text:
    LEE STOTT and BESSIE STOTT, and ALL WEST EQUIPMENT, and Rick Stott, Plaintiffs and Appellants, v. RAYMOND FOX, Defendant and Respondent.
    No. 90-131.
    Submitted July 13, 1990.
    Decided Oct. 30, 1990.
    246 Mont. 301.
    805 P.2d 1305.

      John C. Doubek, Small, Hatch, Doubek & Pyfer, Helena, for plaintiffs and appellants.
    Barry G. O’Connell, Moore, O’Connell, Refling & Manos, Bozeman, for defendant and respondent.
   JUSTICE SHEEHY

delivered the Opinion of the Court.

This legal malpractice action was brought by All West Equipment, Lee Stott, Bessie Stott, and Rick Stott. The plaintiffs allege that Raymond Fox failed to represent them properly in an action for a deficiency judgment brought by First Bank Western. Specifically, plaintiffs contend that Fox was negligent in stipulating to the dismissal of the Bank’s deficiency judgment action with prejudice, having failed to explain to the plaintiffs the effect of the dismissal upon the plaintiffs’ alleged claims against the Bank under various lender liability theories.

After the District Court dismissed the deficiency action, on October 15,1985, the Stotts and All West Equipment, with different counsel, filed a complaint in the Fourth Judicial District against First Bank alleging fraud, misrepresentation, and breach of the covenant of good faith and fair dealing on the part of First Bank in making the loans to them and in obtaining their signature for the release of collateral. The plaintiffs also alleged that the collateral was sold without commercial reasonableness and that First Bank violated the requirements set out in § 30-9-504, MCA.

First Bank filed a motion to dismiss, which was denied by the District Court. When the District Court denied First Bank’s motion to dismiss, it sought a writ of supervisory control from this Court. First Bank v. Fourth Judicial District Court (1987), 226 Mont. 515, 737 P.2d 1132. We granted First Bank’s petition for writ of supervisory control, and dismissed the plaintiffs’ complaint. In that case, we held the plaintiffs’ claims were barred by the stipulated dismissal with prejudice of the Bank’s deficiency judgment action. Confronted with the dismissal of their second action, plaintiffs instituted the malpractice suit against their former counsel Fox. The Fifth Judicial District Court, Jefferson County, entered summary judgment in favor of defendant Fox on the plaintiffs’ claim of legal malpractice. Now the plaintiffs appeal the District Court’s summary judgment in favor of Fox. We affirm.

The parties raise the following issues on appeal:

1. Did the District Court err by finding that Lee and Bessie Stott were not the real parties in interest in the underlying lender liability action?

2. Did the District Court err by finding that an attorney-client relationship did not exist between Rick Stott and Raymond Fox?

3. Did the District Court err by finding that plaintiffs could not have prevailed on their claim for damages allegedly caused by the loss of the Massey-Ferguson dealership?

4. Did the District Court err in finding that Bank did not act in bad faith in its contractual relationship with the plaintiffs?

In order to determine whether Fox was guilty of legal malpractice, we must first examine the facts surrounding Fox’s earlier representation of the plaintiffs in First Bank’s deficiency judgment action against the plaintiffs.

All West Equipment was incorporated in 1971. Lee and Bessie Stott were officers of All West Equipment and spouses. Rick Stott, the son of the Stotts, was an employee of All West Equipment.

All West engaged in the sale and repair of farm implements. All West was a dealer for Massey-Ferguson. On October 18, 1982, Massey-Ferguson terminated All West’s dealership, when Massey-Ferguson received a nonsufficient funds check from All West and further investigation revealed that All West was “out of trust” exceeding $50,000.

All West began its relationship with First Bank in late 1980. Two loans were originally made to All West by First Bank. A number of Security agreements were entered into between First Bank and All West to perfect First Bank’s position. The Stotts also executed a guaranty with First Bank. Furthermore, a “Corporate Authorization Resolution” was executed identifying Lee and Bessie Stotts as corporate officers and having the right to borrow funds.

In Jeme of 1982, All West was in arrears on its debt retirement to First Bank. For that reason, the parties reduced All West’s indebtedness to two demand notes. Specifically, First Bank loaned to All West and Lee Stott (individually) $68,732.30, due in September, 1982. Also, First Bank loaned $21,566.63 to All West. The second loan was due December 15,1982.

The Stotts and All West defaulted on both of these notes. The Bank also discovered that All West was dealing out-of-trust with Massey-Ferguson. As the record reflects, the out-of-trust dealings were discovered on October 15, 1982. Later, possession of the collateral was turned over to First Bank, by a written instrument dated October 20, 1982, and signed by Lee and Rick Stott on behalf of All West Equipment.

The assets of All West, pledged as collateral, were sold at a public and private sale through Gardener Auction on November 13, 1982. As a result of the sales, almost $31,000 was applied to All West’s indebtedness on the operating note, leaving a balance due on the loan of $42,088. On January 7, 1983, First Bank filed a complaint, in the Fourth Judicial District Corut, against All West Equipment and Lee and Bessie Stott, to collect deficiencies owing after the sale of the collateral under the promissory notes and guaranty. Eventually, the deficiency action between First Bank and All West and the Stotts was settled without trial and a stipulation and order of dismissal with prejudice was filed on January 4, 1984.

In reviewing an order for summary judgment, the standard of review for this Court is the same as that used by the District Court under Rule 56(c), M.R.Civ.R Kronen v. Richter (1984), 211 Mont. 208, 211, 683 P.2d 1315, 1317. Therefore, we may find summary judgment when “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.; Mayer Bros. v. Daniel Richards Jewelers, Inc. (1986), 223 Mont. 397, 399, 726 P.2d 815, 816. Once the record discloses no genuine issue of material fact, the burden of proof shifts to the party opposing the motion to present facts of a substantial nature that a material fact issue does exist. Mayer, 726 P.2d at 816. The party opposing summary judgment may not rest upon mere allegations in the pleadings or conclusory statements in the briefs but has an affirmative duty to respond by affidavits or sworn testimony with specific facts that show a genuine factual issue exist. Mere conclusory or speculative statements are insufficient‘to raise a genuine issue of material fact. National Gypsum Co. v. Johnson (1979), 182 Mont. 209, 212, 595 P.2d 1188, 1189. Mayer, 726 P.2d at 816; citing Rule 56(e), M.R.Civ.P. Further, the District Court judge is not required to anticipate possible proof at trial when ruling on a summary judgment motion. Tucker v. Trotter Treadmills, Inc. (1989), 239 Mont. 233, 235, 779 P.2d 524, 525.

In a legal malpractice action, the complaining party, in order to prevail:

“[M]ust initially establish the existence of an attorney-client relationship. The plaintiff must then establish that the acts constituting the negligence ... occurred, proximately causing damages to the plaintiff. The final requirement for the plaintiff is the need to establish, ‘[t]hat “but for” such negligence ... the client would have been successful in the prosecution or defense of the action.’ ”

Lorash v. Epstein (1989), 236 Mont. 21, 24, 767 P.2d 1335, 1337; citing Christy v. Saliterman (1970), 228 Minn. 144, 179 N.W.2d 288, 293-94.

In order for All West and the Stotts to prevail against Fox, they must show that their underlying action against First Bank would have been successful. Some courts, in describing this procedure, have termed it as a “suit within a suit.” Liberman v. Employers Insurance of Wausau (1980), 84 N.J. 325, 419 A.2d 417, 426. The District Court found that “the plaintiffs have failed to meet the burden that they could have prevailed in any counterclaim against First Bank. The legal malpractice test of Lor ash has not been met.” We agree with the District Court’s holding that the plaintiffs’ claims against the Bank would have not been successful.

I.

Did the District Court err by finding that Lee and Bessie Stott were not the real parties in interest in the underlying action?

The District Court found that Lee and Bessie Stott were not proper parties, in the former liability action, nor could they have personally asserted a claim for damages in the dismissed action. The District Court, relying on our holdings in Moats Trucking Co., Inc. v. Gallatin Dairies, Inc. (1988), 231 Mont. 474, 753 P.2d 883, and Bottrell v. American Bank (1989), 237 Mont. 1, 773 P.2d 694, explained that the alleged damages could only have been claimed by All West Equipment, the Stotts’ corporation.

The District Court is correct. This issue is controlled by our holdings in Moats and Bottrell. In Moats, we said:

“In Malcolm v. Stondall Land Co. (1955), 129 Mont. 142, 145, 284 P.2d 258, 260, this Court stated the general rule regarding a stockholder’s personal right to sue in the corporation’s cause of action:
“... As a general rule stockholders may not sue upon a cause of action belonging to their corporation whether in their own names or in the name of the corporation itself.
“In Malcolm, this Court addressed for the first time the issue of whether individual shareholders who control all of the stock of the corporation may disregard the corporate entity and sue as individuals on the corporation’s cause of action. We held that such individual shareholders do not have the right to pursue an action on their own behalf when the cause of action accrues to the corporation. Malcolm, 129 Mont. at 146, 284 P.2d at 260.”

The plaintiffs rely on the fact that as guarantors of the corporate debt of All West Equipment that they should have standing. As the District Court properly noted this contention has been rejected by this Court in Bottrell. In Bottrell, individual shareholders asserted they should be entitled to individual compensatory damages based on the fact they were required to sign personal guarantees of the corporate debt. We affirmed our holding in Moats, and found the cause of action belonging to the Corporation and not the shareholders. Bottrell, 773 P.2d at 709-10.

