author: JUSTICE HUNT

text:
    CARBON COUNTY, Plaintiff and Respondent, v. DAIN BOSWORTH, INCORPORATED, a Delaware Corporation, et al., and D.A. DAVIDSON & CO., KAREN T. DOOLEN and FRANK and MARGO KELLEY, as representatives of the Bondholder Class, Defendants and Appellants, v. CARBON COUNTY, Plaintiff and Respondent, and DON TAYLOR, MONA L. NUTTING and JOHN PRINKKI, Respondents and Respondents.
    No. 93-145.
    Submitted April 18, 1994.
    Decided May 16, 1994.
    51 St.Rep. 436.
    874 P.2d 718.
    265 Mont. 75.

      For Appellants: Keith Strong (argued) and Bruce A. MacKenzie (argued), Dorsey & Whitney, Great Falls; and James H. Goetz (argued), Bozeman, (for the Underwriters); Robert M. Murdo (argued), Jackson, Murdo, Grant & McFarland, Helena (for the Bondholder Class).
    For Respondent Carbon County: Ward Swanser (argued) and T. Thomas Singer (argued), Moulton, Bellingham, Longo & Mather, Billings; and Anthony Kendall, Carbon County Attorney, Red Lodge.
   JUSTICE HUNT

delivered the Opinion of the Court.

Appellants appeal from an order of the First Judicial District Court, Lewis and Clark County, denying their motion for summary judgment and granting summary judgment to plaintiff Carbon County, finding that the County has no further obligation to make loans from the revolving fund to the rural special improvement district (RSID) fund when the RSID assessments are insufficient to pay the RSID bonds. Respondents are the present Carbon County Commissioners. Appellants are three underwriters, Dain Bosworth, Inc., D.A. Davidson & Company, and Piper Jaffray & Hopwood, Inc., and numerous bondholders.

We reverse the District Court’s order for summary judgment and remand for further proceedings in accordance with this opinion.

While many issues are raised by the parties, we need not discuss them because the dispositive issue on appeal is whether a county is required to continue to levy general taxes and loan money to an RSID revolving fund created pursuant to § 7-12-2181, MCA, when the RSID is deficient, and the revolving fund may never be sufficient to retire the bonds, and the county’s loans may never be repaid.

In 1984, when a developer called Joint Venture petitioned Carbon County to approve a subdivision plat to develop a country club subdivision and golf course known as Red Lodge Country Club Estates, the then-seated County Commissioners required that Joint Venture construct street, water, and sanitary improvements. The County Commissioners agreed to help finance these improvements. After notice requirements were met under § 7-12-2105, MCA, the County Commissioners created two RSIDs, 8 and 9, under § 7-12-2103, MCA. The County Commissioners authorized improvements totalling $2,244,000 for RSID 8, and $1,025,000 for RSID 9.

The County Commissioners agreed to issue bonds to the public to finance the improvements following the requirements found in §§ 7-12-2169 to -2175, MCA, and agreed to levy and collect assessments in the principal amount of the bonds against property within the RSIDs under §§ 7-12-2151 to -2168, MCA.

The County Commissioners also created a revolving fund under § 7-12-2181, MCA, and agreed to authorize loans or advances from the revolving fund to the RSID fund when assessments are deficient to pay the bond payments. To replenish the revolving fund, § 7-12-2182(l)(a), MCA, provides that county commissioners may loan monies from the general fund to the revolving fund as may be necessary, and § 7-12-2182(l)(b), MCA, allows the County to levy a tax on all taxable property within Carbon County “as shall be necessary to meet the financial requirements of such fund.” The tax levy is subject to the limitations in § 7-12-2182(l)(b), MCA, requiring that the tax may not be an amount that would increase the balance in the revolving fund above five percent of the principal amount of the then-outstanding RSID bonds. When the revolving fund makes a loan to the RSID fund, a lien up to the loan amount attaches to the following: all RSID property which is delinquent in assessment payments; all unpaid assessments whether delinquent or not; and all money deposited into the RSID fund. Section 7-12-2184(1), MCA. The liens maybe enforced by the sale of the property at a tax sale. Section 7-12-2184(2), MCA.

The County Commissioners published notice of the bond sale stating it would create, use, and fund a revolving fund if assessments were insufficient until all the bonds and interest thereon are fully paid. Because the bonds did not sell initially, the County Commissioners agreed to sell the bonds to Dain Bosworth, Inc., D.A. Davidson, Piper Jaffray & Hopwood, Inc. (underwriters), who in turn sold the bonds to the public. The bond purchase agreement between the County Commissioners and the underwriters restates the promise to use and maintain the revolving fund. The RSIDs were recreated, and again, the County Commissioner’s resolution made the following promise to create, use, and fund a revolving fund:

[T]his Board does hereby undertake and agree ... to secure the Bonds with the Revolving Fund and to issue orders annually authorizing loans ... in the amounts sufficient to make good any deficiency in the District Fund, to the extent that funds are available, and to provide funds for the Revolving Fund by annually making a tax levy or loan from the General Fund, subject to the maximum limitations imposed by the Montana Code Annotated, Section 7-12-2182. Specifically, this Board shall annually or more often if necessary issue an order authorizing a loan or advance from the Revolving Fund to the District Fund in an amount sufficient to make good any deficiency then existing in the Interest Account in the District Fund, and shall issue an order authorizing a loan or advance from the Revolving Fund to the District Fund in an amount sufficient to make good any deficiency then existing in the Bond Account of the District Fund to the extent that moneys are available in the Revolving Fund.

Joint Venture agreed with the underwriters to provide additional security through covenants to: (1) guarantee the bond payments in 1985 and 1986 with two letters of credit; (2) pay the assessments on all developer owned land from 1987 to 1992; (3) pay a substantial portion of the unpaid assessments after 1992; and (4) remain in existence until it sold its assets to a buyer worth $16 million or more. However, in order to keep the tax exempt status of the bonds, the County waived section (2) of the security agreement whereby Joint Venture would pay all assessments on all developer owned land through 1992.

The bonds were prepared according to the form set out in § 7-12-2170, MCA (repealed 1989). The underwriters advertised to the public that the bonds were for sale and were secured by the revolving fund. Numerous people bought the bonds totalling over $3 million. The issued bonds were arranged for interest to mature on January 1, 2000, bearing interest at annual rates from 7.5 percent to 12.625 percent payable on each January 1, commencing January 1, 1985. Additional interest would be paid for a limited time ending January 1, 1986.

The property improvements were made using the bond proceeds. The RSID property did not sell as expected, and of the property that did sell, the assessments became delinquent resulting in inadequate revenue to pay the bond payments. Under § 7-12-2184, MCA, the County used its authority to sell two lots of the 150 delinquent lots at a tax sale. Bond payments on January 1, 1985, 1986, and 1987, were paid from the following: bond proceeds remaining after improvements were completed; the few assessments paid; and one of two letters of credit from Joint Venture. Tax levies to replenish the revolving fund became necessary for the payments on January 1, 1988, 1989, and 1990. Since January 1, 1990, the newly-seated County Commissioners refused to loan funds from the revolving fund, asserting that the loans would be unsecured because the current value of the RSID property is less than the delinquent and future assessments against them.

On December 31,1990, the County Commissioners filed action for a declaratory judgment defining the County’s obligation under the bonds, the revolving fund laws, and the Montana Constitution.

In February 1992, the underwriters and bondholders, and the County filed cross-motions for summary judgment. The underwriters and bondholders also filed two motions in limine challenging the relevance of evidence concerning current property values of the RSID property, and challenging the relevance of Joint Venture’s agreement to provide further security. On February 10, 1992, during the pendency of this action in state court, Joint Venture filed its petition for Chapter 11 bankruptcy. The Bankruptcy Court held a hearing on February 16, 1994, on debtor Red Lodge County Club Estates Joint Venture’s fourth amended plan of reorganization, together with objections filed by Carbon County, and Northwest Capital Management and Trust Company. Each party was represented by counsel. The Bankruptcy Court issued its order on January 7,1994, conditionally approving debtor’s third amended disclosure statement, and set February 10, 1994, as the last day for a party-in-interest to file objections to the disclosure statement. No objections were filed, and the Bankruptcy Court issued its order confirming a Chapter 11 amended plan of reorganization for debtor on February 28, 1994.

In its order, the Bankruptcy Court said:

Once the bondholders agree to accept their payment proposed under the Plan, as is the case, then all legal claims of the bondholders against R.S.I.D. Nos. 8 and 9, as well as lien rights of Carbon County involving the Debtor’s property, are extinguished.

The Bankruptcy Court further said:

The bondholders, like Carbon County, are only secured up to the value of the Debtor’s R.S.I.D. property. 11 U.S.C. § 506(a). Whether that value, pegged at $1,321,011.11, is said to pay assessments or principle or interest, is unimportant. The plan payment is in full satisfaction of all bondholder’s indebtedness against the R.S.I.D. property of the Debtor because all lien rights of both Carbon County and the bondholders are being extinguished.

The debtor owned more than 75 percent of the property in the RSID, and as to the property that the debtor owned, all liens were extinguished. The Bankruptcy Court’s order did not affect the obligations of non-Joint Venture property, and the legal issues posed for this Court remain the same for the property within the RSID not affected by the Bankruptcy Court’s order.

On February 4, 1993, the District Court denied the underwriters’ and bondholders’ motion challenging property value evidence, left undecided the motion concerning the agreement to provide further security, and granted summary judgment in favor of the County. The underwriters and bondholders appeal.

Is a county required to continue to levy general taxes and loan money to an RSID revolving fund created pursuant to § 7-12-2181, MCA, when the RSID is deficient, and the revolving fund may never be sufficient to retire the bonds, and the county’s loans may never be repaid?

Rule 56(c), M.R.Civ.P., provides that summary judgment should be granted when the record does not contain any genuine issue of material fact and the moving party is entitled to judgment as a matter of law. The scope of review for a suit that is disposed of by summary judgment by a judge where the facts are uncontested, is broader than in other appeals, and this Court may examine the case and reach a conclusion according to our findings. District No. 55 v. Musselshell County (1990), 245 Mont. 525, 527, 802 P.2d 1252, 1253.

