author: JUSTICE WEBER JUSTICE McDONOUGH, JUSTICE SHEEHY,

text:
    STATE OF MONTANA, EX REL., FIRST BANK SYSTEM, First Bank West Great Falls, and John Reichel, Relators, v. The DISTRICT COURT OF the EIGHTH JUDICIAL DISTRICT of the State of Montana, In and For the COUNTY OF CASCADE, The Honorable Nat Allen, Presiding Judge, and Robert M. Pancich, Respondents.
    No. 89-257.
    Submitted Sept. 5, 1989.
    Decided Nov. 28, 1989.
    782 P.2d 1260.

      Stephen D. Bell & Keith Strong, Dorsey & Whitney, Billings, for relators.
    Ralph L. Herriott, Billings, Walter M. Hennessey, Butte, William L. Baillie, Great Falls, Gene B. Daly, Helena, for respondents.
   JUSTICE WEBER

delivered the Opinion of the Court.

Relators First Bank System, First Bank West Great Falls, and John Reichel seek a writ of supervisory control from this Court following an order entered in the District Court for the Eighth Judicial District, Cascade County. In exercising our power of supervisory control, we vacate the lower court’s order and remand for further proceedings.

The issues presented for our review are:

1. Did the District Court err in granting summary judgment in favor of plaintiff on the issue of liability?

2. Is supervisory control appropriate when the District Court granted summary judgment despite the presence of numerous factual issues?

Relators are the named defendants in a civil action brought by Robert Pancich, a former employee of First Bank West Great Falls. First Bank System is the parent corporation of First Bank West, and John Reichel was the Managing Director of the Western Montána Region of First Bank System at the time pertinent to this lawsuit. Mr. Reichel had also been elected a member of First Bank West’s Board of Directors.

The incident giving rise to the present controversy occurred in 1983. In that year the Office of the Comptroller of the Currency (OCC) investigated First Bank West Great Falls and determined that it was engaged in “unsafe and unsound” banking practices. An affidavit by Mr. Reichel states that the deficiencies existing in the bank at that time included “ineffectiveness of some existing management personnel, high operating expenses, financial imbalance, unnecessary expenses, and inefficient use of resources.” After the report by the OCC, on August 12, 1983, Mr. Reichel terminated Mr. Pancich’s employment as president of the bank. Prior to termination, Mr. Reichel contacted four members of the bank board, recommending that Mr. Pancich be terminated. Six days later, on August 18, 1983, during a special meeting of the board of directors, a new president was elected. During a regular meeting of the board, on September 15, 1983, the board unanimously accepted a letter of resignation from Mr. Pancich.

The affidavit by Mr. Reichel states that of the bank’s board of directors, nine members were eligible to vote on decisions involving employment termination, one of whom was himself. Affidavits by the four members whom Mr. Reichel contacted state that prior to the August 12 termination Mr. Reichel discussed with them the need for a new president because of the Bank’s serious financial setbacks. The affidavit of each of these four members states, “I concluded and agreed that Robert M. Pancich should be terminated from his employment at the Bank.” Affidavits by three other members of the board state that prior to the termination, each of these three individuals had formed the opinion that the bank needed new leadership. All nine members of the board state by affidavit that on August 18, 1983, each attended a special meeting of the board during which each concurred in the termination of Mr. Pancich. The affidavits further state that at this meeting each member voted to elect a successor to Mr. Pancich. These affidavits are uncontradicted.

Subsequently Mr. Pancich brought suit against the Bank, its parent corporation and Mr. Reichel individually, alleging wrongful termination and breach of an implied covenant of good faith and fair dealing.

Initially defendants moved for summary judgment, which was denied by the District Court. Following denial of this motion, on December 7, 1987, defendants applied to this Court for a writ of supervisory control which was denied on two grounds: (1) that the District Court’s order denying summary judgment was interlocutory; and (2) that relators had an adequate remedy by appeal from the final judgment. A year later plaintiff moved for summary judgment on the issue of liability. Plaintiff’s motion was granted by the District Court without explanation or accompanying memorandum. Defendants moved the lower court to reconsider its order or to certify to this Court pursuant to Rule 54(b), M.R.Civ.P. This motion also was summarily denied. The District Court then set a date for trial on the issue of damages.

I

Did the District Court err in granting summary judgment in favor of plaintiff on the issue of liability?

In our analysis, we begin by emphasizing that summary judgment is only appropriate when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Rule 56(c), M.R.Civ.P. Any inferences to be drawn from the factual record must be resolved in favor of the party opposing summary judgment. Simmons v. Jenkins (1988), [230 Mont. 429,] 750 P.2d 1067, 45 St.Rep. 328.

Defendants contend that the court granted summary judgment based on an incorrect assumption that the denial of defendants’ motion for summary judgment entitled plaintiff to summary judgment in his favor. Defendants’ original motion for summary judgment was based upon the fact that First Bank West is a national bank governed by the National Bank Act, 12 U.S.C. §§ 21, et seq. Defendants’ claimed that this statute preempts state law, and that pursuant to 12 U.S.C. § 24(5), a national banking association has the power to appoint a president and to dismiss an officer “at pleasure.” The District Court denied defendant’s motion by simply stating:

“IT IS ORDERED that said motion is overruled and denied for the reason that a discharge is not ratifiable by the board after defendants executed the discharge of plaintiff and for the further conflicts in the admissible evidence revealed in defendants’ Answers to Interrogatories #40, #50, #58, #70, #73, and #74, and others.”

While we do not rule on this denial of summary judgment, we point out that it contains neither a factual nor a legal analysis. A year later plaintiff moved for summary judgment on the issue of liability. In this motion plaintiff contended that the court’s denial of defendants’ motion for summary judgment entitled plaintiff to summary judgment in his favor. Defendants contend that the court erroneously granted plaintiff’s motion on this basis. While we cannot ascertain the court’s reason for its decision, we do emphasize that summary judgment is not a decision on the merits. A denial of summary judgment is simply a decision that there are factual issues. As stated by one authority;

“[T]he denial of summary judgment does not preclude either party from raising at trial any of the issues dealt with on the motion. This is because the denial of summary judgment is not decision on the merits; it simply is a decision that there is a material factual issue to be tried.”

10 Wright, Miller & Kane, Federal Practice and Procedure, § 2712 at p. 587. While the District Court’s, determination on defendants’ motion for summary judgment was made a year earlier, and is not binding on the present motion, we point out that the District Court concluded that there were factual disputes. If there were material factual disputes, neither plaintiff nor defendant were entitled to summary judgment.

Defendants also contend that the court erroneously granted summary judgment since genuine issues of material fact remain as to each of plaintiff’s allegations, and as to defendants’ affirmative defenses. In the petition for a writ of supervisory control, defendants list the following as issues involving factual determinations:

“(a) Whether the court improperly removed from jury consideration the issue of whether there was a breach of an implied covenant of good faith and fair dealing when numerous affidavits described a fair and honest reason for the discharge from employment;
“(b) Whether an alleged failure to meet the requirements of a federal preemption defense provides grounds for summary ruling that the implied covenant of good faith and fair dealing was breached or wrongful discharge occurred;
“(c) Whether mere discharge from employment, without more, entitled respondent to summary judgment on the issue of liability for breach of implied covenant of good faith and fair dealing;
“(d) Whether denial of relators’ summary judgment motion, without more, entitled respondent to entry of summary judgment;
“(e) Whether the Bank’s parent corporation is subject to liability for breach of implied covenant, based on discharge of its subsidiary’s employee, when respondent offered no proof that the corporate form was used as a subterfuge to perpetrate fraud, justify wrong, or defeat public convenience;
“(f) Whether a director of a corporation is subject to personal liability when his acts were clearly taken in furtherance of corporate purpose.”

In reviewing the applicable law, we emphasize the following standards. The covenant of good faith and fair dealing does not arise unless the employee has been given objective manifestations of job security. Dare v. Montana Petroleum Marketing Co. (1984), 212 Mont. 274, 687 P.2d 1015. Even if the covenant is implied in the relationship, it is not breached if the employer had a fair and honest or legitimate business reason for the discharge. Barrett v. ASARCO, Inc. (Mont. 1988), [234 Mont. 229,] 763 P.2d 27, 45 St.Rep. 1865.

In the present case defendants claim that Mr. Pancich was an at-will employee in that he had no objective manifestations of continued employment. They allege therefore that the covenant of good faith and fair dealing may not even apply to the termination. Additionally, the uncontradicted affidavits identify the OCC’s determination that the bank was engaged in unsound banking practices as a fair and honest business reason for the discharge. The District Court had these affidavits for review prior to granting summary judgment. The affidavits clearly raise genuine issues of material fact. Further, the District Court had reviewed interrogatories and had expressly stated that there were conflicts in the evidence. It is clear that plaintiff established no basis from which the court could conclude that as a matter of law Mr. Pancich was wrongfully discharged and the covenant was breached. We conclude that genuine issues of material fact exist relative to the issues of wrongful discharge and breach of the covenant of good faith and fair dealing, precluding summary judgment.

Additionally, there remain genuine issues of material fact regarding defendants’ affirmative defense that the Banking Act insulates them from liability. Through uncontested affidavits, defendants present evidence supporting their position that the termination of Mr. Pancich had prior authorization by the board. They also present facts indicating that the termination was ratified by the board, both at the special meeting of August 18 where a new president was elected, and again at the September 15 meeting where each member voted to accept Mr. Pancich’s letter of resignation. Although plaintiff contends that Mr. Reichel did not have the authority to discharge Mr. Pancich, the plaintiff failed to support this contention by affidavit or otherwise.