Recently, in Walstad v. Northwest Bank (Mont. 1989), 783 P.2d 1325, 1328, 46 St.Rep. 2160, 2164, we reiterated our prior holding in Bottrell:

“We previously held that when corporate shareholders personally guarantee corporate debts, the shareholders may not recover as individuals for the lender’s breach of the covenant of good faith and fair dealing and negligent misrepresentation absent a separate duty owed to the shareholders. Bottrell, 773 P.2d at 709.”

The evidence overwhelmingly supports the District Court’s conclusions “that individual stockholders (Stotts) do not have a right to pursue an action on their own behalf when the cause of action accrues to the corporation.” A review of the notes identifies the borrower as “All West Equipment” signed by “Lee Stott as President.” The demand note in the amount of $68,732.30 is likewise signed by Lee Stott individually although that is of no significance in view of the existence of guarantees signed by the Stotts with First Bank, and our earlier holdings in Bottrell and Walstad.

To permit this litigation to go forward as to Lee and Bessie Stott, is to permit “reverse piercing of the corporate veil,” thus allowing the shareholders “to invoke the corporate entity only when it would be to their advantage.” Moats, 753 P.2d at 885. Bessie Stott or Rick Stott may not recover under this theory since they were not signatories to either promissory note.

Next, Lee and Bessie Stott argue that All West was not a corporation in 1982 since it was dissolved in 1979 for failure to register, thereby entitling them to proceed individually. However, All West held itself out as a corporation in its dealings -until the very end and took full advantage of the corporate structure. The District Court in its order found that:

“It is not disputed that after ALL WEST’S corporate existence had technically expired, it acted as a corporate entity. Among other things it prepared and filed corporate tax returns, issued corporate resolutions, borrowed money, issued corporate notes and security agreements to secure payment of the same. It generally held itself out to be a corporation to the Court, the Bank, its own accountants and to the world.”

For the above reasons, this Court is compelled to conclude the Stotts are estopped from challenging All West’s corporate status. “An organization that has held itself out as a corporation is estopped from denying the legality of its corporate existence.” 18A Am. Jur.2d Corporations § 269.

Furthermore, the District Court considered the possibility that a material fact might exist as to the precise nature of the business entity of All West (i. e. sole proprietorship or partnership.) The District Court found that the Stotts failed to comply with the fictitious name statute (§ 30-13-203, MCA), and are thus barred from maintaining a suit or action by § 30-13-215, MCA. We agree with the District Court.

II.

Did the District Court err by finding that an attorney-client relationship did not exist between Rick Stott and Fox?

We have held that a plaintiff, in a legal malpractice action, “must initially establish the existence of an attorney-client relationship.” Lorash, 767 P.2d at 1337. There was never an attorney-client relationship between Rick Stott and Fox. Rick’s right to recover is premised upon Fox’s allegedly negligent handling of First Bank’s deficiency judgment action. The parties in that dismissed action were First Bank as plaintiffs, and All West Equipment, a corporation and Lee and Bessie Stott as defendants. Rick Stott, a plaintiff in this action was not a party to the dismissed action. These facts negate the existence of an attorney-client relationship between Rick Stott and Fox.

III.

Did the District Court err by finding that plaintiffs could not have prevailed on their claim for damages allegedly caused by the loss of the Massey-Ferguson dealership?

One of the claims in the dismissed action was damages for the loss of the Massey-Ferguson farm equipment dealership, which plaintiffs attributed to the wrongful acts of First Bank. To support their contention the plaintiffs rely upon the affidavit of Lee Stott. In his affidavit Lee Stott swears that the Bank advised him to terminate the dealership. According to Lee, “The intent of doing this was to, again, free up funds for the Bank and to allow the Bank to better situate its collateral and become more secure in its position. The promise made by Dan Simpkins was that the Bank would continue to finance our family business.” In his prior deposition testimony he says just the opposite. In his deposition, he testified the bank never advised him of the day-to-day operations and management of his business. The District Court, relying on Wilson v. Westinghouse (8th Cir. 1988), 838 F.2d 286, found that Lee Stott’s contradiction between his deposition testimony and his affidavit did not create a genuine issue of material fact. The court in Wilson stated:

“While the district courts must exercise extreme care not to take genuine issues of fact away from juries, ‘(a party should not be allowed to create issues of credibility by contradicting his own earlier testimony’... Ambiguities and even conflicts in a deponent’s testimony are generally matters for the jury to sort out, but a district court may grant summary where a party’s sudden and. unexplained revision of testimony creates an issue of fact where none existed before. Otherwise, any party could head off a summary judgment motion by supplementing previous depositions ad hoc with a new affidavit, and no case would ever be appropriate for summary judgment.”

Wilson, 838 F.2d at 289.

We agree with the District Court. The plaintiffs can not make a material issue of fact, regarding the farm dealership, through the use of his own contradictory testimony. Furthermore, the record reveals the dealership franchise was terminated by Massey-Ferguson prior to any alleged fraudulent action of the Bank. Thus, the Bank, despite Lee Stott’s affidavit, could not have played a part in All West’s loss of the Massey-Ferguson farm dealership.

IV.

Did the District Court err in finding that the Bank acted in bad faith in its contractual relationship with the plaintiffs?

The plaintiffs contend that the District Court erred in finding that the Stotts’ promissory notes were overdue. The Stotts contend that a special relationship existed between the Bank and themselves, and therefore the foreclosure constituted a breach of the covenant of good faith and fair dealing. Notwithstanding Lee Stott’s affidavit, his deposition testimony reflects a strictly contractual banking relationship:

“Q. Can you tell me during your relationship with Mr. Simpkins whether or not he advised you on the day-to-day operations of the business?
“A. No, he never did.
“Q. Did he ever advise you as to long-term goals for the business?
“A. No.
“Q. Did he ever advise you as to capitalization of the business?
“A. No.
“Q. Ever advise you on management decisions in the business?
“A. No.
“Q. Did he take an interest in the business other than that of just a lender of money?
“A. Not really, no.
“Q. Did Mr. Simpkins ever take any part in the stocking of inventory and the decision integral to that?
“A. No.
“Q. And did he give you any advice as to the level of inventory that should be kept?
“A. No.
“Q. Did he ever advise you as to your expansion plans?
“A. No.”

The relationship of the parties in the summer of 1982 was governed by the promissory notes and security agreements. The notes provided that upon any default in payment, “The holder of this note may at its option without notice declare this note immediately due and payable for the entire principal hereof plus accrued interest ...” The notes, likewise, provide that any default under the provisions of any security agreement is a default -under the notes. The record is clear that All West failed to make the Payments.

The security agreements executed by All West state in pertinent part:

“9. The occurrence of any of the following events shall constitute a Default: (a) failure of Borrower, or of any co-maker, endorser, surety or guarantor to pay when due any amount payable under any of the Secured Obligations: (b) failure to perform any agreement of Borrower contained herein; (c) any statement, representation, or warranty of Borrower made herein or any time furnished to the Bank is untrue in any respect as of the date made; (d) entry of any judgment against Borrower; (e) appointment of a receiver for, loss, substantial damage to, destruction, theft, sale or encumbrance to or of any portion of the Collateral, or the making of any levy, seizure, or attachment thereof; (f) Borrower becomes insolvent or unable to pay its debts as they mature or makes assignment for the benefit of its creditors or any proceeding is commenced by or against Borrower alleging that it is insolvent or unable to pay its debts as they mature; (g) death of any Borrower who is a natural person or of any partner of any Borrower which is a partnership; (h) dissolution, consolidation or merger, or transfer of a substantial part of the property of any Borrower which is a corporation or a partnership; (i) such a change in the condition or affairs (financial or otherwise) of Borrower or any co-maker, endorser, surety or guarantor of any of the Secured Obligations as in the opinion of the Bank impairs the Bank’s security or increases its risk; or (j) the Bank deems itself insecure for any reason whatsoever.
“10. Whenever a Default shall exist, the Bank may, at its option and without demand or notice, declare all or any part of the Secured Obligations immediately due and payable, and the Bank may exercise, in addition to the rights and remedies granted hereby, all rights and remedies of a secured party under the Uniform Commercial Code or any other applicable law. The sheriff of any county wherein the Collateral or any part thereof is located is authorized at the request of the Bank and upon delivery of the security agreement, to take possession of the Collateral and sell the same as provided by Law.
“11. Borrower agrees, in the event of Default, to make the Collateral available to the Bank at a place or places acceptable to Bank, and to pay all costs of the Bank, including reasonable attorneys’ fees, in the collection of any of the Secured Obligations and the enforcement of any of the Bank’s rights. If any notification of intended disposition of any of the Collateral is required by law, such notification shall be deemed reasonably and properly given if mailed at least ten (10) days before such disposition, postage prepaid, addressed to the Borrower at the address shown below.”

First Bank by virtue of the provisions of the notes, security agreements and the actions of All West, had the right to declare the loans due and take possession of its collateral. Its actions were not arbitrary, capricious or unreasonable. It loaned the money to All West and when All West defaulted and was also terminated by its major supplier, Massey-Ferguson, the Bank took action necessary to secure the pledged collateral. The Bank obtained the consent of All West and the Stotts to repossess the collateral. Stotts’ claim that they do not remember signing the documents relinquishing the collateral or that they only signed blank pieces of paper are conclusory assertions not supported by the evidence.

