author: MR. JUSTICE WEBER MR. JUSTICE SHEEHY,

text:
    WILLIAM WHITCHER, Claimant and Appellant, v. WINTER HARDWARE COMPANY, Employer, and Pacific Employers Insurance Co., Defendant and Respondent.
    No. 88-425.
    Submitted on Briefs Jan. 5, 1989.
    Decided Feb. 23, 1989.
    769 P.2d 1215.

      Lloyd E. Hartford, Billings, for claimant and appellant.
    Michael P. Heringer, Billings, for defendant and respondent.
   MR. JUSTICE WEBER

delivered the Opinion of the Court.

The claimant, Mr. Whitcher, filed a petition with the Workers’ Compensation Court to reopen his Full and Final Compromise Settlement, to have medical benefits paid, and to receive vocational rehabilitation. The court denied the request to reopen the settlement agreement, but ordered that claimant is entitled to medical benefits, a 20% penalty on those medical benefits, rehabilitation, and costs and attorney fees on the prevailing issues. Mr. Whitcher appeals that portion of the court’s decision denying him the opportunity to reopen his full and final compromise settlement. We affirm.

The issue is whether the Workers’ Compensation Court erred in refusing to allow the claimant to reopen his full and final compromise settlement based on the grounds of mutual mistake.

On December 18,1978, William Whitcher suffered an industrial accident arising out of and in the course of his employment with Winter Hardware in Billings, Montana. Mr. Whitcher was employed as a laborer for the hardware wholesaler, and hurt his back while attempting to move some angle iron. Although injured, he continued to work for the employer until January 12, 1979 before seeking medical treatment.

Mr. Whitcher filed a timely claim for compensation and Pacific Employers Insurance, who insured Winter Hardware, duly accepted liability and paid biweekly benefits and medical expenses as incurred. Mr. Whitcher’s temporary total weekly benefits were $95.53 and his permanent partial disability rate was $94.00 per week. He received the following lump sum advances during 1979, which were to be credited against his right to future permanent partial disability payments:

1. October 1, 1979 — $750.00

2. November 5, 1979 — $500.00

3. November 21, 1979 — $1000.00

At his employer’s insistence, Mr. Whitcher sought medical treatment on January 9, 1979, due to pain in his lower back which radiated into his lower extremities. On March 15, 1979, he underwent back surgery in an attempt to alleviate the pain.

Seven Months after surgery, the orthopedic surgeon who performed the surgery gave Mr. Whitcher an estimated impairment rating of 20% whole body permanent physical impairment and loss of function. That 20% impairment rating was confirmed by the doctor again on March 13, 1980, one year after surgery. On March 20, 1980, Mr. Whitcher signed a Petition for Full and Final Compromise Settlement in the amount of $8,000.00. Initially, the proposed settlement offer of $8,000.00 was rejected by Levi Loss of the Compliance Bureau. However, Mr. Loss suggested to the claims adjuster that the Bureau would approve the settlement if an additional payment of 26 weeks of benefits at the claimant’s temporary total rate, or $2,483.78, was added to the original $8,000.00 settlement figure. The Workers Compensation Court found that Mr. Loss was aware of Mr. Whitcher’s 20% impairment rating which would have entitled him to 100 weeks of benefits at the rate of $94.00 or some $9,400.00

Eventually, the claims adjuster agreed to amend the petition to include the additional payments. The settlement was processed and approved by the appropriate authorities in April 1980. Mr. Whitcher continued to receive benefits through September 11, 1980. Thereafter, he was notified by letter dated September 22, 1980 that he would no longer receive benefits pursuant to the compromise settlement agreement.

On January 27, 1987, Mr. Whitcher filed a petition with the Workers’ Compensation Court to reopen the 1980 settlement. The court denied Mr. Whitcher’s request based on his failure to comply with the applicable statute of limitations. On appeal, Mr. Whitcher argues that he is entitled to reopen his settlement based on the mutual mistake of the parties in settling his claim, and does not address the applicability of the statute of limitations. For purposes of our review, we will first discuss the court’s findings as they relate to Mr. Whitcher’s claim of mutual mistake and then we will review the court’s decision on the applicability of the statute of limitations.

This Court has allowed the rescission of a full and final settlement agreement based on a mutual mistake of fact in Kienas v. Peterson (Mont. 1980), [191 Mont. 325,] 624 P.2d 1, 37 St.Rep. 1747. A mistake of fact is defined by statute as follows:

“Mistake of fact is a mistake not caused by the neglect of a legal duty on the part of the person making the mistake and consisting in:

“(1) an unconscious ignorance or forgetfulness of a fact, past or present, material to the contract, or

“(2) belief in the present existence of a thing material to the contract which does not exist or in the past experience of such a thing which has not existed.” »•

Section 28-2-409, MCA.

Mr. Whitcher contends that there are three separate bases for a finding of mutual mistake which justify a setting aside of the settlement agreement and that therefore, it was error for the Workers’ Compensation Court to deny a reopening of the case. These accounts of mutual mistake relate to (1) the parties’ understanding of the settlement agreement; (2) the condition of the claimant’s back at the time of the settlement; and (3) the claimant’s psychological condition at the time of the settlement.

The Settlement Agreement

First, Mr. Whitcher argues that because he was unable to understand the agreement, there was not meeting of the minds as to what was being settled and that this constitutes mutual mistake. He contends that he thought the lump sum amount of $8,000.00 was analogous to his previous lump sum distributions in that he would continue to receive benefits. While it is not clear how the insurer was in “unconscious ignorance” as to the meaning of the contract terms, we assume that Mr. Whitcher is charging the insurer with knowledge of his own ignorance regarding the meaning and effect of the full and final settlement.

A clinical psychologist testified by deposition regarding the claimant’s ability to read and understand the settlement agreement. The psychologist had performed various tests on the claimant in 1980 at the request of Vocational Rehabilitative Services to determine Mr. Whitcher’s vocational skills and interests. Those tests revealed that in 1980, Mr. Whitcher had an IQ which was just below average intelligence and that his reading ability was at the 8th grade level. When asked whether the claimant would be able to comprehend the Petition for Full and Final Settlement, the psychologist responded:

“A: I think that he would be able to comprehend it with perhaps some concepts explained to him. But basically most of the wording is at a level which he could comprehend.

“Q: What would you feel would need to be explained to him?

“A: Oh, such words I think as duration, he might not be able to understand the meaning of that term without some — just be able to pronouce it and understand it. There’s just a matter of some single words and so forth. Concurrence. These are some more difficult words to read. And they’re not in a typical type of vocabulary of people at Mr. Whitcher’s level.

“However, I think that if there was some discussion along with this, he can understand the figures and terms of the amount of money involved. The fact that this is a lump sum payment, and that he’s due some additional benefits, I think that would be fairly understandable to him.”

Levi Loss, the assistant bureau chief with the Workers’ Compensation Division at the time of the settlement, stated that he would not approve a settlement if he thought a claimant did not understand it. Although Mr. Loss initially rejected the $8,000.00 settlement offer, he later approved it upon the addition of 26 weeks of benefits. When testifying about Mr. Whitcher’s understanding of the finality of the settlement agreement, Mr. Loss stated:

“I believe at the time that he understood it. I think that he must have been in a position to where that was —

“Somehow or another, it didn’t seem to be that important to him. He just wanted his money, and it was more important to get it, although he was aware that it could have some gravity; and if they ask for it and insist on it, it gets to the point where if the adjuster and them, if that’s what they work out, I can’t tell too many people just how far to go, if they insist.”

The adjuster who handled the claim testified that he had no reason to doubt Mr. Whitcher’s ability to understand that $8,000.00 was the maximum he was going to get. The evidence indicates that the adjuster had explained both verbally and in writing that after receiving the $8,000.00, the claimant would be closing his right to compensation forever.

The Workers’ Compensation Court found that Mr. Whitcher was capable of understanding the terms of the settlement agreement. We hold that the above testimony substantially supports that finding so that the claim of mutual mistake as tó what was being settled is without merit.

