author: CHIEF JUSTICE TURNAGE JUSTICE HUNT,

text:
    CITIZENS FIRST NATIONAL BANK OF WOLF POINT, A national banking corporation, Plaintiff and Respondent, v. MOE MOTOR COMPANY, a partnership and A. R. MOE, a/k/a Arvid Moe, and Curtis More a/k/a Curtis W. Moe, partners, associated and in business under the common name and style of said company, Defendants and Appellants.
    No. 90-607.
    Submitted on briefs Apr. 18, 1991.
    Decided June 4, 1991.
    Rehearing Denied July 25, 1991.
    248 Mont. 495.
    813 P.2d 400.

      Don M. Hayes and Rodney T. Hartman, Herndon, Hartman, Sweeney & Halverson, Billings, for defendants and appellants.
    Charles W. Hingle and Stephen D. Bell, Dorsey and Whitney, Billings, for plaintiff and respondent.
   CHIEF JUSTICE TURNAGE

delivered the Opinion of the Court.

This is an action to foreclose a loan. Defendants appeal a summary judgment granted to plaintiff bank by the District Court of the Fifteenth Judicial District, Roosevelt County. We affirm in all respects except that we remand as to the Kelly Moe contract.

The issue is whether the District Court erred in granting summary judgment in favor of the bank on its claims and on defendants’ counterclaims.

Defendant Moe Motor Company (Moe Motor) is a Wolf Point, Montana, partnership owned by defendants Arvid Moe and Curtis Moe. The business sells and services farm implements and equipment. Moe Motor and Citizens First National Bank of Wolf Point (CFNB) had a thirty year debtor-creditor relationship.

From 1978 to 1985, Moe Motor’s indebtedness to CFNB increased from $85,435 to $308,863, while its net worth declined from $435,233 to $192,729. On September 11, 1985, Arvid Moe on behalf of Moe Motor executed a promissory note and security agreement with CFNB in which $210,670.88 of promissory notes were refinanced into one note. The note was payable “on demand, but if no demand is made, then on February 11, 1986.” The security agreement granted CFNB a secured interest in Moe Motor’s inventory, machinery, accounts or other rights to payment, general intangibles, and all vehicles, machinery, equipment, and fixtures identified.

Moe Motor did not make payment on the note by February 11, 1986, but, instead, sought further financing from CFNB. CFNB asked for certain financial information in support of the request. Moe Motor eventually supplied some, but not all, of the financial information. In the meantime, in April 1986, Moe Motor obtained a $230,000 federal disaster loan from the Small Business Administration (SBA). Moe Motor paid $150,000 to CFNB, which voluntarily released $20,000 back to Moe Motor for operating expenses.

In August 1986, with written notice to Arvid Moe, CFNB placed a hold on Moe Motor’s checking account. CFNB then made two setoffs against the account, in the amounts of $14,786.88 and $13,728.08, applying these amounts to Moe Motor’s obligations to the bank. In October 1986, CFNB determined that Moe Motor had sold several pieces of secured equipment “out of trust,” without reporting the sales or remitting proceeds to CFNB. In November 1986, CFNB wrote to Moe Motor debtors and instructed them to make payments directly to CFNB.

CFNB filed this action in December 1986, seeking to recover on the September 11,1985, promissory note. The action was stayed while Moe Motor went through a Chapter 11 bankruptcy. After the bankruptcy was concluded, Moe Motor filed counterclaims against CFNB for breach of contract, tortious interference with third party contracts, tortious violation of the covenant of good faith and fair dealing, defamation, and actual or constructive fraud. Moe Motor claims that CFNB “breached agreements and understandings which had existed for years between the parties;” unreasonably refused to make further loans to Moe Motor; and, in contacting Moe Motor customers, intentionally interfered with Moe Motor’s contracts with those customers.

CFNB moved for summary judgment on its affirmative claims and on the claims of Moe Motor. The District Court granted summary judgment in favor of CFNB in the amount of $216,937.81 in prejudgment principal and interest, plus post-judgment interest and CFNB’s costs and attorney fees.

Our standard of review is the same standard employed by the district court; that is, summary judgment is proper only if no genuine issues of material fact exist and the moving party is entitled to judgment as a matter of law. Rule 56(c), M.R.Civ.P.; McCracken v. City of Chinook (1990), 242 Mont. 21, 24, 788 P.2d 892, 894. All reasonable inferences that may be drawn from the offered proof are to be drawn in favor of the party opposing the motion for summary judgment. Cereck v. Albertson’s, Inc. (1981), 195 Mont. 409, 411, 637 P.2d 509, 511.

CFNB’s action to recover on the note signed by Arvid Moe on behalf of Moe Motor on September 11, 1985, is straightforward. It is undisputed that Moe Motor did not pay off the note by the due date of February 11, 1986. CFNB’s claim would fail only if one of Moe Motor’s counterclaims succeeds. Moe Motor’s first counterclaim is that CFNB breached the contract before it did by taking a setoff when the Moe Motor debt was not due and owing; by wrongfully setting off $14,786.88 due on a contract with Arvid Moe’s son, Kelly; and by refusing to extend further credit to Moe Motor -without solid business reasons.

According to the unambiguous terms of the written contract between the parties, the September 11 note was due and owing when CFNB set off Moe Motor’s checking account. Prior notice of set-off is not required if the depositor’s indebtedness is due and owing. FDIC v. First Mortgage Investors (E.D.Wis. 1980), 485 F.Supp. 445, 455; Northwestern Bank v. Estate of Coppedge (1986), 219 Mont. 473, 476, 713 P.2d 523, 526. Moe Motor’s claim of an -unwritten agreement for an extension of the due date is too vague and indefinite to be an enforceable contract.

Kelly Moe, son of Arvid Moe, purchased a used Kenworth truck from Moe Motor in 1983. Moe Motor assigned the Kelly Moe contract to CFNB and agreed to act as guarantor of Kelly Moe’s obligations under the note. Kelly Moe defaulted on the note by failing to make payments and CFNB discovered that he had sold the truck without remitting the proceeds to CFNB. With notice to Moe Motor, CFNB set off Moe Motor’s checking account in the amount of $14,786.88 to cover the Kelly Moe contract.

The guarantee signed by Arvid Moe on behalf of Moe Motor for the Kelly Moe contract stated that “I hereby guarantee the collection of the above described amount upon failure of the seller named herein to collect said amount from the buyer named herein.” Section 30-3-416(2), MCA, provides that

“ ‘Collection guaranteed’ or equivalent words added to a signature mean that the signer engages that if the instrument is not paid when due he will pay it according to its tenor, but only after the holder has reduced his claim against the maker or acceptor to judgment and execution has been returned unsatisfied, or after the maker or acceptor has become insolvent or it is otherwise apparent that it is useless to proceed against him.”

The guarantee signed by Arvid Moe was of the “collection guaranteed” type.

The record before us does not indicate that CFNB obtained a judgment against Kelly Moe before setting off funds from the checking account of guarantor Moe Motor. The District Court made no findings that Kelly Moe had become insolvent or that it was otherwise apparent that it was useless to proceed against him. We remand this case to the District court for entry of the appropriate finding as to this issue. If no such finding is appropriate from the record before the court, the District Court shall reduce the amount of CFNB’s judgment by the amount set off for the Kelly Moe contract. However, because at the time of the set-off, Moe Motor had defaulted on the September 11 note, no cause of action for wrongful set-off will lie.

Moe Motor contends that CFNB led it to believe that further financing would be provided. That contention is contradicted by Arvid Moe’s own statements in the May 18, 1984, SBA disaster loan application:

“I feel we need this Loan to stay in business and survive this Ag crisis due to No moisture and low Farm and Ranch prices the last few years. The high interest rate and the buyers market to lower profit even less has truly hurt cash flow and Farm Business in general. We have received loans from Citizens 1st National Bank to keep going. However they cannot loan more and in order to keep the 9 families working and lower our payments and interest I feel we must have SBA loan.”

Moreover, Moe Motor failed to provide all of the additional financial information CFNB had requested before granting another loan. Finally, CFNB had no obligation to extend further credit to Moe Motor. Montana Bank of Circle v. Meyers & Son (1989), 236 Mont. 236, 244, 769 P.2d 1208, 1213. We hold that CFNB did not breach the contract before Moe Motor did.

Another counterclaim was for tortious interference with third party contracts. Moe Motor claims that CFNB interfered with its third party contracts by writing to Moe Motor customers and instructing them to pay their Moe Motor debts directly to CFNB.

Under § 30-9-502, MCA, a secured party is entitled to notify an account debtor to make payment to the secured party, in the event of default. It is not disputed that CFNB was a secured party under its contract with Moe Motor. We hold that CFNB was within its rights in writing to Moe Motor’s debtors.

Moe Motor’s counterclaim for breach of the covenant of good faith and fair dealing depends on the claim that it had a special relationship with CFNB, under the standards set forth in Story v. City of Bozeman (1990), 242 Mont. 436, 791 P.2d 767. Here, like in Lachenmaier v. First Bank Systems, Inc. (Mont. 1990), [246 Mont. 26,] 803 P.2d 614, 47 St.Rep. 2244, and Mann Farms, Inc. v. Traders State Bank of Poplar (Mont. 1990), [246 Mont. 234,] 801 P.2d 73, 47 St.Rep. 2094, the parties had a business relationship and every indication is that the contract was for a profit motivation. We hold that there was no special relationship between the parties.