The relationship between plaintiffs and First Bank was contractual in nature and arose out of the Uniform Commercial Code. Under the Code, every contract or duty within the Code imposes an obligation of good faith in its performance or enforcement. Section 30-1-203, MCA. “Good faith” is defined in the Code as “honesty in fact in the conduct or transaction concerned.” Section 30-1-201(19), MCA. The above facts, amply demonstrate the Bank dealt in good faith with All West Equipment and the Stotts.

Under the law applicable at the time, “the nature and extent of an implied covenant of good faith and fair dealing is measured in a particular contract by the justifiable expectations of the parties. Where one party acts arbitrarily, capriciously or -unreasonably, that conduct exceeds the justifiable expectations of the second party.” Nicholson v. United Pacific Insurance Co. (1985), 219 Mont. 32, 41-42, 710 P.2d 1342, 1348. Clearly, under Nicholson, abreach of the implied covenant of good faith and fair dealing requires the breaching party to conduct itself in an impermissible activity, and in doing so, to act arbitrarily, capriciously or unreasonably. In this case, evidence of the implied breach is missing. The Bank here had the right to terminate its financing as long as it did so reasonably and not capriciously. Despite the plaintiffs bare allegations to the contrary, the Bank, from the evidence in this case, did act reasonably and not capriciously or arbitrary.

We affirm.

CHIEF JUSTICE TURNAGE and JUSTICES HARRISON, McDONOUGH and BARZ concur.


source: Caselaw Access Project

license: Public Domain

text:
    In the MATTER OF STEWART A. PEARCE II, An Attorney and Counselor at Law.
    No. 89-033.
    Nov. 1, 1990.
    246 Mont. 313.
    806 P.2d 21.
   ORDER OF DISBARMENT

On January 24,1989, Gail H. Coheen and Robert S. Marcott, acting as Special Counsel for the Commission on Practice, filed a formal complaint against Stewart A. Pearce II, an attorney licensed to practice in the State of Montana. The complaint alleged that Mr. Pearce was an incorporator and director of a corporation known as Family Financial Estate Services Inc. (FFES). This corporation was organized for the purpose of providing financial advice and for selling and preparing estate plans.

Representatives of FFES would contact potential buyers of the estate plans. After purchase, the customers would execute a limited power of attorney which authorized FFES to select an attorney to assist in preparation of the plans. In virtually all cases, Stewart Pearce was selected to be the attorney.

The sale agreements were deficient in numerous respects. In particular, they did not disclose the amount of fee to be paid Stewart Pearce, nor did the agreements disclose that Pearce was working under a conflict of interest through his dual representation of FFES and the customer. Additionally, it was found that Pearce frequently prepared estate documents for the customers without having any contact with those clients.

Following the filing of the complaint by the Special Prosecutors, Pearce submitted a motion requesting a copy of the original complaint. After this motion was denied, Pearce entered into an agreed statement of facts with the Special Prosecutors. This stipulation indicated that Pearce violated several Rules of Professional Conduct, including: Rule 1.2(a), which deals with the topic of consultation with a client; Rule 1.4, requiring that the client be kept informed; Rule 1.5(b), which relates to the fee basis of the lawyer’s representation and communication of that fee basis to the client; Rule 1.7, which relates to conflict of interest; and Rule 1.8(f) which also relates to conflicts of interest, specifically to the topic of compensation.

As part of this stipulation, Special Counsel agreed to recommend that Mr. Pearce receive a public censure, as punishment for his involvement with FFES. Special Counsel did not recommend that Pearce be suspended due to the fact that he was planning to leave the State of Montana and was placing himself on inactive status with the State Bar. Apparently, the Special Prosecutors considered disbarment, but determined that to be an inappropriate sanction.

At a hearing before the Commission on Practice, which was held on September 28, 1989, Pearce’s attorney was informed that the Commission would not accept the recommended sanction. Pearce’s attorney asked for a continuance and informed the Commission that it was his client’s intention to surrender his license to practice.

On October 24, 1989, Pearce surrendered his license to practice law. It is his belief that this act prevents the Commission from proceeding with any further disciplinary hearings. The Comsmission, however, disagreed and held a hearing on December 7, 1989 to determine an appropriate sanction. Following this hearing, the Commission recommended that Stewart Pearce be indefinitely suspended from the practice of law, in no case less than six months, and that he be publicly censured by this Court. It further recommended that Mr. Pearce pay all costs of his disciplinary proceeding as a condition of his reinstatement.

Pearce attacks the Commission’s Findings, Conclusions and Recommendations on several fronts. First, he maintains that the Commission was without jurisdiction to enter any sanction against him because his act of surrendering his license terminated any power over him, once held by the Commission. We disagree.

As stated above, Pearce surrendered his license on October 24, 1989. However, on October 5,1989, this Court clarified Rule 18 Rules for Lawyer Discipline and Enforcement. This Rule now clearly provides that the surrender of license while formal disciplinary proceedings are pending does not divest the Commission of jurisdiction. Contrary to Pearce’s argument, this rule change does not have any retroactive application to him. The rule was changed on October 5th, and he surrendered his license on October 24th. His act of surrendering his license is therefore governed by the changed Rule and the Commission retained jurisdiction to consider an appropriate sanction.

Pearce further argues that he was deprived of due process. He bases his argument on the fact that he was unable to obtain a copy of the original complaint lodged against him. We need not consider the merits of his argument because we find that he waived all rights to assert this position when he entered into and agreed to the stipulation of facts with Special Counsel. Because we base our decision in this case upon those facts, which he agreed to, we hold there is no reason to refer to the original complaint.

Finally, Mr. Pearce objects to several of the Commission on Practice’s Findings of Fact, Conclusions of Law and Recommendations. However, as stated above, our conclusion in this case is based upon his own admissions contained in the Agreed Statement of Facts. We therefore do not find it necessary to fully consider these arguments.

IT IS ORDERED:

1. The recommendations of the Commission on Practice are not adopted by this Court. The nature of Stewart A. Pearce’s admitted misconduct warrants greater disciplinary measures than those recommended by either the Special Prosecutors or the Commission on Practice.

2. Stewart A. Pearce, the respondent above named, is hereby disbarred immediately from any further practice of law in the State of Montana.

3. Copies of this order shall be served by ordinary mail by the Clerk of this Court upon Stewart A. Pearce at his last known address as shown in the records of this Court, upon his counsel of record, and upon such other parties as are specified in Rule 14 of the Rules for Lawyer Discipline and Enforcement.

DATED this 1st day of November, 1990.

s/ J.A. Tumage, Chief Justice

s/ John Conway Harrison, Justice

s/ John C. Sheehy, Justice

s/ Diane G. Barz, Justice

s/ William E. Hunt, Justice

s/ R. C. McDonough, Justice

s/ Fred J. Weber, Justice


text:
    LEE NELS TECCA, Petitioner, v. JACK McCORMICK, Warden, Respondent.
    No. 90-444.
    Oct. 11, 1990.
    246 Mont. 317.
    806 P.2d 11.
   ORDER

Petitioner Lee Neis Tecca, filed with this Court a Petition for Writ of Habeas Corpus seeking transcripts of his sentencing hearing and alleging that new evidence was not made available to him before his guilty plea was made. To this petition, the respondent Jack McCormick, through the Attorney General of the State of Montana has filed a Motion to Deny Petitioner’s Request for Transcripts and Dismiss the Petition for Writ of Habeas Corpus.

The petitioner originally plead not guilty to all charges contained in an information filed in the Eighteenth Judicial District, Gallatin County, which charged him with two counts of aggravated burglary, one count of sexual intercourse without consent, and one count of attempted sexual intercourse without consent. Later, with appointed counsel, petitioner withdrew his plea of not guilty and entered a plea of guilty to all four charges contained in the information.

Petitioner was sentenced to 40 years on Count I to run concurrently with a 40-year sentence for Count II, and 30 years on Count III, to run concurrently with a 20-year sentence on Count IV. In addition petitioner was designated a dangerous offender. The District Court further ordered that petitioner not be released on parole until he had satisfactorily completed the sexual offender treatment program at the Montana State Prison.

Petitioner did not appeal his conviction within the period provided and thus is not entitled to obtain a transcript merely by showing indigency under the authority of Rule 9(c), M.R.App.P. Further, petitioner is precluded from obtaining a transcript for collateral attack of his conviction unless he can identify a specific deprivation of rights or prejudicial error which might serve as a basis for relief. Petition of Parker (1973), 162 Mont. 330, 511 P.2d 973.

As to the grounds for relief in petitioner’s petition for writ of habeas corpus, this Court will consider such petition as a petition for post-conviction relief as the plain language of § 46-22-101(2), MCA, indicates that habeas corpus relief is not the appropriate remedy under the facts of this case.

Petitioner alleges that there is newly discovered evidence which was not available to him prior to the entry of his plea of guilty and that had he been made aware of this evidence, he would have gone to trial. There is no showing as to what constitutes this newly discovered medical evidence. Further, we note that prior to the entry of his guilty plea petitioner was the subject of several medical examinations, including a psychiatric evaluation, an examination for collection of hair, blood and saliva standards, and a neurological examination.

The petitioner here has exhausted his remedy of appeal because an appeal was afforded under § 46-20-104, MCA, but none was filed within 60 days of judgment as required by Rule 5(b), M.R.App.P.

