author: JUSTICE GRAY

text:
    BILLINGS POST NO. 1634, VETERANS OF FOREIGN WARS OF THE UNITED STATES, Plaintiff and Appellant, v. MONTANA DEPARTMENT OF REVENUE, Defendant and Respondent.
    No. 96-291.
    Submitted on Briefs March 20, 1997.
    Decided August 1, 1997.
    54 St.Rep. 786. 943 P.2d 517.
    284 Mont. 84.

      For Appellant: James P. Healow; Sweeney & Healow, Billings.
    For Respondent: R. Bruce McGinnis, Montana Department of Revenue, Helena.
   JUSTICE GRAY

delivered the Opinion of the Court.

Billings Post No. 1634, Veterans of Foreign Wars of the United States (VFW), appeals from the judgment entered by the Thirteenth Judicial District Court, Yellowstone County, on its order granting the Montana Department of Revenue’s motion for summary judgment. We affirm.

The VFW raises the following issues on appeal:

1. Did the District Court err in concluding that the Department of Revenue was not equitably estopped from refusing to classify the VFW’s current all-beverage license as transferable and assignable and reissue the VFW’s lapsed liquor and beer licenses?

2. Did the District Court err in refusing to order the Department of Revenue to classify the VFW’s current all-beverage license as transferable and assignable and reissue the VFW’s lapsed liquor and beer licenses as a matter of equity?

The material facts in this case are undisputed. The VFW is a Billings, Montana, post of a nationally chartered veterans’ organization. It operated a bar under licenses to serve liquor and beer from approximately 1941 through 1974. Prior to 1947, no quota system existed in Montana regarding liquor licensing. In 1947, the Montana legislature enacted a quota law limiting the number of beer and liquor licenses which could be issued for each city or town. See 1947 Mont. Laws Chs. 225 and 226. Two years later, the legislature exempted certain fraternal and veterans’ organizations from the quota system limitations on the number of beer and liquor licenses. The exemption provided that

the foregoing limitations shall not prevent the granting of nontransferable and non-assignable licenses to posts of nationally chartered veterans’ organizations, and lodges of recognized national fraternal organizations, which said national organizations have been in existence for five (5) years or more prior to January 1st, 1949.

1949 Mont. Laws Chs. 164 and 165. After 1949, the Montana Liquor Control Board and its successor, the Montana Department of Revenue (Department), endorsed the liquor and beer licenses of fraternal and veterans’ organizations as nontransferable and nonassignable. The renewals of the VFW’s pre-1947 liquor and beer licenses were so endorsed.

In 1974, the VFW experienced financial difficulties which ultimately resulted in the sale of its premises located on Lewis Avenue in Billings. According to the VFW, it never considered selling its liquor and beer licenses due to the nontransferability and nonassignability endorsements on the licenses; instead, it allowed the licenses to lapse.

The VFW subsequently reopened in a different Billings location. In 1979, five years after allowing its pre-1947 licenses to lapse, the VFW applied for and received its present nontransferable and nonassignable all-beverage liquor license under the statutory exemption from the quota system for beer and liquor licenses.

In 1991, this Court concluded that liquor and beer licenses issued prior to 1947 were not subject to the quota system limitations enacted in 1947 and, therefore, that those licenses remained transferable and assignable. As a result, we held that the legislature’s 1949 restrictions on the transfer and assignment of licenses issued to fraternal and veterans’ organizations did not apply to the Helena Eagles Club’s pre-1947 beer license. See Helena Aerie No. 16 v. Mont. D. of Rev. (1991), 251 Mont. 77, 82, 822 P.2d 1057, 1060.

According to the VFW, it accepted an offer to buy its lapsed pre-1947 licenses for $165,000 shortly after Helena Aerie. The VFW contacted the Department and was informed that its pre-1947 licenses were not governed by Helena Aerie because they had been allowed to lapse. On June 27, 1994, the VFW demanded that the Department issue its 1994-1995 all-beverage liquor license as a “quota all beverage license,” stating that the Department’s failure to do so would result in the VFW losing approximately $250,000. The Department refused on the basis that the VFW’s all-beverage license was a nontransferable and nonassignable veterans’ organization license under § 16-4-201(4), MCA. On June 30, 1994, the VFW filed a declaratory judgment action against the Department requesting the District Court to declare that the VFW’s current all-beverage liquor license is a transferable and assignable quota license and that the VFW is entitled to reinstatement of its lapsed liquor and beer licenses.

The VFW and the Department subsequently filed cross-motions for summary judgment in which each party agreed that the material facts were undisputed. The District Court determined that the Department was entitled to judgment as a matter of law, granted the Department’s motion for summary judgment and denied the VFW’s motion for summary judgment. The VFW appeals.

STANDARD OF REVIEW

Summary judgment is proper where no genuine issues of material fact exist and the moving party is entitled to judgment as a matter of law. Rule 56(c), M.R.Civ.P. We review a district court’s grant of summary judgment de novo, applying the same Rule 56(c), M.R.Civ.P., criteria used by that court. Matter of Estate of Lien (1995), 270 Mont. 295, 298, 892 P.2d 530, 532 (citation omitted). Ordinarily, such a review requires that we first determine whether the moving party met its burden of establishing both the absence of genuine issues of material fact and entitlement to judgment as a matter of law. Jarrett v. Valley Park, Inc. (1996), 277 Mont. 333, 338, 922 P.2d 485, 487.

In this case, however, the parties agree that there are no disputed issues of material fact. Thus, our review is limited to whether the District Court properly concluded that the Department is entitled to judgment as a matter of law. We review a district court’s conclusion of law to determine whether the interpretation of the law is correct. Carbon County v. Union Reserve Coal Co., Inc. (1995), 271 Mont. 459, 469, 898 P.2d 680, 686 (citation omitted).

DISCUSSION

1. Did the District Court err in concluding that the Department was not equitably estopped from refusing to classify the VFW’s current all-beverage license as transferable and assignable and reissue the VFW’s lapsed liquor and beer licenses?

The VFW contended in the District Court — and contends on appeal — that the Department misrepresented the transferability and assignability status of its pre-1947 liquor and beer licenses and that it relied on that misrepresentation to its detriment in allowing the licenses to lapse in 1974. As a result, according to the VFW, the Department should be equitably estopped from denying that its current all-beverage license is a transferable and assignable quota license and from refusing to reissue its lapsed licenses. The Department responds that, prior to Helena Aerie in 1991, it neither knew nor could have known, that its interpretation regarding the liquor license quota law was erroneous and that the VFW’s pre-1947 licenses were transferable and assignable. The District Court concluded that the doctrine of equitable estoppel does not apply in this case. We agree.

Equitable estoppel has long been recognized in Montana and is invoked to promote justice, honesty and fair dealing; the purpose of the doctrine of equitable estoppel is to prevent a party from taking unconscionable advantage of his or her wrong while asserting a strict legal right. In re Marriage of K.E.V. (1994), 267 Mont. 323, 331, 883 P.2d 1246, 1251 (citation omitted). The six elements of equitable estoppel are:

1. the existence of conduct, acts, language, or silence amounting to a representation or a concealment of a material fact;
2. these facts must be known to the party estopped at the time of his conduct, or at least the circumstances must be such that knowledge of them is necessarily imputed to him;
3. the truth concerning these facts must be unknown to the other party claiming the benefit of the estoppel at the time it was acted upon by him;
4. the conduct must be done with the intention, or at least the expectation, that it will be acted upon by the other party, or under circumstances both natural and probable that it will be so acted upon;
5. the conduct must be relied upon by the other party and, thus relying, he must be led to act upon it; and
6. he must in fact act upon it in such a manner as to change his position for the worse.

Elk Park Ranch, Inc. v. Park County (1997), [282 Mont. 154], 935 P.2d 1131, 1137-38 (citations omitted). All six elements must be established before the doctrine can be invoked. Elk Park Ranch, 935 P.2d at 1138 (citation omitted). Moreover, clear and convincing evidence is necessary to establish equitable estoppel. Beery v. Grace Drilling (1993), 260 Mont. 157, 163, 859 P.2d 429, 433 (citations omitted).

Here, the VFW has not established the first and second elements of equitable estoppel. With regard to the first element, equitable estoppel requires a misrepresentation or concealment of a material fact. Elk Park Ranch, 935 P.2d at 1138 (citations omitted). The alleged misrepresentation of material fact in the present case is the Department’s erroneous endorsement of the VFW’s pre-1947 liquor and beer licenses as nontransferable and nonassignable.

As indicated above, we first addressed the status of pre-1947 liquor and beer licenses held by fraternal and veterans’ organizations in Helena Aerie. There, we determined that the Department’s classification of the Eagles Club’s pre-1947 beer license as nontransferable and nonassignable conflicted with the 1947 quota law providing that such licenses were renewable; as a result, we concluded that the Eagles Club’s pre-1947 beer license remained renewable under the 1947 quota law with its original transferability and assignability characteristics. Helena Aerie, 822 P.2d at 1060. Thus, pursuant to Helena Aerie, the Department’s interpretation of the 1947 quota law and the exemption thereto enacted in 1949 was incorrect. As a result, it is clear in this case that the Department erroneously classified the VFW’s pre-1947 liquor and beer licenses as nontransferable and nonassignable.

