author: JUSTICE HUNT

text:
    BIING SONG LEE and MEI-HSUI LEE, Plaintiffs, Respondents, and Cross-Appellants, v. JAMES T. KANE and DEIRDRE KANE a/k/a D. KANE, Defendants, Counterclaimants, Third-Party Plaintiffs and Appellants, v. BIING SONG LEE and MEI-HSUI LEE, Counterclaim Defendants, v. YU-CHI LAI, Third-Party Defendant.
    No. 94-163.
    Submitted on Briefs January 19, 1995.
    Rehearing Denied May 4, 1995.
    Decided April 11, 1995.
    52 St.Rep. 268.
    270 Mont. 505.
    893 P.2d 854.

      For Appellants: John A. Lence, Attorney at Law, Kalispell.
    For Respondents: James D. Moore, Morrisons, McCarthy and Moore, Kalispell.
   JUSTICE HUNT

delivered the Opinion of the Court.

James T. Kane appeals from the jury verdict and denial of his post-trial motions in the Eleventh Judicial District Court, Flathead County. Biing Song Lee cross-appeals. We affirm in part and remand for determination of damages for Lee’s future economic loss, hearing loss, and pain and suffering.

We frame the issues on appeal as follows:

1. Did the District Court err in denying Kane’s motion for judgment as a matter of law on the issue of contract damages and lost profits?

2. Was there sufficient evidence to support the jury’s award of contract damages?

3. Did the District Court err by limiting damages for lost profits to the time period prior to the restaurant’s closing?

4. Does substantial evidence support an award of no damages for Lee’s pain and suffering and for his hearing loss?

In 1990, Biing-Song Lee and his family decided to move from Vermont to Montana. Before moving, Lee traveled to Whitefish, Montana, to find facilities in which to open a Chinese restaurant. He found a vacant facility previously used as a Chinese restaurant in a building owned by James Kane. Kane owned and operated a bar which was located in the same building as the restaurant facility. Kane and Lee entered into a lease agreement for the restaurant facility. They initially agreed on an annual rent of $18,000. Later Lee agreed to pay an additional $4000 in rent and Kane agreed to pay Lee 15 percent of the total drink sales that Lee made from Kane’s bar. Lee paid Kane $5000 of the rent in advance.

According to Lee, Kane agreed to make a variety of repairs before Lee opened the restaurant. These repairs included, but were not limited to, fixing holes in the walls, replacing broken windows, replacing the pilot light in the oven, installing a door, repainting the kitchen, and general cleaning. Lee hoped to open the restaurant by July 1, 1991. In anticipation of this opening date, Lee hired three people from San Francisco as staff and made arrangements for them to be in Whitefish on July 1.

Lee and his family moved to Montana in late June 1991. When they arrived, they discovered that virtually none of the repairs had been made. The facility lacked hot water, and at times lacked any water; the walls and carpet contained holes; and much of the equipment was either missing, broken, or unclean.

Despite the conditions, Lee paid Kane the remaining $17,000 in rent. Lee paid to have some equipment installed or repaired prior to opening the restaurant. Lee testified that he and his family and staff cleaned the facility and opened it for business on July 6, 1991.

Lee testified that throughout the time he operated the restaurant, he had problems with the equipment and the facilities. He also testified that, on numerous occasions, Kane entered the restaurant, including the kitchen area, without notice. According to Kane, he needed to enter the kitchen on various occasions to check the water gauges, as the water supply for his bar came through the kitchen.

Lee testified that after a few months he discovered that the 15 percent drink sales arrangement was illegal. He discontinued the practice, refunded to Kane the money he had received from the arrangement, and placed a sign in the restaurant stating that restaurant patrons would have to get their drinks directly from the bar. On October 8, 1991, Kane entered the restaurant during business hours and began taking pictures of the sign. Lee’s wife, Mei-Hsui Lee, asked Kane not to take photos in front of the customers, and told Kane to leave.

Kane left, but returned to the restaurant with his daughter, Deirdre Kane. Kane and Deirdre entered the kitchen, and an altercation ensued between Kane and Lee. Lee claimed that Kane assaulted and battered him and that Kane also pushed his sister Yu-Chi Lai. Kane claimed that Lee struck him first and that he only struck Lee to protect his daughter. The parties moved from the kitchen into the dining room area of the restaurant. There, Kane struck Lee on the face and/or head at least two times. According to Kane, he struck Lee to protect Deirdre. Kane claimed that Lee also struck him, but this claim was disputed by the testimony of patrons who witnessed the event. Deirdre and Mrs. Lee also struggled and physically interacted while in the dining room. Lee claimed that as a result of the fight, his hearing is now impaired. The Lees closed their restaurant on May 14, 1992.

The Lees filed a complaint against Kane on December 31, 1991. They filed an amended complaint on January 7,1992, adding Kane’s daughter as a defendant. On February 25, the Lees filed a second amended complaint that listed 15 causes of action arising from contractual problems and from the altercation on October 8,1991. On April 13, 1992, Kane and his daughter filed an answer and counterclaim against the Lees, listing eight causes of action, including assault and battery. On the same date, the Kanes also filed a third-party complaint against Lee’s sister Yu-Chi Lai for assault and battery.

On July 7,1992, the Lees filed their answer to Kane’s counterclaim and Yu-Chi Lai filed her answer to Kane’s third-party complaint. On the same date, Lai filed a counterclaim against Deirdre Kane for assault and battery. Deirdre filed her answer to Lai’s counterclaim on July 27, 1992.

The case went to trial before a jury, which rendered its verdict in favor of the Lees on September 25,1993. The special verdict form that the jury completed found Kane liable for the following acts and awarded the following corresponding amounts:

Breach of contract $ 32,823.00
Breach of the covenant of quiet enjoyment 1.00
Trespass 10.00
Assault and/or battery 604.10
Intentional interference with Lee’s business 1,500.00
Intentional infliction of emotional distress 370.00
Total $ 35,308.10

The jury additionally found that Lee was entitled to punitive damages from Kane. In a separate hearing on October 4, 1993, the jury returned a verdict awarding Lee $19,500 in punitive damages.

On October 13, 1993, the District Court entered judgment and awarded Lee the damages set forth in the jury’s verdicts. Kane filed several post-trial motions, including motions for judgment as a matter of law and new trial, which the District Court denied. James Kane appeals and Lee cross-appeals.

ISSUE 1

Did the District Court err by denying Kane’s motion for judgment as a matter of law on the issues of contract damages and lost profits?

At the close of the Lees’ case, Kane moved for judgment as a matter of law on the issues of contract damages and lost income. Kane argued that Lee failed to produce sufficient evidence to allow those issues to go to the jury. Kane argues on appeal that the District Court erred by denying the motion.

“[A] directed verdict may be granted only where it appears as a matter of law that... [the nonmoving party] could not recover upon any view of the evidence, including the legitimate inferences to be drawn from it.” Fox Grain and Cattle Co. v. Maxwell (1994), 267 Mont. 528, 885 P.2d 432, 436 (quoting Simchuk v. Angel Island Community Ass’n (1992), 253 Mont. 221, 225, 833 P.2d 158, 160).

Kane bases his argument on the statement made by the District Court Judge in chambers that “there is no rational basis upon which the jury can make a determination of future economic loss because of the failure of any expert testimony along those lines ....” Kane argues that if Lee failed to introduce sufficient evidence to support future damages, then he also failed to introduce sufficient evidence to support past and present contract damages, including lost profits.

Kane further contends that because there was no expert testimony to establish the amount of lost profits prior to the restaurant closing, that issue should not have gone to the jury. However, Kane correctly concedes in his reply brief “that the use of expert testimony is not essential in proving economic loss ....” As this Court stated in Fox Grain, 885 P.2d at 436:

While damages for lost profits may not be speculative, it is only required that they be proven with “the best evidence under the circumstances [which] will support a reasonably close estimate of the loss.”

(Quoting Stensvad v. Miners and Merchants Bank (1982), 196 Mont. 193, 206, 640 P.2d 1303, 1310, cert. denied (1982), 459 U.S. 831, 103 S. Ct. 69, 74 L.Ed.2d 69.) While in some cases expert testimony may constitute “the best evidence under the circumstances,” we cannot say that expert testimony is required to prove lost profits in all cases.

The record in this case reveals that Lee introduced sufficient evidence, that when viewed in the light most favorable to Lee, warranted the submission of the issues of contract damages and lost profits to the jury. We hold that the District Court properly denied Kane’s motion for judgment as a matter of law.

ISSUE 2

Was there sufficient evidence to support the jury’s award of contract damages?

Kane contends that the jury’s verdict awarding contract damages and lost profits is improper for two reasons. First, Kane contends that Lee failed to provide sufficient evidence, and therefore, the jury engaged in speculation. Secondly, Kane contends that the award for breach of contract was excessive because Lee failed to mitigate his losses.