This Court has previously invoked a procedural bar in § 46-21-105, MCA, and refused to address the merits of a post-conviction petition. See In re the Petition of Martin (Mont. 1989), [240 Mont. 419,] 787 P.2d 746, 46 St.Rep. 2213. Here, petitioner was afforded the right of appeal and did not take it.

We note that it has long been the rule that federal courts will decline review of State court decisions based upon independent and adequate State grounds, which include procedural bars. Henry v. Mississippi (1965), 379 U.S. 444, 446, 85 S.Ct. 564, 566, 13 L.Ed.2d 408. The United States Supreme Court has made it clear that State appellate decisions clearly state, as we have here, the procedural basis for dismissing post-conviction relief claims in order to preclude later review by federal courts on the merits. Harris v. Reed (1989) 489 U.S. 255, 109 S.Ct. 1038, 1043, 103 L.Ed.2d 308.

IT IS ORDERED:

1. The petition of Lee Neis Tecca is hereby dismissed.

2. The Clerk is directed to mail a true copy hereof to counsel of record for the respondent and to Petitioner personally.

DATED this 11th day of October, 1990.

s/ John C. Sheehy, Acting Chief Justice

s/ John Conway Harrison, Justice

s/ Diane G. Barz, Justice

s/ William E. Hunt, Sr., Justice

s/ R. C. McDonough, Justice


author: JUSTICE BARZ

text:
    ROSE LEE WINCHELL, Claimant and Appellant, v. G & B MOTORS, INC., Employer, and WESTERN GUARANTY FUND SERVICES, Defendant, Respondent and Cross-Appellant.
    No. 89-479.
    Submitted on Briefs June 28, 1990.
    Decided Nov. 8, 1990.
    Rehearing Denied Dec. 6, 1990.
    246 Mont. 320.
    805 P.2d 1323.

      Donald R. Marble, Marble Law Office, Chester, for claimant and appellant.
    K. Dale Schwanke, Jardine, Stephenson, Blewett & Weaver, P.C., Great Falls, for defendant, respondent and cross-appellant.
   JUSTICE BARZ

delivered the Opinion of the Court.

This appeal arises from a judgment entered by the Workers’ Compensation Court. Both claimant and Western Guaranty Fund Services appeal. We affirm in part and remand.

On June 1, 1981, claimant injured her lower back while helping two co-workers carry a new pickup box to a wrecked pickup truck. It is undisputed that claimant’s injury occurred while in the course and scope of employment with G & B Motors, whose carrier is Western Guaranty Fund Services (insurer). Claimant was hospitalized at the Northern Montana Hospital from June 5, 1981 to June 14, 1981. Claimant’s treating physician, Dr. James E. Elliott, diagnosed her injury as a severe paravertebral muscle spasm. Claimant returned to work on July 1, 1981, and at that time was taking medications to relieve her back pain.

On September 20,1981, during her lunch break at work, claimant fainted and was found lying on a concrete floor. She was taken to Dr. Elliott for medical services. Claimant told Dr. Elliott that she was experiencing back pain and that the back pain was related to the industrial accident of June 1, 1981. Claimant stopped working near the end of October, 1981, and has not worked since.

On July 6,1981, claimant filed a workers’ compensation claim. The insurer accepted her claim and paid benefits from June 3, 1981 to June 30,1981. The insurer denied subsequent demands for benefits, claiming that claimant’s problems were not due to the June 1, 1981 accident on the basis that the claimant had returned to work and that it had received no medical reports since the last report of June 5,1981.

Claimant filed a petition with the Workers’ Compensation Court to resolve the dispute between herself and the insurer. A trial was conducted on September 30,1986 before the Workers’ Compensation Court. The issues before the court were whether the claimant was temporarily totally disabled, permanently totally disabled, or permanently partially disabled, and if permanently partially disabled, whether claimant was entitled to permanent partial disability benefits. Also in issue was whether claimant was entitled to attorney’s fees and costs and a 20% penalty.

The court heard the testimony of the claimant and nine witnesses. Other testimony was presented to the court by way of post-trial depositions of various physicians and psychologists who had treated or examined the claimant. Conflicting testimony was presented regarding claimant’s condition. For example, claimant’s treating physician and a psychologist opined that claimant’s pain was legitimate while two other physicians opined that claimant was malingering for economic gain.

On December 22,1987, the Workers’ Compensation Court entered its findings of fact and conclusions of law and judgment. The court concluded that claimant’s disability and benefits could not be determined at that time. Claimant was ordered to undergo further testing, treatment and evaluation at a pain clinic to be selected by the parties. The court retained jurisdiction and ordered the insurer to pay $93.33 per week in interim temporary total benefits until a final judgment was issued. The court also determined that claimant was not entitled to a 20% penalty and the issue of attorney’s fees and costs were held in abeyance until issuance of final judgment.

After the issuance of the court’s order there were numerous post-judgment motions filed and eventually claimant underwent treatment and evaluation at the Montana Deaconess Pain Rehabilitation Center in Great Falls from May 22, 1988 until June 17, 1988. The insurer, under order of the court, paid the cost of claimant’s treatment at the pain clinic.

A rehearing was conducted on October 18, 1988 before a hearing examiner. The evidence submitted was limited to the time period after the first trial. However, the parties stipulated that the court could rely upon the record already before it in addition to farther evidence in making its determination on rehearing. On rehearing, claimant again testified as did her vocational expert. Others testified for the defense. Post-trial depositions were taken of the insurer’s vocational expert and of the director and personnel from the pain clinic.

On July 7, 1989, the Workers’ Compensation Court entered its findings of fact, conclusions oflaw and judgment. The court held that: (1) claimant is permanently partially disabled and under § 39-71-703, MCA (1979), is entitled to 500 weeks of permanent partial benefits at the rate of $26.68 per week; (2) insurer is to receive credit for benefits paid after December 22, 1987; (3) claimant is not entitled to any temporary total disability benefits; and (4) claimant is entitled to attorney’s fees based on the amount of benefits now awarded above the benefits paid by the insurer since December 22,1987. Other facts will be discussed as necessary.

The issues raised by claimant on appeal are:

1. Did the Workers’ Compensation Court err in its determination of claimant’s permanent partial disability benefit rate?

2. Do the findings of fact and conclusions of law support the Workers’ Compensation Court’s determination that claimant is not entitled to back temporary total disability benefits?

3. Did the Workers’ Compensation Court err in its determination of claimant’s attorney’s fees and in denying claimant a 20% increase in her award pursuant to § 39-71-2907, MCA (1979)?

The insurer presents the following additional dispositive issue on cross-appeal:

Did the Workers’ Compensation Court err in ordering a rehearing?

I.

The Workers’ Compensation Court determined that claimant is entitled to 500 weeks of permanent partial disability benefits at the rate of $26.68 per week, pursuant to § 39-71-703, MCA (1979), which states in pertinent part:

“Compensation for injuries causing partial disability. (1) Weekly compensation benefits for injury producing partial disability shall be 662/3% of the actual diminution in the worker’s earning capacity measured in dollars, subject to a maximum weekly compensation of one-half the state’s average weekly wage.”

On appeal, claimant contends the court’s finding that she is entitled to benefits at the rate of $26.68 per week is not supported by substantial credible evidence. The insurer, in turn, argues that claimant is not entitled to any permanent partial disability benefits because claimant failed to prove by a preponderance of the medical evidence that she was permanently partially disabled.

We begin with whether the Workers’ Compensation Court erred in its determination that claimant is permanently partially disabled. It is well settled that decisions of the Workers’ Compensation Court will be upheld upon a finding of substantial credible evidence. Snyder v. San Francisco Feed & Grain (1987), 230 Mont. 16, 25, 748 P.2d 924, 929; Tocco v. City of Great Falls (1986), 220 Mont. 221, 226, 714 P.2d 160, 163. The determinative question, therefore, is whether in looking at the record as a whole, substantial credible evidence exists to support the decision of the Workers’ Compensation Court that claimant is permanently partially disabled. In reviewing the record on appeal, we find the medical evidence, together with the other evidence, is sufficient to establish that claimant is permanently partially disabled.

Section 39-71-116(12), MCA (1979), defines permanent partial disability as:

“[A] condition resulting from injury as defined in this chapter that results in the actual loss of earnings or earning capability less than total that exists after the injured worker is as far restored as the permanent character of the injuries will permit.”

It is undisputed that claimant’s accident and injury occurred while in the course and scope of her employment with G & B Motors. The evidence shows that prior to the accident, claimant had been a strong person with no history of previous back problems. Claimant’s position with G & B Motors involved cleaning duties including cleaning floors, washing and vacuuming cars, changing tires, and cleaning water, mud, oil and dirt from a sump pit and carrying this sludge in two five-gallon buckets weighing 40 to 50 pounds apiece. These duties required heavy lifting, kneeling, bending and pushing.

The evidence also shows that after the accident claimant went to numerous physicians and all diagnosed a soft tissue injury. Claimant’s treating physician, Dr. Elliott, testified that most cases of pain have a psychological component and in claimant’s case there is a high psychological basis to her pain. Additionally, Dr. Shubat, a clinical psychologist, testified that claimant is “a characteristic long-term, low-back pain, pain patient.”

Dr. Elliott, Dr. Shubat, and Dr. Labunetz, a neurologist, all were of the opinion that claimant’s problems began with her industrial injury, based on a reasonable degree of medical certainty and all testified claimant would benefit from treatment at a pain clinic. Dr. Elliott farther testified that without treatment at a pain clinic, claimant’s condition would remain the same.

