text:
    PAT M. GOODOVER, Plaintiff and Respondent, v. LINDEY’S, INC., and the Estate of William C. Forest, Deceased, et al., Defendants and Appellants.
    No. 87-464.
    Submitted on Briefs April 7, 1988.
    Decided June 13, 1988.
    757 P.2d 1290.

      Paul Neal Cooley, Skelton & Cooley, Missoula, Harrison, Loendorf & Poston, William Forest Estate, Helena, for defendants and appellants.
    John W. Larson, Missoula, for plaintiff and respondent.
   MR. JUSTICE GULBRANDSON

delivered the Opinion of the Court.

This is an appeal from a judgment of the Fourth Judicial District Court, Missoula County, determining a specific property line monument in favor of plaintiff/ respondent Pat Goodover (Goodover). Defendant/appellant Lindey’s Inc., (Lindey’s), appeals the judgment and we affirm.

Appellant in this case presented eleven issues, which are more appropriately restated as follows:

1. Whether the District Court erred in allowing hearsay evidence in determining the location of the boundary monument?

2. Were the District Court’s findings of fact, conclusions of law and judgment based on substantial credible evidence?

3. Whether the District Court abused its discretion in denying Lindey’s motion for a new trial or in the alternative amendment of the judgment?

4. Whether the District Court abused its discretion in denying Patricia Jewell’s motion to intervene?

In dispute is the location of the northeast corner of lot two, of the Seeley Lake Shores Sites which was filed as a platted unofficial subdivision with the Missoula County Clerk and Recorder in 1944. From this plat, and testimony presented at trial, it is clear that the original intent of the developers was to provide lots with 100 feet of lake frontage, except for lot one, purchased by Lindey’s, which was to contain 125 feet. However, the plat is filled with errors.

Goodover, who owns lot two, filed this action for declaratory judgment and quiet title after Lindey’s, by its surveyor, R. David Schurian, established a new lot corner on the northeast side of Goodover’s boathouse. The complaint was filed August 21, 1984 and subsequently amended twice.

A bench trial was held April 7, 1987, and findings of fact, conclusions of law and a judgment in favor of Goodover were filed on June 15, 1987 reserving the issue of damages for a later hearing. Motions for a new trial or amendment of the judgment, along with a motion for a stay made in anticipation of filing a motion to intervene filed by Patricia Jewell (Jewell), were denied by the District Court on October 2, 1987. Jewell owns lot five which is adjacent to lot three but was not named as a party in this action. This appeal followed.

The only dispute at trial was the location of the monument for the northeast corner of lot two and the accompanying lake frontage. The lots are set around the southeast corner of the lake as follows: lot three is immediately south of lot five, lot one is south and westerly of lot three, and lot two is west of lot one. Goodover purchased lot two with Mills Folsom from Don Paddock in 1965. Paddock had purchased the property from George Meltzer who had bought the land from Jim Sullivan.

Meltzer was called at trial by Lindey’s and testified that the northwest corner of lot two and lot four to the west was marked with a wooden monument. This monumentation was generally accepted by all parties, including Greg Martinsen, Goodover’s surveyor, and Schurian. Meltzer stated that the northeast corner was marked both with a wooden monument and a mushroom-headed spike known as a boat spike. Meltzer was a Missoula County land and building appraiser during the time he owned lot two and testified that he measured the lake frontage of lot two as approximately 93 feet.

In deposition, Folsom testified that the east line of the property was marked by blazes on trees and that the northeast and northwest corners were marked by wooden stakes. Goodover purchased Folsom’s share of the property in 1966. Both Folsom and Goodover stated a metal barrel and wooden stake marked the northeast corner of the lot in 1965. This barrel and stake were removed, and a new fence as well as an outhouse were erected by Lindey’s along the property line, after Schurian re-surveyed the property. Schurian placed a new northeast corner monument near the middle of the east side of Goodover’s boat house. This activity resulted in a temporary order being issued by the District Court disallowing the destruction of any of the other property markers.

Lindey’s is purchasing lots one and three from William C. Forest, now deceased. Lindey’s requested of Forest a Certificate of Survey of the property and hired Professional Consultants, Inc., a firm of registered surveyors including Schurian, to prepare the Certificate. Schurian and his crew found all the corners on lot five, and retraced the work done by Ainsworth and Associates, Inc., which surveyed lot five in 1970. At that time, Martinsen, who was later hired by Goodover, worked for Ainsworth and Associates, Inc., and did work on lot five. Ainsworth and Associates, Inc. later became Professional Consultants. Schurian found uniform one-inch pipes as markers for boundaries common to lots seven and five, five and three, one and three and two and four. The only monument that was not found by Schurian was that between lots one and two.

Schurian prepared the Certificate of Survey using the “compass rule” to locate the corner between lots one and two. He then placed 6/8-inch rebar with a 1 lh -inch aluminum cap to mark where he believed the northeast corner to be. This survey shows the southeast corner of Goodover’s boathouse encroaching on lot one.

The survey completed by Schurian leaves Goodover with what appears to be 89.64 feet of lake frontage, lot one with 125 feet of lake frontage and lot three with Í00 feet of lake frontage. However, at trial, Schurian presented an exhibit and testified that his measurement really provided Goodover with 95.35 feet if the aluminum cap boundary was extended to the waterfront. This testimony was impeached to some extent by Martinsen when he was recalled as a rebuttal witness. Martinsen testified that the problem with Schurian’s explanation was that it required the line to go straight into the lake, whereas the official manner of measuring lake, frontage calls for a central point in the water to be extended back to the land at an angle.

Martinsen was hired by Goodover twice. The first time, Martinsen located a 1 xh -inch pipe with a Vi -inch rod sticking through it which he believed to be the original northeast corner marker. The District Court found, in its judgment of June 12, 1987, that this pipe monumerit was within a foot of the barrel and stake monument that Goodover relied upon and that the monument was in line with at least one of the blazed trees.

Goodover would not accept this marker originally because he found out Martinsen had worked for Ainsworth and Associates, Inc. Martinsen, however, was rehired by Goodover and on March 13, 1987 again located the 1 ¥2-inch pipe with the rod sticking in it by use of a metal detector.

Martinsen also searched for and found pipe that marked the other lots on Seeley Lake. Martinsen testified that 11 of these lots were within two to three percent of the 100-foot frontage intended. By using the pipe that Martinsen located on lot two, Martinsen stated the percentage of variation was less than one percent as the distance of frontage was 99.33 feet. Percentage of variation for lots one and three were 1.12%.

At trial, Goodover testified Sullivan told him a glove and stake, located approximately four to five feet east of the boathouse, was the property marker between lots one and two. Goodover testified that Paddock had indicated a barrel and stake marked the boundary. Paddock, when he transferred the property to Folsom and Goodover, provided a plat that he said was prepared by a surveyor who had blazed the trees along the east boundary of lot two. Pictures of a number of blazed trees were presented as evidence.

Both surveyors testified that the purpose of a retracement survey is to follow in the steps of the original surveyor. The District Court made a finding of fact that the amount of lake frontage allocated by Martinsen more closely followed the original survey than that allocated by Schurian. Therefore, taking into consideration the testimony that all monumentation was second generation monumentation; that both experts acknowledged that distances on the original survey were more reliable than courses or bearings, and that monuments were superior to distances; and the degrees of variation presented, the court found the “best available evidence of the corner between Lot 1 and Lot 2 . . . was the existence of the pipe monument, barrel and stake” and “there is sufficient credible testimony to locate the corner between Lot 1 and Lot 2 . . . approximately five feet to the east of the existing boathouse.”

In its conclusions of law the court referred to the Bureau of Land Management Manual of Survey Instructions (1973), the underlying regulations of which were discussed and approved by the Montana Supreme Court ruling of Vaught v. McClymond (1945), 116 Mont. 542, 155 P.2d 612. The District Court concluded that sufficient credible evidence existed that the original survey distance for lake frontage for lots eight through twenty-one was 100 feet with lot one containing 125 and that the most common type of secondary monumentation along the lake frontage was buried pipe. The court concluded the pipe, found at the northeast corner of lot two by Martinsen, was the best reliable evidence concerning the original intent of the surveyor. Finally, the court made a conclusion of law that sufficient credible testimony was presented to locate the corner between lot one and two at the monumentation found by Martinsen and that COS 2351, the certificate of survey completed by Schurian, should be amended to conform to the findings and conclusions.

Initially, as to issue one, we note that counsel for Lindey’s appropriately objected to Goodover’s recitation of his conversation with Sullivan regarding the boundary according to the barrel and stake as hearsay. The court originally sustained. the objection but upon being directed to the exceptions to hearsay rule, overruled the objection.

Rule 803(20), M.R.Evid., states:

“Reputation in a community, arising before the controversy, as to boundaries of or customs affecting lands in the community, and reputation as to events of general history important to the community or state or nation in which located.”