In Hansen v. Hansen (1992), 254 Mont. 152, 157, 835 P.2d 748, 750-51, we held:

Our scope of review of jury verdicts is necessarily very limited. This Court will not reverse a jury verdict which is supported by substantial credible evidence. This Court has defined substantial credible evidence as evidence which a reasonable mind might accept as adequate to support a conclusion. The evidence may be inherently weak and conflicting, yet it may still be considered substantial. It is well established that if the evidence is conflicting, it is within the province of the jury to determine the weight and credibility to be afforded the evidence. Finally, upon reviewing a jury verdict to determine if substantial credible evidence exists to support the verdict, this Court must view the evidence in the light most favorable to the prevailing party.

(Citations omitted.)

In instructing the jury on the issue of contract damages, the District Court used the exact language of § 27-1-311, MCA, which provides:

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

The primary problem with Kane’s first argument is that it hinges almost exclusively on the contention that Lee failed to establish lost profits. However, because the jury’s lump sum award of $32,823 for breach of contract was not broken into separate components, we are provided with nothing to indicate which, if any, portion of the award constituted lost profits.

Moreover, if the jury did include lost profits in its award, we are convinced that substantial credible evidence exists to support the jury’s award. In Stensvad, this Court held:

Damages for loss of profits may be awarded if not speculative. The rule that prohibits speculative profits does not apply to uncertainty as to the amount of such profits but to uncertainty or speculation as to whether the loss of profits is the result of the wrong and whether such profit would have been derived at all. Once liability is shown, that is the certainty that the damages are caused by the breach, then loss of profits on a reasonable basis for computation and the best evidence available under the circumstances will support a reasonably close estimate of the loss by a District Court. But no damages are recoverable which are not clearly ascertainable both in nature and origin, and only profits which are reasonably certain may be awarded.

Stensvad, 640 P.2d at 1310 (citations omitted).

The District Court in this case instructed the jury:

You may not award speculative damages. The term “speculative damages” refers to mere guesswork as to whether or not the claimed damage is a result of the Defendants’ action, rather than to an uncertainty as to the amount of the damages.

The court further instructed:

Damages are recoverable in this action for loss caused or for profit and other gain prevented by defendant’s breach only to the extent that the evidence affords a reasonable basis for estimating their amount in money. Damages which are a matter of mere speculation cannot be the basis of recovery. Recovery cannot be denied for damages simply because they are difficult to determine. The jury found that Kane breached his contract with Lee. Having

determined liability, it was the jury’s duty to calculate an award of damages, including lost profits, based on the evidence presented. Lee testified that after Kane failed to clean and make repairs, Lee delayed the opening of the restaurant by five days while he, his wife, and his employees cleaned and made repairs. Lee testified that he and his wife spent very long hours making the restaurant fit for use. Lee testified and produced receipts for over $15,000 of his own expenses, including over $2200 for a new ice machine to replace the one that Kane removed, over $3700 for a stainless steel kitchen hood and exhaust fan, and nearly $2400 for plumbing and heating parts and labor. Lee also testified that, in exchange for 15 percent of the restaurant drink sales from Kane’s bar, he agreed to pay an additional $4000 in rent per year. Lee testified that after three months he repaid Kane the amount he had received for drink sales because he believed the arrangement to be illegal.

Lee also provided specific information to support an award of lost profits. He introduced all of his actual income receipt records, rent and utility records, costs of goods and variable expense figures, complete tax returns for the three years prior to moving to Montana as well as the two years in Whitefish, and several summaries of the foregoing information. Kane, however, focuses on the Lees’ tax returns and argues that they “establish and prove nothing” because “the Lees did not deduct any wages for their own work.” Kane asserts that the “true net income” of the restaurant for 1991 actually would have been a net loss if an amount for wages had been subtracted from the $8296.88 of net profit that the Lees reported to the Internal Revenue Service. According to Kane’s attorney, the Lees’ wages should have been calculated using the following formula:

$4.25 (federal minimum wage)
x 40 hours per week
x the number of weeks the restaurant was open in 1991

Besides simply asserting this argument, Kane’s attorney did not introduce any testimony, evidence, or authority to support the theory. Moreover, Kane’s attorney failed to introduce any testimony or evidence to contradict the documents introduced by the Lees. It, therefore, was within the province of the jury to determine the weight and credibility to be afforded the evidence that the parties introduced concerning lost profits. Hansen, 835 P.2d at 751.

We further reject Kane’s assertion that the jury awarded excessive damages because it failed to consider Lee’s efforts to mitigate his damages. According to Kane, the Lees failed to take reasonable steps to mitigate their economic losses.

The District Court instructed the jury:

The Plaintiffs have a duty to minimize their damages. However, that duty does not require them to do what is unreasonable or impracticable.

The record shows that defense counsel fully cross-examined Lee regarding his efforts to mitigate his losses. It was, therefore, within the jury’s province to weigh Lee’s testimony and determine whether he reasonably mitigated his damages. Hansen, 835 P.2d at 751.

We hold that substantial credible evidence supports the jury’s award of contract damages.

ISSUE 3

Did the District Court err by limiting damages for lost profits to the time period prior to the restaurant’s closing?

On cross-appeal, Lee contends that the District Court erred by giving Jury Instruction No. 29 which provides:

If you find that Defendant breached his contract with Plaintiff, committed fraud or deceit against Plaintiff, or committed an intentional interference with business, your award of damages should include lost profit up to May 14, 1992 or other prospective gain from the operation of Plaintiff’s business. Damages for lost profits or other gains are recoverable only to the extent that the evidence affords a reasonable basis for their determination. However, recovery cannot be denied simply because the damages are difficult to determine.

With regard to jury instructions, this Court has held:

It is within the discretion of the District Court to decide how to instruct the jury, taking into account theories of the parties, and we will not overturn the court’s decision unless the District Court abused its discretion.... If jury instructions when taken as a whole properly state the applicable law, there is no abuse of discretion on the part of the District Court.

Chambers v. Pierson (1994), 266 Mont. 436, 880 P.2d 1350, 1354-55 (citations omitted). We determine that the District Court in this case abused its discretion by instructing the jury that lost profits could be awarded only up to May 14, 1992.

The record shows that after the close of the Lees’ case, counsel met with the Judge in chambers. Defense counsel moved for judgment as a matter of law on the issue of contract damages on the grounds that the Lees failed to meet their burden of proof. The District Court denied the motion as to past and present contract damages, but ruled that it would foreclose future damages by providing a limiting instruction. The District Court Judge stated:

I guess I agree with the defense here that there is no rational basis upon which the jury can make a determination of future economic loss because of the failure of any expert testimony along those lines

As we stated under Issue 1, this Court does not require expert testimony to prove lost profits; we only require that lost profits be proven with “the best evidence under the circumstances [which] will support a reasonably close estimate of the loss.” Fox Grain, 885 P.2d at 436; Stensvad, 640 P.2d at 1310. We, therefore, hold that the District Court abused its discretion by limiting lost profits to the period prior to the restaurant’s closing.

ISSUE 4

Does substantial evidence support an award of no damages for Lee’s pain and suffering and for his hearing loss?

Lee contends that the jury’s award of damages resulting from Kane’s assault is insufficient because it awarded the amount of his medical costs but did not award for his pain and suffering or for his hearing loss. Kane, on the other hand, argues that the jury simply chose to believe his expert witness who testified that he had never seen hearing loss following a boxing match.

Lee cites Gehnert v. Cullinan (1984), 211 Mont. 435, 685 P.2d 352, in support of his position. In Gehnert, the plaintiff was assaulted by the defendants. The jury awarded the plaintiff his medical expenses only. This Court reversed and remanded for a new trial on damages, stating that “ [l]iability having been established, it was the jury’s duty to award damages for pain and suffering for the serious injuries suffered.” Gehnert, 685 P.2d at 354 (citing Allers v. Willis (1982), 197 Mont. 499, 643 P.2d 592; Ankeny v. Grunstead (1976), 170 Mont. 128, 551 P.2d 1027; Holenstein v. Andrews (1975), 166 Mont. 60, 530 P.2d 476; Walker v. Alaska Road Commission (Alaska 1964), 388 P.2d 406).

As we stated above, this court will not disturb a jury verdict if there is substantial credible evidence in the record to support the verdict. Hansen, 835 P.2d at 751. In this situation, where Lee appeals from what he considers an insufficient award, our inquiry is whether there is substantial evidence to justify the award of no damages for pain and suffering and hearing loss.

The parties introduced conflicting evidence as to whether the assault caused Lee’s hearing loss. Lee testified at trial that he had no problem with his hearing before Kane assaulted him. Lee’s treating physician, a doctor with 20 years experience as an ear, nose and throat specialist, testified that Lee was administered an audiometric test. The test revealed that Lee suffered a conductive deafness in his left ear. The doctor stated that the deafness was most likely caused by an ossicular discontinuity or fracture — a separation of the tiny bones in the inner ear — and that such a discontinuity or fracture could very well have been caused by a blow to the head. Although some of the symptoms that Lee reported, such as the ringing in his ears, could not be objectively verified, the doctor stated that the symptoms that Lee reported were consistent with a conductive hearing loss caused by a blow to the head.

