author: MR. JUSTICE GULBRANDSON MR. JUSTICE SHEEHY, MR. JUSTICE MORRISON,

text:
    WILLIAM R. McGREGOR and Linda Keener McGregor, d/b/a McGregor Service, Plaintiffs and Respondents, v. HOPE CUSHMAN MOMMER and the Estate of Paul Cushman, Defendants and Appellants.
    No. 84-78.
    Submitted March 28, 1985.
    Decided Feb. 6, 1986.
    Rehearing Denied March 18, 1986.
    714 P.2d 536.

      Johnson, Skakles & Kebe, Greg J. Skakles argued, Anaconda, for defendants and appellants.
    Poore, Roth, & Robinson, Donald Robinson argued, Butte, for plaintiffs and respondents.
   MR. JUSTICE GULBRANDSON

delivered the Opinion of the Court.

The defendants appeal following a four day jury trial completed on October 10, 1983, in the District Court of the Fifth Judicial District, Madison County, Montana. They appeal from the District Court’s denial of their motions for directed verdict; from the judgment entered in accordance with the jury verdict; and from the District Court’s order awarding attorney fees to plaintiffs. We reverse the judgment and remand for a new trial.

Hope Cushman (now Hope Cushman Mommer) and Paul Cushman (now deceased), defendants and appellants, (hereinafter referred to as Cushmans), bought a gas station in Twin Bridges, Montana in 1955. In 1970 they expanded by adding a wholesale operation to serve ranches in the area. This expansion required building a loading dock and warehouse; installing four 10,000 gallon storage tanks and tanks for customers; and buying a bulk truck to make deliveries. Paul Cushman also began having health problems in 1970. In September 1975 he suffered a heart attack and the doctor advised him to sell the business because of his limited life expectancy. They listed the property with a number of realtors in 1976, asking $158,000.

Bill McGregor was looking for employment at the time he heard the Cushmans’ station was for sale. He contacted Paul Cushman and set up a meeting for April 1977. McGregor was interested in the station both because of the location (his wife taught in the Twin Bridges school system) and because he anticipated the family farm where he worked would be sold when his father retired.

At their first meeting McGregor received a prospectus Mrs. Cushman had prepared in 1976 for the various realtors. She had prepared the prospectus in order to give potential buyers an understanding of the business. It contained the reason the property was offered for sale, a description of the property and inventory and a list of customers, as well as the following statements:

“I know of no ranch that would give receipts like this business.
Net
Gross for 1974 was: $35,410.71
Net
Gross for 1975 was: $42,803.15.
Mrs. Cushman changed the word “Gross” to “Net” for both 1974 and 1975 only on the copy of the prospectus given to McGregor and pointed out to McGregor that these changes were correct. The net profit of the business had averaged $9,368 for 1974 and 1975. The net for 1976 was $6,183 and there was a loss of $9,996 in the first five months of 1977. The average net profit for 1972-76 was less than $3,300 per year. The prospectus listed the gross profit (gross income less cost of goods sold) for 1974 and 1975.

McGregor asked the Cushmans to provide more information to support the figures in the prospectus. Mrs. Cushman responded saying she would get the figures from her son for a later meeting. At the third meeting she gave McGregor documents each entitled “Financial Statement” for 1974 and 1975 that concluded with the same figures as in the prospectus and showed double underlines under those figures. These documents did not include operating expenses. Bill Cushman, the Cushmans’son, attended the fourth meeting between Cushmans and McGregor in late April 1977. He had a degree in accounting and testified that he thought McGregor was not sophisticated in accounting and in dealing with financial statements; that he did not volunteer information about the business although he was available for questions; that the full financial statements and other documents were lying on the table at that meeting; and that the prospectus was misleading. McGregor’s background was limited to two basic accounting courses taken during his first year of college. He testified that he understood the figures on the prospectus to represent net income.

The prospectus also included the following statement about one of the customers:

. . the one at Nevada City is exceptionally good for summer time tourist trade. Also this station is the only one to serve Va. city at this time during the winter.”

This station took its last delivery on April 20, 1977 and closed on April 30, 1977. Cushmans’ employee attended a going away party for the station owner on May 1, 1977. Until the closure, this station had taken deliveries about every 6-7 days and represented 35% of Cushmans’ total receipts. They did not inform McGregor that this customer would no longer be available.

The following statement was also in the prospectus:

“To increase my gallonage, I also run my cash wholesale customers thru the station and still make a larger profit (on rent paid by Phillips paid on station gallonage each month.) Total: per gallon doing it this way is 6.18 cents profit.”

This profit is termed “A-G rental payment.” The Cushmans had done this while running the business. However, this was not permitted by the Phillips Company and Phillips would have terminated the contract if they had known of the practice.

The Cushmans operated the station as “consignees” rather than “jobbers” and recommended McGregor do the same. A consignee required less operating capital and Phillips carried the agricultural wholesale customer accounts on a nine-month interest free credit basis rather than requiring the station operator to carry these accounts. A jobber had a slightly higher profit margin on sales than a consignee and paid for the product as it was purchased from Phillips rather than as it was sold to station customers. McGregor met with a Phillips representative twice prior to entering the purchase agreement. Neither Phillips nor the Cushmans told McGregor that he would not be given a consignee contract and would have to take a jobber contract if he wanted to be affiliated with Phillips.

McGregor paid $2,000 as earnest money towards purchase of the Cushmans’ business. By this time he had received an appraisal of $65,300 for the land, buildings, storage tanks and dock. This did not include the truck, wrecker, hand tools or inventory. At an inventory taken with McGregor present, the total value assigned to the merchandise was $27,200. The Cushmans represented the inventory as saleable. McGregor determined that about $2,000 worth was out of date and unsaleable when, after a couple of years, the tires and other parts did not sell.

On June 7, 1977, McGregor and Cushmans entered into a contract where McGregor would pay $120,000 for the business excluding inventory. He made a down payment of $34,800 and made the required monthly payments of $814.51 through November 1981. Mc-Gregor’s total payments to the Cushmans were $78,323.84. He purchased the inventory separately for $27,000.

McGregor operated the business so that the gross gallonage sold greatly increased each year. By 1980 his gross sales were over five times Cushmans’ best year. However, he had difficulty maintaining an adequate cash flow throughout this period. The two main reasons for his cash flow problems were the debt service to Cushmans and the extra capital requirements needed for operation as a jobber rather than a consignee.

McGregor discovered that the figures in the prospectus were gross income rather than net income after speaking with a bank officer in late summer or early fall of 1981. The officer told him there was “no future” in the business so he went back to the information provided by the Cushmans to analyze and compare with his figures. At that time he realized the prospectus showed gross profit. He and a Phillips representative had discussions with the Cushmans in an effort to keep the business going but they did not reach an agreement. McGregor, during this time, traded in the truck used to make bulk deliveries and purchased a newer model. He later sold that truck and closed the wholesale operation. In addition he leased the service station out to another person.

McGregors filed their complaint against the Cushmans on June 22, 1982 seeking rescission of the purchase and sale contract for the retail and wholesale gasoline business and a return of monies paid pursuant to that agreement. The grounds for relief alleged were fraud through misrepresentation, undue influence, and failure of consideration. The alternative prayer for relief requested an order that Hope Cushman execute a warranty deed and bill of sale to the McGregors for the property. The McGregors also requested general damages and attorneys’ fees. The defendants counter-claimed requesting payment of amounts owed under the contract or a return of the property and damages sufficient to return the property to the condition at the time of sale. They also raised defenses of waiver, estoppel and laches.

The trial was scheduled to begin October 4, 1983. In the pretrial order the McGregors included a request for damages because of lost interest and mental distress and alleged that the Cushmans’ conduct violated a duty of good faith and fair dealing. The Cushmans’ motion to prevent presentation of evidence on the new damages as not specifically pleaded and inappropriate was denied. The jury’s verdict, by way of special interrogatory, found actual damages of $78,323 and mental anguish damages of $5,000 for the McGregors, and awarded the Cushmans an offset of $9,000.

Pursuant' to post-trial motions, the trial judge awarded attorneys’ fees of $20,032.78 and costs of $294.49 to the McGregors and denied deposition costs.

The issues on appeal are:

(1) Was there a sufficient factual dispute for the District Court to deny Cushmans’ motions for a directed verdict and allow the case to be submitted to the jury?

(2) Is rescission available as a remedy to McGregors?

(3) Did the District Court correctly instruct the jury on the implied covenant of good faith and fair dealing?

(4) Did the District Court err when it submitted the question of constructive fraud to the jury?

(5) Do the doctrines of estoppel and waiver defeat McGregors’ claims as a matter of law?

(6) Did the District Court correctly refuse two of Cushmans’ offered jury instructions on defenses?

(7) Did the District Court correctly allow testimony on mental distress and lost interest as part of McGregors’ damages?

(8) Did the District Court correctly award costs and attorneys’ fees to McGregors on the basis of the contract?

(9) Does the contract provision include the payment of attorneys’ fees on appeal?

In the first issue, the defendants argue that their motions for directed verdict, made at the conclusions of plaintiffs’ and their own cases, were improperly denied because there was insufficient evidence to allow recovery under the theory of actual fraud.

“Motions for directed verdict or for judgment N.O.V. are proper only when there is a complete absence of any evidence to warrant submission to a jury. In this regard evidence and all inferences must be considered in the light most favorable to the party opposing directed verdict . . . “ (Citations omitted.)

Jacques v. Montana National Guard (1982), 199 Mont. 493, 504, 649 P.2d 1319, 1325, quoting Karczewski v. Ford Motor Company (N.D.Ind. 1974), 382 F.Supp 1346, 1348, aff’d. (7th Cir. 1975), 515 F.2d 511.

