author: MR. JUSTICE McDONOUGH

text:
    DALY DITCHES IRRIGATION DISTRICT, a public corporation, Plaintiff and Appellant, v. NATIONAL SURETY CORPORATION, one of Fireman’s Fund Insurance Companies, Defendant and Respondent.
    No. 88-189.
    Submitted on Briefs Sept. 29, 1988.
    Decided Nov. 29, 1988.
    Rehearing Denied Dec. 20, 1988.
    764 P.2d 1276.

      Sam Haddon, Boone, Karlberg & Haddon, Missoula, for plaintiff and appellant.
    Gregory C. Murphy, Moulton, Bellingham, Longo & Mather, Billings, for defendant and respondent.
   MR. JUSTICE McDONOUGH

delivered the Opinion of the Court.

This appeal from the Fourth Judicial District, in and for the County of Ravalli, involves an insurer’s refusal to defend its insured. The appellant, Daly Ditches Irrigation District (Daly), appeals the decision of the District Court that the insurance policy provided by respondent, National Surety Corporation (Surety), carried no coverage for a claim made against Daly. We affirm.

The relevant facts are as follows: Daly’s former employee sued Daly for breach of the covenant of good faith and fair dealing, and for discharge from employment in violation of the public policy of the State of Montana. The employee alleged that Daly terminated his employment in retaliation for his refusal to violate the laws of Montana, and he claimed damages for lost income, lost benefits, and emotional and mental distress. Daly tendered the suit to Surety, and Surety refused to defend.

Surety’s policy provides Daly coverage for:

“bodily injury or property damage . . . caused by an occurrence

The policy defines occurrence as:

“ ‘occurrence’ means an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured.”

Daly brought this action to establish that the alleged wrongful termination and accompanying damages fell within coverage for bodily injury and property damage from an occurrence. The District Court held for Surety concluding:

“While the Court recognizes that insurance policies are to be interpreted most strongly in favor of the insured and any doubts as to coverage are to be resolved in favor of the insured, this does not apply where the terms of the insurance contract are not ambiguous, and the Court must therefore construe the terms according to their plain and ordinary meanings .... In the case at bar, the terms ‘bodily injury’, ‘property damage’, and ‘occurrence’ are not ambiguous and the Court will not participate in a forced construction of these words in order to extend coverage of the claims made by [the employee] against Plaintiff Daly Ditches.”

We affirm on the basis that the claimed injury falls outside the policy’s definition of an “occurrence.”

Daly presents the following issues for review:

(1) Did the District Court err in ruling that the tort claim of wrongful discharge asserted against Surety was not covered by the policy?
(2) Did the District Court err in ruling that it is against public policy for the tort of wrongful discharge to be covered by liability insurance?
(3) Did the District Court err in ruling Surety had no duty to investigate and defend the claim asserted in the suit filed against its insured?

I.

Daly argues that a breach of covenant of good faith and fair dealing constitutes an occurrence under the policy. The intentional nature of the firing of Daly’s employee should not preclude finding coverage because the consequences of the employment termination were neither expected nor intended, according to Daly.

Surety responds that persuasive authority holds that discharge from employment is not an accident under the policy language at issue here. See Mary & Alice Ford Nursing Home v. Fireman’s Insurance (1982), 86 A.D.2d 736, 446 N.Y.S.2d 599. In Mary & Alice Ford Nursing Home, an employer contended that its insured owed a duty to defend a suit brought by an employee who alleged that she was illegally discharged due to disability. The definition of occurrence in the policy at issue here is identical to the policy definition of occurrence in Mary & Alice Ford Nursing Home. In construing the language, the Court stated:

“If, in fact, plaintiff discharged Kathleen Wood from her employment because of her disability, it cannot be said that the mental and emotional injuries alleged by the Woods as flowing directly from plaintiff’s intentional discriminatory practice were unexpected and unforeseen by plaintiff, the insured. While ‘it is not legally impossible to find accidental results flowing from intentional causes, i.e., that the resulting damage was unintended although the original act or acts leading to the damage were intentional’ (McGroarty v. Great Amer. Ins. Co., 36 N.Y.2d 358, 364, 368 N.Y.S.2d 485, 329 N.E.2d 172), such is not the case here, for the damages alleged in the Woods’ complaint are the intended result which flows directly and immediately from plaintiff’s intentional act, rather than arising out of a chain of unintended though foreseeable events that occurred after the intentional act . . .”

Mary & Alice Ford Nursing Home, 446 N.Y.S.2d at 601, see also, Commercial Union Ins. Co. v. Superior Court (1987), 196 Cal.App.3d 1205, 242 Cal.Rptr. 454.

The rule in California goes further in restricting the definition of occurrence:

“An intentional termination is not an ‘occurrence’ under the policy because it is not an accident. The definition of ‘accident’ halts an argument that real party [the employer] intended his act but not the resulting harm.”

Commercial Union Insurance Co., 242 Cal.Reptr. at 456.

Daly responds that the cited cases cannot be reconciled with this Court’s determinations holding that an occurrence resulted where intentional conduct allegedly lead to unintended injuries. Daly argues that emotional and mental injury was not the intended or expected consequence of the discharge.

Montana has employed the reasoning referred to in Mary & Alice Ford Nursing Home to conclude that an intentional act may nevertheless constitute an occurrence where the alleged injuries were not the expected or intended result of the insured’s intentional conduct. Lindsay Drilling v. United States Fidelity & Guaranty Co. (1984), 208 Mont. 91, 676 P.2d 203; Millers Mutual Insurance Co. v. Strainer (1983), 204 Mont. 162, 663 P.2d 338; Northwestern Casualty Co. v. Phelan (1979), 182 Mont. 448, 597 P.2d 720.

However, here, as in Mary & Alice Ford Nursing Home, the alleged intentional conduct of Daly could be expected to cause the injury claimed by the employee. The allegation is that Daly fired the employee for refusing to violate Montana law. Damages for emotional and mental suffering may be expected to flow directly as injuries from such a discharge. There is no injury alleged which could not be expected to flow from the termination. Thus, we affirm the decision of the District Court that the intentional conduct exclusion applies.

II.

Daly argues that the District Court erred in holding that public policy favored application of the intentional conduct exclusion. The lower court reasoned that Montana policy weighs against allowing employers to insure against violations of the tort of good faith and fair dealing.

Surety responds that the lower court’s analysis of Montana policy provides no grounds for reversal because the decision rested primarily on analysis of the intentional conduct exclusion. We agree with Surety.

Our resolution of issue one affirms the lower court’s decision to find no coverage based on the intentional conduct exclusion. This case may be properly resolved on the finding that the exclusion applies. Thus, any issue on the lower court’s further reasoning is moot.

III.

Daly argues that Surety relied exclusively on the complaint to deny coverage, and that Surety’s failure to take further action violated its positive duty to investigate claims against its insured. Daly also argues that the duty to investigate under Section 33-18-201, MCA, mandated greater action on the part of Surety.

Surety responds that the allegations in the complaint provided sufficient information to refuse coverage. Furthermore, Surety contends, it responded promptly to the demand for coverage, and explained why no coverage existed.

Surety also responds to Daly’s argument for application of Section 33-18-201, MCA, by contending that an insurer has a duty to investigate only covered claims under the statute, and here the claim obviously fell outside the coverage provided by the policy.

Insurers have the duty to investigate “claims and coverage promptly”. Tynes v. Bankers Life Co. (Mont. 1986), [224 Mont. 350,] 730 P.2d 1115, 1124, 43 St.Rep. 2243, 2254. Thus, we do not agree that an insurer has only the duty to investigate covered claims.

However, there is no evidence that Surety failed to properly investigate the claim at issue. Surety inspected the allegations of the complaint and determined that the employee sought damages flowing from intentional conduct on the part of the insured. Ordinarily, where the allegations of a complaint demonstrate that no coverage exists, the insurer has no duty to indemnify or defend. McAlear v. St. Paul Insurance Companies (1972), 158 Mont. 452, 456, 493 P.2d 331, 334. Because the complaint demonstrated that no coverage existed, Surety fulfilled its duty to investigate when it read the complaint and informed Daly no defense would be provided.

AFFIRMED.

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

MR. JUSTICE SHEEHY did not participate in this matter.


source: Caselaw Access Project

license: Public Domain

text:
    GRANT CREEK WATER WORKS, LTD., Jack L. Green, II, the Tax Matters Partner, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
    No. 88-463.
    Nov. 15, 1989.
    775 P.2d 684.
    Thomas F. Topel, Dorsey & Whitney, Billings, for Grant Creek Water Works, Ltd., Jack L. Green, Tax Matters Partner.
    Gary R. Allen, Chief, Appellate Section, Tax Div., U.S. Dept, of Justice, Washington, D.C..

      Thomas F. Ritter, Dist. Counsel, I.R.S., Helena, for C.I.R.
   ORDER

The United States Tax Court proposes to certify to us the following question:

“May Montana county commissioners transfer the ownership of utility facilities created by a special improvement district in accordance with Montana Code Annotated (“M.C.A.”) §§ 7-12-1101, et seq. (1987) to a regulated utility by complying solely with the terms of M.C.A. § 7-12-2127 (1987), or must the county commissioners also comply with M.C.A. §§ 7-8-2211 through 7-8-2214 (1987)?”

After a review of the opinion of the tax court and the briefs of the Commissioner of Internal Revenue and Grant Creek Water Works, Ltd., we decline to answer the proposed question for the reasons set forth below.

Petitioner Grant Creek Water Works, Ltd., allegedly owns a water and sewer system located in Missoula County, Montana, Grant Creek purchased the utility in December, 1983, from R. Montana, Inc., which had purchased the system from Western Montana Land Co. on the same day. Western had acquired the system in November, 1983, pursuant to an agreement with the Missoula County Commissioners.

After Grant Creek purchased the water system, it entered into a lease agreement with Western. Western agreed to lease the system until December 31, 2007, paying — in addition to lease payments — all taxes, insurance, repairs, maintenance and other expenses related to the water system.