Kane’s expert, who treated boxers following boxing matches, testified that he had never observed hearing loss as a result of a blow to the head. However, he stated that he would assume that if the problem did not exist prior to the blow, and did exist after the blow, the blow probably caused the hearing loss. Kane offered only minimal testimony that indicated Lee suffered hearing problems prior to the assault, and that testimony consisted of one of Kane’s employees stating that on the few occasions that he had talked to Lee, Lee would cock his head to one side.

Kane admitted that he struck Lee on the head. The jury found Kane liable for the assault against Lee. The jury awarded Lee damages of $604.10, an amount equal to Lee’s medical expenses. Pursuant to Gehnert, it was the jury’s duty to award Lee damages for pain and suffering for his serious injuries. Viewing the evidence in a light most favorable to Kane, we hold that there is not substantial evidence to support the jury’s failure to award damages for pain and suffering or for the hearing loss. On retrial, the jury should determine an appropriate amount of damages for Lee’s pain and suffering and hearing loss attendant to the assault.

We affirm in part, reverse in part, and remand for proceedings consistent with this opinion.

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


source: Caselaw Access Project

author: JUSTICE LEAPHART

license: Public Domain

text:
    IN RE THE MARRIAGE OF KATHLEEN A. KOVASH, Petitioner and Respondent, and MYRON J. KOVASH, Respondent and Appellant.
    No. 94-500.
    Submitted on Briefs March 9, 1995.
    Decided April 11, 1995.
    52 St.Rep. 280.
    270 Mont. 517.
    893 P.2d 860.

      For Appellant: Mark P. Yeshe, Attorney at Law, Helena.
    For Respondent: Derik Pomeroy, Attorney at Law, Bozeman.
   JUSTICE LEAPHART

delivered the Opinion of the Court.

Myron J. Kovash (Myron) appeals from an order of the Eighteenth Judicial District Court, Gallatin County, which assessed Myron an arrearage in his child support obligation and his children’s uncovered medical expenses, and modified his prior child support obligation to Kathleen A. Kovash (Kathleen). We affirm in part, reverse in part and remand.

We address the following issues on appeal:

1. Did the District Court err in determining the amount of Myron’s arrearage?

2. Did the District Court err by failing to give Myron credit for his payment of the children’s health insurance premiums?

3. Did the District Court err by ordering that the assessed arrearage may be collected by the Child Support Enforcement Division (CSED)?

4. Did the District Court err in setting the effective date of Myron’s modified child support obligation?

5. Did the District Court err in determining Kathleen’s gross income?

Background

Myron and Kathleen were married on October 16,1976. They had four children during their marriage. The parties’ marriage was dissolved on August 31, 1992. Pursuant to the decree of dissolution, Kathleen was granted custody of the four children and Myron was granted limited visitation rights subject to certain conditions. Myron was ordered to pay a total of $493 per month in child support. The District Court also ordered Myron to maintain health insurance for the children through his employer or, if none was available, to pay Kathleen $80 per month to reimburse her for health insurance premiums. The parties were to equally share uncovered medical costs. Myron appealed from the District Court’s findings of facts, conclusions of law and decree. This Court affirmed the District Court in all respects with the exception of a travel restriction placed on Myron. In re Marriage of Kovash (1993), 260 Mont. 44, 858 P.2d 351 (Kovash I).

Subsequently, two of the parties’ four children began living with Myron as of September 1, 1993. Myron petitioned the court for a redetermination of child support. On June 24, 1994, the District Court entered its order modifying Myron’s child support obligation.

The court found that Myron’s new obligation was $322.83 per month and that Kathleen’s support obligation was $34.93 per month, leaving Myron with a net support obligation of $287.90 per month. The court ordered that the new child support amount would be effective as of September 29, 1994. The court also found Myron in arrears a total of $7,678 through September of 1993. The court determined the amount of arrearage by finding that through September of 1993, Myron owed $5,576 in back child support, $502 in uncovered medical expenses and $1,600 representing one-half of the cost of braces for one child’s teeth. The order was not intended to preclude a finding of further arrears that may have occurred since September of 1993.

Myron filed motions for reconsideration or modification of the court’s order. Because the court failed to decide Myron’s post-order motions within 45 days, they were deemed denied pursuant to Rule 59(g), M.R.Civ.R Myron appeals.

Standard of Review

In previous cases, we have stated that we review findings of fact in child support modification cases to determine whether the district court abused its discretion. In re Marriage of Barnard (1994), 264 Mont. 103, 106, 870 P.2d 91, 93 (citing In re Marriage of Durbin (1992), 251 Mont. 51, 55, 823 P.2d 243, 245). However, in other areas of marital law, we review a district court’s findings of fact to determine whether they are clearly erroneous. See, e.g., In re Marriage of Taylor (1993), 257 Mont. 122, 125-26, 848 P.2d 478, 480 (findings regarding division of marital estate); In re Marriage of Eschenbacher (1992), 253 Mont. 139, 142, 831 P.2d 1353, 1355 (findings regarding maintenance award). There is no reason for this inconsistency. Therefore, from this time on we will review a district court’s findings of fact in child support modification cases to determine whether they are clearly erroneous.

We will continue to review a district court’s overall decision on modification of child support awards to determine whether the court abused its discretion. In re Marriage of Hill (1994), 265 Mont. 52, 57, 874 P.2d 705, 707. We review a district court’s conclusions of law to determine whether the court’s interpretation of law was correct. Marriage of Barnard, 870 P.2d at 93.

Issue 1

Did the District Court err in determining the amount of Myron’s arrearage?

The District Court concluded that Myron was $5,576 in arrears in child support payments for the time up to and including September of 1993. Myron contends, and Kathleen concedes, that this amount is incorrect. The parties stipulated that through August of 1993, Myron was $2,316 in arrears in child support payments. Myron contends that this stipulation was binding and that the court erred by finding a child support arrearage over $2,316.

We disagree with Myron’s contention that the court was bound by the stipulation. “Parties cannot make binding agreements, oral or written, as to support, custody or visitation of children.” In re Marriage of Mager (1990), 241 Mont. 78, 80-81, 785 P.2d 198, 200. However, the record does not support the court’s assessment of $5,576 in child support arrearage through September of 1993. The $2,316 figure appears to be the correct child support arrearage amount from the date the dissolution decree was entered through August of 1993. Even considering a possible pre-decree child support arrearage and those for the month of September 1993, the District Court’s amount of $5,576 is inflated. We hold that there is not substantial credible evidence to support the District Court’s finding of $5,576 as Myron’s amount of child support arrearage through September of 1993. Thus, the District Court’s finding was clearly erroneous. We reverse the court’s determination and remand for redetermination of the proper amount.

Next, the District Court included $1,600, one-half the cost of braces, in the amount of Myron’s arrearage. Myron argues that this amount cannot be considered an arrearage as it has not yet been incurred. We agree. Myron is responsible for one-half of the uncovered medical expenses. However, medical expenses must first be incurred before they can be considered in the arrearage. Half of the expense will be Myron’s responsibility, and the court may order payment of this amount including one-half of the down payment required to commence the orthodontic work, but it may not be considered an arrearage at this time. Therefore, we reverse the District Court’s determination that Myron is $1,600 in arrears for payments on braces for his child.

In determining Kathleen’s child support obligation, the District Court also gave Kathleen a credit of $75 per month for payments she would have to make for the braces. Including the amount to be paid for braces in Kathleen’s child support calculation distorts the amount of each party’s child support obligation. The dissolution decree declared that the parties are to equally share the amount of uncovered medical expenses. On remand, to avoid distortion in the guideline amount of each party’s child support obligation, the District Court should exclude any amount for payments on the braces in its guideline calculation.

Finally, the District Court concluded that Myron was $502 in arrears for uncovered medical expenses. Myron argues that Kathleen testified that she had paid a total of $358 in medical expenses and, therefore, he is responsible for only one-half of that amount. We disagree.

Kathleen introduced two exhibits representing amounts still owed for the children’s medical needs and amounts that she had paid for the children’s outstanding medical expenses. The $358 Kathleen testified to represented only the amount she believed she had already paid toward the uncovered medical expenses. Accordingto the parties’ decree of dissolution, Myron is responsible for one-half of the children’s uncovered medical expenses, not just those which Kathleen has already paid. Combining the amounts that Kathleen’s exhibits show she actually paid and the total amounts still due, it is apparent that the District Court’s finding that Myron was $502 in arrears in unpaid medical expenses is not clearly erroneous.

Issue 2

Did the District Court err by failing to give Myron credit for his payment of the children’s health insurance premiums?

In redetermining Myron’s child support obligation, the District Court did not credit Myron with any amounts he paid for the children’s health insurance premiums. Myron testified, without objection or contradiction by Kathleen, that he had obtained health insurance for the children through his employer. The testimony of one witness is generally sufficient for the proof of any fact. See § 26-1-301, MCA. We hold that the District Court erred by failing to include this expense in its redetermination of the parties’ child support obligations. The estimated amount Myron expended on the children’s insurance coverage was $44 per month. On remand, the District Court should include this figure in its determination of the parties’ child support obligations.

