author: MR. JUSTICE SHEEHY MR. JUSTICE GULBRANDSON,

text:
    ED. H. BLOME and Shirley A. Blome, Plaintiffs and Appellants, v. FIRST NATIONAL BANK OF MILES CITY, Defendant and Respondent.
    No. 88-336.
    Submitted on Briefs Jan. 26, 1989.
    Decided July 18, 1989.
    776 P.2d 525.

      Michael P. Sand, Bozeman, for plaintiffs and appellants.
    Thomas M. Monaghan, Lucas & Monaghan, Miles City, for defendant and respondent.
   MR. JUSTICE SHEEHY

delivered the Opinion of the Court.

E.H. Blome and Shirley A. Blome appeal from a summary judgment granted against them in the District Court, Sixteenth Judicial District, Custer County, and in favor of First National Bank in Miles City. We determine that the record discloses no genuine issue of material fact so as preclude summary judgment and so affirm the District Court.

The issues on appeal as stated in the Blomes’ brief are as follows:

1. Whether summary judgment is proper where the record discloses genuine issues of material fact and that the moving party is not entitled to judgment as a matter of law.

2. Whether the trier-of-fact could find that the Bank acted arbitrarily, unreasonably or capriciously and in violation of the Blomes’ justifiable expectations that the Bank would loan them money for the purchase of feeder cattle and to pay on their Contract for Deed with Charles McRae and Jack Ross in December of 1982.

3. Whether the trier-of-fact could find that the Bank acted arbitrarily, unreasonably or capriciously and in violation of the Blomes’ justifiable expectations by failing to give the Blomes reasonable notice that their credit was in jeopardy prior to December 23, 1982.

4. Whether the court could find that the Bank breached a contract with the Blomes when it refused to loan them money for the purchase of feeder cattle and to pay on the McRae/Ross contract in December of 1982.

5. Whether the trier-of-fact could find, assuming an absence of tortious bad faith or breach of contract, that the Blomes relied, to their detriment, on a justifiable belief that the Bank had agreed to loan money for the purchase of feeder cattle and to pay on the McRae/ Ross contract in December of 1982.

The Blomes, who had been successful farmers near Dillon, Montana, for a number of years, in 1981 sold their farm for $360,000. That summer the Blomes approached Charles McRae, co-owner of a farming and feedlot operation near Hysham, Montana, as interested buyers. Eventually the Blomes entered into a contract for deed to purchase for $1,100,000 from Charles McRae and Jack Ross, the ranching and feedlot operation at Hysham. The Blomes agreed to make and did make payments totaling $300,000 on the contract, and agreed to make annual payments of $77,872 beginning in January of 1983 until the amortized debt was paid.

Charles McRae was a director of the First National Bank in Miles City. He suggested to the Blomes that they deal with the Bank for their financing. Beginning on October 6, 1981, and ending on December 23, 1982, the Bank loaned the Blomes money on 27 occasions, each time evidencing the loans through promissory notes.

The memoranda appearing on the Bank records indicate the progress of the loan and the Blomes’ new ranching operation. On March 17, 1982, the Bank learned that Ed Blome had made a crop sharing agreement on 330 acres of land with a neighboring owner. The Bank officers expressed some dismay that the agreement was made without their knowledge. Nonetheless, on July 21, 1982, their inspection report showed an excellent crop of corn being raised, with excess silage also on hand. On November 5, 1982, the Bank noted the purchase by the Blomes of a 1970 Peterbilt truck and a 1966 Wilson grain hopper at a total cost of $14,500. At this point the Bank expressed to Shirley Blome the displeasure of the officers that these purchases had been made without consultation with the Bank.

The notation for December 23, 1982, showed that Ed Blome had approached the officers with a proposal to purchase 1,200 head of calves to utilize his existing silage. Since the finances would have to come from the Bank, the officers had presented the proposal to the Bank’s loan committee. The loan committee had decided not to allow the loan request and to decline renewal of loans for the entire upcoming year. So it was that on November 23, 1982, the Blomes were advised orally that the Bank would no longer be financing Blomes’ operations. At that time their outstanding debt to the Bank amounted to $372,131.24.

Because of the Bank’s withdrawal of support, the Blomes were unable to meet the January, 1983, payment on their contract for purchase with Charles McRae and Jack Ross. The default resulted in a complete loss of the Blomes’ investment in the ranch operation.

The Bank did not commence foreclosure until after the 1983 harvest, apparently with the consent and cooperation of the Blomes who aided the Bank in disposing of the various items of property and crops so that the debt as of the time of foreclosure had been reduced to $64,899.45 on November 29, 1983. There is a notation in the Bank records that the cooperation of the Blomes helped Charles McRae, the Bank director, who would otherwise have had to farm the unit and who was in no position to do the farming.

The Blomes filed their complaint against the Bank in the Yellowstone County District Court on October 15, 1986. A change of venue to the District Court of the Sixteenth Judicial District for Custer County was eventually granted. On December 23, 1987, First Bank moved for summary judgment which the District Court granted on May 12, 1988. This appeal followed.

This case is similar to, and in many respects controlled by our decision in Shiplet v. First Security Bank of Livingston (1988), 234 Mont. 166, 762 P.2d 242. There, with respect to the appropriate standard of review we stated:

“In order for summary judgment to issue, the moving party must show there is no genuine issue as to facts that are material in the light of the substantive principles entitling that party to judgment as a matter of law. If the moving party meets this burden, the non-moving party then has the burden of showing a genuine issue of material fact. These standards also apply to this Court when reviewing the grant or denial of summary judgment. Frigon v. Morrison Maierle, Inc. (Mont. 1988), [233 Mont. 113,] 760 P.2d 57, 45 St.Rep. 1344, and cases cited therein.”

762 P.2d at 244.

The issues presented for review by the Blomes which we have quoted above, can be boiled down to these essential questions:

(1) Was there ever an expressed or implied contract on the part of the Bank to continue to loan the Blomes money for their ranching operation, and to pay on their contract for deed with Charles McRae and Jack Ross?

(2) Was there an implied covenant of good faith and fair dealing between the Blomes and the Bank which the Bank breached?

(3) Did the Bank give reasonable notice of intention not to renew credit for the Blomes after December 23, 1982. (Arbitrary and capricious issue)?

DID AN EXPRESS OR IMPLIED CONTRACT EXIST?

This caption subsumes issues 4 and 5 first above noted as presented by the Blomes for review.

Blomes contended there was an agreement by the Bank to provide the Blomes financing for their operation as long as they needed it with repayment to be made when they were able to with respect to the operation of the ranch and the payments on the contract for deed.

Totally lacking before the District Court and here is any evidence of facts upon which an express contract could be based. The loans by the Bank were evidenced by promissory notes signed by the Blomes; the memoranda in the Bank records are simply journal reports of the progress of the ranching operations and the prospects of payment for the loans; no oral representations by any bank officers may be found which would bind the Bank to perform as the Blomes contend. In other words in this case there can be no express contract upon which the Blomes can base a cause of action.

The same problem attends the contention of the Blomes that there was an implied contract between them and the Bank. Under § 28-2-103, MCA, an implied contract is one the existence and terms of which are manifested by conduct. The evidence here is that from the time the Blomes entered into financing arrangements with the Bank, until the arrangements were terminated on December 23, 1982, their relationship was one of an ordinary bank-customer. Each time the Blomes needed financing, the Bank reviewed their progress, determined their financing needs, and in accordance therewith issued loans based on promissory notes on a short term basis. Nothing in the evidence suggests anything more than a day-to-day or month-to-month financing arrangement, based upon a review of the financial condition of the borrowers at the time the notes were executed and delivered. Particularly, there is no indication in the Bank memoranda or any oral evidence that the Bank did not expect the notes to be paid when due nor any agreement outside the notes for loans to the Blomes when they needed them, and without regard to the necessity of repayment.