The underwriters and bondholders contend that although the District Court acknowledged that the revolving fund laws provide that the County was obliged to make the loans, it ignored the laws when it found that the County Commissioners are not required to make further payments from the revolving fund. The County Commissioners assert that the purpose of the revolving fund was to provide short-term secured loans; it was not intended to be a guarantee of partial payment.

When analyzing statutory law, courts look first to the plain meaning of the words used in the statute, and if that is unclear, then courts look to legislative history. State ex rel. Roberts v. Public Service Commission of Montana (1990), 242 Mont. 242, 246, 790 P.2d 489, 492. If the statute’s language is plain, unambiguous, direct, and certain, the statute speaks for itself. Blake v. State (1987), 226 Mont. 193, 198, 735 P.2d 262, 265.

The County was following a well-established process in Montana when it created the RSIDs and financed the improvements by selling bonds, and when it authorized the use of the revolving fund.

In 1913, the Legislature first authorized cities to create special improvement districts (SIDs). Laws 1913, Ch. 89. In 1915, the Legislature authorized the counties to create rural special improvement districts. Laws 1915, Ch. 123. Prior to 1929, special assessments were the only source of payment for the bonds, and when these assessments were delinquent, many bonds were never paid. Two problems arose: first, bonds matured sequentially, therefore, the failure to pay bond payments placed the entire bond offering into default; second, when property assessments were delinquent and the city sold the property at a tax sale, statute provided that when the tax deed was issued, all liens were extinguished. Once the liens were extinguished, the city had no right to collect delinquent SIDs, and consequently, bonds were not paid in full. In 1929, the Legislature mandated that cities create an SID revolving fund to secure the prompt payment of bonds when interest becomes due. Laws 1929, Ch. 63, § 1.

Before 1983, § 7-12-2181, MCA (1981), also required that any county creating an RSID “shall... create, establish and maintain ... [a] revolving fund.” (Emphasis added). The section was amended in 1983 to read that a county “may ... create, establish and maintain” (emphasis added) a revolving fund, making the revolving fund voluntary. The Legislature also added a final sentence to the section providing:

Nothing herein shall authorize or permit the elimination of a revolving fund until all the bonds and warrants secured thereby and the interest thereon have been fully paid and discharged.

Section 7-12-2181, MCA (1993).

In 1983, the Legislature amended § 7-12-2181, MCA, to allow the counties to have a revolving fund. The sponsor stated in testimony in support of his Bill:

Our present laws that establish bonds for SIDs and RIDs have a revolving fund requirement that the whole tax paying area is actually responsible for the payments of those bonds. When you get into a period like we’re in now when payments are not being made, then the county has to levy a property tax on the whole district to make those bond payments. This is an alternate type of bond. It would limit the obligation to the district where the improvement is being made. There would be no general taxing backup of these bonds. It would not affect the existing law but it would create a new section for a new type bond. Any developer who comes in is getting a cold shoulder because the city does not want to extend itself any further. This would say, if you can find a market for your bonds they will still have a tax exempt feature and it would not fall back on the general taxpayer, it would only be an obligation to that district.

Hearings on H.B. 872 Before the Local Govt. Committee, Montana 48th Legislature, at 4 (1983) (Statement of Representative Walter Sales, sponsor of H.B. 872).

Once the bonds are issued with the agreement to use the revolving fund, the Legislature, in § 7-12-2185(2), MCA, provided the following:

The undertakings and agreements shall be binding upon said county so long as any of said special improvement district bond or warrants so offered or any interest thereon remain unpaid.

Nothing in the statutes voids the commitment to loan from the revolving fund if the RSID becomes deficient. We conclude that the plain meaning of the Revolving Fund Law and the legislative history support the legislative intent to allow counties to choose whether to finance the districts by issuing bonds secured by the revolving fund. Here, the County Commissioners agreed to the revolving fund obligation and issued bonds secured by the revolving fund. The District Court quoted §§ 7-12-2185(2) and -2181, MCA, and found that “[tjhe language of these statutes is clear that the County is required to continue funding the revolving fund and to continue making loans to the district funds so long as the bonds and interest remain unpaid.”

Because it is the obligation of the County to make loans from the revolving fund, and the obligation might never be paid, the District Court reasoned that this was in violation of the Montana Constitution prohibiting indebtedness past a certain percent. In Hansen v. City of Havre (1941), 112 Mont. 207, 114 P.2d 1053, and in Stanley v. Jeffries (1929), 86 Mont. 114, 284 P. 134, we held that this procedure is constitutional.

The District Court found that the loans from the revolving funds to the deficient RSIDs are incurring additional debt to the County, violating § 7-7-2101(2), MCA (1984), which considered void any bonds in excess of $150,000 without a majority vote by voters. The court found that although notice must be published in the local newspaper of the County’s intention to create an RSID, it is mailed only to real estate owners within the proposed district, therefore, the property owners outside the districts have no notice to protest the creation of the district or the bond issuance that they may be required to pay. The court stated that neither Stanley, nor Hansen, applies because neither decision addresses the question of the county’s obligation to make loans to an RSID when it has defaulted on the bonds and loans from the revolving funds are insufficient to cure the default.

Hansen decided the constitutional question concerning debt limit and the revolving fund. The Hansen Court found that special improvement district bonds secured by a revolving fund do not constitute indebtedness of the city within the Montana Constitution, Article XIII, Section 6 (1889), which provided at that time that no city shall be allowed to become indebted, in any manner or purpose, in the aggregate exceeding three percent of taxable property value therein. Hansen, 114 P.2d at 1056. The revolving fund is not chargeable with the bond payments, but makes loans to the district fund secured by a lien on property in the district. Hansen, 114 P.2d at 1056. Although the revolving fund may pay part of the bonds, and the revolving fund is replenished by a tax levy on property within the city, this does not create a city debt, but is merely a loan arrangement to meet possible deficiencies in the district fund whereby the city loans money from the revolving fund. Hansen, 114 P.2d at 1056.

The District Court treated the bonds as general obligation bonds because the County must continue to make loans from the revolving fund and levy taxes to replenish the fund. However, a general obligation would mandate that the bonds be paid when due from the County’s available funds, and if funds are insufficient, from tax levies upon all taxable property within the County. Sections 7-7-2205 and -2206(4), MCA. On the other hand, special improvement bond obligations are limited to the district funds, and if necessary, receive loans from the revolving fund. If both funds are insufficient to meet bond payments, there is no other source to pay the bonds. The revolving fund levies are limited to an amount that would increase the balance in the fund to no more than five percent of the principal amount of the outstanding bonds under § 7-12-2182(l)(b), MCA. The bonds are still special, limited bonds. We hold that the District Court erred in its application of Hansen when it cited that decision for support that the County is relieved of its obligation to make loans to the RSIDs.

The bondholders and underwriters argue that the District Court also misapplied Stanley, which states any loss associated with the bonds falls upon the bondholders and not the city. They also contend the court erred when it relied on Griffin v. Opinion Publishing Company (1943), 114 Mont. 502, 138 P.2d 580, for support that any loss caused by delinquent assessments falls upon the bondholders and not the County.

In Stanley, two challenges were present. The first challenge concerned bonds issued after the revolving fund statutes were enacted and secured by the revolving fund. The second challenge concerned bonds issued before the revolving fund statutes were enacted. This Court held that the bonds issued before the revolving fund laws were enacted were not secured by the revolving fund, and any loss falls upon the bondholders and not the city. Stanley, 284 P. at 139-40. In Griffin, the issue was whether a newspaper article questioned the source of payment for SID bonds and the truth of the article. In analyzing the article’s truth, the Court said SID bonds were not an obligation of the city. Griffin, 138 P.2d at 588.

Here, the County contends that the bondholders are private parties and the obligation to make loans from the revolving fund to repay the bonds is an unconstitutional guaranty of a private party’s obligation in violation of Article VIII, Section 1, of the Montana Constitution, requiring that state funds be used for public purposes.

This Court has consistently upheld the revolving fund law as constitutional when it authorizes a loan or donation of public revenues for the benefit of bondholders in payment for the special improvements in a district, whereby bonds are secured by the revolving fund.

Although bondholders will profit by the revolving fund law, the provision will partly avoid the past scenario where bondholders suffered the loss when a certain percent of property owners fail to pay the property assessments. Stanley, 284 P. at 138. The Stanley Court stated:

[T]he laying out and improvement of streets, alleys, sewers and the like is essentially a public purpose benefitting the entire community, although the work is done in but a portion of the city, and ... each portion of the city might be thus improved at the general public expense, and no taxpayer could be heard to complain thereof. In other words, in order to erect any public improvement by the creation of special improvement districts, both general benefits to the municipality and special benefits to particular property must be conferred — the special benefit to adjacent property is but incidental to the general public; it could not otherwise lawfully be created ....
... [T]he Legislature ... might have, lawfully, imposed a much greater burden upon the municipality.

Stanley, 284 P. at 138-39. The public policy behind the SID statute was to build communities by creating districts within the city and providing improvements, and similarly, the policy behind RSIDs was to improve rural areas which also benefits the entire county. Stanley reveals that losses from delinquent assessments were contemplated, especially given the period in Stanley, where great losses to bondholders were likely because when a tax deed was issued, the unpaid assessment lien on the properties were extinguished, and the bonds issued before the revolving fund laws were enacted were not secured by the fund. Stanley, 284 P.2d at 139. Also, the city received no consideration for pledging the security, therefore, to make loans from the revolving fund would authorize a tax levy for a private purpose. Stanley, 284 P.2d at 139.

We hold that the loans from the revolving fund and subsequent tax levies are within the constitutional mandates of Article VIII, Section 1, of the Montana Constitution, requiring that state funds be used for public purposes.

The County relies on White v. State (1988), 233 Mont. 81, 759 P.2d 971, and Hollow v. State (1986), 222 Mont. 478, 723 P.2d 227, for authority to support its argument that the revolving fund and the obligation to tax county property owners to fund the revolving fund is an unconstitutional pledge of credit. These decisions are distinguishable and do not apply to these facts.