Grant Creek claimed depreciation and investment tax credits for the water system on its 1983 partnership income tax return. The Commissioner of Internal Revenue audited the return, making adjustments to Grant Creek’s taxes. The Commissioner based the adjustments primarily on his determination that the sale and leaseback was a sham structured to tax avoidance. He gave alternate reasons for some of the adjustments in the event that sale and lease back was found to be recognizable to tax purposes.

Grant Creek contested the adjustments and filed a petition with the United States Tax Court on July 2, 1987. The Commissioner filed an answer and a motion for summary judgment premised on the claim that Missoula County’s transfer of the water system was illegal under Montana law. The Tax Court denied the Commissioner’s motion for summary judgment in the same opinion in which it granted Grant Creek’s motion to certify the above question to this Court.

Under Rule 44(a), M.R.App.P., it is within the discretion of the Montana Supreme Court to accept or decline a question certified to it by a United States Court. Pursuant to our discretionary authority, we decline to answer the question presented by the United States Tax Court.

Our refusal to answer the certified question is based upon the fact that the issue presented will not control the outcome of tax court litigation. The issue before the tax court is whether Grant Creek Water Works has acquired a depreciable interest in certain utility facilities. This interest depends on whether Grant Creek has received the benefits and burdens equated with ownership of the utility, not on whether Grant Creek has obtained legal title to the utility facilities. In denying the Commissioner’s motion for summary judgment, the tax court judge himself observed that, even if it were determined that Missoula County had to legally transferred ownership and control of the utility facilities, “it would not establish that Grant Creek had not acquired a depreciable interest in the water system.” Grant Creek Water Works, Ltd. v. Commissioner of Internal Revenue (Aug. 22, 1988), 91 T.C. No.25 at 7.

It appears that the tax court litigation may be settled solely on questions of federal law. The Commissioner points out that, in grant Grant Creek’s motion to certify the state law question, the tax court judge noted that certification would dispose of “major issue between the parties” and “narrow and focus the remaining issue to be tried by the parties.” Grant Creek at 12. The Commissioner argues that these statements make it clear that the issue of whether the transfer of the water works facility was valid under Montana law is not dis-positive of the ultimate issue before the tax court, i.e., whether Grant Creek is entitled to deprecation and investment tax credits. We find the Commissioner’s argument persuasive.

We also agree with the Commissioner that the question certified to this Court is not a “controlling question of the Montana law as to which there is substantial ground for difference of opinion” as required by Rule 44(a), M.R.App.P. A simple disagreement among the parties as to the correct interpretation of state statutes does not constitute grounds for certification. We feel confident that the tax court, by applying well-settled principles of statutory construction, is competent to resolve the issues of Montana law before it.

For the reasons set out above, IT IS ORDERED:

The question certified to us by the United State Tax Court is DECLINED.

/s/John Conway Harrison

/s/Fred J. Weber

/s/John C. Sheehy

/s/William E. Hunt, Sr.

/s/R.C. McDonough, Justices

MR. CHIEF JUSTICE TURNAGE and MR. JUSTICE GULBRANDSON would accept the certified question.


author: MR. JUSTICE SHEEHY

text:
    BILLY M. FROMAN and Bertie Froman, husband and wife, Petitioners and Appellants, v. DEPARTMENT OF REVENUE OF THE STATE OF MONTANA, Respondent and Respondent.
    No. 88-244.
    Submitted on Briefs Sept. 15, 1988.
    Decided Nov. 29, 1988.
    Rehearing Denied Jan. 24, 1989.
    766 P.2d 236.
    Marc G. Buyske, Anderson, Beatty & Buyske, Shelby, for petitioners and appellants.
    David W. Woodgerd, Legal Counsel, Dept, of Revenue, Helena, for respondent and respondent.
   MR. JUSTICE SHEEHY

delivered the Opinion of the Court.

Billy M. and Bertie Froman (hereinafter referred to as the taxpayers) appealed the decision by the State Tax Appeal Board (hereinafter referred to as STAB) that the taxpayers failed to file the required election form with the Department of Revenue (DOR) for Production Systems, Inc. (PSI) to be treated as a small business corporation. The District Court, Ninth Judicial District, Glacier County upheld the decision by STAB. The taxpayers appealed the decision of the District Court to this Court. We affirm.

The issue is whether the District Court erred in upholding the decision of STAB.

This case involves three separate corporations. The first corporation was Orbit Explosives, Inc. (hereinafter OEI), incorporated in the state of Montana on November 17, 1977. OEI validly elected to be treated as a “small business” corporation or S corporation. The second corporation was Orbit Penetration, Inc. (hereinafter OPI), incorporated in the state of Delaware on January 17, 1978, which conducted its business outside the state of Montana. OPI made a valid election to be treated for federal tax purposes under Sub-chapter S of the Internal Revenue Code of 1954, as amended. OPI did not file a specific election under Section 15-31-202, MCA, to be treated as an S corporation for state tax purposes.

The third corporation, PSI was incorporated in the state of Montana on September 7, 1978. Following the incorporation of PSI, it assumed the business activities of OEI and the accounting records of OEI were continued in the name of PSI. No formal articles of merger or consolidation were ever filed on behalf of OEI or PSI. Neither OPI or OEI were formally liquidated; they were involuntarily dissolved.

On January 29, 1978, the Department of Revenue received an “Employer’s Quarterly Withholding Tax Report” from OEI bearing the message: “Due to organizational changes, Orbit Explosives is no longer paying any payroll and will not be in existence.” PSI’s accountant testified that he sent to the DOR on October 31, 1978, a copy of the federal tax election for PSI to be treated as an S corporation. However, DOR denies having received this election and DOR regularly acknowledges such elections. STAB found that there was not a properly filed election and also that the testimony of PSI’s accountant was not credible.

In 1982, DOR assessed PSI for delinquent corporation license taxes as a non-S corporation or C corporation. PSI paid these taxes and never claimed it was exempt from such tax. In January, 1983, the accountant sent the proper form for state S corporation election but stated the effective date as October, 1978.

I.

Did the District Court err by upholding the decision of the STAB?

Tax law is primarily statutory. Therefore to qualify as an S corporation, PSI had to meet the qualifications set out in the statute. Section 15-31-210, MCA, provides:

“Definitions. (1) For the purpose of this part, the term ‘small business corporation’ means a corporation doing business in Montana and which does not have:

“(a) more than 10 shareholders;

“(b) as a shareholder a person (other than an estate and other than a trust described in 15-31-207) who is not an individual;

“(c) a nonresident alien as a shareholder; and

“(d) more than one class of stock.

“(2) For purposes of this part, the term ‘electing small business corporation’ means, with respect to any taxable year, a small business corporation which has made an election under this part in effect for such taxable year.”

One of the advantages of making such an election is that the corporation for state income tax purposes is essentially treated as a partnership and corporate losses are deducted pro-rata from the shareholder’s income, thereby reducing the individual shareholder’s income tax liability. Another result is that if the corporation has profits in a particular tax year, the individual shareholders are liable for personal income taxes due and owing on their pro-rata shares of the profits. Hence, the requirement that the election be made before the start of the tax year.

Section 15-31-202, MCA, requires that the election be made in accordance with the rules prescribed by the DOR. The pertinent administrative rules are found in Section 42.24.101 through .123 ARM. Section 42.24.103, ARM provides:

“PROCEDURE TO MAKE ELECTION. (1) The election must be made by the corporation filing form CT-3, containing the information required by such form, including a statement of consent of each shareholder of the corporation, in the manner provided in ARM 42.24.105. The election shall be signed by one of the following: the president, vice president, or other principal officer or the treasurer, assistant treasurer, or chief accounting officer. The form shall be filed with the department.”

Section 42.24.104 ARM provides:

“TIME OF MAKING ELECTION. (1) The election shall be filed either:

“(a) during the first calendar month of such taxable year; or “(b) during the calendar month preceding such first month.

“(2) In the case of a new corporation which has a year beginning after the first day of a particular month, the term ‘month’ means the period commencing with the first day of the taxable year and ending on the day preceding the numerically corresponding day of the succeeding calendar month.

“(3) Should a corporation fail to physically tender to the department its election in the manner and within the time specified by 15-31-202(3), MCA, the department shall nevertheless consider such election to have, constructively been properly and timely made:

“(a) if the election was made within the taxable year for which the election is desired to take effect; and

“(b) if the corporation can substantiate its intent to file the election for the year in which the election is desired to take effect.

“(4) an election shall not be deemed made within the contemplation of Subsection (3), above, and 15-31-202(3), MCA, unless:

“(a) the corporation has an acknowledgment from the department that the election was received; or

“(b) the corporation has proof by return receipt, that the election was sent to the department by certified mail.

“(5) Any election sought to be effective by a corporation in any manner other than is herein provided or by the provisions of 15-31-202(3), MCA, shall not be recognized.”

The rules above clearly set out the procedure which is required for a corporation to be considered a “small business” corporation. PSI did not follow the required procedure. Based on the findings made by STAB, PSI failed to elect to be treated as an S corporation for state income tax purposes as a matter of law. On judicial review of state agency action, this Court may not substitute its judgment for that of the agency as to the weight of the evidence on questions of fact. We may not reverse the agency unless its findings are “clearly erroneous in view of the reliable, probative and substantial evidence on the whole record.” Section 2-4-704(2)(e), MCA.

Accordingly, we uphold the findings made by STAB in this case, and thereupon affirm the District Court.

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


author: MR. CHIEF JUSTICE TURNAGE

text:
    THOMAS J. WINCHELL and David Winchell, Plaintiffs and Respondents, v. STATE OF MONTANA, DEPARTMENT OF STATE LANDS, Defendants and Appellants.
    No. 88-249.
    Submitted on Briefs Sept. 29, 1988.
    Decided Nov. 29, 1988.
    764 P.2d 1267.

