author:
JUSTICE NELSON JUSTICE NELSON
      JUSTICE LEAPHART,

text:
    IN THE MATTER OF THE ESTATE OF THE DERN FAMILY TRUST AND CLIFFORD DERN, Deceased. MARY R. DERN, Plaintiff, Respondent, and Cross-Appellant, v. DERRIL DERN, DARLENE ADAMS, JANICE COPLEY, and BEVERLY TUBBS, Defendants, Counterclaimants, and Appellants.
    No. 95-368.
    Submitted on Briefs October 17, 1996.
    Rehearing Denied January 2, 1997.
    Decided November 14, 1996.
    53 St.Rep. 1087.
    279 Mont. 138.
    928 P.2d 123.

      For Appellant: Roger M. Sullivan, McGarvey, Heberling, Sullivan & McGarvey, Kalispell.
    For Respondent: Steven E. Cummings, Donald R. Murray, Murphy, Robinson, Heckathorn & Philips, Kalispell.
   JUSTICE NELSON

delivered the Opinion of the Court.

Appellants Derril Dern, Darlene Adams, Janice Copley, and Beverly Tubbs (collectively, the Dern children) appeal from the September 20, 1993 order denying their Motion for Summary Judgment, from the May 17, 1994 Findings of Fact and Conclusions of Law, and from the April 21, 1995 Supplemental Findings of Fact, Conclusions of Law and Judgment of the District Court for the Eleventh Judicial District, Flathead County. The Dern children appeal the District Court’s conclusions that there was nothing in Clifford Dem’s Separate Trust Estate with which to fund the $10,000 bequests to each of the Dern children; that the fourth Trust Minute constituted a valid and enforceable amendment to the Dern Family Trust; and that Mary Dern did not breach her fiduciary duties in the administration of the Trust as trustee. The Dern children also appeal the District Court’s valuation of the respective interests in the Family Bypass Trust.

Respondent Mary Dern cross-appeals from the May 17, 1994 Findings of Fact and Conclusions of Law and from the April 21,1995 Supplemental Findings of Fact, Conclusions of Law and Judgment denying her costs and attorney’s fees. We affirm in part and reverse in part.

We consider the following issues on appeal:

1. Did the District Court err in characterizing Clifford and Mary Dern’s joint bank accounts and Certificates of Deposit as part of the Marital Trust Estate of the Dern Family Trust?

2. Did the District Court err in determining that the fourth Trust Minute was a validly executed amendment to the Trust document?

3. Did the District Court err in determining the parties’ interests in the Family Bypass Trust?

We also consider the following issue on cross appeal:

4. Did the District Court err in denying Mary Dern her costs and attorney’s fees?

Factual and Procedural Background

This appeal involves the disposition of real and personal property from the Dern Family Trust (the Trust), a revocable living trust, on the death of Clifford Dern (Clifford), a settlor. The Dern children, are Clifford’s adult children from a previous marriage. Mary Dern (Mary), is Clifford’s surviving spouse and co-settlor and a trustee of the Trust.

At the time of Clifford’s and Mary’s marriage in 1976, Clifford was 65 years of age and Mary was 62 years of age. Each had adult children from previous marriages.

In 1990, Clifford and Mary purchased the Trust documents from William W. Thompson (Thompson), an agent of American Family Living Trusts. American Family, a California corporation, had been previously enjoined from selling trusts in the state of Washington and Thompson’s license to sell insurance had been revoked by the state of Idaho due to his deceitful conduct in the sale of revocable trusts. Clifford and Mary learned of American Family through mail solicitation.

Clifford and Mary were the settlors and initial trustees of the Trust. Clifford’s son, Derril, was the first successor trustee of Clifford Dern.

The Trust classified property as either “marital” or “separate.” Marital property transferred to the Trust would become part of the Marital Trust Estate and would go to the surviving spouse on the death of either settlor. Separate property of either settlor transferred to the Trust would become part of the Separate Trust Estate and would be distributed according to the Trust with any residue going into the Family Bypass Trust. The Family Bypass Trust named the surviving spouse as the income beneficiary and the surviving spouse, together with the descendants of Clifford and Mary as the principal beneficiaries.

Clifford’s Separate Trust Estate provided that his real property (which included two 160-acre parcels of timber, one-half of a 360-acre parcel of timber, and the 120-acre farm on which he and Mary lived) to be distributed among his four children if he predeceased Mary. Mary owned property that was held in joint tenancy with her two children that was never transferred to the Trust. The Trust further provided that the trustee distribute from Clifford’s Separate Trust Estate, $10,000 to each of the Dern children.

After the Trust was created, Clifford and Mary transferred five bank accounts and Certificates of Deposit to the Trust. At the time of Clifford’s death, these accounts totaled $73,922.77.