In connection with that argument, Mr. Whitcher contends that the modification of the settlement agreement to include 26 weeks of additional payments without his knowledge or consent constitutes mutual mistake since there was no meeting of the minds as to those provisions. No relevant findings were made by the Workers’ Compensation Court, and we are reluctant to serve as factfinders as to this issue. However, we fail to see why Mr. Whitcher would not have agreed to the additional terms of the settlement since they were in his economic interest.

Next, Mr. Whitcher contends that the parties were mutually mistaken in their understanding of the nature and extent of his back condition and how the injury may have aggravated the claimant’s pre-existing psychological impairments. The Workers’ Compensation Court made no specific finding relating to the issue of mutual mistake and the claimant’s mental or physical condition, and as a reviewing court, we will not make our own findings of fact in this regard. However, given our concern for this claimant whose impairment is serious and who was not represented by legal counsel at the time he entered into the settlement agreement, we will briefly examine the record to determine if there is any evidence which might justify further inquiry into these contentions.

The Back Injury

This Court has been reluctant to reopen a Petition for Full and Final Settlement based on mutual mistake surrounding the injury except in a small number of situations. In Kimes v. Charlie’s Family Dining & Donut Shop (Mont. 1988), [233 Mont. 175,] 759 P.2d 986, 45 St.Rep. 1402, this Court allowed an injured worker to reopen his petition where a new and different medical problem was discovered after the settlement. In Weldele v. Medley Development (Mont. 1987), [227 Mont. 257,] 738 P.2d 1281, 44 St.Rep. 1062, we allowed a reopening of the petition where the claimant’s initial condition deteriorated substantially and the treating physician’s initial assessment was a misdiagnosis of the actual extent of the injury.

There is no evidence in the record indicating that Mr. Whitcher’s back condition was originally misdiagnosed and that it subsequently worsened beyond the scope of the initial diagnosis. Nor is there evidence indicating that any new or different medical problem was misdiagnosed after the settlement. While we are sympathetic to the claimant’s purported increased levels of pain, we find nothing in the record to indicate that the present state of his injury is any different than at the time of settlement. The orthopedic surgeon who gave the claimant a 20% whole body impairment rating in 1980 testified again in 1987 that, in his opinion, the impairment rating had not changed during that time. Also, in April of 1982 a myelogram was administered which revealed “an area where there was pressure which did not look significantly different from the time of the myelogram at the time of his first surgery (in 1980).”

The claimant’s testimony indicates that he has suffered extreme and often debilitating pain ever since the injury, which appears to have gotten worse over the years. We note that during this time, Mr. Whitcher has been employed in jobs requiring heavy lifting, bending, and long periods of standing, which was discouraged by his physician. Together with the lack of medical testimony justifying a reopening of the case, we conclude that while Mr. Whitcher may indeed be experiencing an increased level of pain, there is nothing to indicate the parties were mutually mistaken about the condition of his back at the time of the settlement.

The Psychological Condition

Mr. Whitcher also contends that the parties were mutually mistaken about certain diagnosed personality disorders, which he claims did not become “active” until after the injury and the settlement. This Court has found mutual mistake where a claimant’s lower back injury was later determined to have aggravated a preexisting condition of cerebral palsy which the parties did not take into account at the time of the impairment rating and settlement agreement. Kienas v. Peterson, 624 P.2d at 3. However, there is no evidence here which would support a similar conclusion. While it is clear that Mr. Whitcher suffered a number of psychological impairments, there is no evidence to connect those impairments to the back injury. The psychologist’s report indicates that Mr. Whitcher suffered a chronic personality disorder, which he described as:

“. . . (a) generally inadequate adjustment over a number of years, probably first appearing as a teenager, or maybe even a little earlier than that, inadequately adjusting to school, dropping out, not finding any consistent satisfactory type of work, having some family, marital problems.”

The evidence indicates that this described “condition” persisted following the claimant’s injury. However, there is no evidence that it was the claimant’s personality disorder which was the source of his frustration so much as it was just an unfortunate series of events which occurred following the injury.

Mr. Whitcher was examined again in 1982 by a different clinical psychologist who also identified several personality disorders, one of which he characterized as a “schizoid” tendency. When asked about the relationship between the claimant’s schizoid behavior and his back condition, the psychologist testified:

“ ‘. . . I think that in this instance, that he is apt to show rather inconsistent behavior with regard to his back problem. It is going to bother him maybe sometimes a bit more; sometimes he is going to ignore it. He is going to take a very obtuse attitude, he might, I don’t know; like nothing is wrong with me. I am going to go ahead and work. I am not going to lie, I am not going to tell anybody; it will be some irratic behavior about the way he treats his back. I don’t think the back injury is going to make the schizoid personability disorder worse, it is not going to make it worse, it is just going from this way to this way.’ ”

Our examination of the record leads us to conclude that even if the parties did not take into account the existence of the claimant’s pérsonability disorder at the time of the settlement, there is no basis upon which to find a mutual mistake of fact. The evidence does not indicate that the personality disorder was aggravated by the injury or that there was any connection between the injury and the disorder.

Even if we had found some basis upon which to consider this case on the merits, the Workers’ Compensation Court concluded that Mr. Whitcher’s claim is barred by the statute of limitations so that his request to reopen the petition should be denied. In declining to reopen Mr. Whitcher’s settlement agreement based on the grounds of mutual mistake, the Workers’ Compensation Court applied the following statute of limitations:

“The period prescribed for the commencement of an action for relief on the ground of fraud or mistake is within 2 years, the cause of action in such case not to be deemed to have accrued until the discovery by the aggrieved party of the facts constituting the fraud or mistake.”

Section 27-2-203, MCA.

Since the settlement was completed and approved by the proper authorities in April of 1980, the court concluded that under the statute, Mr. Whitcher had until April of 1982 to file his claim. Since it did not appear that he was seeking medical care during that time until he returned to see his doctor in April, 1982, the court noted that the statute may not have begun to run until that time. Based on medical facts and Mr. Whitcher’s debilitating condition in 1982, the court concluded that the limitation period would have expired by at least the fall of 1983. Thus, the claim filed in 1987 was barred by the two year statute of limitations in either case.

Finally, the court noted that the only possibility of not being precluded by the statute of limitations from bringing this claim would be if Mr. Whitcher’s mental capacity was such as to make him unable to knowingly be charged with the statute. Since this possibility was neither raised or pursued by the claimant, the court did not consider it as an issue and stated, “Unfortunately, the harsh reality of his claim under the circumstances gives the Court no alternative but to deny his request.”

We conclude that the determination by the Workers’ Compensation Court that Mr. Whitcher’s claim is barred by the statute of limitations is a correct application of the law in light of the facts of this case. There is no evidence that the statute should be tolled either by latent discovery or by the claimant’s mental condition. We affirm the court’s denial of the claimant’s request to open the Petition for Full and Final Compromise Settlement.

We note the Workers’ Compensation Court’s concern for Mr. Whitcher’s mental, physical, and emotional condition, and the benefits to which the court deemed him entitled. These benefits include medical coverage, a 20% penalty against the insurer, rehabilitation, and costs and attorney fees for the medical benefits issue upon which he prevailed.

Affirmed.

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

MR. JUSTICES HUNT and McDONOUGH did not participate in this cause.

MR. JUSTICE SHEEHY,

dissenting:

This worker’s right to compensation payments should be reinstated on the law and on the facts.

When Mr. Wood, representing Pacific Employer Insurance, offered an $8,000 settlement, on March 20, 1980, Whitcher had a whole body permanent physical impairment of 20 percent recognized by his doctor. The petition which Wood prepared and had Whitcher sign for $8,000 represented the payments that Whitcher would receive at $94 a week for 1.64 years. The people then handling claims for the Workers’ Compensation Division recognized the proposal as unconscionable. Without contacting Whitcher, the Workers’ Compensation Division negotiated with Wood for an additional 26 weeks of compensation. Whitcher never was consulted by either Wood or the Division as to whether Whitcher would consent to the increase. The necessity for the increase would have impressed upon Whitcher, perhaps, that his dealings with Wood were not on all fours with propriety. Thus, we have a full and final settlement to which Whitcher never consented. As the opinion notes, the Workers’ Compensation Court made no relevant findings as to this point. Nonetheless, the majority airily dismisses the lack of Whitcher’s consent saying, “We fail to see why Mr. Whitcher would not have agreed to the additional terms of the settlement since they were in his economic interest.” Thus does the majority supply the missing element of consent to the agreement in this case. The majority does not attempt to explain how an agreement so detrimental to the interests of Whitcher are in his “economic interest.”