It would have been error to direct a verdict for defendants if plaintiffs submitted sufficient evidence of actual fraud at trial to make out a prima facie case, since actual fraud is a question of fact for the jury. Healy v. Ginoff (1923), 69 Mont. 116, 220 P. 539. The elements of actual fraud are:

“1. A representation;
“2. Falsity of the representation;
“3. Materiality of the representation;
“4. Speaker’s knowledge of the falsity of the representation or ignorance of its truth;
“5. Speaker’s intent that it be relied upon;
“6. The hearer’s ignorance of the falsity of the representation;
“7. The hearer’s reliance on the representation;
“8. The hearer’s right to rely on the representation; and
“9. Consequent and proximate injury caused by the reliance on the representation.” (Citations omitted.)

Van Ettinger v. Pappin (1978), 180 Mont. 1, 10, 588 P.2d 988, 994.

Defendants contend that plaintiffs’ evidence was insufficient to establish a false representation or justifiable reliance on the representation. Defendants argue that they made no representations as to net income and even if plaintiffs could show false statements on net income, consignee status, legality of A-G rental payments, and the closure of the Nevada city station, plaintiffs cannot demonstrate justifiable reliance on those statements. The prospectus contained “Net” figures under a statement favorably comparing the “Net” to the receipts from a ranch. The financial records Cushmans gave Mc-Gregor included statements with these same figures. Bill Cushman testified at trial that the financial statements would be misleading to someone not knowledgeable in accounting. A jury could find false representations were made on this evidence.

Further, the jury had sufficient evidence to find McGregor reasonably relied on the representations. A seller’s superior knowledge of the financial condition of a business is a factor in determining a purchaser’s right to rely on the seller’s representations about that financial condition. Bails v. Gar (1976), 171 Mont. 342, 349, 558 P.2d 458, 462. Cushmans, as owners and operators of the business, had knowledge superior to McGregor’s about the past income and profits of the business. Even assuming McGregor should have investigated the statements and ascertained their truth or falsity, he is only required to use reasonable diligence and whether he did so is another factual question for the jury. McGregor questioned Cushmans, talked to the Phillips’ representative and received an appraisal of the business. The jury had sufficient evidence to find that McGregor adequately investigated the business and reasonably relied on Cushmans’ representations. We find no error in the District Court’s failure to direct a verdict for defendants on the claim of actual fraud.

In the second issue, defendants argue that rescission was not available as a remedy to the plaintiffs because they sold or disposed of the wholesale operations and could not return this important part of the business as required by rescission. Section 28-2-1713(2), MCA, states that the rescinding party “must restore to the other party everything of value which he has received from him under the contract or must offer to restore the same, upon condition that such party shall do likewise, unless the latter is unable or positively refuses to do so.” Section 28-2-1716, MCA, states that “ . . . the court may require the party to whom [rescission] is granted to make any compensation or restoration to the other which justice may require.” When this Court considered the requirement of restoration in O’Keefe v. Routledge (1940), 110 Mont. 138, 103 P.2d 307, we recognized the matter as one of equity and quoted the Kentucky Court in Black Motor Co. v. Green (1934), 258 Ky 72, 79 W.W.2d 409, 79 S.W.2d 409, 411:

“An absolute and literal restoration of the parties to their former condition” is not required; it is “sufficient if such restoration be made as is reasonably possible and such as the merits of the case demand.”

110 Mont. at 147-147, 103 P.2d at 310. Where circumstances have changed so that complete rescission is not possible, “[t]he trial judge must use his discretion in doing equity, and this Court will not reverse that decision short of a showing of abuse of that discretion.” Scott v. Hjelm (1980), 188 Mont. 375, 380, 613 P.2d 1385, 1387-1388. The record on appeal reflects no abuse of discretion. The trial judge acted properly in permitting the jury to consider rescission. We hold that, under these circumstances, plaintiffs’ inability to completely restore defendants to their original condition, alone, would not foreclose rescission as a remedy.

Section 28-2-1713(1), MCA, requires a party use reasonable diligence to “rescind promptly upon discovering the facts which entitle him to rescind . . .” The element of promptness corresponds with the defense of laches. “Laches is negligence in the assertion of a right. It exists when there has been an unexplained delay of such duration or character as to render the enforcement of an asserted right inequitable.” Brabender v. Kit Manufacturing Co. (1977), 174 Mont. 63, 67-68, 568 P.2d 547, 549. In Brabender, the plaintiffs purchased a mobile home from the defendants and took delivery in November 1971. Four days later they complained about the condition of the home and stated they would not accept it, but refused to let defendants make any repairs. The plaintiffs later paid all scheduled installments due on the contract for purchase and continued to live in the home intermittently until May 1973. There were no further communications between the parties until plaintiffs filed suit in February 1976 seeking rescission or in the alternative, damages. We held that the plaintiffs’ suit for rescission was barred by laches and their suit for damages was barred by the applicable four year statute of limitations.

“ . . . Under ordinary circumstances, a suit in equity will not be stayed for laches before, and will be stayed after, the time fixed by the analogous statute, but if unusual conditions or extraordinary circumstances make it inequitable to allow the prosecution of a suit after a briefer, or to forbid its maintenance after a longer, period thain that fixed by the analogous statute, a court of equity will not be bound by the statute, but will determine the extraordinary case in accordance with the equities which condition it. When a suit is brought within the time fixed by the analogous statute, the burden is on the defendant to show, either from the face of the complaint or by his answer, that extraordinary circumstances exist which require the application of the doctrine of laches. On the other hand, when the suit is brought after the statutory time has elapsed, the burden is on the complainant to aver and prove circumstances making it inequitable to apply laches to his case.”

Brabender, 174 Mont. at 63, 568 P.2d at 550, quoting Shell v. Strong (10th Cir. 1945), 151 F.2d 909, 911.

The defendants here did not plead, nor do they argue on appeal, that any statute of limitations bars plaintiffs’ claims. The two-year statute of limitations for fraud acts as an aid in determining whether the delay in the assertion of plaintiffs’ claims, along with any other circumstances, so prejudiced the defendant that laches should bar the remedy of rescission. The plaintiffs had notice of circumstances that should have put them on inquiry of possible fraud at the time of sale and in 1978 when the net income did not reflect the earlier representations. Defendants point out that the plaintiffs, as early as August 1977, were aware that the wholesale customer in Nevada City had closed, that a consignee contract was not available and that A-G rental was not available. In his testimony, McGregor stated that in 1978 he knew he was not realizing the expected net income. He had the benefit of financial statements at the close of each year. This information was sufficient to put him on inquiry, thus the knowledge of misrepresentations and fraud will be imputed to him. Lasby v. Burgess (1930), 88 Mont. 49, 62-63, 289 P. 1028, 1032. Nevertheless, the plaintiff continued to make payments and operate the business without complaint until about November 1981. These facts constitute laches, or a failure to use reasonable diligence to rescind promptly on the part of the plaintiffs. Therefore, we hold the District Court erred in permitting the jury to consider rescission as a remedy for the plaintiffs.

The District Court instructed the jury on the implied covenant of good faith and fair dealing. In ruling on objections to the instructions, the court stated that they defined the duty required for an allegation of constructive fraud. Defendants argue on appeal that the implied covenant has no application in a case involving an arms-length contract. Plaintiffs argue that defendants had a duty to disclose the true profitability of the business after making misleading statements, and that a breach of this duty was a breach of the implied covenant of good faith and fair dealing.

We recently discussed the implied covenant of good faith and fair dealing in Nicholson v. United Pacific Insurance Co. (Mont. 1985), [219 Mont. 32,] 710 P.2d, 42 St.Rep. 1822. There, in upholding a damage award for a breach of this implied covenant, we stated:

“The nature and extent of an implied covenant of good faith and fair dealing is measured in a particular contract by the justifiable expectations of the parties. Where one party acts arbitrarily, capriciously or unreasonably, that conduct exceeds the justifiable expectations of the second party. The second party then should be compensated for damages resulting from the other’s culpable conduct.” Nicholson,

710 P.2d at 1342, 42 St.Rep. at 1829. A breach of this implied covenant which results in damages can thus give rise to an action in tort. In order to recover punitive damages, in addition to any recovery for the tort, plaintiffs must prove that defendants’ actions in breaching the implied covenant of good faith and fair dealing met the requirements of Section 27-1-221, MCA. Nicholson, 710 P.2d, 42 St.Rep. at 1829-1830.

The jury instructions given in the case at bar stated that good faith means honesty in fact in the conduct or transaction concerned, apparently taken from the Uniform Commercial Code, Section 30-1-201(19), MCA, and then equated the implied covenant to an obligation imposed by law on defendants to do nothing to deprive plaintiffs of the benefits of their commercial transaction. The tort of breach of the implied covenant of good faith and fair dealing, as defined in Nicholson, requires more than a lack of “honesty in fact.” As discussed above, it requires, at a minimum, that defendants’ actions were arbitrary, capricious or unreasonable and exceeded plaintiffs’ justifiable expectations. We hold that the instructions given to the jury on this issue inadequately defined the tort.

The fourth issue concerns whether the jury should have been permitted to consider recovery on a theory of constructive fraud. Section 28-2-406(1), MCA, defines constructive fraud as “any breach of duty which, without fraudulent intent, gains an advantage to the person in fault ... by misleading another to his prejudice . . .” Contrary to defendants’ contentions, no fiduciary or confidential relationship need exist between the parties to justify a finding of constructive fraud. Mends v. Dykstra (1981), 195 Mont. 440, 449-450, 637 P.2d 502, 507-508. Where sellers, by words or conduct, create a false impression concerning serious impairments or other important matters and subsequently fail to disclose the relevant factors, constructive fraud may be found. Moschelle v. Hulse (Mont. 1980), 622 P.2d 155, 159, 37 St. Rep. 1506, 1510. In Moschelle, the sellers made misleading statements about the rotting floor and foundation of the buildings, the wiring, the sewer lines and the seasonal flooding in the basement. They told the buyers that income from the business would cover payments under the purchase contract and the buyers’ living expenses. This Court relied on the “pattern of repeated concealments”, the buyers’ inability to discover the true condition of the premises and profitability of the business, and the buyers’ lack of experience. 622 P.2d at 159, 37 St.Rep. 1510. In the case at bar, defendants made general statements about the profitability of the business in addition to the figures in the prospectus and the financial statements. Plaintiffs claimed other facts were misrepresented as well. When viewing this evidence most favorably for the plaintiffs, Jacques, 199 Mont. at 504, 649 P.2d at 1325, the District Court did not err by submitting the question of constructive fraud to the jury.