      Lyle Manley, Dept, of State Lands, Helena, for defendants and appellants.
    Thomas E. Smith, Moulton, Bellingham, Longo & Mather, Billings, for plaintiffs and respondents.
   MR. CHIEF JUSTICE TURNAGE

delivered the Opinion of the Court.

A writ of prohibition was filed by the Honorable Dale Cox, Seventh Judicial District Court, Dawson County, restraining and prohibiting the Department of State Lands from (1) canceling State Lease No. 0343 for nonpayment of agricultural rentals, (2) re-leasing the property to other parties, and (3) taking action for trespass against the plaintiffs. The court found that the property in dispute was leased for grazing only and the Department of State Lands (hereinafter Department) was in excess of its jurisdiction for canceling the lease for nonpayment of agricultural rental. The Department appeals. We affirm.

The issue on appeal is whether the District Court erred in issuing the writ of prohibiting appellants from canceling the lease.

Thomas J. Winchell and David Winchell are both residents of Dawson County, Montana. The Department leased 477.9 acres to the Winchells in 1981 for grazing purposes. The lease was scheduled to operate from February 28, 1981, to February 28, 1991.

In the fall of 1980, the Winchells had written the United States Soil and Conservation Service requesting help in developing a water-spreading system. Roy Henderson, Chief of the Resource Development Bureau of Land Administration of the Department of State Lands, explored the possibility of developing the water-spreading project.

Section 77-1-209, MCA, promulgates that the Board of State Lands may prescribe rules relating to the leasing of state lands which contribute to the highest attainable measure to the purpose for which they were granted to the State of Montana. Section 77-1-102, MCA, grants to the Board the power to classify and reclassify state lands. Along these lines, ARM Section 26.3.126 requires that anyone who wishes to reclassify land use must apply to the Department. The Department conducts a capability inventory of the tract to determine whether reclassification is in the best interests of the state. Development of a water-spreading project would require the Department to consider capability and reclassification.

The Department agreed that the project was feasible and thirty-two acres were set aside to be converted from native range land to irrigated hay land through installation of water-spreading dikes. The Department invested approximately $1,300 into the project, to be paid back by the Winchells. In 1981, after the lease had taken effect, the Department and the Winchells entered into a Supplemental Lease Agreement designating thirty-two acres as agricultural land, with the remaining 445.9 acres to continue as grazing land. The supplemental agreement also stated that the Winchells, as lessees, would:

“Pay the State Land Department the greater of Va crop share or a minimum cash payment of $20.00 per acre. The Lessee agrees and understands that the above rental is to be paid on or before November 1st of each year. The State agrees to forego the $20.00 per acre stipulation the year hay is seeded and require only the standard statutory rental of 25% crop share on the developed acres. The second growing year of the initial seeding of developed acres, and for the balance of the lease term, the greater of 25% crop share or $20.00 per acre shall be applicable.”

On the original lease form appeared a handwritten note showing that the thirty-two acres had been reclassified by the Department as agricultural.

In 1983 the Winchells concluded that the water source for the project was inadequate for producing a profitable alfalfa crop at the higher agricultural rental rates. They negotiated to pay back the loan for the thirty-two acre development in a lump sum settlement of $1,920. They then reverted the land to grazing.

In a letter dated April 10, 1984, Roy Henderson informed Tom Winchell that he had received the lump sum payment of $1,920 on March 30, 1984, and that the Supplemental Lease Agreement was null and void. He also stated in the letter:

“Your rental on this portion of ground will now be the current AUM [Animal-Unit-Month] rate if in grazing or the statutory crop-share (currently Va crop-share), if used for agricultural purposes. Since you indicated that the project site was returned to pasture, I have asked that this area be reappraised this year, so a correct AUM rate can be assigned.”

The indications from this letter are that lessees were now grazing on this land again and the Department would reclassify the land to grazing. With no other agreements supplementing the original lease agreement, the thirty-two acres reverted back to grazing land. Furthermore, Henderson’s own notes taken from telephone conversations with lessees confirmed the return to grazing land. Kelly Blake, Administrator of Land Administration Division of the Department, knew and approved the arrangement.

After the lump sum had been paid, Sharon Moore, a land specialist at the Department’s Eastern Land Office in Miles City, inspected the site for reappraisal purposes to see if the land should remain classified as agricultural or be used for grazing. She recommended that the thirty-two acres retain the agriculture classification.

In 1985 the Winchells went into bankruptcy. Before the Department sought relief in Bankruptcy Court, it sent a letter to lessees stating that the land was over-grazed and they owed one-fourth crop share for harvested alfalfa on the reclassified thirty-two acres.

Following the letter, the Department obtained a stipulation from the Bankruptcy Court which promulgated that there was to be no grazing on the land at issue and that they were to pay the one-fourth crop share owing on alfalfa cut from the thirty-two acres. The Department canceled the lease pursuant to Section 77-6-210, MCA, mismanagement of the lease. The court later lifted the stay, and, as a result, the Department held an administrative hearing regarding the cancellation of the lease. The hearing examiner found that the agricultural status was the proper classification and the lessees had mismanaged the lease because they had failed to harvest the alfalfa crop and failed to pay proper rental. The Montana Board of Land Commissioners adopted the hearing examiner’s findings on February 25, 1988. Lessees did not harvest the alfalfa crop or pay the crop share payments but continued to pay grazing rental.

Lessees petitioned the District Court for a writ of prohibition against automatic cancellation of the lease pursuant to Section 77-6-506, MCA, not in opposition to the hearing examiner’s findings of mismanagement. Section 77-6-506(2) provides that rental for agricultural land is due on or before November 15th of the year in which the crop is harvested. If payment is not made by December 31st, the lease is automatically canceled.

The question brought by the appellant is whether the District Court erred in issuing the writ of prohibition, restraining and prohibiting the Department from canceling State Lease No. 0343 for nonpayment of agricultural rentals, from re-leasing the property to other parties, and from taking action in trespass against the lessees.

Appellant stresses that the legislative intent behind revenue collected from leased state lands is that it is primarily “held in trust for the support of education and for the attainment of other worthy objects helpful to the well being of the people of this state.” Section 77-1-202, MCA. We held in Department of State Lands v. Pettibone (Mont. 1985), [216 Mont. 361,] 702 P.2d 948, 42 St.Rep. 869, that anyone acquiring interest in property does so subject to the trust. Moreover, Section 77-1-402, MCA, provides that “classification or reclassification shall be so made as to place state land in the class which best accomplishes the powers and duties of the board as specified in 77-1-102 and 77-1-203(1).”

We hold that the District Court was not in error in issuing the writ of prohibition. We also hold that the Department was overreaching in its discretion in applying Section 77-6-506, canceling the lease solely for nonpayment of the agricultural lease charges.

The power of the Department to classify and reclassify a lease is not without limit. As a case of first impression, it is important to carefully scrutinize the applicable statutory language. Although Section 77-1-202, MCA, states that the land is held in trust for the support of education, and Section 77-1-402, MCA, provides that classification is to be made as to accomplish the powers and duties of the board, the trust powers are limited. For example, Section 77-1-402, MCA, also states:

“When state lands are classified or reclassified in accordance with these duties and responsibilities, special attention shall be paid to the capability of the land to support an actual or proposed land use authorized by each classification.”

Section 77-1-203(1), MCA, expresses that:

“(a) [The state lands] are utilized in that combination best meeting the needs of the people and the beneficiaries of the trust, making the most judicious use of the land . . .”

In the case on appeal, the capability of the land to support the proposed agricultural land use was improbable as shown by the lessees. Originally, the Department accepted that the land was incapable of a strong alfalfa crop. The lessees negotiated to pay back the loan to the Department and return the land to grazing because growing of alfalfa was not profitable.

Section 77-1-202, MCA, requires that the board administer the tract “to secure the largest measure of legitimate and reasonable advantage to the state.” The legitimate and reasonable advantage to the state is to charge grazing rental rates for the thirty-two acres in question. It would be unconscionable to charge the Winchells with agricultural crop-share rentals when the water source is insufficient to grow alfalfa and when the crop is not profitable for the lessees. To do so might prevent other potential lessees from applying for leases, fearing the Department will charge unaffordable rental rates. The state trust is then without any funds.

The original lease agreement does not require payment of agricultural rentals. The supplemental lease reclassified thirty-two acres as agricultural. But once the investment loan was repaid by the lessees and once the Department declared the supplemental lease agreement null and void, the original lease agreement controlled. This original lease stated that the total 477.9 acres was classified as grazing land. The state cannot now insist the lessees pay agricultural rates simply because it is more profitable to the state trust fund without an agreement which reclassifies the tract. To do so would be incongruous. The Department has acted in excess of its jurisdiction in canceling the lease for non payment of agricultural rentals under Section 77-6-506, MCA, advertising to re-lease the property, re-leasing the property, and taking action in trespass against the lessees.

Appellants also claim that the District Court is in error for not considering the hearing examiner’s findings in the MAPA hearing. The hearing, held on June 11, 1987, was brought on the grounds that the lease had been mismanaged, in violation of Section 77-6-210, MCA. This writ of prohibition, however, was brought to the District Court regarding Section 77-6-506, MCA, automatic cancellation of the lease for nonpayment of agricultural rentals.

In Nasi v. Dept. of Highways (Mont. 1988), [231 Mont. 395,] 753 P.2d 327, 45 St.Rep. 710, we held that res judicata applies when an administrative body resolves issues of fact correctly. On appeal, the District Court must apply the hearing examiner’s findings. However, in the case at bar, the cause of action is different. Nasi required application of res judicata if: (1) the parties are the same, (2) the subject matter is the same, (3) the issues are the same and (4) the relationship among the parties, the subject matter, and the issues are the same. Here the parties are the same as is the subject matter. The issues and the relationship of the issues and subject matter are different. The first action before the hearing examiner was to discuss cancellation of the lease because of mismanagement. The action for writ of prohibition is brought in opposition to automatic cancellation for nonpayment of agricultural rentals. This action is brought by the lessees to prohibit automatic cancellation and the statutes are different. The relationship of the issues and subject matter are dissimilar. Therefore, the District Court was under no obligation to apply the findings of the hearing examiner as adopted by the Board of Land Commissioners.