On November 14, 1991, Clifford and Mary deeded five parcels of real property to the Trust by means of a quitclaim deed, properly executed and recorded November 15,1991. In addition they amended the Trust by use of four Trust Minutes, specifying the beneficiaries of each of the parcels of property. These properties included the four parcels owned by Clifford and left to his children by way of the Separate Trust Estate in the original Trust document, and a farm acquired by Mary prior to her marriage to Clifford.

The first three Trust Minutes left Mary’s farm to her two children, Clifford’s two 160-acre parcels of timberland to his daughters, and one-half of the 360-acre parcel to Clifford’s son. These parcels were necessarily removed from the assets of Clifford’s Separate Trust Estate as they were specifically bequeathed through the Trust Minutes. These three Trust Minutes are not in dispute. The fourth Trust Minute left the 120-acre farm, then occupied by Clifford and Mary, to Mary. The fourth Trust Minute was signed by Clifford alone as were the second and third Trust Minutes leaving Clifford’s other properties to his children. The validity of this fourth Trust Minute is disputed.

By the time Clifford and Mary signed the Trust Minutes Clifford had been suffering from several serious health problems for several months. Clifford died on December 9, 1991, after undergoing heart catheterization.

After Clifford died, Thompson went over the Trust with Mary and Clifford’s children. Mary signed deeds as trustee of the Trust conveying the real estate in the manner provided for in the Trust. At that time she had not consulted a lawyer and did not realize that the Trust provided that Derril would succeed Clifford as co-trustee of the Trust, and that, consequently, his signature was required on the deeds. After she consulted an attorney, new deeds were prepared for both Mary’s and Derril’s signatures. Derril refused to sign the deeds and this litigation ensued.

The Dern children appeal the District Court’s conclusion that Clifford’s one-half interest in various bank accounts constituted part of the Marital Trust Estate and was therefore not available to satisfy the $10,000 bequests. They also appeal the District Court’s conclusion that the fourth Trust Minute, leaving the farm to Mary, was a validly executed amendment to the Trust.

Standard of Review

The standard of review of a district court’s findings of fact is whether they are clearly erroneous. Daines v. Knight (1995), 269 Mont. 320, 324, 888 P.2d 904, 906 (citing Columbia Grain Intern. v. Cereck (1993), 258 Mont. 414, 417, 852 P.2d 676, 678).

This Court adopted a three-part test in Interstate Production Credit v. DeSaye (1991), 250 Mont. 320, 820 P.2d 1285, to determine whether the findings are clearly erroneous. This test provides:

First, the Court will review the record to see if the findings are supported by substantial evidence. Second, if the findings are supported by substantial evidence, we will determine if the trial court has misapprehended the effect of evidence. [Citations omitted.] Third, if substantial evidence exists and the effect of the evidence has not been misapprehended the Court may still find that “[a] finding is ‘clearly erroneous’ when, although there is evidence to support it, a review of the record leaves the court with the definite and firm conviction that a mistake has been committed.” [Citations omitted.]

DeSaye, 820 P.2d at 1287. See also Daines, 888 P.2d at 906.

The standard of review of a district court’s conclusions of law is whether the court’s interpretation of the law is correct. Carbon County v. Union Reserve Coal Co., Inc. (1995), 271 Mont. 459, 469, 898 P.2d 680, 686. See also Kreger v. Francis (1995), 271 Mont. 444, 447, 898 P.2d 672, 674; Steer, Inc. v. Department of Revenue (1990), 245 Mont. 470, 474-75, 803 P.2d 601, 603-4.

Issue 1

Did the District Court err in characterizing Clifford and Mary Dern’s joint bank accounts and Certificates of Deposit as part of the Marital Trust Estate of the Dern Family Trust?

The Dem children contend that Clifford’s share in the various bank accounts and Certificates of Deposit (CDs) is a part of Clifford’s Separate Trust Estate and is thus available for partial satisfaction of the $10,000 bequests to each of his children. The Declaration of Trust distinguishes between the marital property and the separate property of Clifford and Mary and provides in part:

Any marital property of Clifford Dern and Mary R. Dem transferred to the trust shall remain marital property after its transfer and shall be called the “marital trust estate.” ... Either Clifford Dern’s or Mary R. Dem’s separate property transferred to the trust shall be called the “separate trust estate” with reference to the contributing settlor.

Trust, Article 1, page 1.

This definition is circular and not very helpful in distinguishing between marital and separate property. The sentence immediately following this definition is the only further direction given by the Trust regarding whether property is to be characterized as “marital” or “separate”. The Trust provides: “Any ‘real property held by Clifford Dern and Mary R. Dern as ‘joint tenants’ shall be considered ‘transmutted’ [sic] to marital property for purposes of trust establishment.” Clifford and Mary held no real property in joint tenancy. The Trust is silent as to the treatment of jointly held personal property.

