearly exceeded the merits of public disclosure; the request of Anderson to be heard out of order was unexpected, but the nature of her testimony was known to the Mayor, and it involved matters personal to Will Goyen and Crystal Denton; notwithstanding Goyen had waived his right to privacy, Denton had expressly demanded hers.

We will review the District Court’s conclusion of law for its correctness. See Day, 900 P.2d at 299.

Goyen contends Denton’s privacy interest was not at issue, and therefore, the District Court erred in concluding that the council did not violate § 2-3-203, MCA, when it closed the meeting to the public given that Goyen had waived his privacy interest.

Section 2-3-203(3), MCA, provides that “[t]he right of individual privacy may be waived by the individual about whom the discussion pertains and, in that event, the meeting must be open.” In interpreting statutes, our role is to ascertain what is contained in the statute, not to insert what has been omitted nor to omit what has been inserted. Section 1-2-101, MCA; see Lovell v. State Comp. Mut Ins. Fund (1993), 260 Mont. 279, 285, 860 P.2d 95, 99. “[I]t is fundamental that words and phrases are to be given their plain, ordinary and usual meaning” when construing statutes. Common Cause, 868 P.2d at 608. The plain meaning of § 2-3-203(3), MCA, does not limit its exception to the individual who is the subject of the proceeding.

Furthermore, we have held that an accuser and witnesses to an alleged incident have a subjective privacy interest which society is willing to recognize as reasonable in an investigation focused on the accused. See Bozeman Daily Chronicle v. Police Dept. (1993), 260 Mont. 218, 230, 859 P.2d 435, 441. The exception applies to the “individual” about whom the discussion pertains. Denton’s and Anderson’s testimony pertained to the conduct of both Denton and Goyen. Denton, as an individual about whom the discussion pertained, could therefore assert her privacy interest in closed session where that interest was determined to exceed the merits of public disclosure.

Given that conclusion, Goyen contends the demands of Denton’s privacy interest did not exceed the merits of public disclosure. Pursuant to our state constitution, the public has the right “to observe the deliberations of all public bodies ... except in cases in which the demand of individual privacy clearly exceeds the merits of public disclosure.” Mont. Const, art. II, § 9. The District Court determined that Denton’s privacy interest did in fact clearly exceed the merits of public disclosure, and we will review the court’s determination for an abuse of discretion. See State v. Burns (1992), 253 Mont. 37, 40-41, 830 P.2d 1318, 1321.

In Hastetter v. Behan (1982), 196 Mont. 280, 639 P.2d 510, we set forth a two-prong test whereby a court may decide whether a privacy interest is protected under the state constitution. First, we must determine whether the person involved had a subjective or

actual expectation of privacy; and second, we must determine whether society is willing to recognize that expectation as reasonable. Hastetter, 639 P.2d at 512-13 (citing Smith v. Maryland (1979), 442 U.S. 735, 99 S. Ct. 2577, 61 L. Ed. 2d 220). We have relied upon this test in subsequent cases. Flesh v. Board of Trustees (1990), 241 Mont. 158, 165, 786 P.2d 4, 8; Great Falls Tribune v. Dist. Court (1989), 238 Mont. 310, 318, 777 P.2d 345, 350; Missoulian v. Board of Regents of Higher Education (1984), 207 Mont. 513, 522, 675 P.2d 962, 967; Montana Human Rights Div. v. City of Billings (1982), 199 Mont. 434, 442, 649 P.2d 1283, 1287.

Goyen contends Denton had no expectation of privacy given the fact that her charges against Goyen were common knowledge in the local community. We have nonetheless recognized that even “harmless or generally known information” is subject to constitutional protection. Missoulian, 675 P.2d at 969. Denton requested that her testimony be presented in private due to the fact she was married, had two small children, and lived in the community. Her relationship with Goyen, while allegedly known by others, was certainly private in nature.