In conclusion, the District Court acted properly in issuing a writ of prohibition against the Department. The original lease agreement classified the land for grazing. Since the lessees have continued paying grazing rental, they are entitled to use the land in the manner provided by the lease, subject to all other remedies available to the Department.

Affirmed.

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

MR. JUSTICES McDONOUGH and SHEEHY did not participate in this decision.


author: MR. JUSTICE GULBRANDSON

text:
    CATHERINE DAHLIN, Plaintiff and Appellant, v. JANICE HOLMQUIST, Defendant and Respondent.
    No. 88-308.
    Submitted Oct. 6, 1988.
    Decided Nov. 29, 1988.
    Rehearing Denied Jan. 25, 1989.
    766 P.2d 239.

      Hoyt & Blewett, Michael J. George, Great Falls, for plaintiff and appellant.
    Donald L. Harris, Crowley, Haughey, Hanson, Toole and Dietrich, Billings, for defendant and respondent.
   MR. JUSTICE GULBRANDSON

delivered the Opinion of the Court.

Catherine Dahlin appeals from the denial of her motion for a new trial by the District Court of the Thirteenth Judicial District, Yellowstone County. We reverse and remand for a new trial.

Appellant raises the following issues upon appeal:

1. Did the District Court’s denial of plaintiff’s motion in limine to exclude the secondary gain testimony of Dr. Lovitt deny plaintiff her right to a fair trial?

2. Was plaintiff denied a fair trial by the District Court’s denial of plaintiffs request to inform the jury of defendant’s insurance coverage following defendant’s allusion to a lack of insurance by the comment “we paid”?

3. Was plaintiff denied a fair and impartial jury by the District Court’s refusal to permit plaintiff to voir dire potential jurors about any bias resulting after media exposure to articles or advertisements on the “liability crisis”?

On February 26, 1984, the parties to this case were involved in an automobile accident in Lewistown, Montana. Catherine Dahlin suffered neck and shoulder injuries in the accident. She was subsequently seen by Dr. James Lovitt, an orthopedic surgeon, in March of 1984. He diagnosed her as suffering from a cervical and lumbar strain. To date, Dahlin continues to experience headaches and neck pain, even though the normal healing period for such an injury is six to twelve weeks.

On February 23, 1987, Dahlin filed a complaint alleging that the defendant’s negligent vehicular operation caused the collision which resulted in her physical injury, pain and suffering, loss of established course of life, and lost earning capacity. The District Court granted plaintiff’s motion for summary judgment on the issue of liability after determining that defendant’s negligence caused the accident. The court scheduled a jury trial on the issue of damages to begin February 16, 1988.

Prior to trial, plaintiff notified the court of her intent to question potential jurors about whether they believe, and consequently would be biased because of anything they had heard or read indicating that jury verdicts for plaintiffs in personal injury cases result in higher insurance premiums. On the morning of trial, plaintiff generally asserted that the extensive “media blitz” on the issue of “tort reform” and the “liability crisis” was sufficient to warrant such questioning. Plaintiff then offered four articles, generally published two years prior to trial, as proof of this “media blitz.” The court held such articles were too remote in time to have any potential prejudicial effect on the jurors, and consequently it denied plaintiff’s request to conduct such questioning.

Plaintiff filed a motion in limine four days prior to trial, requesting the court exclude, among other things, all “secondary gain” testimony by Dr. Lovitt. The doctor defined such secondary gain as that financial, emotional, or other type of benefit received by virtue of the injury which serves to encourage the continuation of an injury. The court delayed ruling on this motion the first morning of trial, stating that it would review the deposition containing the secondary gain testimony prior to its presentation to the jury. The court later ruled, without having read the contested deposition testimony, that all of the deposition was admissible. Both parties subsequently read portions of Dr. Lovitt’s deposition, including the testimony about “secondary gain,” to the jury. Plaintiff then renewed her objection and the court repeated its former ruling. However, the court did strike and admonish the jury to disregard the following highly prejudicial comment espoused by Dr. Lovitt when asked for a definition of secondary gain:

“It frequently is intentional, and we all know the — you know, the situation in which, you know, somebody stands to make a bunch of money if they have a liberal, nonperceptive jury that gives them a big award based on only subjective symptoms and findings.”

Plaintiff also objected at the conclusion of defendant’s closing argument to defense counsel’s remark that, “[w]e paid.” Plaintiff asserted that this allusion to insurance effectively “opened the door” on the subject of insurance. Therefore, the court should permit plaintiff to also comment on insurance coverage. The court denied this request.

The jury subsequently returned a verdict awarding the plaintiff $10,000 in damages. After subtracting those medical costs previously paid by the defendant’s insurer, the court entered judgment for plaintiff in the amount of $8,048.05.

Plaintiff moved for a new trial on March 18,1988, alleging that she was denied her right to a fair trial. The court denied the motion for a new trial on April 26, 1988. This appeal followed.

The first issue raised upon appeal challenges the District Court’s decision to allow the admission of the secondary gain testimony in Dr. Lovitt’s deposition. Appellant alleges that all testimony of secondary gain was irrelevant and highly prejudicial, and that its admission denied plaintiff her right to a fair trial.

Evidence that is not relevant is inadmissible. Rule 402, M.R.Evid. Rule 401, M.R.Evid., defines relevant evidence as:

“[EJvidence having any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence.”

This determination of relevancy and of the admissibility of evidence is within the discretion of the trial court. Welnel v. Hall (Mont. 1984 [1985]), [215 Mont. 78,] 694 P.2d 1346, 1348, 42 St.Rep. 195, 197. Consequently, we will not disturb the District Court’s denial of plaintiff’s motion in limine and permission to admit the disputed secondary gain testimony unless the court abused its discretion.

We hold that the trial judge in this case did in fact abuse his discretion when he denied plaintiff’s motion in limine and ruled that all Dr. Lovitt’s deposition testimony could be read to the jury. The proffered evidence of secondary gain did not meet the test of relevancy as it did not naturally and logically tend to make either the extent or validity of plaintiff’s alleged continuing injury more or less probable. Britton v. Farmers Ins. Group (Mont. 1986), [221 Mont. 67,] 721 P.2d 303, 315, 43 St.Rep. 641, 654. No evidence was introduced even implying that the concept of secondary gain was applicable to plaintiff. Dr. Lovitt did not suggest that the plaintiff’s allegations of continuing pain were a result of either conscious or subconscious expectations of financial, emotional or other type of gain. Rather, Dr. Lovitt himself stated that he perceived plaintiff as a reasonable person who was “probably not going to improve a whole heck of a lot anytime in the near future.” Dr. Lovitt thus concluded:

“Yes I do really tend to believe her. I’ll tell you why. Because her symptoms have been pretty much persistent over time, and she has continued to work.”

Given the lack of any evidence even suggesting that plaintiff’s injuries were influenced by secondary gain motives, the court’s decision to allow the introduction of such testimony amounted to an abuse of discretion.

We will not reverse a judgment, however, unless the error affects the substantial rights of a party. See, State v. Fitzpatrick (1980), 186 Mont. 187, 205, 606 P.2d 1343, 1353, cert. denied, 449 U.S. 891, 101 S.Ct. 252, 66 L.Ed.2d 118. The facts in this case indicate that the court’s erroneous ruling to admit all Dr. Lovitt’s testimony did substantially prejudice the jury and affect plaintiff’s right to a fair trial. One portion of the secondary gain testimony was so prejudicial that the District Court ruled to strike it from the record and then admonished the jury to disregard it. Yet the jury had already heard this highly prejudicial testimony and other irrelevant testimony of secondary gain because of the court’s erroneous denial of plaintiff’s prior motion in limine. It is irrelevant which party at trial read the prejudicial testimony to the jury, in view of the court’s erroneous ruling. In this case, as in Kuiper v. Goodyear Tire (1983), 207 Mont. 37, 673 P.2d 1208, the failure of the trial court to exclude such evidence prejudicial to the defendant permitted the jury “to indulge in improper speculation and guesswork.” Kuiper, 673 at 1217. The failure to exclude all secondary gain testimony constituted error of sufficient magnitude to warrant a new trial. Consequently, the District Court erred in denying plaintiff’s motion for a mistrial.

We need not address the second and third issues, having held the plaintiff is entitled to a new trial under the first issue. We admonish both parties, however, to refrain from any mention of insurance upon retrial.

Reversed and remanded for a new trial.

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


text:
    LENORE F. TALIAFERRO, Plaintiff and Respondent, v. The STATE OF MONTANA and the Department of Social and Rehabilitation Services of the State of Montana, Defendants and Appellants.
    No. 88-338.
    Submitted on Briefs Oct. 6, 1988.
    Decided Nov. 29, 1988.
    766 P.2d 860.

      James M. Scheier, Agency Legal Services Bureau, Helena, for defendants and appellants.
    Frederick F. Sherwood, Helena, for plaintiff and respondent.
   MR. JUSTICE SHEEHY

delivered the Opinion of the Court.

The District Court, First Judicial District, Lewis and Clark County, determined in a jury trial that the State Department of Social and Rehabilitative Services (SRS) discriminated against Lenore Taliaferro when it did not hire her because of her support of certain legislation pending before the 1983 Legislature. The judgment of the District Court awarded damages and attorney’s fees. SRS appealed the judgment of the District Court to this Court. The only question presented to us on appeal is whether support for or against legislation before committees in the legislature constitutes “political ideas” or “political beliefs” for which discrimination in employment may not occur under the Governmental Code of Fair Practices and the Montana Human Rights Act. We hold that such support constitutes the exercise of political ideas or political beliefs.