White concerned a bill establishing a program empowering a special science and technology board to funnel bond proceeds into private business ventures through technology investments. This Court found that the statute required the Legislature to provide the difference between the board’s return on the investment of bond proceeds and the bond obligations, which were used for the benefit of private businesses, and was, in effect, a direct pledge of the state’s credit to secure bonds. White, 759 P.2d at 974. This Court denounced this pledge to secure bonds where the proceeds are to be used for the benefit of private businesses. White, 759 P.2d at 974. Here, the bond proceeds were used to benefit Carbon County by providing improvements to RSIDs within the County — not to private businesses.

For the same reason, Hollow does not apply because that decision also dealt with private debts and obligations. Hollow concerned an act that made an open-ended promise to loan coal severance tax revenues from an in-state investment fund to an economic guarantee fund, which was used to secure bonds for private economic development projects. Hollow, 723 P.2d at 232. Here, the RSIDs receive the benefit of the improvements, and the debt is charged to the district, not to the County. The County is obligated only to make loans to the district pursuant to the revolving fund laws and its agreements. The County receives an asset in return, a loan receivable secured by a lien on the RSID property and the RSID fund for repayment.

We hold that the County’s obligation to make loans from the revolving fund and the obligation to levy taxes to fund the revolving fund is not an unconstitutional pledge of credit.

The underwriters and bondholders assert that because the relationship between them and the County was contractual, and the County was authorized to enter into a contract to establish a revolving fund, this Court should enforce the contract.

Public bodies are as bound by their contracts as are private parties. State v. City of Helena (1952), 125 Mont. 592, 602, 242 P.2d 250, 255. Where the language is “clear and unambiguous there is nothing for the court to construe; the duty of the court is simply to apply the language as written to the facts of the case, and decide the case accordingly.” Bain v. Williams (1990), 245 Mont. 228, 231, 800 P.2d 693, 695 (quoting Danielson v. Danielson (1977), 172 Mont. 55, 58, 560 P.2d 893, 894). In this case, both the County’s resolutions authorizing issuance of the bonds, and the bond purchase agreement between the County and the underwriters, contain the County’s promise to create, use, and fund a revolving fund subject to the maximum limitations in § 7-12-2182, MCA, if assessment payments were insufficient. The agreements are clear and unambiguous, and the parties had mutual understanding of the County’s obligations.

The County freely entered into and agreed to the terms within the resolutions and the bond agreement. In fact, in April 1984, the County passed a resolution to offer bonds with a revolving fund pledge. The revolving fund commitment made in the subsequent resolution on August 30,1984, is nearly identical to the earlier resolution; the bonds were drafted pursuant to the requirements in § 7-12-2170, MCA (repealed 1989). Those who enter a contract are charged with the responsibility of acquainting themselves with the agreement terms, and those who execute a written contract are presumed to know its contents and terms; they cannot obtain relief unless they show ambiguity in the contract, misrepresentation, or bad faith. Johnson v. Estate of Shelton (1988), 232 Mont. 85, 90, 754 P.2d 828, 830-31.

The County was also seeking the benefits of the improvements of property and increased property values within the County. It used the security of the revolving fund to encourage people to buy the bonds. The bondholders relied on the promises to use the revolving fund. The County Commissioners, having exercised their discretion to institute the revolving fund, and having freely entered into an agreement with the bondholders and the underwriters, under both the statutes and terms of the agreement, are obliged to carry out their contractual obligations. The County’s refusal to honor this agreement and authorize loans from the revolving fund is a breach of the contract.

Where the Legislature has provided the requirement to levy taxes to replenish the revolving fund to meet the requirements of this fund, it follows that it is mandatory that the revolving fund be used for the purpose intended — to make loans to the district fund to make up any deficiencies. Hansen, 114 P.2d at 1059. The Court in Hansen stated that under what was then § 5277.3, RCM (1937), providing that the city “may” make the loans from the revolving fund to the districts to make up any deficiencies, that “may” means “must” or “shall” according to the Legislature’s intent; and, a “contract to do so does not bind successive officers to perform a discretionary act” but makes the acts mandatory regardless of the contract. Hansen, 114 P.2d at 1059.

With the exception of the liens and obligations that were against those lots owned by the debtor Red Lodge Country Club Estates Joint Venture at the time of the Bankruptcy Court’s judgment and which were not previously sold or agreed to be sold by Joint Venture and that were extinguished by the Bankruptcy Court’s order of February 28, 1994, we conclude that the County’s agreement to make loans from the revolving fund is mandatory and not discretionary. The County must continue to make loans to the revolving fund and must continue to levy taxes to replenish the revolving fund until the obligations not extinguished by the bankruptcy proceedings are paid in compliance with § 7-12-2181, MCA. Because the County receives a loan receivable secured by a lien on the RSID property when it makes a loan from the revolving fund, the County has the option to dispose of the remaining delinquent assessment properties at a tax sale to acquire revenue for the bond payments.

Other issues were raised by the parties, but because of our holding on the issue discussed, we need not consider the other questions.

We reverse the District Court’s order for summary judgment and remand for further proceedings in accordance with this opinion.

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


source: Caselaw Access Project

author: JUSTICE TRIEWEILER

license: Public Domain

text:
    THEODORE RUSSETTE, JR., Claimant and Appellant, v. CHIPPEWA CREE HOUSING AUTHORITY, Employer, and STATE COMPENSATION INSURANCE FUND, Insurer and Respondent.
    No. 94-035.
    Submitted on Briefs April 14, 1994.
    Decided May 16, 1994.
    51 St.Rep. 414.
    874 P.2d 1217.
    265 Mont. 90.

      For Claimant and Appellant: Cameron Ferguson, Hartelius, Ferguson & Baker, Great Falls.
    For Insurer and Respondent: Daniel J. Whyte, State Compensation Insurance Fund, Helena.
   JUSTICE TRIEWEILER

delivered the Opinion of the Court.

Claimant Theodore Russette, Jr., filed a petition in the Workers’ Compensation Court in which he claimed the right to additional permanent partial disability benefits pursuant to § 39-71-703, MCA (1991). Based on stipulated facts and § 39-71-710, MCA (1987), the Workers’ Compensation Court concluded that claimant’s entitlement to disability benefits, other than for physical impairment, terminated when he began receiving social security retirement benefits. Accordingly, judgment was entered for defendant State Compensation Insurance Fund. Claimant appeals the judgment of the Workers’ Compensation Court. We reverse.

The issue on appeal is whether an injured worker’s right to partial disability benefits pursuant to § 39-71-703, MCA(1991), terminates when a claimant is considered retired pursuant to § 39-71-710, MCA (1987).

This case was submitted to the Workers’ Compensation Court on the following stipulated facts:

Russette was injured during the course of his employment with the Chippewa Cree Housing Authority on September 26,1991. The State Fund insured his employer against workers’ compensation claims and accepted liability for the accident and his injuries. Russette received total disability benefits until his healing period ended on October 13, 1992. At that time, he was given a physical impairment rating of 17 percent, and he was awarded partial disability benefits at the rate of $168 per week. His partial disability benefits were commenced on October 13,1992, and continued for 59.5 weeks.

There is no indication in the record of Russette’s 62nd birthday. However, it occurred prior to October 13,1992, and on that birthday he elected to receive social security retirement benefits. Because he elected to receive retirement benefits, the State Fund took the position that he was not entitled to partial disability benefits beyond those to which he was entitled as a result of his physical impairment. The Workers’ Compensation Court agreed.

The relevant facts are not in dispute. This case presents only an issue of law. We review the Workers’ Compensation Court’s conelusions of law to determine if they are correct. Lovell v. State Fund (1993), 260 Mont. 279, 284, 860 P.2d 95, 98.

DISCUSSION

Prior to 1987, partial disability benefits were awarded pursuant to § 39-71-703, MCA (1975), for impairment to a worker’s earning capacity. Indemnity benefits for physical impairment were paid pursuant to §§ 39-71-705 through -708, MCA (1975).

Prior to 1987, § 39-71-710, MCA (1981), simply provided that when a claimant began receiving social security retirement benefits, he or she would be considered retired and no longer entitled to benefits for total disability. However, that section expressly did not apply to partial disability benefits.

In 1987, both § 39-71-703, MCA (1975), and § 39-71-710, MCA (1981), were amended. As amended, Section 703 provided for two types of partial disability benefits denominated as “impairment awards” and “wage supplements.” Section 39-71-703, MCA (1987). The impairment award was based strictly on the degree of a person’s physical impairment and could be paid biweekly or in a lump sum. Wage supplement awards were based upon the difference between what the worker earned at the time of his or her injury, and what the worker was qualified to earn according to that worker’s “job pool” following the injury. At the same time, § 39-71-710, MCA (1981), was amended to provide that when a claimant began receiving social security retirement benefits the insurer was no longer liable for the payment of “wage supplement, permanent total disability, and rehabilitation compensation benefits.”

The amended Section 710 provided that “the insurer remains liable for temporary total disability benefits, any impairment award, and medical benefits.” Section 39-71-710, MCA (1987).

In 1991, Section 703 was again amended to eliminate the notion of “impairment awards” versus “wage supplement benefits.” Section 39-71-703, MCA (1991). Instead, the concepts were merged and the degree of an injured worker’s physical impairment simply became one factor to consider when arriving at the duration for permanent partial disability benefits. Other factors would include a claimant’s age, education, wage loss, work history, and physical restrictions.

However, Section 710 was not amended in 1991. Therefore, as it existed on the date of Russette’s injury, it did not provide for termination of partial disability benefits upon the receipt of social security benefits, and did provide that after retirement a claimant would continue to be entitled to an impairment award, among other benefits which are not relevant to the issue in this case.

The State Fund contends that it was the Legislature’s intention when it amended Section 710 in 1987 to terminate those types of benefits awarded for future loss of earning power when a person retired or became eligible for full retirement benefits. It contends that it is clear from the 1987 amendment to Section 710 that the only kind of benefits the Legislature intended to continue beyond retirement age are those benefits such as medical benefits, indemnity benefits, and temporary total disability benefits which have as their purpose a claimant’s physical restoration. The State Fund’s argument continues that it was a mere legislative oversight that Section 710 was not amended in 1991 so that its language continued to track the amended language in Section 703. It is the State Fund’s position that this Court should, by interpretation, accomplish what the Legislature did not by construing Section 710 in a way that requires termination of Russette’s partial disability benefits, other than those related to physical impairment, on the date when Russette began receiving social security retirement benefits.