Lindey’s contends there was no evidence “attempting to prove the reputation in the community concerning the boundary between Lots 1 and 2 of Seeley Lake Shores Sites.” The specific statement involved Sullivan stating the northeast corner was marked with a glove located on a post. Goodover said the statement was made after he requested Sullivan to show him where his property line was so he could build his boathouse five feet from the line.

The disputed testimony is as follows:

“Q. When did you find those blazes on the trees?
“A. Before I built the boathouse, where I built it, I got ahold of Mr. Sullivan and asked him to come over and show me the location of the property line so I could build the boathouse leaving about five feet between the property line and where the foundation was poured.
“Mr. Sullivan showed me the property line where the flag — where the glove was located on the post and where the metal can was tied around it, and he said that was my northeast corner.
“[Defense Counsel]: I’ll move to strike on the grounds it’s hearsay.
“The Court: Sustained.
“[Plaintiff’s Counsel]: Your Honor, if I may, I agree it’s hearsay, but I think the evidence as to common boundary is within the exception of 801(d)20. [Sic].
“The Court: I think that’s probably correct. I’ll reverse my ruling.
“[Plaintiff’s Counsel then did not further question Goodover about the stake and glove].”

The exception erroneously quoted by plaintiff’s counsel allows hearsay because it provides a rebuttable presumption “that a person is the owner of property from common reputation of ownership.” MCA Commission Comments, Rule 803(20). Cases cited therein are: Brennan v. Mayo (1937), 105 Mont. 276, 72 P.2d 463; Nemitz v. Reckards (1934), 98 Mont. 229, 38 P.2d 980; and Kurth v. LeJeune (1928), 83 Mont. 100, 269 P. 408. None of these cases are helpful with the issue we are faced with here. Generally, the testimony must report a general consensus of opinion and not just an assertion of an individual’s personal observation. The Nature Conservancy v. Nakila (1983), 4 Hawaii App. 584, 671 P.2d 1025, 1033; 5 Wigmore, Evidence Section 1584 (Chadbourn rev. 1974). Goodover presented the statements of Sullivan as an assertion of Sullivan’s individual personal observation.

“[T]he reason for this rule is not only caused by the perishable nature of boundary markers, but also because general reputation about facts of community interest are generally trustworthy. It is unlikely that a falsehood could become generally accepted in a community as the truth. The prolonged and constant exposure of these facts to observation and discussion by the community sifts out the possible errors and gives to the residual facts which are generally accepted by the locality a trustworthiness which allows these facts to be presented as evidence in a court of law.”

4 Weinstein’s Evidence, Section 803(20)[01], 803-344 (1987).

In the case at bar, the rationale for excepting Goodover’s testimony from the hearsay rule is not present. Goodover asserted Sullivan showed him where the property border marker existed. This assertion was presented as fact of personal observation. The reasoning behind the exception requires that the reputation of where Goodover’s property line existed is reliable because “there is a high probability that the matter underwent general scrutiny as the community reputation was formed.” Weinstein, supra, at 803-345. No evidence was presented regarding the reputation of the monument position. Lindey’s objection was appropriate and should have been sustained.

Other evidence was presented which supported Goodover’s statement, e.g., statements by Martinsen that the marker he found was beyond the monument Goodover referred to; and testimony by Folsom that Paddock had told both Folsom and Goodover that a surveyor had blazed the trees between lots one and two. This evidence was sufficient to be accepted by the court without Goodover’s recitation.

Therefore, we hold that it was harmless error to allow the testimony at issue. Although the District Court referred to the statement in its findings of fact, it did not rely solely on the statement in its conclusions of law nor is it a basis for the judgment. We have held that admission of hearsay testimony can be harmless error and not rise to the level of reversible error numerous times. Hill v. Turley (Mont. 1985), [218 Mont. 511,] 710 P.2d 50, 55, 42 St.Rep. 1783; Lindberg v. Leatham Bros., Inc. (Mont. 1985), [215 Mont. 11,] 693 P.2d 1234, 1243, 42 St.Rep. 137.

Regarding the issue of substantial credible evidence Lindey’s contends: (1) that the District Court erred in finding Martinsen’s exhibits depicted a “retracement;” (2) that it was error to find a 1-inch axle was a monument; (3) that it was error to find Martinsen’s survey was based on the best and most reliable evidence; (4) that the court erred in finding the buried pipe monument at lot two was the most common type of secondary evidence; and (5) that the court erred in finding the correct and true boundary was retraced by Exhibits 31 and 34 (maps of the area).

In considering a judgment rendered in a civil action before the district court without a jury, reversal will not occur unless it is shown findings of fact are clearly erroneous. Rule 52(a), M.R.Civ.P.; Bollinger v. Hollingsworth (Mont. 1987), [227 Mont. 454,] 739 P.2d 962, 963, 44 St.Rep. 1228.

With this standard in mind, we hold that the District Court did not err in adopting its findings of fact, and conclusions of law.

Lindey’s relies on A Treatise on the Law of Surveying and Boundaries, Clark (3rd Ed.), Chp. 13, p. 280 in regard to the “retracement” argument:

“Section 258. The theory of the following surveyor —. The cardinal principle guiding a surveyor who is running the lines of a previous survey is to follow in the footsteps of the previous surveyor.”

Both surveyors agreed with this statement but Lindey’s claims Martinsen did not follow the rule and contends Exhibits 31 and 34 were based on “nothing more than a traverse around the lake shore” and further, that the court erred in finding Martinsen’s survey was based on the best and most reliable evidence.

We find that a number of general rules have been established in this area to determine the proper location of lost or obliterated boundaries or corner monuments. These rules are best set forth in Vaught, supra:

“ ‘A survey of public lands does not ascertain boundaries; it creates them.’ [Citation omitted.] ‘The quarter lines are not run upon the ground, but they exist, by law, the same as the section lines.’ [Citation omitted.] The location of corners and lines established by the government survey, when identified, is conclusive [citation omitted] and the true corner of a government subdivision of a section is where the United States surveyors in fact established it, whether such location is right or wrong, as may be shown by a subsequent survey. [Citation omitted.] Original monuments of survey established during a government survey, when properly identified, control courses and distances, [Citation omitted.] and field notes and an official plat of government surveys of record will control in ascertaining locations, even though the monuments established are gone. [Citation omitted.] In ascertaining the lines of land or in reestablishing the lines of a survey, the footsteps of the original surveyor, so far as discoverable on the ground, should be followed and it is immaterial if the lines actually run by the original surveyor are incorrect. [Citation omitted.] In surveying a tract of land according to a former plat or survey, the surveyor’s only duty is to relocate, upon the best evidence obtainable, the courses and lines at the same place where originally located by the first surveyor on the ground . . . The object of a resurvey is to furnish proof of the location of the lost lines or monuments, not to dispute the correctness of or to control the original survey. The original survey in all cases must, whenever possible, be retraced, since it cannot be disregarded or needlessly altered after property rights have been acquired in reliance upon it. (Emphasis added.)”

Vaught, 116 Mont. at 549-550, 155 P.2d at 616.

The District Court stated that it believed the “best evidence” of the corner between lots one and two was the existence of the pipe monument, barrel and stake, and line of blazed trees. Therefore the court did not rely on the stake and glove referred to by Goodover but more on the testimony of Martinsen. Further, the court stated that Martinsen’s evidence was more in line with the original intent of the surveyor.

Martinsen testified that he worked for Goodover searching for monuments on lot two in 1982 and on March 13, 1987. Both times he located the northeast monument, a lVfc-inch pipe with a V4 -inch round rod sticking in it, with the use of a metal detector. He testified that he searched for and found monuments on lots eight through twenty-one in an effort to establish the 100-foot frontage the original surveyors intended. All of these lots, he testified, had a degree variation of between two and three percent. Finally, it was Martinsen’s expert opinion, relying on the pipe monument, blazed trees, stake and barrel, and line of occupation, that the proper corner monument between lots one and two was the monument he located and which he portrayed on Exhibit 34. The District Court relied upon this opinion in adopting its findings of fact.

There was sufficient, credible evidence for the court to rule as it did. The general rule is that courses and distances, similar to what Schurian did with his “compass rule” location, must yield to natural or artificial monuments. Bollinger, 739 P.2d at 964; citing Buckley v. Laird (1972), 158 Mont. 483, 492, 493 P.2d 1070, 1075. Here, Martinsen located an artificial monument as opposed to the placement made by Schurian through his “compass rule.” Schurian testified that he could not locate the pipe Martinsen found even though he used a metal detector. With the evidence presented by both parties, we cannot find the District Court erred where it relied on one party’s evidence.

In the case of Helehan v. Ueland (Mont. 1986), [223 Mont. 228,] 725 P.2d 1192, 43 St.Rep. 1679, the district court was presented with varying testimony from surveyors in a boundary dispute. The District Court sided with one surveyor’s testimony based on reliance of an original monument. We said a trial judge’s finding based on substantial though conflicting evidence will not be disturbed unless there is a clear preponderance of evidence against such finding. Helehan, 725 P.2d at 1194-1195. No clear preponderance of evidence has been presented by Lindey’s in this case to disturb the District Court’s findings.