Defendants also question the special verdict’s reference to constructive fraud. Since this case is remanded, we need not address this topic.

The defendants contend that waiver and estoppel operate to bar any relief to the plaintiffs as a matter of law. Waiver is the voluntary, intentional relinquishment of a right. Kelly v. Lovejoy (1977), 172 Mont. 516, 520, 565 P.2d 321, 324. A waiver of a right of action will be declared only when the party clearly manifests such an intention. Koch v. Rhodes (1920), 57 Mont. 447, 458-459, 188 P. 933, 937, cited in Falls Sand and Gravel Co. v. Western Concrete (Mont. 1967), 270 F.Supp. 495, 501. The presence of voluntariness and the requisite intent are necessarily questions of fact. Consequently, we hold that the District Court did not err by presenting the issue of waiver by plaintiffs to the jury.

The doctrine of estoppel, to successfully prevent the assertion of a claim of fraud, requires knowledge of the fraud at the time of the execution of the contract. 37 Am.Jur.2d, Fraud and Deceit, Section 386. In Montana, we have held that estoppel “has no application where the omissions of the party claiming estoppel brought about the problem.” Carroccia v. Todd (Mont. 1980), 615 P.2d 225, 228, 37 St.Rep. 1437, 1440; and First Sec. Bank of Bozeman v. Goddard (1979), 181 Mont. 407, 593 P.2d 1040. The evidence presented in this case indicates the plaintiffs did not have full knowledge of the claimed fraudulent acts at the time they entered the contract. Further, the defendants’ misrepresentations and failure to disclose brought about the problem. The District Court correctly refused to instruct the jury on estoppel as requested by the defendants.

The District Court’s refusal to give two of the instructions on defenses offered by the defendants forms the basis of the sixth issue. One concerned the elements of estoppel, properly refused for the reason stated above. The second stated: “Regardless of the falsity of statements, a party is estopped from recovery if there is a long continued silence and failure to raise objections,” citing Kelly, 172 Mont. at 520, 565 P.2d at 324. In Kelly, this Court held that the plaintiffs, by acquiescing in the presence of horses, waived their right to enforce a restrictive covenant prohibiting livestock. Kelly did not concern false statements by a party, nor did it concern a long continued silence. The use of “estopped,” both in Kelly and in the instruction, was confusing in that the issue under discussion was waiver rather than estoppel. We note also that defendants offered no instructions which would explain the word “estopped” as used in that context. The District Court did not err under these circumstances when it refused to give this instruction.

The seventh issue concerns plaintiffs’ requested damages for loss of interest and mental and emotional distress in addition to rescission.

“On rescission of a contract, the court will, where necessary to effect complete justice, award to the party not in default his expenses necessarily incident to the contract.”

17 Am.Jur.2d, Contracts, Section 519. In Silvast v. Asplund (1935), 99 Mont. 152, 42 P.2d 452, this Court permitted an award for lost interest in addition to rescission. The historical reason for not permitting both rescission and damages is that a party may receive a double recovery. In this case the jury was instructed “[TJhat you are not allowed to award damages which would in effect allow a double recovery.” A recovery of lost interest would not duplicate any recovery plaintiffs might have received through rescission in this case. Therefore, we hold that the District Court did not err by allowing the jury to consider this item of damages.

One jury instruction stated that if they forrad for the plaintiffs, they “must award them damages for all emotional distress and mental anguish suffered as a result of the Defendants’ conduct.” (Emphasis added.) This instruction, in effect, directs a verdict on damages for emotional distress even if plaintiffs recovered only on their contract claim.

As this Court stated in Johnson v. Supersave Markets, Inc. (Mont. 1984), [211 Mont. 465,] 686 P.2d, 209, 41 St.Rep. 1495:

“We agree with the Oregon court’s conclusion: “We do not yet live, however, in an ‘eggshell society’ in which every harm to property interests gives rise to a right of action for mental distress . . . “
“In determining whether the distress is compensable absent a showing of physical or mental injury, we will look to whether tortious conduct results in a substantial invasion of a legally protected interest and causes a significant impact upon the person of plaintiff.” (Emphasis in original.) (Citations omitted.)

686 P.2d at 213, 41 St.Rep. at 1500. In Johnson, the plaintiff had been improperly arrested and testimony from at least one witness showed he had suffered “devastating emotional impact” from the tortious conduct. 686 P.2d at 213, 41 St.Rep. at 1500. Although Mc-Gregor testified that his financial problems bothered him a lot and “at times, it would show up at home,” the record reflects no serious emotional distress or anxiety as required by the holding in Johnson, supra. We hold that this instruction improperly required the jury to award damages for emotional distress and mental anguish without finding a significant impact on the plaintiff.

In addition, plaintiffs claim that the award for mental anguish and distress was proper as a result of defendants’ breach of the implied covenant of good faith and fair dealing. As stated above, the jury was not properly instructed on this tort. Thus, the award of damages for mental anguish and distress must be reversed on this basis as well.

The two final issues on this appeal question the award of costs and attorneys’ fees to the prevailing party. Our decision in this case renders these issues moot.

Reversed and remanded for a new trial.

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

MR. JUSTICE SHEEHY,

dissenting:

I dissent.

I would affirm the decision of the District Court in this case, especially because after remand and a further trial, it appears to me that the results will be about the same.

My interpretation of the majority opinion is that it does the following things: (1) denies recovery for rescission because of laches; (2) permits recovery for breach of contract: (3) permits recovery for constructive fraud; (4) denies recovery for a breach of the implied covenant of good faith; and (5) denies recovery for attorneys fees.

On remand, the cause will be submitted in a new trial on issues of breach of contract and constructive fraud. A breach of contract action of course, sounds in contract. On the other hand, a constructive fraud action sounds in tort. Whether in contract or in tort, the Mc-Gregors should be able to recover their payments to the Cushmans in the sum of $78,323. That amount was awarded in the first trial. In addition, because constructive fraud is also a basis for recovery, the rules relating to tort damages apply. In Gibson v. Western Fire Insurance Company (Mont. 1984), [210 Mont. 267,] 682 P.2d 725, 41 St.Rep. 1048, we held that the statutory allowance for recovery of damages in tort cases, for all detriment proximately caused by a tortfeasor, would allow recovery for amounts other than simply the amount of the actual damages, as for example economic loss and emotional distress. Gibson v. Western Fire Insurance Company was, of course, a bad faith action. However, by analogy, since Gibson defined the elements of damages in tort cases, we would eventually hold that emotional distress is an element of recovery in proper cases for damages in tort, which would include a constructive fraud case.

It is clear to me, that in making the representation respecting net profit, Cushmans were guilty of at least constructive fraud, if not actual fraud. It appears to me that a new trial will result in at least the same amount of damages as were awarded earlier and that remand for retrial in this case is a waste of judicial resources, and an unfair imposition upon a plaintiff who has the right to recover. Therefore, I would affirm.

MR. JUSTICE MORRISON,

dissenting:

The majority opinion finds error in (1) granting rescission; (2) submitting an instruction on the implied covenant of good faith and fair dealing; (3) awarding damages for severe mental and emotional distress. The jury did not decide the rescission question. The court granted a rescission in the judgment but any relief granted for rescission has no effect upon the jury award for damages in the tort case. They are separate matters. I only dissent to the granting of a new jury trial on the damage question. It is not necessary to discuss the $5,000 award for mental distress as that could be simply stricken if the majority deems the evidence insufficient for submission on that issue. The question on mental and emotional distress is a close one and I would not be adverse to striking that $5,000 award from the verdict. I strongly oppose granting a new trial as there is clearly no basis for granting same.

The majority grants a new trial on the basis of the court having given instruction No. 24. That instruction stated:

“You are instructed that Hope and Paul Cushman owed William and Linda McGregor an implied-in-law duty of good faith and fair dealing that they would do nothing to deprive the plaintiff of the benefits of the commercial transaction between the parties. The duties or obligations arising from the purchase and sale agreement between the parties imposed an obligation of good faith in the negotiations, performance, and enforcement of those duties and obligations. Good faith is defined as honesty in fact in the conduct or transaction concerned. If you find that the defendants violated this obligation imposed by law, the plaintiffs are entitled to be compensated for all the detriment or injury proximately caused thereby whether that detriment or injury could be anticipated or not.”

This instruction was given prior to our decision in Nicholson v. United Pacific Insurance Co. (Mont. 1985), [219 Mont. 32,] 710 P.2d 1342, 42 St.Rep. 1822. The instruction here given is, in my opinion, better than the one given in the Nicholson case. However, the instruction there given was tendered by the defense and therefore could not be objected to by the defendant on appeal.

In Nicholson, the Court did not wish to bless the instruction given but did, for the first time, articulate the following rule:

“The nature and extent of an implied covenant of good faith in fair dealing is measured in a particular contract by the justifiable expectations of the parties. Where one party acts arbitrarily, capriciously or unreasonably, that conduct exceeds the justifiable expectations of the second party. The second party then should be compensated for damages resulting from the others culpable conduct.”

710 P.2d at 1348, 42 St.Rep. 1829.

The instruction given by the court in the case at bar is more restrictive than the new rule articulated by the court in Nicholson. The two rules are similar in many respects. However, the conduct referred to in instruction No. 24 contemplates that the duties and obligations arising from the purchase and sale agreement be breached in a dishonest way by one of the contracting parties for a cause of action to arise under “implied-in-law duty of good faith and fair dealing.” The standard articulated in Nicholson is broader in that the reasonable expectation of the parties can be breached by arbitrary, capricious and unreasonable conduct. In other words, under the standard adopted by this Court in Nicholson, one can incur liability for breach of the covenant where on acts negligently. The instruction given by the District Court in this case would appear to require that the contracting parties act honestly and only if they fail in that regard, is there a remedy.