The Workers’ Compensation Court agreed with the State Fund’s position. It concluded that the Legislature’s failure to amend Section 710 in 1991 was an obvious oversight. In response to Russette’s argument that disability benefits should not be terminated when their termination was not expressly provided for by statute, the Workers’ Compensation Court stated that:

This is not a perfect world, and this court must assume the burden of determining whether the 1991 Montana Legislature intended to extend the revised permanent partial disability benefit to retired claimants.

On that basis, the Workers’ Compensation Court went on to conclude, without any apparent reference to legislative history, that it was not the Legislature’s intent to allow retired claimants to receive partial disability benefits.

However, we conclude that by its decision the Workers’ Compensation Court amended the termination of benefits statute which the Legislature either failed or declined to amend. In this process, the trial court erred by doing what we have previously held cannot be done. In Lester v. J & S Investment Company (1976), 171 Mont. 149, 153, 557 P.2d 299, 301, we stated that “[i]n construing a statute, courts cannot insert what has been omitted. That is the responsibility of the legislature.”

In State v. Crane (1989), 240 Mont. 235, 238, 784 P.2d 901, 903, we repeated our admonition that:

In construing a statute, it is our function as an appellate court to ascertain and declare what in terms or in substance is contained in a statute and not insert what has been omitted. Dunphy v. Anaconda (1968), 151 Mont. 76, 438 P.2d 660.

Neither can we, as easily as the Workers’ Compensation Court, ascertain the Legislature’s intention in 1991. Prior to 1991, “wage supplement” benefits which were related to actual wage loss were terminated when an injured worker retired under the terms of Section 710. However, indemnity benefits based on physical impairment were continued. After 1991, there are no longer any “wage supplement” benefits, and partial disability benefits include physical impairment as their foundation. Actual wage loss is only one of several additional factors to be considered in determining the duration for which partial disability benefits are awarded. To sort out what was or was not the Legislature’s intention under these circumstances would require sheer speculation on the part of the Court and is one reason for leaving the amendment of Section 710 to the Legislature.

For these reasons, we conclude that § 39-71-710, MCA(1987), does not provide for the termination of Russette’s partial disability benefits which were awarded pursuant to § 39-71-703, MCA (1991), when he retired. Based on this conclusion, we reverse the judgment of the Workers’ Compensation Court and remand for further proceedings consistent with this opinion and a determination of the duration over which Russette is entitled to permanent partial disability benefits.

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


text:
    IN RE THE MARRIAGE OF CAROL A. MARTIN, Petitioner and Respondent, and RONALD I. MARTIN, Respondent and Appellant.
    No. 93-475.
    Submitted on Briefs February 17, 1994.
    Decided May 17, 1994.
    51 St.Rep. 443.
    874 P.2d 1219.
    265 Mont. 95.

      For Respondent and Appellant: Debra D. Parker, Murphy, Robinson, Heckathorn & Phillips, Kalispell.
    For Petitioner and Respondent: Katherine R. Curtis, Kaplan & Curtis, Columbia Falls.
   JUSTICE HUNT

delivered the Opinion of the Court.

Ronald I. Martin appeals from an order of the District Court for the Eleventh Judicial District, Flathead County, denying his motion to set aside default.

We reverse and remand.

The issues on appeal are:

1. Does this Court have jurisdiction to consider appellant’s appeal?

2. Did the District Court abuse its discretion when it entered and refused to set aside appellant’s default?

3. Did the District Court err by including in its distribution of the marital estate that property which was owned by a corporation, other shareholders, and the parties’ son?

On January 8, 1992, respondent Carol Martin filed a petition for dissolution and served the petition and summons to appellant Ronald Martin on January 10, 1992. On January 24, 1992, appellant informed respondent’s attorney of his present address and that he would be acting pro se. In the following months, appellant and respondent’s attorney exchanged correspondence pertaining to marital assets and the corporate assets owned by the parties as majority shareholders in Martin’s Peat, Inc. The parties’ adult children owned eight percent interest in the corporate assets. On May 1 and May 26, 1992, respondent’s attorney sent a letter to appellant requesting he file his response to the dissolution petition so that the matter could proceed and a trial date be set.

On June 10, 1993, respondent filed a notice of intent to enter default with the District Court. Although an attempt was made on June 7,1993, to personally serve notice to appellant, service was not made because he was out of town on vacation for two weeks. At the hearing on June 11,1993, the court granted respondent’s motion for entry of default, and after considering the evidence, the court also entered its findings of fact, conclusions of law, and decree of dissolution. A copy of the decree was served on appellant by mail on that same date. Appellant retained an attorney, and on June 23,1993, he filed a motion to set aside the default, and also for reconsideration and amendment of the June 11 decree due to the court’s distribution of non-marital property.

On August 5, 1993, during a hearing on the motion, the District Court denied the motion to set aside the default, and in response to appellant’s amendment request, suggested that appellant schedule an evidentiary hearing. On August 9,1993, appellant filed his appeal to this Court. On August 26,1993, the District Court entered its order denying appellant’s motion to set aside the default, and on October 1, 1993, notice of entry of the order was served upon appellant’s attorney.

ISSUE 1

Does this Court have jurisdiction to consider appellant’s appeal?

Respondent argues that this appeal is not properly before this Court because appellant failed to file his appeal to the June 11,1993, default within 30 days of entry, pursuant to Rule 5(c), M.R.App.R She also argues that he failed to file his appeal after the entry date of the August 26, 1993, order denying his motion to set aside default, and prematurely filed his appeal on June 9, 1993. Alternatively, she contends that he lost his right to appeal the order by not filing by November 2,1993, because the notice of entry of order was served on appellant’s attorney on October 1,1993. We disagree.

Rule 1, M.R.App.P., allows this Court to consider an appeal from an entry of a final judgment or special proceeding commenced in a district court or from any special order made after final judgment. An order made after final judgment setting aside or refusing to vacate a default judgment is a special order. Marriage of Rex (1982), 199 Mont. 328, 330, 649 P.2d 460, 461. “A final judgment is one in which is there has been a final determination” of the parties’ rights. Kirchner v. Western Montana Regional Community Mental Health Center, Inc. (1993), 261 Mont. 227, 861 P.2d 927, 929, 50 St. Rep. 1299, 1300.

On August 5, 1993, during a hearing on the motion to set aside default, the District Court denied the motion, thus making a final determination of the parties’ rights. See Marriage of Cox (1987), 226 Mont. 176, 736 P.2d 97 (finding minute entry was an effective dismissal of appellant’s subject matter jurisdiction motion). Appellant had 30 days from the August 5,1993, dismissal ofhis motion to perfect his appeal; he filed his notice of appeal on August 9,1993, before the 30-day time limit.

In an appeal from a default judgment, this Court has jurisdiction to hear both the refusal to set aside the entry of default and the judgment entered by default. Lords v. Newman (1984), 212 Mont. 359, 366, 688 P.2d 290, 294. This Court has jurisdiction to review both the refusal of the District Court to set aside the entry of default on August 5, 1993, and the judgment by default entered June 11, 1993.

ISSUE 2

Did the District Court abuse its discretion when it entered and refused to set aside appellant’s default?

Our review standard of a trial court’s refusal to set aside a default is that “no great abuse of discretion need be shown to warrant reversal,” and our review is on a case-by-case basis. Lords, 688 P.2d at 294. Policy favors that a litigated case should be decided on its merits, and judgments by default are not favored. In re the Marriage of Whiting (1993), 259 Mont. 180, 854 P.2d 343. The burden of proof is on the one seeking to set aside the default. Siewing v. Pearson Co. (1987), 226 Mont. 458, 461, 736 P.2d 120, 122. An entry of default may be set aside by showing good cause; default judgment may be set aside pursuant to Rule 60(b), M.R.Civ.P. Rule 55(c), M.R.Civ.P. Good cause is shown by: the defendant proceeded with diligence to set aside the default judgment; the defendant’s excusable neglect; the judgment will be injurious to the defendant if allowed to stand; and the defendant has a meritorious defense to the plaintiff’s cause of action. Blume v. Metropolitan Life Ins. Co. (1990), 242 Mont. 465, 467, 791 P.2d 784, 786. Rule 60(b)(1), M.R.Civ.P., allows a default judgment to be set aside due to mistake, inadvertence, surprise, or excusable neglect.

After reviewing the record and applying the above analysis, we determine that the District Court abused its discretion when it failed to grant the motion to set aside the default.

Appellant proceeded with diligence after the District Court entered the June 11,1993, judgment by default by retaining an attorney and filing a motion to set aside the default on June 23, 1993.

In order to set aside default, an appellant must demonstrate excusable neglect. Respondent argues that appellant was sufficiently warned by letter “several times” that she would proceed as necessary if he did not answer. Respondent does not direct us to the record, and the only reference to the letter in the record was in the transcript of the August 11, 1993, hearing where respondent’s attorney stated to the court that she sent a letter to appellant in December 1992 informing him that she would “proceed as necessary” if he failed to respond. The letter dated December 1992 was not entered as evidence nor filed with the District Court, and is not within the record. Those papers and exhibits filed in the district court are part of the record on appeal. Rule 9, M.R.App.P. A party’s mere reference to certain documents does not bring them within the record. 4 C.J.S. Appeal and Error § 456 (1993). Because the documents are not in the record, we cannot review them on appeal.

Appellant contends that the District Court erred by not finding excusable neglect because his case is similar to In re Marriage of Broere (1994), [263 Mont. 207], 867 P.2d 1092, 51 St. Rep. 17, where the appellant, acting pro se in the dissolution case, was affirmatively misled by the respondent’s attorney that his telefaxed response had been filed. Appellant argues that the present case is analogous to Broere because respondent’s attorney repeatedly communicated to him that nothing could happen in the dissolution proceedings until he filed a formal response.