We recently clarified, however, that “[b]ecause the imposition of equitable estoppel is premised on a misrepresentation of fact, it is inapplicable when... the conduct complained of consists solely of legal representations.” Elk Park Ranch, 935 P.2d at 1138. Here, the classification of the VFW’s lapsed liquor and beer licenses as nontransferable and nonassignable was an erroneous legal interpretation of the 1947 quota law by the Department. That incorrect classification constitutes a misrepresentation of law; it does not constitute a misrepresentation of fact. Therefore, the VFW has not established the first element of equitable estoppel, which requires a misrepresentation of fact.

Moreover, the second element of equitable estoppel requires that the party to be estopped have actual or imputed knowledge of the alleged misrepresentation of fact. Elk Park Ranch, 935 P.2d at 1137. Here, nothingin the record before us establishes, or even suggests, that the Department’s legal misrepresentation regarding the status of the VFWs pre-1947 licenses was knowing. Nor does anything in Helena Aerie suggest that the Department should have known that its legal interpretation was incorrect for purposes of imputing knowledge to the Department and establishing the second element of equitable estoppel.

The VFW relies on Mellem v. Kalispell Laundry (1989), 237 Mont. 439, 774 P.2d 390, in support of its argument that the Department should be charged with imputed knowledge of the transferability and assignability of its lapsed liquor and beer licenses. That reliance is misplaced.

In Mellem, the Workers’ Compensation Court dismissed an appeal from a denial of Marie Mellem’s occupational disease benefits claim by the Division of Workers’ Compensation (Division) on the basis that it did not have jurisdiction to hear the appeal because Mellem failed to request a rehearing with the Division as required by § 39-72-612, MCA. Mellem, 774 P.2d at 390-91. On appeal, we observed that Mellem’s failure to strictly comply with Montana Occupational Disease Act (MODA) procedures by filing a “Request for Rehearing” was caused by the Division’s orders which incorrectly set forth the MODA procedures to be followed by Mellem in pursuing her claim for occupational disease benefits. See Mellem, 774 P.2d at 391. Moreover, the record in Mellem reflected that, while Mellem did not file a document entitled “Request for Rehearing,” the Division considered her exceptions to the Division hearing examiner’s findings of fact and conclusions of law as a request for rehearing in accordance with § 39-72-612, MCA. See Mellem, 774 P.2d at 391-92.

We likened the Division’s confusing and inconsistent orders and responses to Mellem’s inquiries regarding how to proceed and protect her rights to misstatements by an employer or insurer in the workers’ compensation context which prevent a claimant from timely filing a claim or mislead the claimant into believing that no claim can or need be filed; we observed that, under such circumstances, we had applied equitable estoppel to toll the statute of limitations and allow the filing of a claim. Mellem, 774 P.2d at 391-92 (citation omitted). Because a failure to apply equitable estoppel would have permitted the Division’s own misstatements to foreclose the availability of any remedy to Mellem, we concluded that knowledge of the proper MODA procedures could be imputed to the Division. Mellem, 774 P.2d at 392.

Mellem does not help the VFW here. First, Mellem predated Elk Park Ranch, and its continued viability in light of that recent case clarifying that legal misrepresentations do not satisfy the first element of equitable estoppel may be called into question in some future case. Second, the present case is distinguishable from Mellem in that no statement or representation of law or of fact by the Department interfered with legal remedies available to the VFW to challenge the Department’s interpretation regarding the nontransferability and nonassignability of the pre-1947 licenses before they were allowed to lapse in 1974. In other words, the VFW could have challenged the Department’s legal interpretation at any time after 1949 — as the Helena Eagles Club did later in Helena Aerie — and it was not prevented from doing so by the legal “misrepresentation” at issue here.

Finally, the knowledge imputed to the Division in Mellem was of straightforward procedural requirements about which no questions of interpretation were raised. Here, the knowledge the VFW seeks to impute to the Department — namely, that the Department’s interpretation of the pre-1947 licenses as nontransferable and nonassignable was erroneous — simply is not established by clear and convincing evidence and, given that a trial court had determined in Helena Aerie that the Department’s interpretation was correct, no basis for imputing such knowledge exists in the present case.

All six elements of equitable estoppel must be established before the doctrine can be applied. Elk Park Ranch, 935 P.2d at 1138. Having concluded that the VFW did not establish the first two elements, we hold that the District Court did not err in concluding that the Department is not equitably estopped from refusing to classify the VFW’s current all-beverage license as transferable and assignable and reissue the VFW’s lapsed liquor and beer licenses.

2. Did the District Court err in refusing to order the Department to classify the VFW’s current all-beverage license as transferable and assignable and reissue the VFW’s lapsed liquor and beer licenses as a matter of equity?

The VFW contends that the State of Montana, acting through the Department, induced it to allow its pre-1947 liquor and beer licenses to lapse through years of misrepresentation as to the transferability and assignability of those licenses. On that basis, it argues that the District Court should have invoked its equitable powers and restored the VFW to “its status quo position.” The District Court concluded that equitable relief was not warranted. We agree.

It is well-settled in Montana that a court may accept jurisdiction in equity only where no statutory or legal remedy is available. See Eagle Watch Inv., Inc. v. Smith (1996), 278 Mont. 187, 192, 924 P.2d 257, 260; Jeffries Coal Co. v. Industrial Accident Bd. (1952), 126 Mont. 411, 413, 252 P.2d 1046, 1047. As Helena Aerie illustrates, however, the VFW had a legal remedy available at all times with regard to the Department’s classification of its licenses; it could have brought a declaratory judgment action prior to allowing its pre-1947 licenses to lapse, as did the Helena Eagles Club. See Helena Aerie, 822 P.2d at 1058. That the VFW it did not avail itself of that remedy by challenging the Department’s interpretation of the 1949 exemption from the quota system for fraternal and veterans’ organizations does not negate the existence of the legal remedy. Moreover, here, the VFW filed a declaratory judgment action pursuant to § 27-8-202, MCA, seeking its legal remedy thereunder. Had it succeeded in the declaratory judgment action, whatever supplemental relief deemed “necessary or proper” could have been granted. See § 27-8-313, MCA. The VFW having initiated an action at law pursuant to Montana statute and under which all appropriate relief was available, the District Court could not properly have accepted jurisdiction in equity in this case.

The VFW contends that the District Court should have accepted jurisdiction in equity pursuant to State ex rel. Barker v. Town of Stevensville (1974), 164 Mont. 375, 523 P.2d 1388. In Barker, however, the facts established the applicability of estoppel. On that basis, we addressed the issue of whether a municipal corporation could be bound by the acts or statements of its agents where third parties relied thereon to their detriment. See Barker, 523 P.2d at 1390-91. Observing that the great weight of authority held that a municipality could not be bound by acts or statements of its agents in excess of their authority, we rejected such a harsh and inflexible rule; instead, we joined other jurisdictions in adopting a qualification to the general rule. We then applied the qualification to the facts before us in order to fashion appropriate relief. Barker, 523 P.2d at 1390-91.

Unlike the situation before us in Barker, we determined above that equitable estoppel is not applicable in the present case because the VFW did not establish the necessary elements. Thus, the premise upon which Barker was decided does not exist here.

Accordingly, we hold that the District Court did not err in refusing to order the Department to classify the VFW’s current all-beverage license as transferable and assignable and reissue the VFW’s lapsed liquor and beer licenses as a matter of equity. Having concluded above that equitable estoppel is inapplicable here, we further hold that the District Court did not err in concluding that the Department is entitled to judgment as a matter of law.

Affirmed.

CHIEF JUSTICE TURNAGE, JUSTICES REGNIER, LEAPHART and HUNT concur.


source: Caselaw Access Project

author: JUSTICE REGNIER JUSTICE GRAY,

license: Public Domain

text:
    PHOENIX PHYSICAL THERAPY, Petitioner and Appellant, v. UNEMPLOYMENT INSURANCE DIVISION, CONTRIBUTIONS BUREAU, Respondent and Respondent.
    No. 96-581.
    Submitted on Briefs May 1, 1997.
    Decided August 1, 1997.
    54 St.Rep. 791. 943 P.2d 523.
    284 Mont. 95.

      For Appellant: Regan Whitworth, Balyeat Law Offices, Missoula.
    For Respondent: Kevin Braun, Special Assistant Attorney General; Department of Labor and Industry; Helena.
   JUSTICE REGNIER

delivered the Opinion of the Court.

Phoenix Physical Therapy appeals the decision of the Fourth Judicial District Court, Missoula County, affirming a decision of the Board of Labor Appeals. We affirm.

The issue is whether the District Court erred in affirming the decision of the Board of Labor Appeals which determined that Gail Nevin was an employee of Phoenix Physical Therapy.

FACTUAL BACKGROUND

Phoenix Physical Therapy (“PPT”) is engaged in the business of providing physical therapy services to patients on an individual basis. PPT is owned and operated by Janet Hulme, a physical therapist. On July 1, 1990, Hulme and Gail Nevin, another physical therapist, entered into a “Contract for Rental of Facilities and Administrative Services.” The term of the agreement was from July 1,1990, through December 31, 1991. Either Hulme or Nevin could terminate the agreement with thirty-days written notice. The contract did not indicate that either party had any liability for breach of the contract.