In Kienas v. Peterson (1980), [191 Mont. 325,] 624 P.2d 1, 37 St.Rep. 1747 (Harrison, J.) this Court set aside a full and final compromise agreement before the Workers’ Compensation Court on the ground of mutual mistake. Section 28-2-1611, MCA, permits a contract to be revised by the court when through fraud or mutual mistake a written contract does not truly express the intention of the parties. It was on that basis that Kienas was decided. However, Section 28-16-1611, MCA, also permits the revision of a contract when there is a mistake of one party which the other party at the time knew or suspected. The evidence here shows that Whitcher’s consent to the $8,000 settlement was a mistake. If Pacific did not know it was a mistake at the time, it soon found out when the proposal was submitted to the Workers’ Compensation Division. The subsequent amendment of the proposal for settlement executed between Wood and the Division without the knowledge or consent of Whitcher constituted no contract as far as Whitcher is concerned and there should be no problem about reopening his case before the Workers’ Compensation Court under Section 28-16-1611, MCA.

Section 27-2-203, MCA, provides that the two year statute of limitations for reopening a contract on the ground of fraud or mistake is not to be deemed to have accrued until the discovery by the aggrieved party of the facts constituting the fraud or mistake. The question of fact to be determined in this case should be when did Whitcher determine or discover that he had made a mistake in signing the faulty agreement. There is no doubt that Pacific knew or suspected that he had made a mistake.

Whitcher has been completely disabled since his injury and is completely disabled now. The use of legal dodges to deny him his monetary relief where his medical need is verified, shows the absurdity of courts in this Workers’ Compensation system. The consent of Whitcher to the final settlement here cannot be implied under our statutes because he was never offered a proposal which became the final settlement. Section 28-2-503, MCA. The purported contract could be altered here only by another contract here in writing which does not exist, or by an executed oral agreement which also does not exist. Section 28-2-1602, MCA. There being no contract, Whitcher has no problem with respect to his right to additional compensation, no contract, no bar through the statute of limitations.


source: Caselaw Access Project

author: MR. JUSTICE SHEEHY

license: Public Domain

text:
    STATE OF MONTANA, Plaintiff and Respondent, v. GREGORY JOHN JELLISON, Defendant and Appellant.
    No. 88-298.
    Submitted on Briefs Dec. 22, 1988.
    Decided Feb. 28, 1989.
    769 P.2d 711.

      J. Dirk Beccari, Missoula, for defendant and appellant.
    Marc Racicot, Atty. Gen., Kathy Seeley, Asst Atty. Gen., Helena, Robert Deschamps, III, County Atty., Fred Van Valkenburg, Deputy County Atty.,- Missoula, for plaintiff and respondent.
   MR. JUSTICE SHEEHY

delivered the Opinion of the Court.

This is an appeal from a judgment of the Fourth Judicial District, Missoula County. Appellant Jellison was convicted by a jury of four felony counts of robbery, § 45-5-401, MCA. He was sentenced to 40 years on each count plus 10 years on each count for use of a weapon. He was also designated a dangerous offender. Jellison contends that the District Court erred by admitting certain evidence. This Court affirms the District Court.

The issue is whether the District Court erred when it denied the defendant’s motion to suppress as evidence the tennis shoes the defendant was wearing when arrested for robbery and the comparison of the tennis shoes with a print left at the scene of the crime.

On June 2, 1987, Missoula County sheriff deputies responded to a radio report of an armed robbery at the Orange Street Inn. They were parked within sight of the Inn at the time. Within one minute the deputies observed a large white and brown automobile turn left onto Orange Street heading for the 1-9 freeway entrance. This car matched the description of the automobile used in a previous armed robbery. The description of the suspect was of a white male in his twenties, brown hair, stocky build around 5’9” tall. The suspect was reportedly wearing a plaid shirt, blue jeans and white tennis shoes.

The deputies stopped the car and arrested the defendant, Jellison and the driver of the car. The deputies observed a gun in the front seat partially concealed in a K-Mart bag. They also observed clothing in the car, including a plaid shirt. Jellison matched the description of the reported robber. Jellison was taken to jail where his clothing, including his tennis shoes, were placed in a property locker.

A detective investigating the crime scene soon after the crime discovered a shoe print on the counter of the motel. He went to the jail where he obtained Jellison’s shoes from the property locker. He returned to the motel where he compared the shoes to the print found on the counter. The shoes were admitted into evidence at trial as was evidence of the print comparison. Other evidence included the testimony of the victim of the Orange Street Inn robbery that Jellison was the man who robbed her.

Jellison contends that taking his tennis shoes from the property locker after his lawful arrest violated his Fourth Amendment right to be free from unreasonable searches and seizures and his right to privacy guaranteed by Article II, § 10 of the Montana Constitution. We disagree.

First, the seizure of Jellison’s tennis shoes was valid pursuant to § 46-5-101(1), MCA, which authorizes a search “of a person, object, or place may be made and instruments, articles, or things may be seized in accordance with the provisions of this chapter when the search is made ... as an incident to a lawful arrest.” (Emphasis added.) When a lawful arrest is made, police may reasonably search and seize anything within such person’s immediate presence “which may have been used in the commission of [the crime] or which may constitute evidence of the offense.” (Emphasis added.) Section 46-5-102(4), MCA. The suspect was reported to be wearing white tennis shoes at the time of the crime and Jellison was wearing white tennis shoes when he was stopped within 90 seconds of the dispatch over the radio reporting the crime to police on patrol. When Jellison was arrested and brought to the jail and his clothing and tennis shoes were taken, they were taken incident to a lawful arrest and their evidentiary value had already been established by the victim who described the robber. Jellison’s tennis shoes clearly constituted evidence of the crime even before the detective discovered a shoe print at the crime scene.

The Fourth Amendment proscribes unreasonable searches, not reasonable ones. “It is well settled that a search incident to a lawful arrest is a traditional exception to the warrant requirement of the Fourth Amendment.” State v. Ulrich (1980), 187 Mont. 347, 351, 609 P.2d 1218, 1220 (quoting United States v. Robinson (1973), 414 U.S. 218, 224, 94 S.Ct. 467, 471, 38 L.Ed.2d 427).

With regard to the Montana Constitution’s Right of Privacy Clause, Art. II, § 10, the defendant, at the time of his lawful arrest had less or no expectation of privacy with respect to his personal property lawfully seized by the police. A Michigan case, People v. Rivard (1975), 59 Mich. App. 530, 230 N.W.2d 6, articulates this rule:

“Once the [object] had been exposed to police view under unobjectionable circumstances and lawfully taken by the police for safekeeping, any expectation of privacy with respect to that item had at least partially dissipated so that no reasonable expectation of privacy was breached by [the police] taking a ‘second look.’ ”

Rivard, 230 N.W.2d at 8.

The United States Supreme Court held in United States v. Edwards (1974), 415 U.S. 800, 94 S.Ct. 1234, 39 L.Ed.2d 771, that police may, without first obtaining a warrant, seize items of evidence incident to a lawful arrest.

The facts surrounding Edwards are quite similar to the case at bar. Edwards was arrested for attempting to break into a post office. Shortly after he was incarcerated, it was discovered during investigation of the crime scene that the attempted break-in had been made through a wooden window which had been pried with a crow bar leaving paint chips on the sill. Police thought it probable that paint chips would be on the clothing of the perpetrator. Examination of Edwards’ clothing revealed paint chips which matched those found on the window sill. On appeal, the Sixth Circuit Court of Appeals reversed the admission of the wood chips into evidence because a warrant was required “after the administrative process and the mechanics of the arrest have come to a halt.” United States v. Edwards (6th Cir. 1973), 474 F.2d 1206, 1211.