Moe Motor also alleges that CFNB defamed it in the letters CFNB wrote to Moe Motor customers. Copies of these letters are attached to the deposition of Arvid Moe. The first letter provides notice that debts to Moe Motor are to be paid directly to CFNB, citing statutory authority. The letter states that on February 11,1986, Moe Motor defaulted under its security agreement with CFNB by failing to pay the amounts due. It then allows the addressee an opportunity to correct CFNB’s record of the balance due.

After that letter was written, CFNB learned that Arvid Moe had instructed customers to pay Moe Motor directly. A second letter from CFNB notified debtors that if payments were made to Moe Motor, the debtor would be liable to CFNB for wrongful payment. It again offered to correct payment records.

The record indicates that the statements in CFNB’s letters were true. Truth is a complete defense to a claim of defamation. Griffin v. Opinion Publishing Co. (1943), 114 Mont. 502, 507, 138 P.2d 580, 584. We hold that the District Court was correct in granting summary judgment to CFNB on the defamation counterclaim.

Moe Motor claimed actual or constructive fraud on the part of CFNB. This claim evidently arises from alleged representations by the president of CFNB to Arvid Moe that the February 11 due date on the note would not be enforced and that the note would only become due if the bank deemed itself insecure or if Moe Motor violated the agreement.

The claimed representations by CFNB’s president conflict with Arvid Moe’s statement to the SBAthat CFNB could no longer extend credit to Moe Motor. Even if such representations were made, Arvid Moe admitted violating the agreement with CFNB by selling equipment out of trust. He also admitted failing to give the bank information requested before another loan would be extended. We hold that the claim for actual or constructive fraud fails due to Arvid Moe’s own admissions.

In review, we conclude that summary judgment was proper on the claim of CFNB and on Moe Motor’s counterclaims. The judgment of the District Court is affirmed except as to the amount set off from Moe Motor’s account for the Kelly Moe contract. The District Court shall make findings and, if necessary, amend the judgment as to that aspect. Each party shall bear its own costs and attorney fees on appeal.

JUSTICES HARRISON, GRAY, MCDONOUGH and WEBER concur.

JUSTICE HUNT,

dissenting:

I dissent. Once again, this Court takes it upon itself to determine material questions of fact, further eroding a litigant’s right to a trial by jury.

Summary judgment should be granted only if no issues of material fact exist. Rule 56(c), M.R.Civ.R All reasonable inferences must be drawn in favor of the party opposing the motion. Cereck v. Albertson’s Inc., 195 Mont. 409, 411, 637 P.2d 509, 511 (1981). Although the majority gives lip service to these time-honored rules, it refuses to apply them in this case. Instead, it selects evidence that tends to demonstrate CFNB’s view of the suit while ignoring that proffered by Moe Motors. In so doing, it places itself in the position of fact finder, a position that should be left to the jury.

The majority concludes that Moe Motors’ claim of an unwritten agreement for an extension of the promissory note’s due date is too vague and indefinite to be an enforceable contract. However, when the proof is viewed in the light most favorable to Moe Motors, it becomes apparent that material questions of fact exist regarding whether the parties engaged in an implied agreement to extend the due date of the note or whether CFNB, by its actions, waived the condition of payment by February 11, 1986.

If one looks at CFNB’s actions after the February 11, 1986, due date passed, one cannot help but conclude that CFNB led Moe Motors to believe that it would not enforce the time provision of the promissory note. Rather than taking action to collect on the note after February 11, CFNB attempted, in the words of its president Michael Miller, “to work out a plan on it.” CFNB had substantial contact with Moe Motors throughout May, June, July, and August 1986, during which CFNB sought financial information from the car dealer in its attempt to refinance. In April 1986, CFNB accepted a partial payment of $130,000, which reflected money from the SBA loan received by Moe Motors. It also accepted other payments of principal and interest in August and September 1986.

The payment of interest for a definite period of time may be sufficient consideration for a creditor’s promise to extend the time for payment of a note. Hackin v. First Nat’l Bank of Arizona, 101 Ariz. 350, 419 P.2d 529, 531 (1966). The debtor’s promise to pay interest during the extension period may be implied from the circumstances. Hackin, 419 P.2d at 531. Here, we have a debtor who has alleged that an agreement for extension existed and who made periodic payments of principal and interest during the extension period. Certainly, these facts raise an issue regarding whether an agreement to extend actually existed.

Alternatively, the evidence raises a genuine issue of fact concerning whether CFNB waived the due date of the note. The receipt of a delayed partial payment of money due and owing may operate as a waiver of any existing default. 3A A. Corbin, Corbin on Contracts § 754, at 491-92 (1960). Because the facts here demonstrate that CFNB accepted payments after the due date without demanding remittance of the entire amount borrowed and because CFNB attempted to formulate a financing plan with Moe Motors, CFNB may very well have waived the default that occurred on February 11.

If CFNB waived or extended the due date, it was required to notify Moe Motors of its intent to collect the remaining sums due before it setoff funds from the car dealer’s checking account. The right of setoff exists only if the borrower is in default. See Bottrell v. American Bank, 237 Mont. 1, 14, 773 P.2d 694, 702 (1989). There are genuine issues of material fact regarding whether Moe Motors was indeed in default.

If Moe Motors was not in default when the setoff occurred, the Bank may be liable for wrongful setoff for the amounts applied to both the Moe Motors’ promissory note and the Kelly Moe debt. It may also be liable for bad faith, defamation, and tortious interference with the right to contract for notifying customers of Moe Motors of a purported default when a default either had not yet occurred or had been waived by CFNB.

We will never know, however, which party actually committed the first breach. Thanks to this Opinion, the parties will never have the opportunity to reveal the entire story and plead their positions to what should be the only real finder of fact in this state, a jury.

I would reverse the District Court.

JUSTICE TRIEWEILER concurs with the foregoing dissent of Justice Hunt.


source: Caselaw Access Project

author: JUSTICE HARRISON

license: Public Domain

text:
    CARLA J. SMITH-CARTER, Petitioner and Appellant, v. AMOCO OIL COMPANY, (Cyprus Industrial Minerals Beaverhead Mine), Employer, and AMOCO OIL COMPANY, Defendant and Respondent.
    No. 90-629.
    Submitted on briefs May 2, 1991.
    Decided June 4, 1991.
    248 Mont. 505.
    813 P.2d 405.

      R. Lewis Brown, Jr., Butte Legal Center, Butte, for petitioner and appellant.
    Paul C. Meismer, Garlington, Lohn & Robinson, Missoula, for defendant and respondent.
   JUSTICE HARRISON

delivered the Opinion of the Court.

Petitioner, Carla Smith-Carter, appeals from the judgment of the Workers’ Compensation Court of the State of Montana which found petitioner permanently partially disabled and entitled to 500 weeks of permanent partial disability benefits. We affirm the Workers’ Compensation Court.

On appeal petitioner raises five issues which this Court has consolidated into one issue: whether the judgment of the Workers’ Compensation Court is supported by substantial credible evidence.

This complaint was originally heard by the Workers’ Compensation Court on October 9,1986. In that complaint petitioner alleged a dispute between the parties regarding the nature, degree, and extent of injuries from a February 6, 1981, industrial accident which occurred while petitioner was employed by Cyprus Industrial Minerals (Cyprus).

As the result of the 1986 hearing, the Workers’ Compensation Court found that petitioner was not permanently totally disabled, but was permanently partially disabled, although the degree of disability could not be determined because an impairment rating of petitioner’s left wrist was lacking.

On April 10, 1989, Smith-Carter filed another petition in the Workers’ Compensation Court, seeking to adjudicate the nature, duration, and extent of her injuries.

After a hearing on November 1, 1989, and upon consideration of depositions taken before and after the hearing, the court on August 21, 1990, issued an order adopting the findings of fact and conclusions of law of the hearing examiner and entered judgment determining that petitioner is permanently partially disabled, but not permanently totally disabled. The judgment awarded her 500 weeks of permanent partial disability payments. Petitioner requested a rehearing on September 11, 1990, and upon denial by the Workers’ Compensation Court, appealed to this Court.

Petitioner was employed by Cyprus in October of 1979 at its Beaverhead Mine near Ennis, Montana, as a “talc sorter.” Her duties with Cyprus entailed picking and sorting talc rocks from a conveyor belt; the rocks weighed anywhere from a few ounces to two hundred pounds.

On February 6, 1981, petitioner left her job because the pain she had been experiencing in her right wrist became too great. She returned to work on May 4,1981, with a brace on her right wrist. The addition of the brace forced petitioner to use her left arm more than usual in the performance of her duties, and petitioner began to notice pain in her left wrist.

Because of increased difficulties in her right arm and pain in her left wrist, petitioner sought medical assistance from several doctors. Petitioner initially consulted Dr. Wilkins, who sent her to Dr. Losee in Ennis, Montana. Dr. Losee ultimately referred her to Dr. Thomas Johnson in Billings, Montana.

In view of the importance of the testimony of Dr. Johnson and other experts, we will summarize the opinions of each of the principal witnesses.

Medical evidence

Petitioner first saw Dr. Johnson, who became her attending physician, in August 1981. Dr. Johnson diagnosed carpal tunnel syndrome in both wrists, eventually performing two surgeries on her right wrist. Despite the surgeries, petitioner continued to experience problems with her right wrist. Dr. Johnson concluded that surgery on her left wrist would be futile in view of the poor results with the other wrist.

In April 1989, petitioner began complaining of neck pain. Dr. Johnson requested nerve-conduction studies which were performed by Dr. Donald H. See of Billings on May 3, 1989. The test results indicated that nerve velocity was normal without any delay. On May 26, 1989, petitioner received an MRI scan which showed no physical abnormalities, such as a pinched nerve, in her neck. Although Dr. Johnson was unable to explain the neck pain, he did not relate the neck pain to petitioner’s carpal tunnel syndrome.