In Missoulian, we stated that the “ ‘right of privacy turns on the reasonableness of the expectation, which may vary, even regarding the same information and the same recipient of that information.’ ” Missoulian, 675 P.2d at 968 (quoting Montana Human Rights, 649 P.2d at 1288). Considering the subject matter of Denton’s and Anderson’s testimony and the surrounding circumstances, we determine that Denton had a reasonable subjective expectation of privacy and one which society is willing to recognize. Having met both prongs of the test in Hastetter, we conclude that the District Court did not abuse its discretion in its determination that Denton’s privacy interest exceeded the merits of public disclosure.

ISSUE 3

Did the District Court err in quashing the writs of mandamus and prohibition?

The Goyens filed alternative writs of mandamus and prohibition in addition to their petition to void the council’s decision. The District Court concluded that mandamus will not lie to control the discretion of a municipal body or officer, and that prohibition will not lie where the defendants were not exercising judicial functions. The court denied both writs in accordance with its conclusions.

We will review a district court’s grant or denial of writs of mandamus and of prohibition for correctness of law. See Becky v. Butte-Silver Bow School Dist No. 1 (1995), [274 Mont. 131], 906 P.2d 193, 195 (reviewing writs of mandamus); and Awareness Group v. Board of Trustees (1990), 243 Mont. 469, 475, 795 P.2d 447, 451 (comparing writs of mandamus and prohibition). Generally, the purpose of a writ of mandamus is to compel activity, while the purpose of a writ of prohibition is to refrain from performing certain activities. Awareness Group, 795 P.2d at 451.

The Goyens rely upon Board of Trustees v. Board of County Commissioners (1980), 186 Mont. 148, 606 P.2d 1069, where we held that a writ of mandamus was appropriate to void a meeting that was in violation of our open meeting statutes. Bd. of Trustees, 606 P.2d at 1074-75. In that case, the Court was concerned about the unreasonable delay of the case and concluded that “[w]hile the use of a writ of mandamus is not textbook law, it is appropriate here.” Bd. of Trustees, 606 P.2d at 1075. The Court then stated “[i]n the future, however, it would seem the suit should take the form of a simple petition to void an action or a petition for a declaratory judgment.” Bd. of Trustees, 606 P.2d at 1075. We take this opportunity to reiterate that actions for violations of the open meeting law are appropriately brought by a petition alleging violation of the act pursuant to § 2-3-203, MCA. Writs of mandamus and prohibition are not appropriate for the enforcement of those provisions.

There was no unreasonable delay in the present case and the Goyens did in fact appropriately petition the court under § 2-3-203, MCA, to void the council’s actions. We conclude the writs are therefore not appropriate as a matter of law and the District Court did not err in denying them, regardless of its reasons. See Kephart v. Portmann (1993), 259 Mont. 232, 236, 855 P.2d 120, 122-23.

Affirmed.

JUSTICES GRAY, HUNT and LEAPHART concur.

JUSTICE TRIEWEILER

concurring in part and dissenting in part.

I concur with the majority’s conclusion that the District Court did not commit reversible error when it determined that there was no violation of the open meeting law on May 10,1995.1 also concur that the District Court did not abuse its discretion when it denied the Goyens’ petitions for writ of mandamus or writ of prohibition.

I dissent from that part of the majority opinion which concludes there was no violation of the open meeting law on August 16, 1995, because of Crystal Denton’s privacy interest. I would conclude that someone who engages in voluntary acts of sexual intercourse in a police car with a police officer who is on duty, and then after the fact goes to a city council meeting to complain about the experience, has no reasonable expectation of privacy which society should be prepared to recognize, and therefore, that the second prong of the Hastetter test cannot be satisfied. Since there was no other basis for closing the city council’s meeting to the public, the city council violated the open meeting law when it did so.


text:
    MARK N. ROBERTS, Plaintiff/Appellant, v. EMPIRE FIRE AND MARINE INSURANCE COMPANY, Defendant/Respondent.
    No. 96-127.
    Ordered April 23, 1996.
    53 St.Rep. 359.
    915 P.2d 872.
    276 Mont. 225.
   OPINION AND ORDER

This matter comes before the Court on defendant Empire Fire and Marine Insurance Company’s motion to dismiss plaintiff Mark Roberts’ appeal for lack of jurisdiction.