In response to Justice Sheehy’s dissent, we note that while defendants do argue that cases interpreting the Banking Act would allow them this defense, we conclude that this is simply one more area in which issues of fact remain. We further point out that whether discharge “at pleasure” is available to defendants is only relevant to one of their defenses. Even if it were determined that the discharge was not authorized, or that ratification was not effective, this does not establish liability. It only eliminates that particular defense. The issue presently before this Court is only whether summary judgment against all defendants on the issue of liability was proper. The argument in regard to the Banking Act does not dispose of that issue.

We also agree with defendants’ contention that plaintiff has failed to present facts from which it may be concluded that, as a matter of law, the parent corporation of First Bank West is liable for breach of the covenant of good faith and fair dealing, or that Mr. Reichel is personally liable in this suit. Meridian Minerals Co. v. Nicor Minerals, Inc. (1987), 228 Mont. 274, 742 P.2d 456, (parent corporation not a participant in action of subsidiary unless corporate form is used as subterfuge); Bottrell v. American Bank (Mont. 1989), [237 Mont. 1,] 773 P.2d 694, 46 St.Rep. 561, (actions of bank officers protected by corporate shield from personal liability). Genuine issues of material fact remain on these issues.

Because of the numerous genuine issues of material fact on each of the above issues, we conclude that the District Court’s grant of summary judgment was manifestly incorrect.

II

Is supervisory control appropriate when the District Court granted summary judgment in favor of Plaintiff despite the presence of numerous factual issues?

This Court discussed the role of supervisory control in State ex rel Whiteside v. District Court (1900), 24 Mont. 539, 562-63, 63 P. 395, 400, as follows:

“It has its own appropriate functions, and, without undertaking to define particularly what these functions are, we think one of them is to enable this court to control the course of litigation in the inferior courts where those courts are proceeding within their jurisdiction, but by a mistake of law, or willful disregard of it, are doing a gross injustice, and there is no appeal, or the remedy by appeal is inadequate. Under such circumstances, the case being exigent, no relief could he granted under the other powers of this Court, and a denial of a speedy remedy would be tantamount to a denial of justice. Cases may arise also where some relief could be granted under some one of the other original writs named, but such relief would not be complete and adequate because of some error which could not be corrected by means of the limited functions of the particular writ, while the supervisory power is unlimited in the means at our disposal for its appropriate exercise.”

This Court may accept supervisory control pursuant to Rule 17, M.R.App.P., when due appeal is an inadequate remedy. In applying this standard we have repeatedly stated that a writ may issue to prevent extended and needless litigation:

“. . .This Court will nonetheless accept jurisdiction to protect First Bank from participating in needless litigation, a purpose for which a writ of supervisory control is intended: ‘. . . it is in the nature of a summary appeal — a shortcut — to control the course of litigation in the trial court . . . and may be employed to prevent extended and needless litigation.’ ” (Citations omitted.)

First Bank v. Fourth Judicial Dist. Court (1987), 226 Mont. 515, 519, 737 P.2d 1132, 1134.

We also issued the writ in Continental Oil v. Elks Nat. Foundation (Mont. 1989), [235 Mont. 438,] 767 P.2d 1324, 46 St.Rep. 121, to correct a partial summary judgment order, and in Great Western Sugar Co. v. District Court (1980), 188 Mont. 1, 610 P.2d 717, the writ issued to prevent needless litigation where the district court had refused to dismiss a defendant whose affirmative defense clearly allowed dismissal.

Appellate review of an interlocutory order by the district court is not favored because of this Court’s reluctance to intervene in district court decisions and because there normally is an adequate remedy by appeal, State ex rel. Guar. Ins. v. District Court (Mont. 1981), [_Mont__,] 634 P.2d 648, 38 St.Rep. 1682. However, issuance of an extraordinary writ is discretionary, 16 Wright, Miller, Cooper and Gressman, Federal Practice and Procedure, § 3932 at p. 187, and this Court has previously accepted review in an appropriate case. See, e.g., State ex rel. Burlington Northern v. Dist. Ct. (Mont. 1989), [239 Mont. 207,] 779 P.2d 885, 46 St.Rep. 1625 (writ issued because an order placed a party at a significant disadvantage in litigating the merits of a case); Kuiper v. Dist. Court of Eighth Judicial Dist. (Mont. 1981), [_Mont__,] 632 P.2d 694, 38 St.Rep. 1288 (writ issued to determine whether district court properly granted a protective order); Jaap v. District Court of Eighth Judicial Dist. (1981), 191 Mont. 319, 623 P.2d 1389, 38 St.Rep. 280 (writ issued where district court exceeded its jurisdiction by allowing defendant’s attorney to privately interview plaintiffs physicians). A case by case analysis must be employed in determining whether supervisory control should be accepted. State ex rel. Deere and Co. v. District Court (1986), 224 Mont. 384, 730 P.2d 396.

The record here establishes genuine issues of material fact regarding the liability of each of three separate defendants. It is premature to allow a trial on damages as to any one or all three of the defendants under that circumstance. Such a trial on damages becomes needless and expensive litigation. The attendant publicity of such a trial on damages and its adverse effect upon defendants is not easily calculated. We conclude that the order of the District Court was manifestly incorrect and created problems sufficiently burdensome to the defendants to require this Court to take supervisory control. We conclude that supervisory control is appropriate to prevent needless and potentially damaging litigation. We vacate the District Court’s order of summary judgment and remand for further proceedings consistent with this opinion.

CHIEF JUSTICE TURNAGE and JUSTICES GULBRANDSON and the HONORABLE HENRY LOBLE, District Judge, retired, sitting in place of JUSTICE HARRISON, concur.

JUSTICE McDONOUGH,

dissenting.

I would deny the writ. Relators here have an adequate remedy by appeal.

JUSTICE SHEEHY,

dissenting:

The first mistake of the majority is its unwarranted interference with the District Court’s interlocutory order for which, if wrong, there is a complete and speedy remedy by appeal. The second mistake of the majority is, having determined to interfere, the members have failed to interpret properly the applicable law relating to the discharge of a bank officer. Had they properly interpreted the law, they had then discovered that there was no genuine issue of material fact before the District Court.

It should have piqued the interest of the majority that in all of the briefs filed by the banks, there is not a single whisper of contention that Pancich was an at-will employee.

It should further have piqued the interest of the majority that in all of the briefs filed by the banks, there is not a single reference to federal law or federal cases bearing on the discharge of a bank officer, although in this case the banks involved are national associations.

Had their interest been piqued, they should first have looked at the provisions of 12 U.S.C. § 24, which relates to the discharge of bank officers. The statute provides that a national bank has the power:

“FIFTH. To elect or appoint directors, and by its board of directors to appoint a president, vice president, cashier, and other officers, define their duties, require bonds of them and fix the penalty thereof, dismiss such officers or any of them at pleasure, and appoint others to fill in their places.” (Emphasis added.)

The effect of 12 U.S.C. § 24 was discussed in McWhorter v. First Interstate Bank (1986), 81 Or.App. 132, 724 P.2d 877, 879, wherein it was contended that the president of a national bank had authority to dismiss a bank officer. The Oregon court said:

“The difficulty with defendant’s argument is that we are concerned here with the delegation of a specific statutory duty, not simply with the managerial powers that normally accompany a general conferral of authority in the articles or bylaws of a corporation. Section 24 (Fifth) explicitly confers the responsibility for the hiring and dismissal of officers on the board of directors. Other provisions of the national banking laws make it clear that Congress knows how to manifest its intent about what powers are exercisable only by the board and what powers may be exercised by subordinate entities. See, e.g. 12 U.S.C. § 24 (Seventh) (‘board of directors or duly authorized officer or agents’).
“We consider that premise to be incorrect, because the authority to hire and fire the officers of national banks is not simply a matter of corporate organization; it is a matter which Congress has deemed sufficiently important to regulate by statute and to entrust to the highest decision making entity in the corporate structure . . .”

In Mahoney v. Crocker Nat’l Bank (N.Dist.Cal., 1983), 571 F.Supp. 287, discharged national bank officers brought suit against the bank based on the federal Age Discrimination in Employment Act. The bank sought to interpose the defense that because it was a national bank, its bank officers served at pleasure under the National Banking Act, 12 U.S.C., section 24. The appeals court held that because the plaintiff bank officers had not been discharged by the bank’s board of directions, nor by an officer empowered by the by-laws to discharge bank officers, the defense of at-will employment was not available to the bank, since the dismissal of the bank officers was not done in a manner authorized by the National Banking Act, 12 U.S.C., section 24. Mahoney, 571 F.Supp. at 290-291.

In this case, one member of the majority has concluded that because in Mahoney the bank sought to use the National Banking Act in defense, the provisions of the Act are available only to banks as a defense, and that plaintiffs cannot rely on those same provisions to prove an improper discharge. On that basis the member of the majority refuses to acknowledge the right of a discharged bank officer to rely on the procedures established by Congress for the hiring and firing of bank officers in 12 U.S.C., section 24, saying the Act is only available to a bank as a matter of defense. There is no way for me to explain that rationale: Clearly, it seems to me, while it is true that under the National Banking Act, a bank officer is an at-will employee, under the same Act, his dismissal can only be by the board of directors in concert, or by someone authorized in the by-laws to dismiss the bank officer. Any other kind of dismissal is against law and gives rise to liability.

In this case, the discharge of Pancich was by John Reichel, and not by the board of directors. Attempt was made by the bank to show that the board of directors ratified the discharge. Under the cases, they are not helped by that attempt. It is old law and undisputed to this date that the assent of the individual members of the board, acting separately and singly, and not when acting as a unit, is not the assent of the bank, and is not binding on the bank. First Nat. Bank v. Drake (1886), 35 Kan. 564, 11 P. 445, 447. In Wiskotoni v. Michigan Nat. Bank-West (6th Cir. 1983), 716 F.2d 378, 387, the federal court held that an attempt by the board of directors to ratify the president’s action in terminating an officer did not satisfy the statutory requirement that officers of a national bank be dismissed by an action of the bank’s board of directors. Ratification therefore is impossible. The Oregon court recognized the authority of Wiskotoni and refused to recognize an attempted ratification of a discharge by the board of directors after the fact. McWhorter v. First Interstate Bank (1986), 81 Or.App. 132, 724 P.2d 877, 879. In the light of those decisions and the plain statutory language of 12 U.S.C. § 24 (Fifth), the District Court was eminently correct in holding:

“IT IS ORDERED that said motion is overruled and denied for the reason that a discharge is not ratifiable by the board after defendants executed the discharge of plaintiff . . .”