The majority’s insistence on reversing the verdict in this case based upon the giving on instruction No. 24 is appalling. Not only was the instruction narrower than the one approved in Nicholson, but the duty of good faith and fair dealing was not even submitted to the jury in the verdict form. The following excerpt is taken from the “special verdict”:

“ISSUE NO. 1
“(The burden of getting a ‘yes’ answer is on the plaintiffs.)
“Have the plaintiffs proven by a preponderance of the evidence that defendants engaged in actual or constructive fraud in the course of the transactions and dealings between the parties that led to the consummation of a contract between them on June 7, 1977?
X YES NO
“If your answer to the preceding issue is ‘yes,’ then please answer the following issue No. 2; if your answer to the preceding issue is ‘no,’ then please proceed to answer issue No. 4.”

The jury was not asked about the implied covenant of good faith and fair dealing. They found fraud. They were properly instructed on both constructive fraud and actual fraud. The jury then, in issue No. 3, found the amount of actual damages to be $78,323, the amount of mental anguish to be $5,000, and awarded an offset of $9,000. Judgment was thereupon entered by the District Court in accordance with the jury verdict. It is clear that the jury made no findings with reference to the implied covenant of good faith and fair dealing and the giving of instruction No. 24 could in no way have created reversible error.

We recently decided the case of Martin J. Kleinsasser v. Superior Derrick Service, Inc., et al. (Mont. 1985), [218 Mont. 371,] 708 P.2d 568, 42 St.Rep. 1662. The case was determined by a five-judge panel consisting of Chief Justice Turnage, Justices Gulbrandson, Hunt, Morrison and Sheehy. Justice Sheehy dissented. In that case, the issue here involved was presented four square. Plaintiff contended that the instructions given on strict liability were incomplete and misleading. Indeed, court’s instruction No. 16 was most incomplete in its attempt to define strict liability. However, the jury, in a special verdict form, was only submitted the negligence theory. The jury found no negligence. Strict liability was not submitted to the jury although the court gave incomplete instructions on strict liability. In that case, the majority said:

“Plaintiff contends that the instructions given on strict liability offer an incomplete and misleading statement of the law. Any error alleged is harmless when the plaintiff did not object to a special verdict form which required the jury to decide the case on negligence alone. Given a jury instruction on strict liability in tort, no matter how incomplete, would not have cured counsel’s failure to offer a verdict form which would have allowed a jury to consider strict liability in tort.”

708 P.2d 571, 42 St.Rep. 1666.

In the Kleinsasser case, I voted with the majority to affirm a verdiet in favor of defendant because only the negligence theory was submitted to the jury on a special verdict form. In this case, only constructive fraud and fraud were submitted in the special verdict form and the jury found in favor of the plaintiff on these theories. No mention was made of the implied covenant of good faith and fair dealing and it could not be prejudicial error to have given an incomplete instruction defining a tort which was not submitted to the jury.

The bottom line is that in Kleinsasser, the majority wished to affirm the defense verdict and so properly relied upon the fact that the incomplete instruction was not prejudicial because the verdict form only considered negligence. Since the majority was right in its application of legal principles, I voted with the majority opinion although I personally disagreed with the jury verdict finding in favor of the defendant.

Now we have a case where the jury has found in favor of the plaintiff and the majority wishes to reverse the verdict. The majority reverses on an instruction which the majority erroneously finds to be incomplete. However, assuming arguendo that the instruction is incomplete, well established legal principles, affirmed and applied in Kleinsasser, dictate a finding by this Court that any incompleteness could not have infiltrated a jury verdict based upon constructive fraud or fraud.

This Court continues to apply whatever legal principles are desired to achieve the necessary result. Again, the people of this State and the practicing members of the trial bar are left with a revolving door approach to the resolution of every controversy.


source: Caselaw Access Project

author: MR. CHIEF JUSTICE TURNAGE

license: Public Domain

text:
    TIMOTHY E. BENNETT, Plaintiff and Appellant, v. DOW CHEMICAL COMPANY, a corp., Velsicol Chemical Company, a corp., Rancher’s Agra Service, Inc., a corp., E.C.A. Environmental Management Services, Inc., a Mont. corp., and Montana Merchandising, Inc., a corp., d/b/a Agricultural Management Services; Western Ranch Supply Co., a corp.; Superior Fire Apparatus Company, a corp., and Broyhill Company, a corp., Defendants and Respondents.
    No. 85-183.
    Submitted Dec. 4, 1985.
    Decided Feb. 6, 1986.
    713 P.2d 992.

      Smith Law Firm, Robert J. Sewell, argued, Helena, for plaintiff and appellant.
    Boone, Karlberg & Haddon, Randy J. Cox, argued for Dow Chemical, Rancher’s Agra, Western Ranch Supply, Superior Fire Apparatus & Broyhill Co., Missoula; Keller, Reynolds, Drake, Sternhagen & Johnson; Richard E. Gillespie argued for Velsicol Chemical, Helena, M.K. Daniels, Rancher’s Agra Services, Deer Lodge; Alexander & Baucus, Gary M. Zadick argued for E.C.A. Environmental Management, Great Falls; Henningsen & Purcell, James F. Purcell, Western Ranch Supply, Butte; Gough, Shanahan, Johnson & Waterman, Joseph P. Mazurek, Superior Fire Apparatus, Helena; Hooks & Budewitz, Patrick F. Hooks, Broyhill Co., Townsend, for defendants and respondents.
   MR. CHIEF JUSTICE TURNAGE

delivered the Opinion of the Court.

Appellant brought this action in Lewis and Clark County District Court alleging claims in both tort and contract. The District Court granted summary judgment in favor of all respondents except Rancher’s Agra Services, Inc., because the statute of limitations had expired. Rancher’s Agra Services, Inc., had failed to file an answer so its motion for summary judgment was denied. Appellant appeals the summary judgments. Rancher’s Agra Services, Inc., asks that this Court direct the District Court to grant its motion for summary judgment, because the same statutes of limitations that apply to the other respondents apply to it also.

We will consider the following two issues raised by appellant:

1. Does the statute of limitations accrue from the date of injury, date of discovery of the facts which would give rise to a cause of action, or date of discovery of the legal right to a cause of action?

2. Which statute of limitations is applicable to claims of breach of seller warranties where privity is absent between the claimant and defendant?

The Court will also consider whether or not to order entry of summary judgment in favor of Rancher’s Agra Services, Inc.

The following scenario is taken from appellant’s alleged facts.

Appellant was employed by Powell County in the summer of 1979 as a weed sprayer for the Powell County Weed Control Board. He worked under the supervision of Ralph Beck.

On July 2, 1979, appellant was on the job with Beck and his coworkers on the Cliff Gravely property near the Little Blackfoot River between Garrison and Avon. He was holding the spray gun in his hands and one of his other co-workers started the pump. The hose connecting the gun to the pump suddenly separated at the gun spraying appellant in the chest, head and face with a herbicide mixture. Beck took appellant to the river and washed him off.

Within a few days, appellant began to feel weak and experienced stomach cramps and diarrhea. By July 11, 1979, he was losing control of his extremities. He found that he was unable to complete simple tasks such as flipping a light switch or turning on the TV because his fingers would not work. His legs were likewise unusable.

Appellant consulted Stan Smith, M.D., on July 11, 1979, concerning his symptoms and was advised that he was suffering from peripheral neuropathy as a result of exposure to chemical herbicides. Appellant gradually began to recover over the next several months, but he has permanently lost some function and use of his extremities.

On August 9, 1979, Beck brought appellant to Helena and assisted him with the filing of his workers’ compensation claim. Appellant was placed on temporary total disability benefits.

In September 1980, appellant was notified by the Workers’ Compensation Division that his claim was being reclassified as an occupational disease. Concerned about the implications of such reclassification, he retained an attorney, David M. McLean, to represent him on September 11, 1980. If the instant action had been filed at this time, there would have been no statute of limitations problem.

Appellant continued to receive compensation until the spring of 1984. On March 17, 1984, he met with McLean concerning resolution of his claim and was advised that he might have a third party claim against the persons and companies involved in the production, distribution, and sale of the herbicides and spraying equipment. We note that this advisement came three and one-half years after Mr. McLean was originally retained by appellant. The instant action was commenced on July 6, 1984. Appellant claims counts in strict liability in tort, tortious misrepresentation, negligence and contract for breach of sellers’ warranty.

Appellant’s employer, Powell County, purchased 2-4D and TORDON manufactured by DOW, and BANVIL-D, manufactured by Velsicol, from Rancher’s Agra. The sprayer was manufactured by Broyhill and purchased by Powell County from Agricultural Management. Superior Fire performed fabrication and installed parts on the sprayer. The parts were provided by Broyhill, Agricultural Management, and Western Ranch Supply. The purchases, fabrication and installation of parts all occurred prior to the accident. Appellant had no direct written contract with any of the respondents.

The applicable statute of limitations period for actions in negligence and products liability in tort is three years. Section 27-2-204, MCA.

The District Court found that the three-year tort statute of limitations had run on the products liability, tortious misrepresentation and negligence counts. The court also found that there was no contract from which to imply the warranties which appellant claims were breached. The court reasoned that without a contract the breach of warranty claims sounded in tort rather than contract. Therefore, the warranty claims were also barred by the tort statute of limitations.

Appellant first contends that the statute of limitations did not begin running until March 17, 1984, when his attorney advised him that he may have a third party claim against respondents. Appellant is asking us to apply a “discovery rule” by which the statute of limitations was tolled until the appellant “discovered” his legal rights. This application would delay the initial running of the statute by almost five years, because the injury occurred and legal cause was discovered in July 1979.