On May 1,1992, respondent’s attorney wrote to appellant, stating in pertinent part:

Dear Mr. Martin:
It will be necessary for you to file a formal response with the Court in this matter so that I can request that a trial date be set. The Court will not set a trial date unless the case is “at issue, ” which requires that the Respondent file a Response. I would appreciate your filing your Response by May 15,1992, so that we can proceed with this matter. Thank you. [Emphasis added].

On May 19, 1992, appellant answered the letter, and received the following reply from respondent’s attorney:

Dear Mr. Martin:
In response to your letter of May 19,1992, in this matter, I must repeat my request that you file a formal Response with the Court so that we can proceed with this matter. I cannot request a Court date until you have done so, and while I am hopeful that a trial will not be necessary, I do not want to further delay getting a date from the Court.
... The process will be infinitely cheaper, easier and quicker if you will cooperate with Rex Boiler. If you choose not to do so, we will have to obtain the necessary information from you through formal means, such as interrogatories, requests for production. ... This is not intended as a threat, but simply to make clear that we intend to proceed with a valuation of all property, and will do so formally if necessary. ...
The extent to which the process becomes adversarial depends upon whether or not you and Carol cooperate to the fullest extent of your ability. [Emphasis added].

Threats to proceed “formally if necessary’ would be clear to an attorney trained in the law. Those untrained in the law are “often misled and get entire different meanings from conversations than one trained in the legal field.” Broere, 867 P.2d at 1094 (citing Waggoner v. Glacier Colony of Hutterites (1953), 127 Mont. 140, 148, 258 P.2d 1162, 1166). In Broere, after receiving appellant’s telefaxed letter responding to the petition of dissolution, the respondent’s attorney mistakenly sent the appellant a note of issue stating that his response had been filed. A few days later default was granted and respondent’s motion to set aside the default was denied. This Court held that the district court abused its discretion by not setting aside the default because the appellant was affirmatively, though innocently, misled by the respondent’s attorney that his response had been filed. Broere, 867 P.2d at 1094.

Similarly, in the present case appellant was misled by respondent’s attorney who communicated to him that the matter would not proceed in court until he filed his formal response, and then entered default during a two week period when appellant was out of town. Prior to the default, appellant communicated to both respondent and her attorney his objections to respondent’s division of marital assets, and also communicated his desire to settle the matter without court intervention. See Whiting, 854 P.2d at 346 (finding that appellant’s default was unwillful by her attempts to resolve the dissolution issues for weeks prior to the default). Moreover, the judgment will be injurious to appellant if allowed to stand because the record reveals that a portion of the assets awarded were corporate assets, part of which appellant argues are required in the operation of the business, which further indicates that appellant has a meritorious defense to the property distribution.

Respondent argues that she would be prejudiced if this Court set aside the default because it would violate the interests of justice that require finality of the case. However, respondent waited 17 months before attempting to put appellant in default which shows a lack of urgency to finalize matters. In contrast, the harm to appellant is great by having the default entered against him without any possibility of presenting his arguments.

We hold that the District Court abused its discretion by not setting aside the default and the denial of the District Court is reversed.

ISSUE 3

Did the District Court err by including in its distribution of the marital estate that property which was owned by a corporation, other shareholders, and the parties’ son?

Appellant argues that the District Court erred by distributing corporate property belonging to the parties, as well as other minority shareholders, consisting of bank accounts and real and personal property. Respondent cites In re Marriage of Reich (1986), 222 Mont. 192, 720 P.2d 286, for support that the distribution of corporate assets was proper because the parties hold a 92 percent interest in shares, and the court apparently felt that the 8 percent interest owned by the adult children of the parties had no value. We disagree.

Section 40-4-202(1), MCA, directs the lower court to equitably apportion assets “belonging to either or both, however and whenever acquired and whether the title thereto is in the name of the husband or wife or both.”

A district court cannot distribute corporate property where the corporation itself is not a party to the marital dissolution. Reich, 222 Mont. 192, 720 P.2d 286; Buxbaum v. Buxbaum (1984), 214 Mont. 1, 692 P.2d 411. Corporate shares belonging to the parties in a dissolution proceeding are a marital asset subject to distribution within § 40-4-202, MCA. In re Marriage of Westland (1993), 257 Mont. 169, 848 P.2d 492.

Although the general rule is that corporate property cannot be transferred unless the corporation is a party to the dissolution proceedings, in the past this Court has approved the transfer of corporate property but under facts peculiar to the case. In Reich, we approved the district court’s distribution of a corporate vehicle to the wife because the husband was the corporation’s sole shareholder, and as such he could authorize the transfer of the vehicle. Reich, 720 P.2d at 288. We remanded the case for the husband’s decision whether to accept the distribution of the vehicle or to substitute property of equal value. Reich, 222 Mont. 192, 720 P.2d at 288.

In Westland, we affirmed the District Court’s apportionment of corporate ranch properties as part of the marital property distribution because a significant portion of the corporate real property belonged to the parties, and the intended partition could take place by the husband’s transfer of his shares to the wife. Westland, 848 P.2d at 494.

None of the facts found in Reich or Westland are present here. Information in the record reveals that the District Court distributed corporate property by awarding real property to respondent owned by Martin’s Peat, Inc. Also, a boat and trailer awarded to respondent was owned by another family member. Appellant argues that bank accounts belonging to the corporation were also distributed. We are unable to ascertain ownership of the remaining assets. Upon remand, we direct the District Court to determine ownership of the corporate and marital assets before distributing the marital property.

We reverse and remand to the District Court for further proceedings in accordance with this opinion.

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


author: JUSTICE WEBER

text:
    IN THE MATTER OF THE ESTATE OF, JUSTIN PETERSON, also known as JUSTIN C. PETERSON, Deceased.
    No. 93-434.
    Submitted on Briefs February 24, 1994.
    Decided May 20, 1994.
    51 St.Rep. 454.
    874 P.2d 1230.
    265 Mont. 104.

      For Appellant: Charles F. Moses, Moses Law Firm, Billings.
    For Respondent: James L. Jones, William A. Cole, Richard A. Brekke, Dorsey & Whitney, Billings.
   JUSTICE WEBER

delivered the Opinion of the Court.

This is an appeal by Michael J. Whalen from an Order of the District Court of the Thirteenth Judicial District, Yellowstone County, removing him for cause from his duties as personal representative in the above-entitled informal probate proceeding. We affirm.

We have restated the issues as follows:

I. Did the District Court abuse its discretion by removing Michael J. Whalen as personal representative of the estate of Justin Peterson?

II. Did the District Court err in appointing David Peterson, the sole heir, as the successor personal representative?

III. Should the appellant be sanctioned and ordered to pay respondent’s attorney fees and costs pursuant to Rule 32, M.R.App.P., for bringing a meritless appeal?

Justin C. Peterson died on March 25, 1993 at the age of 33 years. David L. Peterson is the younger brother of Justin C. Peterson, the deceased, and the sole beneficiary under Justin Peterson’s will. Justin and David Peterson, although part of a large family, were raised in a series of foster homes. During part of their time in high school after Justin was “on his own,” they lived together in a tent in a cave in the “rims” in Billings. David has suffered from cerebral palsy since birth and one of his teachers would pick him up in the morning to take him to school when the boys lived in the tent. The record indicates an extremely close relationship between the two brothers which continued until Justin’s death in March of 1993.

Justin Peterson died from complications resulting from an accident which occurred on June 23,1982, while swimming at Lake Elmo, a recreational facility in Billings. As an immediate result of that accident, Justin was rendered a quadriplegic, completely dependent on others for his care, including feeding, and he was unable to breathe without the assistance of a respirator or ventilator. Although he could talk, he spoke with difficulty. During the eleven years in which Justin survived following the accident, he endured repeated life-threatening complications.

David lived with Justin following his release from the hospital in September of 1984 and was granted a limited power of attorney by Justin to handle household matters. Another limited power of attorney was given to an accountant who handled payroll matters and taxes for Justin. Justin needed round-the-clock care until the time of his death and employed nursing assistance for such care. Justin had been hospitalized from the date of the accident in 1982 until September 1984, and was able to leave the hospital and move into a home he had purchased only after a settlement was obtained for him by his attorneys.

Ernest F. Boschert of the Boschert & Boschert law firm was contacted by other family members in January 1983 to represent Justin. Mr. Boschert subsequently associated with Michael J. Whalen of the Whalen & Whalen law firm to represent Justin in his claim against the owners of the recreational area, Kimble Properties and Tymon, Inc.

On February 2, 1983, Justin signed a contingency fee agreement with Michael J. Whalen and Ernest F. Boschert which provided the following fee schedule:

25% of the recovery if the case was settled prior to filing a complaint in district court;
33 1/3% of the recovery after a complaint was filed in district court;
40% of the recovery if the case was set for trial or was tried; and
5% additional if the case was appealed or there was a new trial.

On February 22, 1983, the law firm of Whalen & Whalen filed a two-page complaint against the owners of Lake Elmo. Three requests were made for the District Court to set a trial date within the ensuing months of 1983. The first such request was made of the presiding judge in the matter, Judge Wilson, on August 16,1983. Judge Wilson deemed himself disqualified and the case was assigned to Judge Barz. On September 2, 1983, another request was made to set the matter for trial; this time, Judge Barz disqualified herself. The case was then assigned to Judge Speare. Timothy Whalen of Whalen & Whalen wrote a letter on September 7,1983, again requesting that the cause be placed on the trial calendar. On October 17, 1983, the District Court entered an order setting a trial date. As a result of the foregoing actions, the amount of fees increased to 40% under the contingency agreement.

On March 9, 1984, Michael J. Whalen made an offer to settle the case for policy limits of $2,500,000 cash or, in the alternative, for $1,250,000 cash and $1,875,000 to be paid in installments of $15,625 per month over a ten-year period, for a total of $3,125,000. The defendants’ insurers accepted the alternative proposal without making a counteroffer. The final payments on this alternative settlement proposal will be made in May, 1994.

After the 1984 settlement, Michael J. Whalen drafted a will for Justin Peterson in which he and Ernest F. Boschert were named as co-personal representatives. Ernest F. Boschert predeceased Justin Peterson and has not acted as personal representative. Following the death of Justin Peterson, Michael J. Whalen was appointed as personal representative of his estate. David Peterson obtained separate counsel and asked Michael J. Whalen to step aside as personal representative of his brother’s estate.