There is no legal requirement that a district court in ordering summary judgment should express reasons or give a legal analysis as referred to in the majority opinion. We have suggested that such be done but if the district court does not do so, this Court is not excused from its duty to examine the law to determine if the summary judgment is proper. In this case, an examination of the applicable law shows that the order of the district court was correct.

The legal situation in this case boils down to this: John Reichel, as the regional managing director of the western Montana region of First Bank System, or as a director of the bank, in discharging Robert M. Pancich from the presidency of First Bank West, Great Falls, acted completely against a Congressional statute. It is not relevant in this situation that First Bank West might otherwise have had good cause to discharge the president. If it had such cause, it could only act through its board of directors. Reichel plainly tortiously interfered with the contractual relation between Pancich and his bank. A violation of a federal statute with respect to discharge is certainly a breach of the implied covenant of good faith and fair dealing — if expected compliance with federal statutes is not inherent in a national bank officer, what importance can we attach to mere personnel brochures upon which we have previously supported implied covenants? Public policy ordained by Congress through its national banking laws requires that an officer be discharged only by the board of directors of a national bank. When public policy has been violated in connection with a wrongful discharge, a cause of action arises. Keneally v. Orgain (1980), 186 Mont. 1, 5-6, 606 P.2d 127, 129.

Moreover, there is no basis for the contention that John Reichel has no personal liability in this matter. He is the person who violated the Congressional statute. Under the National Banking Act he had no authority to remove Pancich as a bank officer. The order of the District Court fixing liability for a wrongful discharge upon the defendant Reichel was eminently proper in this case.

There is further no basis to contend that a question of fact exists as to the liability of First Bank System. In discharging Pancich, Reichel was acting as the agent of First Bank System. A corporation is liable for the wrongful acts of its agents when the agents are acting in the course and scope of their .employment. First Bank System is responsible for Reichel’s wrongful acts.

The foregoing applicable law convinces me that there is no genuine issue of material fact as to the liability of the defendants and that the District Court properly ordered summary judgment on that point. Even if I were not so convinced, however, I would still not grant supervisory control because such action is a plain interference with the District Court proceedings from which there is complete, adequate and speedy remedy by appeal. The majority cites a number of cases in which we granted summary judgment but that simply glosses over what is occurring here, a direct interloping into the district court process on improvident grounds. I am outraged at the effect on the District Court proceedings. The District Court, after granting partial summary judgment had fixed trial of the cause for September 29, 1989. This Court vacated that trial setting, acting through its majority. In their exorbitant worry over “needless and expensive litigation” and “attendant publicity” the majority here have made the district court trials more expensive and burdensome, and necessarily increased the expense of the litigation — quite needlessly, in view of the law. The same thing happened recently in State ex rel. Burlington Northern v. District Court (Mont. 1989), [239 Mont. 207,] 779 P.2d 885, 46 St.Rep. 1625. There, an injured railroad worker lost his trial setting by the action of this Court. It is too late to rectify the loss of a trial setting in the case at bar but we should at least refuse supervisory control.

JUSTICE HUNT concurs in the foregoing dissent of JUSTICE SHEEHY.


source: Caselaw Access Project

author: JUSTICE HARRISON

license: Public Domain

text:
    FRANK EDWARD GETTEN, Claimant and Appellant, v. LIBERTY MUTUAL INSURANCE COMPANY, Defendant and Respondent.
    No. 89-286.
    Submitted Oct. 31, 1989.
    Decided Nov. 28, 1989.
    782 P.2d 1267.

      Jack E. Sands argued, Billings, for claimant and appellant.
    Robert E. Sheridan argued, Garlington, Lohn & Robinson, Missoula, for defendant and respondent.
   JUSTICE HARRISON

delivered the Opinion of the Court.

This case presents an appeal from the Workers’ Compensation Court which affirmed a determination by the Division of Workers’ Compensation regarding subrogation rights. The Division determined that respondent was entitled to a subrogation right in tort claim proceeds recovered in a wrongful death action brought by appellant. We affirm.

Appellant raises the following issues for review:

1. Does the Division of Workers’ Compensation have jurisdiction over this subrogation claim?
2. Did Liberty Mutual Insurance establish that the claimant was provided full legal redress in its third party claim so that Liberty’s subrogation claim extends to the settlement award?
3. Did Liberty Mutual Insurance establish that the insurer responded to claimant’s invitation to participate in the lawsuit in a manner that was “explicit, immediate and without reservation,” so as to be entitled to the full subrogation amount authorized by the Workers’ Compensation Act?
4. Did Liberty Mutual Insurance establish that fifty percent of the amount of the settlement was related to economic damages or to damages which had their source in the earnings of the decedent, and thus subject to its claim for subrogation?
a. Was Getten’s settlement brochure in the third-party action protected by the attorney work product rule?
b. Should deposition testimony of two adjustors for insurers in the third-party action have been admitted in evidence?
c. Did Liberty Mutual Insurance establish the amount of economic damages that represents reasonable contributions to the heirs derived from the earnings of the decedent?
5. Was the subrogation entitlement computed correctly?
6. Did the Division fail to make findings of fact essential to the question to be decided?

Frank Getten worked as a truck driver for Ryan Wholesale Foods. On December 18,1984, he was killed in a truck accident in Utah. He died instantly during a head-on collision with another semi-truck owned by Zip Trucking. The driver of the other semi, Terry Osborne, an employee of Zip Trucking, was later convicted of automobile homicide because his negligence caused the accident. Mr. Get-ten was survived by two children from a prior marriage.

Liberty accepted liability for Getten’s death and began payment of death benefits to Getten’s children.

Subsequently, Getten’s estate initiated a wrongful death action against Osborne and Zip Trucking. The wrongful death action resulted in a structured settlement which included a cash payment and an annuity for the surviving children. The settlement was well within the available policy limits.

When claimant’s counsel initiated the third-party suit, he wrote to the adjuster for Liberty and requested that Liberty share costs and attorney’s fees for the third-party suit. The adjuster wrote to counsel and requested some information about the third-party suit and estimated costs. Claimant’s counsel did not reply to this letter. The adjuster then wrote to claimant’s counsel and informed him that Liberty would participate in the third-party suit. Liberty agreed to pay its share of attorney’s fees at the time the third-party claim settled in accord with claimant’s counsel’s contingency fee agreement. Later, claimant’s counsel forwarded a bill to respondent’s adjustor for costs which Liberty paid minus some costs the adjuster decided were not related to the third-party suit.

Liberty demanded that it he subrogated to the third-party claim. Appellant disputed Liberty’s claim, contending that Liberty had no subrogation right or alternatively only a right to 50% subrogation because Liberty did not participate in the third-party suit.

Issue I

Appellant contends that jurisdiction of the subrogation claim properly lies with Workers’ Compensation Court for two reasons. First, appellant contends that § 39-71-414, MCA, does not give the Division jurisdiction because respondent’s liability was fully determined prior to the third-party settlement. Secondly, the Division lacked jurisdiction, the appellant claims, because the third-party action was a wrongful death suit. We disagree.

The statute at issue is § 39-71-414, MCA (1985), which sets out an insurer’s subrogation rights. The disputed language appears in sub-paragraph (5) which states:

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

Appellant interprets § 39-71-414(5), MCA, to require only that a final determination of benefits have been made prior to the third-party settlement. In the instant case, the Division entered its order awarding the beneficiaries compensation on March 20,1985, prior to the third-party settlement.

We addressed § 39-71-414(5), MCA, and the Division’s jurisdiction in subrogation claims, in First Interstate Bank of Missoula v. Tom Sherry Tire, Inc. (Mont. 1988), [235 Mont. 48,] 764 P.2d 1287, 1289, 45 St.Rep. 2150, 2152. We stated the following:

“Third, only in those cases where the benefits are not determined at the time the third-party action is settled does the Division resolve the question of subrogation . . .
“However, the total amount of benefits and compensation payable by the insurer must be known to specify the amount of subrogation to which the insurer is entitled. Where the total amount of benefits and compensation are not known, the Montana legislature delegated to the Division the power of determining what proportion of the settlement is to be allocated under subrogation.” (Emphasis added.) This language clearly requires the Division to assume jurisdiction of subrogation claims when the total dollar amount of benefits is not determined prior to the third-party settlement. In the instant case, respondent’s total liability could not have been determined on March 20, 1985, because of contingencies that affect the duration of benefits to the minor children. These contingencies, which relate to the effect of marriage and school on the duration of the benefits, necessarily cannot be resolved until the future. Therefore because its total liability was not fully determined prior to the third-party settlement, § 39-71-414(5), MCA, gives the Division jurisdiction to compute the amount of subrogation. We affirm the Workers’ Compensation Court’s decision that the Division had jurisdiction over the subrogation claim.

Appellant’s second ground for attacking the Division’s jurisdiction is that because the third-party action was a wrongful death action, neither the action nor the subrogation right arises under the Workers’ Compensation Act. Our holding in Swanson v. Champion Internat'l Corp. (1982), 197 Mont. 509, 646 P.2d 1166, confirms that an insurer has a subrogation right in the economic portion of wrongful death recoveries. We reject appellant’s argument.