Under the Governmental Code of Fair Practices, § 49-3-201(1), MCA, state and local government officials must evaluate and hire personnel on the basis of merit and qualifications without regard to, among other factors, “political ideas.” Under the Human Rights Act, Section 49-2-308(3), MCA, it is an unlawful discriminatory practice for the state or any of its political subdivisions to refuse employment to a person because of political beliefs. Government employees are therefore a protected class against discrimination by reason of their political ideas or political beliefs. The Human Rights Act may be enforced before the Human Rights Commission or before the district courts. Title 49, Ch. 2, Part 5, MCA. Likewise, the Governmental Code of Fair Practices may be enforced by the Human Rights Commission and the district courts. Title 49, Ch. 3, Part 3, MCA.

Lenore Taliaferro was under contract to the Community Services Division of the SRS as a Long Term Care Ombudsman (LTCO) for over two years. An LTCO is a liaison between senior citizens and long-term care facilities and acts as the seniors’ ombudsman in case any problems arise regarding their care. Taliaferro’s last contract expired on January 21, 1984. Taliaferro went through an application and interviewing procedure before SRS contracted for her services in 1981 and again in 1982. Each time SRS contracted with her on her merit. Each contract between SRS and Taliaferro was for a fixed term and contained no provision guaranteeing continued employment beyond the termination date set forth in the contract. During the two year period Taliaferro competently performed her LTCO duties. There was no evidence that her competence or qualifications were ever deficient.

In the 1983 Legislative Session, House Bill 773 was introduced proposing to establish a permanent LTCO program. The bill provided for the establishment of a Board, to be appointed by the Governor, to oversee the LTCO program, and it further provided that the Board and the program would be attached to the Office of the Governor. Taliaferro believed that SRS had a conflict of interest in administering the LTCO program because SRS was responsible for licensing long-term care facilities, and therefore she believed the program should be attached to another office such as that of the Governor.

During the 1983 Legislative Session, Taliaferro testified in support of the ombudsman legislation. SRS opposed it because it would remove the position from control of SRS to the Office of the Governor. Eventually, the bill did not pass.

After Taliaferro’s legislative appearance, Norma Vestre Harris, division head of Community Services of SRS, and Taliaferro’s direct supervisor while her services were contracted, informed Taliaferro that SRS would not support the legislation and did not agree with it. In a memorandum of January 19, 1983 Harris informed Taliaferro, “Any activities that you have related to the ombudsman legislation must not involve any SRS staff since it is not part of the executive package and because we are not in agreement with it .... I would like to know if you are registered with a group or organization in regard to the legislation and would like to know the name of the organization.”

Later in 1983, apparently, the SRS decided to convert the LTCO position from a contracted position to a full-time employment position; and to fill the position through an open recruitment and selection process rather than by simply appointing Taliaferro. At the same time, in a parallel matter, the state converted the position of State Aging Coordinator, then held by Charles Briggs, to one of full time employment. No open recruitment took place for the new position, and Briggs, who formerly was supervised by the Governor, simply continued his position as a full-time employee under the SRS. Briggs distinguished to Taliaferro this separate treatment of the State Aging Coordinator, claiming that his position was different from Taliaferro’s in that Briggs was appointed by the Governor, that his contract stipulated that he could become an employee, and that this was approved by legislation. •

A number of applicants applied for the LTCO position. The applications were reviewed for minimum qualifications which were: a degree in social work or a related field such as psychology, sociology, or education, and three years experience or a master’s degree in social work. Each applicant was presented with an “application supplement” which two members of the Council on Aging rated according to model answers. Both the questions and the model answers to the application supplement were prepared by Norma Vestre Harris whom Taliaferro had opposed on the ombudsman legislation. Two members of the Council on Aging scored the answers without knowing the names of the respondents. The passing score was set at 15. The record does not say who decided this score or how it was arrived at. Of twenty applicants who submitted the supplement, only seven passed. The scores ranged from 7.5 to 23. Taliaferro achieved the highest score, 23; and two candidates achieved the next highest score of 18. The candidate ultimately chosen for the LTCO position achieved a score of 18.

The seven passing candidates went on to an oral interview consisting of questions and model answers again developed by Norma Harris. The selection committee consisted of Harris, Charles Briggs, and Kelly Moorse, executive director of the Mental Disabilities Board of Visitors. That panel interviewed the seven candidates, scored their responses based on Harris’s model answers after discussing each response among themselves and deciding on a “consensus score.” The panel did not choose Taliaferro for the job stating that she did not score high enough on the oral interview questions. On those questions the three interviewers scored Taliaferro 37 and the successful candidate 43. The panel based the final hiring decision entirely on the responses to the oral questions.

The District Court jury found that Taliaferro had not been hired because of her support of legislation that SRS opposed. The jury rejected SRS’s assertion that its position on House Bill 773 was “neutral.”

Our standard of review in employment discrimination cases is that iterated in European Health Spa v. Human Rights Commission (Mont. 1984), [212 Mont. 319.] 687 P.2d 1029, 1032, 41 St.Rep. 1766, 1769 where we said:

“In Martinez v. Yellowstone County Welfare Department (Mont. 1981), [_Mont._,] 626 P.2d 242, 38 St.Rep. 474, we adopted the McDonnell test for employment discrimination cases filed under section 49-2-303, MCA, which involve disparate treatment of a protected class because ‘[t]he provisions of Title 49, Montana Human Rights Act, are closely modeled after Title VII of the Federal Civil Rights Act of 1964 . . .’”

In the same case, we set forth a test for such cases following McDonnell Douglas Corporation v. Green (1973), 411 U.S. 792, 93 S.Ct. 1817, 36 L.Ed.2d 668, and we quoted directly from Texas De partment of Community Affairs v. Burdine (1981), 450 U.S. 248, 252-53, 101 S.Ct. 1089, 1093, 67 L.Ed.2d 207, 215:

“First, the plaintiff has the burden of proving by the preponderance of the evidence a prima facie case of discrimination. Second, if the plaintiff succeeds in proving the prima facie case, the burden shifts to the defendant ‘to articulate some legitimate nondiscriminatory reason for the employee’s rejection.’ . . . Third, should the defendant carry this burden, the plaintiff must then have an opportunity to prove by a preponderance of the evidence that the legitimate reasons offered by the defendant were not true reasons, but were a pretext for discrimination.” (Citations omitted.)

Under McDonnell, as adopted by us, a plaintiff establishes a prima facie case of employment discrimination if the plaintiff’s evidence shows (1) the employer received an application or equivalent from a qualified protected-class person; (2) a job vacancy or employment opportunity existed at the time of the application; and (3) the person was not selected. Martinez, supra.

In United States Postal Service Board of Governors v. Aikens (1983), 460 U.S. 711, 103 S.Ct. 1478, 75 L.Ed.2d 403 where the plaintiff claimed employment discrimination because of his color, the Supreme Court held that by establishing a prima facie case, the plaintiff creates a rebuttable presumption that the employer unlawfully discriminated against him, and to rebut the presumption, the defendant must clearly set forth through admissible evidence the reasons for the plaintiff’s rejection. If the defendant fails to persuade the Court to dismiss for lack of a prima facie case, and responds to plaintiff’s proof by offering evidence of the reasons for the plaintiff’s rejection, the presumption drops from the case and the fact finder must then decide the ultimate factual issue of whether the defendant intentionally discriminated against the plaintiff. 460 U.S. at 714, 715, 103 S.Ct. at 1481. The plaintiff, however, is not required to present direct evidence of the defendant’s discriminatory intent. Nonetheless, the ultimate burden of persuading the trier of fact is on the plaintiff at all times. The McDonnell division of intermediate burdens serves to bring the litigants and the Court expeditiously and favorably to the ultimate question. Burdine, supra, 450 U.S. at 253, 101 S.Ct. at 1093.

The decision of the jury in this case means that it rejected the reasons given by SRS for not employing Taliaferro as pretextual and that it found that SRS refused to hire Taliaferro because of her appearance before the legislature. SRS therefore bases its attack on the judgment on appeal principally on the ground that an effort to persuade the legislature one way or the other with respect to pending legislation is not an expression of either “political beliefs” or “political ideas,” and therefore the anti-discrimination statutes do not apply.

Since the ultimate factual issue has already been determined by the jury, the issue on appeal is one of statutory interpretation, and for us a case of first impression. SRS asserts that Taliaferro’s support and backing of the 1983 legislation must be associated with “party politics” before either Section 49-2-308 or Section 49-3-201, MCA, will apply to protect her; that neither the term “political beliefs,” nor “political ideas” is defined in the code; and that the District Court construed these terms too broadly and beyond basic rules of statutory construction. On that basis SRS contends that it was entitled to a summary judgment in the District Court.

We agree with the United States Supreme Court that a public employee does not relinquish First Amendment rights to comment on matters of public interest by virtue of government employment. Pickering v. Board of Education (1968), 391 U.S. 563, 88 S.Ct. 1731, 20 L.Ed.2d 811. Here the employee’s right of petition may also be involved. Pickering also recognized that the state’s interest in regulating the speech of its employees “differs significantly from those that it possesses in connection with speech of the citizenry in general.” A balance must be struck between the interest of the employee as a citizen in commenting upon matters of public concern, and the interest of the state as an employer in promoting the efficiency of public service through its employees.

In Connick v. Myers (1983), 461 U.S. 138, 103 S.Ct. 1684, 75 L.Ed.2d 708, the Supreme Court held that the state’s burden in justifying a particular discharge varies depending upon the nature of the employee’s expression. There it was held that when a public employee speaks out not as a citizen upon matters of public concern, but instead as an employee upon matters of only personal interest, the courts will not review the wisdom of a personnel decision taken by a public agency. 461 U.S. at 138-139, 103 S.Ct. at 1685-86. Conversely, it seems proper to hold that if the public employee does speak on a matter of public concern as a citizen, the public employee is exercising a cherished First Amendment right.

The appellants point to an earlier decision by the Human Rights Commission in 1980, holding that a state employee who was dissatisfied with the performance of his superiors in their operations, and who met with legislators challenging the competence of one superior, was not expressing political ideas or beliefs. Obviously, such an employee was speaking about matters of personal interest, and under Connick v. Meyers, supra, the decision of the Commission was correct. That decision is not precedent for this case.