After discussions, Mr. Whalen declined to resign. On May 27,1993, David Peterson filed a petition to remove Michael J. Whalen as personal representative which is the subject of this appeal. After a hearing held on June 16, 1993, the District Court removed Mr. Whalen and appointed David Peterson as successor personal representative in an order dated July 20, 1993.

David Peterson has filed a claim against the Whalen and Boschert firms with regard to the fee agreement. Michael J. Whalen filed suit against the estate of Justin Peterson (the Estate) to recover his legal expenses.

Issue I.

Did the District Court abuse its discretion by removing Michael J. Whalen as personal representative of the estate of Justin Peterson?

In the petition for removal of Michael J. Whalen as personal representative of the Estate, David Peterson stated that the attorney fees on the part of the two law firms were excessive in relation to the amount of work done in connection with Justin Peterson’s personal injury claim.

After a hearing on June 16, 1993 to determine whether Mr. Whalen should be removed for cause, the District Court determined that a conflict of interest existed between the Estate and Mr. Whalen as Mr. Whalen could not be expected to pursue a claim against himself on behalf of the Estate. A personal representative may be removed for cause in certain situations under § 72-3-526, MCA, which provides in pertinent part:

72-3-526. Termination of appointment — removal for cause. (1) A person interested in the estate may petition for removal of a personal representative for cause at any time. Upon filing of the petition, the court shall fix a time and place for hearing. Notice shall be given by the petitioner to the personal representative and to other persons as the court may order....
(2) Cause for removal exists:
(a) when removal would be in the best interests of the estate', or
(b) if it is shown that a personal representative or the person seeking his appointment intentionally misrepresented material facts in the proceedings leading to his appointment or that the personal representative has disregarded an order of the court, has become incapable of discharging the duties of his office, or has mismanaged the estate or failed to perform any duty pertaining to the office. (Emphasis supplied.)

Removal of a personal representative for cause pursuant to § 72-3-526, MCA, is within the sound discretion of the district court and this Court will not overturn such a termination unless there is a clear abuse of discretion. In re the Estate of Nelson (1990), 243 Mont. 276, 278, 794 P.2d 677, 678. A district court can remove a personal representative or refuse to appoint a person as personal representative for cause if there is a conflict of interest between that person’s interests and those of the estate. In re the Estate of Obstarczyk (1963), 141 Mont. 346, 351-53, 377 P.2d 531, 534-35.

The District Court expressly relied on Estate of Obstarczyk, which affirmed a removal of an executrix on the grounds that her interests were adverse to the estate and held as follows:

... The duty of an executor is to examine strictly all claims against an estate ... seeking judicial interpretation if necessary.... It is clear that [the executrix’s] own interests are antagonistic to the estate.
In the Tice [Tice’s Estate v. Tice, 140 Mont. 28, 367 P.2d 771 (1962)] case, supra, we quoted with approval from In re Rinio’s Estate (1933), 93 Mont. 428, 435, 19 P.2d 322, 325, as follows:
“* * * The law does not look with favor upon the administration of estates by a person where conflicts in the performance of his duty are likely to arise.”

Estate of Obstarczyk, 377 P.2d at 534. We conclude that the potential claim against Michael J. Whalen for excessive attorney fees is sufficient to create a conflict of interest in this case. A conflict of interest is sufficient for removal of the personal representative for cause under § 72-3-526, MCA.

We hold the District Court properly exercised its discretion in determining that it was in the best interests of the Estate to remove Michael J. Whalen as personal representative.

Issue II.

Did the District Court err in appointing David Peterson, the sole heir, as the successor personal representative?

Mr. Whalen also contends that David Peterson was not a proper person for appointment as successor personal representative of the Estate. Although Mr. Whalen testified as noted above that he would not pursue a claim against himself, he stated that he was willing to have a special administrator appointed to explore that claim if the court denied his motion to dismiss David Peterson’s petition to remove him as personal representative.

Section 72-3-527, MCA, provides that parts 2 and 3 of Chapter 72 govern proceedings for appointment of a successor personal representative to succeed one whose appointment is terminated; thus, § 72-3-502, MCA, governs here and provides as follows:

72-3-502. Priorities for appointment. Whether the proceedings are formal or informal, persons who are not disqualified have priority for appointment in the following order:
(1) the person with priority as determined by a probated will, including a person nominated by a power conferred in a will;
(2) the surviving spouse of the decedent who is a devisee of the decedent;
(3) the custodial parent of a minor decedent;
(4) other devisees of the decedent;
(5) the surviving spouse of the decedent;
(6) other heirs of the decedent;
(7) public administrator;
(8) 45 days after the death of the decedent, any creditor.

We review the appointment of a personal representative according to § 72-3-502, MCA, to determine whether a district court has correctly interpreted the law. Steer Inc. v. Department of Revenue (1990), 245 Mont. 470, 474-75, 803 P.2d 601, 603. We conclude that under the order of priority set forth in § 72-3-502, MCA, David Peterson has first priority of appointment as there exist no persons fitting the descriptions of subsections (1) through (3) and he is the sole devisee under his brother’s will. Further, he will serve as personal representative at no charge and as noted by the District Court, a special administrator would increase costs unnecessarily.

Moreover, § 72-3-503(1), MCA, provides that an objection to the appointment of a personal representative can be made only in formal proceedings. Justin C. Peterson’s will is being informally probated. On that basis, Mr. Whalen may not object to the District Court’s appointment of David Peterson as personal representative of the Estate.

We hold the District Court properly appointed David Peterson, the sole heir, as the successor personal representative of the estate of Justin C. Peterson.

Issue III.

Should the appellant be sanctioned and ordered to pay respondent’s attorney fees and costs pursuant to Rule 32, M.R.App.P., for bringing a meritless appeal?

David Peterson contends that this Court should assess sanctions against Mr. Whalen and his attorneys for bringing a meritless appeal. He further claims that it was brought for an improper purpose. Thus, he asks this Court to require Mr. Whalen to reimburse him for his reasonable costs and attorney fees incurred in connection with this appeal.

On the record before us we hold there is no basis for sanctions to be assessed against the appellant for attorney fees and costs pursuant to Rule 32, M.RApp.P., for bringing a meritless appeal.

Affirmed.

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

JUSTICES HUNT and TRIEWEILER did not participate.


author: JUSTICE NELSON

text:
    CRAIG WILLIAMS, Plaintiff/Appellant, v. STATE MEDICAL OXYGEN & SUPPLY, INC., a Montana Corporation, Defendant/Respondent.
    No. 93-516.
    Submitted on Briefs February 24, 1994.
    Decided May 20, 1994.
    51 St.Rep. 458.
    874 P.2d 1225.
    265 Mont. 111.

      For Plaintiff-Appellant: Gene R, Jarussi, Jarussi & Bishop, Billings.
    For Defendant-Respondent: John R. Gordon, Reep, Spoon & Gordon, Missoula.
   JUSTICE NELSON

delivered the Opinion of the Court.

Plaintiff/appellant, Craig Williams, (Williams), appeals a summary judgment in favor of the defendant, State Medical Oxygen & Supply, Inc., (State Medical). The District Court ruled that there were no genuine issues as to any material fact, that State Medical was not liable under the theory of negligent entrustment, and that, therefore, State Medical was entitled to summary judgment as a matter of law. We reverse and remand for further proceedings.

This is a personal injury case arising out of an incident wherein Williams fell from the back of a pickup truck carrying a load of mattresses. The incident occurred on May 6, 1987, while Williams was working as an employee of Cay Enterprises. On the morning of May 6,1987, Brian Cloutier (Cloutier), an officer and director of Cay Enterprises, arranged to have six teenagers employed by that corporation, meet at his house in Kalispell. The employees were to move mattresses from one place to another.

Because a vehicle was needed to transport the Cay Enterprises’ employees and mattresses, Cloutier, who was also an officer and director of State Medical, arranged to have a State Medical pickup left at his home in Kalispell to be used for the job. After the Cay Enterprises’ employees met at Cloutier’s home, he gave the keys to the pickup to one of the employees, who then drove to Big Fork. Upon arriving at Big Fork, Cloutier told the employees that they should move as many box springs and mattresses in each load as they could. He also instructed the employees not to sit on the tailgate of the pickup when moving the load. Cloutier did not provide ropes or any other items that the employees could use to secure the load.

Williams was sitting on top of a load of mattresses, when the pickup turned a corner, and Williams fell off the pickup hitting his head on the pavement. Williams suffered injuries as a result of this fall.

Williams filed an action in the Eleventh Judicial District, Flathead County, seeking damages from State Medical, alleging that it was negligent in supplying the vehicle to the Cay Enterprises’ teenage employees. State Medical moved for summary judgment. After reviewing the briefs and hearing oral arguments of both parties, the District Court issued an order dated August 13,1993, granting State Medical’s motion for summary judgment, and entering a judgment in its favor. Williams appeals from this judgment.

Our standard in reviewing a grant of summary judgment is the same as that utilized by the District Court. That is, we use the same criteria initially used by the District Court under Rule 56, M.R.Civ.P. Minnie v. City of Roundup (1993), 257 Mont. 429, 431, 849 P.2d 212, 214. Summary judgment is proper, “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Rule 56(c), M.R.Civ.P

In a personal injury case we start from a basic premise that issues of negligence are not ordinarily susceptible to summary adjudication, but are better determined at trial. Dillard v. Doe (1992), 251 Mont. 379, 382, 824 P.2d 1016, 1018. Where factual issues concerning negligence and causation are presented, liability should not be adjudicated by summary judgment. Duchesneau v. Silver Bow County (1971), 158 Mont. 369, 377, 492 P.2d 926, 931. In such a case, it is only when reasonable minds could reach but one conclusion, that questions of fact may be determined as a matter of law. Brohman v. State (1988), 230 Mont. 198, 202, 749 P.2d 67, 70. (Citation omitted.) This is not such a case. Here the central factual issues regarding negligence and negligent entrustment must be determined by the trier of fact.