Issue II

Appellant contends that respondent is not entitled to subrogation because the third-party settlement did not provide ¿ppellant with full legal redress and argues that Hall v. State Compensation Ins. Fund (1985), 218 Mont. 180, 708 P.2d 234 is analogous to this case. We disagree.

In Hall this Court held that when “a claimant is forced to settle for the limits of an insurance policy which, together with claimant’s workers’ compensation award, do not grant full legal redress to claimant, the insurer is not entitled to subrogation rights under § 39-71-414, MCA.” Hall, 708 P.2d at 237. The Hall opinion distinguishes the Hall case from Brandner v. Travelers Ins. Co. (1978), 179 Mont. 208, 587 P.2d 933. This Court, in Brandner, found that the claimant was made whole by “a voluntary settlement in satisfaction of all claims” for an amount “not dictated by the upper limits of the insurance policy.” Hall, 708 P.2d at 236. The instant case presents a voluntary settlement (approximately 1.5 million dollars) for less than the upper limits of the applicable insurance policy (six million dollars). We hold that appellant received full legal redress.

Issue III

Appellant contends that the Workers’ Compensation Court erred in finding that Liberty adequately responded to appellant’s invitation to participate in the lawsuit.

This Court’s task in reviewing a Workers’ Compensation Court decision is to determine whether substantial evidence supports the Workers’ Compensation Court’s findings of fact and conclusions of law. Coles v. Seven Eleven Stores (1985), 217 Mont. 343, 347, 704 P.2d 1048, 1050.

Although appellant acknowledges that respondent did agree to participate in the lawsuit, appellant argues that respondent’s participation was not “explicit, immediate, and without reservation” because respondent refused to advance attorney’s fees despite a clear request to do so. Section 39-71-414(2) (b), MCA, does not require that the insurer advance attorney’s fees.

While § 39-71-414(2)(b), MCA, does not specifically require the insurer to advance attorney’s fees, it does not prohibit insurers from either advancing attorney’s fees or sharing attorney’s fees in losing cases. Under proper circumstances and supported by a clear record, a request to “pay a proportionate share of the reasonable cost of the action, including attorney’s fees” could require an insurer to advance attorney’s fees.

Appellant’s counsel pursued the third-party claim on a contingency fee basis. There is no advance of attorney’s fees on a contingency fee contract. Further, the record contains conflicting evidence regarding when and how claimant’s counsel requested advance payment of attorney’s fees. We find that the Workers’ Compensation Court’s decision that respondent adequately responded to appellant’s request that it participate in the lawsuit is supported by substantial evidence.

Issue IV

Appellant contends that the evidence does not establish that fifty percent of the settlement amount was related to economic damages and thus subject to subrogation. As well, appellant claims that the evidence does not establish the amount of economic damages that represents reasonable contributions to the heirs derived from the decedent’s earnings. A review of the record discloses that the Division’s finding that $750,000 of the third-party settlement was subject to subrogation is supported by substantial evidence.

Appellant also objects to the admission into evidence of the settlement brochure and the depositions which she contends are hearsay. Section 39-71-2903, MCA (1985), provides that workers’ compensation proceedings are not bound by formal rules of evidence. Regarding appellant’s evidentiary objections, the Workers’ Compensation Court held them to be without merit. The Workers’ Compensation Court found that the deposition testimony was properly noticed and that the deponents lived beyond the jurisdictional limits. As to the settlement brochure, both the Division and the Workers’ Compensation Court found that it was not privileged. The Division noted that the appellants had not reserved any rights regarding the settlement brochure in disseminating it to the third-party insurer. We affirm the Workers’ Compensation Court’s decisions regarding appellant’s evidentiary objections.

Issue V

Appellant contends that the Division incorrectly calculated the subrogation amount and that the Workers’ Compensation Court used the wrong formula to review the Hearing Examiner’s calculations. The Workers’ Compensation Court used the formula found in Tuttle v. Morrison-Knudsen Co., Inc. (1978), 177 Mont. 166, 580 P.2d 1379. Appellant asserts the formula in Swanson v. Champion Internat'l Corp. (1982), 197 Mont. 509, 646 P.2d 1166, should have been used. Further, the appellant asserts that no basis exists in § 39-71-414, MCA, for respondent to be reimbursed for its mandatory $1,000 payment to the uninsured fund.

Although appellant implies that the Swanson and Tuttle formulas are different, the formulas are identical. The Division did calculate the subrogation amount in accordance with Swanson and Tuttle.

Section 39-71-414(1), MCA, provides for “subrogation for all compensation and benefits paid or to be paid or to be paid under the Workers’ Compensation Act.” Appellant argues that the $1,000 contribution to the uninsured fund required by statute is neither compensation nor a benefit to the estate of the deceased. However, because the workers’ compensation statute requires the $1,000 payment, it falls under § 39-71-414, MCA. We hold that the Division computed the subrogation amount correctly.

Issue VI

Appellant’s main contention regarding the Division’s findings of fact appears to be that the Division essentially adopted the respondent’s proposed findings of fact. Appellant offers no real argument beyond this contention. The standard of review for findings of fact is whether there is credible evidence to support the finding. Further, this Court holds that reliance on counsel’s proposed findings of fact is not automatic error. Moore v. Hardy (Mont. 1988), [230 Mont. 158,] 748 P.2d 477, 45 St.Rep. 108. We reject appellant’s contention.

We affirm the Workers’ Compensation Court.

CHIEF JUSTICE TURNAGE and JUSTICES BARZ, HUNT, McDONOUGH and WEBER concur.

JUSTICE SHEEHY did not participate in this decision.


author: JUSTICE SHEEHY

text:
    EBI/ORION GROUP, Petitioner and Appellant, v. STATE COMPENSATION INSURANCE FUND, Defendant and Respondent. In re CLAUDE L. ATHEY, Intervenor and Claimant.
    No. 89-202.
    Submitted on Briefs Aug. 10, 1989.
    Decided Nov. 29, 1989.
    782 P.2d 1276.

      Charles E. McNeil and Bradley J. Luck, Garlington, Lohn & Robinson, Missoula, for petitioner and appellant.
    Jerome S. Knutson, Murray, Kaufman, Vidal, Gordon & Ogle, Joseph F. Daley, Daley, Seaman & Vannoy, Kalispell, for defendant and respondent.
   JUSTICE SHEEHY

delivered the Opinion of the Court.

We reverse the summary judgment granted by the Workers’ Compensation Court holding in effect that no genuine issue of material fact was presented as to the right of EBI-Orion Group for indemnification from the State Compensation Insurance Fund. We determine that there are substantial issues of material fact which must be decided by the Workers’ Compensation Court, and so remand the cause for further proceedings in accordance with this opinion.

The issue in this case is whether EBI-Orion (EBI) may be entitled to indemnification from the State Compensation Insurance Fund relating to a compromise settlement between EBI and an injured employee, which compromise was approved by the Division of Workers’ Compensation.

Claude Athey was an employee of Harp Line Construction in Kalispell, Montana. On September 19, 1985, when EBI was the Workers’ Compensation carrier for Harp, Claude Athey slipped and fell while carrying nuts and bolts and sustained a back injury in the course of his employment. However Athey did not file a claim for benefits relating to this date until the State Fund received such a claim from Athey on September 16, 1986. On receipt of the claim, the State Fund began payment of temporary total benefits to Athey.

In the course of investigation, the State Fund made a determination that Athey’s accident had actually occurred on September 19, 1985. The State Fund therefore terminated payments because the State Fund coverage of Harp Line Construction did not commence until October 1, 1985. The date determined by the State Fund as the date of the accident preceded the coverage date for State Fund.

EBI, as the carrier whose coverage was in effect on September 19, 1985, first denied liability for late notice to the employer, but later accepted liability and began making benefit payments to Athey.

In the period following September 19, 1985, Athey had continued his employment with Harp Line Construction. The winter months were slow and he was called only occasionally to work. He returned to steady employment in May of 1986 for Harp Line Construction.

In the course of the summer of 1986, Athey’s employment duties included lifting of heavy objects. On August or September of 1986, while State Fund was the compensation carrier for Harp, he was engaged in stacking iron or heavy tires when the condition of his back increased to the point where he could no longer work. He informed his employer, and from the record here, Athey has not worked since.

During the period that the State Fund was making payment of benefits to Athey, one of its field investigators filed a report respecting Athey’s case with the following language in his report:

“It should be noted however that just prior to his leaving on September 8, 1986, the claimant however was involved in fairly strenuous activity in stacking these tires and apparently this is also when he started to complain more about his condition and told Mr. Harp that he could not continue.”

It was after Athey’s back reached the condition that he could no longer work that he filed his first claim for benefits with the State Compensation Insurance Fund.

On April 2, 1987, when EBI accepted liability for the September 19, 1985 claim, it did so by letter, including a reservation of rights to recover any amount paid in the event that further investigation revealed that a second injury occurred while the State Fund was on the risk.

On May 16, 1988, counsel for EBI wrote to the State Fund that EBI had agreed to a compromise settlement of Athey’s claim for Workers’ Compensation benefits, but that the settlement included a reservation by EBI as to its right to pursue the issue of a second injury against the State Fund. The letter requested the State Fund to contribute 50 percent toward the settlement which was by the State Fund denied.

On June 27, 1988, Athey filed a petition for compromise by settlement with EBI for the sum of $52,000. Included in the petition was the language:

“The insurer reserves all rights to pursue indemnification for all of amounts paid to claimant from the State Compensation Insurance Fund for any second injury which may have occurred during the summer of 1986.”

On August 1, 1988, the Division of Workers’ Compensation approved the compromise settlement in an order which included language that the insurer reserved all rights to pursue indemnification against the State Fund for any second injury which may have occurred during the summer of 1986.