Because the Trust is ambiguous as to the terms “marital property’ and “separate property,” extrinsic evidence is admissible to aid in determining the settlors’ meaning of the terms and their intent in distributing their property through the Trust. “Where an ambiguous term is used, the intent of the parties will govern its construction and extrinsic evidence can be used to discover that intent.” Ellingson Agency, Inc. v. Baltrusch (1987), 228 Mont. 360, 365, 742 P.2d 1009, 1012 (quoting Adams v. Chilcott (1979), 182 Mont. 511, 517, 597 P.2d 1140, 1144). This principle applies to the construction of both wills and trusts. Matter of Estate of Flasted (1987), 228 Mont. 85, 90, 741 P.2d 750, 753; § 72-33-106 MCA.

In determining the settlors’ intended meaning of “marital” and “separate” property, the words should be taken in their ordinary meaning. “The words of a will are to be taken in their ordinary and grammatical sense, unless a clear intention to use them in another sense can be collected and that other can be ascertained.” Section 72-11-302, MCA (repealed 1993). Although this statute was repealed in 1993 it was controlling when Clifford and Mary executed the Trust in 1990. The Trust provides some guidance to the interpretation of the terms “marital” and “separate.” The status the property had before being transferred to the Trust dictated the status it would have once it became part of the Trust. Hence “marital property” transferred to the Trust would become part of the Marital Trust Estate. Thus, the status of the bank accounts before transfer to the Trust determines their status within the Trust.

The parties agree that the four Norwest accounts were joint tenancy accounts, with Clifford and Mary each having a one-half interest in the funds in the accounts before the accounts were transferred to the Trust. The dispute as to the Norwest accounts arises over whether Clifford’s share in the accounts constituted marital property or separate property. The fact that Clifford had an equal share in the accounts does not necessarily result in Clifford’s share being characterized as separate property.

Because the Trust does not define what property constitutes marital property or separate property, the intent of the parties to the agreement must be discerned. In its May 17, 1994 Findings of Fact and Conclusions of Law the District Court found that:

It was the intention of Clifford and Mary, settlors of the Dern Family Trust, to allocate to “marital trust property’ all accounts and deposits which they held jointly and to which they had both made contributions during their fifteen and one-half year marriage.

The District Court found and the record indicates that the Derns treated their checking and savings accounts as marital property. Upon Clifford’s request, Mary retired from nursing when they were married and thereafter helped out on the farm. After their marriage, Mary Dem’s name was placed on a savings account and a checking account that Clifford had maintained with his former wife. At the time Marys name was placed on the accounts the savings account had an approximate balance of $30,000, and the checking account had an approximate balance of $27,000. During the marriage, Clifford and Mary placed funds generated from farming and logging into the checking and savings accounts as well as into jointly-held CDs. They combined the crops from both Mary’s and Clifford’s farms, then sold the crops and placed the proceeds in either a joint household checking account or a joint CD.

The record clearly supports the District Court’s determination that Clifford and Mary regarded the Norwest accounts as marital property throughout their marriage, including the point at which the accounts were transferred to the Trust. As such these accounts became part of the Marital Trust Estate.

There is a dispute over whether Clifford’s interest in the Whitefish Credit Union account should be considered marital property or separate property. The parties also disagree as to whether that account was held in joint tenancy or as tenants in common. However, since the Trust does not mandate that personal property held in joint tenancy become part of the Marital Trust Estate, or that personal property held as tenants in common become part of the Separate Trust Estate, the type of cotenancy is not dispositive as to the characterization of Clifford’s interest in the Whitefish account. Cf. Clark v. Clark (1963), 143 Mont. 183, 387 P.2d 907 (holding that a joint interest is not necessarily limited to the estate of joint tenancy).

The District Court found that the circumstances surrounding the opening and use of the Whitefish account indicated that it was a joint account to be treated as marital trust property. The source of the initial deposit was crop proceeds generated from both Clifford’s and Mary’s farms. The bank issued the passbook and monthly statements of account in both Clifford’s and Mary’s names. The District Court’s conclusion that this account was marital property before transfer to the Trust, and thus part of the Marital Trust Estate, is correct.

Accordingly, we affirm the District Court’s conclusion that Clifford’s interest in both the Norwest accounts and the Whitefish account was part of the Marital Trust Estate as opposed to the Separate Trust Estate and therefore unavailable to fund the $10,000 bequests to the Dern children.

Issue 2

Did the District Court err in determining that the fourth Trust Minute was a validly executed amendment to the Trust document?

The fourth Trust Minute allocated the 120-acre farm and the farm equipment to Mary upon Clifford’s death. This Trust Minute was signed by Clifford alone. The Dern children contend that this fourth Trust Minute was not a validly executed amendment to the Trust.