In the contract, PPT was to provide treatment facilities, client billing, and secretarial services for Nevin. Nevin was to provide scheduling instructions to the secretary, patient treatment, and client record keeping. She was to pay fifty percent of the fees she earned to PPT. The fees collected for Nevin’s services were deposited in PPT’s business account. Each month, PPT made payments to Nevin out of the business account based upon fifty percent of the fees generated by Nevin.

In November 1991, the Unemployment Insurance Division (“UID”) of the Montana Department of Labor and Industry conducted a random audit of PPT. Based on that audit, UID determined that Nevin was an employee of PPT.

PPT contested UID’s determination. A hearing was conducted to determine Nevin’s status. The appeals referee determined that the services provided to PPT by Nevin from July 1,1990 through October 1, 1991, were performed as an employee pursuant to § 39-51-203, MCA. PPT appealed that decision to the Montana Board of Labor Appeals. The Board affirmed the appeals referee’s decision.

PPT appealed the Board’s decision to the Fourth Judicial District Court, Missoula County. The District Court reviewed the record and remanded it back to the Board on the issue of whether the Board reviewed the record in its entirety as required by law. After review by the Board on remand, the District Court was satisfied that the record was considered in its entirety and thus affirmed the Board’s finding that Nevin was an employee of PPT. PPT now appeals the decision finding that Nevin was an employee of PPT.

DISCUSSION

Did the District Court err in affirming the decision of the Board of Labor Appeals that Gail Nevin was an employee of Phoenix Physical Therapy?

PPT argues that PPT and Nevin intended to operate two independent practices, sharing facilities. To accomplish this, they entered into an agreement in writing in which PPT agreed to provide facilities and administrative services to Nevin, and Nevin agreed to pay to PPT fifty percent of her collected fees. PPT asserts that Nevin is neither an employee of PPT nor an independent contractor working with PPT. PPT contends that UID must abide by PPT’s and Nevin’s mutual intention that they intended an office sharing arrangement between two independent contractors. In the alternative, PPT argues that if UID did not agree with their mutual intention to operate two independent practices, then Nevin should have been found to be an independent contractor and not an employee.

The Montana Legislature has strictly limited the scope of judicial review of the decisions of the Board of Labor Appeals. Under § 39-51-2410(5), MCA, factual findings of the Board are conclusive if they are supported by evidence and there has been no fraud. The jurisdiction of a reviewing court is confined to questions of law. “Supported by the evidence” means supported by substantial evidence, which is “something more than a scintilla of evidence, but may be less than a preponderance of the evidence.” Gypsy Highview Gathering System v. Stokes (1986), 221 Mont. 11, 15, 716 P.2d 620, 623. This Court has interpreted § 39-51-2410(5), MCA, in Noone v. Reeder (1968), 151 Mont. 248, 252, 441 P.2d 309, 312, stating:

The court is not permitted to balance conflicting evidence in support of and in opposition to the Commission’s findings of fact, nor to determine which is the more substantial evidence, nor to consider where the preponderance of the evidence lies; for to do so would be to substitute the Court’s view of the evidence for that of the Commission, and effectively nullify the conclusive character of the Commission’s findings of fact as provided by statute.

When a District Court reviews a decision of the Board and adopts the decision of the Board of Labor Appeals, the court must first determine if substantial evidence supports the Board’s factual findings. If so, those facts are conclusive. A court is permitted to make different findings only if it determines that no substantial evidence exists for the Board’s findings. Dick Irvin, Inc. v. Department of Labor (1983), 207 Mont. 336, 340, 673 P.2d 1271, 1273. Substantial evidence has been defined as “such relevant evidence as a reasonable mind might accept as adequate to support a conclusion or, stated another way, enough evidence to justify a refusal to direct a verdict on a factual issue in a jury trial.” Noone, 151 Mont. at 252, 441 P.2d at 311-12.

Once disputes about the underlying facts are resolved, the issue of whether a claimant is an independent contractor or employee is a question of law. Northwest Publishing v. Department of Labor and Industry (1993), 256 Mont. 360, 362, 846 P.2d 1030, 1031. Our standard of review of a question of law is whether the conclusion is correct. Steer, Inc. v. Department of Revenue (1990), 245 Mont. 470, 474, 803 P.2d 601, 603.

In its findings of fact, the District Court correctly stated that if “the Board’s findings of fact are supported by the evidence, then they are to be considered conclusive by this Court, and the jurisdiction of this Court is confined to questions of law.” An examination of the record demonstrates the Board’s decision was supported by substantial evidence. The following findings of fact made by the appeals referee and adopted by the Board are supported by substantial evidence in the record:

[1] PPT is engaged in the principal business of providing physical therapy services to patients on an individual basis. PPT is owned and operated by Janet Hulme.

[2] Hulme and Nevin are individually registered and licensed physical therapists.

[3] On July 1,1990, Hulme and Nevin entered into a “Contract for Rental of Facilities and Administrative Services.” This contract stipulates that PPT was to provide treatment facilities, client billing and collection, and secretarial services to Gail Nevin. Gail Nevin was to provide scheduling instructions to the secretary, patient treatment, and client recordkeeping. Nevin was to pay fifty (50%) of the fees she earned to PPT. The term of the agreement was from July 1, 1990, through December 31, 1991. Either Ms. Hulme or Ms. Nevin could terminate the agreement with thirty (30) days written notice. The contract did not indicate that either party had any liability for breach of the contract.

[4] The fees collected by Nevin and by the PPT secretary for services provided by Nevin were deposited in PPT’s business account. On a monthly basis, Hulme made payments to Nevin out of the business account based upon 50% of the fees generated by Nevin. Nevin did not have check signing authority on that business account.

[5] PPT did all the billing, collection, and advertising under the name of PPT.

[6] PPT provided all equipment and supplies.

[7] The patients were assigned to either Hulme or Nevin by the PPT secretary based upon patient request, referral, or availability.

[8] The patients’ files were intermingled and not separated by provider. Nevin did not keep a separate set of files on her patients. The contract required Nevin to properly document the patients’ files. The patients’ files were available for review by PPT.

[9] Nevin is not a partner in, or an owner or co-owner of, PPT.

The District Court properly declined to enter any factual findings of its own. Dick Irvin, Inc., 207 Mont. at 340, 673 P.2d at 1273. Therefore, the findings are conclusive and our review is limited to questions of law. Section 39-51-2410(5), MCA.

Under Montana law, an individual performing services for wages is generally considered to be an employee. Section 39-51-203(4), MCA, states:

Service performed by an individual for wages is considered to be employment subject to this chapter until it is shown to the satisfaction of the department that the individual is an independent contractor.

Wages are defined as follows:

Wages means all remuneration payable for personal services including commissions and bonuses, the cash value of all remuneration payable in any medium other than cash, and back pay received pursuant to a dispute related to employment.

Section 39-51-201(19)(a), MCA.

Under the contract, Nevin was required to pay fifty percent of the fees she earned to PPT. PPT collected the fees generated by Nevin and deposited the money into PPT’s bank account. Nevin did not have access to this account. At the end of the month, Nevin was paid out of the bank account fifty percent of the fees generated by her. PPT argues that this was for the use of the facilities and administrative services provided to her. Thus, PPT contends, Nevin did not provide any service to PPT, instead PPT provided services to Nevin.

The appeals referee rejected PPT’s office sharing argument and further determined that it was Nevin who was providing services to PPT. Under their agreement, it was PPT who realized a profit based upon fifty percent of the fees generated by Nevin. Accordingly, it was PPT who suffered a loss when Nevin did not perform her services. The appeals referee concluded that, given the payment arrangement, Nevin was being paid by PPT for services rendered on a commission-type basis. Commissions are wages. Section 39-51-201(19)(a), MCA. An individual performing services for wages is generally considered to be an employee. Section 39-51-203, MCA. Thus, the Board could properly conclude that Nevin was an employee of PPT performing services for wages.

At this point, for PPT to avoid the imposition of unemployment taxes, it must establish that Nevin was performing services for PPT as an independent contractor.

PPT argues that if Nevin is seen as having treated patients for PPT, it is clear that she should have done so as an independent contractor. PPT states that Nevin was not controlled by PPT at all and was engaged in an independent practice. UID counters that the evidence does not show that Nevin was an independent contractor and not an employee.

The two-part test to determine whether an individual is an independent contractor is found at § 39-51-201(14), MCA:

“Independent contractor” means an individual who renders service in the course of an occupation and:
(a) has been and will continue to be free from control or direction over the performance of the services, both under a contract and in fact; and
(b) is engaged in an independently established trade, occupation, profession, or business.

This test is commonly known as the AB test. The determining factor under both the statute and at common law is control. The first, or “A,” part of the test requires that in order for an individual to be an independent contractor, that individual must be free from control or direction over the performance of such services. This Court has previously recognized four factors to consider in determining if the right to control exists: (1) direct evidence of right or exercise of control; (2) method of payment; (3) furnishing of equipment; and (4) right to fire. Sharp v. Hoerner Waldorf Corp. (1978), 178 Mont. 419, 425, 584 P.2d 1298, 1301-02 (citing Larson’s Workmen’s Compensation Law, Vol. 1A, Sec. 44.31, pp. 8-35).