Moreover, the claimed existence of an implied contract between the parties runs into legal questions which cannot be answered here on the facts. First, an implied contract the performance of which exceeded one year would run afoul of the statute of frauds, § 28-2-903, MCA. Secondly, the language of the notes in each case is clear and explicit as to due dates and payment. The claimed implied contract would have the effect of varying the terms of written instruments. So we said in Shiplet, supra:

“As to any oral representations by the Bank that the application was in fact a contract, the District Court quoted language from our decision in First National Montana Bank of Missoula v. McGuiness (Mont. 1985), [217 Mont. 409,] 705 P.2d 579, 42 St.Rep. 288:
“ ‘[E]vidence of prior oral agreements is not admissible for the purpose of altering subsequent written agreements dealing with the same subjects, and that the prior oral agreements and the written agreement will merge into the subsequent written agreement unless they are distinct and can stand independently of one another. 705 P.2d at 584.’
“Under the doctrine of merger as enunciated in McGuiness, any oral representations made by the Bank merged with the terms of the note, which then represented the contract reached between these two parties.”

762 P.2d at 245.

As a matter of law therefore, neither an express nor implied contract, nor evidence tending to support the same, was presented to the District Court so as to preclude summary judgment. We find no error on these issues.

DID THE BANK BREACH AN IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING?

Under the Uniform Commercial Code, every contract or duty within the code imposes an obligation of good faith in its performance or enforcement. Section 30-1-203, MCA. “Good faith” is defined in the code as “honesty in fact in the conduct or transaction concerned.” Section 30-1-201(19), MCA.

The duty of good faith may not be disclaimed by agreement between the parties, though their agreement may determine the standards by which good faith is to be measured if the standards are not manifestly unreasonable. Section 30-1-102(3) MCA.

We may assume then that there did exist between the parties, mutually, and to each other, because the instruments involved here were related to the Uniform Commercial Code, a duty of good faith in their conduct or performance. This leads us to the next issue raised by the Blomes.

DID THE BANK GIVE REASONABLE NOTICE OF ITS INTENTION NOT TO RENEW ITS FINANCING TO THE BLOMES OR OTHERWISE ACT ARBITRARILY OR CAPRICIOUSLY?

This caption subsumes issues 2 and 3 first noted above by the Blomes as proper for review.

Essentially, the Blomes are claiming that the conduct of the Bank gave rise to their justifiable expectations that the Bank would continue to loan them money for the purchase of feeder cattle, and to pay on their contract for deed. Blomes further contend that they were entitled to reasonable notice that their credit was in jeopardy prior to December 23, 1982.

In Nicholson v. United Pacific Insurance Company (1985), 219 Mont. 32, 710 P.2d 1342, this Court took pains to “more fully articulate our conception of what has been termed loosely as ‘bad faith,’ but has termed more accurately as the tort of breach of the implied covenant of good faith and fair dealing.” There this Court stated:

“. . . [w]e agree with the statement in Quigley, supra, [Quigley v. Pet, Inc. (1984), 162 Cal.App.3rd 877, 208 Cal.Reptr. 394] that the tort resulting from this breach depends on some impermissible activity. The Montana cases discussed above focus on the action of the breaching party in the relationship to find a breach of the implied covenant, not just the existence of a breach of contract.
“ . . . But whether performing or breaching, each party has a justifiable expectation that the other party will act as a reasonable person (citing a case). The nature and extent of an implied covenant of good faith and fair dealing is measured in a particular contract by the justifiable expectations of the parties. Where one party acts arbitrarily, capriciously or unreasonably, that conduct exceeds the justifiable expectation of the second party. The second party then should be compensated for damages resulting from the other’s culpable conduct.”

Nicholson, 710 P.2d at 1348.

Clearly, under Nicholson, a breach of implied covenant of good faith and fair dealing requires the breaching party to conduct itself in an impermissible activity, and in so doing, to act arbitrarily or capriciously. In the case now before us, evidence of such a breach of implied covenant is totally lacking. Certainly the Bank here, analyzing the financial situation of the Blomes, had a right to terminate its financing as long as it did so reasonably and not capriciously. The Bank, from the evidence here, did act reasonably and not capriciously or arbitrarily. As to notice of its intention not to renew the financing, there is no common law or statutory duty to give notice. It further appears here that the Bank gave notice to the Blomes when they applied to the Bank for additional financing to purchase a large herd of feeder cattle. The Bank officials decided that they had gone as far as they could and it was time to call a halt to their financing of the operation. That was a business decision made by the Bank which it fully had a right to make. Again, this point was covered in Shiplet, supra:

“The Shiplets’ fourth count alleged breach of the implied covenant of good faith and fair dealing. The District Court’s ruling cited authority from this Court requiring that a breach of contract must be a result of some ‘impermissible activity’ before the breaching party can be held to have breached the implied covenant of good faith and fair dealing. (Citing cases.)
“The Shiplets seek to distinguish this authority by noting in Nicholson, we held a breach of contract was not a prerequisite to a breach of the covenant, because the implied covenant of good faith is not an obligation arising from the contract itself. Nicholson, 710 P.2d at 1348. While this is true, we also stated the obligation imposed by the covenant is to act reasonably. Under this standard, we have held the ‘minimal requirement’ for breach of the covenant is action by the defendant that is ‘arbitrary, capricious or unreasonable, and exceeded plaintiffs’ justifiable expectation [that the defendant act reasonably].’ Noonan, [v. First Bank Butte (Mont. 1987)] [227 Mont. 329,] 740 P.2d at 635.
“In this case the Shiplets had a justifiable expectation that the Bank would act reasonably by lending money on the terms agreed upon in the notes. As we found above, this was done. The evidence induced by the Shiplets fails to show arbitrary or unreasonable conduct by the Bank. The District Court was correct in granting summary judgment.”

762 P.2d at 246.

CONCLUSION

The first issue presented by the Blomes for review is that summary judgment is not proper where the record discloses genuine issues of material fact. There simply is no evidence adduced by the Blomes here that would indicate either an express or an implied contract, or a breach of the implied covenant of good faith imposed on transactions under the Uniform Commercial Code. The plight of the Blomes in this case, who lost the entire proceeds of their former farming operation in Dillon, is regrettable, but it cannot be said in this case that the Bank is legally responsible for any of the losses sustained by the Blomes. There is no genuine issue of material fact presented in this case, and the decision of the District Court to grant summary judgment in favor of the Bank is hereby affirmed.

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

MR. JUSTICE GULBRANDSON,

specially concurring:

I concur with the result of the foregoing opinion but not with all that is expressed therein.


source: Caselaw Access Project

author: MR. JUSTICE HUNT

license: Public Domain

text:
    LARRY’S POST COMPANY, INC., Appellant, v. UNEMPLOYMENT INSURANCE DIVISION, CONTRIBUTIONS BUREAU, Respondent.
    No. 88-510.
    Submitted on Briefs Feb. 3, 1989.
    Decided July 18, 1989.
    777 P.2d 325.

      C. Eugene Phillips, Murphy, Robinson, Heckathorn and Phillips, Kalispell, for appellant.
    Karl Nagel, Dept, of Labor & Industry, Helena, for respondent.
   MR. JUSTICE HUNT

delivered the Opinion of the Court.

Larry’s Post Company, Inc. appeals from a judgment of the District Court of the Eleventh Judicial District, Flathead County, which affirmed the determination of the Board of Labor Appeals that services performed by individuals who contracted with Larry’s to harvest timber constituted employment within the meaning of the unemployment insurance laws. We affirm.

Larry’s raises the following issues on appeal:

1. Were the facts found by the appeals referee and adopted by the Board of Labor Appeals supported by the evidence?

2. Do the facts substantiate the finding of an employment relationship for the purpose of unemployment insurance?

Appellant Larry’s Post Company, Inc. operated a post yard in Flathead County near Columbia Falls. It was engaged in the business of procuring, cutting, pointing, curing, treating and selling fence posts, poles and rails.

Larry’s arranged with landowners to cut and remove timber from certain private properties. In exchange for the right to harvest timber, Larry’s paid each landowner a stumpage fee.

When the right to harvest a particular tract was procured, Larry’s contracted with woodcutters to cut and remove the timber. Tom Finch, whose claim for unemployment insurance benefits initiated this matter, contracted with Larry’s to cut timber for approximately four weeks in 1986. Finch performed services for Larry’s after quitting his job at the Superior Lumber Mill and while awaiting the completion of contractual arrangements with the State of Montana to begin harvesting timber on state lands.

Although Larry’s usually executed written contracts with its woodcutters, a written contract was not entered into with Finch. The evidence indicates, however, that Larry’s dealt with Finch on the same terms that it dealt with woodcutters who signed written agreements.