Dr. Johnson stated that petitioner’s strength has remained constant since 1987. Using American Medical Association guidelines, Dr. Johnson determined that petitioner’s left wrist was ten percent impaired. Her two wrist impairments converted to a thirteen per cent “whole man” impairment.

Dr. Johnson reviewed three occupations, pharmacy cashier, self-service gas station cashier, and bartender, submitted by Pete Sesselman, a rehabilitation counselor. Dr. Johnson felt that petitioner would be unable to perform the duties of a bartender because of the lifting involved and the temperatures of the coolers. Dr. Johnson agreed that if the job entailed only working on four or five customers a day without stocking shelves or a cooler, as described by Sesselman, then petitioner could work as a bartender. In Dr. Johnson’s opinion, although petitioner would experience some pain during an eight-hour workday, the pain would not prevent her from doing the tasks required by the other suggested occupations.

At Dr. Johnson’s request, Dr. See, a neuromuscular and musculoskeletal specialist, examined petitioner. After extensive examination and testing, Dr. See completed a physical capacities form used by his office. In addition to some restriction in grasping, pushing-pulling, and fine manipulation, Dr. See found that petitioner should limit frequent lifting to ten pounds and occasional lifting to twenty-five pounds. Dr. See also advised that petitioner refrain from driving more than one to three hours without a break. According to Dr. See, petitioner had the ability to sit, stand, or walk for an eight-hour day and could operate foot controls repetitively.

In Dr. See’s opinion, petitioner was not totally disabled and could perform the jobs recommended by Sesselman.

Vocational and rehabilitation evidence

A rehabilitation counselor employed by Cyprus, Pete Sesselman, who had not interviewed or tested petitioner because she refused to meet with him in 1986, testified that in his opinion petitioner had the skills to perform the occupations of self-service gas station cashier, pharmacy cashier, and bartender. Sesselman reviewed the depositions and reports of medical experts and vocational counselors, as well as the testimony taken at the 1989 hearing. In addition, in June 1989 Sesselman sat in on petitioner’s deposition. Based on this information and several types of vocational criteria, Sesselman submitted to Dr. Johnson and Dr. See descriptions of the three occupations in the Ennis area. Sesselman admitted that he did not consider petitioner’s pain in his assessments because the degree of pain was a medical determination which physicians could weigh when evaluating job descriptions.

In Sesselman’s opinion, petitioner was capable of completing her GED and acquiring vocational training.

Petitioner’s vocational expert, Ian Steel, was of the opinion that she could not perform even entry level, sedentary occupations, because of pain, limited education, and lack of skills. He stated that petitioner could not sit, stand, or use her hands for prolonged periods of time.

A professional vocational evaluator employed by the Butte Sheltered Workshop, Robert McGuire, tested petitioner six hours a day for four days in 1986. In reaching his conclusions, McGuire had analyzed earlier medical reports, but had not reviewed recent depositions of the physicians who had treated petitioner. McGuire testified that “depending on the training, how long, intense the training is ... [petitioner] could get into some sort of training and job.” He felt that petitioner could probably handle the bartender’s job at the Silver Dollar Bar if not overburdened with customers.

The Workers’ Compensation Court concluded that petitioner was capable of performing particular jobs in her labor market and noted that college training after completion of her GED could provide her with the skills to enter a number of additional occupations.

I.

Petitioner claims that she is permanently totally disabled, rather than permanently partially disabled as determined by the Workers’ Compensation Court, because her medical condition prevents her from finding regular employment of any kind in her normal labor market.

This Court will not substitute its judgment for that of the Workers’ Compensation Court concerning the credibility of witnesses or the weight of their testimony. When conflicting evidence is presented, the scope of review is to establish whether substantial evidence supports the lower court’s findings, not whether evidence may support contrary findings. O’Brien Central Feeds (1990), 241 Mont. 267, 271-72, 786 P.2d 1169, 1172. In sum, this Court’s role is not to redetermine all issues presented to the lower court, but rather to examine whether the findings of the lower court are based upon substantial credible evidence.

When critical medical testimony is presented through depositions, this Court can assess the evidence as well as the lower court. Stangler v. Anderson Meyers Drilling Co. (1987), 229 Mont. 251, 255-56, 746 P.2d 99, 101-02; Dunn v. Champion International Corp. (1986), 222 Mont. 142, 147-48, 720 P.2d 1186, 1189.

Here, medical testimony does not conflict. Dr. Johnson was the treating physician of petitioner’s choice, and his involvement in this case spans a time period of over ten years from 1981 to the present time. Dr. See had less involvement with the patient, but his conclusions have not been challenged at any stage in the proceedings below. Both physicians approved, without restriction, the jobs in Ennis, Montana, of pharmacy cashier and cashier at two self-service gas stations. In addition, both physicians accepted the job of daytime bartender with limitations on lifting as described by Sesselman.

The Workers’ Compensation Court had the opportunity to personally observe petitioner and her husband testify on more than one occasion. The court was in the best position to determine petitioner’s credibility. According to our standard of review, the court’s findings based on her testimony are to be accorded great weight.

Petitioner sought to be determined permanently totally disabled pursuant to § 39-71-116(13), MCA (1979). To establish the existence of no reasonable prospect of employment in the normal labor market, a claimant must introduce substantial evidence of (1) what jobs constitute her normal labor market; and (2) a complete inability to perform the duties associated with those jobs because of the work-related injury. Metzger v. Chemetron Corp. (1984), 212 Mont. 351, 355, 687 P.2d 1033, 1035; Spooner v. General Insurance Co. of America (1983), III Workers’ Compensation Court Decisions No. 85.

Petitioner failed to satisfy the test found in Spooner and Metzger. Although petitioner’s physical condition prevents her from returning to the type of work in which she was engaged before she was injured, she is not precluded from a reasonable prospect of employment in her normal labor market.

Petitioner attempts to rebut the uncontroverted medical testimony of her treating physician and Dr. See through testimony of her expert, Robert McGuire, who was not a practicing physician or certified by any medical review board in Montana. We note that McGuire did not take issue with the medical findings. McGuire agreed that petitioner could perform the work of bartender and cashier at self-service gas stations. His main concern was whether petitioner had difficulty standing and operating the cash register with her fingers for extended periods of time, although he conceded that if the job descriptions were accurate she could perform the physical tasks required. McGuire questioned whether petitioner could perform “competitively” over a forty-hour work week.

McGuire admitted that petitioner could be retrained for other jobs and could perform them competitively. McGuire was unable to comment upon Sesselman’s descriptions of specific job tasks since he had not reviewed Sesselman’s reports. He concluded that any disagreement he had with Dr. Johnson, Dr. See, or Mr. Sesselman would have no medical basis.

Finally, Ian Steel’s June 1989 evaluation of petitioner was questionable because Steel had drawn conclusions about petitioner’s physical capacities without reviewing the June 1989 reports of Dr. Johnson and Dr. See. After Steel read the medical depositions and reports, he still refused to modify his conclusion that petitioner had the skills, but not the physical capacity, to perform the jobs. The Workers’ Compensation Court properly discounted Steel’s testimony as unfounded and of little assistance in evaluating petitioner’s claim.

Substantial, credible evidence supports the findings of the court below. We do hereby affirm the judgment of the Workers’ Compensation Court.

CHIEF JUSTICE TURNAGE and JUSTICES GRAY, McDONOUGH and HUNT concur.


author: JUSTICE HARRISON JUSTICE TRIEWEILER,

text:
    GARY O. KITTELSON, Plaintiff and Appellant, v. ARCHIE COCHRANE MOTORS, INC., Defendants and Respondents.
    No. 90-614.
    Submitted on briefs April 18, 1991.
    Decided June 6, 1991.
    248 Mont. 512.
    813 P.2d 424.

      Gregory R Johnson and Jock B. West, West Law Firm, Billings, for plaintiff and appellant.
    Don M. Hayes, Herndon, Hartman, Sweeney & Halvorson, Billings, for defendants.
   JUSTICE HARRISON

delivered the Opinion of the Court.

Gary O. Kittelson appeals from summary judgment granted on September 28,1990, by the District Court of the Thirteenth Judicial District, Yellowstone County, Montana, in favor of Archie Cochrane Motors, Inc. Kittelson claimed that by refusing to disburse severance pay, Archie Cochrane Motors was negligent and had breached the employment contract and the implied covenant of good faith and fair dealing. We affirm.

The issue is whether the District Court erred in determining that no genuine issues of material fact exist and improperly granted summary judgment.

Summary of Facts

Gary O. Kittelson was fired on August 11, 1986, after having been employed by Archie Cochrane Motors (ACM) for seventeen years, working his way up from salesperson in 1968 or 1969 to General Sales Manager in 1979. When he was promoted to General Sales Manager on July 1, 1979, Kittelson signed an employment contract which provided that he receive a salary of $1,700 per month plus two per cent of the company’s operating profits, as well as a year-end bonus of two per cent of the company’s operating profits. The contract did not refer to a definite time period of employment. Kittelson’s base salary increased over the years, and although his profit percentage remained the same, he was making over $50,000 a year as General Sales Manager during the last few years of employment.

When Kittelson began working for ACM, the company was owned by Archie Cochrane, who sold ACM in January 1974 to James and Dave McNally. After McNallys bought the car dealership, an employee handbook was distributed to all ACM employees. The handbook did not state procedures or policies for discharging employees except for a section providing that severance pay would be decided on a case by case basis, but would not be given if the employee had engaged in “improper conduct.”