Both experts testified, both presented exhibits. The credibility and weight accorded witnesses is a primary function of a trial judge sitting without a jury and is of special consequences where the evidence is in conflict. Corscadden v. Kenney (1977), 175 Mont. 98, 103, 572 P.2d 1034, 1237; see also, Wortman v. Griff (1982), 200 Mont. 528, 651 P.2d 998. This rule is especially appropriate in a non-jury case where the court is faced with conflicting interpretations, testimony or opinions of expert witnesses. See, Stidham v. City of Whitefish (Mont. 1987), [229 Mont. 170,] 746 P.2d 591, 593, 44 St.Rep. 1869, 1872.

We hold also that the District Court did not err in denying Lindey’s motion for a new trial or in the alternative to amend the judgment and Jewell’s motion to intervene.

The granting of a new trial or amendment of the judgment, is within the sound discretion of the trial court and will be reversed only for manifest abuse of discretion. Walter v. Evans Products Co. (Mont. 1983), 207 Mont. 26, 672 P.2d 613, 616, 43 St.Rep. 1844; Jankovich v. Neill (1969), 153 Mont. 337, 340, 457 P.2d 475, 477. Further, upon review, we view motions for new trials in a light most favorable to the party against whom the motion is directed. Dieruf v. Gollaher (1971), 156 Mont. 440, 446, 481 P.2d 322, 325.

Lindey’s argument for new trial or amendment of the judgment is based on newly discovered evidence. At the September 17, 1987 hearing on Jewell’s motion to intervene, Jewell’s attorney and Lindey’s counsel attempted to get evidence before the court supporting the motion for new trial. Jewell’s counsel made an offer of proof that Lewis Lindemer would testify that it was discovered that the variation in lake frontage could have occurred since 1944 because fill material had been dumped at the site. Further, Lindemer would testify that the lfa -inch pipe the court found to be secondary monumentation between lots three and five was in reality a water pipe. Lindemer had testified at the original trial but did not present this evidence at that time. The evidence could have been available but was not produced at the original trial. The basic rule for granting a new trial on newly discovered evidence is that the new evidence could not have been discovered and produced at trial with exercise of reasonable or due diligence. Rule 60(b), M.R.Civ.P.; Carbon County v. Schwend (Mont. 1984), [212 Mont. 474,] 688 P.2d 1251, 1253, 41 St.Rep. 1874. Further, absent a showing that the new evidence would produce a materially different result, a district court does not abuse its discretion in refusing to grant a new trial. Bushnell v. Cook (Mont. 1986), [221 Mont. 296,] 718 P.2d 665, 669, 43 St.Rep. 825. We find the District Court did not abuse its discretion in denying the motion for a new trial, or in the alternative, amending the judgment where this evidence could have been available but was not presented at trial.

As to the attempted intervention by Jewell pursuant to Rules 19 and 24(a), M.R.Civ.P., we initially note, “[t]he intervention rule is a discretionary judicial efficiency rule used to avoid delay, circuity, and multiplicity of suits.” Grenfell v. Duffy (1982), 198 Mont. 90, 95, 643 P.2d 1184, 1187. At the hearing September 17, 1987, an oral offer of proof was made that a title expert would testify regarding an alleged cloud on Jewell’s title.

In this case, Jewell’s motion was made subsequent to the entry of judgment. Motions to intervene made after a judgment are not per se untimely, but the rule requiring timely application to intervene is, again, left to the discretion of the District Court. Rule 24, M.R.Civ.P.; In re Marriage of Glass (Mont. 1985), [215 Mont. 248,] 697 P.2d 96, 99, 42 St.Rep. 328. The District Court did not abuse its discretion in this case, Jewell’s rights have not been litigated.

We affirm.

MR. JUSTICES HARRISON, WEBER, HUNT and McDON-OUGH concur.


source: Caselaw Access Project

author: MR. JUSTICE MCDONOUGH

license: Public Domain

text:
    PUGET SOUND POWER & LIGHT COMPANY, Petitioner and Respondent, v. The DEPARTMENT OF REVENUE of the State of Montana, Respondent and Appellant.
    No. 87-264.
    Submitted March 22, 1988.
    Decided June 14, 1988.
    Rehearing Denied July 7, 1988.
    761 P.2d 336.

      Larry G. Schuster argued, Dept, of Revenue, Helena, for respondent and appellant.
    Bruce R. Toole, Crowley, Haughey, Hanson, Toole & Dietrich, Billings, Ronald L. Berenstain argued, Perking & Cole, Seattle, Wash., for petitioner and respondent.
   MR. JUSTICE MCDONOUGH

delivered the Opinion of the Court.

This appeal involves an ad valorem property tax valuation. The respondent, Puget Sound Power and Light Company, (Puget) filed a petition with the State Tax Appeal Board (Board) claiming that the Department of Revenue (Department) overvalued Puget’s property for 1983. The petition raised five issues on the Department’s appraisal methods, and the Board held for the Department on all issues relevant to this appeal. Puget appealed the Board’s decision to the District Court, and the District Court reversed the Board on such issues. The Department appeals the District Court decision, and Puget raises one issue on cross-appeal. We reverse on the issues raised on appeal and affirm the issue raised on cross-appeal.

The issues raised by the Department on appeal are as follows:

(1) Did the Court err by concluding that the Department may not treat construction work in progress (CWIP) as a separate indicator of value within the unit method of valuation?

(2) Did the Court err by concluding that the Department may not include an accumulated deferred income tax reserve as a liability within the stock and debt indicator?

(3) Did the Court err by concluding that the Department may not remove the value of the townsite property by subtracting the locally assessed value of the townsite property from the allocated Montana value?

On cross-appeal Puget raises one issue: Did the District Court err by refusing to adjust the stock and debt indicator to reflect the amount of CWIP not expected to go into service?

Before addressing these issues, a brief discussion of the pertinent facts and law is necessary. The parties agree that Montana law requires the Department to appraise Puget’s taxable property at its market value. Section 15-8-111, MCA. The statute defines market value as the value a willing buyer would give to a willing seller, “neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts”. Section 15-8-lll(2)(a), MCA. The method used for finding what the statute defines as market value is left to the Department.

The Department’s administrative rules implement the requirement to find market value in central assessments such as the one at issue here primarily by use of the “unit method of valuation”. ARM Section 42.22.111. The áim of this method is to find the value of the property as a going concern. The method generally values property in three different ways: (1) cost indicator, (2) capitalized income indicator, and (3) stock and debt indicator. Each method purports an approximate total value (both in and out of Montana) of the company appraised.

The cost indicator, (as used in this appraisal), equates a company’s value with the cost of its depreciated original cost of investment. The capitalized income indicator values the company by capitalizing the present value of future income to be produced by the property. The stock and debt indicator values the property using the basic accounting principle; assets = liabilities + owner’s equity. Under this last indicator, the appraiser attempts to ascertain the amount of liabilities owed and the amount of equity outstanding. The sum of these two figures should necessarily equal assets, and thus the company’s value.

In this case, the Department arrived at Puget’s value using the three different methods as follows: (1) cost indicator = $1,044,297,534, (2) capitalized income indicator = $808,843,951, (3) stock and debt indicator = $921,199,487. Instead of then relying on any one of these valuations, the Department used a portion of each to determine fair market value. In this case, the Department added 40% of the cost indicator, to 50% of the income indicator, to 10% of the stock and debt indicator to arrive at an assessed value of $914,260,940. There is no argument as to the weighting of these indicators. The Department then added the market value of Puget’s construction work in progress, $475,793,627, to calculate total value of Puget. This aggregate figure was then multiplied by an agreed percentage to arrive at the value of Puget’s property in Montana.

At this point in the appraisal, the value of Puget’s “non-operating” property must be subtracted from the total value of the Montana property so that the appraisal will reflect only Puget’s Montana operating property. In this case, the townsite property (Puget’s housing for employees) was properly classified as non-operating property, and its value, as appraised by Rosebud County (local situs) in the same manner as other residences, was subtracted from the total value of Puget’s Montana property.

Two of the issues here concern the Department’s implementation of the unit method. The first involves valuing construction work in progress (CWIP) outside the unit method’s traditional indicators, and the second relates to inclusion of tax deferrals in the stock and debt indicator. The third issue concerns the use of Rosebud County’s appraisal of the townsite property for removal of the town-site value from the value of all Puget’s Montana property. The issue on cross-appeal involves Puget’s contentions on the treatment of CWIP not expected to go into service in the stock and debt indicator.

This Court has stated previously the standard to be employed by district courts reviewing decisions by the Board:

“The District Court as a reviewing court may reverse or modify the decisions of the State Tax Appeal Board and remand the case for further proceedings if substantial rights of the appellant have been prejudiced because the administrative findings, conclusions, or decisions are clearly erroneous in view of the reliable, probative and substantial evidence of the whole record or are arbitrary, capricious, or characterized by an abuse of discretion.”

