author: JUSTICE WEBER

text:
    STATE OF MONTANA, Plaintiff and Respondent, v. MELVIN GEORGE DOW, Defendant and Appellant.
    No. 92-060.
    Submitted on Briefs November 18, 1992.
    Decided December 30, 1992.
    49 St.Rep. 1168.
    256 Mont. 126.
    844 P.2d 780.

      For Defendant and Appellant: Philip Walsh, Bozeman.
    For Plaintiff and Respondent: Marc Racicot, Attorney General, Paul D. Johnson, Assistant Attorney General, Helena; Mike Salvagni, Gallatin County Attorney, Martin Lambert, Deputy County Attorney, Bozeman.
   JUSTICE WEBER

delivered the Opinion of the Court.

A jury in the District Court for the Eighteenth Judicial District, Gallatin County, convicted Melvin George Dow of robbery and sexual intercourse without consent. Dow appeals. We affirm.

The issues are:

1. Did the District Court err in denying Dow’s two pre-trial motions to suppress evidence and statements obtained from him before and after his arrest?

2. Were Dow’s constitutional rights violated by application of Section 46-13-302(4), MCA (1989), which places the burden of proof upon a defendant moving to suppress evidence?

3. Was the evidence sufficient to convict Dow of robbery?

Late on the evening of Christmas Day 1990, a woman was assaulted as she walked home from a movie in downtown Bozeman, Montana. Her assailant grabbed her from behind, told her he had a gun and not to “get dumb,” and walked her into a dimly-lit alleyway. The victim repeatedly asked him what he wanted. When she asked if he wanted her money, he said he did. At his direction, she removed her money from her purse and wallet and handed it to him. The victim then asked if she could go. The assailant replied, “No, there is one more thing.” He raped her, then allowed her to leave.

The victim walked home and immediately called the police. Investigating officers escorted her back to the scene of the crime, where two sets of footprints were clearly visible in fresh snow. The officers determined that one set of footprints was the victim’s and that the footprints corroborated her story. The second set of footprints was made by a person wearing footwear which left a distinctive zigzag design in the prints.

One officer took the victim to the hospital for a rape examination and another began following the assailant’s footprints away from the crime scene. There were few other tracks in the new snow. In some places, the footprints indicated that the person was traveling at a run and, in others, the person had doubled back over his own tracks or walked within vehicle tracks. The footprints eventually led to Room No. 11 of the Alpine Motel, several blocks from the crime scene.

When the police officer arrived at the motel, the lights were on in Room No. 11 and noise from a television or radio could be heard from within. After radioing for backup assistance and ascertaining at the motel office that one male was registered in Room No. 11, the officer knocked on the door. It was opened by Dow, clad only in his underwear.

Dow’s appearance matched the description the victim had given of her assailant. Announcing himself as a police officer, the officer entered the room. Dow’s boots were drying on a radiator. The pattern on the soles of the boots matched the zigzag pattern in the tracks the officer had been following. A pair of wet jeans were hanging in the open closet. After the design on the soles of Dow’s boots was compared with the footprints leading from the scene of the crimes, Dow was arrested.

Prior to trial, Dow moved to have evidence seized from his motel room suppressed on grounds that a search warrant was required before police officers could enter the room. He also moved to suppress a tape-recorded statement he gave shortly after his arrest. After briefing and evidentiary hearings, the District Court denied both motions.

I

Did the District Court err in denying Dow’s two pre-trial motions to suppress evidence and statements obtained from him before and after his arrest?

Dow points out that under the Fourth Amendment to the United States Constitution and Article II, Section 11 of the Montana Constitution, warrantless felony arrests in the home are presumptively unreasonable and prohibited. He further points out that a person staying in a hotel or motel room is afforded the same constitutional protection as a person living in a home or other dwelling. U.S. v. Diaz (7th Cir. 1987), 814 F.2d 454, 457-58, cert. denied, 484 U.S. 857, 108 S.Ct. 166, 98 L.Ed.2d 120; State v. Otwell (1989), 239 Mont. 150, 779 P.2d 500. He claims that no justification is present for breaching the prohibition against a warrantless intrusion into his motel room, and that the evidence seized from the room and his post-arrest statements should be suppressed as fruits of an illegal entry.

The State maintains that police officers had probable cause to enter Dow’s motel room and arrest him. The State further maintains that the officers were justified in entering the motel room without a warrant under the hot pursuit and exigent circumstances exceptions to the general prohibition against warrantless entries.

Exception is made to the warrant requirement where exigent circumstances and probable cause are present. Warden v. Hayden (1967), 387 U.S. 294, 87 S.Ct. 1642, 18 L.Ed.2d 782; State v. Sorenson (1979), 180 Mont. 269, 590 P.2d 136. Probable cause exists

if the facts and circumstances within the officer’s personal knowledge, or imparted to the officer by a reliable source, are sufficient to warrant a reasonable person to believe that the suspect has committed an offense. (Citations omitted.)

State v. Schoffner (1991), 248 Mont. 260, 264, 811 P.2d 548, 551.

Dow does not seriously argue that the officer who knocked on his motel room door lacked probable cause to arrest him. When Dow opened the door to his room in response to the officer’s knock, the facts known by the officer were: the victim had promptly reported a rape and robbery by an armed gunman; tracks in the snow at the scene corroborated her report; the only fresh set of tracks leading from the crime scene other than the victim’s led to Dow’s motel room and indicated that he was trying to avoid being followed; Dow was the only person registered in Room No. 11; and Dow matched the physical description of the assailant. We conclude that the officer had probable cause to arrest Dow. We therefore proceed to consideration of whether exigent circumstances were present.

In Hayden, the United States Supreme Court recognized a particular type of exigent circumstance, when police in immediate pursuit tracked an armed robber to his home and entered the home without a warrant. The Court stated

[The police] acted reasonably when they entered the house and began to search for a man of the description they had been given and for weapons which he had used in the robbery or might use against them. The Fourth Amendment does not require police officers to delay in the course of an investigation if to do so would gravely endanger their lives or the lives of others. Speed here was essential, and only a thorough search of the house for persons and weapons could have insured that Hayden was the only man present and that the police had control of all weapons which could be used against them or to effect an escape.
... Here, the seizures occurred prior to or immediately contemporaneous with Hayden’s arrest, as part of an effort to find a suspected felon, armed, within the house into which he had run only minutes before the police arrived. The permissible scope of search must, therefore, at the least, be as broad as may reasonably be necessary to prevent the dangers that the suspect at large in the house may resist or escape.

Hayden, 387 U.S. at 298-99, 87 S.Ct. at 1645-46. While hot pursuit requires “some sort of a chase, ... it need not be an extended hue and cry ‘in and about [the] public streets.’ ” United States v. Santana (1976), 427 U.S. 38, 43, 96 S.Ct. 2406, 2410, 49 L.Ed.2d 300, 305.

This Court has recognized the theory of hot pursuit, but in each Montana case in which the theory has been raised, it has been deemed nonapplicable. In Sorenson, 590 P.2d at 139, this Court stated that the theory is not available to peace officers unless a felony has been committed and the suspect is fleeing. Dow claims the Sorenson opinion limits the definition of hot pursuit so that the facts of this case are outside that definition.

In Sorenson, police officers received a report of a boy who had threatened to shoot his high school principal. The boy was housesitting for Sorenson. While looking for the boy at Sorenson’s house, officers found evidence of use and possession of illegal drugs. Eleven days later, the officers obtained a search warrant for Sorenson’s house and charged Sorenson with drug offenses. They attempted to use a theory of hot pursuit to justify admission into evidence of items seized in the search of the house. This Court held that hot pursuit did not apply. Sorenson, 590 P.2d at 139.

The piggy-backing of nonrelated offenses by separate persons is not present in this case as it was in Sorenson. Further, at the time officers entered Sorenson’s home without a warrant, no crime had been committed and they were not in pursuit of a felon.

In State v. District Court of Eighth Jud. Dist. (1978), 176 Mont. 257, 577 P.2d 849, which Dow cites, this Court held that a warrantless entry into an apartment approximately two hours after a murder was not justified under a theory of hot pursuit. In that case, however, the investigating officers were engaged in a general investigation, not tracking the culprit from the scene of the crime.

Dow also cites Welsh v. Wisconsin (1984), 466 U.S. 740, 104 S.Ct. 2091, 80 L.Ed.2d 732. In that case, police officers received a late-evening report of a car which had proceeded erratically on a highway and then into a field, after which the driver left the car on foot. Officers obtained the registration for the car and determined that it was owned by Welsh and that Welsh’s home was near the field in which the car had been abandoned. The officers went to Welsh’s home, where they arrested him for operating a motor vehicle while under the influence of an intoxicant. The Court held that the entry into Walsh’s home was not justified as hot pursuit. Welsh, 466 U.S. at 753-54, 104 S.Ct. at 2099, 2100.

In Welsh, the Court relied heavily on the nature of the offense — a civil forfeiture traffic offense for which imprisonment was not possible. There, the exigencies were insufficient to overcome the warrant requirement, in the context of an arrest for a mere civil traffic offense. In this case, in contrast, the offenses were two felonies. Moreover, in the present case, there was a significant continuing threat to the public safety as long as the assailant remained at large because, unlike Welch, the assailant had not abandoned his weapon. Also, in the present case, the officers did not have the assailant’s address — the only way of tracking him was to follow his footprints from the scene of the crime.