Furthermore, the District Court ruled that, on the facts before it, State Medical was not liable under the theory of negligent entrustment as a matter of law. We disagree. We conclude that whether State Medical, acting through Cloutier, negligently entrusted a pickup to Cay Enterprises’ employees cannot be decided as a matter of law, but must be decided by the trier of fact.

In granting summary judgment, the District Court focused on § 390 of the Restatement (Second) of Torts, (1965), (Restatement). That section of the Restatement provides:

One who supplies directly or through a third person a chattel for the use of another whom the supplier knows or has reason to know to be likely because of his youth, inexperience, or otherwise, to use it in a manner involving unreasonable risk of physical harm to himself and others whom the supplier should expect to share in or be endangered by its use, is subject to liability for physical harm resulting to them.

We agree that, here, negligent entrustment would not lie under that section of the Restatement. Section 390 deals with the supplying of a chattel to a person incompetent to use it safely. Restatement (Second) of Torts § 390 comment (b). Here it does not appear that the teenage driver was incompetent, nor is there any allegation that he was not properly licensed. The fact that the teenage driver was a minor or inexperienced, without more, does not mean he lacked the training or experience to operate the pickup. Smith v. Babcock (1971), 157 Mont. 81, 89, 482 P.2d 1014, 1018. In addition, there was no allegation that the teenage driver had a reputation as being a negligent driver. Thus, Cloutier did not supply the pickup to a person he knew to be incompetent.

The substantive law governing Williams’ claim in this case is more appropriately set forth in Restatement § 308, which we applied in Bahm v. Dormanen (1975), 168 Mont. 408, 412, 543 P.2d 379, 382.

Section 308 of the Restatement provides:

It is negligence to permit a third person to use a thing or to engage in an activity which is under the control of the actor, if the actor knows or should know that such person intends or is likely to use the thing or to conduct himself in the activity in such a manner as to create an unreasonable risk of harm to others.

Negligent entrustment encompassed in § 308 is somewhat different than that encompassed in § 390. Comment (b) to that Restatement section indicates that the rule “... has its most frequent application where the third person is a member of a class which is notoriously likely to misuse the thing which the actor permits him to use ...,” nevertheless, the rule is also applicable where,

... the actor [here, Cloutier] entrusts a thing [the State Medical pickup] to a third person [the teenage driver and employees of Cay Enterprises] who is not of such a class, if the actor [Cloutier] knows ... the peculiar circumstances of the case are such as to give the actor [Cloutier] good reason to believe that the third person [the teenage driver and employees of Cay Enterprises] may misuse it [the pickup]. (Emphasis added.)

Restatement (Second) of Torts § 308 comment (b).

Here, the critical focus of the finder of fact must be on what Cloutier had in mind as regards moving the mattresses at the time he surrendered control of State Medical’s pickup to Cay Enterprises’ driver and employees. At that time, knowing how he intended to manage and supervise the mattress moving project — i.e. on the “peculiar circumstances” of this case — did he have good reason to believe that the Cay Enterprises’ driver and employees were likely to use the pickup or to conduct themselves in such a manner as to create an unreasonable risk of harm?

As to the “control” requirement of § 308, comment (a) notes that the words “under the control of the actor:”

[A]re used to indicate that the third person is entitled to possess or use the thing or engage in the activity only by the consent of the actor, and that the actor has reason to believe that by withholding consent he can prevent the third person from using the thing or engaging in the activity.

Restatement (Second) of Torts § 308 comment (a).

This Court addressed the element of control encompassed in § 308 in Bahm, 543 P.2d at 382. In Bahm, two men, Nordahl and Dormanen, borrowed a truck to go on a hunting trip. While Nordahl was driving the truck he was involved in an accident, which resulted in the deaths of both Nordahl and the plaintiff’s husband. The plaintiff brought a wrongful death action against Dormanen, alleging he was liable under the theory of negligent entrustment. Bahm, 543 P.2d at 381.

The plaintiff maintained that Dormanen had the physical power to deprive Nordahl of the keys to the truck. This power, the plaintiff argued, was sufficient control to establish liability under negligent entrustment. Bahm, 543 P.2d at 381. This Court disagreed, holding that “the basis of negligent entrustment is founded on control which is greater than physical power to prevent. A superior if not exclusive legal right to the object is a precondition to the imposition of the legal duty.” Bahm, 543 P.2d at 382.

In the instant case, the District Court ruled that the pickup was under the control of State Medical’s officer, Cloutier, before he turned the keys over to the Cay Enterprises’ employees. That being the case, it follows then, that because Cloutier had control over the pickup before he turned it over to Cay Enterprises’ employees, he also had the power to prevent Cay Enterprises’ employees from using the vehicle. Therefore, a question of negligent entrustment under § 308 remains. Was State Medical, through its officer and director, Cloutier, negligent at the time of providing the pickup to Cay Enterprises’ employees, if it knew or should have known that Cay Enterprises’ employees would likely use the pickup or conduct themselves in such a manner as to create an unreasonable risk of harm to others?

To address this question we must discuss two principles of law. The first principle concerns the law regarding when a principal is liable for negligent acts of its agent. The second principle concerns imputing knowledge to two separate corporations which are dealing with one another through a common officer.

The first principle holds, that an officer of a corporation, when acting within the course and scope of his employment, is an agent of the corporation when dealing with third parties. Fletcher, Cyclopedia of the Law of Private Corporations § 266 (rev. perm. ed. 1986). Alley v. Butte & Western Mining Co. (1926), 77 Mont. 477, 492, 251 P. 517, 522.

The law governing a principal’s liability to third persons, for the negligence of its agents or employees is found at § 28-10-602, MCA. That section provides:

Principal’s responsibility for agent’s negligence, omissions, and wrongs. (1) Unless required by or under the authority of law to employ that particular agent, a principal is responsible to third persons for the negligence of his agent in the transaction of the business of the agency, including wrongful acts committed by such agent in and as a part of the transaction of such business, and for his willful omission to fulfill the obligations of the principal.
(2) A principal is responsible for no other wrongs committed by his agent than those mentioned in subsection (1) unless he has authorized or ratified them, even though they are committed while the agent is engaged in his service.

The focus of the inquiry is usually whether the agent was operating within the course and scope of his employment. See cases from Hoffman v. Roehl (1921), 61 Mont. 290, 298, 203 P. 349, 350, through, most recently, Rollins v. Blair (1989), 235 Mont. 343, 347, 767 P.2d 328, 330.

In the instant case, the District Court found that it appeared Cloutier was acting within the scope of his employment and authority as an officer and director of State Medical, when he turned the pickup over to Cay Enterprises’ employees. It also appears from the District Court’s order that Cloutier was acting within the scope of his authority as officer and director of Cay Enterprises when he arranged for the six teenage Cay Enterprises’ employees to move the mattresses.

Turning to the second principle, imputing knowledge to two separate corporations which are dealing with one another through a common officer, we start with the premise that under Montana law, the knowledge of an agent is imputed to the principal. Section 28-10-604, MCA. See also Empire Steel Mfg. Co. v. Carlson (1981), 191 Mont. 189, 196, 622 P.2d 1016, 1021. As a general rule, where there are two corporations, dealing with one another through a common officer, the question of whether one corporation is to be charged with notice of what is known to the agent by virtue of his relation to the other corporation depends on the circumstances of each case. 19 C.J.S. Corporations § 637 (1990), 18B Am.Jur.2d. Corporations § 1683 (1985). “However, [a] common officer’s knowledge of the affairs of one corporation will be imputed to the other when such knowledge is present in his mind and memory at the time he engages in a transaction on behalf of such other corporation, or when such knowledge comes to him while acting for such other corporation in his official capacity, or while acting as an agent of such corporation, and within the scope of his authority...” 19 C.J.S. Corporations § 637, at 288 (1990).

Therefore, albeit he was going to supervise and manage the mattress moving project on behalf of Cay Enterprises, the knowledge Cloutier had regarding how he would manage and supervise the mattress moving project, at the time he turned control of the pickup over to the Cay Enterprises employees, must be imputed to State Medical. Such knowledge of Cloutier is a question of fact to be determined by the trier of fact based on evidence to be introduced at trial.

The order of proof of the various elements of Williams’ cause of action, as discussed above, is left to the sound discretion of the trial court. However, there are issues of negligence in this case which are not appropriately decided on summary judgment, but which must be left for determination by the finder of fact. Accordingly, we hold that the District Court erred in granting summary judgment for State Medical.

Reversed and remanded for further proceedings.

CHIEF JUSTICE TURNAGE, JUSTICES HARRISON, GRAY, WEBER, DISTRICT JUDGE MIZNER, sitting for JUSTICE HUNT, and RETIRED JUSTICE McDONOUGH, sitting for JUSTICE TRIEWEILER, concur.


text:
    KENNETH H. WILLSON, Plaintiff and Appellant, v. HELEN M. COLLINS TERRY, and FLOYD TERRY, Defendants and Respondents.
    No. 93-587.
    Submitted on Briefs March 24, 1994.
    Decided May 20, 1994.
    51 St.Rep. 462.
    874 P.2d 1234.
    265 Mont. 119.

      For Plaintiff and Appellant: Robert C. Melcher, Billings.
    For Defendants and Respondents: Gorham E. Swanberg, Ray F. Koby, Swanberg, Koby & Swanberg, Great Falls.
   JUSTICE WEBER

delivered the Opinion of the Court.

This is an appeal from the dismissal of an action in the Twelfth Judicial District Court of Chouteau County. We affirm.

We consider the following issue on appeal:

Did the District Court err when it granted defendants’ motion to dismiss based upon the court’s conclusion that the option to purchase within the original lease agreement ended at the expiration of the written lease term?

Appellant Kenneth Willson (Willson) leased land from respondent Helen Collins Terry (Terry) for the purpose of farming. The original lease was written and was signed on or about February 8, 1985 and lasted for three years until 1988. The lease provided: “This FARM LEASE shall be for a period of three (3) years, or longer if mutually agreed to by both parties.”