Department of Revenue v. Grouse Mountain Development (Mont. 1985), [218 Mont. 353,] 707 P.2d 1113, 1115, 42 St.Rep. 1642, 1643-44. This standard applies to all the findings and conclusions reviewed in this appeal.

Issue I.

The District Court concluded that the Department abused its discretion by failing to integrate the value of CWIP into the three unit value indicators, and that the Board’s approval of separate treatment for CWIP was clearly erroneous. We reverse.

First, the District Court failed to apply the controlling rule in reviewing the Board’s decision. In this regard, the lower court quoted as controlling an early version of ARM Section 42.22.111, the rule which defines the traditional indicators in the unit method of valuation, as follows:

“(1) the unit method of valuation will be used to appraise centrally assessed companies whenever appropriate. When applying this method, the department will use commonly accepted methods and techniques of appraisal to determine market value. The application of the unit method may include a cost indicator, capitalized income indicator, and a market indicator (stock and debt) of value when sufficient information is available. If the department determines an indicator does not reflect a company’s market value or information is not available, it may substitute net scrap value, net salvage, or other accepted indicators of value. (Emphasis added).”

See ARM Section 42.22.111 (1980). The lower court then noted in Footnote 6 of its memorandum that:

“In 1984 the last sentence of 42.22.111(1) was amended to read as follows: ‘If the department determines that an individual indicator, the unit method of valuation or other method of valuation does not reflect a company’s market value or that information is unavailable, it may adopt a different method or methods of valuation, including but not limited to net scrap, net salvage, corridor value in the case of railroads, or any combination of methods of valuation which reflects the company’s market value.’ (Emphasis added.) Thus, the department now has explicit authorization to combine the unit and summation methods of valuation if, in its discretion, it determines that it is necessary to determine the correct market value of a company.”

A review of the history of this rule reveals that the amendment referred to by the lower court was adopted in 1982, not 1984. Notice of the proposed amendment was published at pages 87-90 of the 1982 Montana Administrative Register, issue No. 2, and notice of the actual amendment of the rule appears on page 705 of the 1982 Montana Administrative Register, issue No. 7. After the amendments were made the new rule was published in the 1982 edition of the Administrative Rules of Montana, and Subsection (3) of the amended version reads as follows:

“(3) This rule shall be effective for all reporting years ending December 31, 1981, and thereafter.”

See ARM Section 42.22.111(3) (1982). Thus, the District Court erred by not applying ARM Section 42.22.111 as it existed after the amendments made in 1982. The amended rule gives the Department the discretion to combine other methods of valuation with the unit method of valuation, and the Board’s decision cannot be clearly erroneous because of the Department’s interpretation of this rule.

The District Court decision also rests on its conclusion that the Board must be reversed because the Department failed to demonstrate that the unit method was inappropriate to the appraisal made in this case. The Board approved treatment of CWIP outside the unit method’s three indicators because credible testimony by an appraiser indicated that capitalization of CWIP was too speculative to render an accurate figure for use in the income indicator. Puget offered testimony by another appraiser to the effect that inclusion of CWIP in the income indicator was practical and appropriate. However, the Board is the expert and the fact finder on valuations, and the issue before the Board depended on the weight to be given to conflicting testimony. We hold that even though Puget presented opinion evidence that it was proper to value CWIP in the income indicator, such evidence is not enough to demonstrate that the Board decision on this issue is clearly erroneous. The opinion of the Department’s appraiser provided substantial evidence that valuation outside the three indicators was a better way to approximate market value. Thus, the District Court erred in holding that the Department failed to demonstrate that the unit method was inappropriate.

The statutory mandate that the Department value according to market value is couched in general terms. The Department’s rule primarily prescribes the unit method for finding market value, but this adoption should not be construed so strictly that the Board is unable to adjust the method when credible evidence demonstrates that the adjustment would better reflect market value. This is the purpose of the last sentence of the regulation. Thus, we reverse on this issue.

Issue II.

The District Court reversed the Board on two findings of fact and one conclusion of law in regard to inclusion of tax deferrals in the stock and debt indicator. We reverse.

The Board found that the tax deferral account was a true liability. The District Court reversal was based on its finding that the account was merely an accounting device which reflected value owed on the books but did not constitute an actual liability. The relevant evidence on this issue is from the parties’ appraisal experts.

The Department’s expert testified that deferral reserves were “tax free loans from the government and that they’re an obligation reflected in some manner in the assets of the company”. On the other hand, Puget’s expert stated that the deferral account:

“should be included in the stock and debt at its fair market value, and that fair market value is zero because deferred taxes do not trade in open market. There is not a market for that. There is a market for stocks. There is a market for debt. Things like that do trade on the open market. You can measure them, but there is no market for Deferred Federal income tax or unamortized investment tax credit. It’s strictly an accounting convention to record for the differences in timing of various intricacies of the Federal income tax development and its not something that changes.
“. . . If there is any effect in the stock and debt approach, if there is any effect in it, it is captured most likely right up in the stock price because prudent investors are out there and they know what’s going on, too.”

In regard to this issue, the parties agree to the following: the reserve account results from “normalized” accounting in Puget’s books. The records are normalized in the sense that the difference in value between the accelerated depreciation deductions Puget actually took, and the lower straight line depreciation deductions Puget could have taken, is recorded in the reserve account as tax deferrals.

The tax deferrals are not presently counted as income to Puget when rates are set. Conversely, in the future if Puget’s exhaustion of its depreciation deductions results in greater tax liability, depletion of the reserve account occurs and the loss is not counted as a reduction in income when rates are set. Thus, rates are not reduced to reflect the added income when the deductions are taken, and they are not increased to reflect the loss of income when the deductions are used up.

The District Court’s Memorandum agrees with the analysis set out above, and on the basis of this analysis the District Court concluded:

“The deferred tax account is merely an accounting device used to normalize income for book purposes. It does not represent a true liability.”

Also important to the District Court’s resolution of this issue was its finding that “the amount of the deferred tax account is never considered in determining the amount of taxes an entity owes.”

The cases cited in the briefs on appeal generally concern double-counting the value of deferrals in the indicator at issue. See In the Matter of Southern Railway (1985), 313 N.C. 177, 328 S.E.2d 235, Burlington Northern R. Co. v. Bair (S.D. Iowa 1986), 648 F.Supp. 91; Pacific Power & Light Co. V. Department of Revenue (1979), 286 Or. 529, 596 P.2d 912. In Southern Railway, the North Carolina Supreme Court disallowed the taxing authority’s inclusion of capitalized deferral income in the income indicator reasoning that the agency had already capitalized income from assets purchased with deferral income. Southern Railway, 328 S.E.2d at 247. In Bair, the taxing authority included the deferrals in the stock and debt indicator. The U.S. District Court reversed because the value of the deferrals was already reflected in the market value of Burlington Northern’s common equity as derived from the use of a price-earnings ratio. Bair, 648 F.Supp. at 101. In Pacific Power, the Court disallowed valuation of deferred taxes in the income indicator because the value of the deferrals would already be recognized in a buyer’s perception of the property’s value as a result of the company’s use of normalization accounting. Pacific Power, 596 P.2d at 927-28.

The current case is similar to the cases cited above in that Puget’s expert stated that if the reserve account had any value, it was already reflected in the price of Puget’s stock. However, the Department’s expert held the opinion that the reserve account did represent value, and that this value was properly included in the stock and debt indicator by adding the dollar amount held in the reserve account as a liability. Thus, the expert testimony is conflicting as to whether the reserve account has any value outside of its effect on the price of the stock.

We reverse because the parties agree that the account represents value to Puget derived from deductions which increase income without reducing Puget’s rate of return. The theory that the value is already reflected in Puget’s stock because the reserve increases the value of Puget’s stock is plausible. But equally plausible is the theory that the value is not reflected in the stock, or actually reduces the value of the stock, because the reserve must serve to mitigate the loss of deductions in the event that Puget has a lack of new equipment to depreciate due to inadequate continuous reinvestment, or because of a static capital base. Thus, the District Court incorrectly substituted its own judgment for that of the Board on a question of fact. Section 2-4-704, MCA.

The District Court’s decision on this issue is also based on its finding that the reserve account was not a true liability under ARM Section 42.22.113 (1982). The rule defines the components of the stock and debt indicator, and the relevant part reads:

“A market value or stock and debt indicator of value shall be derived from the company’s outstanding liabilities. The department shall consider the market value of the company’s preferred and common stocks, outstanding debt, and the net of current assets and current liabilities. The sum of these items represent an indicator of market value for all the company’s property. When the sum represents both operating and nonoperating property, the department will deduct the market value of the nonoperating property.”

ARM Section 42.22.113 (1982). The District Court concluded that the reserve account could not be included in this regulation because it was neither an instrument traded on the financial market nor a true liability as required by the regulation. We disagree.