Evidence of PPT’s control over Nevin was demonstrated by the contract and the parties’ actions. The contract provides the PPT will provide treatment facilities subject to availability. PPT retained the right to terminate the contract without any reason upon thirty-days’notice. Nevin relied on PPT to bill, collect, deposit, and disburse the fees she generated; and to provide facilities, equipment, supplies, advertising, and referrals. In addition, Nevin was required to keep client records. Even if PPT did not exercise control over Nevin, it clearly had the right to control her. The right of control, not just the exercise of control, is determinative. Section 39-51-201(14), MCA; Sharp, 178 Mont. 419, 584 P.2d 1298.

Evidence of employment was also found in the method by which Nevin received compensation from the fees she generated. Nevin was paid fifty percent of the fees she generated. As stated above, this was akin to being paid on a commission type basis. Being paid on a commission basis is not inconsistent with employee status. Zimmer-Jackson v. Department of Labor and Industry (1988), 231 Mont. 357, 752 P.2d 1095.

The evidence showed that PPT provided all of the equipment, supplies, and the facilities necessary for providing physical therapy treatment. Nevin admitted that PPT provided her with an ultrasound machine, HVGs, mirco current, FES, thermophore, computer and software, home units, office furniture, telephone, file cabinet, reference books, and tapes.

Another indication that PPT retained control over Nevin was the fact that the relationship between the two was terminable at will without liability on the part of either party. The contract does not provide any just cause or other grounds that are necessary to terminate the agreement. The ability to terminate the agreement without cause creates the potential for control. Kirby Co. of Bozeman v. Employment Sec. Div. (1980), 189 Mont. 1, 9, 614 P.2d 1040, 1044. In this case, if PPT terminated the agreement with Nevin, Nevin would have to purchase expensive equipment and find a new location to provide physical therapy treatment.

The above combination of factors demonstrated that PPT retained control over Nevin, thereby establishing that their relationship was one of employment. As PPT has failed to establish evidence in support of a conclusion, that there is an absence of control over Nevin under the “A” prong of the test, we need not consider the “B” prong of the test. Larry’s Post Co. v. Unemployment Insurance Division, Contributions Bureau (1989), 238 Mont. 190, 196, 777 P.2d 325, 329. This Court concludes that the District Court’s decision affirming the Board is a correct interpretation of the law, given the evidence.

PPT makes a final argument that the intent of the parties must be given effect in resolving their status. Both Nevin and Hulme, owner of PPT, testified that they had a mutual intention to have independent professional practices, sharing facilities. In support of its argument, PPT cites Nevin’s and Hulme’s testimony where both indicate that they never intended that Nevin would be an employee of PPT. PPT asserts that § 28-3-301, MCA, requires that the intent of PPT and Nevin be honored. Section 28-3-301, MCA, states: “A contract must be so interpreted as to give effect to the mutual intention of the parties as it existed at the time of contracting, so far as the same is ascertainable and lawful.”

The ability to contract is not absolute and without limits. Parties cannot privately waive statutes enacted to protect the public in general. Section 1-3-204, MCA; Hoehne v. Sherrodd, Inc. (1983), 205 Mont. 365, 369, 668 P.2d 232, 234. The Unemployment Insurance Act was enacted to protect the “public good and the general welfare of the citizens of this state.” Section 39-51-102, MCA. Furthermore, the Unemployment Insurance Act precludes an individual from waiving his rights to benefits or other rights under the unemployment insurance chapter. Section 39-51-3102, MCA.

This Court concludes that the intentions of PPT and Nevin to merely be independent practices, sharing facilities, does not control the outcome of Nevin’s status. Nevin must be proven to have been independent in fact. Schrock v. Evans Transfer and Storage (1987), 225 Mont. 348, 351, 732 P.2d 848, 850. The wishes of Nevin and PPT that Nevin is a nonemployee are not dispositive.

In conclusion, there is substantial evidence in the record to establish that Nevin did not have a business separate from PPT or that she was an independent contractor working with PPT. This Court determines that the decision of the District Court affirming the Board of Labor Appeals is correct as a matter of law and is affirmed.

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

JUSTICE LEAPHART did not participate in this decision.

JUSTICE GRAY,

dissenting.

I respectfully dissent from the Court’s opinion. The Court addresses only obliquely and, in my view, incorrectly the threshold issue raised by PPT; namely, whether “employment” existed as defined by statute. Because I conclude that it did not and that this issue is dispositive, I would reverse the District Court’s affirmance of the Board’s decision.

Unemployment insurance law is governed by statute in Montana and liability for payment of unemployment insurance taxes is determined pursuant to statutory standards and definitions. The threshold question in every unemployment insurance tax proceeding is whether employment exists, and “employment” is statutorily defined, in pertinent part, as “service by an individual... performed for wages ....” Section 39-51-203(1), MCA. Moreover, such “[s]ervice performed by an individual for wages is considered to be employment... until it is shown to the satisfaction of the department that the individual is an independent contractor.” Section 39-51-203(4), MCA. Under these statutes, therefore, and subject to enumerated exclusions from the term “employment” set forth in § 39-51-204, MCA, once it is determined that the individual is performing service for wages — that is, once “employment” is established — the burden is on the party against whom the Department is proceeding to establish that the individual at issue is an independent contractor rather than an employee. In other words, the burden of establishing independent contractor status does not arise until it has been established that the individual at issue was performing services for wages for the person or entity against which unemployment insurance tax liability is sought. Sections 39-51-203(1) and 39-51-203(4), MCA.

In the present case, the hearing officer properly stated the issue as whether Nevin’s services were employment pursuant to § 39-51-203, MCA. He then made findings relating to the contract and the actual working arrangements between PPT and Nevin, specifically finding that Nevin was not a partner, owner or co-owner of PPT. On the basis of the latter finding, the hearing officer concluded that Nevin must be either an employee or an independent contractor. He further concluded that services performed for wages constitutes employment and, therefore, that the burden was on PPT to establish that the service performed was not employment. After applying independent contractor-related principles, the hearing officer ultimately concluded that PPT had not established that Nevin was an independent contractor and, indeed, that an employer-employee relationship existed between them. The Board adopted the hearing officer’s findings and decision and, after remand, expressly determined that no errors of law had occurred. The District Court affirmed the Board’s decision, focusing — as had the hearing officer and the Board — on the “independent contractor” issue. In my opinion, the District Court erred in doing so.

As discussed above, a determination that “employment” exists, as defined by § 39-51-203(1), MCA, is a necessary prerequisite to a determination of whether an individual is an independent contractor. See § 39-51-203(4), MCA. In this case, the determination of “employment” would require findings that Nevin performed services for PPT for wages, and such findings would support a conclusion — for purposes of §§ 39-51-203(1) and 39-51-203(4), MCA — that employment existed. Such findings and conclusion would provide the necessary foundation upon which a subsequent determination could be made as to employee or independent contractor status.

Here, however, the foundational findings and conclusion that employment existed were not made. Findings were made that Nevin was to provide — and did provide — treatment to patients as a licensed physical therapist. Additional findings were made that PPT was to provide — and did provide — a wide variety of services to Nevin for which Nevin was to pay PPT 50% of the fees she earned from treating patients. Further, a finding was made that, after Nevin deposited her fees in PPT’s business account, PPT paid Nevin 50% of Nevin’s fees monthly, keeping the 50% Nevin was required by the contract to pay PPT for the services PPT provided to Nevin. No findings were made that Nevin was paid wages for services performed for PPT and no conclusion was made that “employment” existed. As a result, the necessary predicate for a determination of whether Nevin was an employee or an independent contractor — namely, a determination that “employment” existed in that Nevin performed services for PPT for wages — does not exist here. Consequently, it is my opinion that the Board erred as a matter of law in determining that no legal error had occurred, the District Court erred in affirming that decision and this Court errs in affirming the District Court.

Stated briefly, the mischief in this case is that the hearing officer began in mid-stream and improperly placed the entire burden on PPT. The Department was not required to make the initial showing that employment existed via Nevin’s performance of services for PPT for wages before the burden shifted to PPT to establish that Nevin was, in fact and in law, an independent contractor.

Nor would the record in this case support findings that Nevin performed services for PPT so as to produce a threshold conclusion that employment existed. The contract clearly provides that Nevin was to pay PPT 50% of the fees she collected for patient treatment performed by her in return for use of its facilities and administrative services. Nothing in the contract requires, or suggests in any way, that Nevin was to perform services for PPT. Moreover, the record establishes that PPT and Nevin operated in conformance with their contract, with Nevin paying PPT for the services PPT provided to her. The fact that Nevin deposited the entirety of her fees into PPT’s account and PPT then “paid” 50% of those fees back to Nevin on a monthly basis does not establish that PPT was paying Nevin for services Nevin performed for PPT; regardless of the cumbersome pay-in/pay-back administrative process under which PPT and Nevin operated, the 50% payment flowed from Nevin to PPT, pursuant to the contract, for services PPT provided to Nevin thereunder. Thus, the record contains no evidence which would support a finding that Nevin performed services for PPT for wages.