According to James McNally, the President of ACM, Kittelson’s performance began to decline in late 1984. On January 27, 1986, McNally wrote Kittelson a letter, constituting “a formal and final warning on the problems you and I have been discussing over the past ninety days.” The letter listed Kittelson’s shortcomings in “inventory management” and “people management.”

Kittelson told McNally in June 1986 that he felt his performance had improved. McNally disagreed and demoted Kittelson to truck manager, temporarily taking over as General Sales Manager himself. McNally said that because he and Kittelson were friends, he switched Kittelson’s position rather than terminating his employment, to “jar” him back to “functioning like he used to.” According to McNally, Kittelson’s performance continued to decline, leading to his termination in August 1986.

Following his termination, Kittelson approached Jim McNally about the possibility of obtaining severance pay. McNally instructed Kittelson to write down the reasons that he felt entitled to severance pay, and assured Kittelson that he would present the matter to the Board of Directors. According to Kittelson, McNally also commented that if anyone deserved severance pay, Kittelson did. The Board rejected Kittelson’s request for severance pay.

McNally stated that approximately a year later, Kittelson told him that he needed a letter of recommendation because of difficulty in finding employment. Against his attorney’s advice, McNally wrote the letter and backdated it to the time Kittelson’s employment was terminated. McNally said that he did this because “I was trying to help him out.”

Before Kittelson’s termination, ACM had never given an employee severance pay. Subsequent to Kittelson’s discharge, two ACM employees received severance pay after termination of their employment.

Kittelson filed this action against ACM alleging negligent discharge, negligent infliction of emotional distress, breach of the implied covenant of good faith and fair dealing, and breach of contract for failing to provide severance pay.

I.

Before discussing the issues concerning Kittelson’s termination, we must address the preliminary question of whether the Montana Wrongful Discharge From Employment Act, §§ 39-2-901 to -914, MCA, applies to this case. Since Kittelson was discharged in August 1986, this action is not controlled by the Montana Wrongful Discharge From Employment Act, which took effect July 1,1987.

We now turn to Kittelson’s claim that the District Court erred in granting summary judgment to ACM because genuine issues of material fact existed. Summary judgment is proper when no genuine issues of material fact exist, and the moving party is entitled to judgment as a matter of law. Rule 56(c), M.R.Civ.P.; First Security Bank of Bozeman v. Jones (1990), 243 Mont. 301, 303, 794 P.2d 679, 681. Initially, the moving party must allege the absence of genuine factual issues. To prevail, the nonmoving party must set forth facts demonstrating that a genuine issue exists. O’Bagy v. First Interstate Bank of Missoula (1990), 241 Mont. 44, 46, 785 P.2d 190, 191.

Kittelson argues that the following material facts were at issue: (1) whether Kittelson was entitled to severance according to provisions of the employee handbook; (2) whether ACM terminated Kittelson’s employment “for an act of improper conduct;” (3) whether McNally’s statements to Kittelson in regard to his request for severance pay imposed obligations on ACM; and (4) whether the question of Kittelson’s severance pay was presented to the Board by Jim McNally. Examination of the record reveals that no genuine issues of material fact existed.

In Montana, employment “having no specified term may be terminated at the will of either party on notice to the other ...” Section 39-2-503, MCA. In asserting claims of wrongful discharge, Kittelson relied on the exceptions to “at will” termination of employment listed in Prout v. Sears, Roebuck and Co. (1989), 236 Mont. 152, 157, 772 P.2d 288, 291. Aside from statutory exceptions, Prout lists four exceptions to “at will” termination of employment: (1) violation of public policy; (2) breach of express or implied promise of job security; (3) breach of the implied covenant of good faith and fair dealing; and (4) negligent discharge. As noted in Prout and as our discussion will demonstrate, these exceptions frequently overlap. Prout, 236 Mont. at 157, 772 P.2d at 291.

Negligent Discharge

In a recent decision, we held that an employer is not under a “duty to use reasonable care in decision making, based upon a theory of negligence.” Heltborg v. Modern Machinery (Mont. 1990), [244 Mont. 23,] 795 P.2d 954, 961, 47 St.Rep. 1254, 1264. Therefore, negligent discharge is no longer a recognized exception to termination of employment “at will,” and we need not further review Kittelson’s claim that he was negligently discharged.

Violation of Public Policy

In cases not controlled by the Montana Wrongful Discharge of Employment Act, a plaintiff must show a violation of public policy by his employer in order to establish that he has been wrongfully discharged. Rupnow v. City of Poison (1988), 234 Mont. 66, 70, 761 P.2d 802, 804. Administrative rules promulgated by state agencies are one source of public policy, and an employer’s violation of administrative rules in terminating an employee may constitute wrongful discharge. Nye v. Department of Livestock (1982), 196 Mont. 222, 639 P.2d 498. Termination of an employee for refusing to participate in illegal or immoral activities also violates public policy. Stark v. Circle K Corporation (1988), 230 Mont. 468, 475-76, 751 P.2d 162, 167 (employee discharged for refusing to sign false report).

Kittelson does not claim these types of public policy violations. Instead, he alleges that ACM violated public policy by breaching the implied covenant of good faith and fair dealing. Since the covenant is “implied as a matter of law based on the public policy of this State,” breach of the covenant amounts to a violation of public policy. Stark, 230 Mont. at 475, 751 P.2d at 166. Thus, we must determine whether any genuine issue of material fact exists to demonstrate breach of the implied covenant of good faith and fair dealing.

Implied Covenant of Good Faith and Fair Dealing

Montana has long recognized the implied covenant of good faith and fair dealing in employment contracts. Dare v. Montana Petroleum Marketing Co. (1984), 212 Mont. 274, 687 P.2d 1015; Gates v. Life of Montana Insurance Co. (1982), 196 Mont. 178, 638 P.2d 1063. Whether an implied covenant of good faith and fair dealing exists in an “at will” employment context depends upon objective manifestations by the employer that would give rise to the employee’s reasonable belief that he had job security and would be treated fairly. Barrett v. Asarco, Inc. (Mont. 1990), [245 Mont. 196,] 799 P.2d 1078, 1081, 47 St.Rep. 1980, 1982. Both parties are protected by the reciprocal nature of the covenant, which imposes on the employee an obligation of good faith performance of his job duties. Barrett, 799 P.2d at 1081, 47 St.Rep. at 1082.

Kittelson had worked for ACM for seventeen years and for McNallys since they bought ACM in 1974. In 1979, ACM promoted Kittelson to General Sales Manager, a managerial position which required Kittelson to supervise the other sales managers and salespersons. Kittelson received base salary increases and a percentage of profits over his base salary, as well as a year-end bonus. These facts could give rise to a reasonable belief that Kittelson had job security. See Barrett, 799 P.2d at 1081, 47 St.Rep. at 1982 (receiving regular raises and bonuses in salaried, managerial position for fifteen years were sufficient objective manifestations of existence of covenant).

The implied covenant of good faith and fair dealing requires “ “honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade’ ” by both parties. Story v. City of Bozeman (1990), 242 Mont. 436, 450, 791 P.2d 767, 775 (quoting § 28-1-211, MCA). “[T]o rebut allegations by an employee that the employer breached the covenant, the employer need only show a fair and honest reason for termination.” Barrett, 799 P.2d at 1081, 47 St.Rep. at 1982.

Kittelson’s primary contention is that ACM’s refusal to disburse severance pay was unfair and contrary to the policy stated in ACM’s employee handbook:

“G. Separation for Cause. If you are separated for cause, whether or not you are given severance pay depends upon the reason you were leaving our organization, and each case will be handled individually. Severance pay will not be given, however, for separation because of an act of improper conduct.”

No other portions of the handbook commented on procedures for discharge of employees. Kittelson maintains that he was entitled to severance pay because he was not terminated for “an act of improper conduct,” precluding severance pay according to the handbook.

An employee handbook distributed after the employee was hired is not an employment contract because the handbook constitutes a unilateral statement of company policies and procedures, because its terms are not bargained for, and because no meeting of the minds occurred. Gates, 196 Mont. at 183, 638 P.2d at 1066. Nevertheless, an employer can breach the implied covenant of good faith and fair dealing by failing to follow its own policies as set forth in the employee handbook. Gates, 196 Mont. at 184, 638 P.2d at 1067.

On January 27, 1986, Jim McNally wrote Kittelson a letter comprising “a formal and final warning on the problems you and I have been discussing over the past ninety days.” The letter cataloged “short- comings as to inventory management that we discussed” and “short- comings as to people management that we have discussed,” listing three items in each category, and informed Kittelson that he had to improve his performance by June 1, 1986.

About a year after Kittelson’s employment was terminated, Mc-Nally, at Kittelson’s request, wrote a letter of recommendation, addressed “To Whom It May Concern,” citing Kittelson’s “loyalty and honesty” and “abilities as a Sales Manager.” The letter, backdated to August 22,1986, also stated:

“About two years ago, Gary and I started differing on management methods. As these differences grew it became apparent we would be better served if Gary were to seek employment with a firm whose philosophies were more in line with his thoughts.”

Kittelson maintains that this letter raises a question of fact regarding the reasons for his termination. Kittelson further argues that the letter of recommendation shows that he was not terminated for “an act of improper conduct,” and thus was not precluded from receiving severance pay by the provisions of the employee handbook.

The January 27, 1986, letter demonstrates that Kittelson’s performance was lacking. In June 1986, Kittelson was demoted to truck sales manager and given a final warning. The letter of recommendation, written approximately a year after Kittelson was terminated in August 1986, cannot be characterized as giving Kittelson the reasons for ending his employment. The letter was written at Kittelson’s request for the purpose of helping him obtain other employment.