Issue 3

Did the District Court err by ordering that the assessed arrearage may be collected by the CSED?

The District Court concluded that the CSED could collect the arrearage, including the $502 Myron was in arrears for uncovered medical expenses and $1,600 for one-half the cost of braces. Myron contends that Montana statutes only provide the authority for the CSED to collect arrears for child support and amounts for health insurance, not uncovered medical expenses or the cost of braces.

We have already determined that the District Court erred in assessing Myron an arrearage for the unincurred costs of the braces. We need only determine whether the Montana legislature has granted the CSED the authority to collect an arrearage of uncovered medical expenses.

Kathleen contends that the definition of “support order” contained in § 40-5-403, MCA, indicates that medical expenses may be collected by the CSED. Section 40-5-403(7), MCA, states:

“Support order” means an order of the district court of the state of Montana ... that provides a set and determinable amount for temporary or final periodic payments of funds for the support of a child. Support order further includes the following:
(a) an order for reimbursement of public assistance money paid by a public agency for the benefit of a minor child;
(b) an order for maintenance to be paid to a former spouse when the former spouse is the custodial parent of a child for whom child support is awarded under the same order; and
(c) an order requiring payment of interest due on unpaid judgments for child support.

In interpreting statutes, we must give language its plain meaning. Stansbury v. Lin (1993), 257 Mont. 245, 249, 848 P.2d 509, 511. If the legislature’s intent can be determined from the plain meaning of the words used in a statute, we will go no further. State ex rel. Neuhausen v. Nachtsheim (1992), 253 Mont. 296, 299, 833 P.2d 201, 204 (citation omitted). It is the function of the courts to ascertain and declare what, in terms or substance, is contained in a statute; it is not our function to insert what has been omitted. Neuhausen, 833 P.2d at 204 (citation omitted).

The plain statutory language indicates that the legislature intended to grant the CSED the power to collect periodic child support payments. The statute makes no mention of medical expenses. We hold that the legislature did not intend to grant the CSED the authority to collect delinquent medical expense payments. It is the legislature’s prerogative to give the CSED that power if it so chooses, but that is not the function of this Court. We hold that the District Court misinterpreted the law and erred by ordering that the CSED may collect the amount Myron is in arrears in uncovered medical expenses.

Issue 4

Did the District Court err in setting the effective date of Myron’s modified child support obligation?

The District Court ordered that the modified monthly amount of child support due would be effective September 29,1994. The parties stipulated, for the purpose of child support determination, that two of the children began living with Myron as of September 1, 1993. Myron filed his petition for modification of child support on September 29, 1993. In February of 1994, the parties entered into a stipulation that the modified child support obligation would be retroactive to September of 1993.

Again, stipulations involving child support, custody or visitation are not binding on the court. Marriage of Mager, 785 P.2d at 200. However, we hold that the District Court abused its discretion in determining that the child support modification would not be effective until September 29, 1994. In determining the effective date for the support modification, the court apparently gave no weight to the de facto custody arrangement in effect since September of 1993. Continuing Myron’s original child support obligation, which was determined when Kathleen had all four children in her custody, for an entire year after Myron had custody of two of the children does not reflect the realities of the situation.

A court may modify a decree regarding child support only as to installments accruing after the parties have been provided actual notice of the motion for modification. See § 40-4-208(1), MCA. Myron filed for modification of child support on September 29,1993. Therefore, the effective date of the child support modification should be September 29, 1993.

Issue 5

Did the District Court err in determining Kathleen’s gross income?

For the purpose of determining child support, the District Court assigned Kathleen an annual gross income amount of $10,560. Myron contends that this amount is incorrect and that Kathleen should have an imputed annual income of $15,600. He argues that Kathleen was working at a federal job earning approximately $7.50 an hour before leaving that job in June of 1993. Since leaving the job, Kathleen has been indicted, but not convicted, for stealing federal money while employed by the federal government.

Myron contends that the situation in this case is similar to that in Mooney v. Brennan (1993), 257 Mont. 197, 848 P.2d 1020. In Mooney, a majority of this Court held that a father who was being sent to prison did not qualify for a modification of his child support obligation. The majority reasoned that the father’s pre-incarceration income should be imputed to him because committing the crime which resulted in his imprisonment was a choice rather than an involuntary change in circumstances. Also, the obligor should not profit by his criminal conduct at the expense of his children. Mooney, 848 P.2d at 1023 (quoting Willis v. Willis (Or.Ct.App. 1991), 820 P.2d 858, 860, rev’d (Or. 1992), 840 P.2d 697).

The instant case is distinguishable from Mooney. Here, Kathleen had custody of all four children at the time she stopped working for the federal government. Since Kathleen had no child support payment obligations at the time she ceased working for the federal government, it cannot be said that she left her federal job to escape her support responsibilities. We hold that it was not clearly erroneous for the District Court to find Kathleen’s gross income to be $10,560 for the purpose of child support calculations.

We affirm in part, reverse in part, and remand for further proceedings consistent with this opinion.

JUSTICES TRIEWEILER, HUNT, NELSON and GRAY concur.


author: JUSTICE GRAY

text:
    ELIZABETH J. JOHNSON, Contestant and Respondent, v. CURTIS KILLINGSWORTH, Contestee and Appellant.
    No. 94-499.
    Submitted on Briefs January 19, 1995.
    Decided April 11, 1995.
    52 St.Rep. 274.
    894 P.2d 272.
    271 Mont. 1.

      For Appellant: Kevin R. Callaghan; Harris, Callaghan & Velk, Missoula; Alan F. Blakley, Attorney at Law, Missoula.
    For Respondent: Richard R. Buley; Tipp & Buley, Missoula.
   JUSTICE GRAY

delivered the Opinion of the Court.

Curtis Killingsworth (Killingsworth) appeals from the findings, conclusions, and judgment of the Fourth Judicial District Court, Missoula County, voiding his election as commissioner of Division 2 of the Missoula Irrigation District (District) Board. We affirm.

The facts of this case are undisputed. The District is comprised of five divisions and is governed by a board consisting of five commissioners, one elected from each division. Killingsworth ran unopposed for the commissioner position for Division 2 and was elected to that position on April 5, 1994. Killingsworth neither owns irrigable land nor resides within Division 2 of the District; he leases a storage unit within the District’s boundaries.

Elizabeth Johnson (Johnson), who owns irrigable land within Division 2, petitioned to have Killingsworth’s election set aside. She alleged that Killingsworth did not possess the statutory qualifications to be a commissioner because he did not own irrigable land within the division. Following a hearing on the petition, the District Court issued findings of fact, conclusions of law, and a judgment setting aside Killingsworth’s election. Killingsworth appeals.

As a preliminary matter, Johnson has moved this Court to strike references to evidence contained, and argued, in Killingsworth’s brief but not of record in this appeal. The material consists of Killingsworth’s summary of newspaper articles published after the District Court’s judgment regarding possible public health problems posed by the Missoula irrigation system, an exhibit attached to a pretrial brief summarizing the annual cost to Missoula taxpayers for maintenance of the irrigation system, and Killingsworth’s statements regarding the District’s use of toxic chemicals and failure to allow him to erect barriers around an irrigation ditch.

It is axiomatic that this Court will not consider evidence not contained in the record on appeal. In re Marriage of Martin (1994), 265 Mont. 95, 100, 874 P.2d 1219, 1223. Moreover, a party’s reference to evidence does not incorporate that evidence into the record. Marriage of Martin, 874 P.2d at 1223. We note that, although this evidence — including the subject matter later contained in the newspaper articles — generally was described to the District Court, it was never offered or received as evidence of record. Therefore, we grant Johnson’s motion to strike and do not consider any of the challenged evidence or references thereto.

Irrigation districts are created, funded, and operated pursuant to statute. Sixty percent of the holders of title to irrigable lands sought to be included in a district may petition a district court to establish the district. Sections 85-7-101(1) and -104, MCA. If the court determines that the district should be established, it must divide the district into three, five, or seven divisions depending on the district’s size. Section 85-7-107(3)(d), MCA. Each division is represented by a commissioner possessing the qualifications set forth in § 85-7-1501, MCA. See § 85-7-107(3)(e), MCA. Pursuant to § 85-7-1501, MCA, “[a] person may not be a commissioner unless he is an owner of irrigable land within the division of the district he is to represent and is a resident of the county in which the division of the district or some portion of the division is situated.” It is undisputed that Killingsworth is not an owner of irrigable land within Division 2 of the. District.

Killingsworth contends that the land ownership requirement contained in § 85-7-1501, MCA, violates the Equal Protection Clause contained in the Fourteenth Amendment to the United States Constitution. The District Court concluded that the ownership requirement was reasonably related to the state’s interest regarding the efficient functioning of the District and, as a matter of law, did not violate the Equal Protection Clause. We review a district court’s conclusion of law to determine whether it is correct. Associated Students v. City of Missoula (1993), 261 Mont. 231, 234, 862 P.2d 380, 382.