We recognize that nearly two hours is a long “hot pursuit.” However, the doctrine of “fresh pursuit” has been applied to a 75-minute pursuit of a suspect following a shooting. People v. Johnson (Cal. 1981), 637 P.2d 676. An Illinois court of appeals determined that “warm pursuit” justified entry into a private yard and garage several hours after multiple rapes were committed. People v. Morrow (Ill. App. 1982), 433 N.E.2d 985, 992. The court relied upon the limited scope of the search and the serious nature of the crime. Id.

Footprints in fresh snow present a rare situation in which the physical trail of an offender can clearly be followed away from the scene of a crime after the offender has left that scene. The Court of Appeals of Idaho has used the broader theory of exigent circumstances to justify admission of evidence seized about an hour after a robbery, following the tracking of footprints in fresh snow from the scene of the crime to a house in which defendants were arrested. State v. Campbell (Idaho App. 1983), 662 P.2d 1149.

Here, the victim reported the two felony crimes immediately after they occurred. When an officer began following Dow’s footprints thirty to forty-five minutes after the crimes were committed, it was reasonable to assume that the suspect, who left the scene on foot, might still be in flight. The officer continuously followed the distinctive footprints until he reached the motel room and called for backup, knocking on the door of Dow’s motel room less than two hours after the crimes were committed. It was not known whether Dow was aware that the officer, who had been using a bright flashlight, was outside his motel room. It was not known whether Dow was alone, and he was believed to have a gun. In this case, the crimes were serious and the scope of the warrantless search was narrow — officers obtained a search warrant before conducting more than a “plain view” search of Dow’s motel room.

We conclude that exigent circumstances were present in this case as described under Hayden, Santana, and Welsh. We hold that the entry into Dow’s motel room was justified under the hot pursuit exception to the warrant requirement under both the Montana and the United States Constitutions. We further hold that the District Court did not err in denying Dow’s motions to suppress evidence.

II

Were Dow’s constitutional rights violated by application of Section 46-13-302(4), MCA (1989), which places the burden of proof upon a defendant moving to suppress evidence?

Section 46-13-302(4), MCA (1989), provided that, in a hearing concerning suppression of evidence, “[t]he burden of proving that the search and seizure were unlawful shall be on the defendant.” Dow argues that he was deprived of his right of due process as a result of application of the statute.

At the first suppression hearing, Dow’s counsel requested that the State present its evidence first. That request was granted and the State proceeded. Dow then presented his evidence and arguments. The record demonstrates that Dow had the opportunity to present all evidence which he desired to have the court consider. In its ruling, the District Court made no reference to burden of proof as between the parties and in addition made no reference to Section 46-13-302(4), MCA (1989).

The record demonstrates this is not a “close” case in which the application of a particular burden of proof would affect the outcome. The record is devoid of any substantial evidence to support Dow’s theory of suppression. We conclude that there is no reason to consider the constitutional theory presented by Dow.

Ill

Was the evidence sufficient to convict Dow of robbery?

Dow maintains that there is insufficient evidence that he obtained unauthorized control over the victim’s money. Specifically, he argues that he could not have obtained unauthorized control over the victim’s money because she voluntarily gave it to him. He further claims he made no threat which communicated a specific request for money.

Our standard of review is whether, after viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt. State v. Paulson (1991), 250 Mont. 32, 46, 817 P.2d 1137, 1146. The victim testified that Dow grabbed her from behind, told her he had a gun, and forced her into a dimly-lit alleyway. Under these circumstances, the victim asked Dow what he wanted of her. When she asked if he wanted her money, he said he did. She handed Dow her purse, but he indicated that he wanted only the money, not the whole purse. At his direction, she removed her money from her purse and wallet. When she asked if she could go, he replied, “No, there is one more thing.” This statement clearly implies that Dow had two things on his mind when he forced the victim into the alleyway. One thing was to rob her; the “one more thing” was to rape her. Threat is implicit when a lone and unarmed woman on foot is forced into a dimly-lit alley by a man claiming to have a gun and the man then answers “yes” to her question as to whether he wants her money.

We conclude that a rational finder of fact could have found that Dow obtained unauthorized control over the victim’s property. We therefore hold that the evidence was sufficient to support Dow’s conviction of robbery.

Affirmed.

JUSTICES HARRISON, HUNT, GRAY and McDONOUGH concur.


source: Caselaw Access Project

author: JUSTICE HARRISON

license: Public Domain

text:
    DEBBIE NENTWIG, Plaintiff and Appellant, v. UNITED INDUSTRY, INC., Defendant and Respondent.
    No. 92-297.
    Submitted on Briefs October 22, 1992.
    Decided December 30, 1992.
    49 St.Rep. 1172.
    256 Mont. 134.
    845 P.2d 99.

      For Appellant: W. Scott Green, Billings.
    For Respondent: Earl J. Hanson, Billings.
   JUSTICE HARRISON

delivered the Opinion of the Court.

This is an appeal from the Thirteenth Judicial District, Yellowstone County, the Honorable Robert W. Holmstrom presiding. Appellant Debbie Nentwig (Nentwig) appeals from the entry of summary judgment in favor of respondent United Industry, Inc. (United) on her claims of breach of contract and fraud. We affirm.

The following issues are raised on appeal:

1. Did the District Court abuse its discretion by raising an issue that was not in the pretrial order?

2. Did the District Court err in granting summary judgment in favor of United?

3. Did the District Court err in refusing to grant summary judgment in favor of Nentwig?

Nentwig and her then partner, Jill Murphy, entered into a lease dated October 21, 1982, to rent approximately 271 square feet of space in the Transwestem I building (TWI) in Billings. The term of the lease was December 15,1982 to December 14,1985. The purpose of the lease was to provide a location for their hair styling salon. Nentwig dealt with Jeff Shoop who was a managing partner in TW Partnership, the owner of TWI, and with Larry Nitz who worked for the firm that managed TWI for the partnership.

In October 1985, Nentwig and Murphy dissolved their partnership. Also in October 1985, Nitz delivered to Nentwig a copy of a lease for another three years because the original lease was due to expire in December of that year. This new lease (the 1985 lease) expired on October 31, 1988. Nentwig signed this lease and added a letter that read:

I am herewith delivering an executed Office Lease Agreement pertaining to the space I am leasing for “A Touch of Class” barbershop. It is my understanding that if you cancel this lease after October 31,1987, you will provide me with alternative space in the TW Plaza and will pay me some amount to be agreed upon for relocation costs and for leasehold improvements. I understand that you do not want to have this put in writing in the lease but I do want you to know what my understanding is in the event you elect to terminate the lease after October 31,1987. As you know, I have had to buy out my ex-partner, Jill Murphy, and in doing so I had to obtain a substantial loan which will not be paid off until after October 31, 1987. Therefore, it is extremely important to me that I know that I have space available to me down the road and that I will not be required to spend additional money for leasehold improvements, etc. If this letter does not reflect our understanding, please let me know as soon as possible.

She returned the lease and the letter to Nitz who then passed it on to Jeff Shoop for execution by TW Partnership. However, no executed copy was produced, and Shoop and Nitz allege that it never was executed. In fact, Shoop and Nitz testified in their depositions that they told Nentwig that the long term lease would not be signed until another tenant, Mutual of New York, decided whether it wanted to expand into her area of the building. They claim to have told her that the lease was not signed. However, Nentwig claims that she was under the impression the lease had been signed and that she was never given any indication that it was not, or would not be, signed. She does admit in her deposition that Nitz never told her or led her to believe that Shoop had physically signed the document.

Nentwig remained in the building and continued to pay rent after the original lease expired in December 1985.

In July 1986, TW Partnership, as part of the sale of the building, assigned its leases and rents in TWI to United, from whom it had bought TWI originally. Appended to the assignment was a list entitled “Transwestern 1 Leases,” which included Nentwig’s salon. Nitz remained as manager of the TWI property.

In December 1986, Nitz sent a letter to all TWI tenants, including Nentwig, which stated:

All office space leases between Transwestern 1 Tenants and TW Partnership have been assigned to United Industry, Inc. Here is a copy of the Assignment document for your files. If you have a written lease, this document should be attached to it.

In July 1988, Nentwig sent a letter to Nitz informing him that she desired to exercise an option to renew her lease, which was contained in the 1985 lease. United’s general counsel denied Nentwig’s request on the basis that the 1985 lease had never been signed on the lessor’s behalf, therefore she had no option to exercise. Counsel informed Nentwig that she had a month-to-month lease after United took back the property. The letter informed Nentwig that the building would undergo extensive remodelling and that her tenancy was terminated effective October 31,1988. We note that this is the date the 1985 lease expired under its own terms anyway.

Nentwig then sued United for breach of contract for failing to allow her to renew the lease, provide alternative space, pay relocation costs, and reimburse her for improvements. Later she filed an amended complaint asserting that her claim was not barred by the Statute of Frauds and alleging part performance, equitable estoppel, promissory estoppel, and fraud. She was again allowed to amend her complaint to allege breach of the implied covenant of good faith and fair dealing.