Dr. Hinde, the director of the pain clinic, testified that upon entry into the pain clinic claimant had all the characteristics of a chronic pain patient. He noted claimant’s inconsistent behavior regarding her pain and testified that this is frequently seen in a chronic pain state and does not necessarily indicate malingering. Dr. Hinde diagnosed claimant as suffering from predominately myofascial pain or soft tissue-based pain, which followed a lumbar strain injury. Dr. Hinde was of the opinion that claimant’s discomfort occurred as a result of the industrial injury, based on a reasonable degree of medical certainty.

The record shows claimant performed very well at the pain clinic and her condition improved dramatically. At the time of discharge claimant only had occasional reports of discomfort which did not interfere with any of the physical activities she was asked to perform. However, claimant still suffers from limitation in her functional capacity. Occupational therapist Kelly Scott in her discharge summary found claimant could return to work in a medium-range employment where lifting is not greater than twenty-five pounds. Additionally, standing and sitting was limited to “[o]ne hour at a time, no more than 4 hours total out of [an] 8-hour day.”

The Workers’ Compensation Court, after reviewing the supplemental medical evidence and the testimony of the parties’ vocational experts, found that claimant could return to work and earn essentially the same wage, $3.50 to $4.00 per hour, as before her injury. However, the court also considered the other factors for determining earning capacity set forth in Beck v. Flathead County (1988), 230 Mont. 294, 749 P.2d 527. The court in conclusion of law number 3 stated the following:

“The other factors that must be included in the determination of a loss in earning capacity under Section 39-71-703, MCA, include claimant’s age, (42); education and training, (ninth grade education with no vocational training); her previous health (good, although there may have been a preexisting lumbar disc disease aggravated by the injury). She has been released for light or medium work. She does experience pain, which can be minimized by following the pain clinic recommendations. Her 10 percent impairment rating recognizes her pain, which does limit her ability to work long hours standing, or in one position.
“Claimant’s vocational witness testified that the claimant has a 78 percent reduction in her job market, as a result of the injury. However, she testified that the claimant was earning entry-level wages of $3.50 at the time of the injury and at this date, could also work at entry-level wages and therefore had no actual wage loss at this time.
“Defendant’s vocational consultant, D. Bruce Carmichael, testified that the claimant could return to her job at the time of her injury or a number of vocational alternatives, which paid equivalent to or greater than what she was earning at the time of her injury.
“In considering all of the above factors, the Court concludes that the claimant did suffer a loss of earning capacity under Section 39-71-703, MCA, and with her difficulty in competing in her reduced labor market, has suffered a loss of earning capacity of $1.00 per hour, or $40.00 per week. Claimant’s entitlement to permanent partial benefits under Section 39-71-703, MCA, is 66% percent of her actual diminution in earning capacity, which is $40.00 times 66% percent, or $26.68 per week. Since claimant’s injury is a back injury, not scheduled in Section 39-71-705, MCA, claimant is entitled to 500 weeks, or a maximum of $13,340.00.”

The insurer argues that claimant has failed to prove her disability by a preponderance of the medical evidence. In support of its argument the insurer points out the testimony of those medical experts who were of the opinion that claimant was a malingerer. The insurer also stresses that testimony was elicited from pain clinic personnel regarding claimant’s inconsistent pain behavior. However, this Court’s function upon review is to determine whether substantial credible evidence exists to support the Workers’ Compensation Court’s findings of facts and conclusions of law; it is not this Court’s function to determine whether there is sufficient evidence to support contrary findings. O’Brien v. Central Feeds (Mont. 1990), [241 Mont. 467,] 786 P.2d 1169, 1172, 47 St.Rep. 251, 254. We hold that the Workers’ Compensation Court did not err in finding claimant permanently partially disabled.

Having concluded that substantial credible evidence exists supporting the lower court’s determination that claimant is permanently partially disabled, we now turn to whether the court erred in its determination of claimant’s benefit rate. As noted earlier, the Workers’ Compensation Court found that claimant is entitled to benefits at the rate of $26.68 per week. Claimant contends that the correct rate is $93.33 per week, arguing that the court totally ignored the testimony of claimant’s vocational expert that claimant suffered a 78% reduction in her job market as a result of the injury. She claims that the court missed the point presented by her vocational expert that the only work claimant would be able to find in her normal labor market would be in Havre, twenty-eight miles away from home, and that the work, due to her back pain, could only be part-time work.

In the personal injury context, the impairment of earning capacity has been defined as “the permanent diminution of the ability to earn money in the future.” Thomas v. Whiteside (1966), 148 Mont. 394, 397, 421 P.2d 449, 451. “Pre-injury and post-injury wages are but one factor to consider when determining earning capacity. Earning capacity also includes age, occupational skills, education, previous health, remaining number of productive years and degree of physical or mental impairment.” (Citation omitted.) Beck v. Flathead County (1988), 230 Mont. 294, 296, 749 P.2d 527, 529. “The correct test for loss of earning capacity is whether the injury has caused ‘a loss of ability to earn in the open labor market.’ ’’(Citation omitted.) Beck, 749 P.2d at 529.

In the case at bar the Workers’ Compensation Court appropriately considered the factors in determining earning capacity. The court found that claimant does have a number of vocational alternatives and although claimant does experience pain, the pain can be minimized by following the pain clinic’s recommendations. We hold that substantial credible evidence supports the Workers’ Compensation Court’s determination of claimant’s earning capacity and her permanent partial disability benefit rate.

II.

Claimant argues the Workers’ Compensation Court’s findings after the rehearing do not support a conclusion that claimant is not entitled to temporary total disability benefits. She contends the issue of temporary total disability benefits was still before the court at the time of the rehearing but the court’s findings are silent on the issue and the only reference regarding this issue is the court’s conclusion of law number 4:

“Claimant is not entitled to any temporary total disability benefits.
“This Court did not find any temporary total disability benefits due prior to the Judgment of December 22, 1987, and the evidence presented after that date at the rehearing does not change that determination.”

Claimant argues this is an unacceptable conclusion because nothing in the court’s judgment following the first trial indicated that the court at that point felt claimant was not entitled to temporary total wage loss benefits. We agree.

The Workers’ Compensation Court, after the initial trial, made numerous findings detailing the conflicting testimony which was presented as to whether claimant’s back pain was legitimate or whether she was malingering. The court then made the following pertinent conclusions of law:

“2. Claimant’s disability and benefits cannot be determined by this Court at this time ...
“While it is undisputed that claimant suffered an injury to her back from an industrial injury that arose out of and was in the course of her employment, serious questions exist as to claimant’s current physical condition.
“The record in this case is sated with conflicting testimony as to whether claimant’s alleged back pain is legitimate or whether she is malingering ...
“Therefore, it is this Court’s decision that claimant shall be ordered to undergo further testing, treatment and evaluation at a pain clinic. This Court will retain jurisdiction over this matter and will delay its final decision until submission of a report by the pain clinic is received pursuant to the Judgment below.
“3. Claimant is to receive interim temporary total benefits which are to begin on the day of this Judgment and are to continue until the final decision of this matter.
“Claimant has not worked since terminating with employer in October of 1981 and, therefore, has suffered a complete loss of wages. There is no question that claimant sustained a compensable industrial accident in June of 1981. The only issue is whether claimant is still incapacitated because of that injury. Because this Court is unable to make a decision as to that issue until further medical testimony is submitted from the pain clinic, this Court finds that interim temporary total benefits of $93.33 a week are appropriate under these circumstances ...”

These conclusions are inconsistent and conflicting with the court’s conclusion of law number 4 entered after the rehearing. The Workers’ Compensation Court did not make a determination that claimant was not entitled to temporary total disability benefits. The court noted that, due to the conflicting evidence of claimant’s physical condition, it was unable to determine claimant’s disability and benefits, including whether claimant was temporarily totally disabled, and therefore expressly reserved ruling on these issues until further medical evidence could be obtained. After the rehearing, the court made findings relating to claimant’s attendance at the pain clinic and concluded that claimant was permanently partially disabled. It was from testimony regarding claimant’s physical condition after treatment at the pain clinic that the court was able to come to a determination that claimant was permanently partially disabled. However, although the issue was before the court at the time of the rehearing, no definitive findings were made regarding whether claimant was temporarily totally disabled from the time claimant terminated employment with G & B Motors in October, 1981 until interim total disability benefits were ordered by the court on December 22, 1987.

We hold that the findings of fact and conclusions of law are conflicting within, and remand this issue to the Workers’ Compensation Court for further proceedings to determine what temporary total disability benefits are due, if any, from the time claimant terminated employment with G & B Motors until the date of permanent partial disability.

III.

In its judgment after the rehearing the Workers’ Compensation Court awarded claimant attorney’s fees based on the amount of compensation benefits awarded her at that time above the benefits paid by the insurer after December 22,1987. The court’s rationale in limiting the attorney’s fees award was that the court considered it unwarranted to compensate claimant’s counsel at the insurer’s expense for the court’s independent decision to order a pain clinic evaluation. The court stated attendance at a pain clinic was not requested by claimant nor was it part of her case.

Claimant contends she should receive attorney’s fees based on back temporary total disability benefits, permanent partial disability benefits and the attendance at the pain clinic, arguing that she made attendance at a pain clinic part of her case.

