text:
    STATE OF MONTANA, Plaintiff and Respondent, -v-BECKY L. SARBAUM, Defendant and Appellant.
    No. 94-068.
    Submitted on Briefs November 23, 1994.
    Decided March 7, 1995.
    52 St.Rep. 133.
    270 Mont. 176.
    890 P.2d 1284.

      For Appellant: Amy N. Guth, Public Defender’s Office, Libby.
    For Respondent: Hon. Joseph Mazurek, Attorney General, Barbara Harris, Assistant Attorney General; Scott B. Spencer, Lincoln Comity Attorney, Libby.
   JUSTICE NELSON

delivered the Opinion of the Court.

This is an appeal from the Nineteenth Judicial District Court, Lincoln County, from the denial of the defendant’s motions to disclose the identity of a confidential informant and to suppress the evidence seized pursuant to the search warrant issued on April 12, 1993. We affirm.

The following are issues on appeal:

I. Did the District Court err in denying the defendant’s motion to require disclosure of the identity of the confidential informant who provided information set forth in the affidavit in support of the application for a search warrant?

II. Did the District Court err in denying the defendant’s motion to suppress the evidence seized pursuant to the search warrant in the search of her home?

FACTUAL AND PROCEDURAL BACKGROUND

In his affidavit and application for a warrant to search the home of Becky L. Sarbaum (Sarbaum) dated April 12,1993, Lincoln County Sheriffs Department Detective Klint H. Gassett (Gassett) stated that the offense of Criminal Possession with Intent to Sell, a felony, in violation of § 45-9-103, MCA, had been committed. The affidavit described the Sarbaum residence and the items believed to be located on the premises, such as growing marijuana plants and equipment, packaged marijuana and drug paraphernalia. The affidavit set forth Gassett’s experience and knowledge in drug investigations and marijuana grow operations.

Gassett went on to state that a confidential informant, known to be credible and reliable, had provided him with information about drug activities at the Sarbaum home. Gassett’s affidavit states that the confidential informant was in the Sarbaum home approximately four times within the three months preceding his application. During the course of that time, according to the confidential informant, Sarbaum had grown some marijuana plants to maturity and started some new plants. The confidential informant stated that he had seen about 30 plants of varying sizes in the basement of the home and under the pumphouse on the property during different visits. The confidential informant provided this information from his own observations at the Sarbaum residence.

The affidavit also states that Sarbaum’s husband, Blaine, told the confidential informant that he (Mr. Sarbaum) cloned marijuana; that the plants were grown for profit; that he (Mr. Sarbaum) planned to enlarge the growing operation; and when the most recent plants would be ready for harvest. The affidavit noted that the confidential informant had informed Gassett that the most recent plants would be ready for harvest around April 12,1993, the time of the application for the search warrant.

In further support of his application, Gassett also provided further information from two detectives who had been at the Sarbaum home. Detective Bemall, who is familiar with the odor of growing marijuana, had been at the home on February 28, 1993, on an unrelated matter and smelled the odor of growing marijuana in the residence. Officer Sweet had also been to the residence on two other unrelated matters. On April 10, 1993, Sweet answered a possible domestic abuse call at the home and even though Ms. Sarbaum was no longer in the home, Mr. Sarbaum would not let the police officer enter the home. In the fall of 1992, Sweet was at the residence regarding an injury of one of the Sarbaum children and Sarbaum was more concerned about getting the officer out of the home than about the injured child.

The Lincoln County Justice of the Peace issued the search warrant on the same day that the application was made. During the search, marijuana, marijuana stems and stalks, grow equipment, drug paraphernalia and weapons were seized. An information was filed on April 27, 1993, charging Mr. and Mrs. Sarbaum with criminal possession with intent to sell, in violation of § 45-9-103, MCA. (The charges against defendant’s husband, Blaine Sarbaum, were resolved and are not the subject of this opinion).

On May 21,1993, the defendant filed a motion and supporting brief for an order requiring disclosure of the identity of the confidential informant. On September 24,1993, the defendant filed a motion and supporting brief to suppress the evidence seized in the search of her home. On October 4, 1993, the District Court denied the defendant’s motion to disclose the identity of the confidential informant. On December 6, 1993, the District Court issued an order granting the defendant’s motion for suppression of the evidence seized in the search, finding the information which supported the search warrant to be stale.

On December 9, 1993, the State filed a motion to reconsider the court’s order granting the defendant’s motion to suppress based on our recently issued opinion in State v. Rinehart (1993), 262 Mont. 204, 864 P.2d 1219, decided December 2, 1993. The State asserted in the motion that the “Rinehart /McAtee case stands for the proposition that information from an informant of known reliability is sufficient to establish probable cause.” In an order filed January 6, 1994, the District Court reconsidered its prior decision and denied the defendant’s motion to suppress.

On January 13, 1994, the defendant entered an Alford plea and signed a plea bargain agreement, reserving the right to appeal any pre-trial motions in the matter. Sarbaum’s plea of guilty and the plea bargain agreement were accepted by the Court on January 26,1994. On that same day, the court dismissed the charge of criminal possession with intent to sell, and the State filed an amended information charging defendant with criminal possession of dangerous drugs. Sarbaum received a two-year deferred sentence and on January 31, 1994, she appealed the issues of the court’s refusal to require disclosure of the identity of the confidential informant and its denial of her motion to suppress.

DISCUSSION

I. Did the District Court err in denying the defendant’s motion to require disclosure of the identity of the confidential informant who provided information set forth in the affidavit in support of the application for the search warrant?

The government’s privilege to refuse to disclose the identity of a confidential informant is subject to a balancing test enunciated in Roviaro v. United States (1957), 353 U.S. 53, 77 S.Ct. 623, 1 L.Ed.2d 639. In that case the United States Supreme Court stated:

We believe that no fixed rule with respect to disclosure is justifiable. The problem is one that calls for balancing the public interest in protecting the flow of information against the individual’s right to prepare his defense. Whether a proper balance renders nondisclosure erroneous must depend on the particular circumstances of each case, taking into consideration the crime charged, the possible defenses, the possible significance of the informer’s testimony, and other relevant factors.

Roviaro, 353 U.S. at 62, 77 S.Ct. at 628-29. This Court adopted that test in State v. Crowder (1991), 248 Mont. 169, 176, 810 P.2d 299, 303.

Furthermore, with respect to the necessity of disclosing the identity of an informant, Rule 502, M.R.Evid., provides:

Identity of informer.
(a) Rule of privilege. The United States or a state or subdivision thereof has a privilege to refuse to disclose the identity of a person who has furnished information relating to or assisting in an investigation of a possible violation of a law.
(b) Who may claim the privilege. The privilege may be claimed by an appropriate representative of the public entity to which the information was furnished.
(c) Exceptions and limitations.
(2) Testimony on relevant issue. If it appears in the case that an informer may be able to give testimony relevant to any issue in a criminal case or to a fair determination of a material issue on the merits in a civil case to which a public entity is a party, and the public entity invokes the privilege, the court shall give the public entity an opportunity to show facts relevant to determining whether the informer can, in fact, supply that testimony.

Given the above authority, and based on our review of the record in the instant case, we conclude that disclosure of the identity of the confidential informant was properly denied. In Crowder, we stated that the defendant must show the need for revealing the informant’s identity and that mere speculation or conjecture that his testimony will be relevant is insufficient to require that his identity be revealed. Crowder, 810 P.2d at 304.

In the instant case, the defendant’s attorney argued in the July 27, 1993, hearing, that the confidential informant “may indeed be an exculpatory witness for [Sarbaum].” This is precisely the sort of mere speculation and conjecture that was discussed in Crowder and in State v. Babella (1989), 237 Mont. 311, 315, 772 P.2d 875, 878, and which we determined to be an insufficient basis for requiring disclosure of an informant’s identity.

Moreover, the Roviaro balancing test, under these circumstances, weighs in favor of the nondisclosure of the identity of the confidential informant. Roviaro, 353 U.S. at 62, 77 S.Ct. at 628-29; Babella, 772 P.2d at 876. The State has a strong interest in protecting the flow of information regarding the drug trade within Lincoln County. Roviaro, 353 U.S. at 62, 77 S.Ct. at 628-29; Babella, 772 P.2d at 876. The State has demonstrated that this flow of information could be impaired without the probable future services of the confidential informant.