Following the approval of settlement, EBI undertook to obtain medical records and depositions from a team of doctors. On September 2, 1988, it forwarded to the State Fund copies of the depositions of Dr. Ricker and Dr. Coolidge. In its September 2 letter, EBI claimed that the evidence showed that Athey had reached medical stability and maximum healing from the injury of September 19, 1985 and that he received a second injury by aggravation of the underlying condition while the State Fund was on the risk in September of 1986. In the letter, EBI demanded complete indemnification for the compromise paid, and other expenses. The State Fund denied the demand.

EBI filed a petition before the Workers’ Compensation Court for a determination as to its right of indemnification. The hearing examiner, in his proposed order, held that there was no genuine issue of material fact, that the reservation of rights by EBI in its final compromise settlement petition was not binding upon the State Fund, that the only claim filed by Claude Athey was a full and final compromise settlement of an accident which occurred on September 19, 1985 and that the compromise settlement was voluntarily paid by EBI. The Workers’ Compensation Court adopted the proposal of the hearings examiner and on February 22, 1989, granted the motion of State Fund for summary judgment and dismissed EBI’s petition. From that order of summary judgment, EBI appeals.

EBI contends on appeal that the Workers’ Compensation Court erred when it determined that EBI’s reservation of indemnity rights in its compromise settlement had no effect on the State Fund; that the evidence established genuine issues of material fact precluding summary judgment, and that it is entitled to have those issues determined by the Workers’ Compensation Court.

The State Fund contends that EBI cannot shift its liability for the settlement to the State Fund, that any recovery for a 1986 injury is barred by the failure of EBI to comply with the claim and notice requirements of § 39-71-601, -603, MCA, that EBI lacked standing to bring a workers’ compensation claim, and that the Workers’ Compensation Court properly granted summary judgment.

In Belton v. Carlson Transport (1983), 202 Mont. 384, 392, 658 P.2d 405, 409-410, this Court said:

“We hold that the burden of proof is properly placed on an insurance company which is on the risk at the time of the accident in which a compensable injury is claimed. This holding assures that claimant will always know which insurer he can rely on to pay the benefits. It is the duty of the insurance company on risk to pay the benefits until it proves, or until another insurance company agrees, that it should pay the benefits. If it is later determined that the insurance company on risk at the time of the accident should not pay the benefits, this insurance company, of course, has a right to seek indemnity from the insurance company responsible for the benefits already paid out to the claimant.”

This Court held to the Belton rule in Stangler v. Anderson Meyers Drilling Company (Mont. 1987), [229 Mont. 251,] 746 P.2d 99, 101, saying:

“In Belton v. Carlson Transport (1983), 202 Mont. 384, 658 P.2d 405, this Court adopted the idea of ‘maximum healing’ and ‘successive injuries’ in order to more fairly assess which employer is responsible for an employee’s on-the-job injury. Maximum healing means that following a compensable injury a claimant has reached a point constituting the end of the healing period. It does not mean the person is free of symptoms such as pain or objective signs. Belton, 658 P.2d at 408.
“The rule of Belton controls a situation where an employee has been injured more than once and different employers’ insurance carrier are at risk for the separate injuries. If the first injury has not reached maximum healing, the insurer at risk at the time of the first injury will be responsible for the second injury as well. If the claimant is medically stable or has reached maximum healing, the insurer at risk at the time of the second injury is responsible for Workers’ Compensation benefits.”

Under the medical testimony and other evidence of this case, a genuine issue of material fact exists as to whether Athey had attained maximum healing from the incident of September 19, 1985, prior to the time in 1986 when he found that his back condition prevented him from further working. (In Belton, we used the terms “maximum healing,” “maximum recovery,” and “medically stable condition” interchangeably. Belton, 658 P.2d at 409.)

In Stangler, this Court also said:

“. . . we now uphold the Belton rule that once a claimant has reached the maximum healing or a medically stable condition the insurer at risk at the time of the original injury is no longer responsible for any subsequent injuries or conditions.”

Stangler, 746 P.2d at 103.

Nonetheless, State Fund contends that because EBI made a compromise settlement with Athey without the participation of State Fund, that State Fund is no longer liable for any second injury. Moreover, State Fund contends that the compromise settlement referred only to a September 19, 1985 injury, and not to any subsequent injury and therefore does not relate to any claim of Athey’s for a second injury.

The right of indemnity is that where one is compelled to pay money which, in justice, another ought to pay, the former may receive from the latter the sums so paid. Raisler v. Burlington Northern R. Co. (1985), 219 Mont. 254, 258, 717 P.2d 535, 537; DeShaw v. Johnson (1970), 155 Mont. 355, 259, 472 P.2d 298, 301. The right to indemnity does not accrue until the payment is made. St. Paul Fire and Marine Insurance Company v. Thompson (1969), 152 Mont. 396, 403, 451 P.2d 98, 102. The party claiming indemnity need only prove potential liability at the time of making the payment, and that the payment was reasonable. Iowa Mfg. Co. v. Joy Mfg. Co. (1983), 206 Mont. 26, 34, 669 P.2d 1057, 1061. Here, the reasonableness of the compromise settlement was approved by the Workers’ Compensation Division. Thus, it is not a defense that because the State Fund did not participate or approve the compromise settlement, that the State Fund is exonerated from its indemnity obligations. Here, EBI had potential liability, effectuated a reasonable settlement, and if in fact there was a second injury, a right of indemnity exists in favor of EBI.

State Fund also contends that EBI has no standing to bring an indemnity claim. It points to § 39-71-601(1), MCA, which reads as follows:

“In case of personal injury or death, all claims shall be forever barred unless presented in writing to the employer, the insurer, or the division, as the case may be, within 12 months from the date of the happening of the accident, either by the. claimant or someone legally authorized to act for him in his behalf.”

State Fund contends that the indemnity claim is not brought by the claimant or by someone legally authorized to act for him in his behalf, and further contends that the petition for compromise settlement was not executed until June of 1988 and not approved until August of 1988 and that therefore the one year statute of limitations applies. The contention is weightless. EBI is not bringing a claim on behalf of the claimant, but rather on its own behalf, contending that it has an indemnity right for a payment which State Fund should have made. Section 39-71-601(1), MCA, does not apply in this case.

Finally, State Fund contends that there is no genuine issue of material fact in this case and that a second injury cannot be found from the testimony of the doctors through deposition or by the affidavits presented. Our examination of those documents and testimonies indicates that there is such a genuine issue which must be resolved by a trier of fact, in this case, the Workers’ Compensation Court.

The summary judgment of the Workers’ Compensation Court of this case is reversed and the cause remanded. The Workers’ Compensation Court is instructed to determine whether Claude Athey had reached the condition of maximum healing following his injury of September 19, 1985, prior to his second injury, and whether in fact a second injury occurred. A resolution of those fact issues will determine whether EBI is entitled to indemnity.

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


author: JUSTICE McDONOUGH

text:
    In the Matter of the ADOPTION OF C.R.D., A Minor.
    No. 89-187.
    Submitted on Briefs Oct. 13, 1989.
    Decided Nov. 30, 1989.
    782 P.2d 1280.
    Joan E. Cook; Miller & Cook, Great Falls, for appellant. Virginia Bryan, Billings, for respondent.
   JUSTICE McDONOUGH

delivered the Opinion of the Court.

J.M.S. (father) appeals the decree of the Thirteenth Judicial District Court, Yellowstone County, granting the adoption of his natural daughter, C.R.D. (daughter) by respondents J.E.D. and A.C.D. (grandparents). The respondents are the maternal grandparents of the child and have been her legal guardians since 1985. In granting the petition, the District Court held that the father’s consent to the adoption was not required because he failed to pay child support and had abandoned his daughter. We affirm the District Court’s decree on the grounds that the appellant abandoned the child according to Montana law.

Appellant raises the following issues on appeal:

(1) Did the District Court err in concluding that the father’s consent to the adoption was not required because he had abandoned his daughter according to Montana law?
(2) Did the District Court err in allowing evidence of the child’s best interests?
(3) Did the District Court err when it concluded that the father’s consent to the adoption was not required because he failed to pay for the support of his daughter?
(4) Did the District Court err in concluding that the grandparents, as appointed guardians, had the authority to consent to their own adoption of the child?

Father and V.D. (mother) were married on January 2, 1981 in Billings, Montana. The mother was eight weeks pregnant with the child at the time of the marriage, The couple lived together as husband and wife for approximately two weeks following the marriage, and separated on or about January 15, 1981. After the separation, the mother returned and resided at the home of her parents, the petitioners, where she lived when the daughter was born.

Mother filed for divorce on April 3rd, 1981. A decree dissolving the marriage was entered on June 22, 1981. Mother and father signed a Separation, Custody, Support, and Property Settlement Agreement on December 14, 1982. The agreement was incorporated into the decree of dissolution the following August. It established mother as the custodial parent of the child and obligated the father to pay $100.00 per month in child support. During the mother’s pregnancy and at no time since the birth of the child has the father provided financial assistance to either the mother or the child.

The father was jailed on November 15, 1983 in the Yellowstone County Jail. He was later transferred to the Montana State Prison at Deer Lodge where he currently resides. Prior to this incarceration, he had two thirty minute visits with his daughter in 1982, when she was approximately nine months old. Both visits were conducted at the business establishment of the petitioner’s. There have been no further personal visits between father and daughter since 1982.

In May of 1984, the mother moved from her parent’s home to seek employment in another state. Not wanting to disrupt her daughter’s development, she consented to her parents becoming the legal guardians of her daughter. The father was served with the guardianship petition on February 15, 1985. He failed to contest the action, and the petition was granted by default on March 19, 1985.

On February 11, 1985, and October 27, 1986, the grandparents received letters from the father. Neither letter included support for the child. The grandparents have never received any money from the father for his daughter’s support.