Did the District Court err in applying the reasonable relationship standard to its equal protection analysis of the freeholder requirement contained in § 85-7-1501, MCA?

Killingsworth’s first assertion of error is that the District Court erred in applying the reasonable relationship test to determine whether the statutory freeholder requirement in § 85-7-1501, MCA, violated his right to equal protection. He asserts that restrictions on candidate qualifications impact on citizens desiring to vote for that candidate and, as a result, that the United States Supreme Court’s voting rights cases applying the strict scrutiny test are controlling here.

Because voting rights cases involve a fundamental political right, the Supreme Court generally evaluates state legislation apportioning representation and regulating voter qualifications under the strict scrutiny standard. See Dunn v. Blumstein (1972), 405 U.S. 330, 342, 92 S.Ct. 995, 1003, 31 L.Ed.2d 274, 284; Kramer v. Union School District (1969), 395 U.S. 621, 626-27, 89 S.Ct. 1886, 1889, 23 L.Ed.2d 583, 589; Reynolds v. Sims (1964), 377 U.S. 533, 562, 84 S.Ct. 1362, 1381, 12 L.Ed.2d 506, 527. Under that standard, legislation is “unconstitutional unless the State can demonstrate that such laws are ‘necessary to promote a compelling governmental interest.’ ” Dunn, 405 U.S. at 342, 92 S.Ct. at 1003 (emphasis in original)(citation omitted).

As early as 1968, however, the Supreme Court recognized the possibility of an exception to the general rule requiring strict scrutiny in voting rights-related cases. In Avery v. Midland County (1968), 390 U.S. 474, 88 S.Ct. 1114, 20 L.Ed.2d 45, the Supreme Court observed that, while the Equal Protection Clause prohibits states from distinguishing between citizens on an arbitrary or invidious basis in regulating voter qualification or apportioning representation, it does not necessarily prohibit all such distinctions. Avery, 390 U.S. at 484, 88 S.Ct. at 1120. The Supreme Court recognized that, in the event of a special-purpose unit of government whose functions affect a distinct group of citizens more than other citizens, a state might be allowed to give greater influence to those citizens most affected. Avery, 390 U.S. at 483-84, 88 S.Ct. at 1119-20. Subsequent to Avery, the Supreme Court determined that freeholder requirements used to prevent minorities from consideration for appointment to a general governmental board violated equal protection under any standard of scrutiny; it did not, however, “exclud[e] the possibility that other circumstances might present themselves in which a property qualification for office-holding could survive constitutional scrutiny.” Turner v. Fouche (1970), 396 U.S. 346, 364, 90 S.Ct. 532, 542, 24 L.Ed.2d 567, 581.

Salyer Land Co. v. Tulare Water District (1973), 410 U.S. 719, 93 S.Ct 1224, 35 L.Ed.2d 659, presented the Supreme Court with the issue foreshadowed in Avery and Turner. The case involved a water storage district whose primary purpose was the acquisition, storage, and distribution of water for farming. Salyer, 410 U.S. at 728, 93 S.Ct. at 1229-30. The costs of the district’s projects were assessed against land in proportion to the benefits received and service charges were collectible from those receiving the benefit; in the event of delinquencies in payment for such services, the charges became a lien against the land. Salyer, 410 U.S. at 729, 93 S.Ct. at 1230.

The plaintiff in Salyer challenged the California statute limiting the right to vote for water district directors to landowners within the district on equal protection grounds. The Supreme Court observed that the water district had some governmental powers, but provided none of the general public services ordinarily attributed to a governing body; it also determined that the economic burdens of the district’s operations did not fall on residents per se, but affected primarily those residents who owned land within the district’s boundaries. Salyer, 410 U.S. at 728-29, 93 S.Ct. at 1229-30.

On the basis of the “special limited purpose and ... the disproportionate effect of [the district’s] activities on landowners as a group,” the Supreme Court concluded that application of the strict scrutiny standard was inappropriate. Salyer, 410 U.S. at 728, 93 S.Ct. at 1229-30. The Supreme Court held that the appropriate level of scrutiny for determining whether a statute limiting voting for water district directors to landowners within the district violated the equal protection clause was whether the voting limitation was reasonably related to the state’s objectives. Salyer, 410 U.S. at 730, 93 S.Ct. at 1230-31.

The Supreme Court confronted the issue again in Ball v. James (1981), 451 U.S. 355, 101 S.Ct. 1811, 68 L.Ed.2d 150. The primary purpose of the district in Ball was “the storage, delivery, and conservation of water.” Ball, 451 U.S. at 357, 101 S.Ct. at 1814. Like the district in Salyer, financial responsibility for the Ball district primarily fell on subscribing landowners who were assessed on an acreage-proportionate basis with the assessment becoming a lien on the owners’ land until paid; the Ball district differed from the district in Salyer, however, in that it also raised revenue through the sale of hydroelectric power generated at the district’s dams. Ball, 451 U.S. at 361-62, 101 S.Ct. at 1816-17.

In Ball, a class of registered voters who resided within the district’s boundaries, but who owned little or no land, challenged the voter qualification statute. They alleged that limiting the election of district directors to landowners, and apportioning those votes according to acreage, violated their right to equal protection. Ball, 451 U.S. at 357, 101 S.Ct. at 1814. The class argued that the district’s ability to condemn land, levy taxes and sell electrical power to essentially half the population of Arizona, and its significant influence on environmental management within its boundaries, had a substantial effect on all residents within the district regardless of property ownership. Ball, 451 U.S. at 360, 101 S.Ct. at 1815-16.

The Supreme Court rejected this argument, relying on Salyer. The Supreme Court determined that while the district included almost half of Arizona’s population within its boundaries, supplied power to half the state and met its operating costs with revenue derived from its power generation, the differences between the Salyer and Ball, 451 U.S. at 365-66, 101 S.Ct. at 1818. The district did not exercise ordinary functions of general government such as the imposition of ad valorem property taxes or sales taxes, “the maintenance of streets, the operation of schools, or sanitation, health, or welfare services.” Ball, 451 U.S. at 366, 101 S.Ct. at 1818. The district’s water functions were limited to storage, conservation, and distribution of water based on land ownership. Ball, 451 U.S. at 367, 101 S.Ct. at 1819. Finally, even the district’s hydroelectric power functions were only incidental to the water functions which, as the parties had stipulated, was the primary function of the district. Ball, 451 U.S. at 368-69, 101 S.Ct. at 1819-20. Based on the special, limited purpose of the district, the Supreme Court determined that the appropriate standard of scrutiny was whether the voting requirement was reasonably related “to its statutory objectives.” Ball, 451 U.S. at 371, 101 S.Ct. at 1821.

Similar to the districts in Salyer and Ball, the establishment and functions of irrigation districts in Montana relate primarily to landowners and land within the district’s boundaries. A district can be created only by petition of sixty percent of the title holders, in terms of both number and acreage, of irrigable land in a proposed district. Section 85-7-101(1), MCA. Moreover, the powers and duties of a district’s board of commissioners are strictly limited by statute, with the commissioners being specifically authorized to:

construct and maintain the necessary dams, reservoirs, and works for the collection and distribution of water for the district ... and do any and every lawful act necessary to be done in order that sufficient water may be furnished for irrigation purposes to all the lands in the district ....

Section 85-7-1907, MCA. The entirety of the district’s functions relate to the providing of irrigation water to lands in the district.

In addition, financial responsibility for an irrigation district’s operations falls entirely on the landowners and lands within the district. Revenue for the operation of the district may be raised through bond issues or special taxes or assessments levied against the irrigable land within the district. Sections 85-7-2101 through -2104, MCA. Any special tax or assessment levied against the land becomes a lien against the land. Section 85-7-2108, MCA.

Thus, like the water districts in Salyer and Ball, Montana irrigation districts are special, limited-purpose units of government, the activities of which have a disproportionate effect on landowners within such districts as a group. As a result, it is appropriate to depart from the usual strict scrutiny applied to statutes impacting on a citizen’s right to vote and analyze the freeholder requirement contained in § 85-7-1501, MCA, under the reasonable relationship standard.

In arguing for application of the strict scrutiny standard to the freeholder requirement at issue here, Killingsworth contends that this Court “wishe[d] to use” that standard in Sadler v. Connolly (1978), 175 Mont. 484, 575 P.2d 51. Whatever we may have “wished” to do, Sadler does not support application of the strict scrutiny standard in the case presently before us.

Sadler involved an election contest over a city council seat in which the district court ousted Sadler from the position because he did not meet the statutory freeholder qualification. Sadler appealed, contending that the freeholder qualification violated the equal protection clause of the United States Constitution. Sadler, 575 P.2d at 53. We found persuasive the Supreme Court’s reasoning in Turner that it was unnecessary to determine whether the freeholder requirement could withstand strict scrutiny. Sadler, 575 P.2d at 53-54; citing Turner, 396 U.S. at 363-64, 90 S.Ct. at 541-52. Indeed, we held that the freeholder requirement “bears no relation whatsoever” to a person’s ability to serve as a city council member. Sadler, 575 P.2d at 54. Nothing in Sadler supports application of the strict scrutiny standard here.