Here, Taliaferro was not employed at the time that she supported the legislation proposed concerning the LTCO. Her stated concern over the proposed legislation was that a possible conflict of interest existed where the same agency that licensed health care facilities would also supervise the employee concerned with ombudsman duties on behalf of seniors. The effect of the jury verdict is that she was discriminated against because she took that position before the legislature, expressing her rights as a citizen. The First Amendment protects political association with political parties, Buckley v. Valeo (1976), 424 U.S. 1, 96 S.Ct. 612, 46 L.Ed.2d 659; Elrod v. Burns (1976), 427 U.S. 347, 96 S.Ct. 2673, 49 L.Ed.2d 547, but also protects political expression. “. . . Debate on public issues should be uninhibited, robust and wide open,” New York Times Co. v. Sullivan (1964), 376 U.S. 254, 270, 84 S.Ct. 710, 721, 11 L.Ed. 686, 701.

Political association, expression and debate, and competition in political ideas and governmental policies are the bulwark of a democratic government. We therefore agree with the District Court that the support by Taliaferro of proposed legislation before the Legislature was a matter of public concern as to how the government should be conducted, and thus was her expression of her political ideas or political beliefs. The refusal of SRS to hire her based on her political ideas and political beliefs constituted discrimination under our statutes. The judgment of the District Court is aflirmed. Costs and attorney’s fees to respondent, to be determined by the District Court.

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


author: MR. JUSTICE WEBER MR. JUSTICE SHEEHY,

text:
    BRIAN S. OLSON, Petitioner and Appellant, v. STATE OF MONTANA, DEPARTMENT OF REVENUE, and John Nicolay, Supervisor, Respondents.
    No. 88-69.
    Submitted Sept. 12, 1988.
    Decided Dec. 1, 1988.
    765 P.2d 171.

      Kozakiewicz Law Office, Vincent J. Kozakiewicz argued, Dillon, for petitioner and appellant.
    Larry Schuster argued, Dept, of Revenue, Helena, for respondents.
   MR. JUSTICE WEBER

delivered the Opinion of the Court.

Mr. Olson filed a petition in the District Court for the Fifth Judicial District, Beaverhead County, alleging that the Department of Revenue (DOR) denied him his right to veterans’ and handicapped persons’ preference in employment. After a hearing, the court determined that Mr. Olson was not entitled to application of the preference because he was not substantially equally qualified with the successful job applicant. Mr. Olson appeals. We affirm.

We restate the issues as 1) whether the DOR erred in considering application of the preference only after using its objective scoring system to evaluate the applicants, and 2) whether the DOR and the District Court properly concluded that Mr. Olson was not substantially equally qualified with the successful applicant.

Mr. Olson applied for a job as an appraisal clerk with the DOR in Dillon, Montana, claiming a preference in hiring under the Montana Veterans’ and Handicapped Persons’ Employment Preference Act (Act). Mr. Olson’s right to claim a preference has not been questioned. The DOR used an extensive objective scoring system for rating the 56 applicants for the position. The scoring system had three subsections: the applications, written examinations, and oral interviews. The applicants who received the top 17 point scores based on their applications were asked to sit for written examinations. Mr. Olson was one of these. Then the persons with the top 12 point scores on the written exams were orally interviewed. Mr. Olson was orally interviewed. The candidates were given point scores by each of the three interviewers and the three scores were averaged. These scores were added to the scores on the applications and the written exams. The scoring system awarded up to 97 points for the applications, up to 78 points for the written examinations, and up to 90 points for the oral interviews.

The applicant with the highest total score had a total of 219 points. The second-place applicant had a total score of 213.2 and Mr. Olson’s total score was 201.6. After the point scores were totaled, the DOR determined that there was no tie or close grouping of applicants justifying application of the veterans’ and handicapped persons’ preference on Mr. Olson’s behalf. When the job was given to the top-scoring applicant, Mr. Olson went to District Court, arguing that the rating system used by the DOR denied him his right to a preference in hiring. He now appeals the District Court’s determination that he was not entitled to preference in hiring.

I

Did the DOR err in considering application of the preference only after using its objective scoring system to evaluate the applicants?

Mr. Olson contends that the scoring procedure used by the DOR did not give proper effect to the preference to which he was entitled. He argues that the preference should have been considered prior to use of the scoring system, and that consideration of the preference only after applying the scoring system renders the preference statute void.

In 1983, this Court defined the nature of Montana’s veterans’ and handicapped persons’ preference under the statutes then in effect. Crabtree v. Montana State Library (1983), 204 Mont. 398, 665 P.2d 231. The Court adopted the lower court’s opinion that the then-existing statute gave “Montana veterans and disabled civilians who meet the minimum qualifications for a state, county or municipal job an absolute preference over all other non-veterans or non-disabled civilians.” Crabtree, 665 P.2d at 234.

In December of 1983, the Montana Legislature met in special session. During that session, it amended the employment preference statutes to their present form. In introducing this legislation, its sponsor set forth a statement of intent which included the following:

“A statement of intent is provided to address the nature of the employment preference granted in the bill. The legislature intends that public employers seek and hire the most qualified persons for positions in public employment. It is also the intent of the legislature that the nature of the preference is a relative one in that it is to be applied as a ‘tie-breaker’ among two or more applicants for a position who have substantially equal qualifications. Substantially equal qualifications does not mean a situation in which two or more applicants are exactly equally qualified. It means range within which two applicants must be considered to be substantially equal in view of the qualifications set for the job. Qualifications should include job-related knowledge, skill, and abilities. The legislature recognizes that public employers use a variety of scored and unscored selection procedures such as conventional written examinations, training and experience requirements, performance tests, structured oral interviews, or combinations of these. The legislature does not intend to specify the type of selection procedure to be used by a public employer.”

The word “tie-breaker” was deleted in committee. However, the minutes of the committee meetings of the Judiciary Committees of both the Senate and the House demonstrate considerable dissatisfaction with the absolute preference accorded under Crabtree.

Title 39, Chapter 30, MCA, the resulting Act, provides at Section 39-30-201, MCA, that a job applicant who is a veteran or handicapped person and claims the right to a preference is entitled to be hired “over any other applicant with substantially equal qualifications who is not a preference eligible applicant.” The term “substantially equal qualifications” is defined in Section 39-30-103(9), MCA:

“ ‘Substantially equal qualifications’ means the qualifications of two or more persons among whom the public employer cannot make a reasonable determination that the qualifications held by one person are significantly better suited for the position than the qualifications held by the other persons.”

We must presume that in amending the preference laws, the Legislature intended to make some change in the existing law. Mont. Dept. of Rev. v. Am. Smelting & Refining (1977), 173 Mont. 316, 325, 567 P.2d 901, 906. We conclude that in amending the veterans’ preference statutes, the Montana Legislature meant to abolish the absolute employment preference for veterans and handicapped persons who possess the minimum qualifications for a job. Being minimally qualified for the job is no longer enough.

Additionally, the Legislature did not limit the hiring authority to any particular method of assessing job applicants’ relative qualifications. The assertion that the DOR never took a look at the relative qualifications of Mr. Olson and the successful applicant ignores the comparison by use of the point system. We conclude that the DOR gave proper effect to the statutes in first determining applicants’ point scores, then considering whether the preference should be applied.

II

Did the DOR and the District Court properly conclude that Mr. Olson was not substantially equally qualified with the successful applicant?

Section 39-30-207(3)(a), MCA, sets forth the burden of proof in an action such as this one:

“Upon filing of the petition, the court shall order the public employer to appear in court. . . and show cause why the applicant was not hired for the position. At the hearing, the public employer has the burden of proving by a preponderance of the evidence that the employer made a reasonable determination [of substantial equal qualifications] . .

The specific objections made by Mr. Olson to the point score he was awarded relate to the application portion of the scoring procedure. The applications of Mr. Olson and the successful applicant were in evidence before the District Court. The job they were applying for was a clerical position in the county appraisal office. The successful applicant had worked for 10 years as an operations assistant for an agricultural lender and for 4 years as a bank teller. As the District Court found, “clerical work is not the central theme of [Mr. Olson’s work experience.” Mr. Olson’s application shows that he has worked as a surveyor aide for the U.S. Forest Service and a private engineering firm, a crew leader for a scout section of the National Guard, a maintenance worker, a ranch hand, a boiler operator, a logger, a board edger, and a warehouseman.

In view of Mr. Olson’s argument that the DOR acted unreasonably in scoring his application for employment, we quote from parts of the trial transcript. Mr. Nye, who was responsible for scoring the applications testified as follows:

“Q. Now, Mr. Nye, what I would like to do is to take you through your analysis of Mr. Olson’s employment application, if I may. . . .

“Would you explain for the Court how you determined that Mr. Olson should have sixteen points for education?

“A. Because he had a high school diploma, which gave him eight points; and he had four years of college, which gave him another eight, for a maximum of sixteen.

“Q. The third column is entitled ‘clerical office experience’. Would you explain to the Court why Mr. Olson was given six points for that?

“A. He was given six points based on two points per year for his time in the military in which his application indicated he had clerical experience all three years.”

“Q. Mr. Olson was awarded four points for deeds and property description experience. Why did he get four points for that?

“A. He had some surveying experience and we — from his application it indicated that he had about a year’s experience on that in which he would be working with deeds and legal property descriptions.

“Q. Mr. Olson received twelve points for typing experience; am I reading that correctly?

“A. No.

“Q. For mapping experience. Why did he receive that?

“A. In his years as a surveyor he would receive the points for one year at least there. And he’d had some mapping experiences indicated in locating mining claims and various private properties, so I gave him extra points for that.

“Q. Mr. Olson was afforded four points for typing experience. Would you explain that?

“A. Four is all I could get out of his application, which would be four points per year would be about one year was all I could find on his application that indicated he was doing actual typing.

“Q. And with respect to calculator experience, have you given him any credit for that?

“A. Yes, I’ve given him four points for calculator experience based on the fact that he was probably using a calculator during his surveying.