Substantial credible evidence supports the Board’s decision approving treatment of the account as a liability. First, as stated in regard to issue I, the District Court should not interpret the Department’s regulations so narrowly that the statute’s mandate for finding market value is frustrated. Second, the use of the word “outstanding debt” in the regulation is sufficiently comprehensive to include an account which must serve to offset the loss of depreciation deductions Puget may experience in the future. Puget argues that use of the reserve to offset future liability is a contingency which may never occur because tax laws may change or reinvestment will allow Puget to maintain accelerated deductions. However, lack of such an account has lead to problems in the past when accelerated deductions turned out to be unavailable. See Memphis Light, Gas & Water Division v. Federal Power Commission (D.C. Cir. 1974), 500 F.2d 798 (company allowed to switch from flow through accounting to normalization accounting in rate making because evidence showed tax savings on expansion property would not be available to offset declining depreciation on older properties). Thus, we hold that the Board ruling that the Department may treat the account as a liability is not clearly erroneous, and reverse the District Court on this issue.

Issue III.

The District Court found that the Department arbitrarily and capriciously valued townsite property. The value used by the Department and approved by the Board was the value of the property as assessed by the Department’s local Rosebud County appraiser for taxes.

Puget’s position, which the District Court adopted, is that the local assessment undervalued the townsite property because the property originally cost Puget $6,385,395, and the county appraised the property at $1,629,146. Puget pointed out that the cost of the property is included in the cost indicator, and argued that it should be taken out at the same value less average depreciation at which it was put in. On appeal, the Department argues that the townsite non-operating property must be valued according to statutes governing local assessment of property, and that Puget’s contentions on the value included in the cost indicator ignore the fact that the cost indicator, as a weighted component, constitutes only a portion of the data used to determine the unit value of Puget.

The following finding by the Board was reversed by the District Court:

“The Board finds that the townsite is a nonoperating property and as such, its value must not be apportioned to the counties nor should it be considered as a portion of the Montana value. Evidence revealed that the townsite property is real estate. Real estate cannot be valued pursuant to a mechanical apportionment formula. Instead, it must be appraised according to accepted real estate valuation ■principles. Puget introduced no evidence, based upon proper valuation principles, which overcame the Department’s valuation of 1,629,146 for the townsite.”

In reviewing the contentions on this issue, we are in agreement that it would seem unfair to value townsite property at a higher value for inclusion in the cost indicator, and then take it out of the total unit value at a lower value. However, Puget bears the burden of showing that this is what was done. Furthermore, there are various amounts of depreciation, arrived at by different methods, taken on property included in the cost indicator, and the cost indicator is included in the total valuation at a weight of only 50%. Thus, we hold that the Board did not clearly abuse its discretion by accepting the locally assessed value.

Another aspect of this argument also persuades us to reverse this issue. The Department argues that Sections 15-7-111 to -114, MCA, provide the exclusive methods for valuing residential property, and that $1,629,146 was the figure arrived at under these procedures. Thus, according to the Department, no further inquiry into the townsite value should be allowed.

Under the facts of this case, we agree with the Department. Puget’s local taxes were assessed based on a townsite value of $1,629,146. If the Department were to follow the District Court’s mandate on remand Puget would pay local taxes on property valued using the low figure, and would have the high figure deducted from the value of the centrally assessed property for state wide taxation purposes. In other words, Puget would have the best of both worlds because the company would not pay any taxes on the difference between the high and low figures. Under these circumstances, the Board did not abuse its discretion by approving use of the local appraisal.

Cross-appeal Issue

The District Court affirmed the Board’s conclusion that the stock and debt indicator should not be adjusted to reflect the amount of CWIP not expected to go into service. Puget concedes that the Department removed the value of deductible assets from the stock and debt indicator, but contends that the indicator retained value of CWIP not expected to go into service because the Board and the District Court erroneously refused to remove the cost of CWIP not expected to go into service from the liability side of the balance sheet.

The District Court affirmed the Board because evidence disclosed that the reduction in the value of CWIP as a result of CWIP not expected to go into service was already reflected in the market value of Puget’s stock and debt. The District Court also found that the Department’s regulations require that CWIP be included at its market value rather than at its cost value. See ARM Section 42.22.113 (1982). Puget’s proposal on this issue, according to the District Court, would deduct the value of CWIP not expected to go into service at its cost rather than its market value.

We affirm the District Court on this issue because substantial evidence reveals that a reduction equaling the cost of the CWIP would overstate the loss of the property’s value for Puget. We also agree with the District Court’s conclusion that the stock and debt indicator should include property at its market value rather than at its cost value.

In summary, we reverse the District Court’s opinion and order on the appellant’s Issues 1-3 and remand for reinstatement of the Board’s order on these issues. The issue on cross-appeal is affirmed.

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


author: MR. JUSTICE WEBER

text:
    In re the SUPPORT OF K.F.
    No. 87-503.
    Submitted on Briefs May 12, 1988.
    Decided June 14, 1988.
    As Modified and Rehearing Denied July 7, 1988.
    756 P.2d 460.

      Clary & Clary, Thomas Clary, Great Falls, for appellant.
    Baiz & Olson, Kenneth R. Olson, Great Falls, for respondent,
   MR. JUSTICE WEBER

delivered the Opinion of the Court.

The mother appeals an order of the District Court for the Eighth Judicial District, Cascade County. The court denied the mother’s requests for increased child support and for income tax information from the father’s farm corporation. It ordered her to pay the attorney fees incurred by the father. We affirm.

The issues are:

1. Did the District Court err in refusing to order the father to produce the income tax returns of his farm corporation?

2. Did the court err in denying the mother’s motions filed after the denial of her request to require the father to produce tax returns for the farm corporation?

3. Did the court err in denying the petition to increase child support?

4. Did the court err in awarding the father his attorney fees?

The marriage of the mother and father was dissolved in 1978. The mother was granted custody of their son, then 4 years old. The father was ordered to pay child support in the amount of $200 per month.

In 1981, the father signed a relinquishment and consent to adoption so that the son could be adopted by the mother’s second husband. However, the mother’s second husband never adopted the boy, and the mother’s second marriage ended. The mother’s third husband is her attorney in this action.

The father is remarried and has three children by that marriage. He is a farmer. In January 1985, he and his brother incorporated their farm. The father receives a salary as farm manager, along with nontaxable benefits from the corporation.

In February 1986, the mother filed a petition for enforcement of prior child support and for increased child support. She requested payment of back child support to the date of the father’s relinquishment. The parents, both represented by counsel, subsequently entered a stipulation whereby the father would pay $1,000 per year for 5 years as full satisfaction of back support owing, plus $125 per month for current support, plus a $300, $600, or $900 lump sum each January, with the amount of the lump sum depending on the father’s income for the previous year. The stipulation also reestablished a visitation schedule for father and son.

In late 1986 and early 1987, the mother began a series of actions in which she tried to obtain the tax returns from the father’s farm corporation. She argued that these were relevant to the determination of the amount of child support payable under the stipulation. The District Court disagreed, ruling in May 1987 that the stipulation bases the lump sum child support upon the father’s income as reportable on his personal tax returns. Those returns had been provided to the mother. The mother filed a motion to reconsider, to set aside the agreement, or to determine child support. The court denied the motion and reaffirmed its prior ruling.

In September 1987, the mother petitioned for increased child support. She also served interrogatories seeking income tax information for the farm corporation. The father refused to provide that information. A hearing was held at which the father asked that the petition be dismissed because it did not satisfy the provisions of Section 40-4-208, MCA, governing modification of child support. The court denied the mother’s claim for relief and ordered her to pay $297.09 for the father’s attorney fees. The mother appeals.

I

Did the District Court err in refusing to order the father to produce the income tax returns of his farm corporation?

The stipulation entered by the mother and father provided:

“MICHAEL further agrees that, for purposes of determining whether the additional support is to be paid, the income under all farming operations in which he is engaged, regardless of whether it is reported under his Social Security number or his spouse’s Social Security number, together with all income he receives from other sources, reportable under his Social Security number, shall be used to determine the amount of income attributed to him in any given taxable year.”

In its May 1987 order, the District Court interpreted the above language to include all income reportable under the father’s social security number and all farm income reported under his wife’s social security number. The court ruled that the above language did not include nontaxable benefits from the farm corporation to the father and his family. We conclude that the court’s ruling is supported by the plain language of the stipulation.

The court then found in its November 1987 order, based on the previous ruling, that the father had no obligation under the stipulation to provide the mother with corporate tax returns. The mother argues that Section 40-4-204, MCA, requires the court to consider all relevant factors in setting the reasonable and necessary amount of support, and that nothing could be more relevant than the father’s income from the corporation. However, as the District Court concluded, an action for modification of child support is governed by Section 40-4-208, MCA. The standard for modification of child support under that statute is a change in circumstances so substantial as to make the present terms of support unconscionable. The mother, aside from pleading under the wrong statute, has made no allegations of substantial changes in her own financial circumstances or those of the father. She presented no evidence of such a substantial change of circumstances. We conclude that in this situation it was not error for the court to deny the request for production.