We conclude that, because of the District’s narrow function and the disproportionate impact of its activities on landowners within its boundaries, the appropriate level of scrutiny is whether the freeholder qualification for commissioner bears a reasonable relationship to its statutory objectives. We hold, therefore, that the District Court did not err in applying that standard in its equal protection analysis of the freeholder requirement contained in § 85-7-1501, MCA.

Did the District Court err in concluding that the freeholder requirement contained in § 85-7-1501, MCA, bears a reasonable relationship to a legitimate state interest and, therefore, does not violate the Equal Protection Clause of the United States Constitution?

Killingsworth argues that the District Court erred in concluding that the freeholder requirement is reasonably related to a legitimate state interest and, thus, passes scrutiny under the Equal Protection Clause. He argues that the court failed to identify a legitimate interest to which the freeholder requirement is reasonably related.

While the District Court did not precisely articulate the “legitimate state interest” on which its decision was based, it did determine generally that the District commissioners’ limited duties relate to the delivery of water to, and the raising of related revenues from, landowners within the District. Under such circumstances, the District Court concluded that the freeholder requirement for commissioners contained in § 85-7-1501, MCA, was reasonably related to the fair and efficient functioning of the District. We agree.

In Salyer and Ball, the Supreme Court determined that statutes limiting voting for directors of those water districts to freeholders bore a reasonable relationship to a legitimate state interest. It observed in both instances that the subscription of land necessary to create the districts may not have occurred if landowners were not guaranteed a dominant voice in the districts’ control. Salyer, 410 U.S. at 731, 93 S.Ct. at 1231; Ball, 451 U.S. at 371, 101 S.Ct. at 1821. In Salyer, the Supreme Court also noted that funding for that district was obtained solely from assessments against landowners. “Landowners as a class were to bear the entire burden of the district’s costs, and the State could rationally conclude that they, to the exclusion of residents, should be charged with responsibility for its operation.” Salyer, 410 U.S. at 731, 93 S.Ct. at 1231.

Here, financial responsibility for the District falls solely on the landowners within the District as a class. The District commissioners are authorized to assess taxes against the land and to issue bonds secured by the land within the District in order to finance the District’s operations. See § 85-7-2101, MCA. Moreover, it is not unreasonable for Montana to rationally conclude that landowners, who were required to pledge their land for the creation of the District and who remain financially responsible for its operation, should be given the responsibility for governing the District as commissioners.

Killingsworth contends that the state interest underlying the statutory freeholder requirement for commissioners is not legitimáte because lessees of property within the District — such as himself — are forced to bear the financial burden for the District’s operation through rent payments. He argues that there is no distinction between a freeholder directly responsible for levies by the District and a renter who indirectly pays the levies as part of a rental payment. This argument is not persuasive.

In Salyer, the Supreme Court addressed the status of lessees in an election scenario involving the freeholder status of voters. While recognizing that lessees had an interest analogous to landowners, it stated that, under the reasonable relationship level of scrutiny, the test was whether any reasonable factual scenario may be conceived which would allow California to deny the franchise to lessees while grantingitto landowners. Salyer, 410 U.S. at 732, 93 S.Ct at 1231-32. The Supreme Court expressed concern that permitting short-term lessees to vote could lead to manipulation within the voting process by owners of large tracts of land creating short-term leases on behalf of loyal employees. Salyer, 410 U.S. at 732, 93 S.Ct. at 1231-32. Landowners also might be less willing to subject their land to levies supporting the district if the long-term operations were subject to the influence of short-term lessees. Salyer, 410 U.S. at 732, 93 S.Ct. at 1231-32. Moreover, administration of the register of voters could be difficult because leases need not be recorded. Under such circumstances, the Supreme Court determined that lessees reasonably could be denied the right to vote in elections for representation on a water district board. Salyer, 410 U.S. at 733, 93 S.Ct. at 1232.

Here, the District was initiated by landowner petition pursuant to statutes which subjected the landowners’ land to levies and the issuance of bonds to finance the District and ensured that only freeholders within the District could serve as commissioners. Sections 85-7-2101 and 85-7-1501, MCA. Killingsworth, on the other hand, does not own land within the District, but argues that his month-to-month leasehold interest in one storage unit located within the District should suffice in lieu of the statutory freeholder requirement. As in Salyer, landowners certainly could be leery of subjecting the long-term operation and financial integrity of irrigation districts, in addition to the assessment of levies against their land, to the control of lessees with such tenuous relationships to the districts’ purposes and functions. In order to foster creation and financing of the District via the necessary subscriptions of land, the State of Montana could reasonably decide that landowners would require a dominant voice in the management of the District. For this reason, it is not unreasonable for the State to achieve its goal by imposing a freeholder requirement for irrigation district commissioners. We need not further belabor the point related to landowner control over management of the District, except to note that Killingsworth’s mere rental of one storage unit within the District does not qualify him to even participate in the election of the Division commissioner. See § 85-7-1710, MCA.

Killingsworth again asserts Sadler as support for his contention that freeholder requirements are unconstitutional without regard to the nature of the governmental unit involved. As discussed briefly above, Sadler involved a candidate for election to the city council which is the general governing body of a municipality. On that basis alone, Sadler is factually distinguishable from the case before us involving a special, limited-purpose governmental entity serving none of the functions reserved for general governmental entities such as broad taxing authority, street maintenance, sanitation, health, or welfare services. As the Supreme Court noted in Ball, it is those functions which are characterized as “the sort of governmental powers that invoke the strict [one-person, one-vote] demands of Reynolds.” Ball, 451 U.S. at 366, 101 S.Ct. at 1818.

Finally, we observe that Killingsworth does not cite to any case holding that voter or candidacy qualifications based on land ownership for special districts such as the District before us violate equal protection. Thus, we note only briefly that other jurisdictions have applied the Salyer rationale in upholding voter qualifications for special district elections against equal protection challenges. In Chesser v. Buchanan (Colo. 1977), 193 Colo. 471, 568 P.2d 39, for example, the Colorado Supreme Court rejected an equal protection challenge by electors and residents of a tunnel improvement district to a statute permitting only those who paid personal property taxes within the year preceding the election to vote for district commissioner. Because of the district’s limited authority involving construction and operation of the tunnel, in addition to the assessment of costs against the landowners in proportion to the benefits they received, the Colorado court concluded that “a rational basis [existed] for limiting the franchise to tax paying electors within the district.” Chesser, 568 P.2d at 41. An Illinois appellate court reached the same result in Goldstein v. Mitchell (Ill.App.2 Dist. 1986), 144 Ill.App.3d 474, 98 Ill.Dec. 792, 494 N.E.2d 914. Since the district was created for the narrow purpose of managing erosion and flooding problems, and costs of the district were assessed against the land in proportion to benefits received and constituted a lien against the land, the court determined that the voting requirements were “adequately related” to the statutory goals. Goldstein, 98 Ill.Dec. at 799, 494 N.E.2d at 921.

We conclude that the statutory freeholder qualification for irrigation district commissioners, which provides landowners a dominant voice in the management of irrigation districts, is reasonably related to the legitimate state interest in creating and operating those districts in which the financial responsibility falls on the landowners within the district. Thus, we further conclude that the freeholder requirement contained in § 85-7-1501, MCA, does not violate Kdllingsworth’s right to equal protection under the Fourteenth Amendment to the United States Constitution. We hold, therefore, that the District Court did not err in setting aside and voiding Killingsworth’s election as commissioner of Division 2 of the Missoula Irrigation District Board.

Affirmed.

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


author: JUSTICE LEAPHART JUSTICE TRIEWEILER

text:
    PATRICIA SULLIVAN, Petitioner and Appellant, v. AETNA LIFE & CASUALTY, Defendant/Insurer and Respondent, ST. JAMES COMMUNITY HOSPITAL, Employer.
    No. 94-315.
    Submitted on Briefs February 9, 1995.
    Decided April 12, 1995.
    52 St.Rep. 296.
    894 P.2d 278.
    271 Mont. 12.

      For Appellant; Bernard J. “Ben” Everett; Knight; Dahood, McLean, Everett & Dayton, Anaconda.
    For Respondent; Brendon J. Rohan; Poore, Roth & Robinson, Butte.
   JUSTICE LEAPHART

delivered the Opinion of the Court.

Patricia Sullivan (Sullivan) appeals from the April 21, 1994 order of the Workers’ Compensation Court denying her petition for a lump sum advance against permanent partial disability benefits that would otherwise be available to her at age 65. We affirm.