A pretrial conference was held September 13, 1991, at which time the attorneys and the judge signed a pretrial order. On the day of trial, the court held a conference in chambers where Nentwig’s counsel informed the court that he was relying on the option provision contained in the 1985 lease. The judge then informed the parties that his independent research in preparing for trial led him to two Montana cases, Riis v. Day (1980), 188 Mont. 253, 613 P.2d 696, and Drug Fair Northwest v. Hooper Enters., Inc. (1987), 226 Mont. 31, 733 P.2d 1285, which he felt controlled the issues in this case. He informed the parties that the option clause in the 1985 lease might be void for vagueness or indefiniteness under the holdings in those cases. He recognized that the issue had not been raised in the pleadings, in the motions for summary judgment, in the pretrial order, or in the parties’ trial briefs. He gave United fifteen days to file a brief on the issue and to make any motion it deemed appropriate. He gave Nentwig fifteen days to respond, and he gave United five days to reply after that.

Both parties filed briefs and moved for summary judgment. The District Court granted United’s motion and denied Nentwig’s motion.

I

Did the District court abuse its discretion by raising an issue that was not in the pretrial order?

Nentwig asserts that the issue of whether the provision was void for vagueness or indefiniteness had not been raised in a timely fashion, therefore it should be considered waived. The District Court recognized that the issue had not been previously raised, but on the basis of Rule 16, M.R.Civ.R, which provides for modification of the pretrial order to prevent manifest injustice, it determined that it would be best to dismiss the jury and provide the parties an opportunity to argue the issue in briefs.

The District Court reasoned that “the submission to the jury of a case contrary to the law as announced by our Supreme Court would be manifest injustice to one or both of the parties.” After considering the alternatives, the court determined that dismissing the jury and allowing the parties to brief the issue was the best procedure to follow.

Nentwig correctly points out that failure to raise an issue in the pretrial order may result in a waiver. Har-Win, Inc. v. Consolidated Grain & Barge Co. (5th Cir. 1986), 794 F.2d 985; Miles v. Tennessee River Pulp & Paper Co. (11th Cir. 1989), 862 F.2d 1525. The purpose of the pretrial order is to prevent surprise, simplify the issues, and permit the parties to prepare for trial. Bache v. Gilden (1992), 252 Mont. 178, 181-82, 827 P.2d 817, 819, 49 St.Rep. 203, 204. However, this Court said in Bell v. Richards (1987), 228 Mont. 215, 217, 741 P.2d 788, 790, that the pretrial order “should be liberally construed to permit any issues at trial that are ‘embraced within its language.’ ” (Quoting Miller v. Safeco Title Ins. Co. (9th Cir. 1985), 758 F.2d 364, 368.) But the theory or issue must be at least implicitly included in the pretrial order. United States v. First Nat’l Bank of Circle (9th Cir. 1981), 652 F.2d 882, 886; ACORN v. City of Phoenix (9th Cir. 1986), 798 F.2d 1260, 1272.

In the present case, in chambers before the trial was to begin, Nentwig’s counsel informed the District Court that Nentwig intended to rely on a theory that United breached the option clause contained in the 1985 lease. In her contentions listed in the pretrial order, Nentwig raised this issue generally by claiming that United breached the lease. In the “Issues of Law” section of the pretrial order, Nentwig raised the issue of whether options to renew a lease are subject to the Statute of Frauds. United generally denied that it had breached the lease or any contract. In resolving this matter, the judge was required to review the contract, especially the option provision. We feel that Nentwig’s reliance on the option provision necessarily carried with it a requirement that the provision be valid.

As the court said in Manbeck v. Ostrowski (D.C. Cir. 1967), 384 F.2d 970, 975, cert. denied, 390 U.S. 966, 88 S.Ct. 1077, 19 L.Ed.2d 1170 (1967):

[Wjhile the pre-trial order may be the beginning, it is never the end of a matter of this sort. It normally “controls the subsequent course of the action,” but not if it is “modified at the trial to prevent manifest injustice.” The judicial function does not terminate upon discovery that an issue is unspecified, but extends to a determination as to whether the ends of justice implore that the issue nonetheless be introduced into the litigation. This frequently involves a delicate balance of competing considerations, variable from case to case, in order that the decision may be soundly made. And absent perceptible irregularity in a process so largely discretionary, we are loath to disturb the result.

Although the district court has wide discretion, Manbeck, and the pretrial order is to be viewed liberally, Bell, the district court must be mindful not to prejudice the parties. See Glissman v. AT&T Technologies, Inc. (8th Cir. 1987), 827 F.2d 262. We recently held in Bache that the district court abused its discretion by allowing a witness who had not been listed in the pretrial order to testify at trial. We held that because the respondent had not revealed the information in a timely fashion and the appellant was not given the opportunity to depose the witness, the court had abused its discretion. Bache, 827 P.2d at 819.

In a case similar to the present one, Morris v. Horneo Int'l, Inc. (5th Cir. 1988), 853 F.2d 337, the seller of a business brought suit to collect payments under the terms of a non-competition clause. Although the defendant buyer had not raised the issue of substantial performance in his counterclaim or in the pretrial conference, the court, in drafting its opinion a month after trial, injected the doctrine into the case to the defendant’s benefit. The appellate court held this was error because the issue had not been raised and the plaintiff had no notice that the issue would be important in the case “until the time had passed to meet the issue squarely.” 853 F.2d at 343.

On the other hand, we held that there was no error in Ottersen v. Rubick (1990), 246 Mont. 93, 803 P.2d 1066, where even though certain legal issues had not been set forth specifically in the pretrial order, they had been argued in briefs before the court.

We hold that the District Court did not abuse its discretion by raising the issue of vagueness because it is vested with wide discretion, the issue was implicit in those raised, and the court overcame any prejudice to Nentwig by allowing her a fall opportunity to brief the issue. We also note that the court’s action did not require Nentwig to develop further facts or present new evidence to make her argument. This was strictly a matter of law.

II

Did the District Court err in granting summary judgment in favor of United?

United also filed a motion for summary judgment along with its brief on the issue of vagueness. The court granted this motion. Summary judgment “shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Rule 56(c), M.R.Civ.P. On appeal, this Court applies the same standard as that applied by the trial court. McCracken v. City of Chinook (1990), 242 Mont. 21, 24-25, 788 P.2d 892, 894.

We first address the issue of whether the option provision in the lease was void for vagueness or indefiniteness. The provision states, “Lessee shall have an option to renew this Lease for 3 years with rent to be agreed upon by the parties.”

The District Court relied on Riis v. Day (1980), 188 Mont. 253, 613 P.2d 696, and Drug Fair Northwest v. Hooper Enters., Inc. (1987), 226 Mont. 31, 733 P.2d 1285, in determining that this clause was void because it was “nothing more than an agreement to agree in the future [and did] not establish a definite mode for the determination of the rent ....’’Riis is analogous to the present case. In Riis, a two-year lease contained a renewal provision which read in part:

Lessees are hereby given an exclusive option to renew this Lease and Agreement for an additional two years, under the same terms and provisions as this present Lease and Agreement except that the amount of rental shall be subject to negotiation and mutual agreement between the parties.

613 P.2d at 696-697.

We stated in Riis that generally an agreement must contain all essential terms to be binding upon the parties. 613 P.2d at 697. We then noted that at that time this Court had not ruled on the validity of a renewal provision where the amount of rent was negotiable, and that other jurisdictions were divided on the issue.

In Riis, we looked to Slayter v. Pasley (Or. 1953), 264 P.2d 444, for a discussion of the three prevailing views of the time. The “old rule” requires that the renewal provision specify the term of the lease and the rate of rent with certainty, leaving nothing for future determination. 613 P.2d at 697. The “first minority view” permits enforcement of the provision if it expressly contemplates a clear and definite mode for determining future rent. 613 P.2d at 697. The “liberal view” permits enforcement if the contract shows that the parties mutually agreed to meet in the future and make provisions for reasonable rent. 613 P.2d at 698.

In Riis we said:

We believe the “first minority view” reflects the best standard. It recognizes the business utility of renewal provisions. Such provisions often do provide the inducement for entering the original lease. But, given fluctuating market conditions, the parties cannot fairly determine what would be an adequate rent in the future. At the same time, this standard also adheres to the wisdom of the old rule. It recognizes the danger of courts arbitrarily interpolating provisions into an arm’s length transaction to breathe life into an otherwise invalid agreement.

613 P.2d at 698.

We cited Riis extensively in Drug Fair where Drug Fair argued that a letter from the owner of a shopping center in which it was a tenant constituted a lease. The letter provided for four five-year options but did not provide at least a method to determine rent during those periods. We concluded that Drug Fair only had a month-to-month lease. 733 P.2d at 1288.

Nentwig argues that various cases cited in Slayter establish that the first minority view only requires that the language of the lease demand reasonableness or adherence to commercial standards. However, Riis and Drug Fair require more. Although they may be inconsistent with the cases cited in Slayter, we clearly follow Riis and Drug Fair. They require at least a definite mode for determining rent.

Nentwig argues that our decision in Story v. City of Bozeman (1990), 242 Mont. 436, 791 P2d 767, effectively overrules Riis by providing that “[e]ach party to a contract has a justified expectation that the other will act in a reasonable manner” and that every contract contains an implied covenant of good faith and fair dealing. 791 P.2d at 775. The requirement of reasonableness is not inconsistent with Riis and Drug Fair. These cases, however, require more for the reasons stated in Riis, which we have reproduced above. Anytime a material term is required, one could argue that Story provides a sufficient method of establishing that term by requiring that the parties act reasonably. We refuse to extend Story that far.