The petitioners have been the sole providers of their granddaughter’s daily and medical needs since her birth. The girl has become integrated into the petitioners’ home. She refers to the petitioners’ as her parents and the petitioner’s other children as her brothers and sisters. She is also named as a beneficiary in the petitioners’ will.

The father’s mother has visited with her granddaughter on five or six occasions totaling approximately 15 hours during 1985. During these visits, the father had one or two telephone visits with his daughter. There have been no telephone visits since 1985 or visits with father’s mother since 1985. Father sent his daughter a Christmas card in 1987 and a birthday card in July 1988. No other correspondence has taken place between father and his daughter.

On two occasions, prior to father’s incarceration, visitation had been arranged and the father failed to show up at the designated time and place. No requests for visitation with the child by either the father or the father’s mother have ever been denied.

Prior to his incarceration, appellant was employed as a school bus driver from August 1980, to the fall of 1981; as an air freight attendant from June to December, 1982 and as a restaurant worker. He earned $16.00 per day as a bus driver, $900.00 per month with the freight company, and minimum wage at the restaurant. At the adoption hearing, he acknowledged he has earned in excess of $2,000.00 while an inmate at Montana State Prison. He testified that while incarcerated he gave $20.00 to one of the petitioners’ sons for his daughter and opened up a savings account for her with his prison earnings. He has offered no documentary proof of these or any other payment for his daughter’s support.

At the hearing, the father testified that in 1985 he began efforts to have the child’s last name changed to his because he was not recorded as the father on the birth certificate. He testified that this change required the consent of the mother which she refused to give. Father filed a petition to change his daughter’s surname to his own on February 9, 1988. The grandparents filed this action for adoption of the child on October 5, 1988. The mother has consented to the adoption. The father has not consented and has indicated his intentions to seek custody of his daughter upon his release from prison. Father’s petition to change his daughter’s surname was denied and the petition for adoption was granted on February 13, 1989. The natural father now has appealed the adoption decree, raising the aforementioned issues.

I.

Montana law generally requires the filing of written consents in an adoption proceeding. Section 40-8-111(1), MCA. However, where a child has been willfully abandoned by a parent, that parent’s consent is not required for the adoption. Section 40-8-lll(l)(a)(iii), MCA. Abandoning a child is defined as:

“. . . leaving him under circumstances that make reasonable the belief that the parent or other person does not intend to resume care of the child in the future or by willfully surrendering physical custody for a period of 6 months and during that period does not manifest to the child and the person having physical custody of the child a firm intention to resume physical custody or to make permanent legal arrangements for the care of the child . . . .” (Emphasis added.)

Section 41-3-102(3)(d), MCA. Thus, a parent’s rights may be terminated, and an adoption subsequently executed without that parent’s consent upon a showing of abandonment under §§ 40-8-111 and 41-3-102(3)(d), MCA. See In Re Adoption of S.E. (Mont. 1988), [232 Mont. 31,] 755 P.2d 27, 45 St.Rep. 843; Matter of R.B. (1985), 217 Mont. 99, 103-104, 703 P.2d 846, 848. Because parental rights involve a fundamental liberty interest, a judicial decree terminating such rights must be supported by clear and convincing evidence. R.B., 703 P.2d at 848, citing Santosky v. Kramer (1982), 455 U.S. 745, 753-754, 102 S.Ct. 1388, 1394-1395, 71 L.Ed.2d 599, 606; S.E., 755 P.2d at 29; Matter of Adoption of E.S.R. (1985), 218 Mont. 118, 120, 706 P.2d 132, 133.

In the case at bar, the record contains clear and convincing evidence that the natural father willfully abandoned his daughter. Father has never provided any financial support for the child. He has only visited with her personally on two occasions in 1982 and visited with her over the phone on two occasions during the year 1985. There is no evidence that the father even attempted to contact his daughter in 1983, and he failed to show up at scheduled visits in 1984. This amounts to only four personal contacts between the child and her natural parent over some eight years. Father did not contest the proceeding to name the grandparents as the child’s guardians. The evidence of abandonment as found by the District Court is clear and convincing. See, Matter of M.W. (Mont. 1988), [234 Mont. 530,] 764 P.2d 1279, 1282, 45 St.Rep. 2107, 2110.

The record does suggest that the natural father may have had some renewed interest in his daughter after his incarceration. He sent her a Christmas card in 1987 and a birthday card in July, 1988. The father testified that he began attempts to have his daughter’s last name changed to his own in 1985, and filed a petition to have her name changed in 1988. However, this evidence is insufficient to demonstrate that the father has terminated or repented from his abandonment of his daughter. “Abandonment is not an ambulatory thing the legal effects of which a parent may dissipate at will by token efforts at reclaiming a discarded child.” Matter of Adoption of David C. (1978), 479 Pa. 1, 387 A.2d 804, 811; In Re Adoption of Simonton (1982), 211 Neb. 777, 320 N.W.2d 449, 454. The record clearly demonstrates that the child has been fully integrated into the home of her grandparents. It is the only home she has ever had. Considering the length of the abandonment, the father’s efforts at reclaiming his daughter while incarcerated can only be characterized as token. The District Court did not abuse its discretion in concluding that the father had abandoned his daughter and had not terminated that abandonment.

II.

The father also contends that the District Court erred in allowing evidence of the best interests of the child before there was a judicial determination terminating his parental rights. He contends that the District Court prematurely admitted best interest evidence illustrating his daughter’s well adjusted and happy life with her grandparents. The father argues that such evidence is irrelevant toward the issues of abandonment and nonsupport and their effect on termination of his parental rights. Thus, father contends that the admission of this evidence before it became relevant to the adoption was prejudicial.

We disagree. Generally, “the ‘best interest’ test is applied under § 40-8-123 or 124, MCA, after the parental rights have been terminated, in determining whether the adoption should be allowed.” S.E., 755 P.2d at 29. However, once an abandonment is shown to have existed by clear and convincing evidence to the extent shown here, the evidence is sufficient to support the conclusion of the court, and if admission of evidence relating to best interest of the child is in error, such error would not rise in gravity so as to overturn the findings and conclusions of the court as a result of a bench trial.

III. and IV.

The natural father also argues that the District Court erred in concluding that his consent was not required for the adoption because 1) he failed to pay support for his daughter; and 2) the grandparents, as appointed guardians, had the authority to consent to their own adoption of the child. Nonsupport is a ground for excusing the consent requirement for an adoption under § 40-8-lll(l)(a)(v), MCA. However, the District Court need only find one of the substitutes for consent enumerated by the statute in order to proceed with the adoption. Section 40-8-111, MCA. In light of the overwhelming evidence of abandonment in this case, we need not address the sufficiency of the evidence as it relates to nonsupport. Furthermore, because the natural father’s consent was excused when his parental rights were terminated, we need not discuss the guardians’ authority to consent because consent was no longer required to complete the adoption.

We find that there is clear and convincing evidence in the record to support the District Court’s finding that the father abandoned his daughter. The District Court did not abuse its discretion in terminating the father’s parental rights and granting the grandparents’ petition for adoption.

AFFIRMED.

CHIEF JUSTICE TÜRNAGE and JUSTICES HARRISON, WEBER and SHEEHY concur.


author: JUSTICE WEBER JUSTICE HUNT,

text:
    EARL BATTEN, individually and d/b/a Rimrock Honda-Harley Davidson, Plaintiff and Appellant, v. WATTS CYCLE AND MARINE, INC., and Oakland & Company, Defendants and Respondents.
    No. 88-297.
    Submitted on Briefs Sept. 15, 1989.
    Decided Nov. 30, 1989.
    783 P.2d 378.

      JUSTICE HUNT dissented and filed opinion.
    Timothy J. Whalen, Whalen & Whalen, Billings, for plaintiff and appellant.
    T. Thomas Singer, Moulton, Bellingham, Longo & Mather, Billings, James A. Poore, III, Poore, Roth & Robinson, Butte, for defendants and respondents.
   JUSTICE WEBER

delivered the Opinion of the Court.

Plaintiff (Batten) purchased a motorcycle dealership from defendants. When the business failed, he sued Watts, the seller, and his real estate agent, Oakland, under theories of fraud, constructive fraud, and negligent misrepresentation, seeking compensatory and punitive damages. The District Court for the Thirteenth Judicial District, Yellowstone County, granted summary judgment in favor of defendants. From this judgment, Batten appeals. We affirm.

The issues presented on appeal are:

1. Did the District Court err in granting summary judgment in favor of defendants?

2. Did the District Court err in its award of costs and attorney fees to the defendants?

Defendant Watts purchased Billings Honda-Harley Davidson (BHHD) from Arnie Brey in 1976, and operated the business profitably for a number of years. Batten became interested in purchasing a motorcycle business due to his personal interest in motorcycle riding. He had an educational background which included a Bachelor of Arts Degree, a Bachelor of Science in Geology, several graduate courses in business, and he had studied for the Colorado real estate exam. He had read a significant amount about the motorcycle industry, and the various makes of motorcycles and their sales records. He looked at various dealerships, and in 1981, responding to an advertisement in Cycle News Magazine, became interested in purchasing BHHD.