This Court follows the general rule that the fact that a party with a cause of action has no knowledge of his rights, or even the facts out of which the cause arises, does not delay the running of the statute of limitations until he discovers the facts or learns of his rights under those facts. Carlson v. Ray Geophysical Division (1971), 156 Mont. 450, 454, 481 P.2d 327; Kerrigan v. O’Meara (1924), 71 Mont. 1, 8, 227 P. 819. However, the application of the general rule becomes difficult where the injured person is prevented from knowing of his injury by concealment or other circumstances. In such cases, we have recognized certain exceptions which toll the running of the statute until the injury is discovered. See Monroe v. Harper (1974), 164 Mont. 23, 518 P.2d 788. In Grey v. Silver Bow County (1967), 149 Mont. 213, 425 P.2d 819, we extended application of this “discovery rule” in a malpractice action to a situation where the plaintiff was unable to discover his injury until his cast was removed. We tolled the statute until the injury was discovered, thereby delaying the running of the period by fifty-seven days. Also, in Grey, 424 P.2d at 821, we announced the equitable limitation of the discovery rule of giving full scope to the statute of limitations on the one hand and according a reasonable measure of justice to the plaintiff on the other. The Federal District Court in Billings took this lead from Grey and, after considering the equities, applied the discovery doctrine in a products liability action to toll the statute of limitations until the plaintiff discovered that his cataracts may have been caused by the drug MER/29. Hornung v. Richardson-Merrill, Inc. (D. Mont. 1970), 317 F.Supp. 183. Hornung, then, stands for the idea that a statute of limitations can be tolled until the plaintiff discovers the legal cause of his injury if equity so dictates. However, in 1980, the Federal District Court in Butte specifically refused to require discovery of the legal cause of an injury to initiate the running of a statute of limitations. Much v. Sturm, Ruger & Co., Inc.(D. Mont. 1980), 502 F.Supp. 743, 745. Hornung therefore marks the farthest reaches of discovery doctrine in Montana.

As such, there is no Montana precedent for utilizing discovery doctrine to toll the statute of limitations beyond discovery of the cause of an injury. However, appellant here would have us extend the doctrine to toll the statute for five years beyond the discovery of the cause of his injury up until the day he discovered his legal rights. Taken to its logical extreme, and in consideration with the continuing development of new torts and property rights, appellant’s position could have the effect of forever denying potential defendants the benefits of a statute of limitations. Moreover, this Court’s adoption of appellant’s position in this case would encourage less diligent performance of duties by attorneys.

In view of these public policy considerations and the extreme delay involved in the instant case, the equities do not weigh in appellant’s favor. Therefore, under the facts of this case, we expressly decline to extend discovery doctrine to toll statutes of limitation until discovery of legal rights. We affirm the District Court and hold that appellant’s tort claims were barred by the three-year tort statute of limitations which began running in July of 1979, when both injury and discovery of legal cause occurred.

Appellant then contends that one of the longer contract statute of limitations, Sections 27-2-202(2), 27-2-202(1), or 30-2-725, MCA, instead of the tort statute of limitations should apply to his breach of warranty claims. We disagree.

Appellant’s breach of warranty claims include breach of the implied covenants of good faith and fair dealing, fitness for a particular purpose, merchantability and performance in workmanlike manner. These covenants are imposed by law regardless of contract. As such, and absent contract, breach of the implied covenants sound in tort — not contract. See Degnan v. Executive Homes, Inc. (Mont. 1985), [215 Mont. 162,] 696 P.2d 431, 435, 42 St.Rep. 262, and Gates v. Life of Montana Ins. Co. (Mont. 1983), [205 Mont. 304,] 668 P.2d 213, 215, 40 St.Rep. 1287. Appellant has no contract with respondents here. We therefore affirm the District Court’s conclusion that appellant’s breach of warranty claims are barred by the three-year tort statute of limitations.

We will now consider the request of Rancher’s Agra Services, Inc., for this Court to order the District Court to enter summary judgment by reason of the running of the statute of limitations in its favor. Rule 8(c), M.R.Civ.P., provides that a defense of the running of the statute of limitations is an affirmative defense and can only be raised by answer. Taylor v. Dept. of Fish, Wildlife & Parks (Mont. 1983), [205 Mont. 85,] 666 P.2d 1228, 1233, 40 St.Rep. 1112. Rancher’s has never filed an answer nor provided this Court with any reason for this failure. We can perceive no reason to excuse it from filing an answer. The request is denied.

The District Court is affirmed on all issues.

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


author: MR. JUSTICE GULBRANDSON

text:
    In re the MARRIAGE OF DONALD E. BELL, Petitioner and Respondent, and DOROTHY BELL, Respondent and Appellant.
    No. 85-311.
    Submitted on Briefs Oct. 10, 1985.
    Decided Feb. 6, 1986.
    713 P.2d 552.

      Linda Harris, Billings, for respondent and appellant.
    Nye & Meyer, Joan Meyer Nye, Billings, for petitioner and respondent.
   MR. JUSTICE GULBRANDSON

delivered the Opinion of the Court.

Dorothy Bell appeals the property division ordered by the Yellowstone County District Court in this divorce action. The issues on appeal are (1) whether the District Court abused its discretion in dividing the marital estate between the parties, and (2) whether the District Court erred in denying wife’s motion for new trial. We affirm.

In March, 1984, after almost thirty-one years of marriage, Donald Bell (respondent) petitioned for the dissolution of his marriage to appellant. Respondent is a farmer working a relatively small, highly encumbered farm. During the marriage, appellant took care of the family home and performed various farm chores. Appellant began an antique business in 1983 and had sales of approximately $3,500 in 1984 in that business. The parties have one child, a son, who farms on leased land close to the family home and helps out on his parents’ farm. The son stated that he thought the court should award the farm to his father so that he and his father could work on it together.

Clyde Rader, a trained farmland appraiser, testified that the current market value of the Bell farm, allowing for a sale within six months, was $300,000. Rader testified that that was the top price the Bells could receive. Rader’s estimate of $300,000 included the fixtures on the farm but excluded two mobile homes on the farm. At one point, Rader mentioned that the $300,000 estimate was based on a sale for cash within a reasonable length of time. Rader also mentioned that Bells might receive more money for the farm if the buyers arranged for “constructive financing.” Woody Shore, the vice president/senior loan officer of the Little Horn State Bank in Hardin, Montana, testified that he had a rough idea of land values in Big Horn County and that a fair market value for Bells’ irrigated land would be $900 an acre. Based on $900 an acre, the farm (including improvements) would be worth approximately $300,000. Respondent also testified that the current fair market value of the farm was $300,000.

Respondent testified that he owned about $1,600 of Farmers Union stock shares but that he would receive the value for those stocks only upon his retirement or his leaving the county, neither of which he was planning on doing. Respondent has also acquired shares of Federal Land Bank stock but he will receive no value for that stock until he pays off his substantial loan with that hank. Lastly, respondent has Big Horn County Electric Cooperative Capital Credits of approximately $1,000. These credits are repaid to the farmers approximately twenty years after being paid in and respondent has received about $58 a year the last three years.

In January 1985, the District Court filed its findings of fact, conclusions of law, and a final decree of dissolution. The court found that Bells had assets worth $456,374 and total liabilities of $325,762.18, leaving them with a net marital estate worth $130,611.82. The Bells have farm debts on their land and farm equipment of $319,491.82. The court valued the farm land at $300,000.

In dividing the marital estate, the District Court awarded the bulk of the estate to respondent. To respondent, the court awarded the farm, the farm equipment, various vehicles, and other items for a total value of $426,402. Respondent was made responsible for liabilities totaling $321,762, leaving him with $104,640 more in assets than in liabilities. The court awarded appellant $13,972 in assets over and above the liabilities the court made her responsible for. To eliminate any disparity in the awards, the court ordered the respondent to pay appellant $45,334 with the result that each would receive a net award of $59,306. The court ordered the respondent to pay $10,306 to appellant within sixty days of the decree and to pay 120 monthly payments of $292 to appellant. The court ordered that these “equity” payments to the wife shall be a lien on the farm land, but a lien subservient to the mortgages, and renewals of mortgages, on the land.

In February 1985, appellant filed a motion for new trial. The motion was based principally upon what appellant termed newly discovered evidence which purportedly rendered the property settlement inequitable and impossible of performance. The newly discovered evidence was a letter from the Little Horn State Bank which declined respondent’s request for a loan to provide operating expenses and to renew respondent’s carry-over debt. The letter requested that respondent satisfy his existing debt with the bank. The trial court denied the motion for new trial and the wife appeals from this denial and from the property division.

Appellant argues that the District Court abused its discretion in several ways in distributing the marital estate. The standard of review is clear. The District Court has far reaching discretion in resolving property divisions and this Court will not alter the lower court’s judgment unless we find a clear abuse of discretion. The test for abuse of discretion is if the trial court has acted arbitrarily without employment of conscientious judgment or has exceeded the bounds of reason resulting in substantial injustice. In Re the Marriage of Rolfe (Mont. 1985), [216 Mont. 39,] 699 P.2d 79, 42 St.Rep. 623.

Appellant contends that in distributing the marital estate, the District Court erred by failing to consider the factors detailed in Section 40-4-202(1), MCA. In part, this section states:

“. . . In making apportionment, the court shall consider the duration of the marriage and prior marriage of either party; antenuptial agreement of the parties; the age, health, station, occupation, amount and sources of income, vocational skills, employability, estate, liabilities, and needs of each of the parties; custodial provisions, whether the apportionment is in lieu of or in addition to maintenance; and the opportunity of each for further acquisition of capital assets and income. The court shall also consider the contribution or dissipation of value of the respective estates and the contribution of a spouse as a homemaker or to the family unit . . .” This section only requires the District Court to consider the enumerated factors, and the court is not required to make a finding of fact as to each factor. See In Re Marriage of Sell (Mont.1981), 630 P.2d 222, 38 St.Rep. 956; In Re Marriage of Caprice (1978), 178 Mont. 455, 585 P.2d 641. We find that the District Court’s findings of fact and conclusions of law, taken as a whole, demonstrate that the court adequately considered the factors set forth in Section 40-4-202, MCA.