Gassett testified that there was “very much” a risk if the State disclosed the identity of the informant. Also, in an affidavit by Gassett before the District Court, he stated that the confidential informant may be in physical danger if his identity was disclosed; that disclosure would destroy the government’s ability to use the confidential informant as a future source of information and that he (Gassett) had reason to believe that the informant would continue to provide information to the Sheriffs Department. We conclude that the State, in response to Sarbaum’s request, demonstrated that disclosure of the identity of the confidential informant would result in a substantial risk to the informant and/or his operational effectiveness, which, in turn, would negatively impact the flow of information about the drug trade in Lincoln County.

Sarbaum did not demonstrate that her right to prepare a defense would be impaired by the nondisclosure of the confidential informant. Roviaro, 353 U.S. at 62, 77 S.Ct. at 628-29; Babella, 772 P.2d at 876. As stated above, Sarbaum could only speculate that the confidential informant might provide exculpatory information that would, in some manner, be relevant to her case. She failed to demonstrate that the identity of the confidential informant was essential to the preparation of her defense. Moreover, testimony at a motions hearing revealed that the defendant and her husband were fairly certain as to the identity of the confidential informant. Accordingly, they had only to subpoena the confidential informant as a witness.

Moreover, she failed to demonstrate under Rule 502, M.R.Evid., that, as stated above, the confidential informant could present relevant testimony on a material issue in the case.

This rule [502] allows the government to refuse to disclose the identity of an informant, subject to certain exceptions. The exception applicable in this case provides that if an informant can give testimony relevant to any issue in a criminal case, and the government claims the privilege, the trial court must determine if the defendant’s right to prepare his defense will be impinged by the government’s interest in protecting the flow of information by informants. If the trial court determines that the defendant’s rights will be violated if the informant is not identified, and the government refuses to identify the informant, the court must dismiss the charges against the defendant. Even before this rule was adopted, Montana followed the same balancing test, which was set forth by the United States Supreme Court in Roviaro v. United States (1959), 353 U.S. 53, 77 S.Ct. 623, 1 L.Ed.2d 639. State v. Chapman (1984), 209 Mont. 57, 65, 679 P.2d 1210, 1215.

In the instant case, the informant did not testify nor did the defendant demonstrate that Sarbaum’s right to prepare her defense would be impinged by the government’s interest in protecting the flow of information by the informant. Sarbaum did not show under the Roviaro balancing test or under Rule 502, M.R.Evid., that the informant could provide testimony on any relevant issue in the instant case. Sarbaum provided only speculation and conjecture, which is insufficient to warrant the disclosure of the identity of the informant. Crowder, 810 P.2d at 304. The State’s interest in protecting the flow of information by informants does not impinge upon Sarbaum’s right to prepare her defense and accordingly, we conclude that the District Court correctly determined that the disclosure of the confidential informant was not mandated.

Sarbaum also argued that she was entitled to disclosure of the confidential informant because she was “entrapped” by the law enforcement officers. We conclude, however, that there is no support in the record for any such claim, and we decline to address that argument further.

We hold that the District Court did not err in denying the defendant’s motion to disclose the identity of the confidential informant.

We note that both parties argued the applicability of § 46-15-324(3), MCA. Section 46-15-324(3), MCA, provides that the existence or identity of an informant who will not be called to testify is not required if disclosure would result in substantial risk to the informant or his operational effectiveness and the failure to disclose will not infringe the constitutional rights of the accused. Although subsection (3) of the statute was in effect prior to 1991, the Legislature amended § 46-15-324, MCA, by deleting subsection (3) during the 1991 session. The Legislature again amended § 46-15-324, MCA, during the 1993 session by reinserting subsection (3).

In the instant case, the defendant filed her motion to disclose the identity of the informant in May of 1993. The 1993 amendment to § 46-15-324, MCA, which reinserted subsection (3) into the statute was not in effect until October of 1993. Therefore, at the time the defendant filed her motion for disclosure, the 1991 version of the statute was in effect; this version of the statute does not contain subsection (3) of § 46-15-324, MCA. Both parties therefore, argue the applicability of a statute which was not in effect at the time of the defendant’s motion. We remind counsel that it is their obligation to ensure that the statutes they cite are in effect and are, thus, authority for the legal arguments being made.

II. Did the District Court err in denying the defendant’s motion to suppress the evidence seized pursuant to the search warrant in the search of her home?

The defendant also challenges the District Court’s denial of her motion to suppress evidence seized during the execution of the search warrant. She contends that much of the information supplied to the magistrate by the State was stale; that the State failed to corroborate the confidential informant’s information; and that, as a result, the affidavit and application for the search warrant failed to establish probable cause to issue the warrant.

The State counters that the defendant’s claim that the information in the search warrant was stale is not supported by the facts and case law. The State also argues that the confidential informant was reliable and credible and that information supplied by the police officers, in addition to that supplied by the confidential informant, demonstrated sufficient probable cause for a warrant to issue.

It is well established that the “totality of the circumstances” test is used to determine whether probable cause supports the issuance of a search warrant. We review the circumstances set forth in the affidavit and consider whether the issuing magistrate had a substantial basis for concluding that probable cause existed. Probable cause is established if there is a fair probability that incriminating items will be found at the place described in the search warrant. (Citations omitted.)

State v. Hulbert (1994), 265 Mont. 317, 321, 877 P.2d 25, 27.

Here, the search warrant described the premises to be searched in detail. It states that the affiant, Detective Gassett, is trained and experienced in the detection of illegal drugs and provides background information to support his statement that he is knowledgeable about illegal drugs and marijuana grow operations. The affidavit further stated that the confidential informant was credible and reliable, had been in the home of the defendant a number of times, had seen the marijuana grow operation, and had spoken with the Sarbaums about the marijuana grow operation. The confidential informant provided very specific information about the grow operation. Moreover, as noted in our discussion of issue I, the affidavit contained information from two other police officers that supported the likelihood that the Sarbaums were conducting an illegal activity in their home.

We conclude that the information provided by the confidential informant, whom the applicant, an experienced police officer, stated was credible and reliable, together with the observations of the other two officers, under the totality of circumstances, provided a substantial basis upon which the issuing magistrate could conclude that there was a fair probability that incriminating items would be found on the Sarbaums’premises. Hulbert, 877 P.2d at 30.

Moreover, we also conclude that the defendant’s argument that the information in the application was stale is without merit. As we observed in State v. Pierre (1984), 208 Mont. 430, 436-37, 678 P.2d 650, 654:

The likelihood that the evidence sought is still in place is a function not simply of watch and calendar but of variables that do not punch the clock: the character of the crime (chance encounter in the night or regenerating conspiracy?), of the thing to be seized (perishable and easily transferable or of enduring utility to its holder?), of the place to be searched (mere criminal forum of convenience or secure operational base?), etc. The observation of a half-smoked marijuana cigarette in an ashtray at a cocktail party may well be stale the day after the cleaning lady has been in; the observation of the burial of a corpse in a cellar may well not be stale three decades later. The hare and the tortoise do not disappear at the same rate of speed.

Rinehart, 864 P.2d at 1224-25.

The affidavit in the instant case states that the confidential informant was in the Sarbaum home about four times in the three months prior to the application and “[t]he time between the first time in the residence and the last time in the residence [was] approximately two months.” The confidential informant stated that the most recently planted marijuana plants would be ready for harvest around the time of the application for the search warrant. The other police officers had been in the home in the fall of 1992, on February 28,1993, and on April 10,1993.

The information provided from these dates is not too remote in time, and the information is not stale. While some of this information, considered individually, might be considered stale, “[w]hen a criminal activity is continuing in nature ... more time may elapse between the observation of the activity and the application for the search warrant without negating probable cause.” Rinehart, 864 P.2d at 1225. When the earlier information is combined with more recent information, the earlier information carries greater weight in the determination of probable cause. Rinehart, 864 P.2d at 1225. “Considering the continuous nature of a marijuana growing operation, the information provided in the application for the search warrant was not too stale to prohibit a determination of probable cause under the totality of the circumstances.” Rinehart, 864 P.2d at 1225. We likewise conclude that, here, the information in the application was not too stale to support a determination of probable cause. See also; Hulbert, 877 P.2d at 29, (the observation of marijuana plants by a confidential informant three and one-half weeks before the search warrant was issued was not “stale” information.)

The defendant also questions the reliability of the informant. This argument, too, is not persuasive. In Rinehart, we reiterated that a statement in the affidavit by the affiant attesting to an informant’s past reliability is sufficient to establish the reliability of an informant. Rinehart, 864 P.2d at 1223-24. In fact, an officer may even rely on information about an informant’s reliability from other police officers. See State v. Seaman (1989), 236 Mont. 466, 771 P.2d 950. The reliability of the confidential informant in the instant case was sufficiently established by Detective Gassett’s statements attesting to the informant’s reliability and credibility.