After seeing another ad in the Denver Post, Batten called Watts’ agent, Gary Oakland, to inquire about the dealership, and was sent a copy of the brochure which included the financial statements for the fiscal year ended November 29, 1981. Because the representations in the brochure are central to this case, we will set forth the brochure in pertinent part:

“PRICE: $360,000.00
“DOWN PAYMENT: $160,000.00
“EARNEST MONEY REQUIRED: $15,000.00
“DESCRIPTION: Billings Honda-Harley Davidson is the largest dealer for Honda and Harley-Davidson motorcycles in the state of Montana. The price includes the parts inventory, used cycles, shop tools, dealership agreement, leasehold improvements, trade name, etc. The new merchandise inventory is priced above $360,000.00 and is financed on a floor-plan arrangement.
“In 1981, the company sold over 450 Honda’s and 72 Harley-Davidson motorcycles.
“BUILDING: The real estate is leased at the rate of $2,700.00 per month. It consists of approximately 14,400 square feet. The facility is in good condition, is attractive, and has ample parking. The rent is presently $2.25 per square foot including utilities and other expenses.
“EMPLOYEES: The business is completely staffed with a sales manager, parts manager, service manager, 5 mechanics, and bookkeeper-secretary. It is understood that these people wish to remain with the firm,
“The seller will agree to a covenant of non-competition.
“OWNER: Ronald J. Watts
“BROKER: Gary Oakland”

Upon his request, Batten was later provided with financial statements for other years. He and his family then visited the dealership to inspect the business and the Billings business community. Both the local and out-of-state advertisements put out by Oakland, represented BHHD as the leading dealership in Montana; as making profits on both Honda and Harley-Davidson; that the business had strong assets; was well run and had a nice facility with a complete sales service and office staff. Batten maintains that these representations convinced him to purchase the business. After a series of negotiations with Gary Oakland, Batten signed a purchase agreement and deposit receipt in August, 1982. The deal was closed in October of that year.

During the first year of ownership, gross sales were $1.6 million which were higher than any of the previous six years under Watts’ management. Batten had profits of approximately $20,000 to $24,000. In November, 1983, Batten changed the location of the business, changed the name and the product mix, and fired many of the employees. After 1983, sales dropped and the business did not show a profit. In June, 1985, Batten filed a complaint against Watts and Oakland seeking compensatory and punitive damages. However, he continued to operate the business until May 4, 1988, when he filed a Chapter 7 Petition in Bankruptcy.

I

Did the District Court err in granting summary in favor of defendants?

Batten urges that the representations made by defendants concerning the business amounted to fraud, constructive fraud, or negligent misrepresentation. Summary judgment is only proper when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Rule 56(c), M.R.Civ.P. Any inferences to be drawn from the factual record must be resolved in favor of the party opposing summary judgment. Simmons v. Jenkins (1988), [230 Mont. 429,] 750 P.2d 1067, 45 St.Rep. 328. Summary judgment is never a substitute for a trial on the merits. Kronen v. Richter (1984), 211 Mont. 208, 211, 683 P.2d 1315, 1317.

Here, the materials submitted on summary judgment by defendants successfully show that there are no genuine issues of material fact. Thus, the burden of proof shifts to Batten to prove a prima facie case of fraud, constructive fraud, or negligent misrepresentation.

In order to prove fraud Batten must prove all of its nine elements. The elements are:

1. a representation;
2. its falsity;
3. its materiality;
4. speaker’s knowledge of the falsity or ignorance of its truth;
5. speaker’s intent that the representation be relied upon;
6. hearer’s ignorance of the falsity;
7. hearer’s reliance on the representation;
8. hearer’s right to rely on the representation; and
9. hearer’s consequent and proximate injury caused by the reliance. Sprunk v. First Bank W. Mont., Missoula (Mont. 1987), 228 Mont. 168, 741 P.2d 766, 44 St.Rep. 1429. Fraud, an intentional act of misrepresentation, Gregory v. City of Forsyth (1980), 187 Mont. 132, 609 P.2d 248, can never be presumed but must be proved by a preponderance of the evidence. Wright v. Blevins (1985), 217 Mont. 439, 705 P.2d 113. Mere suspicion of fraud is not sufficient. In Re Marriage of Hoyt (1985), 215 Mont. 449, 698 P.2d 418.

Constructive fraud, unlike actual fraud, does not require dishonesty of purpose or intent to deceive. Section 28-2-406(1), MCA; Moschell v. Hulse (1980), 190 Mont. 532, 622 P.2d 155. A plaintiff’s opinions alone do not provide a sufficient basis in fact to prove constructive fraud when there is no evidence of any breach of duty or of a fraudulent act or omission. Westlake v. Osborne (1986), 220 Mont. 91, 713 P.2d 548. Breach of duty to disclose material facts is an indispensable element of constructive fraud. Mends v. Dykstra (1981), 195 Mont. 440, 637 P.2d 502.

Negligent misrepresentation has a lesser standard of proof. It does not require intent to misrepresent, but rather a failure to use reasonable care or competence in obtaining or communicating the information. However, liability is limited to the loss suffered by the person(s) relying on the information. See State Bank of Townsend v. Maryann’s, Inc. (1983), 204 Mont. 21, 33, 664 P.2d 295, 301. In State Bank of Townsend, we cited the Restatement (Second) of Torts § 552, in part, as follows:

“The liability stated in this Section is likewise more restricted than that for fraudulent misrepresentation stated in § 531. When there is no intent to deceive but only good faith coupled with negligence, the fault of the maker of the misrepresentation is sufficiently less to justify a narrower responsibility for its consequences.”

Batten sets forth several factual contentions in an attempt to prove fraud, constructive fraud or negligent misrepresentation. In summary, Batten contends that there were misrepresentations regarding “current” inventory; the condition of the premises, the capabilities of the staff, and the operation of the business; the sales volume of the business; the value of the business; the financial status of the business; the inventory of the business; the unit sales of the business and the floor plan financing; and the amount of the rent for the location of the business, Defendants maintain that Batten failed to prove that there were any misrepresentations made by the defendants, whether intentional, constructive or negligent. We agree.

The District Court concluded that there were no facts presented by Batten indicating that any of the representations were false, and that since liability for fraud will attach only where a misrepresentation is material, Batten’s claim fails. We agree. In a detailed memorandum, the District Court carefully considered each of Batten’s contentions. Noting that “a misrepresentation is not material unless it is significant,” Bails v. Gar (1976), 171 Mont. 342, 347, 558 P.2d 458, 463, the District Court concluded that even if some of the representations were false, none of them were significant. Furthermore, the District Court pointed out that many of the alleged misrepresentations were nothing more than subjective opinions. Statements of opinion are subject to the common law doctrine of caveat emptor. Dolson Co. v. Imperial Cattle Co. (1981), 191 Mont. 357, 362, 624 P.2d 993, 996. Many of the defects of which Batten complains were noticeable upon reasonable inspection, or “even a superficial investigation” as the District Court points out.

Batten failed to make a factual showing that any of the representations were false. Thus, the core element of fraud, constructive fraud and negligent misrepresentation is missing. We hold that the District Court did not err in granting summary judgment in favor of the defendants.

II

Did the District Court err in its award of costs and attorney fees to the defendants?

The District Court awarded Watts $24,743.75 in attorney fees and $4,157.78 in disbursements for a total of $28,901.53. The contract provided for reasonable attorney fees and costs. The Court, noting that this was a rather high figure, explained that the costs were legitimate, and that it would not reduce the award by one-half as requested by Batten. Batten argues that the award is unreasonable. He argues that the effect of this award is punitive and that it will invoke a policy among courts that makes it impossible for valid claims to be pursued by a plaintiff who could not bear such costs.

Watts points out that the District Court properly held a hearing and considered the contract between the parties to determine the reasonableness of the fees. Furthermore, Watts contends that the District Court has broad discretion in determining what constitutes reasonable attorney fees, and that this Court shall not disturb the lower court’s judgment in the absence of an abuse of discretion. Majers v. Shining Mountains (Mont. 1988), [230 Mont. 373,] 750 P.2d 449, 453, 45 St.Rep. 283, 288. We agree.

After reviewing fully briefed arguments by both parties on this issue, the District Court specifically stated that it considered the contract between the parties which provided for “any costs or expenses, including reasonable attorney fees” prior to the court’s determination. It further acknowledged that the amount awarded was high, however, the award is reasonable under the circumstances of this case, and the amount could not justifiably be reduced without being arbitrary. Batten has failed to set forth any facts to show that the District Court abused its discretion. We hold that there has been no abuse of discretion and affirm the District Court’s award of costs and attorney fees to the defendant.

Batten raises additional issues on appeal which could be significant at trial. However, in light of our decision that summary judgment was proper, it is unnecessary to address those issues.

Affirmed.

CHIEF JUSTICE TURNAGE and JUSTICES HARRISON * and McDonough concur.

JUSTICE HUNT,

dissenting:

I dissent. This opinion is another attempt by the judiciary in the state of Montana to divest plaintiffs of their right to reach the jury. By stating that “the District Court pointed out that, many of the alleged misrepresentations were nothing more than subjective opinions,” the majority makes it possible for the District Court in a motion for summary judgment to decide as a matter of law whether a statement is one of opinion or of fact. However, in Dolson Co. v. Imperial Cattle Co. (1981), 191 Mont. 357, 363, 624 P.2d 993, 996, the case cited by the majority for the proposition that “[statements of opinion are subject to the common law doctrine of caveat emptor,” and in Spence v. Yocum (1982), 201 Mont. 79, 83-84, 651 P.2d 1022, 1025, this Court emphasized that the trier of fact is in the best position to determine whether a representation constitutes a statement of fact or a statement of opinion.

Both Dolson and Spence involved appeals from judgments of district court trials where the district courts sat without juries. This case, on the other hand, involves an appeal from a summary judgment. The District Court in the present case did not sit as a fact finder. Its only function was to determine issues of law, not issues of disputed fact. Summary judgment should not have been granted.


author: JUSTICE HUNT

text:
    In the Matter of the WAGE CLAIM OF FREDERICK C. HOLBECK, Claimant and Respondent, v. STEVI-WEST, INC., Respondent and Appellant.
    No. 89-231.
    Submitted on Briefs Aug. 31, 1989.
    Decided Dec. 1, 1989.
    783 P.2d 391.

      Noel K. Larrivee, Missoula, for respondent and appellant.
    Melanie Symons, Dept, of Labor & Industry, Helena, for claimant and respondent.
   JUSTICE HUNT

delivered the Opinion of the Court.