The provisions of the Trust pertinent to this issue are as follows:

Major modifications of your trust should be accomplished through formal amendments, many of the minor actions you wish to take can be accomplished through your Trust Minutes.

Trustee Instructions, page 2.

Amendment During Settlors’ Lives: Clifford Dern and Mary R. Dern acting together may at any time during their joint lives amend any of the terms of this trust by a written document delivered to the trustee or including such amendment in the Minutes of Trust. [Emphasis added.]

Trust, Article 2, page 3.

Attention Trustees and Successor Trustees: This is a record of the Dern Family Trust, referred to as Trust Minutes. These Trust Minutes are instructions to successor trustees on the distribution desires of Clifford Dern and/or Mary R. Dern. Each item included below, provided each is signed and dated by the Settlors, constitutes an important element of this revocable living trust, established on December 22, 1989. [Emphasis added.]

Trust Minutes, page 1.

It is black-letter law that in the construction of an instrument, “[w]here there are several provisions or particulars, such a construction is, if possible, to be adopted as will give effect to all.” Section 1-4-101, MCA. Moreover, the provisions of the Trust control as to the requirements for modification. See § 72-33-403, MCA; Hauseman v. Koski (1993), 259 Mont. 498, 501, 857 P.2d 715, 717.

It is undisputed that the settlors are Clifford and Mary. We assume, without necessarily agreeing, that the fourth Trust Minute was a minor modification of the Trust and the Trust could, thus, be amended, through the Trust Minutes. Reading all of the above provisions together so as to give effect to all, as required by § 1-4-101, MCA, it is clear from the Trustee Instructions that to amend the Trust, the settlors, Clifford and Mary, were required to act together and that, from the instructions to the Trust Minutes, both settlors were required to sign and date any such Trust Minute. This is the only interpretation of the Trust language that will give effect to all of the above provisions. To the contrary, ignoring the requirement for both settlors’ signatures set forth in the instructions to the Trust Minutes, would violate § 1-4-101, MCA, by failing to give any effect to that provision in the Trust.

We conclude that the fourth Trust Minute was invalid and the proposed amendment to the Trust was not accomplished on Clifford’s purported signature alone. Therefore, the 120-acre farm continued as part of Clifford’s Separate Trust Estate and at his death the 120-acre farm became the property of the Dern children as provided in Article 3 of the Trust. Accordingly, we reverse the trial court on this issue and remand for further proceedings.

In reaching this conclusion, we acknowledge that it is inconsistent that Trust Minutes one, two and three, each of which contain only one of the settlor’s signatures, have, likewise, not also been invalidated. The short answer to this anomaly is that the parties only chose to litigate the fourth Trust Minute and that is the only Trust Minute at issue here. Moreover, we are not inclined to speculate on why the other three Trust Minutes were not challenged. The fact is they were not, and it would be improper for us to address and decide matters not appealed.

Issue 3

Did the District Court err in determining the parties’ interests in the Family Bypass Trust?

The Trust contained a Family Bypass Trust. The income beneficiary of the Family Bypass Trust is the surviving spouse and the principal beneficiaries are the surviving spouse and Clifford’s and Mary’s descendants. The District Court found that due to the litigation between the parties the administration of the Family Bypass Trust was “imminently impractical” and that the Family Bypass Trust should be terminated and properly allocated to the Trust beneficiaries.

The Family Bypass Trust was to be funded by property allocated to it by the settlors, by the remainder of the deceased spouse’s Separate Trust Estate, and by the remainder of the deceased spouse’s interest in the Marital Trust Estate. At the time of Clifford’s death the settlors had not allocated any property to the Family Bypass Trust. In addition, Clifford specifically bequeathed all of the property held in his Separate Trust Estate to his children, thus there was nothing left in his Separate Trust Estate to fund the Family Bypass Trust. Therefore, the remainder of Clifford’s interest in the Marital Trust Estate was the only source of funds in the Family Bypass Trust.

The Dern children appeal the District Court’s conclusion that the funeral expenses should be deducted from Clifford’s share of the Marital Trust Estate and claim that the expenses should be deducted from the entire Marital Trust Estate, thereby leaving more funds to roll over to the Family Bypass Trust.

The Trust provides:

The trustee may, in the trustee’s reasonable discretion, pay from the trust estate the deceased spouse’s debts, last illness and funeral costs, and expenses of administration for this trust and the deceased spouse’s probate estate. The trustee may allocate the payment of the deceased spouse’s debts to the deceased spouse’s interest in the marital trust estate and the deceased spouse’s separate trust estate as the trustee determines in the trustee’s reasonable discretion. [Emphasis added.]

Trust, Article 3, page 4.