Finally, Sarbaum’s argument that the information from the confidential informant was not sufficiently corroborated is not well taken. “Corroboration of an informant’s information through other sources is necessary when the information is hearsay or the informant is anonymous.” Rinehart, 864 P.2d at 1224; see also Crowder, 810 P.2d at 302. In the instant case, the confidential informant provided information based on his own personal observations of the grow operation in the Sarbaum home. Statements of personal observation are not hearsay. Rinehart, 864 P.2d at 1224. In State v. Walston (1989), 236 Mont. 218, 768 P.2d 1387, we stated that:

... information of a criminal activity known from observation by a previously reliable informant, such as we have in the present case, is sufficient to establish the probability of criminal activity without outside investigation and verification of the reported information.

Walston, 768 P.2d at 1390. Here, an informant, determined by an experienced police officer to be credible and reliable, provided information based on his personal observations at the Sarbaum residence. That information was also supported by the observations from other police officers of conduct consistent with illegal activity at the Sarbaum residence. As stated above, under the totality of circumstances, the affidavit and application provided a substantial basis upon which the issuing magistrate could conclude that there was a fair probability that incriminating items would be found on the Sarbaum’s premises.

Accordingly, we hold that the District Court did not err in denying the defendant’s motion to suppress evidence obtained in the search of the Sarbaum residence.

AFFIRMED.

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


source: Caselaw Access Project

author: JUSTICE WEBER

license: Public Domain

text:
    IDA M. MILLS, Plaintiff and Appellant, -v-TOM MATHER, d/b/a TOM MATHER & ASSOCIATES CO., DARLENE THOMAS, FIRST MONTANA TITLE COMPANY OF GREAT FALLS, Defendants, and J. BRIAN TIERNEY, Defendant and Respondent.
    No. 94-060.
    Submitted on Briefs December 1, 1994.
    Rehearing Denied March 30, 1995.
    Decided March 7, 1995.
    52 St.Rep. 139.
    270 Mont. 188.
    890 P.2d 1277.

      For Appellant: Keith Tokerud, John McCarty, Scott & Tokerud, Great Falls.
    For Respondent: L. Neil Axtell, Axtell & Briggs, Spokane, Washington.
   JUSTICE WEBER

delivered the Opinion of the Court.

This is an appeal by Ida M. Mills (Mills) from an order of the Eighth Judicial District Court, Cascade County, granting summary judgment to defendant J. Brian Tierney (Tierney). The court granted summary judgment to Tierney on Mills’ claim that he negligently represented her interests concerning a real estate transaction involving a contract for deed. Mills lost over $30,000 when the escrow agent embezzled money intended to pay off the contract. We reverse and remand.

The sole question on appeal is whether the District Court erred in granting defendant Tierneys motion for summary judgment.

The extensive deposition testimony of Mills and other witnesses in this case establishes the following factual background, which is undisputed unless otherwise noted throughout this opinion. Mills was a practical nurse in Great Falls, Montana, until 1980 when she retired and sold her home on a contract for deed. An escrow account with Guaranty Escrow was established and the purchaser began making payments of $305.90 per month to Guaranty Escrow. Mills planned to live on these payments and her Social Security income.

Mills purchased a home in Sheridan, Montana. Her testimony indicates that her former husband, with whom she had reconciled, cashed in his retirement benefits to make a down payment of $20,000 on the Sheridan home. Mills arranged for Guaranty Escrow to make payments directly to the Bank of Sheridan to cover the monthly mortgage payments of $304.17 on the Sheridan property.

E. Robert Brown (Brown) owned Guaranty Escrow. Mills testified that she contacted him as early as 1984 when payments she depended on to cover mortgage payments on the Sheridan home were late and she was forced to use her limited Social Security income to cover the mortgage payments. Mills testified that she tried to get information from Brown on more than one occasion and Brown either refused to talk with Mills or he “stonewalled” her. Although Mills did not keep records, she claimed that she was shorted two payments in 1984 and as many as four payments per year after 1984. This information is unverifiable because most of Brown’s records were shredded or otherwise destroyed.

Mills also contacted the purchasers and determined that they had been making monthly payments to Guaranty Escrow. Mills testified that she became convinced that Brown was a “crook.” However, she did not seek legal assistance to recover the payments she had not received; she testified that she could not afford an attorney. Instead, Mills turned the Sheridan property back to the bank, thinking that she had no other recourse because the house payments, if not paid from escrow, took nearly all of her monthly Social Security check. Mills testified that she checked herself in at Warm Springs State Hospital and spent five weeks in treatment there after losing the house in Sheridan.

Attorney Tierney practiced law in Butte and also two days each week in Whitehall. In 1986, Mills was living in Whitehall and contacted Tierney about her problems with the late and missing payments from Guaranty Escrow which were now to be sent to Mills’ account at a Whitehall credit union. Mills testified that she had tried again unsuccessfully to get the problem straightened out with Brown at Guaranty Escrow.

Mills testified that she fell and injured herself outside her apartment on the day she was to meet with Tierney, and postponed her appointment until she was out of the hospital. Tierney represented her in a personal injury claim for that fall as well as the matter of the late payments from Guaranty Escrow.

Mills told Tierney about her problem with the late and missing payments. She testified that she told Tierney that she did not trust Brown and that she thought he was the root of the problem. She also told Tierney that she did not understand why Donald Ayers was now living in the house and making the payments and she asked Tierney to check this for her also. Tierney accepted a retainer of $100 and agreed to investigate the problems Mills was having with the escrow payments.

Tierney wrote to Guaranty Escrow, asking for a copy of escrow documents to explain transfers of the property to subsequent owners. He also asked for copies of the current insurance policy on the home, copies of receipts for tax statements for 1985 and ledger copies of payments made by Donald Ayers. He did not specifically ask for — nor did he receive in .response to the letter — copies of records to indicate whether Guaranty Escrow was making monthly payments to Mills. When he received a copy of Guaranty Escrow’s records showing all payments had been made by Donald Ayers and Dianne Ayers Mielke (Mielke) to Guaranty Escrow, Tierney explained to Mills that she must be wrong about missing payments. Although he did not further investigate the matter of the late and/or missing payments, he did handle a transfer of the contract from Jack May to Ayers and Mielke.

Still concerned about the late and missing payments, Mills testified that she went to Great Falls in 1987 and met with Donald Ayers. Ayers showed her his records indicating that he was making the monthly payments to Guaranty Escrow. Mills testified that she then contacted Brown in person and Brown again stonewalled her. Even more convinced that Brown was crooked, she testified that she told Tierney again of her fear that Brown was dishonest and that he would steal her money unless something was done to prevent it. Mills testified that she was not pursuing a claim for previously missed payments and, at that point, wanted only to prevent Brown from taking any more of her money.

Tierney testified that he arranged for the transfer of the property from Jack May to Ayers and Mielke and collected a fee from Donald Ayers to complete the transfer. He testified that he then suggested to Mills that she try to get the contract paid off early. Tierney talked to Mielke concerning an early payoff of the contract and learned that she was trying to sell the house; Tierney and Mielke discussed the possibility of Mills’ accepting a discounted principal payment in return for early payoff of the contract. Mielke asked Tierney to see whether Mills would accept a $5,000 reduction of principal, which at that time was approximately $36,000.

Mills agreed to the discount. Mielke testified that she asked for written confirmation of the discount at the direction of her realtor. In response to this request, Tierney wrote a letter dated October 23, 1987 verifying that Mills had agreed to discount the principal by $5,000 in exchange for an early payoff. Tierney’s letter also indicated that he would prepare the necessary release for Mills’ signature at the time of a sale to authorize the escrow agent to release instruments of title to Mielke upon payment of the discounted principal amount. The deposition testimony of numerous witnesses provides that, over the next two months, Tierney was in contact numerous times with Mielke, with the realtor representing Mielke and with an agent of the title company handling the closing of the sale. Mills testified that she instructed Tierney to make sure that she got her money from the payoff of the contract for deed and to make sure that Brown did not get her money. Tierney did not inform any of the parties he had dealt with who were involved in the sale — Mielke, the realtor, or the title company — that Mills was concerned about Brown taking her money.