Sullivan injured her neck on October 5, 1983 in the course and scope of her employment for St. James Community Hospital. St. James and its insurer, Aetna Life and Casualty (Aetna) accepted liability for her industrial accident and do not challenge that she is permanently totally disabled. Aetna has continuously paid Sullivan total disability benefits. Despite numerous surgeries, she continues to suffer severe pain in her neck, arms, and hands and severe headaches.

Sullivan seeks a lump sum advance against permanent partial disability benefits which she would otherwise begin receiving upon conversion of her social security benefits to retirement benefits. See § 39-71-710, MCA (1985). Sullivan seeks $41,582.29 to pay for: (1) bank loans taken out for a motor home and to repay her mother for mortgage payments; (2) a credit card debt; and (3) repair of two motor vehicles. The sum requested does not include $10,000 Aetna recently paid to Sullivan to pay off a loan from her mother and two credit card debts. Sullivan’s monthly income is $1,662.56, consisting of $732 from social security benefits and $930.56 from workers’ compensation benefits. Her annual income, which is tax free, is $19,950.72.

Sullivan reported monthly expenses of $2,035.05. This amount includes, among other expenses, $466.07 for her motor home loan, $245.81 for insurance, maintenance, and registration of her vehicles, $130 for a bank loan taken out to repay her mother for a prior loan, and $100 for a credit card debt.

Sullivan lives with her parents, ages 76 and 84, and is a part-owner of the house. In recent years, she has paid for new water pipes, new windows and doors, and aluminum siding for the house. Sullivan testified that because her mother cooks and takes care of her, she pays $175 a month rent to her parents. She also testified that she pays one-half of the household expenses but later conceded that some monthly expenditures reported were actually total household costs rather than just her share.

In 1989, Sullivan purchased a motor home for $40,000, which she testified she uses in the summer “to escape to the country,” and occasionally to sleep or read in while it is parked at home. She pays approximately $523 per month to finance, register, and insure the vehicle. The Workers’ Compensation Court noted that this amounts to over 26% of her current monthly expenditures. She testified she has not sold the motor home because she cannot “get value out of it” and that she cannot rent one because of insurance. She provided no support for these claims and on cross-examination conceded that she in fact has not even tried to sell the motor home.

Testimony at trial indicated that Sullivan received a personal injury settlement in 1990. However, she claimed she did not know the amount of the settlement, although respondent’s counsel suggested it was approximately $40,000. Sullivan could not recall the amount she received after attorney’s fees and was confused as to how she had spent the money. She initially testified that she used the money to pay off a vehicle loan but on cross-examination stated that her mother had paid that loan.

Sullivan testified that she has difficulty handling her money. The Workers’ Compensation Court found that Sullivan does not have a good understanding of her own financial affairs, concluding that she has had numerous opportunities to reduce her monthly expenses, including selling her motor home, paying only her share of household living expenses, and repairing and maintaining only one vehicle. The Workers’ Compensation Court further considered that Sullivan is only 48 years old and concluded that her ability to support herself in the future could be jeopardized if she received a lump sum payment. Concluding that Sullivan did not establish by a preponderance of credible evidence that the lump sum advance requested was in her best interest, the Workers’ Compensation Court denied her request. This appeal followed.

The sole issue on appeal is whether the Workers’ Compensation Court erred when it concluded that a lump sum advance is not in Sullivan’s best interest.

Standard of Review

Workers’ Compensation Court decisions denying lump sum settlements will not be interfered with on appeal unless there is an abuse of discretion. Byrd v. Ramsey Engineering (1985), 217 Mont. 18, 21-22, 701 P.2d 1385, 1387; Kent v. Sievert (1971), 158 Mont. 79, 81, 489 P.2d 104, 105. The Workers’ Compensation Court’s findings are presumed to be correct and will be affirmed if supported by substantial evidence. Byrd, 701 P.2d at 1387. Sullivan has the burden of proving that the lump sum conversion is in her best interest. Stanley Structures v. Scribner (1992), 253 Mont. 236, 241, 833 P.2d 166, 169.

Discussion

Many of our prior decisions have listed three elements (outstanding debt, pressing need, and best interest of the claimant, his family, and the general public) to be considered when evaluating lump sum settlements. The focus, however, has always been on the best interest component. See, e.g., Stanley Structures, 833 P.2d 166; Byrd, 701 P.2d 1385. While outstanding indebtedness is a factor identified by this Court, both indebtedness and pressing need have, in fact, been secondary factors with best interest being the primary criterion.

As early as 1929, this Court established that for industrial accident claims, periodic payments should be the rule and lump sum settlements should be the exception. Landeen v. Toole County Refining Co. (1929), 85 Mont. 41, 47, 277 P. 615, 617. In Willoughby v. Arthur G. McKee & Co. (1980), 187 Mont. 253, 257, 609 P.2d 700, 702, the Court recognized that lump sum settlements are granted where there is outstanding indebtedness, pressing need, or where the best interests of the claimant, his family, and the general public will be served. In Willoughby, this Court elevated the best interest standard over the other two criteria:

“The criteria determinative of the advisability of conversion to a total or partial lump sum award have generally been held to be ‘... the best interests of the claimant, his family and for the best interests of the public ....’ Kustudia v. Ind. Acc. Brd. [1953], 127 Mont. 115, 123, 258 P.2d 965, 969. See also Legowik v. Montgomery Ward [1971], 157 Mont. 436, 486 P.2d 867. The existence of a ‘pressing need’ and/or ‘outstanding indebtedness’ has likewise been held to be relevant criterion.” [Citation omitted.]

Willoughby, 609 P.2d at 702.

In Byrd, which considered the petitioner’s debts, this Court acknowledged the best interest rule established in Willoughby but further stated:

The [Willoughby] court goes on to say:
Lump sum settlements are only granted where there is “outstanding indebtedness,” “pressing need,” or where “the best interests of the claimant, his family and the general public will be served.”

Byrd, 701 P.2d at 1387. The Byrd Court then went on to include all three factors in its review, rather than just best interest. In Crittendon v. Terri’s Restaurant (1991), 247 Mont. 293, 295, 806 P.2d 534, 536, the Court restated the three-part test from Willoughby but further stated:

[w]hile the presumption is in favor of periodic payments, where the best interests of the parties will be served by lump sum conversions, “they should be awarded without hesitancy....” [Citation omitted.]

The Court analyzed the facts of that case primarily in terms of the best interest test but it also considered pressing need.

In Stanley Structures, our most recent decision on this issue, the claimant had petitioned for a lump sum payment to pay off debts. Even though the claimant’s outstanding indebtedness was at issue, the Court listed all three factors to be considered for lump sum settlements and then based its decision on the best interest standard. Stanley Structures, 833 P.2d at 169. The Court affirmed the denial of the lump sum request, stating that:

[a]n additional lump sum would benefit [the claimant] by reducing his monthly expenses at the present time. However, the fact that [the claimant’s] debts exceed his income does not require conversion of [his] weekly benefits into a lump sum settlement. Ruple v. Bob Peterson Logging Co. (1984), 209 Mont. 276, 281, 679 P.2d 1252, 1254.

Stanley Structures, 833 P.2d at 169. This analysis demonstrates that the mere fact that the claimant has outstanding indebtedness is not sufficient grounds for lump sum settlement.

These cases indicate that the claimant’s best interest is the primary factor to be considered when evaluating lump sum settlements. Where appropriate, courts should also consider outstanding indebtedness and pressing need but these are to be components of the best interest analysis. Considering that debt is a significant part of our society, including home mortgage, credit card, medical expenses, and student or farm loans, it is unrealistic to conclude that outstanding debt alone is sufficient grounds to grant a lump sum settlement. Were that the case, most claimants could get lump sum settlements on demand. This would be contrary to the express policy that regular payments are the rule rather than the exception. Landeen, 277 P at 617. Similarly, pressing need, considered alone, is particularly subjective and ignores the consequences of granting a lump sum settlement. The best interest test embraces all factors, including outstanding debt and pressing need.

The dissent suggests that the majority of this Court along with the trial court patronized Sullivan by passing judgment as to her “best interests.” This criticism is based upon a misconception of the role of this Court. The majority has not made an independent determination as to what is in Sullivan’s best interest. Rather, we sit in review of the decision of the Workers’ Compensation Court. In affirming the Workers’ Compensation Court, we have not made an independent, de novo determination of Sullivan’s best interests. We have merely reviewed the conclusions of the Workers’ Compensation Court and have decided that that court did not abuse its discretion.

In accusing the courts of being patronizing and judgmental, the dissent assumes that lump sum advances are available, if not as a right then certainly as a matter of mathematics; i.e., to anyone whose debts exceed his/her income. This, of course, is not the law. Stanley Structures, 833 P.2d at 169. This Court and the trial court are operating under legal precedent which requires that lump sum advances are the exception and are available only upon a showing, by the claimant, that such an advance is in the best interests of the claimant. Krause v. Sears Roebuck & Co. (1982), 197 Mont. 102, 106-07, 641 P.2d 458, 460-61. If the Court were addressing the issue of whether the “best interests” test should be retained, the comments in the dissent might have some relevance. That issue, however, is not before the Court. Everyone, Sullivan and dissenters included, agrees that the trial court was required to resolve this petition for a lump sum advance by application of the best interests standard. So long as that remains the standard, it serves little purpose to accuse the judiciary of being judgmental. The best interests standard, by its very nature, requires the Workers’ Compensation Court to exercise its discretion — that is, to use its judgment.