The Department of Labor and Industry (DOLI) issued an order directing appellant, Stevi-West, Inc., to pay overtime wages of $3,288 and a statutory penalty of $3,288 to its former employee, Frederick C. Holbeck. The District Court of the Fourth Judicial District, Ravalli County, affirmed the DOLI order. Stevi-West appeals. We affirm.

Stevi-West presents three questions for our consideration:

1. Was Frederick Holbeck an executive employee within the meaning of § 39-3-406(1)(j), MCA, and, therefore, exempt from overtime compensation?
2. Did Frederick Holbeck provide sufficient and accurate substantiation of his overtime hours?
3. Did the District Court err in failing to allow Stevi-West to present additional evidence?

In October, 1985, Stevi-West, Inc., owned primarily by Tom and Karen Bauer, opened an eight-lane bowling center, lounge and snack bar in Stevensville. A few months prior to the opening, the Bauers hired Dave Sears to manage the center. In August, 1985, Sears hired the claimant, Frederick Holbeck, under an* oral employment agreement.

Holbeck’s primary duties included attending the customer service counter, working on the automatic pinsetting machines and maintaining the bowling alleys. He also performed janitorial chores, drilled balls, organized leagues, promoted the alleys, instructed bowlers and closed the center after work hours.

Stevi-West initially paid Holbeck $1,300 per month. In June, 1986, after the manager, Sears, was laid off, Holbeck’s wages increased to $1,600 per month. In October, 1986, his wages again increased, this time to $1,900 per month. On December 31, 1986, Holbeck resigned from his position for personal reasons.

On February 19, 1987, Holbeck filed a claim with the DOLI to collect overtime wages from Stevi-West. After a hearing, the DOLI hearings officer entered findings of fact, conclusions of law and an order requiring Stevi-West to pay Holbeck $3,288 as overtime wages due and owing and $3,288 as a statutory penalty.

Stevi-West petitioned for judicial review. Following briefing of the issues, the District Court affirmed the DOLI order. Stevi-West appealed to this Court.

The standard of review of an agency decision is delineated at § 2-4-704, MCA, as follows:

“(2) The court may not substitute its judgment for that of the agency as to the weight of the evidence on questions of fact. The court may affirm the decision of the agency or remand the case for further proceedings. The court may reverse or modify the decision if substantial rights of the appellant have been prejudiced because: “(a) the administrative findings, inferences, conclusions, or decisions are:
“(v) clearly erroneous in view of the reliable, probative, and substantial evidence on the whole record;
“(vi) arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion.”

Thus, judicial review of factual matters is limited. The reviewing court will not overturn an agency’s findings of fact unless they are clearly erroneous. Facts supported by substantial credible evidence are not clearly erroneous. City of Billings v. Billings Firefighters Local No. 521 (1982), 200 Mont. 421, 430-31, 651 P.2d 627, 632.

Judicial review of legal issues is somewhat broader. The reviewing court will reverse a/i agency’s legal conclusions if they are characterized by an abuse of discretion. Billings Firefighters, 200 Mont. at 431, 651 P.2d at 632.

The first question raised on appeal is whether Holbeck was an executive employee within the meaning of § 39-3-406(l)(j), MCA, and, therefore, exempt from overtime compensation.

Generally, an employee is entitled to overtime compensation for any hours worked in excess of 40 per week. Section 39-3-405(1), MCA. Among the employees excluded from this general rule are those employed in a bona fide executive capacity. Section 39-3-406(1)(j), MCA. A bona fide executive is defined in § 24.16.201, ARM, which provides:

“(1) The term ‘employee employed in a bona fide executive * * * capacity’ in Section 39-3-406(1) (j) MCA of the Montana Minimum Wage and Overtime Compensation Act shall mean any employee:
“(a) Whose primary duty consists of the management of the enterprise in which he is employed or of a customarily recognized department or subdivision thereof; and
“(b) Who customarily and regularly directs the work of two or more other employees therein; and
“(c) Who has the authority to hire or fire other employees or whose suggestions and recommendations as to the hiring or firing and as to the advancement and promotion or any other change of status of other employees will be given particular weight; and
“(d) Who customarily and regularly exercises discretionary powers; and
“(e) Who does not devote more than 20 percent or in the case of an employee of a retail or service establishment who does not devote as much as 40 percent, of his hours of work in the workweek to activities which are not directly and closely related to the performance of the work described in subsections (a) through (d) of this section. (Emphasis added.)

Before an individual will be deemed an executive employee exempt from overtime compensation, the employer must prove each of the elements of the above regulation. Rosebud County v. Roan (Mont. 1981), [_Mont. _,] 627 P.2d 1222, 1228, 38 St.Rep. 639, 646. In this case, Stevi-West has failed to meet its burden.

Substantial credible evidence supports the DOLI hearings officer’s finding that Holbeck did not act in a managerial capacity. Although Holbeck was hired to assist the manager, Sears, the evidence demonstrates that his primary responsibilities related to customer service and maintenance of the bowling lanes and equipment. After Sears was laid off, Holbeck’s responsibilities remained the same. The owners themselves, rather than Holbeck, filled the managerial void left by Sears’ departure.

New factors indicate that Holbeck held a managerial position. He was not given the authority to make major business decisions. He did not schedule employees or set pay rates. He did not handle money except to collect it from customers at the customer service counter and to put it in safekeeping on the nights he closed the center. He was not responsible for any business recordkeeping. Apart from arranging for the exchange of free bowling for help from high school students, he did not hire or fire employees. He had little input regarding hiring, firing or promoting employees.

Clearly, the record demonstrates that Stevi-West failed to prove elements (a), (b), (c) and (e) of § 24.16.201, ARM. Consequently, Stevi-West failed to show that Holbeck was exempt from overtime compensation. The District Court did not err in affirming the DOLI order.

The second issue is whether Holbeck provided sufficient and accurate substantiation of his overtime hours.

The employer is required to record the hours worked by its employees. Garsjo v. Department of Labor and Industry (1977), 172 Mont. 182, 188-89, 562 P.2d 473, 476. If the employer fails to record the employee’s hours, the employee’s records may be used to determine the amount of time worked. The employee’s records, however, need not be precise. The employee may substantiate his claim by proving “that he has in fact performed work for which he was improperly compensated and [producing] sufficient evidence to show the amount and extent of that work as a matter of just and reasonable inference.” Garsjo, 172 Mont. at 189, 562 P.2d at 476 (quoting Anderson v. Mt. Clemens Pottery Co. (1946), 328 U.S. 680, 687, 66 S.Ct. 1187, 1192, 90 L.Ed. 1515, 1523.)

In the present case, Stevi-West did not track the hours worked by Holbeck. Holbeck began recording his hours in October, 1986. To substantiate his claim prior to that time, he submitted exhibits reconstructing the approximate number of hours worked. The exhibits were based on weekly schedules, seasonal duties and common practice. Both Holbeck and the former manager, Sears, testified in support of the exhibits. Under the circumstances, substantial credible evidence supported the finding that Holbeck should be compensated for the hours reconstructed in the exhibits.

Stevi-West also claims that Holbeck should not be compensated for overtime hours because he spent much of his time bowling while on duty. Testimony offered at the hearing indicated that much of the time Holbeck spent bowling was work related. Furthermore, Tom Bauer testified that he knew Holbeck bowled while working. As long as Bauer permitted Holbeck to bowl while on duty, Holbeck must be properly paid, even if the pay includes overtime compensation.

The last issue is whether the District Court erred in failing to allow Stevi-West to present additional evidence.

After it petitioned for judicial review, Stevi-West filed a motion to present additional evidence. Although the District Court granted the motion, the order was buried in the court record. The order was not served on Stevi-West or noted on the court docket. Nor was the matter set for hearing. Nonetheless, we do not remand for further proceedings.

The statute governing receipt of additional evidence provides:

“If, before the date set for hearing, application is made to the court for leave to present additional evidence and it is shown to the satisfaction of the court that the additional evidence is material and that there were good reasons for failure to present it in the proceeding before the agency, the court may order that the additional evidence be taken before the agency upon conditions determined by the court. The agency may modify its findings and decision by reason of the additional evidence and shall file that evidence and any modifications, new findings, or decisions with the reviewing court.” (Emphasis added.)

Section 2-4-703, MCA.

The evidence sought to be introduced by Stevi-West consisted of testimony of three individuals employed by the bowling center concerning the number of employees supervised by Holbeck. Even if the testimony were persuasive, it would not be material to the action because it would affect only one of the six required elements of § 24.16.201, ARM. The result would not differ. Holbeck’s classification would not change to that of an exempt executive employee. He would still be eligible for overtime compensation.

Stevi-West also sought to introduce the testimony of Karen Bauer, one of the owners of the bowling center, who was not present at the administrative hearing. Although Karen’s testimony regarding Holbeck’s alleged managerial responsibilities and the number of hours he worked would be material to the outcome of this case, Stevi-West did not present good cause for its failure to introduce this evidence at the original hearing as is required by § 2-4-703, MCA. In his affidavit supporting the motion to present additional evidence, Stevi-West’s attorney stated only that Karen was unavailable to attend the hearing. While such a conclusory assertion may be sufficient to show good cause for the failure of a disinterested witness to attend an agency hearing, it is insufficient when the witness is one of the owners of the entity that requested the hearing in the first place.

Stevi-West does not allege, nor does the record show, that it was given insufficient notice of the time and date of hearing. In fact, the administrative record demonstrates that the notice of the April 20, 1988 hearing was mailed on March 14, 1988. Under the circumstances, we cannot say that Stevi-West has shown good cause for its failure to present Karen’s testimony during the administrative hearing.

Affirmed.

CHIEF JUSTICE TURNAGE and JUSTICES SHEEHY, Mc-DONOUGH and WEBER concur.