Prior to closing the sale, Mielke assigned her interest in the discount by typing the following on the bottom of Tierney’s letter and having her signature notarized:

With regards to the above payoff authorization made by Ida Mills, I, the undersigned, hereby transfer said discount to George Krauss, purchaser of property at 1300 5th Avenue N.W.

Closing was completed on J anuary 19,1988, wdth First Montana Title Company handling the disbursements; upon payment of the principal amount of $35,091.96, Guaranty Escrow gave the title instruments to the title company. No mention of the discount was made on any of the closing instruments. According to the testimony of the realtor, the title company representative and Mielke, this was done at the instruction of the mortgage company providing an FHA guaranteed loan to the purchaser for the full selling price.

On the day following closing, the purchaser, George Krauss, took the copy of Tierney’s letter authorizing the discount to Guaranty Escrow. Without contacting Tierney or Mills, Brown paid $5,000 to Krauss. The closing was completed without Mills’ knowledge and no payment was made to Mills for any of the remaining proceeds of the payoff.

Mills testified that she contacted Tierney when she did not receive the payoff following the sale. Tierney testified that he contacted Mielke immediately and Mielke informed him that the closing had been completed on January 19,1988. Mielke also told him there were rumors going around in Great Falls about Brown stealing money from escrow accounts. Tierney testified that he subsequently learned that the FBI had shut down Brown’s office and Brown had been arrested and charged with felony theft.

Brown was prosecuted and later imprisoned for crimes arising from his handling of escrow accounts. Mills’ money was never recovered from Brown. Mills testified that, following the loss of her money, she suffered a “nervous breakdown” and was hospitalized twice for that condition.

Did the District Court err in granting defendant Tierney’s motion for summary judgment?

Our standard of review of an order by a district court granting summary judgment is the same as that used by the district court under Rule 56(c), M.R.Civ.R Morton v. M-W-M, Inc. (1994), 263 Mont. 245, 249, 868 P.2d 576, 578. Summary judgment is proper when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Rule 56(c), M.R.Civ.P. It is never a substitute for a trial on the merits. Morton, 868 P.2d at 578-79.

Ordinarily, issues of negligence are questions of fact not readily susceptible to summary adjudication. Brohman v. State (1988), 230 Mont. 198, 201, 749 P.2d 67, 69. However, questions of fact may be determined as a matter of law in certain cases where reasonable minds could reach but one conclusion as to causation. Brohman, 749 P.2d at 70. It is well established that in an action based in negligence, summary judgment favoring a defendant is proper only if the plaintiff fails to establish an element material to his negligence claim. See, e.g., Bickler v. Racquet Club Heights Assoc. (1993), 258 Mont. 19, 23, 850 P.2d 967, 970; and Dillard v. Doe (1992), 251 Mont. 379, 382, 824 P.2d 1016, 1019.

In order to establish a cause of action for attorney malpractice, a professional negligence action, there must be a showing that the attorney owed his client a duty of care, that there was a breach of this duty by a failure to use reasonable care and skill, and that the breach was the proximate cause of the client’s injury resulting in damages. Kane v. Miller (1993), 258 Mont. 182, 187, 852 P.2d 130, 133, citing Merzlak v. Purcell (1992), 252 Mont. 527, 830 P.2d 1278.

The District Court concluded that Tierney had no duty to monitor the activities of the realtor, title company and escrow company and that Tierney did not breach the standard of care required of attorneys handling assignments of contracts for the purchase of property and real estate closings in the state of Montana. The court further determined that the actions of the realtor, title company and escrow company are superseding intervening actions which are the sole proximate cause of Mills’ damages. This is not a typical case of an attorney handling an assignment of a contract and a closing of the sale of real estate, however. In this case, Tierney’s client was not a party to the closing and she had expressed her concerns that the escrow agent be left out of the transaction.

From our review of the affidavits, depositions and pleadings composing the record in this case, we conclude there is a key question of fact regarding the extent of Tierney’s representation of Mills in this matter and whether Tierney breached the requisite standard of care. Further, there are questions of fact concerning proximate causation.

Mills testified that she repeatedly advised Tierney of her concerns that Brown was a “crook” who had stolen her money in the past and that she was concerned that he might steal money from the early payoff of the contract in the event of a sale by Mielke. She testified that he told her that could not happen. Tierney testified that he regarded Mills as “paranoid.” He conceded that he had no medical basis for that conclusion and did not tell Mills about his assessment of her mental state.

Tierney testified that he merely agreed to contact Guaranty Escrow to determine if payments were being made to it by the purchaser and that Guaranty Escrow provided him with ledger documentation indicating that the payments had been made to Guaranty Escrow. The documentation provided by Guaranty Escrow in response to Tierney’s request did not contain actual proof that the payments had in fact been made to Mills or that Brown had not stolen any of her money as Mills claimed. Tierney apparently assumed that she had no basis for her concerns and failed to act as if they were legitimate.

In a summary judgment action, plaintiffs are entitled to all reasonable inferences which may be drawn from the offered proof and which indicate any issue of fact which would defeat the summary judgment motion. Lorash v. Epstein (1989), 236 Mont. 21, 24, 767 P.2d 1335, 1337. Inferences can be made in favor of Mills from the record indicating that Tierney did not take Mills’ suspicions about Brown seriously and, further, that he did nothing to assuage Mills’ concerns.

Moreover, there are numerous indications in the record to support the inference that Tierney’s representation of Mills in the matter of the contract for deed extended further than Tierney would have the Court believe. Mills testified that she hired him to investigate why her escrow payments were missing and late, that she specifically told him about her concerns about Brown’s dishonesty and that she specifically instructed him to make sure that Brown did not get her money when the sale from Mielke to Krauss took place. In addition to negotiating the discount with Mills, Tierney talked to Mielke and her realtor numerous times prior to the sale and also talked to Jo Roberts, a closing agent for First Montana Title Company, prior to the sale. Tierney’s letter to Mielke confirming the discount states that he would prepare the necessary releases and obtain Mills’ signature to forward to the escrow company. These facts raise an inference that Tierney undertook representation of Mills’ interest up to and including the closing and, therefore, had a duty to make sure Mills received her money. There was no written retainer agreement on this matter, but Tierney accepted a $100 retainer and a subsequent payment of $150 from Mills. Tierney further testified in his deposition that he was doing much of his representation in the real estate matter as a favor to Mills after representing her in the personal injury action.

Although Tierney’s expert testified that Tierney had no duty to monitor the transaction to ensure Mills received her money from the early payoff of the contract for deed, Mills’ expert testified that the attorney-client relationship existing between Tierney and Mills involved overseeing the resale of Mills’ former residence and collection of proceeds on the contract for deed under which Mills originally sold her residence. He also stated in his affidavit that from his review of all the pertinent documents in the record, Mills had instructed Tierney to make certain that payment was not received by Guaranty Escrow Services, but he failed to carry out those instructions.

Mills’ expert further stated his assessment from reviewing the record that it was apparent that Mills relied entirely upon Tierney to handle the transaction. He opined that the standard of care applicable to transactions of this type required Tierney to make inquiry on behalf of Mills as to the record of payments received by and made by Guaranty Escrow, to clearly instruct the realtor and title company not to make payment directly to Guaranty Escrow, to undertake action in accord with the instructions and wishes of the client, to obtain full and complete information about the reasons for the discount, and to at least require that any checks be made payable jointly. Tierney’s expert stated that there was no duty; however, his opinion was based on an incomplete knowledge of the facts. He did not review the depositions of Mills, Tierney or Mielke. We conclude there is no basis for summary judgment on the elements of duty and breach in this case.

Tierney’s brief on appeal concentrates argument on the issue of proximate causation. Proximate cause is analyzed in terms of foreseeability. United States Fidelity & Guar. Co. v. Camp (1992), 253 Mont. 64, 69, 831 P.2d 586, 589. Although normally a question for the jury to decide, in certain cases foreseeability may be determined as a matter of law for purposes of summary judgment. Such cases involve factual circumstances where it is clear that the plaintiff cannot prove by a preponderance of the evidence that the defendant proximately caused the injury in question. Camp, 831 P.2d at 590, citing Kiger v. State Dept. of Institutions (1990), 245 Mont. 457, 462, 802 P.2d 1248, 1251.

Tierney contends that if the Great Falls realtors, bankers and title companies could not foresee that Brown might embezzle fiduciary funds, he should not be required to foresee that Brown would steal Mills’ money because he practices law so far from Great Falls. He contends that the District Court correctly determined that the acts of the Great Falls realtors, escrow company and title company were superseding and intervening actions which were the sole proximate cause of Mills’ damages.