Each cutting agreement granted the woodcutter the exclusive privilege of cutting post and pole timber from areas designated by Larry’s. The woodcutter was required to conform to performance specifications stipulated by the contract, the landowner and statutes. Any failure to conform to these specifications constituted cause for termination.

The woodcutters were allowed to set their own hours. They could also provide services to others, although no evidence was submitted showing that any woodcutter was under contract with any other firm while under contract with Larry’s.

The woodcutters were permitted to hire assistants or subcontract out all or part of the work. Tom Finch was assisted by his son, whom he paid for that assistance. However, no evidence was introduced regarding whether Finch or any other woodcutter paid employment taxes or whether they withheld taxes from the earnings of their assistants or subcontractors.

The woodcutters were permitted to sell to other buyers the timber cut under the contract with Larry’s. When a woodcutter sold his posts and poles to another, he was obliged to pay stumpage fees to Larry’s.

Larry’s paid the woodcutters on a regularly scheduled basis — every two weeks — for cut posts and poles. All contractors were paid the same rate. The woodcutters did not negotiate prices, nor was the work awarded on the basis of competitive bids. Certain costs, including stumpage fees paid to the landowner, were deducted from each woodcutter’s paycheck.

The woodcutters provided their own transportation to and from the cutting site. They also furnished their own tools and equipment, usually a chain saw and other tools common to the woodcutting trade. However, if a woodcutter did not own the appropriate tools, he could rent them from Larry’s. The rental cost was deducted from his paycheck.

Other than equipment and transportation, the woodcutters did not make a significant investment in the job. They did not purchase stumpage prior to harvest; they paid only for the stumpage they cut; they were under no liability if they were unwilling or unable to complete their contracts; they faced little opportunity for profit or loss other than their success or failure in performing efficiently.

Each contract provided that the agreement could be terminated at any time by either party. Tom Finch’s agreement with Larry’s ended in June, 1986, when the property on which he was working was sold by the landowner and was no longer available for timber harvesting. From that time until September, 1986, Finch was self-employed, buying stumpage and cutting timber on state lands.

In October, 1986, Finch filed a claim for unemployment insurance benefits. His claim was denied because he left the Superior Lumber Mill to engage in self-employment. In November, 1986, he sought a redetermination of the claim, this time including his earnings from Larry’s as requalifying wages. The Unemployment Insurance Division then initiated an investigation, resulting in the Division’s determination that, as the services performed by Finch for Larry’s constituted employment, he was eligible for unemployment insurance benefits.

In May, 1987, Larry’s appealed the decision. A hearing was held before an appeals referee from the Department of Labor and Industry. The appeals referee also concluded that the work performed by Finch constituted employment.

In August, 1987, Larry’s again appealed, this time to the Board of Labor Appeals. In the absence of a request for oral argument, the Board reviewed the matter and affirmed the referee’s decision.

Larry’s then sought judicial review of the determination. After briefing, the District Court dismissed the petition and affirmed the agency decision. Larry’s appeals to this Court.

The standard of review of decisions by the Board of Labor Appeals is set out in § 39-51-2410(5), MCA, which provides in pertinent part:

“(5) In any judicial proceeding under 39-51-2406 through 39-51-2410, the findings of the board as to the facts, if supported by evidence and in the absence of fraud, shall be conclusive and the jurisdiction of said court shall be confined to questions of law.”

Thus, as mandated by statute, we are bound by those facts found by the Board of Labor Appeals that are supported by the evidence. “Supported by the evidence” means supported by substantial evidence, that is, more than a scintilla of evidence but less than a preponderance. Gypsy Highview Gathering Sys. v. Stokes (1986), 221 Mont. 11, 15, 716 P.2d 620, 623.

Larry’s argues that several of the findings made by the appeals referee and adopted by the board are not supported by the evidence. Specifically, Larry’s refers to those findings in which the appeals referee stated that no evidence was presented regarding certain matters. Larry’s argues that “no evidence” is not the same as “substantial evidence” and cannot be the basis of any finding of fact.

The so-called “non-findings” that Larry’s challenges are:

“[1] [T]here was no evidence or testimony submitted showing that any woodcutter was ever under contract with any other firm while under contract with Larry’s Post Company.
. “[2] [T]here is no evidence or testimony on the record that the woodcutters pay any employment taxes (workers’ compensation, unemployment insurance, social security). Nor was any evidence or testimony submitted showing that the woodcutters withhold taxes from their assistants/subcontractors earnings.
“[3] There is no testimony or evidence in the record showing that woodcutters post a hazard reduction bond as required by Section 76-13-408, et. seq., MCA.
“[4] There was no evidence or testimony submitted showing that the woodcutters negotiated prices or that work is awarded on the basis of competitive bids.”

These “non-findings” are especially pertinent to the present case. Each reflects an element indicative of an individual’s status as an independent contractor. The appeals referee’s finding of a lack of evidence on these points tends to demonstrate that an employment relationship existed between Larry’s and the woodcutters.

Furthermore, Larry’s, as the employer, had the burden of proving that the services performed by the woodcutters did not constitute employment. Section 39-51-203(4), MCA (1985). The very fact that Larry’s neglected to introduce evidence indicating that the woodcutters were independent contractors — evidence showing that not only did the woodcutters have an opportunity to work elsewhere, they actually did so; evidence showing that while the woodcutters occasionally had other individuals assist them, those individuals were actual employees of the woodcutters; evidence showing that the price of the posts was negotiated between two entities of similar bargaining power or that the contracts were awarded on the basis of competitive bids; evidence showing that the woodcutters were required to invest in hazard reduction bonds — established that Larry’s failed to meet its burden. Under the circumstances, the challenged findings were appropriate.

Larry’s next argues that the facts found by the appeals referee do not substantiate the finding of an employment relationship. Larry’s contends that the facts establish that the woodcutters were independent contractors and, therefore, not covered by the unemployment insurance laws.

The formula for determining whether individuals are independent contractors or employees within the meaning of the unemployment insurance laws is commonly known as the ABC Test. The test is delineated in § 39-51-203(4), MCA (1985), which provides:

“(4) Service performed by an individual for wages is considered to be employment subject to this chapter unless and until it is shown to the satisfaction of the department that:
“(a) such individual has been and will continue to be free from control or direction over the performance of such services, both under his contract and in fact;
“(b) such service is either outside the usual course of the business for which such service is performed or that such service is performed outside of all the places of business of the enterprise for which such service is performed; and
“(c) such individual is customarily engaged in an independently established trade, occupation, profession, or business.”

Under the statute, employment is presumed. Before an individual will be deemed an independent contractor, elements of all three subsections of the statute must be proven. Pioneer Baseball League v. Friedricks (Mont. 1988), [233 Mont. 384,] 760 P.2d 93, 95, 45 St.Rep. 1573, 1576; Standard Chem. Mfg. Co. v. Employment § Div. (1980), 185 Mont. 241, 245, 605 P.2d 610, 613.

The first and most crucial element of the ABC test is the right of the individual who performs services to retain control and direction over his labor. Pioneer Baseball, 760 P.2d at 95, 45 St. Rep. at 1576. Control is necessarily implied in every contract that gives the employer the right to insist that services be performed according to specifications. St. Regis Paper Co. v. Unemployment Compensation Comm’n (1971), 157 Mont. 548, 553, 487 P.2d 524, 527. Evidence of Larry’s control over the woodcutters was demonstrated by the written contracts, which enumerated several performance specifications. Further evidence of Larry’s control was illustrated by testimony indicating that Larry’s had the right to specify and change the size of the posts to be cut, depending on the orders the post company needed to fill. In addition, Larry’s monitored the cutting area to assure that the woodcutters followed all stipulations. If a woodcutter failed to comply, Larry’s could withhold from the woodcutter’s pay any amounts necessary to bring the worker into compliance. Failure to comply could also result in dismissal.

Evidence of employment was also found in the method by which the woodcutters were paid. Larry’s paid the woodcutters every two weeks for the number of posts cut, rather than by the job. Moreover, each woodcutter was paid the same amount per post, in accordance with a price list attached to the written contract. The woodcutters did not negotiate the price to be paid per post, nor were the contracts awarded on the basis of competitive bids — both factors that, if present, would indicate an independent contractorship. See Pioneer Baseball, 760 P.2d at 95, 45 St.Rep. at 1576.