FACTS

Roberts filed a complaint against Empire in the Eighteenth Judicial District Court, Gallatin County, alleging unfair insurance claims practices in the settlement of an automobile property damage claim.

On May 22, 1995, the District Court entered judgment of liability by default against Empire and on October 2, 1995, a hearing to determine compensatory and punitive damages was held. On October 19, 1995, the District Court entered its findings of fact, conclusions of law, and final judgment against Empire in the amount of $615,000.

On December 4, 1995, after final judgment had been filed in the District Court of the State of Nebraska (the state where Empire is incorporated) Empire filed a motion for relief from judgment pursuant to Rule 60(b)(1) and (6), M.R.Civ.P. Empire claimed that Roberts’ complaint was misfiled through mistake, inadvertence, or excusable neglect and, in the alternative, that relief should be granted due to the extraordinary circumstances of the case, including the substantial amount of money awarded.

On February 2, 1996, the District Court set aside the default judgment and on February 20, 1996, the court entered its memorandum in support of order. The District Court stated that Rule 60(b)(1), M.R.Civ.P., “provides a basic correction system for protecting the legal process from errors caused by neglect, inadvertence, and mistake— clearly, improper foundations upon which to base legal judgments.”

On February 5, 1996, Roberts filed a notice of appeal with this Court and on March 28, 1996, Empire filed a motion to dismiss Roberts’ appeal for lack of jurisdiction, claiming that an order granting a motion to vacate a default judgment is nonappealable.

DISCUSSION

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

(b) In civil cases a party aggrieved may appeal from a judgment or order, except when expressly made final by law, in the following cases:
(2) ... from any special order made after final judgment....

Empire relies on Shields v. Pirkle Refrigerated Freightlines (1979), 181 Mont. 37, 591 P.2d 1120, and Kinion v. Design Systems, Inc., (1980), 190 Mont. 226, 620 P.2d 852. In Shields we stated:

In all this long history, the appealability of orders granting motions to set aside default judgments has never been specifically questioned. We find no Montana cases holding that such orders may be appealed from. There is, however, dictum to the effect.

Shields, 591 P.2d at 1122. The Shields Court noted such dictum in State ex rel. Deck v. District Court, (1922), 64 Mont. 110, 207 P. 1004, where we stated that “[a]n order setting aside or refusing to vacate a default judgment is a special order made after final judgment within the meaning of the statute” Deck, 207 P. at 1005. One year later in Kinion we stated:

In [Shields] we specifically held that an order vacating a default a default judgment is only appealable as a final judgment under Rule 1, M.R.App.Civ.P., if the result of the order is to finally dispose of the case. In the present case the order vacating the default judgment left the case pending in the Cascade County District Court for a trial on the merits. As a result, no final judgment was entered, the District Court order was interlocutory and the appeal is not properly before this Court.

Kinion, 620 P.2d at 853.

Roberts argues that the District Court’s damages judgment was a “final judgment” and that the court’s order granting Empire’s motion for relief from judgment was a “special order made after final judgment.” Thus, according to Roberts, this Court has jurisdiction to consider his appeal. Roberts relies on In re Marriage of Rex (1982), 199 Mont. 328, 649 P.2d 460, and In re Marriage of Martin (1994), 265 Mont. 95, 874 P.2d 1219. In Rex we stated that “[a]n appeal from any special order made after final judgment includes an order setting aside or refusing to vacate a default judgment.” Rex, 649 P.2d at 461. Likewise, in Martin we stated that “[a]n order made after final judgment setting aside or refusing to vacate a default judgment is a special order”. Martin, 874 P.2d at 1222.

Rex and Martin do not reference or distinguish the Shields rule, and as a result there is confusion in this area as to whether an order setting aside a default judgment is appealable under Rule 1(b)(2), M.R.App.P. We take this opportunity to clarify this area and find that Rex and Martin more accurately reflect the plain language of Rule 1(b)(2), M.R.App.P.