The Supreme Court disagreed:

“With or without probable cause, the authorities were entitled at that point [of arrest] not only to search Edwards’ clothing but also to take it from him and keep it in official custody. There was testimony that this was the standard practice in this city. The police were also entitled to take from Edwards any evidence of the crime within his immediate possession, including his clothing. And the Court of Appeals acknowledged that contemporaneously with or shortly after the time Edwards went to his cell, the police had probable cause to believe that the articles of clothing he wore were themselves material evidence of the crime for which he had been arrested. 474 F.2d at 1210 .... Once the accused is lawfully arrested and is in custody, the effects in his possession at the place of detention that were subject to search at the time and place of arrest may lawfully be searched and seized without a warrant even though a substantial period of time has elapsed between the arrest and subsequent administrative processing, on the one hand, and the taking of the property for use as evidence, on the other. This is true where the clothing or effects are immediately seized upon arrival at the jail, held under the defendant’s name in the “property room” of the jail and at a later time searched and taken for use at the subsequent criminal trial.”

Edwards, 415 U.S. at 806-07, 94 S.Ct. at 1237-39.

In the present case, police thought it probable that the print found on the counter could be matched with the shoe worn by the defendant. Comparison of the print to the shoe proved to be a match. The defendant had been lawfully taken into custody and the police followed their standard practice of taking detainees’ clothing. The police were also entitled to take from the defendant any evidence of the crime within his immediate possession, including his clothes. There was probable cause to believe the defendant’s clothing would provide material evidence of the crime for which he was arrested.

This Court concludes that the District Court did not err by denying Jellison’s motion to suppress the tennis shoes as evidence and the evidence of comparison to the print. The shoes were lawfully seized incident to the lawful arrest of the defendant.

Affirmed.

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


author: MR. JUSTICE HUNT

text:
    BOYNE, U.S.A, INC., Plaintiff and Respondent, v. NICHOLAS L. MALLAS, Bruce Frank and the Montana Territorial Land Co., a Montana corporation, Defendants and Appellants. NICHOLAS L. MALLAS and Bruce Frank, Plaintiffs and Appellants, v. BOYNE, U.S.A., INC., Lone Peak, inc., Big Sky, Inc., and John E. Kircher, Defendants and Respondents.
    No. 88-322.
    Submitted Dec. 2, 1988.
    Decided Feb. 28, 1989.
    769 P.2d 1235.

      Edmund P. Sedivy, Jr., Morrow, Sedivy & Bennett, Bozeman, for defendants and appellants.
    Stephen M. Barrett, Kirwan & Barrett, Bozeman, for plaintiff and respondent.
   MR. JUSTICE HUNT

delivered the Opinion of the Court.

The defendants, Nick Mallas, Bruce Frank, and the Montana Territorial Land Co., a Montana corporation, appeal the decision by the District Court of the Eighteenth Judicial District, Gallatin County, finding that the July 18, 1986 agreement between Boyne U.S.A., Inc., the plaintiff, and the defendants is not enforceable by the defendants. We affirm the District Court.

The substantive issues raised on appeal are:

(1) whether the District Court erred in finding that Mallas was acting in a fiduciary capacity, as Boyne’s realtor, at the time of the July 18, 1986 agreement; and

(2) whether an agreement between a principal and an agent is voidable by the principal when the agent fails to disclose information regarding the agreement.

Boyne U.S.A., Inc. (Boyne) is a Michigan corporation authorized to do business in the state of Montana. The corporation is solely owned by the Kircher family, with Everett Kircher as president and his son, John Kircher, as vice-president. Among its holdings, Boyne owns the Big Sky resort properties located south of Bozeman, Montana.

John Kircher has served as general manager of Boyne’s Big Sky resort properties since 1982. His duties as general manager of the Big Sky resort includes handling routine to complex real estate transactions. While John Kircher was required to clear important transactions with the home office, no consistent pattern of obtaining written corporate resolutions for such transactions was observed. At a special meeting of Boyne’s Board of Directors on February 1,1985, John Kircher was given authority by the Board to:

“investigate inquiries into the possible sale of Big Sky of Montana’s properties and/or the Corporation’s possible purchase of other ski areas. This would entail discussions with prospective buyers as to their actual interest and ability to make such purchases; and . . . John Kircher will present any such proposal(s) which appear to be valid to the Board for consideration and whatever action the Board deems appropriate.”

John Kircher subsequently signed a one year listing agreement on March 28, 1985 with the Montana Territorial Land Co., a closely held corporation engaged in the sale of real estate and owned by Nicholas Mallas and other family members. The listing agreement was accepted by Mallas, a licensed real estate agent, on behalf of the Montana Territorial Land, Co. Mallas then began a search for a buyer for the Big Sky resort properties.

In September, 1985, Everett Kircher wrote to Mallas on behalf of the Boyne’s Board of Directors, advising Mallas that John Kircher executed the March, 1985 listing agreement without their knowledge or authority. Everett Kircher advised Mallas that the Board deemed the contract null and void ab initio because the agreement may result in the sale of a substantial portion of Boyne’s assets not in the ordinary course of business which would require shareholder approval. Everett Kircher further wrote that the Board “simply require [s] that you deal directly with our corporate home office to negotiate an agreement which we can present to the Board of Directors for their approval.” This issue was not resolved and the listing agreement was permitted to expire in March, 1986. While the listing agreement was in effect, no sale was consummated. The listing agreement, however, provided that Mallas would receive a commission for the sale of the property if it was sold within twelve months after the termination of the agreement to a prospect introduced by Mallas.

In May and June, 1986, Mallas started negotiating with John Kircher regarding the sale of the Big Sky resort properties. Mallas apparently intended to be one of the ultimate purchasers of the resort, although conflicting evidence exists as to whether this was clearly disclosed to John Kircher. Mallas submitted two written offers to John Kircher, one for $15 million and one for $17 million, with different downpayments. John Kircher acknowledged receipt of these offers and then relayed the price, downpayment, interest rate, and the time over which the payments would be made to Boyne by telephone to Boyne through Everett Kircher. Boyne, however, rejected the two offers. Because of the rejection, the written offers were not forwarded to Boyne headquarters by John Kircher, and the Board of Directors in Michigan did not know of the specific terms contained in the two offers.

On July 18, 1986, Mallas called John Kircher and advised him that he had a new offer to purchase the property. The offer was a $7 million downpayment and a $13 million note. John relayed this offer to Boyne by telephone and was then told that he could inform Mallas that the price was acceptable. No terms or conditions of the offer other than the price were discussed during the telephone call and no authority was given to sign a binding contract. When John Kircher indicated that the latest offer was acceptable, Mallas then arranged to have a proposed agreement typed.

Mallas and John Kircher met on July 19, 1986 at a secluded lodge in Madison County. At that meeting, Mallas presented a written offer, dated July 18, 1986, that he exclusively prepared for the purchase of the property. John Kircher, his wife, Sara Kircher, and Mallas were present at the meeting. The July 18, 1986 written offer contained provisions increasing the purchase price to $21.2 million; providing for an $8.2 million downpayment; granting the Montana Territorial Land Co. a $1.2 million commission; subordinating Boyne’s note to “any bank financing required by the Buyer, working capital required by the company and any sale and leaseback of the machinery and equipment required by the Buyer;” allowing Mallas and Frank a unilateral right to rescind the agreement without any obligation or reason while Boyne had no such option; and stating that sellers have the requisite authority, including Board of Directors’ and shareholders’ approval, to sell the Big Sky resort properties.

After reading the July 18, 1986 document, John Kircher had reservations about the document. No telephone service was available at the secluded lodge, leaving John unable to talk to either the Boyne’s Board of Directors or an attorney employed by Boyne. John asked few, if any, questions. Nonetheless, he signed the document after Mallas convinced him that the document was not binding but merely a “letter of intent” which Mallas needed to show his financial backers in California to establish that Boyne was serious about selling its properties.

On July 30, 1986, an attorney for Boyne wrote to Mallas claiming that the July 18, 1986 agreement was of no force and effect because the letter was only a nonbinding letter of intent; the offer was vague; Mallas failed to disclose in the agreement that he was acting as a principal and on behalf of the Montana Territorial Land Co.; Mallas’s unilateral right of recession was unconscionable and unenforceable; and the agreement had not been reviewed by an attorney, contrary to what the agreement stated. Boyne therefore brought action to void and rescind the July 18, 1986 agreement. Nick Mallas and Bruce Frank, the defendants, brought action to specifically enforce the agreement. The actions were consolidated. The District Court, sitting without a jury, entered findings of fact and conclusions of law and submitted an order that the July 18, 1986 agreement between Boyne and Mallas and Frank is of no further force and effect. Mallas and Frank appeal.