The insurer also contests the Workers’ Compensation Court’s award, asserting that claimant was not entitled to an award of attorney’s fees. The insurer argues the court stated in its initial decision of December 22,1987 that claimant had elected to waive any claim to attorney’s fees and costs in exchange for going forward with the case and taking post-trial depositions of medical providers. The insurer contends the court’s position on the issue of attorney’s fees and costs was based on the claimant’s failure to exchange all pertinent medical information by the time of the first trial.

When reviewing an award of attorney’s fees this Court will not disturb the award absent an abuse of discretion by the lower court. Martinez v. Montana Power Co. (1989), 239 Mont. 281, 285, 779 P.2d 917, 920. Our review of the record reveals that although the issue of referring claimant to a pain clinic was not raised before trial, this issue was presented to the court during the initial trial. In his opening statement, claimant’s counsel stated:

“The medical testimony is to be introduced later. The records we have now indicate she should be referred to a pain clinic. We are not exactly sure how the court would handle this, but our feeling right now is that she is probably still in a healing phase. She checked out of the Northern Montana Hospital to come here for this hearing today, she was in traction and, due to extreme pain, she was medicated. It has been since recommended that she be referred to a psychological pain clinic. As far as I can tell she is probably in some sort of a healing phase. If the court felt that she is probably more in a presently permanently-total condition, then we think that would be reasonable. We aren’t here to ask for permanent-partial benefits or permanent-total benefits, because we are really concerned she get adequate medical care at this point, that the insurer be required to pay for this.” Moreover, claimant’s attorney elicited the testimony from claimant’s medical providers regarding the need for a pain clinic.

In its December 22, 1987 decision, the Workers’s Compensation Court noted that the following occurred at the commencement of the trial:

“At trial, a discussion ensued between the Court and counsel relative to the status of the exchange of medical information and after that discussion, the Court gave the claimant the alternative of proceeding with the understanding the claimant would be limited to the medical the claimant had in her possession on July 16,1986, when her Petition was filed and any examination post-trial would be limited to that period, or the claimant could proceed on the basis she would waive any claim to attorney’s fees or costs but would be able to take post-hearing depositions with the medical evidence the claimant had at the time of trial to be submitted to the Court through the deposition process. Claimant chose the latter course.”

Although we recognize that the fixing of attorney’s fees is within the lower court’s discretion, from our review of the record we are unable to determine the reasons why the court subsequently granted claimant limited attorney’s fees after previously noting that claimant had elected to waive any claim to attorney’s fees and costs.

Because this Court is unable to determine whether or not the Workers’ Compensation Court abused its discretion in fixing claimant’s award of attorney’s fees, we remand this issue to the Workers’ Compensation Court. The Workers’ Compensation Court is instructed to conduct such further proceedings as are necessary and again consider the amount of attorney’s fees claimant is entitled to, if any, taking into consideration its findings and conclusions on remand regarding claimant’s back temporary total disability benefits, claimant’s permanent partial disability benefits, claimant’s attendance at the pain clinic and the possibility of claimant’s waiver of any claim to attorney’s fees and costs.

Claimant further asserts she is entitled to a 20% penalty under § 39-71-2907, MCA (1979), arguing there was no legitimate dispute between the parties such that the insurer was justified in rejecting her claim after paying less than one month of benefits in 1981. We disagree. Our review of the record finds no evidence to show that it was unreasonable for the insurer to deny benefits under the circumstances of this case. This is especially true given the Workers’ Compensation Court’s inability to come to a conclusion as to disability and benefits after the initial hearing. We hold that the Workers’ Compensation Court properly denied claimant a 20% increase in her award.

Cross-Appeal

On cross-appeal the insurer argues claimant was not entitled to a new trial because claimant neither requested a new trial nor did she have grounds for one pursuant to §§ 25-11-103 and 25-11-102(1),(3) and (4), MCA, which set forth the bases for which a court sitting without a jury may grant a new trial.

The record demonstrates that it was the insurer, not the claimant, who filed a petition for “Rehearing or Modification of Findings of Fact and Conclusions of Law and Judgment.” In its petition the insurer argued that the decision of the Workers’ Compensation Court was in error and that the insurer was entitled to a rehearing or an amendment of the decision. In granting the petition and ordering a rehearing, the Workers’ Compensation Comb noted claimant had not responded to the petition and had not complied with the court’s order to begin evaluation at a pain clinic. The court found it had no alternative but to grant the insurer’s motion since claimant’s failure to respond to the petition and to move the case forward lead to the conclusion that the insurer’s petition had merit.

The insurer, having filed the petition for rehearing in the first place, is in no position to argue the court erred in granting its motion. We hold the Workers’ Compensation Court did not err in ordering a rehearing.

Affirmed in part and remanded in part with instructions.

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


text:
    In the MATTER OF JEFFREY L. SHROM, An Attorney and Counselor at Law, Respondent.
    No. 90-023.
    Nov. 8, 1990.
    246 Mont. 333.
    806 P.2d 23.
   ORDER OF DISBARMENT

On the 19th day of April, 1990, the Commission on Practice conducted a hearing on the Matter of Jeffrey L. Shrom, an attorney and counselor at law. At the hearing, Mr. Shrom was present and represented by his attorney, Mr. William Dee Morris, and the special prosecutor, Charles W. Schuyler, was also present. Following the hearing, on the 30th day of June, 1990, the Commission entered its Findings of Facts and Conclusions of Law, and Recommendations, recommending that Jeffrey L. Shrom be disbarred from the practice of law and be ordered to pay the costs of proceedings.

We adopt the recommendations of the Commission and hereby disbar Jeffrey L. Shrom from the practice of law in Montana and order him to pay the costs of the proceedings.

The course of conduct by the respondent that has lead up to this order is as follows:

The respondent, Jeffrey L. Shrom, as a duly licensed attorney at law in the state of Montana, was suspended from the practice of law on an interim basis by an order of the Supreme Court dated January 9, 1990 under Rule 16(D)1 Rules for Lawyer Disciplinary Enforcement for having been convicted of a “serious crime.” At the time of the order of suspension for the conviction, the respondent Shrom had been and still was suspended from the practice of law for nonpayment of membership dues in the State Bar of Montana.

On November 28, 1989, The District Court of the Fourth Judicial District entered judgment against Respondent for issuing bad checks, a felony, and that the amount of said checks exceeded the sum of $1,000 and no appeal was taken from that conviction by the respondent. It was for this conviction that the respondent was ordered suspended from the practice of law by this court in January of 1990. The Court notes the respondent has made full restitution to the parties for the bad checks he issued.

A client of respondent, Ronald J. Allison, filed a complaint with Commission on Practice against the respondent who was notified by the Commission on Practice of Mr. Allison’s complaint, but failed to respond to the notice from the Commission either orally or in writing.

Respondent was retained by Ronald J. Allison who paid him $750 to pursue an appeal in the 9th Circuit Court of Appeals and respondent failed to take the necessary action to perfect the appeal. He had no written memorandum of his agreement with Ronald J. Allison.

On August 18, 1989, respondent was convicted of criminal contempt for failure to appear at the sentencing of his client of record before the Honorable Richard A. Enslen in the United States District Court, Western District of Michigan, and accepted respondent’s plea of guilty and sentenced him to 30 days of incarceration with credit served and a fine of $260 to cover court costs which respondent never paid.

Respondent represented to Judge Enslen that the Montana check charge against him involved only a single check when in fact there were several bad checks. Respondent was suspended by the State Bar of Montana on July 15, 1986, for noncompliance with court rules for mandatory Continuing Legal Education and for failure to pay dues to the State of Montana. He subsequently represented a client in two jury trials in Federal Court in San Diego, California, while he was suspended from the practice of law in Montana and that he was admonished on November 18, 1988, by the U.S. Court of Appeals for the Third Circuit for failure to diligently prosecute his client’s cause. That respondent filed his objections to the findings of facts and conclusions of law without serving a copy on the Special Prosecutor. The Special Prosecutor received a copy on September 12, 1990.

In the response to the Commission’s Findings of Fact, Conclusions of Law and Recommendations Shrom objects to Findings No. 10, 11, and 12 and incorporates his June 11, 1990 Response to the findings and recommends that Mr. Shrom not be disbarred and after probation on the felony conviction has been successfully completed the Court can fashion sanctions at that time. Finding No. 10 of the Commission says, “Respondent failed to respond to the notice from the Commission on Practice either orally or in writing.”

The record shows that Shrom received two written letters from the Commission and he did receive them without responding to them. He misrepresented the service and his claim of response to the federal court system.

Findings 11 and 12 are findings by the Commission that relate to the Allison appeal. Respondent claims the $750 paid to him was for services already performed and that no appeal was to be taken by him on behalf of M. Allison. The Commission found otherwise and we adopt those findings here.

THEREFORE, it is hereby ordered that the recommendation of the Commission on Practice for disbarment of Jeffrey L. Shrom be adopted by this Court. That Jeffrey L. Shrom is hereby disbarred immediately from any further practice of law in the state of Montana. Three copies of this order shall be served by ordinary mail by the Clerk of this Court upon Jeffrey L. Shrom at his last known address as shown on the record to this Court, upon his counsel of record, and by such other parties as are specified in Rule 14 of the Rules for Lawyers’ Discipline and Enforcement.