I fully recognize the state’s significant interest in furthering the public policies which underpin the Unemployment Insurance Law. Those public policies are to lessen the serious menace to the health, morals and welfare of the people of Montana produced by economic insecurity due to unemployment, and to prevent the spread — and lighten the burden — of involuntary unemployment by requiring the assessing of unemployment taxes under the police powers of the state. Sections 39-51-102(1) and 39-51-102(2), MCA. Those purposes are not furthered, however, by allowing the Department to avoid having to make an initial showing that employment exists, especially in a case such as this which involves neither unemployment nor involuntary unemployment. Moreover, as discussed above, the statutes duly enacted by the legislature to advance its stated public policies do not support the Court’s rationale in this case. Indeed, those statutes appear to have been carefully crafted to advance the underlying policies while providing protection to purported employers by requiring that the Department first establish, at the outset, that employment exists.

No evidence exists in the record which would support findings that Nevin performed services for PPT for wages. On that basis, I would conclude that “employment” was not established in this case and that, absent “employment,” it was legal error to reach the question of whether PPT established that Nevin was an independent contractor rather than an employee. Accordingly, I would hold that the District Court erred in affirming the Board’s decision that Nevin was an employee of PPT for unemployment tax purposes and reverse.


text:
    IN RE THE MATTER OF THE DRIVER’S LICENSE OF CHRISTOPHER T. ANDERSON, Petitioner and Appellant, v. DEPARTMENT OF JUSTICE, Respondent and Respondent.
    No. 96-687.
    Submitted on Briefs May 8, 1997.
    Decided August 1, 1997.
    54 St.Rep. 797. 943 P.2d 978.
    284 Mont. 109.

      For Appellant: Terry L. Seiffert, Attorney at Law, Billings.
    For Respondent: Hon. Joseph P. Mazurek, Attorney General, Pamela P. Collins, Ass’t Attorney General, Helena; Dennis Paxinos, Yellowstone County Attorney, Brent Brooks, Deputy County Attorney, Billings.
   JUSTICE GRAY

delivered the Opinion of the Court.

Christopher T. Anderson (Anderson) appeals from the order of the Thirteenth Judicial District Court, Yellowstone County, which denied his petition challenging the declaration by the Montana Department of Justice (Department) that he is a habitual traffic offender and the Department’s revocation of his driver’s license. We reverse and remand.

The sole issue before us is whether the District Court erred in denying Anderson’s petition.

On or about May 7,1996, the Department notified Anderson that, according to its records, he had accumulated 30 or more conviction points related to the use or operation of a motor vehicle within a 3-year period. The records reflected convictions for driving under the influence of alcohol (DUI) on September 20,1995, November 27,1995, and April 11, 1996. Each DUI conviction was assigned 10 conviction points.

Under such a circumstance, the Department is required to declare the driver a habitual traffic offender and to revoke the person’s driver’s license for 3 years. The notification so advised Anderson, and also advised that he could challenge the declaration and revocation by petitioning the district court in the county of his residence within 30 days.

Anderson timely filed a petition in the District Court challenging the Department’s actions. He contended that the purported DUI conviction on April 11, 1996, was erroneous because his conviction date for that DUI was November 14, 1991. As a result, Anderson argued that he had not accumulated 30 or more conviction points within a 3-year period under § 61-11-203(2), MCA, and the Department’s habitual traffic offender declaration and driver’s license revocation were invalid.

The District Court ordered the parties to submit an agreed statement of facts and memoranda of law. After the parties complied, the District Court entered its order denying Anderson’s petition. Anderson appeals.

Did the District Court err in denying Anderson’s petition challenging the Department’s declaration that he is a habitual traffic offender and its revocation of his driver’s license?

In Montana, a habitual traffic offender is a person who, within a 3-year period, accumulates 30 or more “conviction” points relating to the use or operation of a motor vehicle. Section 61-11-203(2), MCA. “ ‘Conviction’ means a finding of guilt by duly constituted judicial authority. ...” Section 61-11-203(1), MCA. In the case presently before us, it is clear that if Anderson was convicted of DUI on November 14, 1991, rather than on April 11, 1996, he did not accumulate sufficient conviction points within a 3-year period to support the Department’s declaration that he is a habitual traffic offender and revocation of his driver’s license. Thus, it is necessary to carefully scrutinize the record before us to determine the correct conviction date.

According to the record, Anderson was arrested on the DUI charge at issue on October 26, 1991, found guilty by the Billings City Court (City Court) on November 14,1991, and sentenced on the same date. He appealed to the district court where, for unknown reasons, the case languished. On April 11,1996, the district court signed an order, based on a stipulation by the parties, dismissing the appeal and remanding to the City Court for final imposition of sentence. The abstract of record relating to proceedings on remand in the City Court, signed by the Clerk of the City Court and dated April 30,1996, is the only document before us relating to those proceedings. The Clerk wrote in “4-11-96” after “DATE OF CONVICTION” and checked boxes captioned “FOUND GUILTY” and “JUDGE.”

The Department’s declaration that Anderson is a habitual traffic offender is based on its contention that Anderson had an “April 11, 1996, conviction.” That contention is premised entirely on the district court’s April 11, 1996, order dismissing Anderson’s appeal and remanding for final imposition of sentence, and the abstract of record from the City Court containing an identical conviction date. The problem is that, on this record, no “duly constituted judicial authority” found Anderson guilty of DUI on that date and, as a result, no conviction occurred at that time. See § 61-11-203(1), MCA.

First, it is important to recall that the City Court convicted Anderson of — and sentenced him on — the DUI at issue on November 14,1991. Anderson appealed for a trial de novo, but the district court ultimately dismissed his appeal from that conviction pursuant to the parties’ stipulation and remanded for final imposition of sentence. The district court did not find Anderson guilty of DUI and, thus, did not “convict” him as defined in § 61-11-203(1), MCA, on April 11,1996.

With regard to the abstract of record concerning the remand to the City Court, it is clear that the abstract reflects a conviction date of April 11, 1996, and indicates “FOUND GUILTY” and “JUDGE.” It is equally clear, however, that the City Court had no statutory authority to find Anderson guilty again, at that time, of the offense for which it had already convicted and sentenced him in November of 1991. Nor does the Department cite to any case law under which such authority would exist.

Moreover, the district court’s dismissal of Anderson’s appeal remanded to the City Court only for imposition of sentence already pronounced. While we prohibited such a remand in Rickett v. City of Billings (1993), 262 Mont. 339, 864 P.2d 793, that case is inapplicable here. In Rickett, the pro se defendant appealed a city court conviction to the district court and then failed to appear for a scheduled omnibus hearing. Based on her failure to appear, the district court determined that the defendant had waived her appeal and remanded to the city court for imposition and/or execution of that court’s sentence. Rickett, 864 P.2d at 794. We determined that the district court’s options in response to a failure to appear were limited to those set forth in § 46-16-122(2), MCA, and, as a result, we held that the district court exceeded its authority in remanding to the city court for imposition or execution of sentence. Rickett, 864 P.2d at 794-95. Here, the parties stipulated to the dismissal of Anderson’s appeal to the district court and its remand to the City Court for final imposition of sentence. Nothing in Rickett precludes a remand under this factual scenario.

We conclude that the records on which the Department relied in declaring Anderson a habitual traffic offender and revoking his driver’s license incorrectly reflected an April 11,1996, DUI conviction and, as a result, Anderson did not accumulate 30 conviction points within a 3-year period. On that basis, we further conclude that the Department improperly declared Anderson a habitual traffic offender and revoked his driver’s license.

The Department contends that Anderson is attempting to collaterally attack his April 11, 1996, conviction in this proceeding challenging a habitual traffic offender declaration and correctly cites to State ex rel. Majerus v. Carter (1984), 214 Mont. 272, 278-80, 693 P.2d 501, 504-505, as authority for the proposition that he cannot collaterally attack a conviction at this time. The Department’s position, however, is premised on its theory that a conviction occurred on April 11, 1996. As we concluded above, that theory is incorrect.

Moreover, while Majerus prohibits efforts to refute underlying charges or dispute the propriety of underlying convictions in a habitual traffic offender proceeding by collaterally attacking those convictions (Majerus, 693 P.2d at 504-505), Anderson is not attempting to do so here. Rather, Anderson is disputing the accuracy of the records regarding the alleged April 11, 1996, conviction on which the Department’s declaration and revocation were based; that is, Anderson questions only whether the records on which the Department relied correctly reflected a DUI conviction on April 11, 1996. Section 61-11-210(3), MCA, and Majerus, 693 P.2d at 504-505, expressly authorize him to do so.

We hold that the District Court erred in denying Anderson’s petition challenging the Department’s declaration that he is a habitual traffic offender and its revocation of his driver’s license.

Reversed and remanded for further proceedings consistent with this opinion.

JUSTICES HUNT, REGNIER, NELSON and LEAPHART concur.


author: JUSTICE NELSON JUSTICE LEAPHART,

text:
    IN THE MATTER OF THE ESTATE OF: HARRY ALBERT BOLINGER, III, Deceased.
    No. 97-113.
    Submitted on Briefs May 29, 1997.
    Decided August 1, 1997.
    54 St.Rep. 799. 943 P.2d 981.
    284 Mont. 114.