The first issue raised on appeal is whether the District Court erred in finding that Mallas was acting in a fiduciary capacity, as Boyne’s realtor, at the time of the July 18, 1986 agreement.

The District Court found that up to and including the time when Mallas signed the July 18, 1986 agreement for the purchase of the Big Sky resort, Mallas was acting as a real estate agent for Boyne and therefore was in a fiduciary relationship with Boyne. The court noted that the most important factor which it based this conclusion upon was the July 18, 1986 agreement, drafted by Mallas, which provided that Mallas’s company, the Montana Territorial Land Co., was to receive a $1.2 million real estate commission.

Mallas and Frank argue that substantial credible evidence does not support the court’s finding that a fiduciary relationship existed. In attempting to explain the word “commission” in the July 18, 1986 agreement, Mallas and Frank argue that the “question of a ‘real estate commission’ was never a factual.” They argue that John Kircher knew that the “stated ‘commission’ was not a true earned real estate commission” because Kircher knew that Mallas was not acting as Boyne’s realtor when he attempted to buy the property and that it was Frank who suggested that the contract should provide for a $1.2 million commission. Mallas and Frank state that the commission would allow them additional capital to renovate the golf course and make other improvements. Mallas and Frank therefore argue that the significance the District Court places on the use of the word “commission” is not supported by the evidence. We disagree.

When a district court determines that an extrinsic ambiguity exists in a contract, evidence may be used to determine the intent of the parties. Section 28-2-905(2), MCA; Monte Vista Co. v. Anaconda Co. (Mont. 1988), [231 Mont. 522,] 755 P.2d 1358, 1362, 45 St.Rep. 809, 814; Martin v. Laurel Cable T.V., Inc. (1985), 215 Mont. 229, 696 P.2d 454, 457, 42 St.Rep. 314, 317. The terms of a contract are considered ambiguous when different interpretations are possible. Monte Vista Co., 755 P.2d at 1362, 45 St.Rep. at 814. In the present case, the District Court did not note any ambiguity in the terms of the contract providing Montana Territorial Land Co. with a real estate commission of $1.2 million. The District Court therefore found that this most important provision contained within the July 18, 1986 agreement was one of the circumstances that allowed it to conclude that Mallas was acting as a real estate agent and therefore in a fiduciary relationship with Boyne. The District Court did not err in relying upon the unambiguous contract term “commission.” This provision granting Mallas’s Montana Territorial Land Co. a $1.2 million commission establishes that a fiduciary relationship existed between Mallas and Boyne.

The term “commission” is defined by Webster’s Dictionary as “a formal written warrant granting the power to perform various acts or duties.” Webster’s Ninth New Collegiate Dictionary 265 (9th ed. 1984). If the language of the contract is clear and explicit and does not involve an absurdity then the contract’s language governs the interpretation of the contract. Section 28-3-401, MCA. The contract provides that Montana Territorial Land, Co. was to receive a $1.2 million commission. The terms of the contract implicitly grants Mallas, as the real estate agent, the power to perform various acts or duties in connection with the sale of the Big Sky resort properties. By granting Mallas a commission, the contract also establishes that a fiduciary relationship existed. The statute addressing when extrinsic evidence concerning a written agreement may be considered, § 28-2-905, MCA, precludes us from even considering Mallas’s “argument” that everyone concerned knew that the commission was not really a commission. We therefore hold that substantial credible evidence supports the District Court’s conclusion that a fiduciary relationship existed between Mallas and Boyne, as a result of Mallas acting as Boyne’s realtor at the time the July 18, 1986 agreement was signed.

The second issue raised on appeal is whether an agreement between a principal and an agent is voidable by the principal when the agent fails to disclose information regarding the agreement.

Mallas and Frank argue that substantial credible evidence does not support the District Court’s conclusions that Mallas breached his duty as Boyne’s real estate agent by not disclosing critical information about the agreement. They further argue that substantial credible evidence does not support the District Court’s conclusions that Boyne, as the principal, may elect to rescind the agreement. We disagree.

A contract is voidable by a principal if the principal’s agent, who was employed to sell the principal’s property, purchases the property himself, either directly or indirectly through a third person. Crowley v. Rorvig (1921), 61 Mont. 245, 251-52, 203 P. 496, 496-97. The principal’s right of remedy is not defeated by the amount of consideration, the absence of undue advantage, or other similar features. Only after the principal has confirmed that he has full knowledge of all the facts, will this right to avoid the contract no longer be available to the principal. Crowley, 61 Mont. at 252, 203 P. at 497. The reasoning behind this well established principal is to insure that an agent, when carrying out an entrusted duty as the agent, does not place his interests above the principal’s interests. This Court recognizes that when an agent’s and principal’s interests are brought in conflict, the agent will not necessarily look upon the principal’s interests as more important and entitled to more protection than his own. Therefore, the courts allow a principal to void a contract without even inquiring into whether the agent obtained an advantage or acted fraudulently. Crowley, 61 Mont. at 252-53, 203 P. at 497. A principal may void the entire contract even though purchasers other than the agent are also involved in the transaction. Crowley, 61 Mont. at 261-62, 203 P. at 500.

As noted above, Mallas was acting as Boyne’s real estate agent at the time the July 18, 1986 agreement was signed and therefore a fiduciary relationship existed between Mallas and Boyne. Mallas and Frank note that John Kircher, as general manager, vice-president and director of Boyne, was also an agent of Boyne. Mallas and Frank therefore argue, citing § 28-10-604, MCA, that knowledge imparted to John Kircher by Mallas is imputed by law to Boyne. While Mallas and Frank attempt to switch the focus from Mallas’s duties as an agent for Boyne to John Kircher’s duties as an agent for Boyne, we hold that the proper focus is whether Mallas breached his duty by not disclosing all pertinent facts regarding his purchase of the Big Sky resort properties to Boyne and whether he acted in the utmost good faith. Mallas’s and Frank’s reliance on § 28-10-604, MCA, is therefore misplaced in light of the entire facts. Further, as we have noted previously, “[i]n the event of any litigation between [the agent] and his employer, the burden is upon [the agent] to prove both the permission and the exemplary manner in which he availed himself of it. . . .” First Trust Co. v. McKenna (1980), 188 Mont. 534, 539, 614 P.2d 1027, 1030 (quoting 12 Am.Jur.2d Brokers § 91 (1964).

As Boyne’s agent, Mallas in his fiduciary capacity had the duty to act in the utmost good faith towards his client, which includes a duty to make full disclosure. When the agent is buying the property himself, this duty to disclose all pertinent facts becomes particularly important. McKenna, 188 Mont. at 539, 614 P.2d at 1030. The evidence supports the District Court’s finding that Mallas knew or should have known that Boyne’s Board of Directors did not know of the specific terms of the July 18, 1986 agreement and that John Kircher did not have the authority to sign an agreement to sell the Big Sky resort properties. Specifically, the evidence shows that Mallas exclusively prepared the July 18, 1986 agreement and that John Kircher first saw this agreement on July 19,1986 at a secluded lodge in Madison County. No telephone was available for John Kircher to call and discuss the contract provisions with either the Boyne headquarters or an attorney employed by Boyne. Mallas himself did not discuss the provisions in the document with John Kircher, including the meaning and possible eifects of the subordination clause, and then convinced John Kircher that the document was only a “letter of intent.”

In addition, Mallas allowed John Kircher to sign the agreement with the provision stating that the “[s]ellers represent that they have the requisite authority, including Board of Directors’ and Shareholders’ approval, to sell the assets as described herein.” The evidence shows that Mallas received a letter from Boyne’s headquarters in September, 1985 stating that John Kircher did not have the requisite authority to sign a listing agreement to sell the Big Sky resort properties without the Board of Directors’ approval of the specific terms. We fail to see how Mallas, in the exercise of utmost good faith, could therefore contend that approximately ten months later John Kircher nonetheless had the authority from the Board to sell the entire Big Sky resort properties when John Kircher himself had not seen the July 18, 1986 agreement until the July 19, 1986 meeting at the secluded lodge. In light of the circumstances, a secluded lodge with no telephone, Mallas knew that John Kircher was unable to convey to the Boyne headquarters any of the specific provisions of the contract.