The present case illustrates the problem foreseen in Riis. Under the 1982 lease, Nentwig paid $400 per month over the three-year term. Under the 1985 lease, she paid $405 per month. This rent was higher on a per square-foot basis than what the other tenants were paying. They averaged about nine dollars per square-foot during the first lease period and twelve dollars per square-foot during the second period. Nentwig was paying about eighteen dollars per square-foot until her rent was reduced during the second term when United took back the building. In her letter seeking to exercise the option provision, she proposed that the rent be ten dollars per square-foot for a total of $225.83 per month. This is two dollars per square-foot less than she testified Shoop was willing to agree to in the 1985 lease. We point out that the 1982 and 1985 leases both contained a provision that Nentwig would pay $532 per month if she held over after the expiration of the term. Nentwig relies on this term to argue that a price had been fixed in the lease and therefore, the option provision is not vague.

The range of prices evidenced in this case provides a clear example of the problem that the Court in Riis and Drug Fair sought to avoid. The courts must not be forced to provide the material term of rent.

We hold that the District Court did not err in determining that the option clause was void for vagueness when it granted summary judgment.

Nentwig also argues that there was a writing sufficient to satisfy the Statute of Frauds and puts forth several other arguments including an equitable argument that “[t]hat which ought to have been done is to be regarded as done, ....” Section 1-3-220, MCA; an argument that the lease was signed because “Transwestem Partnership” was typed above the signature line; an argument that options are not subject to the Statute of Frauds; integration; part performance; and fraud. Because the District Court assumed for the purpose of summary judgment that TW Partnership had signed the lease, therefore eliminating any Statute of Frauds problems Nentwig encountered, we need not address these issues. As we view the facts in the same light as the District Court, we will make the same assumption. McCracken, 788 P.2d at 894.

Nentwig argues that United, as assignee of the leases in TWI, assumed the benefits and burdens of the assignment. As we hold that the option provision was void, there is no burden associated with it.

Further, Nentwig argues that United breached the relocation agreement contained in the letter she included with the 1985 lease. That letter stated:

It is my understanding that if you cancel this lease after October 31, 1987, you will provide me with alternative space in the TW Plaza and will pay me some amount to be agreed upon for relocation costs and for leasehold improvements.

Jeff Shoop admitted in his deposition that he would provide as stated in the letter. However, Nentwig does not assert, nor could it be argued, that the agreement extended beyond the term of the lease to which it was attached. That lease expired by its own terms on October 31, 1988. Nentwig was not forced to relocate between October 31, 1987 and October 31, 1988. Therefore, United did not breach this agreement.

Lastly, Nentwig argues in her brief to this Court that the District Court erred in granting summary judgment to United because United committed fraud. The elements of fraud are: a representation, falsity of the representation, materiality of the representation, the speaker’s knowledge of the falsity of the representation or ignorance of the truth, the speaker’s intent that it should be relied on, the hearer’s ignorance of the falsity, the hearer’s reliance upon the representation, the hearer’s right to rely on the representation, and consequent and proximate injury caused by reliance on the representation. Lee v. Armstrong (1990), 244 Mont. 289, 293, 798 P.2d 84, 87.

In its Memorandum accompanying the Order, the court stated: While there is a genuine issue of material fact as to whether or not the acts of the Defendant and its assignor amounted to fraud, it is clear that Plaintiff did not sustain any damage resulting from the alleged fraud. She asserts that the fraud consisted of representations that the 1985 lease had been signed and that a signed copy would be returned to her, that she was entitled to and did rely upon the representations. However, she was not damaged thereby because she received everything that she was entitled to receive under the 1985 lease. It expired by its own terms on October 31, 1988, and she was permitted to occupy the premises until that date. Further, Defendant, after it acquired the building, reduced her rent by fifty percent (50%) and as testified by one or more of its officials, this would not have occurred had it been known that there was a written lease. Not only did the Plaintiff not sustain any damage but she actually received a benefit from what she claims to be the fraud committed upon her.

In her brief, Nentwig does not dispute the District Court’s determination that she was not damaged and in fact received a benefit. We find no evidence on the record otherwise. She received everything to which she was entitled under the 1985 lease. Because the option provision was void, she could have suffered no damages based on it.

We hold that the District Court did not err in granting summary judgment to United.

Ill

Did the District Court err in refusing to grant summary judgment in favor of Nentwig?

In its Memorandum, the District Court stated that “[t]he granting of the Defendant’s Motion for Summary Judgment of necessity required a denial of the Plaintiff’s Motion for Summary Judgment.” We agree.

Affirmed.

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


text:
    MONTANA HEALTH CARE ASSOCIATION; a Montana nonprofit corp.; DISCOVERY CARE CENTRE; a Montana Corporation; and VALLEY NURSING, INC., D/B/A VALLEY HEALTH CARE CENTER, a Minnesota Corporation, Plaintiffs and Appellants, v. MONTANA BOARD OF DIRECTORS OF THE STATE COMPENSATION MUTUAL INSURANCE FUND; PATRICK SWEENEY, Executive Director of the State Compensation Mutual Insurance Fund; and STATE COMPENSATION MUTUAL INSURANCE FUND, Defendants and Respondents.
    No. 92-044.
    Submitted September 10, 1992.
    Decided January 4, 1993.
    50 St.Rep. 1.
    256 Mont. 146.
    845 P.2d 113.

      For Plaintiffs and Appellants: G. Steven Brown argued, Helena.
    For Defendants and Respondents: John T. Alke argued, Hughes, Kellner, Sullivan & Alke; Nancy Butler, General Counsel, State Compensation Mutual Insurance Fund, Helena.
   JUSTICE HARRISON

delivered the Opinion of the Court.

This is an appeal from a declaratory judgment of the First Judicial District Court, County of Lewis and Clark, the Honorable Thomas C. Honzel presiding. The original action was a request for writs of mandamus and prohibition and a declaratory judgment that the respondents (State Fund) had illegally adopted workers’ compensation rates, including a substantial increase in appellants’ premium, and had violated the Montana Open Meeting Act, the Montana Public Participation Act, the Montana Administrative Procedure Act (MAPA) and Article II, sections 8 and 9 of the Montana Constitution. We affirm in part and reverse in part.

The District Court decided that even though State Fund had violated the notice provisions of the Public Participation Act, it would not be appropriate to set aside the rate increases, or issue a writ of mandamus or prohibition, “because of the requirement that the state insurance program be adequately funded.” Instead, the court issued a declaratory judgment that State Fund is not required to release employer-specific data on payroll and claims experience; that State Fund must comply with MARA in amending a rule that incorporates the Underwriting Manual; and that State Fund must make an “association plan” available to every policy holder. The court also ruled that State Fund is not required to follow MAPA rule-making procedures when it changes its schedule for premium payments or adopts portions of the Underwriting Manual, and that State Fund is not required to mail packets of Board of Directors materials to the public in advance of meetings, as long as the materials are available for review at State Fund’s office. Attorney’s fees were awarded to appellants.

The State Compensation Mutual Insurance Fund is the workers’ compensation insurer for 27,000 Montana employers. It collects approximately 64 percent of the premiums paid for workers’ compensation insurance in Montana. Patrick Sweeney is its executive director.

The Montana Health Care Association (MHCA) is a Montana nonprofit corporation whose members provide long-term health care throughout the state. Discovery Care Centre and Valley Health Care Center are members of MHCA and hold State Fund workers’ compensation insurance policies.

DISCLOSURE OF EMPLOYER — SPECIFIC INFORMATION

The first issue on appeal is whether State Fund must make available to the public the employer-specific payroll and claims information that is used to calculate workers’ compensation rates.

In May 1991, State Fund notified MHCA members that the fiscal 1992 workers’ compensation rate for class code 8829 (nursing homes) would be increased from $10.67 to $13.33. Although State Fund had already advised MHCA of the general method used to calculate these rates, MHCA requested employer-specific information, in a letter dated May 21, 1991. State Fund provided some but not all of the requested information, and on June 19, 1991, State Fund informed MHCA that it would not provide this information without a signed release from each policy holder. MHCA filed the District Court action on June 21,1991.

Appellants rely on Article II, section 9 of the Montana Constitution, which provides that no one may be deprived of the right to examine documents or observe the deliberations of public bodies except when the demand of individual privacy “clearly exceeds the merits of public disclosure.” State Fund relies on Article II, section 10 of the Montana Constitution, which provides that the right of individual privacy shall not be infringed without the showing of a compelling state interest, and on Section 39-71-224, MCA, which exempts from disclosure public records of the Department of Labor that contain information of a personal nature.

This Court has held that the only limit on the public’s right to receive information is the constitutional right to privacy. Allstate Insurance Co. v. City of Billings (1989), 239 Mont. 321, 325, 780 P.2d 186, 188. We have adopted the following two-tier test for determining whether a person has a constitutionally protected privacy interest:

(a) Whether the person has a subjective or actual expectation of privacy; and

(b) whether society recognizes that expectation as reasonable. Great Falls Tribune Co. v. Cascade County Sheriff (1989), 238 Mont. 103, 105, 775 P.2d 1267, 1268, citing Montana Human Rights Div. v. City of Billings (1982), 199 Mont. 434, 441, 649 P.2d 1283, 1287. If we determine that a constitutionally protected privacy right exists, we then balance it against the constitutional right to know.