Mills contends that Tierney failed to adequately investigate her concerns about Brown initially and then compounded this error by ignoring her instruction to keep Brown from getting her money at the time of closing the sale between Mielke and Krauss. She further contends that he did not tell her he was not going to follow her instructions or that he considered she was mixed up or “paranoid.” She states that he left her with the belief that he would take care of her interests and would follow her instructions and then “dropped the ball.” Thus, according to Mills, she did not see the need to obtain another attorney or to try to handle the transaction herself.

On the question of proximate causation, Mills contends that Tierney could foresee, if Mills’ concerns about Brown were in fact correct, that Brown might steal her money if steps were not taken to prevent that. She contends there is an issue of material fact as to whether Tierney did an adequate job of monitoring the progress of the sale and protecting her interests because it was foreseeable to Tierney that Mills would be injured if he ignored her instructions. She contends that Brown would not have been able to get her money if Tierney had made the other defendants in this action aware of her concerns and had instructed them to act differently to safeguard her interests.

Most negligence actions contemplate some action on the part of a defendant which is the actual and proximate cause of the plaintiff’s damages. However, failure to act can form the basis for a claim of negligence as well. Comment e to § 302B of the Restatement (Second) of Torts (1965) is applicable to the circumstances present in this case and states the following:

There are ... situations in which the actor, as a reasonable man, is required to anticipate and guard against the intentional, or even criminal, misconduct of others. In general, these situations arise where the actor is under a special responsibility toward the one who suffers the harm, which includes the duty to protect him against such intentional misconduct .... The following are examples of such situations....
A. Where, by contract or otherwise, the actor has undertaken a duty to protect the other against such misconduct. Normally such a duty arises out of a contract between the parties, in which such protection is an express or an implied term of the agreement.

Mills’ assertions that her injury was foreseeable by Tierney and that “but for” his inaction, she would not have lost her money are material fact issues.

We conclude that the issues raised by Mills are not the sort which may be determined as a matter of law for purposes of summary judgment. She has raised genuine issues of material fact which are not speculative and conclusory and Tierney has not demonstrated that the acts of the other defendants are superseding intervening acts which relieve him of liability as a matter of law.

We hold the District Court erred in granting Tierney’s motion for summary judgment.

Reversed and remanded.

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


author: JUSTICE HUNT

text:
    IN RE THE MARRIAGE OF MELODY E. CONKEY, f/k/a MELODY E. PAUNOVICH, Petitioner and Respondent, and RAYMOND M. PAUNOVICH, Respondent and Appellant.
    No. 94-429.
    Submitted on Briefs December 22, 1994.
    Decided March 7, 1995.
    52 St.Rep. 144.
    270 Mont. 200.
    890 P.2d 1291.

      For Appellant: Todd R. Hillier, Schraudner & Hillier, Bozeman.
    For Respondent: Lynda S. Weaver, Morrow, Sedivy & Bennett, Bozeman.
   JUSTICE HUNT

delivered the Opinion of the Court.

Raymond Paunovich moved the Eighteenth Judicial District Court, Gallatin County, to modify his child support obligation. The District Court denied his motion and awarded Melody Conkey, formerly known as Melody Paunovich, attorney fees and costs. Raymond appeals. We affirm and remand for determination of attorney fees and costs.

We frame the issues on appeal as follows:

1. Did the District Court abuse its discretion by not modifying Raymond’s child support obligation?

2. Was the District Court’s award of attorney fees and costs to Melody supported by substantial evidence?

Melody and Raymond were married on October 4, 1976. Two children were bom of the marriage. Melody petitioned for dissolution of the marriage on April 8, 1991. Following trial, the District Court issued findings of fact and conclusions of law on January 17, 1992, which Melody moved to amend. Melody asserted, along with other issues that are not before this Court, that the January 17 findings and conclusions did not provide for child support. The District Court conducted a hearing on the motion on January 29, and on February 5, the District Court entered an order voiding its January 17 findings and conclusions. The court issued revised findings and conclusions on February 20, and its final decree on February 24.

The February 20 findings and conclusions required the parties to file child support determination worksheets by April 1,1992. On November 4,1992, the District Court ordered Raymond to pay Melody child support in the amount of $276.62 per month, retroactive to April 1,1992.

Raymond made child support payments until April 1993. On June 30, 1993, he filed combined motions to modify child support, clarify the final decree, and allow the transfer of property to satisfy the judgment pertaining to the division of the marital estate. In his supporting affidavit, Raymond stated

[t]hat substantial and continuing changes have occurred in [his] financial and employment status since the court order determining child support was issued... which directly affect [his] ability to pay the amount of support so ordered and/or to make any more payments on the property distribution amount decreed by the court back in February of 1992.

Melody filed a motion for contempt against Raymond on September 2, 1993, on the grounds that he had failed to pay child support and court-ordered monthly property distribution payments since April 1993. The District Court issued an order to Raymond to appear and show cause why he should not be held in contempt. On October 21, 1993, the show cause hearing took place. Raymond’s attorney stated that Raymond had filed for bankruptcy, and the court stated that it would reset the hearing at a later date.

The parties conducted extensive discovery, and the hearing on Raymond’s motion to modify child support was held on January 5, 1994. Following the hearing, both parties submitted proposed findings and conclusions. On May 26, 1994, the District Court issued findings and conclusions denying Raymond’s motion to modify child support and ordering him to pay all arrearages. The court further determined that Raymond should pay Melody’s attorney fees and costs, and stated that a hearing on the matter would be held at a later date.

A hearing to determine attorney fees and costs was held on June 20, 1994. The District Court received testimony concerning Melody’s attorney fees and costs. The court entered judgment on June 20,1994, awarding Melody $3805.66 for past-due child support and interest, $229.90 for costs, and $2882.50 for attorney fees. Notice of entry of judgment was filed on June 27. Raymond filed notice of appeal on July 22.

Raymond and Melody each filed briefs in this Court. On November 22,1994, Raymond moved this Court to strike “any and all references contained in Respondent’s Answer Brief ... pertaining to matters outside the record and which occurred subsequent to the date of the trial (January 5, 1994) from which this appeal is taken.” Raymond specifically complains that Appendix G of Melody’s brief on appeal and references to the bankruptcy court proceedings should be stricken. An examination of the record shows that the documents and references which Raymond objects to are part of the record on appeal. Therefore, his motion to strike is denied.

ISSUE 1

Did the District Court abuse its discretion by not modifying Raymond’s child support obligation?

Raymond argues that, because he filed bankruptcy, allegedly has no assets, and allegedly is unemployed, the District Court should have modified his child support obligation. Before a child support obligation can be modified, § 40-4-208(2)(b), MCA, requires the moving party to establish that there are changed circumstances so substantial and continuing as to make the terms of the existing child support agreement unconscionable. In re Marriage of Clyatt (1994), [267 Mont. 119], 882 P.2d 503, 505; In re Marriage of Craib & Rhodes (1994), 266 Mont. 483,_, 880 P.2d 1379, 1384.

In reviewing the district court’s findings in child support modification cases, a presumption exists in favor of the district court’s decision, and we will overturn the decision only if the district court abused its discretion. Craib & Rhodes, 880 P.2d at 1384; In re Marriage of Platt (1994), [267 Mont. 38], 881 P.2d 634, 635; Clyatt, 882 P.2d at 505; In re Marriage of Long (1994), [268 Mont. 187], 885 P.2d 533, 534.

In this case, the District Court found that:

The evidence is insufficient to establish changed circumstances warranting modification of child support as [Raymond] has requested. [Raymond] testified that his circumstances are essentially the same as at the time of dissolution, i.e., his work situation varies in that there are times when he is under contract earning a substantial income, and there are times when he is not earning income because he is soliciting new proposals for production. This Court determined in the dissolution action that Mr. Paunovich is capable of earning substantial income and he remains capable of earning substantial income at the present time.

During the January 5, 1994, hearing, Raymond testified that he stopped making child support payments after April 1993 because he had sold the parties’ house, was unemployed, and had “a lot of debts” to pay. After selling the house, he paid off a $24,000 note held by the Stock Grower’s State Bank and over $21,000 in credit card bills. He testified that he chose to pay off these debts and not his debts to Melody, and that after doing so, he “didn’t have any future work available or lined up” from which to make child support payments. Additionally, he stated that he incurred monthly expenses of about $6768.46.