In the present case, final judgment on liability and damages was entered against Empire and the District Court’s order setting aside the default judgment was a special order made after final judgment. We therefore conclude, based on the clear language of Rule 1(b)(2), M.R.App.P, that this Court has jurisdiction over Roberts’ appeal from the District Court’s order setting aside the default judgment. To the extent Shields and Kinion are inconsistent with this opinion and order they are hereby overruled. Therefore,

IT IS HEREBY ORDERED that Empire’s motion to dismiss Roberts’ appeal for lack of jurisdiction is DENIED.

The Clerk is directed to mail copies of this order to counsel of record and to the Clerk ofCourtfor the Eighteenth Judicial District, Gallatin County.

DATED this 23rd day of April, 1996.

/S/J.A.TURNAGE

/S/ CHARLES E. ERDMANN

/S/JAMES C. NELSON

/S/ WILLIAM E. HUNT, SR.

/S/KARLA M. GRAY

/S/ W. WILLIAM LEAPHART


author: JUSTICE HUNT

text:
    SWANDAL RANCH CO., Plaintiff and Appellant, v. JIM HUNT, TERRY SARRAZIN and CARLO CEIRI, Commissioners of Park County; and PARK COUNTY, a political subdivision of the State of Montana, and ROBERT H. BURNS, HORATIO W. BURNS, SETH S. BURNS, LINDSAY H. BURNS and CAMERON H. BURNS, Defendants and Respondents.
    No. 95-096.
    Submitted on Briefs January 11, 1996.
    Decided April 23, 1996.
    53 St.Rep. 361.
    915 P.2d 840.
    276 Mont. 229.

      For Appellant: Belinda D. Rinker, Bozeman.
    For Respondent: David L. Weaver, Bozeman; Leanne M. Schraudner, Schraudner & Hillier, Bozeman.
   JUSTICE HUNT

delivered the Opinion of the Court.

Appellant, Swandal Ranch Company, appeals the November 1994 judgment of the Sixth Judicial District Court, Park County, granting Park County a prescriptive easement to ‘Wallrock Road.”

We affirm.

The sole issue raised on appeal is: did the District Court err in concluding that Park County had established a county road through the Swandal Ranch by prescriptive use?

FACTS

The Swandal Ranch Company (SRC) owns Sections 29 and 30, Township 4 North, Range 8 East, in Park County, Montana. The predecessors to SRC, Neis and Thora Swandal, acquired title to the land in 1946. In 1993, SRC commenced action to quiet title to a stretch of roadway on the ranch, which is commonly referred to as Wallrock Road.

Wallrock Road begins at Highway 89, about three miles north of Wilsall, Montana, and continues through the Swandal Ranch in Sections 29 and 30 until it reaches a point in neighboring Gallatin County. Sometime between 1990 and 1992, SRC began locking a gate at the entrance of its land on Wallrock Road.

SRC then began proceedings to quiet title to Wallrock Road against the Park County Commissioners and Park County (Park Comity). Park County answered SRC’s complaint by asserting that the county had established a public easement through prescriptive use and pursuant to the statutory process. According to SRC’s brief, prior to trial SRC moved for summary judgment on Park County’s claim of an easement by statutory process and the District Court granted the motion. The issue of the county’s claim to an easement by statutory process has not been raised in this appeal.

The owners of the property adjoining SRC’s land, Robert H. Burns and family (Burns), were granted permission to intervene as defendants. The Burns alleged they held a private easement to Wallrock Road based on prescriptive use.

A bench trial was held in August 1994. Witnesses testified that Wallrock Road was used by area landowners, hunters, loggers, and recreationists. Park County introduced the maintenance records for Wallrock Road. A Park County employee testified that the county had maintained the road from 1956 to 1989, this included installing a culvert in the mid-1950’s. Maintenance ceased after SRC began locking the gate to the entrance of the ranch.

Other evidence included area maps that identified Wallrock Road as a county road. Park County also presented a 1950 declaration by Park County Commissioners that Wallrock was a county road, and the subsequent publication of the Commissioners’ meeting minutes containing this declaration in a local newspaper.