Appellant also charges that the District Court abused its discretion in valuing the farm land and in failing to place a value on certain assets (Federal Land Bank stock, Farmers Union Credits, Big Horn County Electric Cooperative Capital Credits). Appellant complains that the court’s valuation of the farm land was based upon Clyde Rader’s estimate of what the land would bring in a “cash” sale. Rader’s testimony, as a whole, shows that his estimate was not based on a “distress” sale but rather on what he believed was the fair market value of the land. The testimony of Rader, respondent and Woody Shore provides an adequate basis for the court’s valuation of the land. Furthermore, the court explained its reasons for not placing a value on certain assets and the evidence supports a finding that these assets had little or no value to respondent.

Appellant also complains that the District Court abused its discretion in failing to order the sale of the farm and the division of the proceeds between the parties. This Court has established a policy “that a family farm or a ranch should be kept intact and operated as a unit upon a marriage dissolution whenever there is a reasonable means of providing a wife her equitable share of the marital property short of selling the land.”

Gomke v. Gomke (Mont. 1981), 627 P.2d 395, 396, 38 St.Rep. 578L, 578N; citing In Re Marriage of Jacobson (1979), 183 Mont. 517, 600 P.2d 1183. The policy is especially valid where, as here, the parties’ child desires to take over the farm and family members “want to insure the continuity of a family heritage.” Gomke, at 397; see also In Re the Marriage of Knudson (1980), 186 Mont. 8, 606 P.2d 130.

Here, the lower court order provided that appellant will receive her equitable share of the marital property. Under the order, the respondent must make a $10,306 payment to appellant by March 22, 1985 and monthly payments thereafter. We note that appellant does not complain that respondent did not make the initial payment. Furthermore, from the record it appears that the monthly payments of $292 are within respondent’s ability to pay. The lower court’s plan results in a fifty-fifty split of the marital estate between the parties and provides that appellant will have a lien on the farm in the amount of the payments. We have approved similar plans in both Gomke and Knudson. In light of the foregoing, we find that the lower court provided a reasonable means of giving the wife her equitable share of the marital property and that the District Court did not abuse its discretion in allowing respondent to buy out appellant’s interest in the land.

Appellant also quarrels with the lower court’s valuation of certain farm equipment and other assets. We need only state that there is sufficient evidence to support the valuations placed on the marital estate assets.

Finally, the appellant contends that the District Court erred in denying her motion for new trial. In February 1985, appellant filed a motion for new trial on the basis of newly discovered evidence. This evidence was a letter from respondent’s bank to respondent declining to loan him more money or to renew his carryover debt. The letter also requested him to liquidate his present loan at the bank. Appellant was apparently contending that respondent would have to sell the farm to pay off the loan and she would not receive her equitable share of the farm because her interest was subject to the mortgages on the land. In March 1985, the lower court held a hearing and testimony was given by the parties on appellant’s motion. From other documents in the record, it appears that respondent may have refinanced the debt on the farm with a loan from the Farmers Home Administration.

Although appealing the denial of her motion for new trial, appellant has not provided this Court with a transcript of the hearing on the motion. In denying the motion, the lower court specifically referred to the parties’ testimony at the hearing. “It is the duty of a party seeking review of a judgment to present this Court with a record sufficient to enable us to pass upon the question raised.” Harrington v. Harrington (1979), 181 Mont. 541, 542, 594 P.2d 319, 320; citing e.g., Rule 9, M.R.App.Civ.P. Appellant has failed her duty as to this issue. We cannot consider the merits of this issue without a satisfactory record of the evidence presented at the hearing on the motion for new trial. Therefore, the wife’s appeal is dismissed as to this issue. See Harrington, supra, and Yetter v. Kennedy (1977), 175 Mont. 1, 571 p.2d 1152.

This Court has considered respondent’s request for attorney’s fees and costs on appeal and the same is denied.

Affirmed.

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


author: MR. JUSTICE HARRISON

text:
    In the Matter of the ESTATE OF LOUIS S. LEHNER, Deceased.
    No. 85-326.
    Submitted on Briefs Nov. 14, 1985.
    Decided Feb. 6, 1986.
    Rehearing Denied March 11, 1986.
    714 P.2d 130.
    Morse Law Firm, Wm. R. Morse, Absarokee, for Joanne Lehner.
    Heard Law Office, Douglas D. Howard, Columbus, for Scott, Brian & Michele Lehner.
   MR. JUSTICE HARRISON

delivered the Opinion of the Court.

This is an appeal from an order of the District Court of the Thirteenth Judicial District in and for the County of Stillwater, Montana, removing the personal representative of the estate of Louis S. Lehner, deceased. We affirm.

Louis Lehner was killed in an industrial accident in Kansas in July, 1984, although his domicile was considered to be Stillwater County, Montana. He died intestate. His first marriage, to Donna, ended in divorce in 1975. Decedent’s only children, Scott, Brian, and Michelle, now adults, were born of this marriage. His second marriage, to Wanda, ended in divorce in 1983. He married Joanne June 22, 1984, just over a month before he was killed.

The decedent’s older son, Scott, indicated he wanted to be appointed personal representative and employed counsel. He then changed his mind and Joanne petitioned to be and was appointed in an informal proceeding August 31, 1984. Notwithstanding the provisions of Section 72-3-603, MCA, Joanne failed to give notice to the heirs of the decedent within thirty days after her appointment. She contends they had actual notice because of various letters which were exchanged between the parties and because the appointment and notice to creditors was published in the county newspaper.

Included in the estate’s meager assets was a 1978 pick-up truck and several life insurance policies. At the time of the decedent’s death, the truck was subject to a lien in favor of the Yellowstone Bank of Absarokee, Montana, in the approximate amount of $3,100. Joanne arranged for a personal friend to loan her sufficient money to pay off the lien to the bank and he took an assignment of the bank’s lien rights. The decedent’s children were not given an opportunity to buy the truck from the estate. Bank officials were requested by Joanne’s attorney not to divulge the fact of the repayments or the method by which it received payment.

Lehner had a checking account at the Yellowstone Bank of Absarokee containing approximately $1,360. Joanne withdrew the money from this account after being appointed personal representative and deposited it in her account, claiming she did so because her attorney had not advised her it was improper to co-mingle estate funds with her own funds.

At the time of his death Lehner was the named insured in at least four different life insurance policies, one issued by Rushmore Mutual Life and three by Mutual Life Insurance Company of New York. The policy issued by Rushmore apparently designated the decedent’s first wife, Donna, as beneficiary. The other policies designated his second wife, Wanda, as beneficiary of one-half of the proceeds and the decedent’s three children as beneficiaries of the other one-half.

Shortly after Lehner’s death, the attorney representing Joanne notified the Mutual of New York agent in Absarokee, Montana, that there had been some changes in the code whereby Joanne, the third wife and personal representative, would be entitled to the proceeds of the insurance policies, notwithstanding Lehner had designated others as beneficiaries. He made demand by letter to the Absarokee agent for the proceeds of the policies. He subsequently sent a letter to Mutual Life Insurance Company of New York advising them the letter constituted an adverse claim on the proceeds of the policies. He also commenced a suit against Rushmore Mutual Life Insurance Company to recover the proceeds of that policy. As a result, neither insurance company has paid the proceeds to the named beneficiaries or Joanne.

Testimony indicates the inventory and appraisement filed by the personal representative omitted certain items of personal property owned by the decedent, including an outboard motor and a gold watch.

The issue before the Court is whether the District Court abused its discretion in removing Joanne Lehner as personal representative of the decedent’s estate.

The removal of a personal representative for cause is authorized “when removal would be in the best interest of the estate.” Section 72-3-526(2)(a).

The Court’s role on review is not one of substituting

“. . . our judgment for that of the trial court. We are confined to determine whether there is substantial credible evidence to support the findings of fact and conclusions of law . . . Moreover, Rule 52(a), M.R.Civ.P. provides, in part, that ‘[findings of fact shall not be set aside unless clearly erroneous, and due regard shall be given to the trial court to judge the credibility of the witnesses.”

General Mills, Inc. v. Zerbe Bros., Inc. (Mont. 1983), [207 Mont. 19,] 672 P.2d 1109, 1111, 40 St.Rep. 1830, 1832-33. “This Court will not interfere with a District Court’s decision unless it is clearly established that the District Court abused its discretion.” Matter of Estate of Counts (Mont. 1985), [217 Mont. 350,] 704 P.2d 1052, 1055, 42 St.Rep. 1243, 1246. The discretion of the trial judge within the statute, Section 72-3-526(2)(a), is wide, but the grounds must be valid and supported by the record. Matter of Estate of Wooten (1982), 198 Mont. 132, 137, 643 P.2d 1196, 1199. The record before the Court indicates an unwillingness on Joanne’s part to cooperate fully and to make full disclosure to the decedent’s heirs of all the facts involving the estate.

The Wooten case, supra, controls in these circumstances notwithstanding appellant’s argument to the contrary. Despite factual differences between the transgressions in the case at bar and those in Wooten, so long as the District Court’s grounds [for dismissal of the personal representative] are valid and sufficiently conform to the pleadings, we will not disturb its findings. 198 Mont. at 137, 643 P.2d at 1199. Dissimilarity of transgressions is not a prerequisite for distinguishing Wooten.

The petition for removal sets forth Joanne’s refusal to account for numerous specific items of the decedent’s personal property. She did not notify any of the surviving heirs she had filed a lawsuit against an insurance company involving an insurance contract which is not part of the estate and under which neither she as personal representative nor the estate is a beneficiary. She asserted adverse claims in three other insurance contracts under which neither she as personal representative nor the estate is a named beneficiary and has no apparent interest. The facts clearly comport with these allegations in the petition for removal. The District Court concluded it was not in the best interest of the estate for Joanne to continue to be its personal representative. The record manifestly justifies this finding. We affirm the lower court’s decision to remove Joanne Lehner as personal representative of the decedent’s estate.

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


author: MR. JUSTICE WEBER MR. JUSTICE MORRISON, MR. JUSTICE SHEEHY,

text:
    CHARLES F. FEMLING, Plaintiff and Appellant, v. MONTANA STATE UNIVERSITY, an agency of the State of Montana, et al., Defendant and Respondent.
    No. 84-181.
    Submitted Oct. 22, 1985.
    Decided Feb. 7, 1986.
    713 P.2d 996.