The Trust clearly provides that the trustee should pay the funeral costs from the “trust estate.” While the Trust provides that the deceased spouse’s debts may be allocated to the deceased spouse’s Marital Trust Estate or Separate Trust Estate, it does not allow this option for funeral expenses. The Trust distinguishes between debts and funeral expenses in the first sentence of the above provision for deceased spouse’s expenses. The next sentence gives the trustee discretion to allocate only the deceased spouse’s debts, not funeral expenses, to the deceased spouse’s Marital Trust Estate or Separate Trust Estate. Contrary to the District Court’s finding that the second sentence is the more specific provision and should therefore control, we hold that, as to funeral expenses, the first sentence is the more specific and, thus, the controlling provision. Therefore, the funeral expenses should be deducted from the entire Trust estate. The only funds available in the Trust estate are the funds in the Marital Trust Estate, and therefore the funeral expenses must be deducted from the Marital Trust Estate. The funeral expenses must be deducted before allocation of the Marital Trust Estate into Clifford’s and Mary’s separate interests.

The District Court correctly subtracted the funeral expenses from the entire Marital Trust Estate rather than from Clifford’s interest in the Marital Trust Estate in its supplemental conclusion of law no. 3. The District Court inexplicably deducted the funeral expenses from Clifford’s interest in the Marital Trust Estate in its supplemental findings of fact no. 10. Supplemental finding of fact no. 10 is inconsistent with supplemental conclusion of law no. 3, which is controlling on this question of interpretation.

In determining the amount of money in the Family Bypass Trust it becomes necessary to determine Clifford’s “interest” in the Marital Trust Estate upon his death. As set out above, the Marital Trust Estate, totalling $73,922.77, consisted of both the Norwest bank accounts and CDs and the Whitefish bank account. The funeral expenses of $4,855 must be deducted from this amount leaving a total of $69,067.77 in the Marital Trust Estate. Mary’s costs of bringing this suit and attorney’s fees will be deducted from this amount as explained below. After this deduction, the Marital Trust Estate must be divided into the surviving spouse’s interest and the deceased spouse’s interest.

The Trust fails to elaborate on how to determine respective “interests” in the Marital Trust Estate upon the death of one of the settlors. The District Court, finding that the Norwest accounts were all held in joint tenancy, apportioned half of the value in these accounts to Clifford’s interest in the Marital Trust Estate. This apportionment is correct because in Montana, joint tenants are entitled to equal shares of joint property, absent proof to the contrary. Section 70-1-307, MCA; Stapleton v. First Sec. Bank (1983), 207 Mont. 248, 256, 675 P.2d 83, 88, appeal after remand 219 Mont. 323, 711 P.2d 1364 (remanded to allow the District Court to consider evidence of Stapleton’s equitable interest in the proceeds of the sale of her home as part of the proof to rebut the presumption that as joint payee on checks issued for the sale price of the home she was entitled to one-half or more of the amount of the checks).

The Dern children concede that Clifford’s interest in the Norwest accounts is a one-half interest. Because neither party offered evidence to rebut the presumption of equal shares, the District Court’s holding that Clifford had a one-half interest in the Norwest accounts is correct.

In its April 21, 1995 Supplemental Findings of Fact, Conclusions of Law and Judgment, the District Court concluded that Clifford and Mary held the Whitefish account as tenants in common and consequently apportioned Clifford’s interest in the account according to contribution. The District Court had reached a different conclusion in its May 17,1994 Findings of Fact and Conclusions of Law, wherein the court concluded that all of the bank accounts, including the Whitefish account, were held in joint tenancy. Notwithstanding this discrepancy, the District Court accurately apportioned the Whitefish account according to contribution. The District Court’s inconsistency in defining the cotenancy status of the Whitefish account is irrelevant because the cotenancy status of the Whitefish account does not dictate the manner of apportionment of the Whitefish account into Clifford’s and Mary’s respective interests.

It is presumed that shares of cotenants are equal, whether they be tenants in common or joint tenants. 20 Am. Jur. 2d Cotenancy and Joint Ownership § 127 (1995); Poepping v. Monson (1960), 138 Mont. 38, 47, 353 P.2d 325, 330 (citing Ivins v. Hardy (1947), 120 Mont. 35, 40, 179 P.2d 745, 747-48 (overruled on other grounds)). This presumption is not conclusive but is subject to rebuttal and may be rebutted by parol evidence. 20 Am.Jur. 2d Cotenancy and Joint Ownership § 127 (1995); D.M. v. D.A. (Alaska 1994), 885 P.2d 94, 96. See Lawrence v. Harvey (1980), 186 Mont. 314, 322-24, 607 P.2d 551, 556-57. Furthermore, our decision in Stapleton (adhering to the presumption of equal shares in joint tenancy property absent evidence to the contrary), follows the traditional approach to division of interests of all cotenancies and is persuasive here.