Following the trial, the District Court concluded that the Burns had not established a prescriptive easement to the road, but that Park County had. Judgment was entered and Wallrock Road was declared a Park County road.

SRC appeals.

STANDARD OF REVIEW

A district court’s findings of fact will not be set aside unless they are clearly erroneous. Rule 52(a), M.R.Civ.P.; Glenn v. Grosfield (1995), [274 Mont. 192], 906 P.2d 201, 202. Conclusions of law by a district court are reviewed to determine whether the tribunal’s interpretation of the law is correct. Public Lands Access, Inc. v. Boone and Crockett (1993), 259 Mont. 279, 283, 856 P.2d 525, 527.

DISCUSSION

Did the District Court err in concluding that Park County had established a county road through the Swandal Ranch by prescriptive use?

On appeal, SRC argues that Park County’s claim of a prescriptive easement to Wallrock Road fails for two reasons. First, SRC contends Park County failed to prove the element of adversity necessary to establish a prescriptive easement. Second, SRC alleges that the public use of Wallrock Road was permissive and therefore could not ripen into prescriptive use.

In Montana, a prescriptive easement is created by operation of the law. See Woods v. Houle (1988), 235 Mont. 158, 160-62, 766 P.2d 250, 252. To establish either a public or private easement by prescription, the party claiming the easement must show “open, notorious, exclusive, adverse, continuous and uninterrupted use of the easement claimed for the full statutory period. The statutory period is five years.” Section 70-19-404, MCA; Unruh v. Tash (1995), 271 Mont. 246, 250, 896 P.2d 433, 435. The elements of prescriptive easement have been defined through case law. See Rappold v. Durocher (1993), 257 Mont. 329, 849 P.2d 1017; Lemont Land Corp. v. Rogers (1994), 269 Mont. 180, 887 P.2d 724.

In prior cases, this Court has discussed the public acquisition of a prescriptive easement to a private road:

That the public may acquire the right by prescription to pass over private land is undisputed and such is the law in Montana. To establish the existence of a public road by prescription it must be shown that the public followed a fixed and definite course continuously and uninterruptedly for the prescribed statutory period together with an assumption of control and adverse to the owner...

Granite County v. Komberec (1990), 245 Mont. 252, 257, 800 P.2d 166, 169.

SRC first contests the District Court’s findings and conclusions with respect to the requirement of adversity. Specifically, SRC argues that the evidence presented by Park County failed to prove the element of adversity.

In order for a claim to be adverse, “the use of the alleged easement must be exercised under a claim of right and not as a mere privilege or license revocable at the pleasure of the owner of the land; such claim must be known to, and acquiesced in by, the owner of the land.” Rappold, 849 P.2d at 1019 (citing Keebler v. Harding (1991), 247 Mont. 518, 521, 807 P.2d 1354, 1356-57).

In support of its argument, SRC argues that evidence regarding the declaration of Wallrock Road as a county road was misconstrued by the District Court. This evidence was used by the District Court in Finding of Fact No. 58:

That the action of the Park County Commissioners specifically declaring that portion of the Wallrock Road traversing Sections 29 and 30 of Township 4 North, Range 8 East as a county road on October 3, 1950, and published in the Livingston Enterprise on Monday, November 27, 1950, a newspaper of general circulation in Park County, was sufficient to give the Plaintiffs and their predecessors in interest, actual knowledge of the adverse use and hostile claim of Park County...

SRC contends that the County Commissioner’s 1950 declaration of Wallrock Road as a county road and the subsequent publication of its meeting minutes in the local newspaper were not intended to assert an adverse claim to Wallrock Road. Instead, SRC contends that the Commissioners made the 1950 declaration merely to facilitate a related land purchase, and that the Commissioners did not intend to put the affected landowners on notice of an adverse claim.

Park County has conceded that the October, 1950 action by the County Commissioners was legally inadequate to create a county road through the statutory process. Park County’s claim to statutory easement was dismissed by partial summary judgment prior to trial, and has not been raised for review on this appeal.