After the expiration of the written lease, Willson continued on the property following yearly oral agreements between the parties. In January of 1990, respondents offered to sell the farm to Willson for $325 per acre. Willson believed this price to be inflated and informed the Terrys that he would not buy it at this price, but would like to buy it at a more representative price. Willson claims that Mr. Terry agreed that he would notify him if they lowered the price. However, in July of 1990, the Terrys sold the farm to a third party for $265 per acre while Willson was in possession of the land and without notifying Willson that the price had been dropped.

Willson filed a complaint in Chouteau County alleging breach of contract, breach of implied covenant of good faith and fair dealing, failure to disclose, negligent misrepresentation and breach of promise. Defendants filed a motion to dismiss pursuant to Rule 12(b)(6) M.R.Civ.P. The court granted dismissal on October 19, 1993, finding that the renewal clause in the written lease was inadequate to continue the option to buy beyond the original written lease term.

Did the District Court err when it granted defendants’ motion to dismiss based upon the court’s conclusion that the option to purchase within the original lease agreement ended at the expiration of the written lease term?

Willson argues that in making its determination to dismiss, the court based its decision on an issue of law not placed in contention by the parties. Willson claims that the court’s interjection of legal theory without providing him an opportunity to respond to the theory denies him due process. Further, Willson argues that he was not a holdover tenant as determined by the court, but was instead a lessee in possession of the land by virtue of an oral agreement. Because he was not a holdover tenant, Willson contends that he was entitled to a carryover of the option to purchase from the original written lease. Willson further argues that his possession of the land entitles him to an automatic renewal of his lease on the same terms as the original lease pursuant to § 70-26-204, MCA.

Terry argues that the issue of the renewal clause and its viability was thoroughly discussed by both parties and that the court did not interject a new issue. Further, Terry contends that Willson incorrectly states the problem when he argues that the court acted improperly to characterize him as a holdover tenant. According to Terry, the court’s determination springs from established Montana law stating that in order for a renewal of an option to purchase to continue beyond the written lease, that clause must be specific; the clause in question here was not specific and the court did not err in so finding.

This Court will only affirm a district court’s dismissal of an action if it finds that the plaintiff is not entitled to relief under any set of facts which could be proven in support of the claim. King v. State (1993), 259 Mont. 393, 856 P.2d 954. Therefore, the District Court can only be affirmed if Willson could not recover under any set of circumstances.

Willson’s argument that the court decided the action based upon a new issue is not well taken. Willson cites Nentwig v. United Industry (1992), 256 Mont. 134, 845 P.2d 99, for the proposition that the District Court was required to allow him an opportunity to address the new issue. However, we do not believe that the issue of whether the renewal clause was void for vagueness as so described by the court was a new issue. Such a consideration was implied within the context of the pertinent legal question.

The record indicates that one of the main issues briefed by counsel concerned whether the written lease was renewed together with all of its terms. Because this is the fundamental legal question the court had to answer, it was within its jurisdiction to consider all relevant law pertaining to resolution of the question and interpretation of the original written lease. Thus, the court did not err by citing a relevant case, Riis v. Day (1980), 188 Mont. 253, 613 P.2d 696, which was not cited by either counsel and which dealt with the void for vagueness theory.

The written instrument interpreted by the District Court and which we must also review is a written lease executed in 1985. Willson argues that this lease contains an “option to purchase.” It reads:

Tenant shall be granted an option to purchase said property, in the event it should be offered for sale during this lease period, at the same price and terms as may be offered by a bona fide prospective purchaser.... (Emphasis added.)

Despite the use of the word “option” in this sentence, the drafters intent must be determined from the entire instrument itself. Lee v. Shaw (1992), 251 Mont. 118, 822 P.2d 1061. Having considered the entire contract, we determine that the above sentence indicates Willson had a “right of first refusal” as opposed to an option contract.

The legal distinction is very important. An option is a right acquired by which an owner of property agrees with another person that he shall have the right to buy the property at a fixed price within a certain time. Lee, 251 Mont. at 121, 822 P.2d at 1063. The wording of the contract before us does not indicate a fixed price, although it does indicate a fixed term — during this lease period — which is three years.

A right of first refusal means that when the owners decide to sell the property, the person named has the first chance to buy it.

A right of first refusal or preemptive right does not give to the preemptioner the power to compel an unwilling owner to sell; it merely requires the owner, when and if he decides to sell, to offer the property first to the person entitled to the preemption... (Emphasis in original.)

Lee, 251 Mont. at 121, 822 P.2d at 1063. The wording in the lease states “in the event that it should be offered for sale.” This indicates that no decision to sell has been made; the intent of the drafters, therefore, was to create a right of first refusal and not an option contract.

The written lease also contains the disputed “renewal” clause:

This FARM LEASE shall be for a period of three (3) years, or longer if mutually agreed to by both parties. (Emphasis added.)

The District Court found that this clause was void for vagueness. Thus, the court reasoned that any agreement beyond the expiration of the original written lease was a new agreement between the parties and did not represent an extension of the original written lease with its attendant ambiguous renewal clause.

Where vagueness or imprecision exist in a contract, the contract as a whole must be considered. Barrett v. Ballard (1980), 191 Mont. 39, 622 P.2d 180. The language of the above alleged renewal clause is made totally nebulous because of the word “if.” We agree with the District Court that neither this clause, nor any other language in the written lease, can renew the lease unless more specific language is used; the lease itself only mentions that such a course of action is possible if the parties agree to it. The clause above does nothing but alert the parties to the possibility that any renewal beyond the three year term of the written lease will require a future separate agreement.

We know from the record that an oral yearly agreement of some kind existed, but such agreement existed totally apart from any renewal of the original lease. There is nothing in the record to indicate that the year-to-year tenancy created by oral agreement and under which Willson stayed upon the land contained a right of first refusal.

Willson cites Nevala v. McKay (1978), 178 Mont. 327, 583 P.2d 1065, and Rumph v. Dale Edwards, Inc. (1979), 183 Mont. 359, 600 P.2d 163, for the proposition that when a lease is extended, an option to purchase is likewise extended. These cases do not bolster his argument. Rumph involved a written extension of a lease. The document extending the lease, a rider to the original lease, contained specific terms and the following language: “That the lessee, Hubert C. Rumph and/or Margery Rumph has the option to renew this lease as well as the option to buy.” Rumph, 183 Mont. at 363, 600 P.2d at 165. The rider provided a specific provision for extension of the lease and renewal of the option to buy. It is because of the explicitness of the rider that we affirmed the district court stating that the option to purchase was continued. Rumph, 183 Mont. at 370, 600 P.2d at 169. Here, no such specific written rider exists which continues the right of first refusal.

Unlike the present case, the original lease in Nevala contained a specific clause extending the lease by “written” one-year lease extensions. The original lease ended on October 4,1971. Instead of executing the written one-year extensions, the parties wrote a three-year handwritten extension to December 1,1974 by writing on the back of the original lease. After 1974, the Nevalas stayed on the farm until 1975 with no written lease extensions.

During September of 1975, the owner of the ranch told Nevala that he was going to sell the ranch. Before Nevala could obtain financing, the owner called and said that he would retain the ranch. However, the owner sold the ranch to a third party. We held that no right of first refusal had been passed on because the parties had “modified” the original lease by writing on the back of it instead of adhering to the original lease provision of one-year “written” extensions. Nevala, 178 Mont. at 331, 583 P.2d at 1069. This modification, occurring without inclusion of a written option or right of first refusal, effectively ended the terms under which the original lease operated, and therefore, ended the original option to buy.

While the present case does not present a situation in which the original written lease was “modified” it does present a similar situation in which the terms of the written lease ended. In Nevala, the written lease was modified and then expired. In the present case, the written lease was not renewed because the renewal clause was inadequate to renew. In either case, the terms of the written lease ended with the term expiration of the written lease.

Another difference between Nevala and the present case is that the tenant in Nevala became a holdover tenant when the period of the modified lease under which the tenant lived, ended. Here, we have a situation in which the tenants lived on the land with a yearly oral agreement. Willson argues that he was a lessee in possession as opposed to a holdover tenant. The distinction is immaterial for the purposes of this opinion. Given either nomenclature, Willson still has not retained a right of first refusal springing from the written lease.

Finally, Willson argues that § 70-26-204, MCA, gives him an automatic lease renewal by virtue of his possession of the land:

Renewal of lease by lessee’s continued possession. If a lessee of real property leased under an arrangement not governed by chapter 24 of this title remains in possession thereof after the expiration of the hiring and the lessor accepts a rent from him, the parties are presumed to have renewed the hiring on the same terms and for the same time, not exceeding 1 month when the rent is payable monthly, or in any case 1 year. (Emphasis added.)

Section 70-26-204, MCA. The record reveals that Willson was on the land several years past the expiration of the term of the written lease. If the written lease expired in 1988, then according to this statute, any oral agreement extending the “hiring” or lease could only last until 1989.

We construed the forerunner of the aforementioned statute, that consists of identical wording, in Roseneau Foods, Inc. v. Coleman (1962), 140 Mont. 572, 374 P.2d 87. We stated there that:

As pointed out, section 42-203 as applied here created a tenancy for one year. Section 42-205 applied with section 42-203 created a presumption that the tenancy was renewed on a year to year basis. While it is true that section 42-205 presumes a renewal on the basis of a monthly rental period, it is also clear that the section provides that the implied renewal period may be presumed to be for a year, but not in excess of that period. (Emphasis added.)

Roseneau, 140 Mont. at 578, 374 P.2d at 90. Therefore, any oral agreement made after a renewal of one year, cannot be presumed to contain all of the terms of the initial written agreement. We conclude that an oral agreement made after the first year’s oral renewal pursuant to § 70-26-204, MCA, constitutes a brand new agreement and must contain its own terms. The plain words of the statute indicate this. Therefore, this statute does not support Willson’s argument.

We finally conclude that the right of first refusal was not renewed pursuant to the renewal clause in the original written lease because that renewal clause was inadequate to renew the written lease. Therefore, we hold that the District Court did not err in dismissing the action based upon the court’s conclusion that the right of first refusal (option to purchase) located in the original lease agreement ended at the conclusion of the written lease.

Affirmed.

CHIEF JUSTICE TURNAGE, JUSTICES HARRISON, NELSON and TRIEWEILER concur.