      Ted J. Doney argued, Helena, for plaintiff and appellant.
    LeRoy H. Schramm argued, Office of Commissioner of Higher Education, Helena, Roger N. Flair, Montana State University, Bozeman, for defendant and respondent.
   MR. JUSTICE WEBER

delivered the Opinion of the Court.

Charles F. Femling appeals from an order of the Gallatin County District Court which dismissed his complaint for veterans’ preference in hiring. We affirm the order of the District Court.

The issues raised on appeal are:

1. Did the retroactive repeal of the Montana veteran’s preference statutes (hereinafter, the repealer) deprive Mr. Femling of an accrued cause of action in violation of the due process clauses of the Montana and United States Constitutions?

2. Did the repealer deprive Mr. Femling of a remedy for an injury in violation of Art. II, Section 26, Mont. Const.?

3. Did the repealer deprive the courts of jurisdiction in violation of the doctrine of separation of powers?

4. Did the repealer provide for sovereign immunity from accrued causes of action without a vote of two-thirds of the members of each house as required by Art. II, Section 18, Mont. Const.?

5. Did the repealer violate Art. II, Section 35, Mont. Const, and the due process clauses of the Montana and United States Constitutions by retroactively depriving Mr. Femling of a vested right and entitlement to be employed?

Charles Femling applied in August, 1983 for a position at Montana State University (MSU). He claimed entitlement to the then statutory veterans’ preference in employment but was not interviewed for the job. A nonveteran was hired.

On December 19, 1983, Femling petitioned the District Court for an order for MSU to show cause why he should not be employed and given lost wages and benefits. His amended petition set forth his qualifications for the position for which he applied, and alleged that he was a qualified applicant, that he was a veteran, that he was not hired, that he was physically and mentally qualified for the job, and that he possessed the business capacity, competency, and education to discharge the duties of the position. On December 20, 1983, the day after Femling filed his petition, the Governor signed the repealer, which retroactively extinguished pending claims for violations of the former law.

MSU moved for dismissal based upon the new law. Femling argued to the District Court that the new law was unconstitutional on several grounds. He asserted that the new law denied his constitutional rights to access to the courts,-due process and equal protection. In addition, he asserted that the law was unconstitutional in that it impaired obligations of contract, provided immunity to the State without a required two-thirds vote of both houses, and violated the veterans’ preference section of the Montana Constitution. He also claimed the new law was illegal because the bill addressed more than one subject and was altered to change its purpose during the Special Session.

MSU also moved for dismissal of Femling’s petition on the ground that it failed to state a claim on which relief could be granted. MSU argued the new veterans’ preference statute constituted a valid repeal of the old laws.

The District Court granted MSU’s motion and dismissed Femling’s petition with prejudice. The District Court held that:

(1) The veterans’ preference under the old Montana statute was a gratuity.

(2) The gratuity had not vested.

(3) A gratuity may be repealed by the legislature.

(4) The legislature could abrogate Mr. Femlings’ cause of action against the State.

(5) MSU is exempt from the preference by legislative enactment.

From this order, Mr. Femling appeals.

I.

Did the repealer deprive Mr. Femling of an accrued cause of action in violation of the due process clauses of the Montana and United States Constitutions?

In Crabtree v. Montana State Library (Mont. 1983), [204 Mont. 398,] 665 P.2d 231, 40 St.Rep. 963, this Court determined that the statutory veterans’ preference in employment was absolute. In response to the Crabtree decision, the 1983 Special Session Legislature retroactively repealed the absolute preference and enacted a tie-breaker preference. The repealer states:

“This repeal applies retroactively to bar any claim of violation or application of 10-2-201 through 10-2-206 that has not been reduced to judgment, whether or not the judgment is final, on [the effective date of this act]. Claims under 10-2-201 through 10-2-206 that have been reduced to judgment, whether or not the judgment is final, on [the effective date of this act] are enforceable.”

Section 14, Ch. 1, Sp.L.Mont. 1983, set out in the Compiler’s Comments to Sections 10-2-201 through 10-2-206, MCA, which were repealed in 1985. At the time of the Special Session, approximately fourteen lawsuits were pending against the State for alleged violation of the absolute preference in employment. The legislative history of the repealer “shows that the legislature was unequivocal in its aim to bar those pending claims.” Nick v. Montana Dept. of Hywys (Mont. 1985), [219 Mont. 168,] 711 P.2d 795, 42 St.Rep. 1926.

The fourteenth amendment to the United States Constitution and Art. II, Section 17, in the Montana Constitution provide that the State may not deprive a person of life, liberty or property without due process of law.

Femling asserts that his cause of action against MSU for failure to hire and violation of the preference statute accrued when the University hired a nonveteran. He argues that cause of action became a vested property right upon the filing of his complaint. He contends that the legislature could not repeal the law without substituting another remedy to protect his vested right to the absolute preference in employment.

“A citizen can have no vested right in a general law which can preclude its amendment or repeal, and there is no implied promise on the part of the state to protect its citizens against incidental injury occasioned by changes in the law.” Stanford v. Coram (1903), 28 Mont. 288, 293, 72 P. 655, 656. As we noted in Conboy v. State (Mont. 1985), [214 Mont. 492,] 693 P.2d 547, 42 St.Rep. 120, a veteran acting under the absolute veterans’ preference statute did so in contemplation of the legislature’s power of repeal. Statutes may be replaced at any time, and a person acting under a statute is “deemed to have acted in contemplation of this power or repeal.” Section 1-2-110, MCA.

For substantive due process protections to apply, Femling’s claim to the absolute preference must be a vested right. In Conboy, we stated that the preference statute was a gratuity given to veterans by the State. It did not amount to a right vested in the veterans. Conboy, 693 P.2d at 552. We reaffirmed this conclusion in Nick v. Montana Dept. of Hywys. (Mont 1985), [219 Mont. 168,] 711 P.2d 795, 42 St.Rep. 1926.

A veteran does not have a reliance interest in the veterans’ preference unless and until it is actually received. Nick, [219 Mont. 168,] 711 P.2d 795, 42 St.Rep. at 1930. “[B]enefits conferred by gratuities may be . . . withdrawn at any time . . .” Lynch v. United States(1934), 292 U.S. 571, 577, 54 S.Ct. 84, 842, 78 L.Ed. 1434. The Ninth Circuit Court of Appeals has characterized a claim to an unreceived gratuity as a “floating expectancy”:

“Whatever anticipations a serviceman entertained . . . with respect to preferential advantage in the federal civil service were no more than some floating expectancy entirely dependent upon the government’s bounty. A claim of unconstitutional deprivation cannot be built upon this foundation.”

Monaco v. United States (9th Cir. 1975), 523 F.2d 935, 940, cert. den. 424 U.S. 914, 96 S.Ct. 1114, 47 L.Ed. 319.

The giving of a government gratuity does not change the nature of the gratuity. The giving of a veterans’ preference in employment does not cause that preference to become a private vested right.

We conclude that the filing of a claim to a government gratuity does not change that gratuity into a vested right. Mr. Femling’s claim to and expectancy of a veterans’ preference do not transform a gratuity into a protectable, vested right.

We hold that the repeal of the preference gratuity and dismissal of Mr. Femling’s claim to that gratuity did not violate the due process clauses of the Montana and United States Constitutions.

II.

Did the repealer deprive Mr. Femling of a remedy for an injury in violation of Art. II, Section 16, Mont. Const.?

Article II, Section 16, Mont. Const, provides in pertinent part:

“Courts of justice shall be open to every person, and speedy remedy afforded for every injury of person, property, or character.”

In order for Art. II, Section 16 to apply, there must have been an “injury of person, property or character.” As stated in White v. State (Mont. 1983), [203 Mont. 363,] 661 P.2d 1272, 1275, 40 St.Rep. 507, 510: “The language ‘every injury’ embraces all recognized compensable components of injury . . .”

The veterans’ preference statutes were and are enforceable by court order reopening the selection process. Sections 10-2-206, MCA (1981) and 10-2-226, MCA (1985). Neither the statutory law nor the common law has ever recognized violation of the preference statutes as compensable in money damages. Jensen v. State, Dept. of Labor and Industry (Mont. 1984), [213 Mont. 84,] 689 P.2d 1231, 1234-35, 41 St.Rep. 1971, 1976.

We conclude that violation of the preference statute does not result in a compensable injury within the meaning of Art. II, Section 16, Mont. Const. Therefore, the repeal of the preference statute did not deprive Mr. Femling of a remedy for an injury. We hold that the repeal of the preference statute did not violate Art. II, Section 16, Mont. Const.

III.

Did the repealer deprive the courts of jurisdiction in violation of the doctrine of separation of powers?

Mr. Femling contends that the doctrine of separation of powers prohibits the legislature from depriving the courts of jurisdiction over an action which has already been filed. He contends that the repealer has unlawfully deprived the District Court of jurisdiction over this case. MSU argues that this Court has acknowledged that a statute may wipe out pending causes of action. Continental Oil Co. v. Montana Concrete Co. (1922), 63 Mont. 223, 207 P. 116. MSU also argues that the bill repealing the Montana preference statute was drafted without reference to court jurisdiction, properly leaving interpretation of that issue to the courts.

Mr. Femling has acknowledged that this issue was not raised before the District Court. Because it was not raised below, we will not consider it on appeal. Dodd v. City of East Helena (1979), 180 Mont. 518, 523, 591 P.2d 241, 244.

IV.

Did the repealer provide for sovereign immunity from accrued causes of action without a vote of two-thirds of the members of each house as required by Art. II, Section 18, Mont. Const.?

This issue has been decided in two previous cases. The legislature could repeal the veterans’ preference by a majority vote at any time. Conboy, 693 P.2d at 552; Nick, 42 St.Rep. at 1933. The repealer does not provide for sovereign immunity. It simply revokes a gratuity. We reaffirm our holding that the legislature properly repealed the veterans’ preference.