II

Did the court err in denying the mother’s motions filed after the denial of her request to require the father to produce tax returns for the farm corporation?

After the District Court entered its May 1987 order denying the mother’s request for an order for production, the mother filed three motions. One asked the court to reconsider its ruling. The second asked the court to set aside the stipulation for lack of consideration. The third motion asked the court to hold an evidentiary hearing for the purpose of setting the amount of child support. The father did not file responses to the motions. After hearing the arguments of counsel for both sides, the court denied all three motions without stating its reasons. The mother argues that she is entitled to know the court’s reasons for denying her motions.

As the father points out, the three motions were reiterations of the arguments made prior to the order denying the request for production. When post-trial motions are based on questions about the court’s discretionary rulings and no new facts are raised, it is not required that the opposing party file objections in order for the court to affirm its ruling. Matter of Adoption of S.E. (Mont. 1988), [232 Mont. 31,] 755 P.2d 27, [45 St.Rep. 843]. We hold that the denial of the mother’s motions was not error.

III

Did the court err in denying the petition to increase child support?

In September 1987, the mother filed her petition to increase child support, citing Section 40-4-204, MCA. A hearing was held, at which the mother’s counsel argued that $125 per month is not enough support for a 14 year old boy. The mother argues on appeal that the court should have held an evidentiary hearing on her petition and should have found that the $125 per month under the stipulation is unconscionable.

Although she had the opportunity at the hearing on her petition, the mother produced no evidence demonstrating changed circumstances between the time the stipulation was signed and the time her petition was filed. Given the absence of proper pleadings, and the absence of any allegation or proof of changed circumstances as required by Section 40-4-208, MCA, we hold that the court did not err in denying the petition to increase child support.

IV

Did the court err in awarding the father his attorney fees?

The court’s finding on attorney fees was:

“Petitioner’s motion is the third attempt in six months to extract more money from respondent than that to which she is entitled under the agreement she freely entered into on June 13, 1986. It is noted that petitioner’s attorney is, also, her husband. While the court does not speculate as to the issue of petitioner’s attorney fees, the court does acknowledge that respondent is forced to retain counsel and incur costs each time this matter is brought before the court. On previous occasions the court has refused to order petitioner to pay respondent’s attorney fees and costs. Due to the history of this case, the insufficiency of petitioner’s pleadings and proof and the need for finality in judgments in this type action, the Court finds that it is appropriate to order petitioner to pay respondent’s reasonable attorney’s fees and costs.”

The mother argues that the award of attorney fees to the father is unsupported by any basis in law. However, a district court has the equitable power to order attorney fees when justice so requires. Holmstrom Land Co. v. Hunter (1979), 182 Mont. 43, 48, 595 P.2d 360, 363. We conclude that this is such a case. The mother has made repetitive claims on issues already decided by the court. We hold that the District Court did not abuse its discretion.

Affirmed.

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


author: MR. CHIEF JUSTICE TURNAGE

text:
    CANDACE WAGNER, Plaintiff and Respondent, v. EARL CUTLER and The Corporation of the Presiding Bishop of the Church of Jesus Christ of the Latter-Day Saints, a Utah Corporation, Defendants and Appellants.
    No. 87-230.
    Submitted on Briefs May 19, 1988.
    Decided June 15, 1988.
    757 P.2d 779.

      Michael C. Coil, Bozeman, for defendants and appellants.

      Morrow, Sedivy & Bennett, Lyman H. Bennett, III, Bozeman, for plaintiff and respondent.
   MR. CHIEF JUSTICE TURNAGE

delivered the Opinion of the Court.

Defendant, Church of Jesus Christ of the Latter-Day Saints (LDS) appeals the January 20, 1987, bench decision of the Eighteenth Judicial District Court, Gallatin County. The court ordered that LDS pay $15,203.19 to plaintiff Wagner in compensation for defects in a house vihich LDS sold to Wagner. We affirm.

LDS raises four issues for our review:

1. Did the District Court properly consider the “as is” language and the “independent investigation” clause contained in the Earnest Money Receipt and the Special Warranty Deed?

2. Did the District Court properly grant amendments to the pleadings seven months after the close of the trial?

3. Is the District Court’s decision regarding negligent misrepresentation supported by substantial evidence?

4. Did the District Court properly consider the duty of LDS to disclose defects and the defense of contributory negligence?

LDS employed Earl Cutler as an educator in Bozeman, Montana. Cutler owned a three-quarter-acre lot in Gallatin County. In July of 1973, Cutler hired several contractors to build a house on the lot. One of the contractors was CAPP Homes, which erected the framing, doors, windows and unshingled roof. After occupying the new house in the summer of 1975, Cutler experienced problems with the septic system, the lawn sprinkler system, and flooding in the basement.

In July of 1980, LDS transferred Cutler to Missouri. Cutler tried to sell his house, but was unsuccessful. The house remained vacant for over a year. In the fall of 1981, LDS briefly inspected the house and bought it from Cutler. LDS never occupied the house.

On October 28, 1981, LDS entered a listing agreement with realtor Paul Lytle. The listing agreement stated that the house was four years old and well-built. LDS disclosed no defects to the real estate agent, as shown by this clause:

“To the best of my knowledge, the following items are in good repair and working condition, and I am unaware of anything wrong with the foundation, roof, siding, wiring, drainage, heating, plumbing or sanitation system except: none”

Realtor Lytle sent for publication in the Multiple Listing Service an advertisement relating to the property in dispute. The advertisement sent to' Multiple Listing Service, which was published in substantially the same wording, read in essential part as follows:

“Remarks: Excellent home with Timberline wood burner on brick hearth on upper level & large rock fireplace in family room on lower level. Large deck on two sides. Basement level needs some finishing & carpet, but is mostly done. Well suited for a large family.”

In April of 1982, Wagner arrived in Bozeman from Los Angeles. She was interested in buying a house. Wagner contacted Carmen Murphy, a real estate agent for ERA Landmark of Bozeman. Murphy showed the LDS house to Wagner. She also provided Wagner with a copy of the ad in the Multiple Listing Service. Murphy knew that the house was a “CAPP Home” but did not disclose that fact to Wagner. Murphy represented to Wagner that the house was “well built” according to “code.” Murphy also gave Wagner a document from the Gallatin County Sanitarian representing the document to be an approval by Gallatin County of the septic system. Wagner liked the house and toured it several more times.

After some negotiations, Wagner and LDS agreed on a purchase price of $78,500. On July 15,1982, the sale was closed. LDS received $15,500 down. The balance of $63,000 was carried by LDS on a contract for deed at 13 percent with a balloon payment due after five years.

Upon taking possession, Wagner encountered numerous problems with the house. Wagner then sued to recover damages for misrepresentation, violation of duty to inspect and disclose defects, and breach of the implied warranty of habitability. The court dismissed the breach of habitability cause. During the trial, the court also dismissed defendant Cutler from the case.

Trial was held without a jury on January 30, 1986, and subsequently continued until June 5, 1986, when all the testimony was completed. On October 29, 1986, the District Court found that many of the defects were noticeable prior to Wagner’s purchase of the house. These noticeable defects included the unfinished basement, unfinished steps leading to the basement, light fixtures which were not in their sockets, cracks in the patio pavement, and incomplete heating ducts. The court disallowed recovery for items which were clearly observable upon inspection of the residence.

However, the court found twenty-three other defects which were latent and undiscoverable prior to occupancy. The court further found that LDS was not aware of the latent defects and that LDS performed no positive acts of wrongdoing. The latent defects included a hazardous chimney, poor ceiling insulation, broken sewage pump, and faulty lawn sprinkler system.

On April 7, 1987, the court amended its conclusion in response to a motion by LDS. The court concluded that Wagner relied on LDS’s representation that the home was “well built” to “code,” and that LDS failed to exercise reasonable care in communicating the true condition to Wagner. The court awarded Wagner $15,203.19 in damages.

Issue 1. “As is” and “independent investigation” clauses, a. Earnest money receipt.

The earnest money receipt signed by LDS and Wagner contained the following clauses: “Purchaser agrees to accept property and appliances in ‘as is’ condition unless otherwise provided for . . .” and “Purchaser enters into this agreement in full reliance upon his independent investigation and judgment.” (Emphasis added.)

LDS contends that Wagner agreed to the “as is” clause and therefore bought the property subject to any defects, both observable and latent. LDS also asserts that it had no knowledge of any defects. LDS argues that the “independent investigation” clause and “as is” clause should “trigger the purchasing party’s obligation to thoroughly investigate the property to his own satisfaction” and “dispel any misconception that the buyer had the right to rely on any information supplied by the seller.” LDS concludes that Wagner failed to thoroughly investigate and is now barred from any recovery.

In analyzing this issue, we note that an “independent investigation” clause does not preclude justifiable reliance by a buyer upon the misrepresentations of the seller and its realtor. Parkhill v. Fuselier (Mont. 1981), [_ Mont. _,] 632 P.2d 1132, 1135, 38 St.Rep. 1424, 1427.