Further evidence of employment was indicated by the fact that the woodcutters continued their relationship with Larry’s through a succession of jobs. Their contracts were not renewed each time they were granted a new area in which to cut — a factor that, if present, would point to independent contractorship.

Perhaps the most important indication that Larry’s retained control over the woodcutters was the fact that the relationship between the two was terminable at will without liability on the part of either party. This fact signified the existence of an employment relationship. Kirby Co. of Bozeman v. Employment Sec. Div. (1980), 189 Mont. 1, 9, 614 P.2d 1040, 1044.

The above combination of factors demonstrated that Larry’s retained control over the woodcutters, thereby establishing that their relationship was one of employment. As Larry’s failed to establish the first leg of the ABC Test, we need not consider the remaining two branches. As noted earlier, if the employer fails to prove all three elements of the ABC test, the services performed will be considered employment.

Affirmed.

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


author: MR. JUSTICE HARRISON MR. CHIEF JUSTICE TURNAGE,

text:
    In re the MARRIAGE OF MARY LOU MILLER, Petitioner and Appellant, and DALE LEE MILLER, Respondent and Respondent.
    No. 88-557.
    Submitted on Briefs May 11, 1989.
    Decided July 18, 1989.
    777 P.2d 319.

      Joan Meyer Nye, Nye & Meyer, Billings, for petitioner and appellant.
    James D. Rector, Rector & McCarvel, Glasgow, for respondent and respondent.
   MR. JUSTICE HARRISON

delivered the Opinion of the Court.

This is an appeal from the Fifteenth Judicial District Court, Roosevelt County, Montana, the Honorable M. James Sorte presiding. In this marriage dissolution action, appellant appeals that portion of the District Court’s findings of fact, and conclusions of law pertaining to the property distribution of the marital estate. We reverse and remand.

Mary Lou and Dale Miller were married on March 7, 1964 and remained married for a period of some twenty-four years. Three children were born of the marriage, two sons, both of legal age at the time of the dissolution, and one daughter who has since reached majority.

Respondent Dale Miller (hereinafter referred to as the husband) has been a farmer/rancher most of his life. The appellant, Mary Lou Miller (hereinafter referred to as the wife) cared for the family home, raised the three children, assisted with various farm duties and worked outside the home at assorted jobs. Those jobs included work as a substitute school teacher, school bus driver and retail sales clerk.

The wife filed her petition for dissolution of marriage on April 5, 1985, and requested the court divide the marital and personal property equally between the parties. The husband answered the petition on April 18, 1985, and admitted that the court should divide the property equally. However, two years later, the husband filed with the District Court two reports, one on June 1, 1987 and one on June 29, 1987, regarding his premarital property. These reports claimed totally different marital assets. The husband asserted in these two reports that he had owned various personal property and land prior to the marriage. The husband requested the District Court deduct the value of his premarital property from the total of the marital estate before it made its determination and distribution, and that the value of his premarital property should be awarded solely to him. In addition, the husband asserted that part of the value of the land the parties acquired during the marriage should also be deducted from the marital estate prior to division and be awarded to the husband as his sole premarital and gifted property.

On August 23, 1988, the District Court entered its Findings of Fact, Conclusions of Law and Decree and found the net worth of the marital estate to be:

Total assets: $318,936.50
Total liabilities: $12,950.00
Total (net) marital estate: $305,986.50

The District Court distributed the total net estate as follows: $70,812 to the wife (or 23% of the total marital estate) and $235,174.50 to the husband (or 77% of the total marital estate).

On appeal the wife claims the District Court’s division of property was not supported by the record. She takes specific objection to the court deducting, prior to division, the following: the present value of all personal property the husband claimed he owned at the time of the marriage but did not own at the time of the dissolution; the full value of land both parties received by gift in 1970 from the husband’s mother; the claimed discount below market value in the purchase price at which the husband’s parents sold certain land to the parties during the marriage; and all premarital land of the husband.

The husband claimed that, with personal funds owned prior to the marriage, he paid for all land the parties purchased during the marriage, specifically from the husband’s parents. In addition to land the husband purchased in 1954, he claimed sole personal ownership, prior to the marriage of the following items: 1958 MM GB tractor; 1956 Oliver 88 tractor and loader; 1952 Ford 8N tractor; 1957 Ford 2-ton truck; 1954 Oliver 33 combine; 1953 MF 10 baler; 1957 IHC swather; 1958 Cockshutt tool bar; 1957 John Deere disk; John Deere plow; 1961 Farmhand rake; 1963 Ford pickup; 1954 Ford pickup; pickup camper; Aluma Craft boat and trailer with 40 hp Johnson motor; water well; 85-90 head of cows; 12 bulls; 2 horses; saddle; 500 bushels alfalfa seed; hay, oats and barley; cow shed; buildings moved from other place; fences; two 1100-bushel steel bins; 2 fuel tanks; cattle chute; tools and chain saws; approximately 9 guns; and $7,000 in savings bonds.

It should be noted that the wife’s original attorney dropped out of the case a month or two prior to the case being heard by the District Court and certain matters were stipulated or allegedly stipulated to prior to new counsel taking the case. Part of the alleged stipulation went to the above-listed premarital property. The wife’s counsel objected, alleging a stipulation as to the deduction of premarital assets was never entered. Testimony at trial concerning the value of the husband’s premarital property was not supported by qualified estimates or appraisals, as reflected in the husband’s testimony on cross-examination:

“Q [By wife’s attorney] Do you know what the price of registered cows were on March 7th, 1964?
“A No.
“Q So that this figure of a thousand dollars is just a guess, isn’t it?
“A Yes.
“Q Is the camper, boat, motor and trailer still in existence?
“A It was traded in since then.
“Q And you don’t have any appraisal or no written documents to reflect what its value was on March 7th, 1964, do you?
“A No.
“Q So then that value is speculation as well.
“A Yes.”

The extent of the wife’s contribution to the farm operation and its many related tasks, was disputed by both parties. The District Court heard testimony regarding the wife’s contribution to the farm operation from the husband, the wife, one of their sons and various friends and neighbors. After hearing the testimony, the District Court found that the wife made a “negligible contribution” to the farm and the ranch operation.

This Court finds error with the District Court finding the wife made a “negligible contribution.” The record reveals just the opposite; she raised the parties’ three children, was a helping hand on the ranch, was primarily responsible for the ranch home and town home, and worked outside of the home at various jobs.

The wife objects to the District Court’s findings of fact, specifically Nos. 15, 16, 19 and 20. In finding No. 15 the wife objects to the court’s finding that while she had received a $3,700 settlement for a personal injury, an injury incurred prior to the marriage and the settlement received after the marriage, that the District Court found “[t]he $3,700.00 was not used for any land payments or as contribution towards the marital estate.”

In finding No. 16 the wife objects to the court’s finding that the husband paid for the land purchased from his parents during the marriage with money “[d]irectly traceable and attributable to the premarital assets of the [husband].”

In finding No. 19 the wife objects to the court’s finding that she “[d]oes have an opportunity for future acquisition of substantial capital assets through inheritance” from her father if she out-lives him. The District Court did not note that she is one of eight children in her family, and according to the wife’s testimony at trial the oil wells owned by her father were not in operation due to the shutdown of many of the oil fields in eastern Montana.

In finding No. 20 the wife objects to the court’s finding that the husband “[h]as little or no opportunity for the acquisition of capital assets or income,” even though the record indicates thát he received money from mineral leases on the property and that during the years of the parties’ marriage, he has received substantial income from those mineral leases.

Following trial, the wife moved for a new trial, presenting bank documents to show that findings 15 and 16 were clearly erroneous. Her motion for a new trial was denied and the District Court adopted the summary order prepared by the husband’s attorney. The wife now appeals that distribution.

Numerous issues have been presented on appeal, but in view of the fact that we are returning this matter to the District Court, only two issues will be discussed to clarify the matter on remand. Those issues are:

1. Did the District Court err in applying the “not unconscionable” standard of § 40-4-201, MCA, instead of the “equitable” standard under § 40-4-202, MCA, for division of property by the court where the parties had no agreement on division of property?

2. Did the District Court abuse its discretion in setting over $218,220 of the marital estate to the husband before dividing the marital property, without properly considering the wife’s contributions to the marriage, resulting in an inequitable division of the marital estate?