DATED this 8th day of November, 1990.

s/ J.A. Turnage, Chief Justice

s/ William E. Hunt, Sr., Justice

s/ Diane G. Barz, Justice

s/ R. C. McDonough, Justice

s/ John Conway Harrison,

s/ Justice Fred J. Weber, Justice

s/ John C. Sheehy, Justice


author: JUSTICE WEBER

text:
    FAY LARSON, Plaintiff and Respondent, v. JACK UNDEM and Lydia Undem, Defendants and Appellants.
    No. 90-083.
    Submitted on Briefs Aug. 23, 1990.
    Decided Nov. 8, 1990.
    Rehearing Denied Dec. 11, 1990.
    246 Mont. 336.
    805 P.2d 1318.

      Raymond P. Tipp, Tipp, Frizzell & Buley, Missoula, for defendants and appellants.
    Noel K. Larrivee, Larrivee Law Offices, Missoula, for plaintiff and respondent.
   JUSTICE WEBER

delivered the Opinion of the Court.

This is an action for breach of contract covering the sale of real estate. Defendants appeal from the judgment entered by the District Court for the Fourth Judicial District, Missoula County, granting plaintiff specific performance of the contract, surveying costs and attorney fees and emotional distress damages. We reverse the award of emotional distress damages and otherwise affirm the District Court.

The issues for our consideration are:

1. Whether Larson’s claim is barred by the statute of limitations or laches?

2. Whether the District Court erred in awarding Larson emotional distress damages?

3. Whether the District Court erred in granting Larson specific performance of the contract?

In a bench trial, the District Court found the following facts which are supported by substantial evidence in the record: In June of 1972, plaintiff (Larson) entered into a written contract with defendants (Undems) whereby Larson sold Undems a parcel of land reserving seven acres of the parcel for Larson’s personal use. The contract for deed and other necessary documents were prepared by Larson’s attorney. Although Mr. Undem is not a licensed surveyor, the parties agreed that Mr. Undem would prepare the property description including the description of the seven acres reserved by Larson.

The parties together examined the land to be sold including the boundaries of the tract which Larson desired to reserve for herself. Mr. Undem then prepared the first description which was used in the preparation of the contract and deed. The first description was inaccurate. The description of the seven acre reservation contained land which was a part of the Burlington Northern Railroad (BN) right- of-way, and the metes and bounds description did not close. The District Court specifically found: “The legal description contained in the real property transfer documents ... was supplied by Defendant Jack Undem” and “Larson relied upon the legal description provided by Undem when she executed the contract documents and Warranty Deed”.

After the execution of the contract and deed, Larson discovered that the legal description was incorrect, and requested that Mr. Undem prepare a proper description. Mr. Undem acknowledged that the first description was incorrect. Mr. Undem obtained the help of an engineer to prepare the second description of the land. They referred to public records, Montana Highway plats and BN plats. They prepared a second description and made a diagram of that description, and delivered the same to Larson and her attorney. At that time none of the parties realized that the second description was incorrect because it still included a portion of the BN right-of-way and failed to accurately describe the reserved seven acre parcel.

In April or May of 1973, Larson and her sons measured the land and discovered that the second description was inaccurate and did not encompass the property she reserved. Larson so informed Mr. Undem. Mr. Undem failed to prepare a third description. The District Court concluded: “Larson had at all times relied upon Undem to provide a valid legal description for the seven acre parcel of land which was reserved by her. Undems failure to provide such a legal description ... constitutes a breach of said contract.”

The contract also provided that Undems were not to sell or convey the property purchased from Larson without Larson’s written consent. Nonetheless, on October 29, 1984, approximately 26 months before the last payment was made to Larson, Undems sold and conveyed the property purchased from Larson to a third party purchaser (Olsons). Undems did not obtain the required consent from Larson. In the Olson contract Mr. Undem used the second description which he knew to be incorrect. The District Court found that Mr. “Undem knew that the legal description contained in [the] contract was inaccurate and invalid and entered into the third-party contract with [such] knowledge.”

The last payment on the Larson-Undems contract was made in December of 1986. The deed was obtained from escrow and recorded in January, 1987. Several months after receiving the last payment, Larson hired a surveyor to provide a legal description for the reserved land, at a cost of $700. In October 1987, Larson filed suit against Undems requesting specific performance of the contract; emotional distress damages; and sought to quiet title against the Olsons for her seven acres. She also requested her costs and attorney’s fees.

The District Court concluded that Undems breached the contract when they sold the property on October 29, 1984, without first obtaining the written consent of Larson. The court further found that the Undems breached the contract when they failed to provide an accurate legal description of the reserved seven acre tract. Undems appeal.

I

Whether Larson’s claim is barred by the statute of limitations or laches?

Undems maintain that Larson’s claims are barred by the statute of limitations. They raised this issue before the District Court in a motion for summary judgment. The District Court denied their motion. They argue that the statute of limitations started to run in 1973 when Larson discovered that the second legal description prepared by Mr. Undem was erroneous. They urge that by not immediately acting upon that discovery she waived any right to raise the claim later.

An action for breach of a written contract must be brought within eight years under § 27-2-202, MCA. A contract for deed has been construed as a contract in writing to which the eight year statute applies. Neils v. Deist (1979), 180 Mont. 542, 591 P.2d 652. The eight year statute of limitations begins to run when the cause of action accrues. McWilliams v. Clem (1987), 228 Mont. 297, 743 P.2d 577. We conclude that the first cause of action accrued on October 29, 1984, when the Undems contracted with the Olsons to sell the property purchased from Larson using the second property description known by the Undems to be inaccurate, and also without first obtaining the written consent of Larson. We conclude that the action was brought by Larson within the eight year statute of limitations.

Undems also argue that Larson’s cause of action was barred by laches. Laches exists where there has been an unexplainable delay of such duration or character as to render the enforcement of an asserted right inequitable, and is appropriate when a party is actually or presumptively aware of his rights but fails to act. Sperry v. Montana State Univ. (1989), 239 Mont. 25, 778 P.2d 895; Smithers v. Hagerman (Mont. 1990), [244 Mont. 182,] 797 P.2d 177, 47 St.Rep. 1483. Undems sold the property without Larson’s consent in October of 1984. The last payment on the contract was tendered in December of 1986 and Larson filed suit in October of 1987. We agree with the District Court conclusion that the facts do not demonstrate an inequitable delay on the part of Larson.

We affirm the District Court’s holding that Larson’s claim was not barred by either the statute of limitations or laches.

II

Whether the District Court erred in awarding Larson emotional distress damages?

The District Court awarded Larson $10,000 in emotional distress damages. Undems maintain that emotional distress damages are not recoverable in a contract action. They argue that contract damages allow the injured to receive the benefit of the bargain, no more, no less. They urge that emotional distress damages are not damages within the reasonable contemplation of the parties at the time the contract was entered, and are therefore unrecoverable. Undems urge that there is not sufficient evidence to support a claim for emotional distress. They contend the only evidence was Larson’s testimony that she lost sleep on some nights and was very upset.

Larson maintains that her repeated attempts to obtain the correct legal description of the reserved property, and the subsequent discovery that the property had been sold without her consent, caused her stress, anxiety and frustration. She contends that the amount of damages awarded her was reasonable under the circumstances.

It is important that we distinguish the present emotional distress claim in a breach of contract action from emotional distress damage claims in tort actions. Section 27-1-303, MCA, contains a limitation on damages for breach of obligation. It states:

“27-1-303. Limitation of damages for breach of obligation. No person can recover a greater amount in damages for the breach of an obligation than he could have gained by the full performance thereof on both sides -unless a greater recovery is specified by statute.” By its wording this statute limits the recovery to the amount the plaintiff could have gained by full performance of the contract. That rule applies -unless there is a greater recovery specified in some other statute.

Section 27-1-311, MCA, sets forth the key provisions with regard to breach of contract:

“27-1-311. Breach of contract. For the breach of an obligation arising from contract, the measure of damages, except when otherwise expressly provided by this code, is the amount which will compensate the party aggrieved for all the detriment which was proximately caused thereby or in the ordinary course of things would be likely to result therefrom. Damages which are not clearly ascertainable in both their nature and origin cannot be recovered for a breach of contract.”

It is important that we also look at the same time at the damage section applying to obligations not arising from contract, which states:

“27-1-317. Breach of obligation other than contract. For the breach of an obligation not arising from contact, the measure of damages, except where otherwise expressly provided by this code, is the amount which will compensate for all the detriment proximately caused thereby, whether it could have been anticipated or not.”

We note that under § 27-1-317, MCA, for breach of an obligation not arising from contract, the measure is the amount which will compensate for all the detriment proximately caused, whether it could have been anticipated or not. This is the measure of damages to be used in a tort action. That tort measure of damages is to be distinguished from the measure under § 27-1-311, MCA, which provides that for a breach of contract a party may collect damages for all the detriment proximately caused thereby (which is similar to the wording in § 27-1-317) but contains the additional limitation that the detriment must in the ordinary course of things be likely to result therefrom and the damages must be clearly ascertainable in nature and origin. These code sections were not discussed in the lower court opinion. We have carefully reviewed the transcript to determine if there was a basis for emotional distress damages.

We conclude that the evidence does not show that in the ordinary course of things, emotional distress damages were likely to result from the defendant’s breach of contract. We further conclude that the evidence presented fails to establish that the emotional distress damages were clearly ascertainable in origin. We hold that the District Court erred in awarding Larson emotional distress damages.

Ill

Whether the District Court erred in granting Larson specific performance of the contract?

Undems sold their land to Olsons in 1984. Larson did not file her complaint until 1987. Undems maintain that the District Court erred in granting specific performance because they cannot transfer title they no longer have.