In spite of this, the evidence regarding the 1950 declaration and subsequent publication of the minutes is relevant to a claim of prescriptive easement. Regardless of the intent of the Commissioners, this evidence can be used to support a finding that SRC had knowledge of Park County’s adverse claim to Wallrock Road in 1950.

Next, SRC argues the evidence of the maintenance of Wallrock Road was intermittent and nonexclusive, and therefore does not support the element of adversity.

However, the record indicates that the maintenance was not “intermittent” rather, that it was performed on a regular basis every year. While the records were not available for the entire period from 1950 to 1992, a Park County employee, Robert Youngberg, testified that he had either graded or directed the maintenance of Wallrock Road to the Gallatin County line from 1956 until his retirement in 1989. The county discontinued maintenance only after SRC began locking the gate to the entrance to the ranch on Wallrock Road. Additional evidence established that Park County had improved the road by installing a culvert on Wallrock Road in Section 29 in the mid-1950’s.

Furthermore, the 1950 declaration and records of road maintenance represent only a portion of Park County’s evidence supporting the element of adversity. Park County provided other evidence indicating adverse use. Several witnesses testified that the road was used to support logging and timber hauling, provide access to seasonal residences, and to haul livestock. The county presented several maps, including a “Clerk Recorders Map” of 1936, and a 1960 State of Montana document entitled “Montana County Maps,” both of which delineate the road through Sections 29 and 30 as a Park County road.

A District Court’s findings of fact must be supported by substantial evidence, which is the amount of relevant evidence a reasonable mind might accept as adequate to support a conclusion. Wallace v. Department of Fish, Wildlife & Parks (1995), 269 Mont. 364, 371, 889 P.2d 817, 822. In this case, a review of the entire record provides the necessary relevant evidence to support the District Court’s finding of adversity. Therefore, we conclude that Park County did not fail in proving the element of adversity in its claim to a prescriptive easement.

SRC’s second contention is that the use of Wallrock Road was permissive and could not be subject to a prescriptive easement. In Montana, if an owner shows permissive use, no easement can be acquired since the theory of prescriptive use is based on adverse use. Public Lands, 856 P.2d at 527.

Once the party seeking the easement has established all of the elements of prescriptive easement the burden is then on the owner to show that the use was permissive. See Rathbun v. Robson (1983), 203 Mont. 319, 322, 661 P.2d 850, 852; Warnack v. Coneen Family Trust (1994), 266 Mont. 203, 879 P.2d 715. In this case, SRC does not contest the other elements for establishing a prescriptive easement besides the element of adversity. Having previously determined that the District Court’s conclusion of adversity was a correct interpretation of the law, it becomes SRC’s burden to establish that the use of the road was permissive. Rathbun, 661 P.2d at 852.

In support of this contention, SRC argues that it was local custom and accommodation for neighbors to pass freely over one another’s property. In Montana, neighborly accommodation and courtesy are permissive in nature and therefore the use cannot be construed as adverse. Public Lands, 856 P.2d at 528. SRC argues that witnesses, including the Burns and the Swandals agree that the shared use of the road was an agreeable neighborly practice.

In contrast, Park County presented members of the general public, besides the neighboring Burns, who testified that they had not sought permission from SRC to use Wallrock Road. Furthermore, Park County argued that prior to the annual maintenance of Wallrock Road, county employees did not contact the Swandals for permission to grade the road. Park County also argues that SRC’s theory of “neighborly accommodation” does not apply in this situation because Park County is not claiming a private prescriptive easement. Therefore, by its very nature, “neighborly accommodation” is not relevant.

At trial, both sides presented evidence as to whether use of the road was permissive or adverse. A review of the record shows that Park County submitted substantial evidence to show the use of the road was not permissive, this Court has held that a district court sitting as a fact finder, is in the best position to determine whether use was permissive or adverse. Granite, 800 P.2d at 169.

The District Court found and we agree that the substantial evidence supports a finding that the use of Wallrock Road was not neighborly accommodation, and was therefore not permissive.

Affirmed.

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