Despite the protestations in the dissent, it is not the function of this Court to substitute its judgment for that of the trial court. This Court will not reverse the Workers’ Compensation Court’s determination of best interests unless it appears that the court has abused its discretion. Given the facts presented to the Workers’ Compensation Court and given that court’s observations as to Sullivan’s lack of credibility and lack of money managing abilities, we see no basis for concluding that the court abused its discretion.

The facts of this case are distinguishable from those cases where we held it was an abuse of discretion to deny the claimant’s lump sum award. See, e.g., Utick v. Utick (1979), 181 Mont. 351, 593 P.2d 739 (claimant treated unfairly and presented detailed investment plan); Byrd, 701 P.2d 1385 (claimant would lose house without lump sum). In the instant case, the Workers’ Compensation Court considered that Sullivan’s motor home consumed over 26% of her income, that she maintained two other vehicles, maintained more than her share of household expenses, and that she has difficulty managing her money. The court concluded that Sullivan failed to sufficiently demonstrate that all of her monthly expenses are for her own personal maintenance or that she cannot make ends meet if she properly manages her money and pays only her share of household expenses. In light of the above analysis and the substantial evidence supporting the Workers’ Compensation Court’s findings and conclusions, we hold that the Workers’ Compensation Court did not abuse its discretion. Affirmed.

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

JUSTICE TRIEWEILER

dissenting.

I dissent from the majority opinion. I would reverse the Workers’ Compensation Court’s denial of claimant’s petition to convert a portion of her biweekly disability benefits to a lump sum. Based on the uncontroverted evidence, I conclude that it was clearly in her best interest that she do so.

Patricia Sullivan was 48 years old at the time of the trial court’s decision, and according to the court’s findings, is entitled to total disability benefits for an additional 17 years at the rate of $930.56 a month. She sought to convert a portion of her future disability benefits in the amount of $41,582.29 to a lump sum to pay debts for which she currently makes monthly payments in the amount of $696.44.

Advancing the necessary amount would only require a reduction of her total disability benefits in the amount of $205.46 per month. In other words, by converting a portion of her future disability benefits to a lump sum, paying it to her at the present time, and allowing her to pay off her current debts, she could realize a positive improvement in her current cash flow equal to $490.98 per month.

Section 39-71-741, MCA (1983), which was in effect at the time of claimant’s injury, authorized a conversion of future disability benefits to a lump sum when requested by the claimant. We have previously held that where the insurer denies conversion of those benefits to a lump sum, the standard by which the courts should resolve the dispute between the parties is as follows:

The general rule is that disability payments under the Workers’ Compensation Act are biweekly. They may, however, at the discretion of the Workers’ Compensation Division, be converted into a lump sum settlement. While lump sum settlements are an exception to the general rule, they are not looked upon with disfavor and should be awarded without hesitancy where the claimant’s interest would be best served.

Krause v. Sears Roebuck & Co. (1982), 197 Mont. 102, 106, 641 P.2d 458, 460 (citing Willoughby v. Arthur G. McKee & Co. (1980), 187 Mont. 253, 256, 609 P.2d 700, 702).

The Workers’ Compensation Court, and the majority of this Court, have concluded that it is not in the claimant’s best interest to use the benefits to which she is entitled in a form that would enable her to improve her cash flow and provide her with disposable income that she does not currently have. This conclusion makes no sense to me. The simple mathematics of the problem presented to us requires that we conclude otherwise.

In spite of the obvious conclusion that having nearly $500 extra cash a month to spend would be in anyone’s best interest, the Workers’ Compensation Court denied claimant’s request based on its subjective opinion that Patricia spends a disproportionate amount of her income on a motor home, that she does not really need two vehicles, that she is paying a disproportionate share of household expenses, and that she has difficulty managing her money. The majority, in their opinion, approve of the Workers’ Compensation Court’s reasoning.

In reality, the evidence was that claimant’s motor home is her only means of recreation and is important to the mental health and well-being of a totally disabled person who has no other escape from a very restricted lifestyle. She cannot sell the motor home for enough to pay off the balance of the purchase price, even if she agreed with those more fortunate people who have decided that it is not necessary for her to own it.

While the fact that claimant owns two vehicles may sound excessive, one vehicle is a pickup truck which has been driven for 89,000 miles. The other is a van, which has been operated for 56,000 miles. Both are in bad shape and need substantial engine work. However, both are otherwise paid for and having them repaired is cheaper than the alternative of trying to finance a new vehicle.

Patricia is hardly deserving of this Court’s, or the trial court’s, criticism for trying to share household expenses with her 76-year-old mother and 84-year-old father, both of whom are retired and limited to social security income, and one of whom has substantial medical expenses for severe health problems. The world would be a better place if others were as conscientious. Neither is there any evidence in the record that Patricia’s living expenses would be less if she left her mother and father’s home and had to live independently.

Finally, it seems to me unduly judgmental to criticize someone as being a poor money manager when, due to her limited income, her inability to enjoy life as most people do, and her willingness to assist her elderly parents with certain basic necessities of life, her average monthly expenses exceed her average monthly income. Furthermore, even if the trial court was correct in its finding that Patricia is not a good money manager, it should not be inferred from that finding that the money, if advanced, would not be spent to reduce her debts. Through her attorney, she offered to have the remaining advances, like the previous advances, made jointly payable to her and her creditors to assure that the money was spent on the purpose for which it was sought.

The role of the courts in resolving disputes which arise under § 39-71-741, MCA (1983), is to simply conclude, based on the evidence (usually the mathematics) presented, whether it is in the claimant’s best interest that he or she receive disability benefits in one form, as opposed to another. A claimant should not be required to prove that all of his or her expenses, or all of the purposes for which he or she has incurred debt, meet with the trial court’s approval, based upon the trial judge’s value system. The simple fact in this case is that Patricia Sullivan incurred debts for understandable purposes which now require that she make monthly payments which she is unable to make in combination with her other monthly living expenses. However, even if that was not the case, she has proven that by converting a portion of her future disability benefits to a lump sum and paying off those debts, the expenses she would eliminate are more than three times the amount of the income she would lose. I conclude that this fact alone was sufficient to establish that conversion of her disability benefits to a lump sum for the purposes set forth in her petition was in her best interest.

Furthermore, contrary to the suggestion in the majority opinion, there is no misperception by the dissenting justices of this Court’s role. This Court’s role is to determine whether the Workers’ Compensation Court abused its discretion when it denied the claimant an opportunity to use her benefits in a way that would enable her to live within her income when she clearly cannot do so otherwise. This Court’s role is not to use the old “scope of review” dodge (which is applied selectively at best in this Court) to avoid applying a relatively simple “best interest” standard to the undisputed facts.

Neither do those who join in the dissent need an explanation of the role that precedent plays in this Court’s decisions. The dissent is based on this Court’s precedent. It clearly provides that lump sum conversions “should be awarded without hesitancy where the claimant’s best interest would be best served.” The only people who could claim that simple mathematics are not sufficient to divine the claimant’s “best interests” in this case are people who have never had to struggle to make ends meet on disability checks.

If there was no abuse of discretion in this case, I cannot imagine a set of circumstances where one could be found.

As a final observation, I find it ironic that Patricia Sullivan’s desire to convert some of her future disability benefits to a lump sum has caused Aetna Life and Casualty such great concern for her best interests.

The insurer now cares about whether she is paying an unfair proportion of her family’s living expenses, whether she really needs two vehicles, or whether one would suffice, whether she would be better off renting a motor home, rather than owning one, and whether her family members couldn’t do more for her personal care without being reimbursed- for their time. One would think that these are normally issues best left to the individual, especially when all she is asking for is her own money in a different form. However, according to Aetna, the trial court, and this Court, Patricia Sullivan is no longer qualified to make those decisions by virtue of being the recipient of workers’ compensation disability benefits. She, like many other injured workers, is surely damned by the pervasive and patronizing concern for her “best interest” that has been demonstrated by her insurer and this State’s courts.

If only the insurers and self-insured employers in this State would show as much concern for an injured worker’s best interests when it was time to accept responsibility for claims and pay disability benefits and medical expenses in a timely fashion, we certainly could reduce the amount of litigation in this area of the law.

However, judging by the number of disputes over disability, medical, death, and other workers’ compensation benefits which have been submitted to this Court over the years, and the results of those disputes, this overriding concern for the best interests of injured workers is selective and infrequent at best.

For these reasons, I dissent from the majority opinion. I would reverse the judgment of the Workers’ Compensation Court; I would award attorney fees and costs to the claimant; and I would impose the statutory penalty for the unreasonable denial of Patricia Sullivan’s benefits.

JUSTICE HUNT joins in the foregoing dissent.