Larson maintains that in a contract for deed legal title to the property remains vested in the sellers. Therefore, Larson contends that specific performance was proper. We agree.

Specific performance is an equitable remedy and is a matter of discretion for the District Court. Seifert v. Seifert (1977), 173 Mont. 501, 568 P.2d 155; Myhre v. Myhre (1976), 170 Mont. 410, 554 P.2d 276. Upon reviewing the record, we conclude the District Court did not abuse its discretion in granting specific performance. Therefore, we hold that the District Court correctly granted Larson specific performance.

We reverse the portion of the judgment granting emotional distress damages to the plaintiff and affirm the balance of the judgment.

CHIEF JUSTICE TURNAGE and JUSTICES BARZ, HARRISON, HUNT, McDONOUGH and SHEEHY concur.


author: JUSTICE HARRISON

text:
    IN RE THE MARRIAGE OF SALLA MARIE KEIL, f/k/a Salla Marie Ferguson, Petitioner and Appellant, and RICHARD A. FERGUSON, Respondent and Respondent.
    No. 89-587.
    Submitted on briefs Oct. 19, 1990.
    Decided Nov. 20, 1990.
    246 Mont. 344.
    805 P.2d 1334.

      Robert G. Olson, Frisbee, Moore, Stufft & Olson, Cut Bank, for petitioner and appellant.
    Laura Christofferson, Gallagher, Archambeault & Knierim, Wolf Point, for respondent and respondent.
   JUSTICE HARRISON

delivered the Opinion of the Court.

Salla Marie Keil appeals from an August 22, 1989, order of the District Court of the Fifteenth Judicial District, County of Roosevelt, denying her motion to modify the joint custody of her three children with her former husband, Richard A. Ferguson. Keil also appeals the order of the District Court modifying the original dissolution decree with respect to child support payments. We affirm.

The parties present the following issues:

1. Did the District Court abuse its discretion by refusing to modify the joint custody arrangement of the dissolution decree?

2. Did the District Court abuse its discretion by ordering the parties to pay child support “for each full month” that the children are in the other parent’s custody?

The marriage of Salla Marie Keil and Richard A. Ferguson was dissolved on June 17,1986. The parties were granted joint custody of their three children, now ages 14, 8, and 6. Ferguson was awarded physical custody of the three children. In January 1988, Ferguson requested that Keil take custody of the children while he attempted to resolve difficulties between him and his second wife, whose children were also living with the couple. The Ferguson children resided in Shelby, Montana, with Keil and her current husband from that time until the end of the school year. The children returned to live with Keil during the 1988-89 school year.

Keil wanted the children to continue to live with her for the 1989-90 school year and filed a petition to modify child support and the joint custody arrangement to give her primary physical custody. Ferguson cross-petitioned for modification of child support provisions of the dissolution decree. After a hearing held August 2, 1989, the court ordered that the children remain with Ferguson pursuant to joint custody provisions of the dissolution decree. The court modified child support and required Keil to pay $171 per month “for each full month that the children are in the custody of the Respondent,” as well as ordering Ferguson to pay $651 per month “for each full month that the children are in the custody of the Petitioner.”

From this order, Keil appeals.

I.

Modification of primary custody without termination of joint custody.

Keil argues that the District Court erred in applying the criteria of § 40-4-219(1), MCA, which governs termination of joint custody where custody has been granted to one party. She asserts that the court’s application of the factors of § 40-4-219(1), MCA, in determining whether modification of custody can be allowed, rather than using the child’s “best interest” standard as required by § 40-4-224, MCA, constitutes reversible error.

We have previously addressed the standard for review of custody issues in Bier v. Sherrard (1981), 191 Mont. 215, 217, 623 P.2d 550, 551, 38 St.Rep. 158, 159:

“In order to prevail, (the appellant) must show an abuse of discretion by the judge, must demonstrate that there is a clear preponderance of evidence against the findings, and must overcome the presumption that the judgment of the trial court is correct.”

This Court will not substitute its judgment for that of the trier of fact concerning the “delicate” issue of child custody because the trial court is in the best position to observe witnesses and determine their credibility and character. In re the Marriage of Syljuberget (1988), 234 Mont. 178, 183, 763 P.2d 323, 326. With this standard in mind, we review the findings of the court in this case.

Keil is correct in her statement of which statutory provision applies to a change of primary physical custody without termination of joint custody. In resolving whether modification of custody will be allowed, the court need merely make a “best interest” determination pursuant to § 40-4-224(2), MCA, rather than deciding whether the more stringent requirements of § 40-4-219 are satisfied. In re Marriage of Stephenson (1988), 230 Mont. 439, 445, 750 P.2d 1073, 1077. The section governing joint custody and modification of physical custody arrangements without terminating the decree of joint custody provides:

“ ‘[J]oint custody5 means an order awarding custody of the minor child to both parents and providing that the physical custody and residency of the child shall be allotted between the parents in such a way as to assure the child frequent and continuing contact with both parents. The allotment of time between the parents must be as equal as possible; however:
“(a) each case shall be determined according to its own practicalities, with the best interest of the child as the primary consideration; and
“(b) when allotting time between the parents, the court shall consider the effect of the time allotment on the stability and continuity of the child’s education.”
Section 40-4-224(2), MCA (emphasis added). In determining the child’s best interest, the court must consider “all relevant factors” pursuant to § 40-4-212, MCA, including:
“(a) the wishes of the child’s parent or parents as to his custody;
“(b) the wishes of the child as to his custodian;
“(c) the interaction and interrelationship of the child with his parent or parents, his siblings, and any other person who may significantly affect the child’s best interest;
“(d) the child’s adjustment to his home, school, and community;
“(e) the mental and physical health of all individuals involved;
“(f) physical abuse or threat of physical abuse by one parent against the other parent or the child; and
“(g) chemical dependency, as defined in 53-24-103, or chemical abuse on the part of either parent.”

Examination of the court’s findings reveals that the court addressed each of the mandatory factors.

Keil claims that the District Court did not take into account a “potentially volatile and dangerous situation” existing in Ferguson’s home, referring to the difficulties which prompted Ferguson to ask Keil to take the children in 1988. We have reviewed the record and find no support for this allegation. In fact, the record reflects quite the opposite; Ferguson appears to be a stable, responsible parent, interested in his children and their activities. Both parties testified that the other parent was an able parent. Keil agreed in her testimony that Ferguson was a good father who took good care of his children. The children appear to be well-integrated into the family and into the community of Wolf Point, Montana. On the other hand, Keil has recently moved to Thompson Falls, Montana, and the children would need to make adjustments to new schools and a different community.

One of the goals of the custody provisions of the Uniform Marriage and Divorce Act as enacted in Montana, is to maximize finality to assure continuity and stability for the child. Keil did not overcome the presumption that the judgment of the trial court is correct. We find that the court did not abuse its discretion in refusing to modify primary physical custody of the children.

Moreover, we find no merit in Keil’s claim that the court’s consideration of § 40-4-219, MCA, rather than § 40-4-224, MCA, constitutes reversible error. Keil cites no authority for this proposition. More importantly, although the District Court did not specifically refer to § 40-4-224, MCA, in its findings, the court did comply with its provisions by making a determination of the children’s best interest pursuant to § 40-4-212, MCA. Erroneous findings of fact that are not necessary to support the judgment of the trial court are not grounds for reversal. Eaton v. Morse (1984), 212 Mont. 233, 244, 687 P.2d 1004, 1010. As long as the District Court correctly complied with the provisions of § 40-4- 224, MCA, its error in considering § 40-4-219, MCA, is harmless.

II

Modification of child support.

Keil claims that the District Court erred in modifying child support by providing in its order that child support be paid “for each full month” that the children are in the custody of the other parent. The court’s order provides:

“That Petitioner is hereby ordered to pay $57.00 per month per child to the Respondent as and for the support of the minor children of the parties for each full month that the children are in the custody of the Respondent. That Respondent is hereby ordered to pay $217.00 per month per child to the Petitioner as and for the support of the minor children of the parties for each full month that the children are in the custody of the Petitioner. (Emphasis added.)”

Keil argues that the “full month” restriction is unworkable and unsupported by the Uniform Child Support Guidelines. She claims that under the order, the children could stay with one parent for 29 days, but not receive child support because that would not constitute a full month. We have examined the Uniform Child Support Guidelines and find that payments are determined “monthly” or “per month”. See Uniform Child Support Guidelines (1987), [227 Mont. 1,] 44 St.Rep. 828; also see Desk Book published annually by the State Bar of Montana. No guidelines exist regarding pro rating payments when a child lives less than a full month with a parent.

The literal interpretation of the court’s order given by Keil is unnecessary. The District Court reviewed the Uniform Child Support Guidelines and used the Guidelines in its calculation of support payments. We find that the District Court intended that normal methods of collection of support according to the Guidelines be used. The District Court did not abuse its discretion.

The District Court’s judgment is affirmed.

CHIEF JUSTICE TURNAGE and JUSTICES SHEEHY, McDONOUGH and WEBER concur.

       Pursuantto§ 40-5-209, MCA, the Montana Department of Social and Rehabilitation Services has promulgated new Uniform Child Support Guidelines, effective July 13, 1990, to be published this fall at § 46.30.1501-,1549. ARM. See 1990 Montana Administrative Register 1337-1366 (Issue No. 13, July 12,1990).