Raymond testified that he was unemployed from October 1991 until February 1992. In February 1992, he entered into a contract with Busch Productions to make a film about bears. The contract provided that “Ray Paunovich, d/b/a The Natural Image Films” would receive $6500 per month. Raymond stated that Busch Productions did in fact pay him and his film company $6500 a month.

Raymond testified on cross-examination that he never contacted the court to amend his child support guideline worksheets, which were submitted in 1991 when he was unemployed, to reflect his employment with Busch Productions in 1992. The following exchange took place during the hearing:

[BY MELODYS ATTORNEY
Q. And at no time after [February 1992] until today have you informed the Court that you had obtained that contract; isn’t that correct?
A. That’s correct.
Q. And in fact, you filed several affidavits with this Court, the first of which was filed on behalf of yourself on November 2,1992 ... do you recall that?
A. Correct.
Q. And in your affidavit, you stated that “The evidence does not indicate that I earn $54,000 per year; rather the evidence indicates that I earn $18,000 per year.” Do you recall stating that and signing that in your affidavit?
A. Correct.
Q. And you did not at that time disclose to the Court you had current income at a much higher level, did you?
A. Was I supposed to?
Q. I’m asking the question. Did you disclose it?
A. I did not.

Raymond testified that his actual income during 1992 was about $31,000, consisting of $18,150 in wages and an additional amount of $13,000. He claimed that his contract with Busch Productions ended in late fall 1992 and that in January 1993 he sold his equipment to Busch Productions for $28,000. Melody disputed both of these claims.

Both attorneys questioned Raymond regarding his contract with Busch Productions. In response to his attorney’s question whether he was earning any money in 1993, Raymond stated, “I have been unemployed all year.” On cross-examination, however, he testified that, in conjunction with Busch Productions, he continued to work on the project and attempted to develop alternative sources of financing for the film. Melody’s attorney introduced evidence which showed that from May to August 1993, Raymond processed and/or work-printed approximately 7600 feet of film on behalf of Busch Productions. Raymond testified that he obtained the film from Busch Productions and that he used the camera equipment and editing table which he allegedly sold to Busch Productions. According to Raymond, Busch Productions did not “want to spend any more money or put up any more of the budget to finish the project,” however, “if there were certain expenses that were attributable to this, [Busch Productions] would reimburse me for those costs and we would work together on trying to get the financing.”

Melody’s attorney also introduced into evidence Raymond’s bank account statements from 1993 which showed deposits as follows:

First Western Federal Total
Month Citizens Acct. 1 Acct. 2 Deposits
January $ 5,094 $ 3,700 $ 0 $ 8,794
February 6,231 2,720 85 9,036
March 6.000 6,940 85 13,025
April 7.050 62,456 170 69,676
May 2.000 7,834 10,000 19,834
June 3,500 3,744 85 7,329
July 0 2,869 85 2,854
August 827 3.900 0 4,727
TOTAL $30,70 $94,063 $10,510 $135,275

Only $62,000 of Raymond's total deposits was attributable to the sale of the parties’ house.

Melody’s attorney also questioned Raymond regarding the alleged sale of his equipment to Busch Productions. According to Raymond, Busch Productions “took possession of [the equipment] when they bought it.” However, when Melody’s attorney asked during the hearing whether Busch Productions currently had physical possession of the equipment, Raymond stated that he still had physical possession of some it. Raymond also testified that during 1993, he used the equipment for filming and editing. When asked whether he got a release of his financing statement from the Stock Grower’s State Bank, to whom the equipment had been pledged as collateral on a note, Raymond stated that he could not recall, and then he stated that he did not communicate with Stock Grower’s at all regarding the sale of the equipment. Melody’s attorney asked Raymond whether a bill of sale or acknowledgment of receipt was ever executed by a representative of Busch Productions. Raymond stated that he could not recall.

Melody’s attorney asked Raymond if he anticipated eventually getting his money back and making a profit on the bear film project. Raymond answered:

A. I will not get my money back, but I hope that we will get the financing so I can at least get employed again. That’s part of being an independent producer, is you have to risk a lot of capital to get income.
Q. You anticipate getting that back?
A. I always anticipate that. My whole life is anticipation. Nothing that is being an independent producer is guaranteed. Everything that you do is done on anticipation. You hope somebody likes your concept and idea and will finance it.
Q. That was true in 1992; isn’t that true?
A. This has been true ever since I have been working.
Q. It hasn’t changed a bit since you testified in trial in 1992?
A. What hasn’t changed?
Q. The fact that there are highs and lows in your industry and sometimes you have highs and sometimes you have zero.
A. That’s correct.

Based on the foregoing testimony and evidence, it is clear that Raymond failed to demonstrate a change in circumstances so substantial and continuing to make the terms of the existing child support agreement unconscionable. We determine that the District Court did not abuse its discretion by refusing to modify Raymond’s child support obligation.

ISSUE 2

Was the District Court’s award of attorney fees and costs to Melody supported by substantial evidence?

Section 40-4-110, MCA, provides district courts with the discretion to award attorney fees and costs in certain domestic relation matters. In re Marriage of Malquist (1994), 266 Mont. 447,_, 880 P.2d 1357, 1361. That statute provides:

The court from time to time, after considering the financial resources of both parties, may order a party to pay a reasonable amount for the cost to the other party of maintaining or defending any proceeding under chapters 1 and 4 of this title and for attorney’s fees, including sums for legal services rendered and costs incurred prior to the commencement of the proceeding or after entry of judgment. The court may order that the amount be paid directly to the attorney, who may enforce the order in his name.

Section 40-4-110, MCA.

In Malquist, we held that

before a court awards attorney fees under the statute, the petitioning party must make a showing of necessity. In addition, the award must be reasonable and must be based on competent evidence. To make a showing of reasonableness a hearing must be held allowing for oral testimony, the introduction of exhibits, and the opportunity to cross-examine. If the award of attorney fees is supported by substantial evidence, we will not reverse the award upon appeal.

Malquist, 880 P.2d at 1362 (citations omitted).

In the instant case, Melody’s attorney filed affidavits of attorney fees on June 2, 1994, and June 15, 1994, and a hearing was held on June 20, 1994. Counsel for both parties were present at the hearing. Melody’s attorney moved for entry of judgment for back child support and attorney fees. The record shows that Raymond’s attorney stated that he had no objection to the motion. The District Court, therefore, entered judgment.

The requirements set forth in Malquist clearly were met in this case. The record contains substantial evidence supporting the District Court’s award of attorney fees to Melody.

Melody further requests that this Court award her attorney fees and costs for defending this appeal. Section 40-4-110, MCA, allows the recovery of attorney fees incurred after entry of judgment by the district court, including attorney fees incurred in defending an appeal. We, therefore, award the respondent her attorney fees and costs on appeal and remand to the District Court for determination of the amount to be awarded.

Affirmed and remanded.

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


author: JUSTICE NELSON

text:
    DAVID WILLIAMS, Petitioner and Appellant, v. PLUM CREEK TIMBER COMPANY, Respondent/Insurer and Respondent.
    No. 94-351.
    Submitted on Briefs December 15, 1994.
    Decided March 7, 1995.
    52 St.Rep. 148.
    270 Mont. 209.
    891 P.2d 502.

      For Appellant: David W. Lauridsen, Laurie Wallace, Bothe & Lauridsen, Columbia Falls.
    For Respondent: Kelly M. Wills, Garlington, Lohn & Robinson, Missoula.
   JUSTICE NELSON

delivered the Opinion of the Court.

Workers’ compensation claimant, David Williams, appeals from the findings of fact, conclusions of law and judgment of the Workers’ Compensation Court entered on June 28, 1994. The court ruled that Williams was entitled to permanent partial disability benefits, however the court denied Williams’ request for attorney fees and a 20% penalty. We affirm.

The sole issue on appeal is whether Workers’ Compensation Court erred when it denied the claimant’s requests for attorney fees and a 20% penalty.

BACKGROUND

On December 4, 1992, while working for Plum Creek Timber Company (Plum Creek), Williams injured his left foot after catching it in a chain and sprocket. Williams suffered a partial amputation to his fifth toe, and a comminuted compound fracture of his great toe. Williams was treated by Dr. G.W. Ingham, an orthopedic surgeon, who assigned an impairment rating of one percent of the whole man, based on the injuries Williams’ suffered to his left foot.

At the time of the injury, Plum Creek was self-insured pursuant to Plan I of the Workers’ Compensation Act, and accepted liability for Williams’ injury. Williams was out of work for approximately one month, during which time he received temporary total disability benefits. On January 6, 1993, Williams returned to work at Plum Creek, and worked there for approximately one month before taking a job at another sawmill where he operated equipment. Williams is presently employed with the City of Kalispell as a truck driver and street sweeper.