      For Appellant: Charles F. Angel, Angel Law Firm, Bozeman.
    For Respondent Personal Representative: John Frohnmayer, Bozeman.
    For Respondent Children: Gregory O. Morgan, Bozeman.
   JUSTICE NELSON

delivered the Opinion of the Court.

This is an appeal from the December 18, 1996 Findings of Fact, Conclusions of Law and Order of the Eighteenth Judicial District Court, Gallatin County, determining by way of summary judgment that Decedent’s will created a trust for the benefit of his children; terminating the trust in favor of the children and distributing the corpus of the trust to them; denying the application of Marian Bolinger (Marian) to be appointed personal representative of Decedent’s estate; and appointing Deborah Reichman (Deborah) as personal representative. We reverse and remand for further proceedings consistent with this opinion.

Background

Harry Albert Bolinger, III, (Decedent), died March 23,1995. Decedent’s estate was initially commenced as an intestacy proceeding with Deborah being nominated by Decedent’s three adult children (the children) and subsequently being appointed as personal representative. On July 13, 1995, however, H. A. Bolinger (Hal), father of Decedent, filed a petition for formal probate of will and a request to be appointed personal representative. The November 15,1984 will so offered for probate devised all Decedent’s estate to Hal, or, in the event that Hal predeceased Decedent, to Hal’s wife (Decedent’s stepmother), Marian. Specifically, the Fifth paragraph of the will, the language of which is at issue here, provides:

I intentionally give all of my property and estate to my said father, H. A. Bolinger, in the event that he shall survive me, and in the event he shall not survive me, I intentionally give all of my property and estate to my step-mother, Marian Bolinger, in the event she shall survive me, and in that event, I intentionally give nothing to my three children, namely: Harry Albert Bolinger, IV, Wyetta Bolinger and Travis Bolinger, or to any children of any child who shall not survive me. I make this provision for the reason that I feel confident that any property which either my father or my step-mother, Marian Bolinger, receive from my estate will be used in the best interests of my said children as my said beneficiaries may determine in their exclusive discretion.

The will nominated Hal as personal representative with Marian as the alternate. Hal subsequently renounced his right to serve as personal representative and suggested the appointment of Marian, who petitioned to be appointed on November 6, 1995. Decedent’s children objected, contending, among other things, that the will was void as a matter of law because of undue influence or constructive fraud on the part of Hal, and, in the alternative, that the will created a trust on behalf of the children.

The children moved for summary judgment. Marian filed certain deposition and discovery responses and the court took those into consideration. The court did not enter any findings or conclusions as to undue influence or constructive fraud. However, following the receipt of additional briefs as to the construction of the Fifth paragraph of the will, and, after taking into consideration (over Marian’s objection) an affidavit of John B. Folsom, Professor of English Emeritus, Montana State University, submitted by the children, the court ruled that the will, through the language in the Fifth paragraph created an express trust in favor of Decedent’s children. Because Marian would be the trustee under the Fifth paragraph of the will and because of the admitted hostility between her and the children, the court also ruled that the trust should be terminated and the trust corpus distributed to them with Deborah continuing to act as the personal representative.

On appeal from this decision, Marian raises three issues:

1. Whether the District Court erred in its legal conclusion that the Fifth paragraph of Decedent’s will created an express trust for the benefit of Decedent’s three children;

2. Whether the District Court erred in considering the affidavit of John B. Folsom;

3. Whether the District Court erred in its Findings of Fact Nos. 20 and 21 regarding an alleged partnership between Hal and Decedent.

We will address Issues 1 and 2 together. We will not address Issue 3 or the court’s findings and conclusions as to that issue as Marian states in her brief on appeal that Issue 3 is the subject of other proceedings and that she merely brings the matter to our attention here so as to avoid any later waiver argument.

Standard of Review

We review a district court’s grant of a motion for summary judgment de novo and apply the same criteria under Rule 56, M.R.Civ.P, as did the district court. Missoula Rural Fire Dist. v. City of Missoula (1997), [283 Mont. 113] 938 P.2d 1328, 1329. We review the district court’s findings of fact to determine whether they are clearly erroneous under the three-part test adopted in Interstate Production Credit v. DeSaye (1991), 250 Mont. 320, 820 P.2d 1285, and we review the court’s conclusions of law simply to determine whether the court’s interpretation of the law is correct, Matter of Estate of Dern Family Trust (1996), 279 Mont. 138, 144, 928 P.2d 123, 127.

As with the judicial interpretation and construction of any instrument, the question of whether any particular language in a will creates an express trust, given the circumstances under which the trust was executed, is a question of law for the court to decide. See Klawitter v. Dettmann (1994), 268 Mont. 275, 281, 886 P.2d 416, 420. Here, accepting the facts found by the court, we conclude, nevertheless, that the District Court erred as a matter of law in its interpretation and construction of the effect of the language of the Fifth paragraph of Decedent’s will.

Discussion

On the basis of the discovery responses and depositions provided as part of the summary judgment proceedings, the District Court found that both Hal and Marian believed that the language in the Fifth paragraph of Decedent’s will created a trust (although in a second deposition Marian contended that she was mistaken in her initial impression in this regard). The court also found that Marian believed that at the time Decedent’s will was drafted and executed, the children were minors and that Decedent used the language in the will to prevent his ex-wife from obtaining control over his estate. The court also agreed with Professor Folsom that, when read in its entirety, the Fifth paragraph of the will expressed Decedent’s intention that all of his property must be used in the best interests of his children. The court found that the subject or res of the trust was all of Decedent’s property and that the testator’s purpose in creating the trust was to ensure that his assets would be used in his children’s best interests. The court then concluded that Decedent having thus manifested his intention, and, on the basis of the criteria and authorities argued by the children, an express trust for the children’s benefit was created under the Fifth paragraph of Decedent’s will.

On appeal from the District Court’s decision, Marian argues that proof of an express trust requires clear and convincing evidence that the trustor intended to create a trust and that devises, bequests and gifts that do not contain any restrictions on use or disposition of the property involved do not create an express trust. She contends that the use of “precatory” words by a testator, that is words which express only a wish or recommendation as to the disposition of property, are not sufficient to establish an intention to create a trust. She cites, among other cases, our decision in Stapleton v. DeVries (1975), 167 Mont. 108, 535 P.2d 1267, in support of her position in this regard. Furthermore, she maintains that the trial court erred in considering the affidavit of Professor Folsom because the question of whether given language in a will creates an express trust is one of law, and, as such, is not a proper subject of expert opinion.

In support of the District Court’s decision, the children argue that where the testator manifests his intention to create a trust, no particular form of words or conduct is necessary, and that, providing that the trustor indicates with reasonable certainty the subject, purpose and beneficiary of the trust, an express trust is created. The children contend that, under the facts here and under these criteria, the language used by Decedent in the Fifth paragraph of his will created an express trust in their favor. They maintain that a trust must be construed in a manner so as to implement the trustor’s intent and that, here, Decedent clearly expressed his intention that his property be used for the benefit of his children. The children cite a 1894 New York case, People v. Powers (N.Y. Sup.Ct.1894), 29 N.Y.S. 950, rev’d on other grounds, 41 N.E. 432 (N.Y. 1895), for the proposition that a testator’s expression of “confidence” that a bequest will be used to benefit another is sufficient to create a trust. Finally, as to the matter of the Folsom affidavit, Decedent’s children maintain that the professor did not express an expert opinion on the ultimate legal question, but, rather, his opinion went simply to “the factual issue of the grammatical construction of [the Fifth paragraph] — not on whether the language creates an express trust.”

At the outset, we note that there are differences in the statutory law in effect at the time that Decedent executed his will in November 1984 and when he died in March 1995. While the parties do not take any definitive position as to which body of statutory law applies in this case as to this first issue, the District Judge cites to the law in effect at the time Decedent died and which is presently in effect, § 72-33-202, MCA. In this regard, we note that § 72-33-102, MCA, provides that after September 30, 1989, the present “Trust Code” (Title 72, Chapters 33 through 36) applies to all trusts regardless of when they were created and to all proceedings concerning trusts whenever they were commenced unless, in the opinion of the court, application of a particular provision of the Trust Code would substantially interfere with the rights of the parties and other interested persons or with the effective conduct of the proceedings. While no such opinion, one way or the other, explicitly appears in the trial court’s decision, as mentioned, the court did cite to the present version of the code and thus, implicitly, determined that this statutory law applied.

We also note, however, that various cases cited in the briefs and in the trial court’s decision predate the Legislature’s 1989 adoption of the present Trust Code and that in certain instances those cases tend to track the statutory language in effect at the time the cases were decided instead of the present statutory law. See e.g., Wild West Motors, Inc. v. Lingle (1986), 224 Mont. 76, 728 P.2d 412, relied upon by the children and the court, which tracks the language of the pre-1989 statute, § 72-20-107, MCA, as to how a trust is created. Whether those prior decisions simply apply across the board to cases decided under the present Trust Code is not addressed in the briefs; it does appear, however, that the parties and the trial court assumed that to be true.