“Q. And then there’s a column entitled ‘other office machine experience’; do you see that?

“A. Yes, sir.

“Q. And would you tell the Court what that pertains to, please?

“A. Either they would have experience along some sort of computer or other office machine. None was indicated on his application; and therefore, I could give him no points.

“Q. Now, did you screen the initial employment application form for Ms. Cindy Doering?

“A. Yes, I did.

“Q. And I’d like to have you go through your examination and scoring for her employment application form in the same fashion that we did for Mr. Olson . . . Why was Ms. Doering given ten points for education?

“A. She had her high school diploma plus one year at Western Montana College.

“Q. And she received six points for clerical office experience. Why did she receive that?

“A. She was employed in a clerk and secretary position both with the — well, the Federal Land Bank, which was the maximum I could give her.

“Q. And she has twelve points for deeds and property experience. How did you achieve that rating?

“A. She had eight to ten years of experience with the Land Bank in which she was doing deeds and property descriptions in there as well. And I was able to give her the maximum, which was twelve points.

“Q. And why was she afforded twelve points for mapping experience?

“A. It would be the same program. She’d had the experience over there at the Land Bank.

“Q. Why did she receive eight points for typing experience?

“A. Because in her job at the Land Bank she was also typing up all these descriptions and doing the secretarial work there. And she had more than the two years experience.

“Q. And would you tell the Court why she was given eight points for calculator experience?

“Q Because in her figuring of acreages and so forth in all the years that she was at the Land Bank she had a maximum there.

“Q. And finally, why was she afforded six points for other office machine experience?

“A. There was two other machines that she indicated in her application that she was using at the Land Bank office for which she was allowed the six points.”

Based on our review of the record, we hold the District Court did not abuse its discretion in concluding that the DOR’s scoring procedure was reasonable.

Mr. Olson argues that this position was advertised as entry-level with possible on-the-job-training and that he was substantially equally qualified for a position of that description with the successful applicant. But the determination of substantially equal qualifications is not limited to the qualifications set forth in the position advertisement:

“Hamner contends, however, that the criteria for judging applicants for the position at issue is contained solely in the advertisement . . . soliciting proposals, and that the only criteria in the advertisement for judging applicants is that they be attorneys. We disagree. The advertisement solicits proposals demonstrating the applicants ability to provide extensive legal services for the County. An analysis of that ability, rather than the advertisement itself, constitutes the criteria for judging an applicant’s qualifications for the position. Here, substantial evidence supports the District Court’s finding that the County correctly determined that Hamner’s qualifications were not substantially equal to the firm awarded the contract. Thus, this contention fails.”

Hamner v. Butte-Silver Bow County (Mont. 1988), [233 Mont. 271,] 760 P.2d 76, 79-80, 45 St. Rep. 1481, 1485. We conclude that where Mr. Olson’s total point score was 201.6 and the successful applicant’s was 219 and where the records supports that difference in scores, the District Court did not err in ruling that the DOR met its burden of proving that Mr. Olson and the successful applicant were not substantially equally qualified. This is not to say, as Mr. Olson claims, that in order to be eligible for the preference, he would have to have been the top-scoring applicant. We hold that the conclusion that Mr. Olson was not substantially equally qualified with the successful applicant does not represent an abuse of discretion.

Affirmed.

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

MR. JUSTICE SHEEHY,

dissenting:

The majority has given the statehouse gangs a blueprint on how to avoid the veterans’ preference in job hiring. Simply parse the experience of the favored non-veteran into as many segments as needed, and award each segment the maximum points.

The successful applicant here was employed for ten years as an “operations assistant” at the local office of the Federal Land Bank. She did clerical and stenographic work. For that experience her job was segmented as follows:

Clerical office experience 6 points
Deeds and property descriptions 12 points
Mapping 12 points
Typing 8 points
Calculators 8 points
Other machines 6 points
Total 52 points

Olson had done work as a surveyor, had successfully completed a real estate training course, held a current real estate license for the state of Idaho, and had computer experience. Witness his comparable scoring:

Deeds and property description 4 points
Calculators 4 points
Other machines 0 points

The “other machines” for which the successful applicant got maximum points were a bank proof machine, a bank posting machine, and a copy machine. The scorers did not include the water cooler, but probably would have if needed. None of these machines is used by an appraisal clerk except the copy machine, the technical difficulty of which can be mastered by a first-grader. The scorers ignored Olson’s computer experience.

Having rigged the scores for the successful applicant, the scorers then ignored the law, which declares that if the applicants are substantially equally qualified, the veterans’ preference is decisive. Olson could not be hired under the scorers’ view unless he had the highest score, but then he would not have to call on his preference rights. Thus is the veterans’ preference emasculated.

Olson is not only a Viet Nam veteran, but is also a certified handicapped person. He was entitled to the job on both counts. We should make sure he got it.

MR. JUSTICE HUNT concurs in the foregoing dissent of MR. JUSTICE SHEEHY.


text:
    In re the MARRIAGE OF JAN M. HARPER (DeGraff), Petitioner and Appellant, and WILLIAM B. HARPER, Respondent and Respondent.
    No. 88-262.
    Submitted on Briefs Sept. 23, 1988.
    Decided Dec. 1, 1988.
    764 P.2d 1283.

      Marcia Birkenbuel, Great Falls, for petitioner and appellant.
    Joan E. Cook, Great Falls, for respondent and respondent.
   MR. JUSTICE McDONOUGH

delivered the Opinion of the Court.

This appeal involves disputed child visitation rights under a dissolution decree. Jan M. Degraff, f.k.a. Jan M. Harper (Jan), appeals from an order of the District Court of the Eighth Judicial District, Cascade County. The District Court order: (1) Jan must keep her former husband William B. Harper (William) informed of the current address and telephone number for herself and the couple’s minor child; (2) Jan must allow William unrestricted telephone access to the child and reasonable visitation consistent with the original dissolution decree in this case; and (3) should Jan continue her attempt to prevent William from speaking with, visiting or knowing the whereabouts of the child, William will be relieved of his obligation to pay child support. We reverse and remand.

Jan presents three issues for review:

1. Did the Montana District Court have jurisdiction to make a determination regarding visitation with the parties’ minor child?

2. Did the District Court err in conditioning William’s obligation to pay child support upon Jan’s compliance with the court’s visitation order?

3. Did the District Court err in refusing to consider Jan’s request for an increase in child support and for an order directing payment of the child’s medical and drug expenses?

In 1979, Jan obtained a decree dissolving her marriage to William. At the time, she was living in Great Falls with William and their minor child, William B. Harper II. Custody of the child was awarded to Jan. William was granted “reasonable” visitation rights specified in the decree, and ordered to pay child support of $125 per month. Jan subsequently remarried, and in 1981 she moved with the child and her new husband to New York. She testified before the District Court in the present action that she informed William in advance of her intent to move to New York. William testified that he was not given an address or telephone number when Jan left.

Jan and the child left New York in 1983 and moved to Colorado, where they still reside. She did not advise William of this move because, according to Jan, she did not know where he was. William also moved after , the dissolution, living in Washington and Idaho before returning to Great Falls, where he is currently a resident. William maintains he has been denied visitation since 1981, although he has tried to locate Jan and the child several times. Jan admits she refused a visitation request from William while living in New York in 1982, because she wanted to take the child to a funeral being held out of the state.

On March 5, 1988, William was served with process in an action brought by Jan under the Uniform Reciprocal Enforcement of Support Act (URESA) seeking past due child support payments. Having thus discovered where Jan was living, William then moved the District Court for an order directing Jan to appear and show cause why she should not be held in contempt for failing to allow visitation under the original decree. The order was issued on March 10, 1988.

A hearing was held on March 22, 1988, at which Jan made a “special appearance” challenging the court’s jurisdiction to determine the visitation issue. She also sought two court orders: one to require William to pay her attorney’s fees and costs, and a second to modify child support. The court refused to hear testimony on Jan’s request for modification of support. The order directing Jan to allow visitation or lose child support was issued on March 24, 1988. This appeal followed.

William raises a threshold question in his brief. He argues that Jan is attempting to appeal a contempt order, which is not allowed. Section 3-1-523, MCA, states contempt orders are final and conclusive, and may not be appealed. Review may be had only on a writ of certiorari by this Court. We have held this statute applicable in dissolution cases. In re Marriage of O’Neill (1979), 184 Mont. 415, 603 P.2d 257.

Jan was not held in contempt by the District Court. The court’s order directed her to honor the visitation terms of the original decree in this case, but did not find her in contempt of court or impose a contempt penalty. The order is appealable to this Court.

Jan argues that under the provisions of the Uniform Child Custody Jurisdiction Act (UCCJA) as adopted in Montana, the District Court was without jurisdiction to render its order. Montana’s version of the UCCJA is found at Sections 40-7-101, et seq., MCA. Section 40-7-102, MCA, lists the general purpose of the UCCJA, including:

“(c) assure that litigation concerning the custody of a child takes place ordinarily in the state with which the child and his family have the closest connection and where significant evidence concerning his care, protection, training, and personal relationships is most readily available and that courts of this state decline the exercise of jurisdiction when the child and his family have a closer connection with another state;”

Under Section 40-7-103, MCA, visitation rights are included in the definition of matters encompassed by a custody proceeding.