In the instant case, the court found no willful misrepresentation: “. . . the Defendant, Church, did not construct said premises and was no more aware of the latent defects than was the Plaintiff, that the Church performed no positive wrongful acts . . .” However, LDS bears responsibility for the actions of its real estate agent. Section 28-10-602, MCA. Wagner relied on the material misrepresentations of LDS as they appeared in the written listing agreement prepared by LDS’s realtor. Wagner was under no additional duty to discover the latent defects in the house. Parkhill v. Fuselier, 632 P.2d at 1135, 38 St.Rep. at 1427. We find that the District Court considered the clauses and properly held that Wagner was not responsible for the latent defects.

b. Special Warranty Deed.

LDS conveyed the real estate to Wagner in a document entitled, “Special Warranty Deed,” which stated in part: “. . . Grantor, of Salt Lake County, State of Utah, hereby conveys and warrants, against all acts of itself, and none other, to all claiming by, through or under it to CANDACE A. WAGNER, Grantee,. . . the following parcel . . .” (Emphasis added.)

LDS contends that the warranty clause limits the liability of LDS to its own acts. LDS contends that it did not cause the defects and is therefore not responsible for the defects. LDS concludes that the warranty clause should have alerted Wagner, who “should bear the responsibility of having improperly proceeded in light of the Special Warranty Deed, and the language contained therein.”

In reviewing this issue, we note that all sale documents were drafted by LDS or its agent. Wagner relied on LDS’s misrepresentations to her detriment. In the plain language of the contractual clause, LDS warranted the house. Having done so, LDS contractually obligated itself to the veracity of the warrant. Section 28-3-401, MCA. Any uncertainty over “what was warranted” in the deed should be interpreted most strongly against the party who drafted it. Section 28-3-206, MCA. We find that the District Court properly considered the language of the deed and held LDS liable for the latent defects.

Issue 2. Amendments.

The District Court handed down its judgment on January 20, 1987. On January 29, 1987, LDS moved the court to amend its findings of fact and conclusions of law, and to strike references to the implied warranty of habitability. A hearing was held on the motion on February 9, 1987. The District Court amended its conclusions on April 7, 1987, stating that LDS had “failed to exercise reasonable care or competence in obtaining and/or communicating” information about the house’s condition to Wagner. LDS contends that the District Court procedurally erred by not amending its conclusions in the manner requested by LDS.

Amendments to judgments are discussed in Rule 52(b), M.R.Civ.P., which states: “Upon motion of a party made not later than 10 days after notice of entry of judgment the court may amend its findings or make additional findings and may amend the judgment accordingly. . .” (Emphasis added.)

LDS filed its motion and the court responded. The amended conclusions were supported by the record. The decision to amend and manner of amendment lie squarely within the discretion of the court. The court was under no obligation to tailor its amendment to fit LDS’s specifications. We find that the court properly amended its judgment.

Issue 3. Negligent Misrepresentation.

As noted above, the District Court concluded that LDS failed to exercise reasonable care in communicating the house’s condition to Wagner. LDS contends that it did not have adequate notice of the theory of negligent misrepresentation, and was thereby precluded from preparing an adequate defense.

We disagree. The District Court discussed negligent misrepresentation nine months before trial. In its order with memorandum dated April 18, 1985, the court discussed Wagner’s complaint and stated:

“Together, Counts I and II sufficiently state a cause of action for negligent misrepresentation.” LDS’s trial brief dated January 30, 1986, specifically mentions and discusses negligent misrepresentation. The theory of negligent misrepresentation was mentioned again during trial in January 1986, when Wagner’s counsel stated:
“The theory being present is actually fraud and misrepresentation, constructive fraud, negligent misrepresentation.”

Negligent misrepresentation was mentioned repeatedly throughout the proceedings. We hold that LDS had adequate notice of the theory.

LDS next contends that the facts do not support the elements of negligent misrepresentation. LDS asserts that Wagner failed to establish the proper standard of care through some type of expert testimony, and therefore failed to prove that LDS deviated from the standard. LDS argues that it never knowingly supplied false information and, therefore, was not negligent.

We are guided on this issue by Brown v. Merrill, Lynch, Pierce, Fenner, Etc. (1982), 197 Mont. 1, 12, 640 P.2d 453, 458-459, quoting the Restatement of Torts 2d Section 552 (1977), where we noted:

“One who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.” [Emphasis added.]

The “standard of care” testimony was not necessary. The test for the admissibility of expert testimony is whether the matter is sufficiently beyond common experience that the opinion of an expert would assist the trier of fact. Vandalia Ranch v. Farmers Union Oil & Supply (Mont. 1986), [221 Mont. 253,] 718 P.2d 647, 650, 43 St.Rep. 790, 793; Rule 702, M.R.Evid. The instant case presented no concept or requirement of specialized knowledge beyond the cognizance of the judge.

LDS had a duty to obtain and communicate information on the true condition of the house. It failed to do so. We hold that the District Court properly concluded that LDS failed to exercise reasonable care.

Issue 4. Contributory negligence.

LDS asserts that it, like Wagner, bought without knowledge of latent defects. LDS asserts that Wagner’s unreasonable failure to investigate constituted contributory negligence.

In analyzing this issue, we note that the District Court only allowed Wagner recovery for latent defects and denied recovery for obvious defects. In effect, the court found Wagner accountable for the defects a reasonable buyer would have noticed. With that distinction, the court properly addressed Wagner’s contributory conduct in the transaction.

In conclusion, the District Court balanced the responsibilities of seller and buyer in the sale. The court carefully apportioned the burden of the defects between the parties. The court’s decision was well reasoned and accomplished a just result. We hold that the District Court’s decision was proper and fully supported by the evidence in the record.

Affirmed.

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


author: MR. JUSTICE McDONOUGH MR. JUSTICE HUNT,

text:
    KENNETH K. KOMEOTIS, Claimant and Appellant, v. WILLIAMSON FENCING, Employer, and State Compensation Insurance Fund, Defendant and Respondent.
    No. 87-324.
    Submitted on Briefs March 18, 1988.
    Decided June 16, 1988.
    756 P.2d 1153.

      Bottomly Law Offices, Joe Bottomly, Great Falls, for claimant and appellant.
    Marra, Wenz, Johnson & Hopkins, Thomas A. Marra, Great Falls, for defendant and respondent.
   MR. JUSTICE McDONOUGH

delivered the Opinion of the Court.

This case appears before us for the second time. The first appeal involved the Workers’ Compensation Court’s improper application of Section 39-71-741, MCA, as amended in 1985. This Court reversed the lower court in the former appeal holding that the statute could not be applied retroactively. Komeotis v. Williamson Fencing (Mont. 1987), [225 Mont. 356,] 736 P.2d 93, 44 St.Rep. 298. The case was remanded for a determination of the lump sum issue applying the law as it existed at the time of the injury. Komeotis, 736 P.2d at 93.

On remand the Workers’ Compensation Court applied the correct law and denied the lump sum request as well as the claimant’s request for attorney fees on the issue of disability. The claimant appeals this decision. We affirm.

The issues may be stated as follows:

(1) Did the Workers’ Compensation Court err in denying the claimant’s request for a partial conversion of his benefits to a lump sum?

(2) Did the Workers’ Compensation Court err in denying the claimant’s request for attorney fees for prevailing on the issue of disability?

The claimant, Mr. Komeotis, worked for Williamson Fencing for thirteen years before degenerative arthritis in his elbows rendered him incapable of performing his former job duties. The State Compensation Insurance Fund (Fund) provided temporary total disability benefits to Mr. Komeotis, but contested conversion of the entitlement to permanent disability benefits. Mr. Komeotis petitioned for determination of the disability issue by the Workers’ Compensation Court. Prior to adjudication of the disability issue the Fund conceded liability.

Mr. Komeotis also petitioned for partial conversion of weekly disability benefits to a lump sum of $120,000. Mr. Komeotis planned to spend $110,000 of that amount for the purchase and operation of rental property, and the remaining $10,000 to cover medical expenses for needed surgery, and for the purchase of a reliable vehicle. The petition also requested attorney fees. These issues were heard before the hearings examiner.

Expert testimony taken at the hearing revealed that Mr. Komeotis’s plan to buy rental property was financially feasible. Experts also testified that having responsibility for the rental property would lessen the severe depression Mr. Komeotis had begun to experience since the onset of his disability. However, expert testimony also revealed that Mr. Komeotis’s physical and educational deficits would hamper his ability to care for the rentals, and that other vocational options might ease his depression. The impact of Mr. Komeotis’s vocational problems was lessened by testimony showing that friends and family would help him manage the rental enterprise.

After the hearing the Workers’ Compensation Court reviewed the transcript, exhibits, and depositions. The lower court also considered the parties’ proposed Findings of Fact and Conclusions of Law and supporting briefs. The lower court then ruled that Mr. Komeotis was entitled to a lump sum of at least $10,000 to have surgery and to purchase a vehicle, but denied Mr. Komeotis’s lump sum request of $110,000 for the purchase and operation of the rental property. The lower court also granted attorney fees for the resolution of the $10,000 lump sum, but refused attorney fees for resolution of the disability issue.