The “not unconscionable” standard is contained in § 40-4-201, MCA, which in pertinent part states:

“(2) [t]he terms of the separation agreement. . . are binding upon the court unless it finds, after considering the economic circumstances of the parties and any other relevant evidence produced by the parties . . . that the separation agreement is unconscionable.”

The foregoing section limits the application of the standard of unconscionability to the case where a separation agreement is presented to the court. No agreement was proposed in the present case.

As a result, the appropriate standard required of the court is contained in § 40-4-202, MCA, which states in pertinent part:

“(1) In a proceeding for dissolution of a marriage, . . . the court, without regard to marital misconduct, shall, . . . finally equitably apportion between the parties the property and assets belonging to either or both, however and whenever acquired and whether the title thereto is in the name of the husband or wife or both. In making apportionment, the court shall consider the duration of the marriage . . ., the age, health, station, occupation, amount and sources of income, vocational skills, employability, estate, liabilities and needs of each of the parties; . . . and the opportunity of each for future acquisition of capital assets and income.”

Clearly, the standard of equitable apportionment set forth in § 40-4-202, MCA, is not comparable to the standard of unconscionability set forth in § 40-4-201, MCA. In the present case, the District Court adopted without significant change the property description proposed by the husband, and in doing so applied a standard that the proposal was not unconscionable. That does not meet the statutory test of § 40-4-202, MCA.

In the present case, the court was required to “finally equitably apportion” the property and assets and was further required to take into consideration a number of factors which are not even mentioned in the other code section. We conclude that the District Court’s “not unconscionable” finding does not constitute a finding of equitable apportionment. We conclude that the District Court must review all of the elements contained in § 40-4-202, MCA, and make a determination of equitable apportionment following the provisions of that section. We hold that the application of the “not unconscionable” standard of § 40-4-201, MCA, in the present case constitutes reversible error.

The second issue is whether the court abused its discretion in setting over $218,220 of the marital estate to the husband before dividing the marital property, without considering the wife’s contributions to the marriage.

This Court in In re Marriage of Brown (1978), 179 Mont. 417, 422, 587 P.2d 361, 364, noted the standard of review where we set forth the following:

“The standard for reviewing the property division in a dissolution decreed by a District Court is well settled in Montana. The apportionment made by the District Court will not be disturbed on review unless there has been a clear abuse of discretion as manifested by a substantially inequitable division of the marital assets resulting in substantial injustice. In re Marriage of Blair (1978), [178] Mont. [220], 583 P.2d 403, 405, 35 St.Rep. 1256; Vivian v. Vivian (1978), [178] Mont. [341], 583 P.2d 1072, 1074, 35 St.Rep. 1359; Eschenburg v. Eschenburg (1976), 171 Mont. 247, 557 P.2d 1014, . . . Porter v. Porter (1970), 155 Mont. 451, 473 P.2d 538.”

In addition, in In re Marriage of Hall (Mont. 1987), [228 Mont. 36,] 740 P.2d 684, 686, 44 St.Rep. 1321, 1323, we noted:

“We have concluded that in a property distribution review in marriage dissolution, this Court will reverse a district court only upon a showing that the district court has acted arbitrarily or has committed a clear abuse of discretion, resulting in either instance in substantial injustice.”

In the case at bar, the District Court’s findings of setting over to the husband all premarital property and all property derived from his parents, are very similar to the district court’s findings in Brown. We note, however, the unfairness of the order herein where the gift of land by the husband’s mother to the parties was not made to just one party but to both the husband and the wife, and such land has been in both of their names. Here the duration of the marriage was substantial, twenty-four years, considerably longer than the fourteen years in Brown. We note in the case at bar the District Court went further than the district court in Brown. The court here gave full credit for unappraised personal property which the husband claimed he owned at the time of the marriage. As a direct result, the court divided the property with 77% going to the husband and only 23% to the wife. The record does not disclose evidence which establishes that the unappraised personal property was still in existence at the time of the dissolution or that it was “acquired in exchange” for such property, as referred to and described in § 40-4-202, MCA. The District Court also did not grant any value to the wife’s contribution to the ranch and marriage.

With regard to the 640 acres of land, the court did not have valuations or appraisals as of the date of dissolution. The only values given were those in effect prior to the marriage.

With regard to the property owned by the husband prior to marriage, there is no evidence that any part of this property is still in existence. There were no adequate appraisals of the values of such property, only estimates. The court valued the property at $129,900 without substantiated appraisals.

We also conclude that in the absence of evidence disclosing that such $129,900 worth of property was in existence or was traceable to property now in existence, such property could not be considered. As stated in Glasser v. Glasser (1983), 206 Mont. 77, 87, 669 P.2d 685, 690, “if inheritance funds are not traceable, then they may not be considered as separate property of the spouse.” While the trial court has discretion to select or reject appraisal values, provided there is substantial credible evidence to support the values, there must be evidence to support the trial judge. See In re Marriage of Williams (1986), 220 Mont. 232, 714 P.2d 548, 554, 43 St. Rep. 319, 327. We conclude that it was an abuse of discretion to set over to the husband $129,900 in value of property on the basis of the alleged premarital personal property brought into marriage by the husband.

In addition, we find that the trial court abused its discretion in setting over to the husband the full value of land deeded by the husband’s mother:

240 acres — gift from mother in 1970
108 acres of farmland at $155 per acre
............................................ $16,740
132 acres of grassland at $35 per acre
............................................. 4,620
Total gift— $21,360

It is undisputed that the husband’s mother transferred title to both the husband and the wife. There is no evidence that the gift was intended entirely for the husband, nor did testimony indicate whether $20,000 of the parties’ marital savings was paid to the husband’s mother for this land. The court failed to make any findings as to a claim by wife of payment for the land.

While the couple separated in early 1985, we note the husband was in full possession of all cropland, some of which had been in the names of both husband and wife, because the mother gave it to the parties jointly. Yet, the wife received no proportionate share of income from that land between the time of the separation and the time of the final dissolution decree. During the husband’s testimony under cross-examination, he admitted that the wife had some interest in the land by virtue of her name appearing on the deed. In 1987, during the period between the separation and the final decree, the income from the land (which included government payments and total crop production) was declared for tax purposes at $38,895.

In 1986, the total farm income, calculated for taxation purposes, including depreciation, government payments, etcetera, showed a cash flow in excess of $20,000 after taxes. Additionally in 1985, the year the parties separated, the farm had a cash flow of approximately $11,000. We conclude the District Court erred by inequitably dividing the marital property.

Reversed and remanded for proceedings consistent with this opinion.

MR. JUSTICES WEBER, McDONOUGH and SHEEHY concur.

MR. CHIEF JUSTICE TURNAGE,

dissenting:

I respectfully dissent from the majority decision finding error in the division of the marital estate and remanding this cause for further proceedings. I would affirm the decree of the District Court.

The majority, in part, appears to be concerned about valuation of certain marital property. In Finding of Fact No. 12, the court found that the parties had prepared and filed a stipulation as to the value of the marital estate. In light of that finding, there should be no dispute about valuations.

The standard of review needs no citation. However, as a reminder, we have adopted this standard:-

“A District Court has far-reaching discretion in dividing the marital property. Our standard of review is that the District Court’s judgment, when based upon substantial credible evidence, will not be altered unless a clear abuse of discretion is shown.”

In Re Marriage of Stewart (Mont. 1988), [232 Mont. 40,] 757 P.2d 765, 767, 45 St.Rep. 850, 852. The obvious reason for adopting this standard of review in marital cases was the recognition that the District Court inevitably is called upon to exercise its discretion based upon the court’s opportunity to personally observe the witnesses and hear the testimony in relation to the discrete circumstances of the marriage of the parties. This opportunity afforded the District Judge is not available to this Court, and we should not presume to second-guess the District Judge.

The findings of the District Court fairly establish that the wife has, for a considerable period of time during the marriage, found employment away from the farm and the husband has continuously devoted his time to the management of the farm. The result of the individual effort of the parties in their separate endeavors produced almost equal incomes over a five-year average with the wife’s income exceeding somewhat that of the husband.

Recent agricultural history would indicate operations comparable to that of the husband’s farm are barely break-even propositions. If the agricultural assets were to be distributed in part to both parties, it would be almost inevitable that this family farm would cease to exist.