The specific section cited in support of Jan’s argument is Section 40-7-104, MCA. That section is entitled “Jurisdiction,” and incorporates Section 40-4-211, MCA, to set forth the jurisdictional requirements under the UCCJA:

“(1) A court of this state competent to decide child custody matters has jurisdiction to make a child custody determination by initial or modification decree if:

“(a) this state:

“(i) is the home state of the child at the time of commencement of the proceedings; or

“(ii) had been the child’s home state within 6 months before commencement of the proceeding and the child is absent from this state because of his removal or retention by a person claiming his custody or for other reason and a parent or person acting as parent continues to live in this state; or

“(b) it is in the best interest of the child that a court of this state assume jurisdiction because:

“(i) the child and his parents or the child and at least one contestant have a significant connection with this state; and

“(ii) there is available in this state substantial evidence concerning the child’s present or future care, protection, training, and personal relationships; or

“(c) the child is physically present in this state and:

“(i) has been abandoned; or

“(ii) it is necessary in an emergency to protect him because he has been subjected to or threatened with mistreatment or abuse or is neglected or dependent; or

“(d)(i) no other state has jurisdiction under prerequisites substantially in accordance with subsections (l)(a), (l)(b), or (l)(c) of this section or another state has declined to exercise jurisdiction on the ground that this state is the more appropriate forum to determine custody of the child; and

“(ii) it is in his best interest that the court assume jurisdiction.

“(2) Except under Subsections (l)(c) and (l)(d) of this section, physical presence in this state of the child or of the child and one of the contestants is not alone sufficient to confer jurisdiction on a court of this state to make a child custody determination.

“(3) Physical presence of the child, while desirable, is not a prerequisite for jurisdiction to determine his custody.

“(4) A child custody proceeding is commenced in the district court:

“(a) by a parent, by filing a petition:

“(i) for dissolution or legal separation; or

“(ii) for custody of the child in the county in which he is permanently resident or found; ...”

At the hearing held pursuant to the show cause order, the District Court held these requirements did not apply to this action. The court relied instead on its continuing jurisdiction to enforce the original decree.

We addressed the question of continuing jurisdiction in relation to the UCCJA in In re Marriage of Bolton (Mont. 1984), [212 Mont. 212,] 690 P.2d 401, 41 St.Rep. 1698. While Bolton involved a modification of custody, the distinction between modification and enforcement of custody in a case such as this is superficial. Preserving such a distinction would defeat the purposes set out in Section 40-7-102, MCA.

In Bolton, we applied a two-part test for the exercise of jurisdiction. The first step requires that the jurisdictional requirements set out above be met before a court can assert continuing jurisdiction in a custody proceeding. If the requirements are met, the second step requires that the court determine whether it should exercise its jurisdiction using the criteria found at Section 40-7-108, MCA. This determination is within the court’s discretion. Bolton, 690 P.2d at 405.

We hold the District Court was incorrect in concluding that the UCCJA jurisdictional requirements did not apply to this case. Section 40-7-102, MCA, states the UCCJA was enacted in Montana to deal with custody proceedings involving residents of different states. Under Section 40-7-103, MCA, custody proceedings settle questions of visitation rights. Jan and the child reside in Colorado, William resides in Montana and the subject of this action is William’s right of visitation.

We remand for a determination of jurisdiction under the test applied in Bolton. If on remand the court determines it has jurisdiction and decides to exercise that jurisdiction, we feel compelled to note two factors that should be considered in the court’s decision on the merits.

First, we note the final sentence of Section 40-5-124, MCA:

“The determination or enforcement of a duty of support owed to one obligee is unaffected by any interference by another obligee with rights of custody or visitation granted by the court.” ■

Conditioning the obligation to pay child support upon non-interference with visitation rights would be error under this statute. Second, once the court asserts continuing jurisdiction, it can hear argument on the question of child support. Continuing jurisdiction applies to child support as well as custody. In re Marriage of Ensign (Mont. 1987), [227 Mont. 357,] 739 P.2d 479, 44 St.Rep. 1146.

Furthermore, the court can still address the child support issue if it determines it does not have jurisdiction to hear the visitation issue. Modification of child support is not subject to the jurisdictional strictures imposed on custody proceedings under the UCCJA. Child support provisions in a dissolution decree can be modified under Section 40-4-208, MCA. Jan’s motion in response to the show cause order effectively petitions for an increase in child support. Because William resides in Montana, the court has in personam jurisdiction over him and can increase his obligation of child support if it so decides. See In re Marriage of Appleton (Mont. 1988), [234 Mont. 345,] 763 P.2d 658, 45 St.Rep. 1959.

Reversed and remanded.

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


text:
    FIRST INTERSTATE BANK OF MISSOULA, N.A., (formerly known as First National Montana Bank of Missoula), Conservator for Tina Louise Malone, an incapacitated person, Claimant and Appellant, v. TOM SHERRY TIRE, INCORPORATED, Employer, and EBI Companies/ Orion Group, Defendant and Respondent.
    No. 88-345.
    Submitted on Briefs Oct. 20, 1988.
    Decided Dec. 1, 1988.
    764 P.2d 1287.

      Boone, Karlberg & Haddon, William L. Crowley, Missoula, for claimant and appellant.
    Dzivi & Rebeck, Susan J. Rebeck, Great Falls, for defendant and respondent.
   MR. CHIEF JUSTICE TURNAGE

delivered the Opinion of the Court.

This is an appeal from the Workers’ Compensation Court of the State of Montana. Claimant and appellant, First Interstate Bank, petitioned the Workers’ Compensation Court for a hearing which would determine the subrogation rights of respondent EBI Companies/Orion Group pursuant to Section 39-71-414(5), MCA. The court found that the issue was outside the scope of its jurisdiction and that the Workers’ Compensation Division is the proper forum for defining the subrogation rights.

We affirm.

The issue to be decided is whether the proper forum for determination of the insurer’s subrogation rights is the Workers’ Compensation Court or the Workers’ Compensation Division.

While Tina Louise Malone was driving across Reserve Street Bridge in Missoula, Montana, on April 2,1985, her car was struck by a forklift owned and operated by Fisher Enterprises, Inc. It is from that accident that this appeal originates. Malone suffered damage to her brain stem, impairing judgment and her cognitive abilities. For this reason First Interstate Bank acts as conservator.

EBI/Orion denied Malone’s claim that her injuries were received in the scope of her employment. On January 29, 1987, the Workers’ Compensation Court entered findings of fact, conclusions of law, and judgment finding that the industrial injuries arose out of and were incurred in the course of her employment. EBI/Orion was liable for compensation.

On November 20, 1986, a third-party action had been filed on behalf of Malone against Ronald Gohl, Fisher Enterprises, Inc., and Champ Corporation as defendants. EBI/Orion was made aware of this suit but chose not to participate, thus reducing any subrogation claim it had by 50 percent, according to Section 39-71-414(c), MCA.

On July 14, 1987, counsel for claimant and EBI/Orion reached a partial settlement agreement. Employer agreed to pay a total of $97,477.94 for medical expenses. The agreement provided that insurer also pay any additional past medical expenses unless it found something legitimately objectionable. Insurer and conservator agreed that insurer would pay $45,000 in partial disability obligations over a ten-year period and $13,050.80 in attorney fees. Any other future medical expenses resulting from Malone’s injuries were reserved. Insurer agreed to pay these future medical expenses unless they were legitimately objectionable. EBI/Orion reserved subrogation rights.

Subsequently, a settlement agreement was reached in the third-party action between claimant and Ronald Gohl, Fisher Enterprises, Inc., Mark Fisher, and United States Fidelity and Guaranty Company. The settlement arranged for claimant to be paid $175,000. The Fourth Judicial District Court approved the settlement on December 28, 1987.

On March 4, 1988, a petition for full and final settlement was filed with the Workers’ Compensation Division, between EBI/Orion and Malone.

On December 28, 1987, claimant filed a petition with the Workers’ Compensation Court for a hearing to determine subrogation rights. On April 5, 1988, a petition to determine subrogation rights was filed with the Workers’ Compensation Division by EBI/Orion. On June 23, 1988, the Workers’ Compensation Court stated that determination of subrogation rights was beyond its scope of jurisdiction accorded it by Section 39-71-414(5), MCA. It found that the Division was the proper forum.

Claimant appeals the Workers’ Compensation Court’s findings, contending that it is within the court’s jurisdiction to review the subrogation issue.

Section 39-71-414(5), MCA, provides:

“If the amount of compensation and other benefits payable under the Workers’ Compensation Act have not been fully determined at the time the employee, the employee’s heirs or personal representatives, or the insurer have settled in any manner the action as provided for in this section, the division shall determine what proportion of the settlement shall be allocated under subrogation. The division’s determination may be appealed to the workers’ compensation judge. [Emphasis supplied.]”

Carefully scrutinized, the statute shows that the Division is the proper forum for considering an insurer’s subrogation rights in specified cases. The requirements are as follows. First, the employee’s insurer is required to pay benefits and compensation according to the Workers’ Compensation Act. Second, there must be a third-party action between the employee and the third party responsible for the injury. Third, only in those cases where the benefits are not determined at the time the third-party action is settled does the Division resolve the question of subrogation. Generally, once the third-party action has been settled (Section 39-71-414(4), MCA), the insurer is entitled to full subrogation from that settlement, or in the case where the insurer does not participate in the third-party action, it receives 50 percent of the subrogation rights. However, the total amount of the benefits and compensation payable by the insurer must be known to specify the amount of subrogation to which the insurer is entitled. Where the total amount of benefits and compensation are not known, the Montana legislature delegated the Division the power of determining what proportion of the settlement is to be allocated under subrogation.

In the case on appeal, appellant contends that the amount of compensation and benefits payable was fully determined prior to the time that the third-party action was settled. According to appellant, full compensation and benefits were determined on July 14, 1987, pursuant to a partial settlement agreement. Because no major changes have been made subsequent to that document, settlement was final prior to the third-party settlement of December 28, 1987.

However, the record is clear that the settlement agreement of July 14, 1987, was intended to be only partial settlement of Tina Malone’s claims. Therefore, the December 28, 1987, third-party settlement preceded the petition for full and final settlement of workers’ compensation benefits filed March 4, 1988. The statute is applicable. It is clear that where the settlement of a third-party action precedes full determination of the workers’ compensation claim, the Division is the proper forum for resolving the issue of the proper amount of subrogation allocated to the insurer.

After the Division has addressed the issue, the Workers’ Compensation Court can consider an appeal of the subrogation matter. We hold that the workers’ compensation judge properly dismissed, for lack of jurisdiction, the petition for hearing on subrogation rights.

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