While Mallas and Frank attempt to argue that the District Court “forgot” evidence more favorable to them, we hold that the District Court properly considered all of the evidence and thus made findings of fact consistent with the evidence. The trier of facts, and not this Court, is in the best position to assess the credibility and weight of conflicting evidence. Mountain West Farm Bureau Mutual, Ins. Co. v. Girton (1985), 215 Mont. 408, 697 P.2d 1362, 1363, 42 St.Rep. 500, 501. We affirm the District Court’s conclusion that the July 18, 1986 agreement between John Kircher and Nick Mallas and Bruce Frank is voidable by Boyne.

Affirmed.

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


author: MR. JUSTICE SHEEHY MR. JUSTICE SHEEHY,

text:
    SIDNEY E. WARD, Plaintiff and Respondent, v. VIBRASONIC LABORATORIES, INC., a corporation, Defendant and Appellant.
    No. 88-337.
    Submitted on Briefs Dec. 9, 1988.
    Decided Feb. 28, 1989.
    769 P.2d 1229.

      Roger Tippy, Helena, for defendant and appellant.
    Jardine & Grauman, John J. Jardine, Whitehall, for plaintiff and respondent.
   MR. JUSTICE SHEEHY

delivered the Opinion of the Court.

Vibrasonic Labs, Inc., appeals from a judgment of the District Court for the Fifth Judicial District, Jefferson County. Trial was held April 6, 1988, without a jury. The District Court entered judgment for the plaintiff, Ward and awarded $2,500.00 punitive damages. This Court affirms the judgment of the District Court but remands the cause for specific findings with regard to punitive damages pursuant to § 27-1-221, MCA.

There are three issues for review:

(1) whether the District Court erred by allowing the plaintiff to amend his complaint to conform to the evidence presented at trial;

(2) whether the District Court erred by denying defendant’s motion to vacate the trial setting; and,

(3) whether the District Court erred by not presenting findings pursuant to § 27-1-221, MCA, regarding punitive damages.

The plaintiff, Sidney E. Ward, entered into a purchase/lease agreement with Vibrasonic Laboratories, Inc. for the purchase of a hearing aid on July 31, 1986. The cost of the hearing aid was $499.00 plus $100.00 fitting fee for a total of $599.00. Ward made a down-payment of $180.00 leaving a balance of $419.00 to be paid in monthly installments of $20 over 36 months. As the District Court noted in its findings of fact, the agreement failed to comply with several provisions of the Montana Retail Installment Act. The agreement fails to give notice of the buyer’s right to payoff in advance the full amount and obtain a partial refund of the finance charge as required by § 31-1-231(2), MCA. The agreement is required to state, if a separate amount for insurance is paid, the specific types of coverage and benefits, § 31-l-231(5)(d), MCA. It fails to state the amount of the finance charge as required by § 31-1-231 (5) (g); and it fails to state the total amount of the time balance required by § 31-l-231(5)(h), MCA. Finally, Vibrasonic itself violated § 31-1-233, MCA, by writing an insurance policy which it was not authorized to do by the state of Montana.

Ward purchased this insurance from Vibrasonic’s agent. Vibrasonic called the insurance “the Ultimate Hearing Aid Protection Plan.” The plan provided for loss against physical damage to the hearing aid caused by “external sources such as theft, fire, accidental breakage, water, auto accident,” plus loss by mysterious disappearance. This plan specifically states it is “separate and distinct from the factory warranty and does not cover repair service normally covered by the factory warranty.”

The District Court found that “the Ultimate Hearing Aid Protection Plan” to be “insurance” within the meaning of the insurance code of the state of Montana because of terms used in the plan such as “insured’s name, policies, coverage, and premiums.” The District Court found that this was an attempt to write an insurance policy by an unlicensed insurer; that a premium of $20 was collected and constituted a fraudulent, deceptive and illegal act on the part of Vibrasonic.

Ward became dissatisfied with the hearing aid despite attempts by Vibrasonic to make adjustments. Ward tried to rescind the contract but Vibrasonic would not return payments already made under the contract. Nonetheless, Ward returned the hearing aid in the summer of 1987 and stopped making payments. During this time, Ward was diagnosed as having terminal cancer in the facial area and brain. Ward’s physician, Dr. Sacry, wrote a letter pursuant to paragraph three of the agreement between Vibrasonic and Ward which should have allowed Ward to rescind the contract. Paragraph three reads as follows:

“You may cancel this agreement if in one year after the delivery date you consult a licensed physician, or a non-competitive certified audiologist, that has no connections with a hearing aid dispenser, and such person advises you against the purchase or use of a hearing aid and specifies in writing the medical or audiological reasons for such advice.”

Vibrasonic denied Ward’s right to rescind under this clause of the contract. It was upon this basis that the District Court found that Vibrasonic breached the contract and ordered that Ward be refunded $440.00, the amount which he had paid.

Ward filed a complaint on October 6, 1987. The complaint contained four counts upon which Ward based his claims for relief. Count I alleged the basis for rescission; Count II was an alternative to Count I; Count III alleged usurious interest rates on the contract, this Count was later dropped; and Count IV alleged fraudulent misrepresentation in the sale of the insurance policy covering the hearing aid. Count IV reads as follows:

“That plaintiff was required to purchase ‘insurance’ as set forth in said agreement, but plaintiff is unaware of the nature or extent of any such insurance coverage, nor was he ever furnished with a policy or other memorandum of insurance, nor was plaintiff advised that he may either accept or decline said insurance, and that the additional charge of $20.00 for ‘insurance’ is unwarranted and unlawful and was obtained by false and fraudulent misrepresentations by defendants, and should be returned to plaintiff.

“That the actions of the defendants in requiring said ‘insurance’ or in charging the plaintiff for the same, were false and fraudulent and oppressive and defendants should be assessed punitive damages in the amount of $10,000.00, or such amount as may be determined upon trial of this cause, by reason of said actions.”

Trial was set on February 17, 1988, for April 6, 1988, giving Vibrasonic seven week’s notice to prepare for trial. On March 23, 1988, two weeks before trial, Vibrasonic moved for a continuance and asked to present argument on its motion for summary judgment on the trial date rather than try the case.

On April 6, 1988 the plaintiff and his counsel appeared and were ready for trial; the defendant appeared only through counsel. Vibrasonic’s motions for continuance and summary judgment were denied and the trial was held. The plaintiff presented the testimony of Ward. The defendant did not put on a case-in-chief.

The District Court entered its findings on April 18, 1988 and judgment was entered April 27, 1988 in favor of Ward. Vibrasonic moved for a new trial on the grounds of irregularities in the proceedings of the District Court and surprise. This motion was denied and the defendant, Vibrasonic, appeals to this Court.

I

Did the District Court err by allowing the plaintiff to amend his complaint to conform to the evidence presented at trial?

First, the appellate procedural doctrine that matters not raised at trial will not be considered on appeal applies here.

“It has long been the rule of this Court that on appeal we will not put a District Court in error for a ruling or procedure in which the appellant acquiesced, participated, or to which appellant made no objection.”

Green v. Green (1978), 176 Mont. 532, 536, 579 P.2d 1235, 1237. When plaintiff’s counsel made the motion to amend, defendant’s counsel made no objection.

Second, the rule with regard to amendments to the pleadings is well-settled. As early as 1905, the position of this Court has been:

“. . . the court has discretionary power to permit the amendment under such terms as it deemed just and proper. This it did.”

Dorais v. Doll (1905), 33 Mont. 314, 316-17, 83 P. 884, 885.

“The policy of the law is to permit amendments to the pleadings in order that litigants may have their causes submitted upon every meritorious consideration that may be open to them; therefore it is the rule to allow amendments and the exception to deny them. (Emphasis added.)”

Union Interchange, Inc. v. Parker (1960), 138 Mont. 348, 353-54, 357 P.2d 339, 342.