MR. JUSTICE GULBRANDSON and MR. JUSTICE HUNT join in the foregoing dissent of MR. CHIEF JUSTICE TURNAGE.


author: MR. JUSTICE McDONOUGH

text:
    GAR L. AMUNDSON, Plaintiff and Respondent, v. RICHARD A. WORTMAN, Defendant and Appellant.
    No. 88-564.
    Submitted on Briefs June 8, 1989.
    Decided July 18, 1989.
    777 P.2d 315.

      Morrow, Sedivy & Bennett, P.C., Lyman H. Bennett, III, and Terry Schaplow, Bozeman, for defendant and appellant.
    Drysdale, McLean, Nellen & Nellen, Richard C. Nellen, Bozeman, for plaintiff and respondent.
   MR. JUSTICE McDONOUGH

delivered the Opinion of the Court.

This is an appeal from an action for breach of a contract to buy a business. Defendant Richard A. Wortman appeals from the judgment of the District Court of the Eighteenth Judicial District, Gallatin County, finding him in breach of the contract and awarding the balance of the purchase price, plus interest, to plaintiff Gar L. Amundson. We affirm on the substantive issues regarding the breach, but remand for further proceedings.

Wortman presents three issues for review:

1. Did the District Court err in failing to find the existence of constructive fraud?

2. Did the District Court err in equating “customer lists” with “mailing lists”?

3. Did the District Court err in awarding attorney’s fees without holding an evidentiary hearing?

Amundson was the proprietor of a business called Information Processing in Bozeman, Montana. Information Processing produced a product known as the Direct School Marketing Program, a series of computer-generated booklets designed to list the names, addresses and telephone numbers of school officials, faculty and coaches, together with dates and locations of various conferences and student events taking place during a given season or school year. The booklets were sold to businesses — chiefly in the lodging and restaurant industries — interested in making contact with the listed officials in order to obtain their patronage during a conference or event. Information Processing also offered a follow-up service, which involved putting its subscribers in touch with school officials by mail. Amundson set up the business himself, which included writing the computer program that compiled the booklet.

In 1987, Wortman approached Amundson with a proposal to buy the Direct School Marketing Program. While negotiating terms of the sale, Amundson made various representations to Wortman concerning subjects such as projected earnings from the program, the costs involved and opportunities for new business. Pursuant to these negotiations, Wortman drew up a contract in longhand. Amundson read the contract and prepared a typed version. The contract was executed on April 7, 1987. The price for the business was $18,000, to be paid with a $2,000 down payment and two annual installments of $8,000.

Among other provisions, the contract called for Amundson to deliver to Wortman the computer equipment, software and other items listed in an appendix to the contract, as well as the copyright and logo for the Direct School Marketing Program and all documents related to its course of business. Amundson was also to provide Wortman with “whatever assistance is deemed necessary” in the preparation, marketing and distribution of the Fall 1987 edition of the program. The contract called for Wortman to pursue the business in a diligent, businessman-like manner, and pay all expenses of doing business.

Wortman began operating the business, but was dissatisfied with the results of his efforts. He sought to rescind the contract and return the business, but Amundson did not agree to the rescission. Wortman did not pay his first installment. On September 17, 1987, Amundson made a written demand through his attorney for payment of the installment. When Wortman did not do so, Amundson filed this action on October 21,1987. The complaint sought payment of “all monies owing now or in the future” under the contract, or return of the business and damages for waste due to Wortman’s actions in running it. Wortman raised an affirmative defense, alleging that Amundson had made several misrepresentations during negotiation of the sale that amounted to constructive fraud and entitled him to rescission.

The case was tried before the District Court, sitting without a jury. On August 10, 1988, the court issued its Findings of Fact and Conclusions of Law with Memorandum, in which Wortman was adjudged to be in breach of the contract. Judgment was entered awarding Amundson the balance of the contract price plus interest, together with attorney’s fees and costs, and Amundson’s attorney filed a Notice of Judgment. This appeal followed.

I.

On appeal, Wortman challenges the District Court’s Findings of Fact. When reviewing the findings of fact in a civil action tried by a district court without a jury, this Court will not substitute its judgment for that of the trier of fact. Rather, our review is confined to determining whether the findings of fact are clearly erroneous. Although the evidence may conflict, the court’s findings will be presumed correct if supported by substantial evidence. Meridian Minerals Co. v. Nicor Minerals, Inc. (Mont. 1987), [228 Mont. 274,] 742 P.2d 456, 461, 44 St.Rep. 1516, 1523-24.

The District Court’s Findings of Fact relevant to Wortman’s appeal read as follows:

“12. That the Montana Supreme Court discusses constructive fraud in the case of Moschelle v. Hulse, [190 Mont. 532,] 622 P.2d 155 (1980). The Court spoke in terms of ‘a pattern of repeated concealments of the true state of affairs’ and ‘withholding relevant facts,’ all of which created a false impression to the purchaser.
“13. That the Court does not find constructive fraud by the seller to the buyer.
“14. That the evidence did not show that past profits of the Plaintiff were falsely stated, that he made repeated concealments in promoting the business sale, that an intentional lack of full disclosure created a false impression, or that there was deliberate misleading of the facts which crossed the threshold of ‘puffing’ and entered the realm of constructive fraud.
“15. That the Court finds a customer list was provided, but any mailing list undergoes a constant rollover, and use of such a list in a business requires aggressive and continual updating.
“16. That a sales person leaving the employment upon the sale of a business is not reason to invoke constructive fraud.
“17. That the Contract was very vague regarding what ‘assistance’ was to be provided by the seller, and compelling evidence has not been presented to this Court justifying a lack of assistance to the point of constructive fraud.”

Wortman argues that the court’s Finding of Fact No. 13 was in error and contrary to the evidence in this case. Wortman also argues that the court confused “customer lists” with “mailing lists”, which rendered its Finding of Fact No. 15 erroneous.

Constructive fraud is defined at § 28-2-406, MCA, as

“any breach of duty which, without an actually fraudulent intent, gains an advantage to the person in fault or anyone claiming under him by misleading another to his prejudice or to the prejudice of anyone claiming under him ...”

In cases such as the one at bar, the “duty” involved is the duty to disclose material facts to the purchaser, a breach of which is an essential element of constructive fraud. Mends v. Dykstra (1981), 195 Mont. 440, 637 P.2d 502. The Mends case addressed the issue of when such a duty arises. While the defendants in Mends asserted that no duty arose absent a fiduciary or confidential relationship, it was pointed out that this Court had found “special circumstances” surrounding some transactions which give rise to the duty to disclose. One such set of circumstances was the “pattern of repeated concealments” found in the Moschelle case cited by Wortman in support of his position and included in the District Court’s Findings of Fact quoted above.

Wortman argues that Amundson repeatedly concealed the true state of aifairs concerning the business. According to Wortman, Amundson failed or refused to provide business records detailing the financial history of the business and did not disclose important details concerning its current status. Wortman thus asserts that his negotiations with Amundson created a false impression about the desirability of purchasing the Direct School Marketing Program. We disagree.

The business records Wortman complains of are ledgers and tax records for the years preceding the purchase. He argues that he was unable to gauge the true performance of the business without them, and was forced to rely on representations Amundson made in income projections prepared during their negotiations. Wortman also argues that the projections presented an inflated notion of the profit that could be made selling booklets.

Both sides introduced income projections into evidence. According to testimony by Amundson, as many as five or six such projections were prepared for various possible approaches Wortman might take in operating the business. Amundson also testified that the figures for such things as materials costs, labor and net profit per booklet were based on the past performance of the business. The projections introduced at trial as Wortman’s Exhibit “A” include a statement of annual net profit for the years Amundson ran the business, which Amundson testified he had taken from the ledgers at issue. The projections state net profit forecasts that closely approximate the actual figures from past operation, although some projected profits are actually lower than past performance. Amundson also testified that Wortman never requested tax records during negotiations.

Wortman complains that Amundson also concealed facts about the status of the business that worked to Wortman’s detriment. After the contract had been executed, Amundson and Wortman met with Amundson’s salesman, Tim Barrett, in Butte to go over Barrett’s role in the business. At this meeting, Barrett informed Wortman that he would be quitting his job to pursue other business interests. Wortman alleges that Amundson knew this before the meeting and concealed it, leading Wortman to believe that he was buying a business employing an active salesman.