But, we need not decide whether Kittelson was discharged for “an act of improper conduct.” The language of the employee handbook clearly states that “each case will be handled individually” in deciding whether severance pay is given.

At some time shortly after he received notice of termination, Kittelson approached McNally about receiving severance pay. Mc-Nally told Kittelson that he would bring the matter before the Board of Directors of ACM and suggested to Kittelson that he record the reasons which entitled him to severance pay. Kittelson sent his written reasons for receiving severance pay to the other two Board members. Kittelson contends that a factual dispute remains over whether McNally presented the matter of Kittelson’s severance pay to the Board of Directors as he had described to Kittelson. Kittelson also emphasizes that McNally said to him, “If anyone has severance pay coming, you do.”

Kittelson’s reasoning fails because the employee handbook does not outline the procedures ACM must take to reach a decision regarding severance pay. As stated by the District Court, “[t]he contents of the employment handbook paragraph regarding such pay, the content of the conversation between McNally and Kittelson, and the result of the Board’s determination regarding the severance pay are not at issue.”

McNally stated in his deposition that because ACM had continued to employ Kittelson for some time after his performance declined, he and the Board “felt that we had paid Mr. Kittelson probably a year’s salary that was unearned.” The action of the ACM Board of Directors, however the Board may have arrived at the decision and for whatever reasons, complies with ACM policy to handle each case individually as stated in the employee handbook. McNally’s statement that Kittelson had severance pay coming if anyone did is neither a promise to Kittelson that he would receive severance pay nor a representation to Kittelson that the Board decision would be in Kittelson’s favor. The District Court did not err in concluding that genuine issues of material fact did not exist and that ACM did not breach the implied covenant of good faith and fair dealing by denying severance pay to Kittelson.

We briefly discuss Kittelson’s last two claims. Kittelson does not have a breach of contract claim based on the employee handbook because, as noted in the above discussion, an employee handbook is not an employment contract. Gates, 196 Mont. at 183, 638 P.2d at 1066. Finally, we note that Kittelson’s claim of negligent infliction of emotional distress is without basis.

Affirmed.

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

JUSTICE TRIEWEILER,

specially concurring:

I concur with the result of the majority’s decision, but not with all that is said therein.

The plaintiff has alleged five causes of action. However, all causes are based on plaintiff’s assumption that he was entitled to severance pay which his employer wrongfully refused to give him.

Plaintiff’s assumption that he was entitled to severance pay was based on the following provision found in his employer’s Employee Handbook:

“If you are separated for cause, whether or not you are given severance pay depends upon the reason you are leaving our organization, and each case will be handled individually. Severance pay will not be given, however, for separation because of an act of improper conduct.”

Plaintiff contends that it is reasonable to interpret the above provision as, “the assurance that an employee terminated for cause, other than an act of improper conduct, is entitled to and will receive benefits from Respondent.”

Plaintiff’s proffered interpretation is not reasonable. All that is guaranteed by the Employee Handbook is that each case will be handled individually and that consideration will be given to the circumstances of an employee’s departure. That is what the employer did in this case, and therefore, there was no employment policy violation which could form the basis for any of the plaintiff’s five causes of action.

For this reason, I would affirm the judgment of the District Court, even though I do not concur with all that is said in the majority opinion.

JUSTICE HUNT concurs in the foregoing opinion.


author: JUSTICE WEBER

text:
    JOHN R. PENCE, individually, and JUDY L. PENCE, individually and as Guardian Ad Litem of BRITTNEY PENCEand JARED PENCE, Plaintiffs and Appellants, v. BINGHAM R. FOX and BARBARA A. FOX, d/b/a RAINTREE PRODUCTS; HAROLD STRUCK and BETTY STRUCK, d/b/a ALL SEASON SPAS; KELLER SUPPLY CO., d/b/a KELLER’S LEISURE SUPPLY; and JOHN DOES I - V, Defendants and Respondents.
    No. 90-483.
    Heard April 19, 1991.
    Decided June 11, 1991.
    248 Mont. 521.
    813 P.2d 429.

      Norman L. Newhall, Floyd D. Corder, Alexander, Baucus & Linnell, Great Falls, for plaintiffs and appellants.
    James E. Aiken, Tracy A. Axelberg argued, Jardine, Stephenson, Blewett and Weaver, Great Falls, for Raintree Products.
    Lee LeVeque, Conklin, Nybo, LeVeque & Murphy, Great Falls, for Struck, All Season Spas.
    Keith Strong argued, Dorsey & Whitney, Great Falls, for Keller Supply.
    W. Wm. Leaphart, Leaphart Law Firm, Helena, amicus curiae Montana Trial Lawyers Ass’n.
   JUSTICE WEBER

delivered the Opinion of the Court.

Plaintiffs brought this suit arising from personal injuries sustained by John R. Pence. The District Court for the Eighth Judicial District, Cascade County, granted defendants’ motions, pursuant to Rule 12(b), M.R.Civ.P., to dismiss loss of consortium claims of Brittney and Jared Pence, brought by their mother and guardian, Judy L. Pence. Mrs. Pence, as guardian for the children, appeals. We reverse and remand for further proceedings on the merits.

The issue as restated is: Do minor children have a separate cause of action for loss of parental consortium when a parent is tortiously injured by a third party and rendered a quadriplegic?

The District Court determined that the children did not state a claim upon which the Court could grant relief. The District Court expressly directed immediate entry of judgment against the children in the interest of judicial economy. The action in behalf of the parents is pending the outcome of this appeal so that if the children do have a claim upon which the Court could grant relief, the cases can be tried together. As alleged in plaintiffs’ complaint, the facts are essentially as follows:

John Pence is the husband of plaintiff, Judy Pence, and father of plaintiffs, Brittney and Jared Pence. Defendants Harold Struck and Betty Struck, d/b/a All Seasons Spas, sold and installed a hot tub in the yard of Connie Jensen. The hot tub was manufactured by defendants Bingham R. Fox and Barbara A. Fox, d/b/a Raintree Products. On January 2, 1988, Mr. Pence was using the hot tub. He emerged from the hot tub and trotted a short distance into the yard whereupon, suddenly and without warning, he was rendered immediately unconscious and collapsed forward, striking his face against the frozen ground with such force that his C5 vertebra burst from the impact and he was rendered a helpless quadriplegic. Brittney was four years of age and Jared was three years of age at the time of Mr. Pence’s injury.

A look at the history of loss of consortium claims is helpful in analyzing the issue before this Court. Ancient Roman civil law provided that only a husband could bring loss of consortium claims when the loss was caused by intentional torts. This law carried into the common law of England. Over time the wife was given the right to bring consortium claims in ecclesiastical courts but not courts of law. During the 19th century the law was expanded to give the husband the right to bring consortium claims when the loss was caused by an act of negligence. With the adoption of the Married Women’s Acts, the wife was finally able to bring consortium claims in courts of law for loss caused by intentional acts. It wasn’t until 1950 that the law recognized the wife’s right to bring consortium claims for loss caused by negligent acts.

Montana Federal District Court was the first to recognize the wife’s right to sue for loss of consortium in Montana. Duffy v. Lipsman, 200 F.Supp. 71 (D.Mont. 1961); Dutton v. Hightower (D.Mont. 1963), 214 F.Supp. 298; Hall v. United States (D.Mont. 1967), 266 F.Supp. 671. In 1986, this Court also recognized the wife’s right to sue for loss of consortium claims in Montana in Bain v. Gleason, (1986), 223 Mont. 442, 726 P.2d 1153.

Montana currently allows loss of consortium claims by a husband or wife whose spouse has been killed or injured. Montana also allows loss of consortium claims, pursuant to Montana’s Wrongful Death Statutes, by a parent whose child has been killed, and by a child whose parent has been killed. Dawson v. Hill & Hill Truck Lines (1983) 206 Mont. 325, 671 P.2d 589; Ewalt v. Scott (1983), 206 Mont. 503, 675 P.2d 77. The question is whether this Court ■will now recognize the child’s right to recover when a parent is seriously injured rather than killed.

Prior to 1980 no state recognized such a claim. Since 1980 there has been a growing trend to recognize loss of parental consortium claims. At least ten states now recognize such claims. (Arizona, Alaska, Vermont, Washington, Wisconsin, Iowa, Michigan, Massachusetts, Oklahoma, and Texas.) However, the majority of jurisdictions do not as yet recognize the claim of a child for loss of parental consortium. (Arkansas, California, Colorado, Florida, Georgia, Illinois, Minnesota, New York, North Dakota, Ohio, Oregon, Pennsylvania, Missouri, North Carolina, Tennessee, Maryland, Louisiana, Nevada, New Jersey, Kansas, Indiana, and 3rd Cir.).

Defendants cite Prosser for the rule that the child’s claim for loss of consortium has not been widely recognized. Prosser, Torts (4th ed. 1971), §§ 124, 125 at 886, 894. We note that in the same edition Dean Prosser criticized the failure of the courts to compensate children. Prosser, Torts (4th ed. 1971), § 125 at 896.

The defendants argue that because social and economic factors should be considered before extending to children the right to consortium claims, the legislature is the appropriate body to create such an expansion. The courts have the responsibility to reform common law as justice requires. We agree with and adopt the following conclusions of the Supreme Courts of Iowa and Vermont.

“The contention that recognition of such a cause of action is a question for the legislature ignores the fact that the action for loss of consortium is a creation of the common law, and that the development of the common law is within the proper sphere of our authority and responsibility.” Wietl v. Moes (Iowa, 1981), 311 N.W.2d 259, 266.