In addition to settled case law, Rule 15(b), M.R.Civ.P. provides:

“When issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings .... the court may allow the pleadings to be amended and shall do so freely when the presentation of the merits of the action will be subserved there . . . (Emphasis added.)”

The purpose of Rule 15(b) allowing amendment of a complaint to conform to the evidence presented is to “put an end to wasteful and needless litigation and have trial on the merits of the case.” Reilly v. Maw (1965), 146 Mont. 145, 156, 405 P.2d 440, 447.

Vibrasonic contends that to allow the amendment of the complaint on the insurance issue raises a new theory of recovery. This Court disagrees. Count IV of the complaint clearly contemplates the claim of tortious misrepresentation by Vibrasonic to Ward by requiring insurance on the hearing aid. The policy purchased by Ward was an insurance policy as defined by Montana law and not a guaranty or warranty as purported by Vibrasonic. The Montana Insurance Code, § 33-1-210, MCA, defines property insurance as:

“Property insurance is insurance on real or personal property of every kind and every interest therein, whether on land, water, or in the air, against loss or damage from any and all hazard or cause, and against loss consequential upon such loss or damage, other than noncontractual legal liability for any such loss or damage. (Emphasis added.)”

The contract presented to Ward was indeed insurance under this definition. Vibrasonic claims this policy was simply a warranty. We disagree:

“A warranty promises indemnity against defects in an article sold, while insurance indemnifies against loss or damage resulting from perils outside of and unrelated to defects in the article itself.” State ex rel. Duffy v. Western Auto Supply Co. (1938), 134 Ohio St. 163, 16 N.E.2d 256, 259.

The contract refers to a standard factory warranty which lasts for one year. The insurance was sold separately by the Vibrasonic agent approximately three weeks after the contract was signed, and as set out above, protected against loss or damage, not defects in the hearing aid itself.

This Court concludes that the District Court did not err by allowing the plaintiff to amend this complaint to conform to the evidence presented.

II

Did the District Court err by denying defendant’s motion to vacate the trial setting?

The thrust of Vibrasonic’s argument with regard to this issue is that it was prejudiced and surprised because of the amendment to the plaintiff’s complaint and because no continuance was granted to allow the defendant to prepare a defense.

Count IV of the complaint, as set out above, contains many references to insurance. It expressly refers to the issuance of insurance, the unlawful collection of a premium, that it was obtained by false and fraudulent misrepresentations by Vibrasonic, and that punitive damages should be assessed. This pleading standing alone is enough to cover the unlawful activities of Vibrasonic in the insurance business. There was no surprise, there was no change in theory, there was no prejudice to Vibrasonic. Vibrasonic employees or agents did not appear at trial, after seven weeks notice of a trial date and over a year’s notice of Count IV. It appears such motions were filed simply for delay. Ward died soon after trial and a continuance at the time would have been fatal to Ward’s case.

This Court concludes that the District Court did not err by denying Vibrasonic’s motion to continue.

Ill

Did the District Court err by not presenting findings pursuant to § 27-1-221, MCA, regarding punitive damages?

This Court agrees with both the plaintiff and defendant on the point that punitive damages were awarded without making all the required findings pursuant to § 27-l-221(7)(b)(i-ix), MCA:

“When an award of punitive damages is made by the judge, he shall clearly state his reasons for making the award in findings of fact and conclusions of law, demonstrating consideration of each of the following matters:

“(i) the nature and reprehensibility of the defendant’s wrongdoing;

“(ii) the extent of the defendant’s wrongdoing;

“(iii) the intent of the defendant in committing the wrong;

“(iv) the profitability of the defendant’s wrongdoing, if applicable;

“(v) the amount of actual damages awarded by the jury;

“(vi) The defendant’s net worth;

“(vii) previous awards of punitive or exemplary damages against the defendant based upon the same wrongful act;

“(viii) potential or prior criminal sanctions against the defendant based upon the same wrongful act; and

“(ix) any other circumstances which may operate to increase or reduce, without wholly defeating, punitive damages.”

Although the District Court did not specifically state in its findings with regard to punitive damages that the findings were being made pursuant to the above statute, the court did make partial findings in accordance with the statute. Findings of fact No. 9 and No. 10 state the District Court’s findings as related to Count IV and the sale of insurance by Vibrasonic. The findings are set out as follows:

“9. That at the time of delivery of said hearing aid, the agent, Richards, sold Plaintiff an insurance policy thereon (which was provided for by written addition in the agreement) being called ‘The Ultimate Hearing Aid Protection Plan’ (Plaintiff’s Exhibit 3). The policy provided for loss against physical damage to the aid caused by . external sources such as theft, fire, accidental breakage, water, auto accident, plus many others.’ It also covers loss by mysterious disappearance. The ‘policy’ also provides for a $75 deductible for the replacement of the hearing aid ‘in case of loss.’ The Court finds that ‘The Ultimate Hearing Aid Protection Plan’ is ‘insurance’ within the meaning of the insurance code of the state of Montana, there being many terms used that are indicative of insurance policies such as the application containing the ‘Insured’s Name,’ the terms ‘policies, coverage, premiums, uninsured shipping, protection,’ among others, all of which clearly spell out an attempt to write an insurance policy in the state of Montana by an unlicensed insurer; that a premium of $20 was collected and constituted an illegal act on the part of Defendant, and which was fraudulent and deceptive.

“10. That Richards, acting on behalf of the Defendant VIBRASONICS, falsely and fraudulently sold insurance to the Plaintiff and collected a premium therefor. This act was done with the knowledge that neither he nor Defendant were authorized to sell insurance in the state of Montana. This was a wrongful, tortious act, which justifies the imposition of punitive damages by way of example in an amount hereinafter fixed.”

These findings address (i) through (iv) of the statutory requirements. Section (v) relates to amount of actual damages awarded by the jury; although this was not a jury trial, actual damages in the amount of $40 were awarded by the judge. It was subdivisions (vi) through (ix) that were not addressed. In order to consider these statutory requirements, evidence must be presented for the court to consider. This Court remands on this issue so that evidence may be presented to the District Court for consideration and so that findings and conclusions may be made in accordance with § 27-1-221(7)(b)(i-ix), MCA.

With respect to Subdivision (vi), as to the defendant’s net worth, either party may present such evidence at trial. The plaintiff may want to introduce evidence of this kind in an effort to obtain a greater damage award and the defendant may want to present evidence of its wealth in an effort to mitigate the damage award. The purpose of punitive damages is to punish and deter the party found liable, but not to hit so hard as to bring about financial ruin. In the usual case “a defendant which presents no evidence of financial worth cannot complain that the jury did not have such evidence.” Hicks v. Lilly Enterprises (1980), 45 Or.App. 211, 608 P.2d 186, 189.

Finally, the defendant argues that if indeed the sale of the insurance is a violation of the Montana Insurance Code, the State Auditor’s office is the agency which should proceed against the defendant, not the plaintiff. This Court disagrees. The plaintiff has a common-law. tort action against the defendant for fraud and misrepresentation. The State Auditor’s office may also proceed against the defendant under its penalty provisions for violation of the insurance code.

The award of compensatory damages is affirmed and the punitive damages judgment is reversed and remanded for proceedings in accordance with this Opinion. Costs of appeal to plaintiff.

MR. JUSTICES HARRISON, GULBRANDSON, HUNT and Mc-DONOUGH concur.

MR. JUSTICE SHEEHY,

in special concurrence:

This case demonstrates how silly the results can be when the legislature, in the guise of “tort reform” interjects itself in matters that are properly in the province of the courts. In my opinion, the District Court was measurably conservative in assessing punitive damages against a company that took advantage of the ill and the elderly, and violated our state’s insurance laws. It is safe to predict that punitive damages awards will be larger in the future because of the rites of passage now required by the legislature to be followed. The notion that torts can be handled in the legislative halls instead of in courts at law is prevalent now, and unfortunately it will keep muddying the legal waters.


author: MR. JUSTICE McDONOUGH

text:
    In the MATTER OF A.H., T.H., J.A.H., Youths in Need of Care.
    No. 88-367.
    Submitted on Briefs Feb. 3, 1989.
    Decided March 2, 1989.
    769 P.2d 1245.