ISSUE I.

Mr. Komeotis contends that the Workers’ Compensation Court erred in its findings on the severity of his depression. Mr. Komeotis also contends that the lower court misapplied the best interest test to the financial facts of the case.

First, in regard to Mr. Komeotis’s depression, the Workers’ Compensation Court found that:

“Both Dr. Wagner and Jeff Baker testified as to claimant’s depression and need for some sort of constructive outlet, reasoning that this need stems from claimant’s strong work ethic and deep-rooted sense that in order to ‘feel good about himself as a man’ he needs to be the primary bread winner in his family.”

From this finding the lower court concluded:

“The claimant here has not presented any probative evidence of age or health reasons sufficient to override the preference for periodic payments. Testimony was presented as to claimant’s depression and need to maintain his ‘manhood’ by again becoming the primary breadwinner in his family. Despite Mr. Baker’s attempt to characterize this depression as ‘suicidal,’ the Court found no evidence that this depression reached proportions beyond what any normal hardworking person would feel when they are no longer able to provide for themselves by their own efforts.. . . [Counseling and rehabilitation would seem more appropriate [to alleviate the depression] than simply setting claimant up as an apartment house owner.”

Mr. Komeotis contends that we should reverse because the lower court’s characterization of his depression is not supported by the record.

The essential conclusion here is that the evidence presented was insufficient to override the preference for periodic payments. See Polich v. Whalen’s O.K. Tire (Mont. 1981), [_ Mont. _,] 634 P.2d 1162, 1165, 38 St.Rep. 1572, 1575. A review of the record reveals that the lower court may have understated the severity of the depression. However, substantial evidence supports the lower court’s finding that rehabilitation and counseling could provide Mr. Komeotis with the type of activity which would help to alleviate his depression. Given this finding, and the evidence of Mr. Komeotis’s vocational deficits, we hold that the Workers’ Compensation Court acted within its discretion by concluding that Mr. Komeotis failed to overcome the presumption for periodic payments.

We also hold that the lower court acted within its discretion by refusing to follow the results reached in Polich and Legowik v. Montgomery Ward (1971), 157 Mont. 436, 486 P.2d 867, cases where this Court affirmed the decision to grant lump sum benefits for health reasons. Unlike Legowik and Polich, we are asked here to reverse the finder of fact on a lump sum issue even though the lower court is more favorably situated than this Court to familiarize itself with the circumstances surrounding the applicant, to consider his or her needs, and the results which probably will follow action granting or denying the application. See Polich, 634 P.2d at 1164. Furthermore, in addition to the immediate health needs of the claimant, the lower court must consider the best interests of the claimant generally, as well as the best interests of his family, and the public. Utick v. Utick (1979), 181 Mont. 351, 355, 593 P.2d 739, 741. In weighing these interests, the presumption favors periodic benefits. Utick, 593 P.2d at 741.

In this case, other factors weighed against granting the lump sum request. Thus, we hold that the lower court acted within its discretion by refusing to follow Legowik, and Polich. We also hold Utick inapplicable as that case is limited to the particular circumstances which appear therein, and we affirm as to this contention in Issue 1.

Mr. Komeotis also argues that the lower court misinterpreted the dictates of the financial best interest test. Specifically, Mr, Komeotis argues that the evidence he presented disclosing that inflation will lower the value of his benefits in the future should have been accorded more weight.

The lower court’s decision to not grant the lump sum because inflation would cause a future “pressing need” is consistent with this Court’s previous dispositions where similar arguments were made. See Belton v. Carlson Transport (Mont. 1986), [220 Mont. 194,] 714 P.2d 148, 43 St.Rep. 286; LaVe v. School District No. 2 (Mont. 1986), [220 Mont. 52,] 713 P.2d 546, 43 St.Rep. 165.

Mr. Komeotis asserts that where a sound business proposal is coupled with evidence demonstrating health benefits from a lump sum conversion, the rule against inflation as justification for granting a lump sum does not apply. However, in addition to finding the lack of a pressing financial need, the lower court considered the claimant’s physical and mental disabilities before concluding that the rationale from Belton and LaVe provided authority for rejecting the lump sum request. Thus, we are convinced the lower court acted within its discretion by refusing to distinguish Belton and LaVe, and the balance of Issue 1 is affirmed.

ISSUE II.

Mr. Komeotis contends that the lower court erred by not granting his request for attorney fees for resolution of the disability issue. The lower court found that this Court’s previous decisions in Lasar and Yearout controlled this issue because liability for permanent disability was conceded here prior to trial. See Yearout v. Rainbow Painting (Mont. 1986), [222 Mont. 65,] 719 P.2d 1258, 43 St.Rep. 1063; Lasar v. Oftedal & Sons (Mont. 1986), [222 Mont. 251,] 721 P.2d 352, 43 St.Rep. 1239. We agree with the lower court that there must be an issue on disability benefits later judged compensable for an award on such benefits pursuant to Section 39-71-612, MCA. Lasar, 721 P.2d at 354.

However, Mr. Komeotis contends that the rationale from Krause v. Sears Roebuck (1982), 197 Mont. 102, 641 P.2d 458, applies and distinguishes the instant case from Lasar and Yearout. The Fund responds that Krause should be distinguished from the instant case because it was only shortly before the hearing that discovery revealed the facts which compelled the Fund to concede the disability issue, and Mr. Komeotis was not required to submit proof on the disability issue. We agree and affirm the lower court’s application of Lasar. Thus, both issues are affirmed.

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

MR. JUSTICE HUNT,

dissenting:

I dissent from the majority’s conclusion that the District Court did not abuse its discretion when refusing to award partial lump sum payments to Mr. Komeotis. While periodic payments are favored over lump sum payments when granting Workers’ Compensation benefits, this Court expressly recognizes that lump sum benefits should be awarded without hesitancy when it is in the claimant’s best interest. See, e.g., Polich v. Whalen’s O.K. Tire Warehouse (Mont. 1981), [_ Mont. __,] 634 P.2d 1162, 1164, 38 St.Rep. 1572, 1574; Willoughby v. Arthur G. McKee & Co. (1980), 187 Mont. 253, 257, 609 P.2d 700, 702; Utick v. Utick (1979), 181 Mont. 351, 355, 593 P.2d 739, 741.

The record clearly indicates, through the testimony of experts, that a lump sum payment is in Mr. Komeotis’s best interest. Specifically, these expert witnesses testified that Mr. Komeotis was severely depressed as a result of his inability to work and to provide a living for his family. When considering Mr. Komeotis’s background and his previous rehabilitative experiences, these experts testified that the plan for Mr. Komeotis to purchase rental property would greatly help to relieve his severe depression.

The majority recognizes that the lower court may have understated the severity of Mr. Komeotis’s depression, but claims the record contains substantial evidence supporting the lower court’s finding that “counseling and rehabilitation would seem more appropriate than simply setting claimant up as an apartment house owner.” Komeotis v. William Fencing and State Compensation Insurance Fund, WCC Docket No. 8502-2934, at 26 (July 30, 1987). I disagree.

The record contains little or no evidence that rehabilitation and counseling alone will alleviate Mr. Komeotis’s severe depression. When asked about the benefits of counseling for Mr. Komeotis, Dr. Wagner, who holds a Ph.D. in clinical psychology, testified that “counseling usually occurs once a week, an hour once a week or so, and it would be difficult for him to overcome the depression. You know, once a week he’d come in and then the rest of the week he’d sort of slip . . . .” In addition, Dr. Baker, who holds a Ph.D. in counseling psychology, testified “that we had to get some kind of vocational direction for this person, or we could possibly have suicide on our hands, at the worse . . . .” Dr. Baker further testified that in light of Mr. Komeotis’s condition and background, a self-employment venture was the only possible vocational plan available to him.

On the other hand, no solid evidence can be found in the record to support the majority’s conclusion that substantial evidence exists to support the lower court’s findings that counseling treatments alone will alleviate Mr. Komeotis’s severe depression. The record does contain, however, substantial credible evidence that the claimant’s family and the public, will be better served if claimant is granted a lump sum payment that will let him take part in a program recommended by experts who examined him and offered the only real evidence of what can be done to help him fight his depression.

In the present situation, the lower court found that the apartment building was financially feasible and that Mr. Komeotis could “manage and supervise the building and that the result would mean more total income to the claimant [Mr. Komeotis] than if he merely collected his biweekly compensation.” Komeotis, WCC Docket No. 8502-2934, at 24. The overwhelming evidence found in the record indicates that Mr. Komeotis’s severe depression could be alleviated upon managing and supervising the apartment building.

I would reverse and order the lump sum paid so that the claimant can get on with rehabilitation.

MR. JUSTICES SHEEHY concurs with the foregoing dissent of MR. JUSTICE HUNT.