Most of the cases in which we have balanced the public’s right to know against the right to privacy concerned the privacy of individuals. In Great Falls Tribune, for example, we held that when law enforcement officers have engaged in conduct that subjects them to disciplinary action, the public’s right to know outweighs law enforcement officers’ privacy interests. Similarly, we held in Montana Human Rights Division that the State’s interest in prohibiting employment discrimination outweighs the privacy interest of city employees who had not complained of discrimination, but whose employment records were critical to the Human Rights Division investigation of a complaint. In Engrav v. Cragun (1989), 236 Mont. 260, 769 P.2d 1224, on the other hand, we found that the public’s right to know about county law enforcement operations does not outweigh the privacy interest of people whose names appeared in telephone logs and case files. Here, we must balance the public’s right to know against the privacy interest of employees and employers insured by State Fund.

Appellants concede that employer-specific payroll information meets our criteria for a right to privacy, but they contend that the merits of public disclosure are more important, and that the District Court wrongly held that the insured employees’ and employers’ right to privacy outweighs appellants’ right to know. To support this contention, appellants assert that MHCA cannot assess the accuracy of State Fund classifications without access to employer-specific data. This assessment is critical, they argue, because a State Fund error regarding one employer in a class affects the workers’ compensation rate for every member of that class.

State Fund argues that appellants can detect errors and illegal actions on the part of State Fund by reviewing published aggregate data; therefore, no compelling state interest justifies an invasion of the insured employees’ and employers’ privacy. In other words, State Fund asserts, employer-specific information should not be released merely to allow MHCA to check State Fund’s arithmetic.

Our cases establish that corporations have a right to privacy and that a state agency may assert the privacy interest of others, including corporations. Belth v. Bennett (1987), 227 Mont. 341, 345, 740 P.2d 638, 641; Mountain States Telephone and Telegraph Co. v. Dept. of Pub. Serv. Reg. (1981), 194 Mont. 277, 634 P.2d 181. The question here is whether the privacy interests of State Fund’s insured employees and employers outweigh the right of the public, as represented by appellants, to inspect aggregate payroll data and claims experience for individual employers.

State Fund points to our decision, in Belth, that public access to insurance companies’ financial statements should be denied because the demands of privacy outweighed the merits of public disclosure. In Belth, however, we found that the insurance companies had provided the information with the understanding that it was confidential and that comparable information was available to the public elsewhere. Here, it has not been argued that the insured employees and employers were assured of confidentiality, and comparable information is not available elsewhere. Employer-specific claims data are not available from any source, though some of the payroll data sought by appellants have been reported to the Department of Health and Environmental Sciences for health planning purposes.

The District Court found that appellants’ purpose in requesting employer-specific claims and payroll information is essentially an “audit function,” because an employer has no right to a contested case hearing when its premium rate is changed. The court concluded, therefore, that the insured employees’ and employers’ right to privacy outweighs appellants’ right to know and that State Fund therefore is not required to release employer-specific claims or payroll information.

We reverse, holding that in this case employees’ and employers’ right to privacy does not clearly exceed the merits of public disclosure, and that the public’s right to know therefore outweighs the privacy interest. We believe, as we suggested in Mountain States Telephone and Telegraph, 634 P.2d at 187, that

an order can be fashioned in such manner that the state public agencies can perform their duties with the fullest available information and at the same time disclose to the public all information required to enable citizens to determine the propriety of governmental actions affecting them.

We remand this case to the District Court for an order that meets this standard.

RULEMAKING

The second issue on appeal is whether State Fund must adopt the following as rules under MAPA: provisions of State Compensation Mutual Insurance Fund Policy Service Underwriting Manual (Underwriting Manual); criteria for “association plans;” and policies regarding the payment of premiums. Since different considerations govern each of these areas, we address them separately.

First, however, we emphasize that the State Compensation Mutual Insurance Fund (the state fund) is subject, as the District Court recognized, to laws that apply generally to state agencies, including MAPA and the Montana Public Participation and Open Meetings Acts. Section 39-71-2314(2), MCA. In particular, the state fund must follow MAPA rulemaking procedures when it adopts “a process, a procedure, formulas, and factors” for setting or changing premium rates, under Section 39-71-2316(6), MCA, though it is exempt from MAPA rulemaking procedures when it changes classifications and premium rates. In other words, once the state fund has promulgated rules for establishing premium rates, it need not go through MAPA rulemaking procedures to change those rates.

The Underwriting Manual

On May 6, 1991, State Fund published a Notice of Proposed Amendment of ARM 2.55.301, which prescribes the method of classifying occupations for the purpose of assessing workers’ compensation rates. The proposed amendment incorporated by reference the “Classifications” section of the Underwriting Manual, effective July 1, 1991. This section is the only portion of the Underwriting Manual that State Fund has adopted formally as a rule. Patrick Sweeney adopted the amendment for the state fund on June 17, 1991.

MHCA requested a copy of the July 1991 Underwriting Manual in June but was told that it had not been prepared or printed and probably would not be available until September 1991. On July 8, MHCA was given a draft version of the revised classification section. This draft was not available to Patrick Sweeney when he adopted the amended rule on June 17. Comment on the proposed amendment was invited on May 6, but as the District Court pointed out, it was not possible at that time for an employer to know whether it was affected by the changes.

As the District Court said, “for an agency to adopt as a rule something which is not available for review and comment is directly contrary to the requirements of MAPA.” We agree. Since State Fund adopted the classification section of the Underwriting Manual as a rule, it may amend that section only through the process described in Title 2, chapter 4, MCA.

Appellants contend that the District Court should have required State Fund to adopt the “General Rules” section of the Underwriting Manual, which is incorporated in its insurance contracts, as a formal rule under MAPA, because this section implements and prescribes law and policy in ways that affect employers’ substantive rights. State Fund argues that its insurance policy is a contract and that the “General Rules” section of the Underwriting Manual merely states some of the contract terms and does not implement, interpret, or prescribe law or policy.

The District Court found that State Fund’s failure to adopt the “General Rules” section of the Underwriting Manual in accordance with MAPA was not critical to this lawsuit, and that in any case State Fund is not required to adopt this section of the Underwriting Manual as a formal rule. Finding that the District Court interpreted MAPA correctly, we affirm.

Association Plans

State Fund has agreements with three trade associations (loggers, food distributors, and motor carriers) under which it reimburses the association for providing safety inspectors in lieu of State Fund safety inspectors. These agreements are called “association plans.”

Appellants complain that State Fund has no policies or criteria regarding the creation or administration of association plans, and that State Fund has never met with MHCA, as it promised it would in March 1990, to determine whether MHCAis eligible for an association plan. Appellants assert that association plans provide substantial benefits to the employers that have them, and that all State Fund policy holders pay indirectly for the safety inspectors hired under these plans. Therefore, appellants argue, State Fund should be ordered to adopt as formal rules its criteria and standards for awarding and administering the plans.

State Fund asserts that it has no policy of general application with respect to association plans and that formal rule-making is not appropriate because each “plan” is a unique contract, with provisions that depend on the nature of the trade association involved. State Fund also implies, though it does not state directly, that it intends to make association plans available to all trade associations, including MHCA if it is “willing and able to enter into the contract.”

The District Court held that State Fund must make association plans available to all associations and must let associations and employers know that such plans are available, but it was “not convinced” that State Fund must adopt rules setting forth uniform standards for such plans. We agree. The intent of the 1989 act that created the state fund was that the state fund must, as the “primary means” of insuring its solvency, “institute safety programs and set rates in a manner that rewards employers who provide a safe working environment and penalizes those who do not.” Statement of Intent, 1989 Mont. Laws, Ch. 613. So long as State Fund administers its association plans consistently with this intent, formal rulemaking is not required. Indeed, State Fund probably can fulfill the intent of the Act only by entering into contracts tailored to the needs and circumstances of each trade association or class of employers.

Premium Payment Schedule

Until early 1991, State Fund’s practice was to require employers to submit payroll information at the end of each quarter and then to pay the premium due for that quarter thirty days later. In mid-1991 State Fund combined payroll reporting and premium payment on a single form, which in effect accelerated the premium payment by thirty days. This change in procedure was initiated by staff and apparently accepted by the Board at its meeting of May 24, 1991. No notice of this change was sent to MHCA or to policy holders.

Appellants argue that MAPA applies because State Fund’s decision to change the premium date affects parties’ rights and obligations, and that State Fund’s decision therefore should be subject to public notice and comment. The District Court held that the obligation to pay a premium arises when the coverage is provided, and that the timing of billing for that coverage is not a matter that requires a rule. We affirm. State Fund’s billing schedule does not alter the obligation incurred by employers who enroll with State Fund.

PUBLIC PARTICIPATION AND THE BOARD PACKET ISSUE

The third issue on appeal is whether State Fund should be required to mail a copy of the agenda and the meeting materials or “Board packet” to anyone who requests it, prior to a meeting of the State Fund Board of Directors (Board).

Board agendas and packets of materials are generally mailed to Board members a week to ten days in advance of meetings. On June 3, 1991, MHCA requested advance notice of Board meetings and advance copies of the agenda and other materials sent to Board members. Patrick Sweeney promised to ask his receptionist to call MHCA two or three days before each Board meeting, but he declined to provide packets on the grounds that the materials would be available at the State Fund office to anyone who wished to inspect them.