Williams filed a claim for compensation benefits in January 1993. While the insurer did not dispute the one percent impairment rating, it denied Williams permanent partial disability benefits after concluding that he did not meet the 1991 statutory definition of permanent partial disability. On March 11, 1994, Williams filed a petition with the Workers’ Compensation Court, requesting permanent partial disability benefits, attorney fees and costs, and the imposition of a 20% penalty. The Workers’ Compensation Court held a hearing on the matter on June 14,1994. During the hearing, Williams testified that while his injury does not interfere with his ability to perform his present job, his foot is sensitive to cold. Dr. Ingham testified by deposition that Williams’ foot is affected by cold conditions as a result of his injury.

The Workers’ Compensation Court issued its findings of fact, conclusions of law and judgment on June 28, 1994. The court concluded that Williams met the definition of permanent partial disability and is entitled to a permanent partial disability award in the amount of $3,053.75. The court also concluded that the insurer’s refusal to pay Williams benefits was not unreasonable, and accordingly denied Williams attorney fees and did not impose a penalty. The court did however award Williams costs. The court denied attorney fees and the imposition of a 20% penalty because it determined that a valid dispute existed over the statutory interpretation of § 39-71-703, MCA (1991), and a factual dispute existed concerning whether Williams had a medically determined physical restriction. Williams appeals from this judgment.

STANDARD OF REVIEW

We employ two different standards when reviewing the Workers’ Compensation Court’s decisions. We review findings of fact to determine whether they are supported by substantial credible evidence. We review the Workers’ Compensation Court’s conclusions of law to determine whether the court’s interpretation of the law is correct. Caekaert v. State Comp. Mut. Ins. Fund (1994), [268 Mont. 105], 885 P.2d 495, 498.

DISCUSSION

On appeal, Williams argues that the Workers’ Compensation Court erred when it denied his request for attorney fees and a 20% penalty pursuant to § 39-71-612, MCA (1991), and § 39-71-2907, MCA (1991). Williams contends he is entitled to attorney fees and costs because the insurer unreasonably denied his request for permanent partial disability benefits, and the court erred in determining that the insurer did not unreasonably deny benefits based on its interpretation of § 39-71-703, MCA (1991), and § 39-71-116(15), MCA (1991).

Williams maintains that because he was given an undisputed impairment rating, he is automatically entitled to permanent partial disability benefits pursuant to § 39-71-703, MCA (1991). Williams relies on Holton v. F.H. Stoltze Land & Lumber Co. (1981), 195 Mont. 263, 637 P.2d 10, to support his argument that undisputed impairment ratings implicitly satisfy the definition of permanent partial disability, and therefore undisputed impairment awards must be paid without contest.

The insurer however, argues that the impairment rating in and of itself is insufficient to establish an entitlement to permanent partial disability benefits under the 1991 statutes. Rather, the insurer contends that Williams must meet the definition of permanent partial disability as that term is defined in § 39-71-116(15), MCA (1991). According to the insurer, permanent partial disability benefits do not have to be paid absent a finding that the industrial injury resulted in a physical restriction which impairs the worker’s ability to work. The insurer concluded that Williams did not have any physical restriction which would impair his ability to work and therefore denied Williams benefits.

The Workers’ Compensation Court found that Williams met the definition of permanent partial disability, however, it concluded that the insurer did not act unreasonably in denying benefits because there was a valid dispute over the interpretation of § 39-71-703, MCA, (1991), and § 39-71-116(15), MCA (1991) (hereinafter Section 703, and Section 116(15)), because of the amendments made to those statutes during the 1991 legislative session. Williams claims the court erred in interpreting the statutes and argues that had the court correctly concluded that undisputed impairment awards must be paid without contest, the court would have been required to find that the insurer’s refusal to pay the permanent partial disability benefits in this case was unreasonable. Williams contends that while Section 703 and Section 116(15) were amended in 1991, the amendments did nothing to change the law with respect to the automatic entitlement for undisputed impairment awards. We disagree.

It is well established under the Workers’ Compensation Act (Act) that the law in effect at the time of a claimant’s injury establishes the claimant’s substantive right to benefits. Plooster v. Pierce Packing Co. (1993), 256 Mont. 287, 291, 846 P.2d 976, 978, citing, Buckman v. Montana Deaconess Hospital (1986), 224 Mont. 318, 321, 730 P.2d 380, 382. Therefore, the governing statute in this case is §39-71-703, MCA (1991).

Under the 1987 Act, there were two types of benefits for permanent partial disability, impairment awards and wage supplements. In order to meet the definition of permanent partial disability under the 1987 Act, a claimant had to have a medically determined physical restriction and be able to return to work, albeit with the impairment or partial wage loss or both. Section 39-71-116(14), MCA (1987). Section 39-71-703, MCA (1987), set forth the entitlement to the impairment award, and was based on a physician assigned impairment rating. According to our holdings in Holton and Grimshaw v. L. Peter Larson Co. (1984), 213 Mont. 291, 691 P.2d 805, once a physician assigned an impairment rating, that became the medical component of the disability award and had to be automatically paid.

However, the 1991 Legislature amended both the definition of permanent partial disability (Section 116(15)) and the entitlement statute (Section 703). The 1991 amendments eliminated the notion of ‘impairment awards’versus ‘wage supplement benefits.’Under the 1991 Act, claimants are entitled to a “permanent partial disability award” if they are permanently partially disabled. Russette v. Chippewa Cree Housing Auth. (1994), 265 Mont. 90, 91, 874 P.2d 1217, 1218.

Therefore, before claimants are entitled to permanent partial disability benefits they must meet the definition of permanent partial disability. Section 116(15) provides:

“Permanent partial disability” means a condition, after a worker has reached maximum healing, in which a worker:
(a) has a medically determined physical restriction as a result of an injury as defined in 39-71-119; and
(b) is able to return to work in some capacity but the physical restriction impairs the worker’s ability to work.

Section 116(15) requires a claimant to meet a two prong test in order to be eligible for permanent partial disability benefits under Section 703. To meet the two prongs, the claimant (1) must have a medically determined physical restriction as a result of an injury; and (2) must be able to return to work in some capacity but the physical restriction must impair the worker’s ability to work. Therefore, according to the 1991 Act, if the physical restriction does not impair the claimant’s ability to work, then he or she is not permanently partially disabled under Section 116(15), and is not entitled to a permanent partial disability benefit award under Section 703.

Upon applying the two part test to the instant case, the Workers’ Compensation Court found that Williams met the definition of permanent partial disability and concluded he was entitled to an impairment award. The court based its decision on Dr. Ingham’s testimony that cold temperatures cause Williams’ toes and foot to ache and that Williams will, therefore, have difficulty working in very cold environments for prolonged periods of time. After reviewing the evidence the Workers’ Compensation Court relied on in making this determination, we conclude the court’s finding in this regard is supported by substantial credible evidence.

The determination of whether Williams met the definition of permanent partial disability is a conclusion of law. See, Denial of Application for Issuance of Beer/Wine License (1994), [267 Mont. 298], 883 P.2d 833, 835, (“The interpretation and application of a statute to a particular set of circumstances are matters of law.”). We hold that the Workers’ Compensation Court was correct in concluding that Williams met the definition of permanent partial disability.

Finally, we address Williams’ contention that the Workers’ Compensation Court erred in denying his request for attorney fees and by failing to impose a 20% penalty. The court did not award attorney fees or apenalty, concluding that: (l)the 1991 amendments to Section703 and Section 116(15) created a legitimate dispute over the legal interpretation of the statutes; and (2) a valid factual dispute existed over whether Williams had a medically determined physical restriction.

According to the 1991 Act, a claimant is only entitled to attorney fees and a penalty if the insurer’s conduct in denying benefits was unreasonable. Sections 39-71-611, and 612, MCA (1991). In addition, the Workers’ Compensation Court judge may, pursuant to § 39-71-2907(1), MCA (1991), increase by 20% the full amount of benefits due a claimant during the period of delay or refusal to pay, if the insurer unreasonably delays or refuses to make payments. Here, the court found that the insurer did not act unreasonably when it refused to pay the undisputed impairment rating.

The court concluded that a valid factual dispute existed concerning whether Williams’ injury impaired his ability to work. The court noted that Dr. Ingham’s office notes did not indicate any physical restriction regarding Williams’ work. The court also concluded that Dr. Ingham’s deposition testimony was not clear in resolving the issue of whether Williams’ injury impacted his ability to work.