      J. Mayo Ashley, Helena, for appellant.
    Marc Racicot, Atty. Gen., Dorothy McCarter, Asst. Atty. Gen., Mike McGrath, County Atty., Carolyn Clemens, Deputy County Atty., Randi Hood, Guardian Ad Litem, Helena, for respondent.
   MR. JUSTICE McDONOUGH

delivered the Opinion of the Court.

This is an appeal from a ruling of the District Court of the First Judicial District, Lewis and Clark County, terminating the mother’s parental rights to J.H., a minor, and committing T.H. and A.H., minors, to the long-term custody of the State. We affirm.

The mother frames a single issue on appeal: Whether the District Court erred in terminating the mother’s parental rights to J.H. and in granting long-term custody of T.H. and A.H. to the State Department of Family Services.

This action is the latest in a series of dealings between the State and the mother, who suffers from emotional and psychological disturbances. The mother initially relinquished custody of her four minor children on a voluntary basis, and they were placed in foster homes. In March of 1986, the State petitioned the District Court for temporary custody and protective services. After several hearings on the petition, the court issued an order in June of 1986, in which it found the children to be “youths in need of care” and directed the Lewis and Clark County Department of Family Services (Department) to develop a treatment plan.

The plan developed by the Department was designed to reunite the children with the mother, and was divided into three phrases. The goal of the first phase was:

“To restore [the mother]’s mental/emotional health and capability to a level sufficient to enable her to conduct herself behaviorally in a manner which would make it reasonable for mental health and child protective service professionals to believe her likely to function responsibly in the future as an adult, parent and homemaker.”

The goal of the second phase was for the mother to maintain the mental and emotional stability established during the first phase. The third phase would then attempt to restore full custody of the children to the mother. The plan would take approximately one year. During that time, the children would remain in the custody of the Department.

The mother was making apparent progress under the first two phases, and in the spring of 1987, the process of reintegrating the children into the mother’s home began. However, the children soon exhibited behavioral problems. On November 10, 1987, the State filed a petition seeking to terminate the mother’s parental rights, or in the alternative, for long-term custody of A.H., T.H. and J.H. (the fourth child had since reached majority). On November 20, the State petitioned for temporary investigative authority and protective services. The court granted the latter petition, provided that the children remained in foster care and had no contact with the mother until she had completed a psychiatric evaluation.

A hearing on the State’s petition to terminate parental rights was held in January of 1988. The court heard evidence concerning the state of the mother’s mental health, as well as the health of the children. In March of 1988, the court issued its order terminating the mother’s parental rights as to J.H., and granting long-term custody of A.H. and T.H. to the State. This appeal followed.

I. Termination of Parental Rights

In our recent decision, Matter of J.L.S. (Mont. 1988), [234 Mont. 201,] 761 P.2d 838, 45 St.Rep. 1842, we outlined the legal standards to be applied to this type of case. We noted that a parent’s right to custody is a fundamental liberty interest. The State may petition for termination of parental rights, but it must show by clear and convincing evidence that the statutory criteria for such termination have been met. J.L.S., 761 P.2d at 840.

The District Court views the evidence and decides whether the State has met that burden. We will not disturb the District Court’s decision “unless a mistake of law exists or the factual findings are not supported by substantial credible evidence.” J.L.S., 761 P.2d at 840-41 (citing In re V.B. (Mont. 1987), [229 Mont. 133,] 744 P.2d 1248, 44 St.Rep. 1838).

The termination of parental rights is governed by § 41-3-608, MCA. Under this statute, parental rights can be terminated only after three requirements are satisfied: (1) the children have been adjudicated youths in need of care, (2) a court-approved treatment plan has not been complied with or has been unsuccessful, and (3) the conduct or condition causing the problem cannot be rectified within a reasonable time.

J.H., A.H., and T.H. were adjudicated youths in need of care by the District Court’s order of June, 1986. That order was not appealed, and both sides agree that the first requirement under the above statute was therefore met.

The District Court made a specific finding on the second requirement; the court-approved treatment plan had not been complied with due to disruption caused by the mother, and it was therefore not successful. Counsel for the mother disputes this finding on appeal. Counsel argues that witnesses who testified about the lack of compliance with the plan gave inconsistent testimony on some points, and were in conflict with testimony given by other witnesses.

In addition to the mother, nine witnesses testified before the District Court. Joe Baumgardner, the Department social worker who submitted the treatment plan approved by the court, testified about his concerns regarding behavioral problems (e.g., defiance and aggressiveness) that resurfaced in the children after each visit with the mother during the second phase of the plan. Baumgardner had become worried that even if the mother were able to gain some control of her own problems, she might not be able to deal with the children. He also testified about actions by the mother in violation of the plan: her association with known and suspected felons (one of whom had been convicted of sexually deviant conduct with children) that brought the children into contact with these people; her interference with the children’s schooling; her arrest for assaulting one of the children; and other conduct Baumgardner characterized as “bizarre,” causing him to fear for the safety of the children in the mother’s home.

Sandi Ashley, a private therapist who has treated the mother and two of the children at various times since 1982, testified about the mother’s consistent refusal to take prescribed medication and her threatening behavior toward Ashley and personnel in Ashley’s office. Ashley also testified about the mother’s unpredictable behavior toward the children, which had caused them to distrust her, and about the children’s complaints that the mother was not complying with the treatment plan.

There was also testimony by Dr. George Cloutier, who has diagnosed the mother as being a manic depressive in a hypomanic stage. Dr. Cloutier also testified about having difficulty in getting the mother to take prescribed medication and about the mother’s difficulty in benefiting from therapy.

The State also presented documentary evidence concerning the behavioral problems that Baumgardner had noticed in the children, which stemmed from their association with their mother. This evidence described behaviors such as uncontrolled urination, aggression and threats to burn down a foster home. The children continue to exhibit anxiety, identity disorders, depression and possible suicidal tendencies. Two of the children have been recommended for extensive therapy in order to address emotional and personality disorders.

The District Court’s findings as to the second statutory requirement was supported by substantial credible evidence. The record shows that the mother failed to comply with the treatment program. The continuing problems exhibited by the mother and the children are clear evidence that the plan has not been successful.

The court also found that the third requirement was satisfied; it was apparent that the conduct or condition rendering the mother unfit was unlikely to change within a reasonable time. The court made a specific finding that continuation of the parent-child legal relationship would result in continued abuse or neglect of the children.

Counsel for the mother also disputes this finding, and first points out that Dr. Cloutier testified it would take three or four months to correct the mother’s condition with proper therapy. This, it is argued, is a reasonable time. However, Dr. Cloutier testified that the three- or four-month period would be a minimum time frame for stabilizing the mother. It would then be necessary to assess her situation and begin' a course of treatment. Dr. Cloutier also reiterated the problems encountered in getting the mother to take medication. This could lengthen the stabilization period significantly.

The mother’s counsel also argues that the District Court ignored the statutory considerations to be used in making this finding. Section 41-3-609(2), MCA, lists factors to be considered before finding that continuation of the parent-child relationship would be detrimental. These factors include an emotional or mental illness of the parent, a history of violent behavior by the parent, and any reasonable efforts by protective service agencies that have been unable to rehabilitate the parent.

The evidence discussed above shows these factors to be present in this case. The court also noted the mother’s persistent and perhaps worsening condition, which was evident from her behavior at the hearing. The mother showed a lack of coherence and control to the point of screaming, pounding her fists and defecating in her pants. The District Court’s finding on the third statutory requirement is supported by substantial credible evidence.

II. Long-Term Custody

The District Court granted custody of T.H. and A.H. to the State until such time as they reach the age of 18, or until further order of the court. The court’s authority to do so was derived from § 41-3-406, MCA. Under this statute, once a youth is found to be abused, neglected or dependent, custody of that youth can be transferred to the State. We will not overturn such a ruling absent a clear showing of abuse of discretion. In re Moyer (1977), 173 Mont. 208, 567 P.2d 47. Given the unfortunate circumstances resulting from the mother’s emotional and psychological difficulties, it is clear that granting custody of these two youths to the Department was not an abuse of discretion.

The District Court applied the correct law to the facts before it, and its findings of fact are supported by substantial credible evidence. We therefore affirm the court’s order.

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