Appellants contend that agenda materials sent to members of the Board must be mailed to interested members of the public in advance of Board meetings. They argue that Article II, section 8 of the Montana Constitution, which establishes a right to “such reasonable opportunity for citizen participation” in the operation of governmental agencies “as may be provided by law,” and the Public Participation Act that implements it, require State Fund to provide any interested person with advance notice of the agenda and copies of materials distributed to Board members. See Sections 2-3-101 through -114, MCA. In short, appellants assert that by refusing to mail Board packets to members of the public who request them, State Fund denies the public a reasonable opportunity for meaningful public participation before final decisions are made.

State Fund contends that MHCA’s right to public participation is not impaired by State Fund’s refusal to mail advance Board packets on request because the material is available at State Fund’s office, which is across the street from MHCA’s office. No one else has requested an advance Board packet. The District Court agreed, holding that State Fund is not required to mail Board packets. We affirm.

As we held in Kadillak v. Anaconda Co. (1979), 184 Mont. 127, 141, 602 P.2d 147, 155, “the right to participate is limited to those instances where that right is provided by law.” Neither the Public Participation Act nor the Open Meetings Act requires advance mailings. Making Board agenda materials available to the public at State Fund’s office, in our view, provides a “reasonable opportunity” for participation.

The Public Participation Act does require advance notice of final agency action, however, and the District Court pointed out that State Fund has not always complied with this provision (Section 2-3-103, MCA). Further, Section 2-3-103 requires state agencies, including State Fund, to develop procedures for public participation. State Fund has adopted only one rule providing for public participation, and it provides that the date, time and place of a Board meeting may be obtained by contacting the State Fund office. The District Court found that this provision is not adequate, and we agree. State Fund, however, did not appeal the District Court’s conclusion that it must adopt rules that comply with Section 2-3-103, MCA.

ATTORNEY’S FEES

Appellants have requested reasonable attorney’s fees and costs incurred in this appeal. This Court has adopted the “American Rule” regarding attorney’s fees. Department of Fish, Wildlife and Parks v. Montana Stockgrowers Ass’n, Inc. (1989), 240 Mont. 39, 782 P.2d 898. Under the American Rule, a party in a civil action is generally not entitled to fees absent a specific contractual or statutory provision. Section 25-10-711(1), MCA, provides for attorney’s fees in civil actions to which the state is a party, but only when the party seeking attorney’s fees has prevailed and the court finds that the state’s claim or defense is frivolous or pursued in bad faith. See Armstrong v. Dept. of Justice (1991), 250 Mont. 468, 820 P.2d 1273; Myers v. Dept. of Agriculture (1988), 232 Mont. 286, 756 P.2d 1144. Here, there is no indication that State Fund’s defense was frivolous or in bad faith. Appellants therefore are not entitled to attorney’s fees for this appeal.

CONCLUSION

We reverse the judgment of the District Court that State Fund is not required to provide employer-specific information and remand to the District Court for entry of an appropriate order. We affirm the judgment of the District Court with respect to all other issues addressed herein.

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

       The District Court found that the State Fund’s rulemaking power must be exercised by the State Fund Board of Directors, not by the State Fund’s executive director. State Fund has not appealed this decision, and the Board of Directors has adopted rules that are identical in effect to those previously adopted by the executive director.


text:
    ROBERT WIESNER and FRANK HARTMAN, JR., Plaintiffs and Appellants, v. BBD PARTNERSHIP, a Montana general partnership and DOUG FELLER, RODGER WILSON, ROBERT TAYLOR, and MELVIN McNEA, Individually, Defendants and Respondents.
    No. 92-278.
    Submitted on Briefs October 29, 1992.
    Decided January 12, 1993.
    50 St.Rep. 17.
    256 Mont. 158.
    845 P.2d 120.

      For Plaintiffs and Appellants: Terry Spear, Matovich, Addy & Keller, Billings.
    For Defendants and Respondents: Rodney T. Hartman, Herndon, Hartman, Sweeney & Halverson, Billings.
   JUSTICE HARRISON

delivered the Opinion of the Court.

This is an appeal from a judgment entered after a non-jury trial in the Thirteenth Judicial District, Yellowstone County, the Honorable Robert W. Holmstrom presiding. The District Court found the parties to be joint venturers and denied appellants’ claim for usury penalties. We affirm.

The dispositive issues on appeal are:

1. Did the District Court err in finding that the parties were involved in a joint venture?

2. Should the District Court have applied usury laws to this “transaction” whether or not it was a joint venture?

Appellants Frank Hartman, Jr. (Hartman) and Robert Wiesner (Wiesner) travelled to a Burlington Northern (BN) derailment near Ranchester, Wyoming, around February 2, 1988, to inspect the site for a possible bid on the salvage of nineteen railway cars of lumber. The lumber was to be cleared from the site and salvaged. Hartman had worked as a laborer on several salvage operations for BN but had never done a lumber salvage or bid on one himself. Wiesner had started his own business selling dimension lumber in 1982. Hartman was to provide the expertise necessary to do the actual clean up and salvage. Wiesner was to provide the expertise necessary to sell the salvaged lumber. They calculated a bid to present to BN. Although Hartman was aware that he would have to pay cash if his bid were accepted, he went ahead and submitted a bid of $113,663 even though he did not have the cash available. He submitted the bid on February 4, and it was accepted by BN around 3:00 p.m. that day. Payment was due by 5:00 p.m. the next day. Hartman and Wiesner exhausted their avenues of funding but were unable to obtain the necessary cash. On the evening of February 4, they asked Dave Anderson (Anderson), a business associate of Wiesner’s, to obtain the funding if possible.

At approximately 9:00 p.m. that day, Anderson contacted Doug Feller (Feller), the managing partner of BBD Partnership (BBD), through the advice of another BBD partner, Mel McNea. Anderson explained what Hartman and Wiesner were trying to do and some of the figures they had calculated. Feller met the next morning with Hartman, Wiesner, and Anderson. They discussed the project further, and Feller contacted BN to confirm the details.

The four men negotiated an agreement under these urgent circumstances without the aid of legal counsel. The result was a document entitled simply “Agreement” which set forth the terms of the negotiations in rough detail. All four men contributed to the agreement and reviewed it before they signed the final draft around 4:00 that afternoon.

BBD did not have the $113,663 necessary to satisfy the bid and could not get that much from a commercial lender in time because it required the approval of a loan committee. Therefore, BBD borrowed $100,000 from an individual and the balance from a commercial lender. BBD paid the individual lender 12% interest and a $5,000 fee on the borrowed funds and paid the commercial lender 12% interest. Only BBD and its partners were liable for repaying these loans. BBD delivered a cashier’s check directly to BN in time for the 5:00 p.m. deadline. Neither Hartman, Wiesner, nor Anderson signed a promissory note to repay BBD the money. Nor did BBD obtain a security interest on any of their assets. Under the agreement, BBD was to receive 15% interest on the funds, a $27,500 fee, and 3% of the net profit.

Feller testified at trial that BBD would get involved only if it could own the lumber. However, BN required Hartman’s name on the salvage contract because he submitted the bid. At the last minute Feller Associates, a sole proprietorship owned by Feller, was put on the bill of sale and the salvage contract along with Hartman Construction.

Wiesner eventually negotiated a deal with Fallow Forest Products (Fallow) to sell most of the lumber. Feller first learned of the deal when Fallow contacted him to determine where to wire the money. Testimony from Wiesner and Feller indicates that Fallow wanted to buy BBD out of the transaction completely and become a part of the transaction itself, which it eventually did, becoming a one-fourth partner. Fallow also wanted BBD to waive its claim to three percent of the profit in getting completely out. At that point Feller contacted his partners in BBD and recommended that they get out of the transaction because he saw friction developing between Hartman, Wiesner, and Anderson. Feller felt it would be in BBD’s best interest to waive their share of the net profit and get out.

BBD waived its claim to a share of the profit when Fallow sent it a check for $143,000 on or around February 23. At that point, the parties considered BBD’s participation in the project complete.

Almost two years later, Hartman’s attorney sent a letter to Feller asserting that the interest rate charged in this transaction exceeded the allowable rate under Section 31-1-107, MCA (1987). Hartman, Wiesner, and Anderson then brought suit. Anderson assigned his interest in the suit to Hartman and Wiesner and was dismissed. The District Court found that the transaction involved here was not a loan from BBD, rather the parties were involved in a joint venture to which the usury laws did not apply.

I

Did the District Court err in finding that the parties were involved in a joint venture?

In reviewing the District Court’s finding that the transaction amounted to a joint venture, we are guided by Rule 52(a), M.R.Civ.R, under which findings of fact are to be set aside only when they are clearly erroneous. This Court will uphold the lower court’s findings where there is substantial credible evidence to support them even though the record contains evidence supporting contrary findings. Trad Indus., Ltd. v. Brogan (1991), 246 Mont. 439, 447, 805 P.2d 54, 59.

In its Findings of Fact, the District Court stated:

The Court finds that the transaction between the parties was not a loan but was in fact a joint venture wherein the parties pooled their respective assets and talents for the completion of a specified transaction, the salvage and sale of the lumber and agreed to divide between themselves the proceeds from the sale; that the actual performance of the venture, the salvage, the sale, the record keeping, was to be done by the members of the venture.