“[Sjuch an argument ignores our responsibility to face a difficult legal question and accept judicial responsibility for a needed change in the common law.. .when the conditions and needs of the society have changed, judges must adapt the common law to those new conditions ... It must also be noted that our recognition of a new cause of action for the loss of parental consortium, as in the present case, in no way precludes the legislature from addressing the subject; it is still free to act. The legislature may ratify limit or reject our holding.” Hay v. Medical Center Hosp. (1985), 145 Vt. 533, 496 A.2d 939, 945-46. We reject the defendants’ argument that the loss of parental consortium cause of action should be left solely to the legislature.

In refusing to recognize a child’s right to sue for loss of consortium for injury to a parent, the District Court premised its conclusion upon the assumption that loss of consortium actions in Montana is exclusively statutory rather than common law. The District Court cited Bain, 223 Mont. at 445, 726 P.2d at 1155, which stated:

"... the basis for a consortium claim lies in Montana statutes in which husband and wife contract for the obligation of mutual respect, fidelity, and support. Section 40-2-101, MCA. We further agree with the court in Button, supra, that consortium includes a legal right to the aid, protection, affection and society of the other spouse.”

See also Gunning v. General Motors Corp. (1989), 239 Mont. 104, 107, 779 P.2d 64, 66. Section 40-2-101, MCA, reads:

“Husband and wife contract toward each other obligations of mutual respect, fidelity, and support.”

Section 40-2-101, MCA, does not “create” the cause of action. It merely defines the obligations which inhere in the marriage relationship and upon which the common law action is based. The inaccuracy of the defendants’ conclusion that the legislature created the claim through § 40-2-101, MCA, is proven by the fact that the statute has been on the books since 1895, but it was not until 1986 that this Court recognized the claim. The statute merely codifies the policy behind the common law by recognizing that spouses contract with one another for mutual obligations.

In the same way that § 40-2-101, MCA, defines the marriage obligations upon which the common law action of loss of spousal consortium is based, § 40-6-211, MCA, defines the obligation of support which inheres in the parent-child relationship. Section 40-6-211, MCA, provides:

“The parent or parents entitled to custody of a child must give him support and education suitable to his circumstances.”

The consortium rights of spouses, and parents in the case of loss resulting from a child’s injury or death, and children in the case of a deceased parent, have arisen not only by statute but by court decisions extending the common law that once gave only husbands that right. In 1929 this Court held that “in addition to support, a wife is entitled to the aid, protection, affection, and society of her husband.” Wallace v. Wallace (1929), 85 Mont. 492, 516, 279 P. 374, 382. The rationale behind Wallace, Duffy, Dutton, and Hall, supra, apply equally well to parent- child relationships. Like the rights of a wife, the rights of the child to support, aid, protection, affection and society of the parent derive from both statute and case law. Sections 40-6-211, 40-6-214, 41-3-102(3)(c); In re Krug (1988), 231 Mont. 78, 751 P.2d 171. In addition, the child has the right to parental discipline, guidance and training. Colorado’s Federal District Court came to the following conclusions:

“While the term loss of consortium’ has been attached to the children’s claim, the broader term, loss of society and companionship,’ is equally appropriate. Use of the latter term avoids the narrower construction connoting this right derives primarily from the sexual relationship incident to marriage. Indeed, loss of consortium is ‘a useful though ambiguous term having a rather old- fashioned ring today.’ H. Clark, Domestic Relations § 10.1 (1968). While companionship may include sexual relations [See, e.g. Prosser, Torts § 125 at 889 (4th Ed. 1971) as cited in CJI-Civ.2d 6:7 (1980)], courts have continued to regard loss of consortium to embrace all of those values — tangible and intangible — inherent in the family relationship. In his treatise, Clark (supra.) asserts that the term loss of consortium is equally appropriate in reference to the parent-child relationship to summarize ‘the multitude of rights and duties binding parents to their children and vice versa.’ Clark at § 10.1 (1968).

“Thus, in the context of the parent-child relationship, the term consortium encompasses a complex of rights — care, comfort, guidance, society, companionship — which is imbued from the earnest stages of bonding infant to parent. Indeed, the family unit has been recognized by the Supreme Court to bear constitutionally protected aspects. (Citations omitted).”

Reighley v. International Playtex, Inc. (D.Colo. 1985), 604 F.Supp. 1078, 1081.

We also cite with approval the Alaska Supreme Court which stated:

“When a parent is seriously injured, his or her child suffers a loss of enjoyment, care, guidance, love and protection, and is also deprived of a role model. Even courts that deny the parental consortium cause of action have acknowledged the reality of such emotional and psychological injury to the child, and the Alaska legislature has implicitly done so in allowing recovery by children for loss of consortium under Alaska’s wrongful death statute.
“Precluding minor children from maintaining a cause of action for loss of parental consortium arising from their parent’s injury would, in our view, be inconsistent with the legislature’s authorization of such recovery when the parent dies, and with our prior holding in Fruit that a husband or wife may recover damages for loss of consortium when an injured spouse survives. The claim for loss of parental consortium presented in this case is not sufficiently distinguishable from either spousal consortium claims in injury cases or children’s consortium claims in death cases to warrant nonrecognition. (Citations omitted).”

Hibpshman v. Prudhoe Bay Supply, Inc. (Alaska 1987), 734 P.2d 991, 994.

We conclude that under the Montana case law and statutes as developed, minor children are entitled to the support, aid, protection, affection, society, discipline, guidance and training of their parent. This policy underlies the “best interests of the child test” in custody determinations under § 40-4-212, MCA, and the right of the child to seek damages under Montana’s Wrongful Death Statute. See §§ 27-1-512 and 513, MCA, and Ewalt, 206 Mont. 503, 675 P.2d 77. Therefore we hold that minor children who have been deprived of these rights have a separate cause of action for loss of parental consortium when a parent is tortiously injured by a third party and rendered a quadriplegic.

However, we caution that any one element of damages for the injury may be recovered only once. Damages for support and education under § 40-6-211, MCA, that go to the benefit of the child maybe recovered by the injured parent, a spouse or by the child. While these economic losses may be recovered by the injured parent, a spouse or the child, the damages for loss of parental aid, protection, affection, society, discipline, guidance and training are recoverable only by the child. Therefore possible duplication of damage awards must be considered by the trial court in order to prevent double recovery for any element of damages. We approve of the procedure used in the present case where the consortium claims brought in behalf of the children are combined with the consortium claims of the injured parent and the spouse. Such procedure furnishes the opportunity to prevent double recovery for economic losses such as support and education of the children.

We reverse and remand to the District Court for further proceedings on the merits.

CHIEF JUSTICE TURNAGE and JUSTICES HARRISON, HUNT, TRIEWEILER, McDONOUGH and GRAY concur.


author: JUSTICE TRIEWEILER

text:
    STATE OF MONTANA, Plaintiff and Appellant, v. GERRY VAN ROBINSON, Defendant and Respondent.
    No. 90-572.
    Submitted May 2, 1991.
    Decided June 11, 1991.
    248 Mont. 528.
    813 P.2d 967.
    Marc Racicot, Atty. Gen., Jennifer Anders argued, Asst. Atty. Gen., Helena, John S. Forsythe, argued, County Atty., Forsyth, for plaintiff and appellant.
    Marcey Femling Schwarz argued, Schwarz Law Firm, Billings, for defendant and respondent.
   JUSTICE TRIEWEILER

delivered the opinion of the Court.

On February 28, 1990, the State of Montana filed an Information charging the defendant, Gerry Van Robinson, with three counts of sexual assault in violation of § 45-5-502, MCA, and one count of sexual intercourse without consent in violation of § 45-5-503, MCA. The alleged victim of the acts charged was the defendant’s adopted daughter, S. L. R. On July 9, 1990, the defendant entered into a plea bargain agreement with the County Attorney for Rosebud County, and pursuant to that agreement, pled guilty to sexual intercourse without consent and to two counts of sexual assault. The defendant was sentenced to 20 years in the Montana State Prison for each conviction of sexual assault, and 40 years in the State Prison for his conviction of sexual intercourse without consent. The sentences were to run concurrently and all but the first 60 days of his sentence were suspended. The District Judge attached a number of conditions to the defendant’s suspended sentence.

The State has appealed from the sentence imposed on the defendant, and raises the following issue on appeal:

Did the District Court err when it applied the exception found in § 46-18-222(5), MCA, to the mandatory two-year sentence for sexual intercourse without consent?

We affirm the District Court.

FACTUAL BACKGROUND

The incidents which form the bases for the charges against the defendant occurred between June 1989 and December 1989. During that period he was alleged to have assaulted his adopted daughter, who was less than 14 years of age, by fondling her breasts and genitalia. He was also accused of digital intercourse with the same minor on at least one occasion. He admitted committing these acts and other similar acts over a longer period of time.

On September 6 and 7, 1990, a lengthy sentencing hearing was conducted by the District Cotut. As a result of that hearing, the District Judge made findings of fact which have not been challenged by the State on appeal. The following is a summary of those facts found to be true by the District Court:

The defendant is genuinely remorseful for his conduct and is willing to do whatever is necessary to assist the victim and her family. He has moved out of the family home, ceased communicating with the victim, and has enrolled in a certified sex offender treatment program.

Based upon the nature of the defendant’s sexual offenses and the strong external controls placed on the defendant through the intensive supervision program that he is currently under, the District Court found that he was unlikely to reoffend during treatment and that outpatient treatment would have the greatest likelihood of preventing him from reoffending in the future.