We will not attempt to address these collateral matters in this opinion, leaving their analysis and resolution to some future case if specifically raised, argued and briefed. Rather, in the case at bar, we will address the first issue in the context of those legal principles which, we believe, have remained historically constant regardless of the changes in the statutory law over the time period in question. In this regard, we also note that under the present Trust Code, § 72-33-103, MCA, provides that “[e]xcept to the extent that the common law rules governing trusts are modified by statute, the common law as to trusts is the law of this state.”

Taking this approach, it is clear that a trust is created only if the testator demonstrates that he or she intends that a trust be created. This rule, followed in Wild West Motors, was set forth prior to 1989 at § 72-20-107, MCA:

a voluntary trust is created, as to the trustor and beneficiary, by any words or acts of the trustor indicating with reasonable certainty: (1) an intention on the part of the trustor to create a trust; and (2) the subject, purpose and beneficiary of the trust.

Since 1989, under the Trust Code the law is that “[a] trust is created only if the trustor properly manifests an intention to create a trust.” Section 72-33-202, MCA.

Moreover, in our case law, we continue to cite to the general rule that in the construction of trusts it is the trustor’s intent that controls and that to determine that intent we look to the language of the trust agreement. Houseman v. Koski (1993), 259 Mont. 498, 501, 857 P.2d 715, 717 (citations omitted). In that regard, our rules of construction with respect to testamentary instruments are well settled:

The words of the instrument are to receive an interpretation which will give some effect to every expression, rather than an interpretation which will render any of the expressions inoperative. The will is to be construed according to the intentions of the testator, so far as is possible to ascertain them. Words used in the instrument are to be taken in their ordinary and grammatical sense unless a clear intention to use them in another sense can be ascertained. In cases of uncertainty arising upon the face of the will, the testator’s intention is to be ascertained from the words of the instrument, taking into view the circumstances under which it was made, exclusive of his oral declarations.
* * * *
‘The object, therefore, of a judicial interpretation of a will is to ascertain the intention of the testator, according to the meaning of the words he has used, deduced from a consideration of the whole instrument and a comparison of its various parts in the light of the situation and circumstances which surrounded the testator when the instrument was framed.’

In re Strode’s Estate (1946), 118 Mont. 540, 545, 167 P.2d 579, 581-82 (quoting Blacker v. Thatcher (9th Cir. 1944), 145 F.2d 255, 259, 158 A.L.R. 1, cert. denied 324 U.S. 848, 65 S.Ct. 686, 89 L.Ed. 1409). Accord In re Hume’s Estate (1954), 128 Mont. 223, 226, 272 P.2d 999, 1000.

Furthermore, “[n]o particular form of words or conduct is necessary for the manifestation of intention to create a trust,” Restatement (Second) of Trusts § 24 (1959), and “words of trusteeship are not necessarily conclusive,” George T. Bogert, Trusts § 11 at 24 (6th ed. 1987). Nonetheless, we have held that “express trusts depend for their creation upon a clear and direct expression of intent by the trustor,” Eckart v. Hubbard (1979), 184 Mont. 320, 325, 602 P.2d 988, 991, and that the burden of proof to establish the existence of a trust is upon the party who claims it and must be founded on evidence which is unmistakable, clear, satisfactory and convincing. First Nat’l Bank v. Sant (1973), 161 Mont. 376, 386, 506 P.2d 835, 841 (citing Bender v. Bender (1965), 144 Mont. 470, 397 P.2d 957, and Platts v. Platts (1959), 134 Mont. 474, 334 P.2d 722). See also Bogert, supra § 11 at 26 ([i]t is frequently stated by courts that the evidence to establish the existence of a trust must be “clear,” “convincing,” “explicit,” and “unequivocal”), and Eckart, 602 P.2d at 991 (evidence must be “clear, convincing, and practically free from doubt”).

Again, for purposes of this opinion, the parties having cited to no authority that would support a conclusion that the law would be different under the Trust Code, we will apply these foregoing legal principles. Therefore, we now turn to the language of the Fifth paragraph of Decedent’s will:

I intentionally give all of my property and estate to my said father, H. A. Bolinger, in the event that he shall survive me, and in the event he shall not survive me, I intentionally give all of my property and estate to my step-mother, Marian Bolinger, in the event she shall survive me, and in that event, I intentionally give nothing to my three children, namely: Harry Albert Bolinger, IV, Wyetta Bolinger and Travis Bolinger, or to any children of any child who shall not survive me. I make this provision for the reason that I feel confident that any property which either my father or my step-mother, Marian Bolinger, receive from my estate will be used in the best interests of my said children as my said beneficiaries may determine in their exclusive discretion.

From this language it is clear that Decedent intended to accomplish several things under this paragraph of his will. First, he “intentionally’ devised outright all of his property and estate to his father, and in default of that bequest, then to his step-mother, Marian. Second, it is also clear that Decedent “intentionally” devised nothing to his three children. Third, Decedent desired to make some explanation as to why he disposed of his estate in the foregoing manner. To this end, he added to the otherwise unequivocal language of the first sentence of the Fifth paragraph, a second sentence with the explanation that he made this provision because he felt “confident” that any property which either his father or his step-mother, Marian, received from his estate would [“will”] be used in the best interests of his said children as Hal or Marian may determine in their exclusive discretion. It is the language in this second sentence which is at issue and which the District Court determined created an express trust in favor of the children.

The use of this latter sort of qualifying language in a will or instrument is referred to as “precatory” language. As stated in Bogert, supra § 19 at 41:

Usually, if a transferor of property intends the transferee to be a trustee, he directs him to act in that capacity, but sometimes he merely expresses a wish or recommendation that the property given be used in whole or in part for the benefit of another. Words of this latter type are called “precatory” and are generally construed not to create a trust but instead to create at most an ethical obligation.
In weighing the effect of precatory expressions the courts consider the entire document and the circumstances of the donor, his family, and other interested parties.

The author of this treatise notes that the primary question in construing precatory language is whether the testator meant merely to advise or influence the discretion of the devisee, or himself control or direct the disposition intended. Bogert, supra § 19 at 42. Here, in Marian’s favor, the author notes that “the settlor must have explicitly or impliedly expressed an intent to impose obligations on the trustee and not merely to give the donee of the property an option to use if for the benefit of another.” Bogert, supra § 19 at 42 (emphasis added). Put another way, considering the language of the entire instrument and the situation of the alleged settlor, his family, and the supposed beneficiaries at the time the will was executed, “was it natural and probable that the donor intended the donee to be bound by an enforceable obligation or was he to be free to use his judgment and discretion?” Bogert, supra § 19 at 42 (emphasis added). Moreover, “[w]here a donor first makes an absolute gift of property, without restriction or limitation, and later inserts precatory language in a separate sentence or paragraph, the courts are apt to find that there was no intent to have a trust.” Bogert, supra § 19 at 43.

We have addressed the use of such language in a prior decision relied on by Marian. In Stapleton, 535 P.2d at 1268, the decedent’s will provided as follows:

I give, devise and bequeath to my beloved wife, Amanda DeVries, all the balance, residue and remainder of my property of whatever nature, kind or character which I may own at the time of my death to have and to hold as her sole and separate property. I do this with the knowledge that she will be fair and equitable to all of my children, the issue of myself and my former wife as well as the issue of herself and myself.

When Amanda died leaving all her property to her children and nothing to the decedent’s children by his first marriage, the latter sued claiming that a constructive trust was created by decedent’s will in their favor. Stapleton, 535 P.2d at 1268. Reversing the trial court’s summary judgment in the plaintiffs’favor, we ruled that the language was clear on its face — Amanda was given decedent’s property outright and the remaining precatory language did not create a trust for the benefit of the children by decedent’s first marriage. Stapleton, 535 P.2d at 1268.

Furthermore, in Stapleton, while rejecting as of "little value” cases cited by the parties and pointing out that precatory trust cases are fact driven, we relied on Miller v. Walker Bank & Trust Co. (1965), 17 Utah 2d 88, 404 P.2d 675, as being factually similar. Stapleton, 535 P.2d at 1268-69. In Miller, the precatory language at issue was:

I give, devise and bequeath to my beloved wife, Nettie Knudsen Miller, all of my property, whether the same be real or personal or mixed, and I do this acknowledging all my children hereinafter named, and for the reason that I know that my beloved wife will care for my children from the remainder of my estate, if there be any, share alike ....

We quoted with approval the Utah court’s conclusion that this precatory language did not create a constructive trust, specifically emphasizing that part of the court’s decision that “[w]here there is a clear and unequivocal devise, the statement of the reasons for doing so does not limit or restrict the testamentary gift.” Stapleton, 535 P.2d at 1269. We noted, further, that there was nothing in the Stapleton record to support any conclusion that the decedent intended to create a trust through the precatory language used. Stapleton, 535 P.2d at 1269.