We have defined a joint venture as a “enterprise undertaken by several persons jointly, and more particularly, as an association of two or more persons to carry on a single business enterprise for profit. It has also been defined, somewhat variantly, as a special combination of persons undertaking jointly some specific adventure for profit.” Sunbird Aviation, Inc. v. Anderson (1982), 200 Mont. 438, 444, 651 P.2d 622, 625 (quoting Rae v. Cameron (1941), 112 Mont. 159, 167, 114 P.2d 1060, 1064). It is essential that each party contribute property, money, skill, knowledge, or effort, although the contributions need not be equal or of the same character. Rae, 114 P.2d at 1064-1065.

In the Memorandum accompanying its Findings of Fact and Conclusions of Law, the District Court addressed the requisite elements of a joint venture and found that each had been satisfied. To qualify as a joint venture there must be: “1) an express or implied agreement or contract creating the joint venture; 2) a common purpose among the parties; 3) community of interest; and 4) an equal right of control of the venture.” Papp v. Rocky Mtn. Oil & Minerals, Inc. (1989), 236 Mont. 330, 342, 769 P.2d 1249, 1257.

As to the first element, Hartman, Wiesner, Anderson, and Feller negotiated a deal and drafted a document they simply entitled “Agreement” without the aid of legal counsel and under the constraint of the 5:00 p.m. deadline. The document, though less than artfully drafted, purports to memorialize their agreement. It does contain what appear to be inconsistencies, but those do not warrant a reversal of the District Court’s findings. See Trad Indus., Ltd., 805 P.2d at 59. The first time the transaction is referred to it is referred to as “this joint venture” and the next two times it is referred to as “this venture.” The use of the word “this” seems to make all parties to the agreement part of the joint venture.

The second requirement is that the parties share a common purpose. The purpose here was to salvage and resell the lumber for a profit. All parties were to receive a share of the net profit, albeit a small percentage for BBD.

The third element requires a community of interest. Each participant played a vital role in this project. Hartman had the expertise to salvage the lumber; Wiesner had the expertise to sell the lumber. Both of them were necessary in order to prepare a bid for the salvage project. Anderson became involved at their behest to acquire financ- ,■ ing for the project. BBD became involved at Anderson’s behest because it could provide the necessary venture capital. They were in this venture together, each providing a necessary element to ensure that the salvage project was completed.

The last element requires that the parties have an equal right of control. In this case, BBD requested ownership of the lumber as a condition of its participation. This was accomplished by putting the lumber in the name of Hartman Construction and Feller Associates jointly. BBD, through Feller, clearly had a right to control the sale of the lumber. The fact that appellants may have subverted that control by negotiating a sale in BBD’s name without its authority does not diminish BBD’s right to control. Further, by the terms of the Agreement, Feller Associates was to be used for the accounting on this venture.

We hold that there was substantial credible evidence to support the District Court’s finding that the parties were involved in a joint venture.

II

Should the District Court have applied usury law to this “transaction” whether or not it was a joint venture?

Appellants argue that joint venturers can loan money to the venture and that those loans are subject to usury laws. They cite Bennett v. Wise River Lumber Co. (1955), 129 Mont. 228, 284 P.2d 990, and Felska v. Goulding (1990), 245 Mont. 188, 800 P.2d 161, in support of their argument. We find Bennett inapplicable and Felska clearly distinguishable. The transactions in Felska were intended to be loans, clearly denominated as loans, and made after the initial investment capital was contributed to the venture in order to keep the venture afloat. Here, however, the transaction involved the initial venture capital for the salvage project.

The District Court noted that the parties had not called its attention to any “Montana cases wherein the Court was asked to determine whether an agreement, which provided for the payment of interest to one of the parties, was a loan or a joint venture agreement.” It relied on Atkinson v. Wilcken (Cal. Dist. Ct. App. 1956), 298 P.2d 147, and Martter v. Byers (Cal. Dist. Ct. App. 1946), 171 P.2d 101, in determining that the usury laws did not apply. In Atkinson, the plaintiff owned dwelling units on which a $4,000 balloon payment was past due resulting in foreclosure proceedings against the property. The defen- „ dant provided the $4,000 and required the plaintiff sign a $6,000 promissory note, a third trust deed, and a grant deed to the property. The plaintiff contended this was a loan. The defendant contended they were co-owners and were to share the profits from the sale of the property. The plaintiff claimed that defendant charged a usurious rate on the money. The court held that the parties were involved in a joint venture to which the giving of the note and security was “an incidental part of the entire transaction,” and declined to find a usurious transaction. Atkinson, 298 P.2d at 149. In Martter, the court held that the usury laws did not apply to the transaction because it was a joint venture even though the agreement called for interest to be paid under certain circumstances. Martter, 171 P.2d at 107.

Based on these cases, the District Court concluded that “the fact of payment of interest and the agreement by Hartman, Anderson and Wiesner to ‘personally guaranty BBD Partnership in this venture’ were incidental parts of the transaction and therefore, not controlling.” We agree.

Affirmed.

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


text:
    MARTI L. WANGEN, Plaintiff, Counterdefendant and Appellant, v. MICHAEL B. KECSKES, Defendant, Counterclaimant and Respondent.
    No. 92-255.
    Submitted on Briefs November 5, 1992.
    Decided January 5, 1993.
    50 St.Rep. 6.
    256 Mont. 165.
    845 P.2d 721.

      For Appellant: Gregory W. Duncan, Harrison, Loendorf & Poston, Helena.
    For Respondent: William F. Hooks, Hooks Law Firm, Townsend.
   JUSTICE HARRISON

delivered the Opinion of the Court.

This is an appeal from the Fourteenth Judicial District, Meagher County, the Honorable Roy C. Rodeghiero presiding. Appellant Marti Wangen (Wangen) appeals an order granting summary judgment to respondent Michael Kecskes (Kecskes) and declaring that he has an easement by implication and by necessity on a road crossing Wangen’s property in Meagher County. We affirm.

Wangen and Kecskes own adjoining tracts of real property in Sections 8 and 9, respectively, in 'Ibwnship 9 North, Range 8 East, M.P.M. Until 1972, these tracts were part of a cattle ranch owned by Alfred Edwards (Edwards). The Edwards ranch comprised approximately 4,400 acres on hilly terrain cut by timbered ravines. In 1972, Edwards sold over 4,000 acres to Frank Murphy (Murphy), reserving a 320-acre tract along Fourmile Creek at the west end of the original ranch. In 1988, he conveyed this reserved tract to Wangen, his granddaughter.

Murphy conveyed all but 240 acres of his portion of the ranch to Townsend Ranch, Inc., a Montana corporation, in 1975. The 240-acre reserved tract was at the west end of Murphy’s land, east of and adjacent to the 320-acre tract now owned by Wangen. In 1984, Murphy sold 220 acres of this tract to Kecskes. Two years later, he sold the remaining 20 acres to Mark Scott, who in turn sold it to Sandra Gould, the owner at the time these proceedings commenced. Gould’s parcel abuts the common boundary between the Kecskes and Wangen tracts and is otherwise surrounded by the Kecskes property.

AU.S. Forest Service road (the Fourmile Road) runs along the west edge of Wangen’s tract, connecting it with U.S. Highway 12 east of White Sulphur Springs. This road existed in 1972, when Edwards sold 4,000 acres of his ranch to Murphy. No other known public road crossed the ranch in 1972, though a dirt road linking the east portion of Murphy’s purchase to the Fourmile Road is shown on U.S. Forest Service maps. This road, known to the parties as the Coal Bank Road, also existed in 1972.

The subject of this controversy is an unimproved single-track road that connects the Fourmile Road with Gould’s 20-acre lot. It crosses Wangen’s property from west to east, passing through Kecskes’ land to terminate at Gould’s cabin. Murphy attested to the existence of this road in 1972, and to his use of it for motor vehicle access and for trailing cattle, from the time that he bought the land. In his affidavit he said:

The connecting road between the Fourmile Forest Service Road and the 220 acre parcel was necessary to use and enjoy the 220 acre parcel subsequently sold to Mr. Kecskes .... In June, 1972, when I purchased the [220 acre] parcel from Alfred M. Edwards, there was no outlet to a public road or highway from that parcel, except over the remaining property retained by Mr. Alfred Edwards, or over the lands of strangers.

Edwards stated that he had occasionally used the road for fixing fence and cutting poles, but that to his knowledge, Murphy had used it on only one occasion, for cutting timber. On that occasion Edwards had refused to allow logging trucks on the road, though he had, he said, “granted permission” for the cutters to use it.

On July 25,1986, Edwards granted Sandra Gould an easement on the road, under an agreement that it would remain in its present unimproved condition and would not be graded. Kecskes had asked for a similar easement in 1984, before he bought the 220-acre parcel from Murphy, but Edwards had refused. Instead, he and Kecskes signed a “Memorandum of Agreement” in which Edwards agreed to allow Kecskes and his family access to the 220-acre parcel through Edwards’ land in exchange for Kecskes allowing water access for Edwards’ cattle. By its terms, the 1984 agreement was to remain in effect as long as Kecskes owned the 220 acres. Two weeks after Edwards and Kecskes signed this agreement, Kecskes purchased the land from Murphy.

In his 1991 affidavit, however, Edwards stated that he believed that the 1984 agreement was merely a license and that it was “terminable” at the time he conveyed his 320-acre parcel to Wangen. Wangen herself views the agreement as a “limited conditional permissive agreement.” In 1990, Kecskes asked her for an easement similar to the one Edwards had given Gould, but she refused. Through counsel, however, she has indicated that she would be willing to give Kecskes a license.