Other states have applied the “equal share presumption rule” to tenancies in common. In D.M., the plaintiffs rebutted the general presumption of equal shares between tenants in common by demonstrating unequal contribution to equity in real property. There the court found that this evidence created a presumption that they intended to share property in proportion to their respective contributions and was enough to rebut the general presumption of equal shares. D.M., 885 P.2d at 97-98. The court held that if the parties intend to hold a tenancy in common in a particular proportion or if an intent to determine proportion by a particular method can be discovered, this intent controls over the equal share presumption rule of cotenancy. D.M., 885 P.2d at 97. Nonetheless, the court recognized that the common law presumptions concerning the respective interests of tenants in common where one contributes unequally to the purchase price are not applicable where the relationship between the parties indicates that one might have intended to make a gift to the other. D.M., 885 P.2d at 97 (citingPeople v. Varel (Ill. 1932), 184 N.E. 209, 211; Wood v. Collins (Alaska 1991), 812 P.2d 951, 956). In Wood, the court held that where the parties cohabit and share an intimate relationship, it is more likely than otherwise that one party may contribute more of the acquisition or upkeep costs and still expect only an equal share of the property. Wood, 812 P.2d at 956. The court in Wood went on to state that the court must still find, however, that it was in fact the intent of the party making the excess contribution to confer it on the other party as a gift. Wood, 812 P.2d at 957.

Although the above cases involved division of real property held as tenants in common, the same principles pertain to a bank account held as tenants in common. This Court has held that while joint bank accounts have special attributes not applicable to all jointly held property, a joint bank account is otherwise subject to the same rules as other joint tenancies. Casagranda v. Donahue (1978), 178 Mont. 479, 483, 585 P.2d 1286, 1288. As the standard rules of joint tenancies apply to jointly held bank accounts, by analogy, the standard rules of tenancies in common should apply to bank accounts held as tenants in common.

As the above decisions indicate, including the Montana decision in Stapleton, the general rule of equal shares in cotenancies may be rebutted by evidence such as unequal contribution. The burden of proving that an account is owned other than equally between cotenants rests with the party asserting such claim. Purma v. Stark (Kan. 1978), 585 P.2d 991, 993. The Dern children alleged that a greater amount of the funds in the Whitefish account was attributable to the crop proceeds from Clifford’s land than from Mary’s land. However, as the decisions in D.M. and Woods indicate, unequal contribution will not always be enough to rebut the presumption of equal shares. Where cotenants are related or cohabit and intend to confer equal shares as a gift to the other cotenant despite unequal contribution the property must be divided in equal shares.

Here, the Dern children rebutted the general rule of equal shares through evidence of unequal contribution. Although Clifford and Mary were married and cohabited, Mary presented no evidence that Clifford clearly intended to confer more than her interest in the Whitefish account as a gift. Although the Whitefish account was used as a joint account and the District Court held, and this Court holds, that the Whitefish account was marital property, it does not necessarily follow that Clifford intended to confer on Mary any more than her contribution upon distribution of the account through the Trust. In fact, as marital property, the Whitefish account became part of the Marital Trust Estate which would be divided into Clifford’s interest and Mary’s interest upon the death of Clifford. The transfer of the Whitefish account to the Trust which became part of the Marital Trust Estate, indicates that Clifford did not intend to confer his excess contributions upon Mary as a gift, but rather intended his share of the Whitefish account to fund the Marital Trust Estate, which would eventually be divided between the surviving spouse’s share and the Family Bypass Trust.

Because the evidence does not clearly prove that Clifford intended to confer his excess contribution to the Whitefish account on Mary as a gift, the exception to the unequal contribution rule (relatives/spouses giving equal interest as gift), does not apply in this situation. Therefore the Dern children successfully rebutted the general rule of equal interests in a cotenancy and the District Court did not abuse its discretion in apportioning the Whitefish account according to contribution.

Before apportioning the Whitefish account between Clifford’s share and Mary’s share, appropriate deductions from the account may be necessary to satisfy the funeral expenses, costs, and attorney’s fees. After these deductions, if any, sixty percent of the remainder of the account should be apportioned to Clifford’s interest in the Marital Trust Estate and forty percent of the remainder should be apportioned to Mary’s interest in the Marital Trust Estate as held by the District Court.

Accordingly, we hold that the District Court’s conclusions regarding the specific monetary values of Clifford’s and Mary’s interests in the Norwest and Whitefish accounts in its supplemental findings of fact nos. 8 through 11 and supplemental conclusion of law No. 3 must be amended to reflect the deductions to be taken from the entire Marital Trust Estate for funeral expenses, costs, and attorney’s fees.

Issue 4

Did the District Court err in denying Mary Dern her costs and attorney’s fees?