Similarly, in the case at bar, the language used by Decedent clearly and unambiguously makes an outright gift to his father, and in default of that gift, to his step-mother and specifically excludes his children. Then, in a separate sentence, Decedent explains the reason for this distribution, expressing his “confidence” that the devisees will use his estate for the children’s “best interests” in the devisees’ “exclusive discretion.” This language does not impose any sort of clear directive or obligation (other than, perhaps, a moral or ethical one) on either Hal or Marian. The purported trustee is given no direction as to how the supposed settlor intends his estate to be used to further the “best interests” of the children and neither does Decedent provide any guidance as to what those best interests might include. Decedent imposes no restrictions on the purported trustee, but, rather, leaves in that person the “exclusive discretion” as to how the estate will be used for the children’s best interests, expressing his “confidence” that will be accomplished. Decedent’s statement of reasons for devising his estate to Hal and Marian, neither limits nor restricts the gift to them any more than did the language at issue in Stapleton and in Miller limit or restrict the bequests made in those cases. Stapleton, 535 P.2d at 1269. The bottom line is that, under the precatory language used by Decedent, his devisees had complete discretion as to how to use the property given them outright.

Furthermore, as in Stapleton, the facts found by the court and relied on by the children in the case at bar do not support the conclusion that Decedent intended that his expression of confidence in his father and step-mother would create a legally enforceable express trust. First, the trial court and the children focus on deposition testimony of Marian that she (initially at least) and Hal believed that the will created a trust. How Marian and Hal may have construed the language is not the issue, however. The real issue is what Decedent intended when he used the language which he did. Unfortunately, neither Marian’s nor Hal’s conclusory interpretation of the meaning of the language in the Fifth paragraph of the will assists in divining Decedent’s intent one way or the other. Second, while Marian believed that Decedent may have been concerned that his first wife would obtain control over his estate while the children were minors, her personal belief of what motivated Decedent is not evidence of what Decedent actually intended. Even Marian’s testimony on this point was equivocal and speculative:

Bud [Decedent] was flying around a good deal in those days because of his being an officer in the Pinsgauer [sic] Association, and I think he got worried about his kids. And by that time, his father had given him the 240 acres up south, and so he probably did not want Fae to have anything to do with it, is what my own personal feeling is. And he certainly made it clear. [Emphasis added.]

Third, as to Professor Folsom’s affidavit, he first recites the entire Fifth paragraph of Decedent’s will. He then analyzes various words and phrases in the paragraph as parts of speech and in the context of grammar and sentence structure. Professor Folsom then reaches the conclusion that “[w]hen read in its entirety, the paragraph expresses the intention that the property must be used in the best interest of the children.” Regardless of whether Professor Folsom’s affidavit was admissible or not on the issue of Decedent’s intent, we conclude simply that, either on a stand-alone basis or in conjunction with Marian’s deposition testimony, this affidavit does not provide substantial evidence, much less clear and convincing evidence, of Decedent’s intent. Without belaboring the point, nothing here suggests that Decedent chose his nouns, verbs and adverb prepositional phrases with the surgical precision that Professor Folsom concludes adds up to an expression of intention that the property “must” (Professor Folsom’s word, not Decedent’s) be used in the best interest of the children. Arguably, had Decedent given the sort of considered thought to his choice of words that is suggested by the affidavit and had he clearly intended to create an express legal trust, it is more likely that he would not have used the sort of precatory language that he did.

Furthermore, we note that the Third paragraph of Decedent’s will makes an unconditional, outright devise of all of Decedent’s estate to Hal and that the Fourth paragraph of the will makes an unconditional, outright devise of the same property to Marian, should Hal die before Decedent. Also, we note that the Sixth paragraph of the will appoints Hal as the personal representative with Marian as the alternate, both without bond, and gives both unrestricted power to sell any or all of the estate property without court order at public or private sale, with or without notice. Again, Decedent’s unequivocal, outright and unrestricted gifts to Hal and alternatively to Marian, and his appointment of them as the personal representative and alternate without bond and without restriction on their powers, supports the conclusion that the one precatory sentence in the Fifth paragraph was advisory only and was not intended to create a legal, express trust obligation.

While the children and the trial court rely upon Wild West Motors and In Re Marriage of Malquist (1988), 234 Mont. 419, 763 P.2d 1116, as generally describing the creation of a voluntary trust, neither case is particularly helpful in resolving the specific question of Decedent’s intent and the construction of the language in his will at issue here. In the former case the existence of a trust was admitted, Wild West Motors, 728 P.2d at 415, and in the latter case the issue was whether certain real property was included in an already existing trust, Malquist, 763 P.2d at 1117.

Furthermore, the children’s and the court’s citation to Powers, an 1894 New York case, is not persuasive. The case is cited for the proposition that the testator’s expression of “confidence” that a bequest will be used to benefit another is sufficient to create a trust. We conclude that, while such an expression may be considered as part of the evidence of a testator’s intention, in and of itself, the use of that word is not dispositive of this issue. Whether a trust will be found from the use of any precatory word or phrase, whether that be “desire,” “wish,” “hope,” “recommend,” “in confidence” or “rely,” cannot be concluded merely from the particular word or phrase used. Bogert, supra § 19 at 41-42. Importantly, and while other courts may interpret precatory language more liberally, our case law precedent is clear and we decline to depart from it on the facts here. Stapleton, 535 P.2d at 1268-69.

In short, we conclude that, reviewing Decedent’s will as a whole, taking the words and phrases used by Decedent in their ordinary and grammatical sense and considering the facts found by the District Court, there was not the sort of “unmistakable,” “clear,” “convincing,” “explicit,” “unequivocal” and “practically free from doubt” evidence that would support a legal conclusion that Decedent clearly and directly expressed his intention to create an express trust in favor of the children through his use of precatory language in the Fifth paragraph of his will. Eckart, 602 P.2d at 991; First Nat’l Bank, 506 P.2d at 841; Platts, 334 P.2d at 727; Stapleton, 535 P.2d at 1269.

Finally, as an aside, we note that both Stapleton and Miller addressed whether the precatory language at issue created a constructive trust, as opposed to the claim in the case at bar that the trust created was an express trust. Express trusts depend upon intention and implied trusts, i.e., constructive or resulting trusts, arise by operation of the law. Platts, 334 P.2d at 727. See also §§ 72-33-201, -219 and -220, MCA. With regard to the latter trusts, intent may be presumed or implied or intent may not even be an issue. Eckart, 602 P.2d at 991. Nevertheless, for purposes of this opinion, we do not believe that this distinction as to the type of trust created is of particular importance, where the central issue — whether the testator’s intent is manifest from the language used and the facts found — is the same and is governed by the same principles of law.

We hold that the District Court erred in its legal conclusion that the Fifth paragraph of Decedent’s will created an express trust for the benefit of Decedent’s three children. Accordingly, we reverse and remand for further proceedings consistent with this opinion.

Reversed and remanded.

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

JUSTICE LEAPHART,

dissenting.

I dissent.

The majority, relying principally upon our decision in Stapleton v. DeVries (1975), 167 Mont. 108, 535 P.2d 1267, holds that the language used in the Bolinger will is only precatory. In Stapleton, the will provided as follows:

I give, devise and bequeath to my beloved wife, Amanda DeVries, all the balance, residue and remainder of my property of whatever nature, kind or character which I may own at the time of my death to have and to hold as her sole and separate property. I do this with the knowledge that she will be fair and equitable to all my children, the issue of myself and my former wife as well as the issue of herself and myself.

Stapleton, 535 P.2d at 1268.

In the present case, the Bolinger will provides:

I intentionally give all of my property and estate to my said father, H.A. Bolinger, in the event that he shall survive me, and in the event he shall not survive me, I intentionally give all of my property and estate to my step-mother, Marian Bolinger, in the event she shall survive me, and in that event, I intentionally give nothing to my three children, namely: Harry Albert Bolinger, IV, Wyetta Bolinger and Travis Bolinger, or to any children of any child who shall survive me. I make this provision for the reason that I feel confident that any property which either my father or my step-mother, Marian Bolinger, receive from my estate will be used in the best interests of my said children as my said beneficiaries may determine in their exclusive discretion.

The language used in the Bolinger will is distinguishable from and more conclusive than that used in Stapleton. In Stapleton, the decedent’s will devised the property to the beneficiary “to hold as her sole and separate property.” Such a “sole and separate property” provision is absent in the Bolinger will. Secondly, in Stapleton, the testator made the devise knowing that the beneficiary would be fair and equitable to all his children (i.e. children from both marriages). The beneficiary was thus under no obligation to segregate the devised property or to treat it any differently than her sole property. In contrast, Bolinger provided that “any property” received from his estate was specifically tagged for use “in the best interests of [his] children.” In other words, his father or step-mother were not to commingle the property with their own property, nor were they to treat it as their sole and separate property with some vague understanding that they would then be fair and equitable to all concerned. Rather, Bolinger was confident that this specific property “will be used in the best interests of my children.” The language in the Bolinger will is more than precatory, it is peremptory.

As the court recognizes, no particular form of words is necessary for the manifestation of an intent to create a trust, RESTATEMENT (SECOND) OF TRUSTS § 24, and express trusts depend upon a clear and direct expression of intent by the trustor. Eckart v. Hubbard (1979), 184 Mont. 320, 325, 602 P.2d 988, 991. Bolinger clearly intended that the property passing maintain its separate identity and that his father or step-mother, as trustees, use the property solely for the benefit of his children, who were, at the time of the will, minors.

I would affirm the decision of the District Court.

JUSTICE HUNT joins in the foregoing dissent of Justice W. William Leaphart.