The testimony cited by Wortman on this point bears examination. Barrett testified that he did in fact tell Amundson of his decision to quit prior to the meeting. However, Barrett said, “I believe I told Mr. Amundson the day he called me and he said he had sold the business . . . .” This testimony indicates that Amundson did not know of Barrett’s departure until after the sale was consummated. He therefore could not have concealed it to Wortman’s detriment in deciding on the purchase. Furthermore, Wortman himself testified that the presence or absence of a hired salesman was not crucial to his plan for operating the business.

Wortman also complained that Amundson did not disclose the “considerable ill will” he had generated among his customers, or their complaints that the booklets were ineffective. However, Wort-man testified that the sluggish sales he experienced could have been the result of his own shortcomings as a salesman. Wortman’s Exhibit “I”, a file folder containing returned sales letters introduced in support of his contention of customer animosity does not lend support to his claim. The file contains 12 letters sent out by Wortman and later returned. On one of the envelopes is written “not interested,” but the other 11 were returned because the addressee had moved. The only letter actually written by a customer states that the booklet previously purchased “helped a great deal” and asks that the customer be retained on Wortman’s mailing list. When testifying about the letters, Wortman admitted that the drop in sales could have been attributed to other causes, such as a generally slow business climate.

Still another of Wortman’s claims was that Amundson failed to supply assistance with business operations that he promised during negotiations and in the contract itself. In response, Amundson testified that he had volunteered assistance, and supplied a record of his activities.

While the examples above do not address every claimed concealment, they are sufficient to illustrate that evidence in this case supports the District Court’s conclusion that constructive fraud was not present. We have found no “pattern of repeated concealments” in the record, and affirm the District Court on this issue.

Wortman’s second challenge concerns “mailing lists” versus “customer lists”. One of the items purchased by Wortman as part of the business was a “customer list” compiled over the course of the Direct School Marketing Program’s existence. Wortman’s brief to this Court makes much of the definition of “customer” as one who repeatedly makes purchases or has business dealings with a tradesman.

According to Wortman, the list supplied was a misrepresentation, because he was able to make only approximately 80 sales to over 300 listed “customers”. At trial, Amundson testified as to how the list was compiled. According to Amundson, businesses were placed on the list when they purchased a booklet. Entries were also made for each purchaser indicating such things as method of payment. The names on the list were thus “customers” in that each business had made at least one purchase. While nearly every business strives for repeat customers, there is no guarantee that a customer with an established record of repeated purchases will not take his business elsewhere or simply stop purchasing for any number of reasons. We also see nothing in the record to indicate that Amundson made such a guarantee to Wortman. The manner in which the list was referred to was thus irrelevant, and we affirm the court on this issue.

II.

Wortman challenges the District Court’s award of attorney’s fees, arguing that it did so on the basis of the affidavit of Amundson’s counsel as to the amount of such fees, without holding an evidentiary hearing. Wortman is correct in that attorney’s fees cannot be awarded solely on the basis of an attorney’s affidavit. An evidentiary hearing is required. Stark v. Borner (Mont. 1988), [234 Mont. 294,] 762 P.2d 857, 860, 45 St.Rep. 1885, 1888.

Wortman’s argument has placed this Court in an unusual situation. When the District Court entered its Findings of Fact and Conclusions of Law with Memorandum, counsel for Amundson was instructed to draft a judgment in conformity with the court’s ruling. Part of that ruling, and consequently part of the “Judgment” signed and filed by the court, was an award of “reasonable attorney’s fees and costs, which shall be determined at a separate hearing.” Shortly after the “Judgment” was filed and noticed, but before the time for the hearing, counsel for Wortman filed his Notice of Appeal.

The problem arises because counsel for Wortman filed his Notice of Appeal prematurely. A judgment that awards costs and attorney’s fees to be determined at a later hearing is not final and appealable until those costs and fees are determined. Boles v. Ler (1984), 213 Mont. 266, 692 P.2d 1. However, neither party raised this issue in their briefs, and it only became apparent upon our review of the record, after all briefs had been filed and the record deposited with this Court. Therefore, in the interests of judicial economy, and for the purposes of this case only, we affirm the decision of the District Court on the issues discussed above, and remand the cause to the court for proper determination of costs and attorney’s fees, both at the District Court level and upon appeal.

Affirmed and remanded.

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


author: MR. JUSTICE McDONOUGH MR. JUSTICE SHEEHY,

text:
    JUDITH A. JOHNSON, Plaintiff and Respondent, v. STATE OF MONTANA, Ed Argenbright, Superintendent of Public Instruction, Defendants and Appellants.
    No. 88-236.
    Submitted April 11, 1989.
    Decided July 19, 1989.
    Rehearing Denied Aug. 11, 1989.
    776 P.2d 1221.
    Beda J. Lovitt, Office of Public Instruction, John H. Maynard, Dept, of Admin., Helena, Sam Haddon argued, Missoula, for defendants and appellants.

      W. William Leaphart argued, Helena, for plaintiff and respondent.
    Jeffrey T. Renz, American Civil Liberties Union, Billings, Marshall Murray, Murray, Kaufman, Vidal, Gordon & Ogle, Montana Innkeepers Assoc., et al., Kalispell, for amicus curiae.
   MR. JUSTICE McDONOUGH

delivered the Opinion of the Court.

This appeal from the First Judicial District, Lewis and Clark County, concerns the liability of appellants the State of Montana and Ed Argenbright for damages arising from the alleged wrongful discharge of respondent Johnson. Johnson has alleged common-law and statutory wrongful discharge claims against appellants, and has also requested that the District Court declare that portions of the Montana Wrongful Discharge Act, §§ 39-2-901 to -913, MCA, (Act) unconstitutionally limit Johnson’s fundamental right to full legal redress.

Johnson moved for summary judgment on the requested declaratory relief. She argued specifically that classifications created under the Act violated equal protection guarantees under Article II, § 4, by denying her, as a member of a class of wrongful discharge claimants, her fundamental right to full legal redress. Pursuant to the motion, the District Court declared the Act unconstitutional citing White v. State (1983), 203 Mont. 363, 661 P.2d 1272; Pfost v. State (1986), 219 Mont. 206, 713 P.2d 495. The District Court reasoned that White and Pfost mandate that the State demonstrate a compelling state interest justifying such classifications because Article II, § 16, guarantees a fundamental right to full legal redress. The District Court went on to conclude that the State had failed to make the required showing, and the lower court then declared the Act unconstitutional. This is the only issue which has been adjudicated in the lower court. Appellants contend that White and Pfost should be overruled.

Our decision handed down recently in Meech v. Hillhaven West, Inc. (Mont. 1989), [238 Mont. 21], 776 P.2d 488, [46 St.Rep. 1058], overrules White and Pfost, relative to Article II, § 16. Specifically, Meech holds that Article II, § 16, does not guarantee a fundamental right to a particular cause of action, and that therefore the legislature may alter common-law causes of action, remedies, and redress, without demonstrating that a compelling state interest justifies classifications created by such modifications. Meech controls this case. Therefore, the decision of the District Court must be reversed.

Other issues have been briefed on appeal by Johnson and Argenbright. These issues have not been ruled on by the District Court. Therefore, they are presented prematurely before this Court, and cannot be properly reviewed at this time. See Velte v. Allstate Ins. Co. (1979), 181 Mont. 300, 593 P.2d 454. We reverse and remand for further proceedings consistent with Meech.

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

MR. JUSTICE SHEEHY,

dissenting:

For all of the reasons expressed in my dissent in Meech v. Hillhaven West, Inc. (Mont. 1989), [238 Mont. 21,] number 88-410, filed June 21, 1989 [46 St.Rep. 1058], 775 P.2d 488, I emphatically dissent from this decision.

MR. JUSTICE HUNT concurs in the foregoing dissent.


author: MR. JUSTICE WEBER

text:
    MURLAND W. SEARIGHT and Virginia Searight, Plaintiffs and Appellants, v. MICHAEL CIMINO, Defendant and Respondent.
    No. 89-192.
    Submitted on Briefs June 8, 1989.
    Decided July 19, 1989.
    Rehearing Denied Aug. 25, 1989.
    777 P.2d 335.
    Murland W. Searight, Columbia Falls, pro se, and for Virginia Searight.

      James C. Bartlett, Hash, O’Brien & Bartlett, Kalispell, for defendant and respondent.
   MR. JUSTICE WEBER

delivered the Opinion of the Court.