This case originated as Wangen’s action to quiet Kecskes’ claim to an easement on the road crossing Wangen’s property. Both parties moved for summary judgment, which the District Court granted in favor of Kecskes. On appeal, Wangen presents the following issues:

1. Whether the District Court erred in finding that Kecskes has an easement by implication.
2. Whether the District Court erred in finding that Kecskes has an easement by necessity.
3. Whether the District Court erred in finding that Kecskes’ claim or right to an easement was not extinguished under Section 70-17-111, MCA.
4. Whether the District Court erred in granting summary judgment in favor of Kecskes.

Kecskes argues that the only issue is whether the District Court erred in granting summary judgment. Because the District Court granted summary judgment on the basis of its finding that Kecskes had an easement by implication and by necessity, we address the issues of easement by implication and its extinguishment. As these issues are dispositive, we do not address the issue of easement by necessity.

I

Does Kecskes have an easement by implication?

An implied easement rests on the “implied intent of the parties gathered from the circumstances surrounding the conveyance.” Woods v. Houle (1988), 235 Mont. 158, 162, 766 P.2d 250, 253. See also Graham v. Mack (1985), 216 Mont. 165, 173, 699 P.2d 590, 595 (an easement by implication arises when it is necessary to effect a presumed intent on the part of parties to a deed). We have emphasized that an implied easement is to be considered with extreme caution, because it imposes a servitude through mere implication. Woods, 766 P.2d at 253; Graham, 699 P.2d at 596, citing Goeres v. Lindeys, Inc. (1980), 190 Mont. 172, 619 P.2d 1194. The following elements must be satisfied: (1) separation of title; (2) a long-standing, obvious use before the separation, which shows that the use was meant to be permanent; and (3) necessity of the easement for beneficial enj oyment of the land granted or retained. Graham, 699 P.2d at 596.

Here, the first element is satisfied because Edwards is the original grantor of the Wangen and Kecskes parcels. Separation occurred in 1972, when Edwards conveyed all but 320 acres of his land to Murphy. The second element is satisfied because Edwards used the road at issue before 1972, for access to the land now owned by Kecskes, and because use of the road, in 1972 as now, was obvious, visible, and appeared to be permanent. The third element is satisfied because the road offered the only practical access to the west end of the property Murphy bought in 1972.

Murphy stated in a 1991 affidavit that both he and Edwards had used the road for access to the land subsequently sold to Kecskes, and that in 1972 the road was the only outlet to a public road from that land. Wangen argues that Edwards never intended to give Murphy an easement, but Edwards’ 1991 affidavit does not describe his intention at the time of the 1972 conveyance to Murphy. It does imply that he expected Murphy to use the road in such a way as not to damage his (Edwards’) property. He had refused access to logging trucks, he said, because they would “tear up the property;” presumably he had accepted cutters because they would not. This statement suggests that Edwards and Murphy intended an easement for purposes associated with cattle-raising and that using the road for logging trucks would have expanded the easement beyond the use contemplated at the time of the 1972 conveyance.

We hold that Murphy acquired an easement by implication on the road over Edwards’ property when he bought 4,000 acres from Edwards in 1972. In the absence of any act on the part of Murphy or Edwards that extinguished that easement, it passed to Kecskes with title to the 220-acre tract at the west end of the property Murphy bought from Edwards. Section 70-20-308, MCA.

II

Was Kecskes’ claim or right to an easement extinguished under Section 70-17-111(3), MCA?

Section 70-17-111(3) provides that a servitude is extinguished by “the performance of any act upon either tenement by the owner of the servitude or with his assent that is incompatible with its nature or exercise.” Wangen argues that Murphy extinguished any claim he might have had to an easement across Edwards’ land by asking Edwards for permission to use the road for logging purposes. The District Court determined, and we agree, that this single act does not rise to the type of act or omission sufficient to constitute an extinguishment of the easement.

To support her argument, Wangen cites Downing v. Grover (1989), 237 Mont. 172, 772 P.2d 850. In Downing, we held that asking permission to use a road across another’s property is inconsistent with a prescriptive easement, which requires open, notorious, adverse, and continuous use. The plaintiff, Downing, and his predecessor in interest had gained access to the plaintiff’s property through a locked gate and a road across the defendants’ property. The Grovers allowed access to anyone who asked, but Downing used the road only once, in connection with his lawsuit. Here, no claim has been made that Murphy established a prescriptive easement, with which permissive use is inconsistent. See Keebler v. Harding (1991), 247 Mont. 518, 521, 807 P.2d 1354, 1356 (existence of a prescriptive easement depends on whether historical use of road was adverse or permissive).

Wangen goes on to argue that Kecskes’ request for an easement from Edwards also was inconsistent with an easement and is evidence that Kecskes bought the property knowing that he had no easement. She characterizes the agreement Edwards and Kecskes signed in 1984 as a “permissive license” and argues that it is incompatible with possession of an easement.

A license is the permission or authority to do a particular act or series of acts upon another’s land without possessing an interest therein. It is revocable at the will of the servient tenement. Kuhlman v. Rivera (1985), 216 Mont. 353, 357, 701 P.2d 982, 984-85. Kecskes’ 1984 agreement with Edwards, by its express terms, gives him access to his 220-acre parcel across Edwards’ land as long as Kecskes owns the land. It is not, as Wangen contends, “revocable” if “certain terms and conditions are not met” but is conditioned only on Kecskes allowing Edwards’ cattle access to water on the 220-acre parcel. Although Wangen’s lawyer stated that Edwards has never used this water, no suggestion has been made that Kecskes breached the condition. Because the agreement is not revocable at the will of the servient tenement (Edwards’), it is not a license.

Finally, Wangen argues that Kecskes’ attempt to obtain an easement from her is incompatible with prior possession of an easement and indicates that Kecskes knew his agreement with Edwards was not an easement. While it is obvious that the Edwards-Kecskes agreement was not an easement — if it were, it could not be terminated when Kecskes sold the land — we have no evidence that Kecskes knew that Murphy had an implied easement or that his own access was assured by that easement. Kecskes’ deed for the 220- acre parcel includes “all easements ... providing access” but without covenants of warranty. Kecskes’ effort to secure written confirmation of access is understandable in light of his lack of documentation from Murphy and Wangen’s opposition to his use of the road.

We held in City of Billings v. O.E. Lee Co. (1975), 168 Mont. 264, 542 P.2d 97, that the city’s purchase of an easement in 1944 for a right of way that had been conveyed to the city in 1885 did not extinguish the 1885 easement. Here, Kecskes’ effort to obtain documentation of the easement that already existed by implication did not extinguish that easement.

Ill

Did the District Court err in granting summary judgment to Kecskes?

Our standard of review for a grant of summary judgment is the same as that initially applied by the trial court under Rule 56, M.R.Civ.P. Mayer Bros. v. Daniel Richard Jewelers, Inc. (1986), 223 Mont. 397, 726 P.2d 815. Summary judgment is appropriate if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Rule 56(c), M.R.Civ.P.

The party moving for summary judgment has the initial burden of showing that “there is no genuine issue as to any fact deemed material in light of the substantive principles that entitled the movant to judgment as a matter of law.” Fleming v. Fleming Farms, Inc. (1986), 221 Mont. 237, 241, 717 P.2d 1103, 1105-1106. Once the movant has met this burden, the party opposing the motion must show “by present facts of a substantial nature that a material fact issue does exist. Mere conclusory or speculative statements are insufficient to raise a genuine issue of material fact.” Mayer Bros., 726 P.2d at 816 (citations omitted).

Here, the District Court determined that the pleadings, the discovery propounded by Kecskes, and the affidavits established that the material facts of this case are not in dispute. Both parties agreed that Edwards had been the sole owner of both Wangen’s and Kecskes’ parcels and that severance of title occurred in 1972; that the Fourmile Road existed as a public road at the time of severance of title; that the single-track dirt road crossing Edwards’ property also existed at the time of severance of title and was open, visible, and in use for ranching purposes at that time.

The court also determined that the affidavit, maps and photographs submitted by Kecskes established that at the time of severance of title, the land now owned by Kecskes had no outlet to a public road except over the property retained by Edwards, and that the road in question was then and still is necessary to beneficial enjoyment of the land now owned by Kecskes.

Wangen submitted affidavits from her mother, Sue Weingartner (Edwards’ daughter), stating that she was not aware of geographical barriers preventing access to Kecskes’ land from the Coal Bank Road. Because the Coal Bank Road does not provide access to Kecskes’ land, this testimony is irrelevant. Further, as the District Court observed, Wangen offered no evidence that Weingartner had personal knowledge of the feasibility of road construction over the land north and east of Kecskes’ property, or that she was competent to testify on such matters. Her testimony, therefore, does not meet the standard of Rule 56(e), M.R.Civ.P., which provides that affidavits filed in opposition to a motion for summary judgment “shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated therein.” Because they do not meet this standard, Weingartner’s affidavits do not raise a genuine issue of material fact.

In short, the undisputed facts show that the road across Edwards’ land was the only means of access to the Fourmile Road from the property now owned by Kecskes, and that the elements of an easement by implication were present when severance of title occurred in 1972. Kecskes is entitled to judgment as a matter of law.

AFFIRMED.

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

APPENDIX A