Mary appeals the District Court’s failure to award her costs and attorney’s fees. Generally each party to a lawsuit pays its own costs and attorney’s fees. Absent a contractual agreement or statutory provision, the prevailing party in a civil action is not entitled to recover attorney’s fees. Thompkins v. Fuller (1983), 205 Mont. 168, 186, 667 P.2d 944, 954.

This is a case where contractual provisions govern the awarding of costs and fees. The Trust provides in Article 3 that the trustee may pay from the trust estate the “expenses of administration for this trust ....” Additionally, § 72-33-631, MCA, provides that “[a] trustee is entitled to the repayment out of the trust property for ... (1) expenditures that were properly incurred in the administration of the trust....”

The Dern children and the District Court rely on § 25-10-103, MCA, for the proposition that imposition of costs is discretionary with the court. However, § 25-10-103, MCA, applies only to situations in which costs are not otherwise provided for. In the present situation, costs are provided for in the Trust. Therefore, the District Court did not have discretion to apportion the costs between the parties and the Court’s order refusing costs is incorrect. (May 17, 1994 Finding of FactNo. 30 and Conclusion of Law No. 7; April 21,1995 Supplemental Finding of Fact No. 15 and Conclusion of Law No. 2.)

The costs of bringing this suit were a necessary expense of administering the Trust. Derril Dern, as co-trustee, refused to sign quitclaim deeds conveying the various properties left to the beneficiaries through the Trust Minutes. As a result of Derril’s intransigence, Mary initiated this litigation.

Furthermore, attorney’s fees should be included in the costs of administering the Trust. Section 72-33-631, MCA, allows for repayment of expenditures incurred by the trustee in the administration of the Trust. Section 72-33-631 was adopted in 1989 and patterned after California Probate Code § 15684 (1987). The California decisions interpreting this code provision indicate that reasonable attorney’s fees are considered a necessary and reasonable expense of administering a trust where they were incurred in connection with defending or maintaining the Trust. Metzenbaum v. Metzenbaum (Cal. 1953), 252 P.2d 31, 34; In re Spencer’s Estate (Cal. 1937), 63 P.2d 875, 876. Additionally, a trustee is entitled to reimbursement out of the trust estate. Bixby v. Hotchkis (Cal. 1943), 136 P.2d 597, 601. The California Court of Appeals recently held that it is proper to allow certain ordinary attorney's fees as administrative expenses of a trust, but not extraordinary fees associated with a professional trustee’s breach of fiduciary duties:

absent evidence of fraud or self-dealing, it seems reasonable to allow compensation for services relating to trust assets which were properly managed, denying compensation only for those assets which were administered negligently or in breach of trust.

Matter of Estate of Gump (Cal.Ct.App. 1991), 2 Cal.Rptr.2d 269, 279.

The District Court’s conclusion that Mary did not breach her fiduciary duties as trustee is supported by substantial evidence and will not be overturned. The attorney's fees incurred by Mary were necessary to fulfill the Trust purpose and as such constitute expenses of administration.

Including attorney’s fees as an expense of administering the Trust is further buttressed by this Court’s holding that “expenses” as used in § 72-12-206, MCA (1979), (determining fees and expenses of contested wills and probate), encompassed attorney’s fees as part of the expense of the proceedings to confirm the probate of a will. Matter of Estate of Weidner (1981), 192 Mont. 421, 425, 628 P.2d 285, 287.

Finally, this Court must ascertain from which part of the Trust to deduct the costs and attorney’s fees. Article 3 of the Trust indicates that the expenses of administration should be paid out of the “trust estate” without further specification. Because the Trust does not specify that these expenses should be deducted from the deceased spouse’s Marital Trust Estate or Separate Trust Estate as it does for the debts of the deceased spouse, the “trust estate” should be read to signify the entire Trust estate. Because the individual properties have been specifically bequeathed, the Marital Trust Estate is the only source of funding in the Trust estate. The attorney’s fees and costs should therefore be deducted from the entire Marital Trust Estate before it is divided into Clifford’s and Mary’s interests.

Accordingly, we remand to the District Court to redetermine the distribution of the Family Bypass Trust after the costs and attorney’s fees have been deducted from the total Marital Trust Estate. The funeral expenses must also be deducted from the entire Marital Trust Estate. After these deductions, the Marital Trust Estate should be divided into Mary’s interest and Clifford’s interest. Mary’s interest in the Marital Trust Estate will consist of one-half of the remaining interest in the Norwest accounts and forty percent of the remaining interest in the Whitefish account. Clifford’s interest in the Marital Trust Estate, consisting of one-half of the remaining interest in the Norwest accounts and sixty percent of the remaining interest in the Whitefish account will pass into the Family Bypass Trust. The Family Bypass Trust must be revalued according to the above considerations.