The Searights appeal from an order of the District Court for the Eleventh Judicial District, Flathead County, denying their motion to vacate judgment and imposing sanctions against the defendant, Mr. Cimino. We affirm the District Court’s denial of the motion, and further assess damages against the appellants pursuant to Rule 32, M.R.App.P., for the filing of an appeal without substantial or reasonable grounds.

The Searights present several issues for our review but we find it necessary only to address the issue of whether the District Court properly denied appellants’ motion to vacate judgment and impose sanctions. Because we answer this question affirmatively, we will not discuss the remaining issues raised by appellants.

This case has a lengthy history. The Searights initiated a cause of action against Mr. Cimino in 1981, seeking to enforce the terms of a contract for deed requiring Mr. Cimino to pay half the cost of an airstrip constructed on the Searights’ land. On May 14, 1985, judgment was entered in favor of the Searights, and on appeal this Court affirmed. Searight v. Cimino (1986), 221 Mont. 277, 718 P.2d 652, 43 St.Rep. 810.

Mr. Cimino then sought to enforce the terms of the contract for deed granting him the right to use the airstrip. In July of 1986, he filed a motion to cause appellants to execute an airport easement pursuant to Rule 70, M.R.Civ.P., which provides in relevant part:

“If a judgment directs a party to execute a conveyance of land or to deliver deeds or other documents or to perform any other specific act and the party fails to comply within the time specified, the court may direct the act to be done at the cost of the disobedient party by some other person appointed by the court and the act when so done has like effect as if done by the party.”

The Searights resisted defendant’s motion, arguing that the previous judgment entered did not contain any reference to an easement which could be enforced by invoking Rule 70, M.R.Civ.P. The Searights acknowledged defendant’s right to use the airstrip as set forth in the contract for deed, but argued that the granting of an easement was not contemplated either by the contract or by the District Court’s judgment so that defendant’s motion should be dismissed. The Searights also requested sanctions against Mr. Cimino under Rule 11, M.R.Civ.P.

The District Court held a hearing on the motion to cause the execution of the easement, and ruled that a written easement needed to be prepared and recorded. Following a later hearing on the Searights’ motion for sanctions, the District Court found that an easement had been prepared and recorded by the Searights’ attorney. The court further found that the motion for sanctions “appears to be harassment on Mr. Searight’s part.” The court denied sanctions against Mr. Cimino, and on its own motion, imposed sanctions against the Searights of $100.

The Searights then filed a motion to alter or amend the judgment, arguing that Rule 70, M.R.Civ.P., was inappropriate to enforce a judgment granting an easement which never existed. The District Court denied the motion, reasoning that:

“The thrust of Plaintiffs’ argument is to relitigate the issue of easement. Since plaintiffs have already signed and recorded the easement the point is moot.”

On appeal, this Court refused to disturb the actions of the parties in putting the easement on record. Searight v. Cimino (Mont. 1988), [230 Mont. 96,] 748 P.2d 948, 45 St.Rep. 46. This conclusion was reached based upon the absence of a record of the hearing on Mr. Cimino’s motion to require execution of an easement, and the absence of proof of whether an order was issued or whether the parties were simply told to work it out. This Court also affirmed the levying of sanctions against the Searights, but refused to award damages for a frivolous appeal under Rule 32, M.R.App.P. 748 P.2d at 952.

On March 10, 1989, after appointing himself as counsel, Mr. Sea-right filed a motion to vacate judgment and impose sanctions in the District Court. The motion requested that the court, pursuant to its authority under Rule 12(h)(3), M.R.Civ.P., and Rule 60(b)(4), M.R.Civ.P., vacate all orders, decrees, and judgments entered in the action arising from Mr. Cimino’s motion to cause appellants to execute an airport easement. Mr. Searight contended that the District Court lost subject matter jurisdiction of the case after entry and satisfaction of its final judgment in the first action and had no power to order the granting of an easement. Mr. Searight also requested that sanctions be imposed against Mr. Cimino pursuant to Rule 11, M.R.Civ.P. The District Court summarily denied the motion. It is from this denial that the Searights appeal.

I

Did the District Court properly deny appellants’ motion to vacate judgment and impose sanctions?

Appellants contend that the District Court was without subject matter jurisdiction to hear and determine the easement issue because final judgment had been rendered in the prior decision and that judgment included no reference to an easement which could have been enforced under Rule 70, M.R.Civ.P.

Appellants argue that all orders and judgments rendered as to the easement issue must be vacated, citing Crawford v. Pierse (1919), 56 Mont. 371, 375-76, 185 P. 315, 317-18:

“It is elementary that when the judgment-roll upon its face shows that the court was without jurisdiction to render the particular judgment, its pronouncement is in fact no judgment. It cannot be enforced. No right can be derived from it. All proceedings founded upon it are invalid and ineffective for any purpose .... An affirmance of such a judgment on appeal cannot make it valid. (Citations omitted.)

In response, Mr. Cimino argues that appellants are merely attempting to relitigate the easement issue, and that because they have already had the opportunity to raise a jurisdictional challenge, the doctrine of res judicata applies to preclude further litigation of this matter, citing Wellman v. Wellman (1982), 198 Mont. 42, 643 P.2d 573:

“Once there has been full opportunity to present an issue for judicial decision in a given proceeding, including those issues that pertain to a court’s jurisdiction, the determination of the court in that proceeding must be accorded finality as to all issues raised or which fairly could have been raised, else judgments might be attacked piecemeal and without end.” (Emphasis supplied.)

643 P.2d at 575, citing Royal Coachman Color Guard v. Marine Trading (Me. 1979), 398 A.2d 382, 384.

Contrary to appellants’ contentions that Wellman is distinguishable we conclude that it controls. In Wellman, appellants attempted to attack a judgment rendered ten years prior to the appeal, contending that the District Court exceeded its jurisdiction by granting more relief than was sought in the pleadings. In affirming the lower court’s dismissal, this Court said:

“Plaintiffs had a full opportunity to litigate the voidness issue in 1971 when they first moved to set aside the default judgment. They failed to do so. The doctrine of res judicata is founded upon the generally recognized public policy that there must be some end to litigation. The end for the plaintiffs in this case occurred more than ten years ago when they failed to.raise the issue of jurisdiction and the District Court denied their first motion to set aside the default judgment.”

643 P.2d at 575-76.

In the present case, appellants had the same opportunity to raise the voidness issue when Mr. Cimino first filed his motion'to cause execution of an airport easement. They did in fact object to the District Court’s ability to enforce an easement under Rule 70, M.R.Civ.P., in their motion to alter or amend the judgment following disposition of the easement issue. They further raised the specific issue of lack of subject matter jurisdiction in their Petition for Rehearing after this Court’s opinion in the matter. Because the substance of appellants’ challenge to the District Court’s actions has remained the same, it is apparent they are merely attempting to re-litigate issues which have already been decided by invoking different labels by which to contest the proceedings, one of which is subject matter jurisdiction. We will not allow appellants’ characterization of their claim to hinder application of the doctrine of res judicata, and the prevention of protracted litigation.

Furthermore, the District Court’s handling of the easement issue was compelled by the actions of the appellants themselves. While it is not clear from the record whether the District Court ordered an easement be granted or told the parties to “work it out,” the District Court’s findings indicate that appellants were uncooperative and that Mr. Cimino’s attorney was left with three alternatives:

(a) to do nothing and have this matter continue indefinitely without resolution;

(b) to breach the Code of Professional Responsibility and communicate directly with Mr. Searight; or

(c) to seek relief through the Court.

The District Court found that Mr. Cimino’s attorney chose the only alternative that was reasonably available to him, namely, to file a motion asking the court to compel an easement be drawn and recorded.

Even if the relief sought by Mr. Cimino was beyond the scope of the original pleadings in the first proceeding, we hold that a jurisdictional challenge to the court’s actions will nevertheless be barred by the doctrine of res judicata under this Court’s holding in Well- man. We affirm the District Court’s order denying appellants’ motion to vacate and impose sanctions. Because we conclude that this appeal is taken without substantial or reasonable grounds and that appellants are merely attempting to relitigate the easement issue, we impose damages in the amount of $500 pursuant to Rule 32, M.R.App.P.

Affirmed.

MR. CHIEF JUSTICE TURNAGE and MR. JUSTICES HUNT, SHEEHY and McDONOUGH concur.