The Workers’ Compensation Court also found that a dispute existed over the statutory interpretation of § 39-71-703, MCA (1991), and concluded the insurer’s interpretation of that statute was not unreasonable as it was attempting to interpret a statute without having the benefit of any case law to aid in its interpretation.

The determination of whether an insurer unreasonably delayed or refused to make payment is a question of fact. Stordalen v. Ricci’s Food Farm (1993), 261 Mont. 256, 258, 862 P.2d 393, 394. We hold that substantial credible evidence supported the Workers’ Compensation Court’s determination that the insurer did not act unreasonably in denying Williams permanent partial disability benefits in light of valid factual disputes and questions of legal interpretation.

AFFIRMED.

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


text:
    KENNETH GREENWOOD, Plaintiff and Appellant, -v-STEVE NELSON TRUCKING, INC., Defendant and Cross-Appellant.
    No. 94-412.
    Submitted on Briefs December 8, 1994.
    Decided March 7, 1995.
    52 St.Rep. 151.
    270 Mont. 216.
    890 P.2d 765.

      For Appellant: J. Reuss, Wright, Tolliver and Guthals, Billings.
    For Respondent: Brad L. Amdorfer, Billings.
   JUSTICE WEBER

delivered the Opinion of the Court.

This is an appeal from the grant of summary judgment to Steve Nelson Trucking by the Thirteenth Judicial District Court, Yellowstone County. We affirm.

We consider the following issues:

I. Did the District Court err in granting summary judgment to Steve Nelson Trucking?

II. Did the District Court err in denying Steve Nelson Trucking its attorney’s fees?

On September 24, 1990, Kenneth Greenwood (Greenwood) contracted with Steve Nelson Trucking (Nelson Trucking) to have Nelson Trucking haul livestock from Nye, Montana to Glentana, Montana. Nelson Trucking hauled the livestock on September 25, 1990 and charged Greenwood $3,174.80.

In the hauling of three loads of livestock, two calves were injured. Greenwood alleges that Nelson Trucking agreed to charge $946 per load and at three loads, the total would be $2,838.00. Greenwood deducted the cost of the injured calves from the $2,838.00 and tendered payment to Nelson Trucking of $1,972.29.

Nelson Trucking sued Greenwood in Justice Court for $1,202.51. Greenwood did not submit an answer on Nelson Trucking’s charges until the day of trial. The Justice of the Peace sustained Nelson Trucking’s objection and refused the answer. The court entered a default judgment for Nelson Trucking ordering Greenwood to pay $1,202.51 and $35.00 court costs. Greenwood did not appeal the Justice Court decision.

Greenwood then filed an action in District Court alleging that Nelson Trucking overcharged him for hauling the cattle and that he had two injured calves worth $865.71. Greenwood also alleged that Nelson Trucking violated § 69-12-502, MCA, and that Greenwood should recover for the overcharge. Greenwood asks for treble damages and attorney’s fees.

Nelson Trucking moved the court for summary judgment arguing that Greenwood’s claims cannot be filed again, having already been filed in Justice Court and decided. The District Court granted summary judgment to Nelson Trucking.

I.

Did the District Court err in granting summary judgment to Steve Nelson Trucking?

The District Court granted summary judgment based upon its analysis that Greenwood’s action was a collateral attack on the Justice Court’s ruling. The court determined that the original contract to haul cattle was not void because Nelson Trucking overcharged Greenwood. According to the court, the appropriate statute § 69-12-502, MCA, requiring a trucking company to only charge approved rates, does not say that any contract involving higher rates is void.

Further, the court stated that §§ 28-2-701, and 28-2-803, MCA, only make a contract void when the contract has an illegal purpose. Hauling cattle from place to place is not an illegal purpose. The contract is not void; therefore, any claims brought before the Justice Court or claims that should have been brought before the Justice Court are res judicata.

Summary judgment should be granted if the moving party successfully carries its burden to establish that there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Thomas v. Hale (1990), 246 Mont. 64, 802 P.2d 1255. Once the movant has discharged this burden of proof, then the non-moving party must come forward with substantial evidence raising a genuine issue of material fact. Thomas, 246 Mont, at 66-67, 802 P.2d at 1257.

Greenwood argues that material issues of fact exist arguing that his contract to haul cattle was void because the consideration for the contract was not lawful pursuant to § 28-2-803 and § 28-2-701, MCA. According to Greenwood, the void contract prohibits a finding of res judicata. Further, Greenwood argues that res judicata is not applicable here because the issues are not the same.

Nelson Trucking contends that only one of Greenwood’s claims was not considered by the Justice Court. Nelson Trucking argues that Greenwood’s excessive charge claim, though not considered by the Justice Court, should have been brought and cannot now be raised. Nelson Trucking contends that all issues are res judicata and, therefore, it is entitled to summary judgment as a matter of law.

Greenwood centers his arguments on unlawful consideration. The consideration for hauling cattle was money. Money is not unlawful consideration. “Amount of money” does not make the consideration unlawful. Greenwood has provided us with no legal precedent for his legal argument. His contract was not based upon unlawful consideration and is not void. Not being void, the contract claims made by Greenwood must be analyzed as to whether they are res judicata.

Res judicata requires that the parties must be the same, the subject matter of the action must be the same, the issues must be the same and relate to the same subject matter, and the capacities of the persons must be the same in reference to the subject matter and to the issues. Filler v. Richland County (1991), 247 Mont. 285, 806 P.2d 537. The principle underlying the doctrine of res judicata is that a party is prohibited from relitigating a matter that the party has already had an opportunity to litigate. Whirry v. Swanson (1992), 254 Mont. 248, 836 P.2d 1227.

In the present action, Greenwood had an opportunity to litigate the claims that he now charges against Nelson Trucking. The fact that he did not file an answer until the day of trial and suffered a default judgment does not negate the fact that he had the opportunity to litigate all claims arising from the contract with Nelson Trucking. Greenwood could have appealed his default judgment but chose not to do so. Having made that decision, Greenwood cannot now raise the same issues concerning the contract price and Nelson Trucking’s negligence. These issues are res judicata because the parties, the issues, the subject matter, and the parties’ capacities are the same as those raised in Justice Court.

In addition to the issues considered by the Justice Court, Greenwood contends that he was charged an excessive amount for the services. The materials considered in connection with the summary judgment show that Greenwood paid $1,972.89 of the $3,174.80 contract price. The Justice Court assessed Greenwood $1,202.51. Because of an admitted $200 overcharge, Nelson Trucking filed a partial satisfaction of $200 as to Greenwood. Greenwood has failed to establish any overcharge other than the admitted $200 overcharge for which a partial satisfaction has been given. As a result Greenwood has no basis to contend that he paid an excess charge. We affirm the conclusion of the District Court that Greenwood failed to raise an issue of material fact with regard to any excess charges.

The District Court was correct in granting summary judgment on this issue as well as other issues, because no evidence was presented to show that Greenwood had overpaid Nelson Trucking.

We hold the District Court correctly granted summary judgment to Nelson Trucking because Greenwood’s claims are barred by the doctrine of res judicata.

II.

Did the District Court err in denying Steve Nelson Trucking its attorney’s fees?

Nelson Trucking filed a cross-appeal seeking its attorney’s fees because Greenwood has continued to engage in frivolous litigation. Nelson Trucking cites State v. Frank (1987), 226 Mont. 283, 735 P.2d 290, for the proposition that equity demands such an award. Greenwood argues that the present case does not represent any “extreme” situation which would demand the equitable action of grant of attorney’s fees.

The Frank case involves attorney’s fees awarded as costs because a governmental entity had acted in bad faith or pursued a claim frivolously. Frank, 226 Mont, at 292-293, 735 P.2d 290. The present case contains no governmental entity. Nor does the present case concern “extreme” facts as presented in Frank. Frank is not authority for Nelson Trucking’s arguments.

The general rule for award of attorney's fees is that absent statute or contract, attorney’s fees will not be awarded. Sage v. Rogers (1993), 257 Mont. 229, 848 P.2d 1034. In isolated instances, a district court, by using its discretion, can award attorney’s fees to make an injured party whole under its equity powers. Goodover v. Lindey’s (1992), 255 Mont. 430, 843 P.2d 765. This case does not present one of the rare cases in which a district court could use its equitable powers to award such fees.

We hold that the District Court did not err in denying Steve Nelson Trucking attorney’s fees.

Affirmed.

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