The District Court found that neither the victim nor the victim’s mother wanted the defendant in prison, and that his imprisonment could be harmful to the victim’s chances for successful therapy and the family’s economic survival. Sending the defendant to prison would result in the immediate cessation of his financial contributions to the victim and her family, necessitating a loss of home and probable bankruptcy. The victim and her family would have to go on welfare for which the State of Montana would have to pay. In addition, the District Court found that without the defendant’s contributions to the cost of counseling for the victim, the State would have to pay for the victim’s counseling, the family’s counseling, and the defendant’s sex offender treatment program.

Finally, the District Court found that while it would cost the State approximately $18,000 per year to keep the defendant in prison, the prison is currently overcrowded with more inmates than it has beds. That overcrowded condition would make it difficult for the prison to provide the kind of rehabilitative treatment that the defendant needs.

While all but 60 days of the defendant’s prison term were suspended, the District Court did attach a number of conditions to the suspension of that sentence. Some of those conditions are as follows:

1. The defendant was placed under the supervision of the Bureau of Adult Probation and Parole and subjected to their rules and regulations.
2. The defendant was required to enroll in and successfully complete a sex offender treatment program, including follow-up treatment for the entire 40 year term of his sentence.
3. The defendant was required to register with local law enforcement officials as a convicted sex offender pursuant to § 46-18-254, MCA.
4. The defendant was prohibited from working anywhere that children are present, and was ordered to avoid contact with his family, unless it was first approved by his therapist and parole officer.
5. The defendant was required to pay for all counseling and therapy expenses he incurs, as well as the expenses for therapy and counseling of the victim and her family.
6. The defendant was ordered to obtain and maintain satisfactory employment and to provide regular support to his family.
7. The defendant was ordered to abstain from usage of any mood-altering substances, and required to submit to urinalysis periodically to assure his compliance with this condition.

The plea bargain agreement, which was signed by the defendant and the Rosebud County Attorney, and pursuant to which defendant entered his guilty plea, contains the following provision:

“In exchange for the entry of pleas of guilty to the charges alleged, the State agrees to make no recommendation as to the sentencing on this matter.”

In spite of that provision, the State has appealed that portion of the District Court’s sentence which was imposed for violation of § 45-5-503, MCA. That statute provides, in relevant part, as follows:

“(1) A person who knowingly has sexual intercourse without consent with a person of the opposite sex commits the offense of sexual intercourse without consent....
í¡í sfc >}:
“(3)(a) If the victim is less than 16 years old and the offender is 3 or more years older than the victim or if the offender inflicts bodily injury upon anyone in the course of committing sexual intercourse without consent, he shall be imprisoned in the state prison for any term of not less than 2 years or more than 40 years and may be fined not more than $50,000, except as provided in 46-18-222.”

It is undisputed that the defendant’s victim was under the age of 16 and that he was more than three years older than she. It is also ■undisputed that the only portion of § 46-18-222, MCA, which is arguably applicable as an exception to the two-year minimum sentence requirement found in § 45-5-503, MCA, is subparagraph (5). That statute provides as follows:

“All mandatory minimum sentences prescribed by the laws of this state and the restrictions on deferred imposition and suspended execution of sentence prescribed by subsections (4), (5), and (6) of 46-18-201, 46-18-221(3), 46-18-224, and 46-18-502(3) ado not apply if:
“(5) where applicable, no serious bodily injury was inflicted on the victim unless a weapon was used in the commission of the offense.”

The State argues that the introductory language “where applicable” has been inserted into § 46-18-222(5), MCA, because the legislature intended that that subsection apply to some offenses and not others. The State contends, and we agree, that if this Court were to apply subsection (5) to any crime where “no serious bodily injury occurred,” the language “where applicable” would be rendered superfluous and without meaning.

The State acknowledges that the 1977 legislative history for this statute is devoid of any discussion regarding the crimes that might be exempted from minimum sentences. However, the State suggests that this exception should be limited to those crimes such as robbery (§ 45-5-401, MCA), and aggravated assault (§ 45-5-202, MCA), where the threat of or infliction of bodily injury are essential elements of the crime. Since the threat of or infliction of bodily injury are not essential components of the offense of sexual intercourse without consent, the appellant concludes that it is not in the category of crimes which are subject to the exception found in § 46-18-222(5), MCA.

One problem with the appellant’s argument is that the threat of or infliction of bodily harm is not always an element of robbery. Section 45-5-401, MCA, provides that:

“(1) A person commits the offense of robbery if in the course of committing a theft he:
“(a) inflicts bodily injury upon another;
“(b) threatens to inflict bodily injury upon any person or purposely or knowingly puts any person in fear of immediate bodily injury; or
“(c) commits or threatens immediately to commit any felony other than theft.

(Emphasis added.)

Conversely, the threat of or infliction of bodily harm may be an element of the crime of sexual intercourse without consent. Section 45-5-501, MCA, provides the following definition of “without consent”:

“As used in 45-5-503 and 45-5-505, the term “without consent” means:

“(1) the victim is compelled to submit by force or by threat of imminent death, bodily injury, or kidnapping to be inflicted on anyone; or

“(2)7the victim is incapable of consent because he is:

“(a) mentally defective or incapacitated;
“(b) physically helpless; or “(c) less than 16 years old.”

It is clear that the crimes of robbery and sexual intercourse without consent may or may not involve the threat of or actual infliction of bodily harm.

The State also points out that § 45-5-503(3)(a), MCA, increases the maximum penalty in those cases where the victim is under 16 years of age, or where bodily injury is inflicted on the victim. The State argues that it would be inconsistent for the legislature to increase the penalty under one section of the code where “bodily injury occurs,” and then to waive the minimum prison term in a subsequent section where no “serious bodily injury was inflicted on the victim.”

The language of § 46-18-222(5), MCA, is of little assistance to this Court in our effort to determine the legislature’s intent. It is obvious that the exception does not apply to crimes that have no victim, nor does it apply to crimes where violence, or the threat of violence, are never an element of the crime. However, beyond that general conclusion, nothing can be said with certainty about the intended scope of the statute’s application.

We conclude that our decision in this case is controlled by our recent decision in State v. Goodwin, [249 Mont. 1,] 813 P.2d 953, 48 St.Rep. 539 (Mont. 1991). In that case, while discussing the same issue, we concluded:

‘We agree that in reconciling these two provisions there is at least an ambiguity regarding the meaning of ‘where applicable’ in those cases where the victim is under the age of 16 (therefore the threat of or infliction of harm is not an element of the crime), or where some injury less than ‘serious bodily injury5 has been inflicted on the victim. However, if the legislature had intended this exception to minimum sentences to be limited to certain crimes, it had it within its power to clearly state the crimes to which the section was applicable. By doing so, the legislature could have made its intention clear. It did not do so, and under these circumstances our duty is clear. We must interpret the criminal statute in a way most favorable to the private citizen against whom it is sought to be enforced, and against the state which authored it.
“The District Court and this Court are compelled to follow the classic rule of construction of criminal statutes which is succinctly set forth as follows:
“ ‘Penal statutes are construed with such strictness as to safeguard the rights of the defendant. If the statute contains patent ambiguity and admits of two reasonable and contradictory constructions, that which operates in favor of a party accused -under its provisions is to be preferred. Moreover, penal statutes are not to be extended in their operation to persons, things, or acts not within their descriptive terms, or the fair and clear import of the language used. Nothing can be read into penal statutes by implication.’
“73 Am.Jur. 2d Statutes § 295.”

Goodwin, [249 Mont. 1,] 813 P.2d 953, 966, 48 St.Rep. 539 (Mont. 1991).

In summary, we conclude as we did in Goodwin, that since the threat of or infliction of bodily harm may, depending on the circumstances, be an element of the offense of sexual intercourse -without consent, it is reasonable to conclude that the exception to the minimum sentence found at § 46-18-222(5), MCA, when no “serious bodily injury was inflicted on the victim” is applicable to that offense. Any ambiguity regarding the applicability of this exception must be resolved in favor of the defendant.

We affirm the sentence of the District Court.

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


text:
    BYRON C. KELLER, Plaintiff, Respondent and Cross-Appellant, v. THOMAS A. DOOLING, MARGARET L. DOOLING, and ANN DOOLING, Defendants, Appellants and Cross-Respondents.
    No. 90-508.
    Submitted on briefs May 16, 1991.
    Decided June 11, 1991.
    Rehearing Denied Aug. 1, 1991.
    248 Mont. 535.
    813 P.2d 437.

      Vincent Kozakiewicz, Dillon, William A. Brolin, Anaconda, for defendants, appellants and cross-respondents.
    W. Cecil Jones, Dillon, for plaintiff, respondent and cross-appellant.
   JUSTICE WEBER

delivered the Opinion of the Court.

The plaintiff, Byron C. Keller, initiated this suit to recover damages for breach of contract, fraud, and breach of the implied covenant of good faith and fair dealing. Defendants counterclaimed to recover damages for breach of contract, fraud, and breach of the implied covenant of good faith and fair dealing. The District Court for the Fifth Judicial District, Beaverhead County, dismissed the fraud claims under statute of limitations defenses. Following trial, the District Court entered judgment for the plaintiff for $26,395.37 for defendant’s breach of contract, $10,000.00 for defendant’s breach of the covenant of good faith and fair dealing, and $5,000.00 for punitive damages for the breach of the covenant of good faith and fair dealing. The defendants’ counterclaims were dismissed on the merits. Defendants appeal and plaintiff cross-appeals. We affirm in part and reverse in part.

The issues are:

(1) Was the contract between the Doolings and the Kellers correctly interpreted by the District Court and the jury?
(2) Was the Doolings’ obligation under the contract extinguished by their offer of performance?
(3) Was evidence of the provisions of an amended contract for deed barred by the parol evidence rule?
(4) Did the District Court err in awarding punitive damages?
(5) Did the District Court err in awarding usurious rates of interest to Mr. Keller?
(6) Did the District Court err in allowing the Doolings to amend their answer at trial to raise a statute of limitations defense?