V.

Did the repealer violate Art. II, Section 35, Mont. Const, and the due process clauses of the Montana and United States Constitutions by retroactively depriving Mr. Femling of a vested right and entitlement to be employed.?

Art. II, Section 35, Mont. Const, provides:

“The people declare that Montana servicemen, servicewomen, and veterans may be given special considerations determined by the legislature.”

As we discussed under issue one, the fourteenth amendment to the United States Constitution and Art. II, Section 17, in the Montana Constitution provide that the state may not deprive a person of life, liberty, or property without due process of law.

This issue, which we find nearly identical to issue one, was addressed in both Conboy and Nick. We have held that the veterans’ preference was a government gratuity, and not a right vested in the veterans, Conboy, 693 P.2d at 552. We have also held that Art. II, Section 35, Mont. Const, is a permissive provision, and does not provide an independent ground for finding that the veterans’ preference is more than a gratuity. Nick, [219 Mont. 168,] 711 P.2d 795, 42 St.Rep. at 931. Because the preference is a gratuity, and not a life, liberty, or property right, the repealer does not violate the due process clause of either the State or the Federal Constitution, and it does not deprive Mr. Femling of a right or entitlement to be employed.

The District Court’s order granting MSU’s motion to dismiss is therefore affirmed.

MR. CHIEF JUSTICE TURNAGE and MR. JUSTICES HARRISON and GULBRANDSON and HON. THOMAS M. McKITTRICK, District Judge, sitting in place of MR. JUSTICE HUNT concur.

MR. JUSTICE MORRISON,

specially concurring:

As the issues are framed, I concur in the result. However, I do not agree with all that is said in the majority opinion.

MR. JUSTICE SHEEHY,

dissenting:

I dissent.

We should not approve on any ground an outright refusal of state employees in managerial position to flout the applicable statutory law. At the time Femling applied for state employment at the University, he had a statutory right to preference, which he claimed. His right to that employment became vested with his claim for preference. The statute granting veterans’ preference should have been then obeyed.

An accrued statutory right of action is a vested right and is to be protected. Stucki v. Loveland (1972), 94 Idaho 621, 495 P.2d 571, 573. Giving retroactive effect to the repeal of Section 10-2-203, MCA deprives Femling of an accrued statutory right. It was no longer a possible gratuity. His preference vested, but is now stripped away. I would reverse with instructions to accord him his rights as a veteran.


author: MR. JUSTICE HUNT MR. JUSTICE GULBRANDSON,

text:
    STATE OF MONTANA, Plaintiff and Appellant, v. DENNIS R. HAACK, Defendant and Respondent.
    No. 85-236.
    Submitted Dec. 18, 1985.
    Decided Feb. 7, 1986.
    713 P.2d 1001.
    Mike Greely, Atty. Gen., Mark J. Murphy, argued, Asst. Atty. Gen., Helena, John R. Frederick, County Atty., Poison, for plaintiff and appellant.
    Brian J. Smith, argued, Manley & Smith, Poison, for defendant and respondent.
   MR. JUSTICE HUNT

delivered the Opinion of the Court.

The respondent, Dennis Haack, was charged with ten counts of theft for purposely or knowingly obtaining or exerting unauthorized control over property of the owner consisting of funds in a joint checking account. The respondent filed a motion to dismiss on the grounds that he was a joint owner in the joint checking account and authorized to withdraw funds from the account. The District Court found as a matter of law the respondent could not be convicted of the crime of theft for withdrawing funds from a joint tenancy bank account and granted the respondent’s motion to dismiss. The appellant, State of Montana, appeals from the granting of that motion.

We affirm.

The issue presented for review is whether, under the facts presented in this case, the District Court erred in ruling as a matter of law that there can be no conviction for the crime of theft when an individual withdraws funds from a joint tenancy checking account if that individual is a joint tenant in that account.

Because this matter is presented on appeal from the granting of a motion to dismiss, few facts have been presented in District Court. The record consists of the charging documents and the parties’ briefs pertaining to the motion to dismiss.

The record and the arguments on appeal show that the respondent, Dennis Haack, contracted with homeowners, George and Lois Carey, to construct a house for them. The Careys deposited a total of $30,000 in a joint checking account in which the respondent and George Carey were Joint tenants authorized to draw from the account. The account contained the total funds for construction to completion and, evidently, included the respondent’s potential profit also.

Construction commenced and the respondent began drawing from the account. The charging documents allege that checks totaling in excess of $10,000 were drawn by the respondent for personal unauthorized purposes. Although the reason why is not clear, Careys requested that construction be halted. The reason may be that they had notice of the respondent’s withdrawals. The Careys withdrew the remaining funds in the account and determined that the balance was less than should be in the account at that time.

The respondent was then charged by information with ten counts of theft for writing checks on the joint account. The respondent successfully moved to dismiss the charges. The District Court found as a matter of law that the respondent could not be convicted of the crime of theft because he was a joint tenant in the account.

The appellant, State of Montana, argues that Section 45-6-303, MCA, makes it perfectly clear that a joint tenant may be convicted of theft of joint tenancy property. Section 45-6-303, MCA, provides that it is no defense to a charge of theft of property that the offender has an interest therein when the owner also has an interest to which the offender is not entitled. The appellant argues that if this Court finds any ambiguity in Section 45-6-303, MCA, it is immediately cleared up when the legislative comment to that code section is considered. The legislative comment contained in Section 45-6-303, MCA, (annot.), states that the provision removes any doubt regarding the commission of theft by a co-owner who exercises unauthorized control with the purpose to permanently deprive a co-owner of his interest in the property.

The respondent, Dennis Haack, argues that a joint tenancy bank account gives to both joint tenants the authority to exert control over the property placed in that account without further consent by any other person and that, therefore, a person cannot be convicted of theft as a result of withdrawing funds from a joint tenancy bank account. The respondent refers to several Montana cases for the proposition that a special interest is created by a joint bank account. He argues that such precludes a finding that he could have “exerted unauthorized control over the property of an owner” and, therefore, he could not be convicted of theft. He argues that it is abundantly clear that either joint tenant may withdraw all funds from a joint tenancy bank account without the consent of any other person because both joint tenants have the authority to exert absolute control over all the funds placed in such an account. The respondent recognizes Section 45-6-303(1) MCA, relied on heavily by the appellant, but argues that it is not applicable because the owner had no “interest to which the offender is not entitled.”

We are solely concerned with whether, as a matter of law, a joint tenant may not be convicted of the crime of theft for drawing funds from a joint tenancy checking account. A joint tenancy bank account is a special relationship between co-owners. It is a relationship that may create an equal unrestricted and absolute interest in such co-owners with neither co-owner having an interest to which the other is not entitled. A statutory example of the law on joint bank accounts or similar joint ownership arrangements is contained in Section 32-1-442, MCA, which provides:

“32-1-442. Joint deposits — survivorship. (1) When a deposit has been made ... in the names of two or more persons, payable to either . . . such deposit, or any part thereof . . . may be paid to any of said persons . . . .”

There are a number of cases in Montana on the nature of joint bank accounts. In Casagranda v. Donahue (1978), 178 Mont. 479, 585 P.2d 1286, this Court said:

“A joint bank account has a special attribute which allows either joint owner, by virtue of the contract with the bank, to acquire dominion over the entire account by drawing a proper order on the bank . . . [e]ither party can acquire the whole account either by withdrawing it during the lifetime of the co-owners or by survivor-ship. Casagranda, 585 P.2d at 1288.
“A review of the applicable criminal statutes demonstrates that there can be no theft of joint tenancy bank account property.
“Theft is defined in Section 45-6-301, MCA, as:
“45-6-301. Theft. (1) A person commits the offense of theft when he purposely or knowingly obtains or exerts unauthorized control over the property of the owner and:
“(a) has the purpose of depriving the owner of the property;
“(b) purposely or knowingly uses, conceals, or abandons the property in such manner as to deprive the owner of the property; or
“(c) uses, conceals, or abandons the property knowing such use, concealment, or abandonment probably will deprive the owner of the property.
“(2)

The Montana statutes have a provision concerning an offender’s interest in the property. Section 45-6-303, MCA, provides:

“45-6-303. Offender’s interest in the property.
“(1) It is no defense to a charge of theft of property that the "offender has an interest therein when the owner also has an interest to which the offender is not entitled.
“(2)

The Criminal Law Commission Comments state in regards to subsection (1) of Section 45-6-303, MCA:

“The provision removes any doubt regarding the commission of theft by a co-owner, such as a partner, joint tenant or tenant in common, or any other type of co-owner who exercises unauthorized control with the purpose to permanently deprive a co-owner of his interest in the property. Section 45-6-303, MCA (annot.).

The respondent presents the stronger argument. Statutes and case law demonstrate that a joint tenancy bank account is indeed a special relationship between co-owners. This special relationship precludes application of the theft laws. For example Section 45-6-303, MCA, on the offender’s interest in property requires the owner to have “an interest to which the offender is not entitled,” and the comments to this section, Section 45-6-303, MCA, (annot.), require “unauthorized control.” The special relationship between co-owners in a joint tenancy bank account cannot have any “unauthorized control” or “interest to which offender is not entitled” by a joint tenant.

Affirmed.

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

MR. JUSTICE GULBRANDSON,

dissenting:

I respectfully dissent.

In my view, the last sentence of the majority opinion would be legally sound if an additional written contract did not exist between the two named joint tenants. The majority refer to the contract, but, in effect, rule that as a matter of law the contents of that contract can have no legal criminal effect on the use of the funds in the joint tenants’ bank account.

I would allow the State to prove, if it is able, that the defendant, by the terms of his contract, was not authorized to exercise control over the joint tenancy funds in the manner which he did. This manner of proceeding would recognize that the legislature had a legitimate reason for enacting Section 45-6-303, MCA.

MR. JUSTICE WEBER joins in the foregoing dissent of MR. JUSTICE GULBRANDSON.