The plaintiff, Byron C. Keller, and his ex-wife, Karen R. Keller, entered into a contract with Thomas Dooling and his ex-wife, Margaret L. Dooling dated January 13, 1976. Kellers agreed to sell to Doolings a tract of land located in Beaverhead County, Montana, consisting of approximately 96 acres. The parties agreed to have the property surveyed and to determine a final price of $1,000.00 per acre for each acre described in the survey.

The 1976 contract called for the Doolings to make an initial down payment of $27,840.00, annual payments in 1977,1978, and 1979 in the amount of $12,684.12 and a balloon payment in 1980 of the remaining balance. The contract interest rate was 7.5%. Doolings made the initial down payment and the annual payments in 1977, 1978, and 1979.

Prior to the 1980 balloon payment, the property was surveyed and determined to contain 106 acres. The purchase price was thus $106,000.00. The parties negotiated a rescheduling of the balloon payment over a period of four years. The exact nature of the rescheduling was disputed by the parties at trial. The parties agreed that the payments remained at $12,684.12. Mr. Keller contended that in exchange for extending the payment schedule he was to receive interest on the last four annual payments at 13%. Mr. Keller had his attorney draft a 1980 amendment to the 1976 contract incorporating the surveyed legal description, the extension of the payments by four years, and changing the interest rate to 13%.

The 1980 amendment to the 1976 contract was never executed. However, Mr. Dooling drafted an amortization schedule showing the interest payment at 13%, and wrote several letters indicating the amount he owed in 1984 and the interest rate at 13%. The final payment was not made by Mr. Dooling and this litigation ensued.

I.

Was the contract between the Doolings and the Kellers correctly interpreted by the District Court and the jury?

The subject property under the contract for deed between the parties was part of a larger tract of land owned by the Kellers. The Kellers were making payments under a mortgage to Connecticut Mutual Life Insurance Company and a contract for deed to Clark and Geraldine Harshbarger on the larger tract of land. Under the KellerDooling contract for deed, the Doolings would pay off their obligation to the Kellers several years before the Kellers would pay off their obligations on the underlying mortgage and Harshbarger contract.

The Doolings assert that the intent under the contract for deed was for the Kellers to provide the Doolings with a warranty deed free of the underlying mortgage and Harshbarger contract obligations at the time that the Doolings made their final payment on the contract for deed. When Kellers failed to produce such a warranty deed, Doolings refused to make the final payment and Kellers sent notices of default.

The relevant language in the Keller-Dooling contract provides:

“(7) The Kellers further agree that prior to the delivery to the Doolings of the warranty deed, they will purchase and deliver to the Doolings an owner’s title insurance policy insuring the merchantable title of the Kellers to the property excepting, however, mortgages of record of which the Doolings have been advised and the usual exceptions with respect to easements of public record.
“(8) ... The Doolings have further been advised of the existence of other interests in this property including a mortgage to Connecticut Mutual Life Insurance Company and an equitable interest in favor of the said Clark and Geraldine Harshbarger. It is understood that the sellers Keller (sic) are primarily hable and will timely discharge these obligations. Should they fail, however, to make the payments to either Connecticut Mutual Life Insurance Company or the Harshbargers, then and in that event the Doolings may at their option make said payments which would constitute a credit to them of the monies owing on this Contract.
“The hen of the mortgage to Connecticut Mutual Life Insurance Company and the equitable interest of the Harshbargers shall not constitute a defect of title. (Emphasis supplied.)”

It is clear from this language that the Keller-Dooling contract is subject to the interest of the underlying mortgage and Harshbarger contract. When the language of a contract is clear and unambiguous, the contract does not require the application of the rules of construction and it is the court’s duty to enforce the contract as made by the parties. Morning Star Ent., Inc. v. R. H. Grover, Inc. (Mont. 1991), [247 Mont. 105,] 805 P.2d 553, 556, 48 St.Rep. 112, 113. Under the above quoted language Kellers did not have an obligation to produce a warranty deed free of the underlying obligations and Doolings breached the contract by not making the final annual payment. We hold that the contract between the Doolings and the Kellers was correctly interpreted by the District Court and the jury.

II.

Was the Doolings’ obligation under the contract extinguished by their offer of performance?

The Doolings contend that they made a tender of performance in 1984 and that no interest should accrue beyond the date of tender of performance. Nothing in the record establishes that a tender of performance was ever made. On June 13,1984, Mr. Dooling stated in a letter to the Kellers’ attorney:

“Assuming that the final payment is made on June 29, a Friday, which is the 178th day of the year, I owe Byron the sum of $12,429.14 plus 178 days’ interest at 13% per year, in the amount of $787.97. (Emphasis supplied.)”

On the same day Mr. Dooling wrote a letter to Mr. Keller which stated:

“This letter is formal notice of my intention to prepay the balance of my Contract for Deed with you, on or before July 1, 1984. I had notified you orally of my plans in January, when I made my last payment. According to the amortization schedule which I provided to you some years ago, the principal balance now due on my contract with you is $12,429.14. Assuming that I make the payment on the 29th of June, I will owe you interest for 178 days at 13%, or $787.97. The total payment I expect to make, then, will be $13,217.11... (Emphasis supplied.)”

The Doolings citeLehrkind v. McDonnell (1915), 51 Mont. 343,153 R 1012, for the proposition that the interest stopped accruing at the time he made his tender of performance. That case stated:

“An unconditional offer in good faith to perform, by the party upon whom the obligation rest, coupled with the ability to perform, if rejected by the other party, is equivalent to full performance and extinguishes the obligations as to the party making the offer.”

The Doolings also cite § 28-1-1202(1), MCA, which states in relevant part:

“An offer in writing to pay a particular sum of money...is, if not accepted, equivalent to the actual production and tender of the money...”

Mr. Dooling’s statements were statements of what he might do in the future. These statements do not rise to the level required to make an unconditional tender of performance that triggers the Lehrkind rule or constitute an offer to pay under § 28-1-1202(1), MCA.

We hold that the Doolings failed to prove that they made an unconditional tender of performance or offer to pay and therefore their obligation under the contract was not extinguished.

III.

Was evidence of the provisions of an amended contract for deed barred by the parol evidence rule?

The critical documents establishing the amended contract for deed, the interest rate in that amended contract for deed and the payment schedule of that amended contract for deed were admitted without objection from the Doolings. This Court will not consider for the first time on appeal an issue which was not raised in the District Court. In Re the Marriage of Merriman (Mont. 1991), [247 Mont. 491,] 807 P.2d 1351, 1354, 48 St.Rep. 275, 276.

IV.

Did the District Court err in awarding punitive damages?

Applying the law as set forth in Nicholson v. United Pac. Ins. (1985), 219 Mont. 32, 710 P.2d 1342, the District Court awarded $5,000.00 in punitive damages for the tortious breach of the implied covenant of good faith and fair dealing. Subsequent to the District Court’s award this Court held in Story v. City of Bozeman (Mont. 1990), 242 Mont. 436, 450-51, 791 P.2d 767, 776, that absent a special relationship, tort damages are not available for breach of the implied covenant of good faith and fair dealing in common contract actions. Also see Mann Farms, Inc. v. Traders State Bank (Mont. 1990), [245 Mont. 234,] 801 P.2d 73, 76. Under Story and Mann Farms it was improper for the District Court to award punitive damages for breach of the implied covenant of good faith and fair dealing. We reverse and vacate that portion of the District Court’s award ($5,000.00) that represents punitive damages.

V.

Did the District Court err in awarding usurious rates of interest to Mr. Keller?

The Doohngs argue that the $26,395.37 awarded by the jury to Mr. Keller by necessity included a usurious 13% rate of compounded interest. There is evidence in the record to support the conclusion that Doolings agreed to pay 13% interest in return for the Kellers’ waiver of the balloon payment requirement. The question of compounding interest on the taxes and payments was not objected to by the Doohngs at the time the relevant documents were introduced at trial. The Doolings had the opportunity to argue their position to the jury regarding the compounding of interest and to the nature of the agreements. The Doolings did not ask the Court to have the jury break out how they computed their damage award in the verdict form. Mr. Dooling cannot now ask this Court to speculate how the jury broke out the damage award and what it relied on. We hold that Doolings did not establish that the District Court erred in awarding usurious rates of interest to Mr. Keller.

VI.

Did the District Court err in allowing the Doolings to amend their answer at trial to raise a statute of limitations defense to Mr. Keller’s fraud claim?

At the end of trial, the District Court allowed the Doolings to amend their answer to raise a statute of limitations defense to Mr. Keller’s fraud claim. The District Court then dismissed the claim. On cross-appeal Mr. Keller seeks to have this Court order the District Court to reinstate his fraud claim.

Mr. Keller argues that under Rule 8(c), M.R.Civ.P., the Doolings had waived their statute of limitations defense. Rule 8(c) provides that affirmative defenses shall be set forth in the pleadings. However Rule 8(c) does not preclude the District Court from allowing the parties to amend the pleadings to conform to the evidence under Rule 15(b), M.R.Civ.P. See Butte Teachers’ Union v. Bd. of Trustees (1982), 201 Mont. 482, 487, 655 P.2d 146, 149. We hold that the District Court did not err in allowing the Doolings to amend their answer at trial to raise a statute of limitations defense to Keller’s fraud claim.

We reduce the judgment $5,000.00 for punitive damages, and otherwise affirm the District Court.

CHIEF JUSTICE TURNAGE and JUSTICES HUNT, McDONOUGH and GRAY concur.