Conclusion

We affirm the District Court’s holding that Clifford’s interest in the Norwest accounts and the Whitefish account constituted “marital property” and was therefore unavailable to fund the $10,000 bequests to the Dern children.

We reverse the District Court’s holding that the fourth Trust Minute, naming Mary as the Trust beneficiary of the 120-acre farm, was a valid amendment to the Trust.

We reverse the District Court’s determination that Mary was not entitled to costs and attorney’s fees and we remand for a redetermination of the Family Bypass Trust after funeral expenses, costs and attorney’s fees have been deducted from the entire Marital Trust Estate in conformity with this opinion.

Affirmed in part, reversed in part and remanded for further proceedings consistent with this opinion.

CHIEF JUSTICE TURNAGE, JUSTICES GRAY and ERDMANN concur.

JUSTICE NELSON

specially concurs.

Given the facts of this case, it is appropriate to make a further observation. If nothing else, our decision here should serve as a warning of the pitfalls of the “canned,” “fill in the blanks,” “one size fits all” trust instruments that are increasingly being sold to unsuspecting members of the public, particularly senior citizens, by salesmen, many of whom have no professional qualifications whatsoever and some of whom are little better than scam artists.

In this case, the salesman, William W. Thompson, was not licensed to practice law; he had no legal training; and he was, in all probability, unlawfully practicing law in this State in violation of Title 37, Chapter 61 of the Montana Code. He was, quite properly, ridden out of the states of Washington and Idaho on a rail for deceitful, manipulative and unscrupulous conduct. Unfortunately, he got off the train in Montana.

According to the record, over a five-year period, Thompson sold approximately 200 living trusts in Idaho, Washington and Montana. The price of the living trust sold to the Derns was over $2,000. After Thompson sold the Derns their trust, his employer, American Family Living Trust, was dissolved.

The Trustee Instructions, among other things, tout the trust instrument sold to the Derns in the following glowing, folksy terms:

Deciding to avoid probate, the costly process of court supervised administration of your estate, and the long delays and unwanted publicity associated with probate, you have taken an important step not only for you but for your family as well.
Like anything else, an American Family Living Trust can appear to be very complicated. It is not, however.
Just remember, you are managing the assets of your trust. When you transfer your home or other assets to your trust, you control everything. You can even “revoke” your trust anytime, so you never risk your property by creating an American Family Living Trust.

Trustee Instructions, page 2.

While it might sell well, in actuality it is difficult to find one accurate statement in the foregoing. In truth, few areas of the law are more technical, complicated and prone to financial disaster than estate planning and trusts, nor more demanding of the sort of individually tailored advice and assistance that can best be obtained from a competent attorney and tax professional. This case, unfortunately, proves that point.

CHIEF JUSTICE TURNAGE and JUSTICES GRAY, ERDMANN and LEAPHART concur in the foregoing special concurrence.

JUSTICE LEAPHART,

dissenting.

I dissent from the conclusion reached in Issue 2 regarding the validity of the bequest of the family farm via the fourth “Trust Minute.” I disagree that we should allow the narrow instructional language found only in the Trust Minutes to control the method of amendment of the Trust and defeat the settlors’ intent where the amendment provisions throughout the Trust are ambiguous.

Article 2 of the Trust provides for amendment to the Trust through the Trust Minutes. The Trust Minutes, as noted in the “Trust Summary,” are an informal means of amending the Trust and direct the settlors to “simply include in the minutes” the settlors’ desires so “successor trustee can give effect. ...” The instructions in the Trust Minutes indicate that the Minutes should be signed by both settlors.

On the other hand, Article 2 of The Trust provides:

Clifford Dern and Mary R. Dern acting together may at any time during their joint lives amend any of the terms of this trust by a written document delivered to the trustee or including such amendment in the Minutes of Trust.

(Emphasis added.)

While acknowledging that the Minute instructions employ narrower language than the amendment directions in the Trust document itself, the Trust must be construed as a whole to give effect to the settlors’ intent. When construction questions cannot be resolved by reference to a clause alone, the court may examine the entire trust instrument to determine the creator’s intent and purposes, and in some cases apply statutory or court rules of construction. Bogert, Trusts and Trustees § 182 (2d ed. 1979). Although statutory rules exist for the proposition that where general and particular provisions of an instrument are inconsistent, a particular intent will control, § 1-4-103, MCA, the conflicting provisions in this Trust are not inconsistent, but merely ambiguous. In interpreting ambiguous terms of a contract to determine the intent of the parties, particular clauses are subordinate to its general intent. Section 28-3-307, MCA. Therefore, the “acting together” language controls the method of amendment.

From the handwriting on the Trust document and the Minutes it is evident that Clifford and Mary were acting together when they amended the Trust via the Minutes. On page 4 of the Trust, Article 3, the paragraph allocating four parcels of land to Clifford’s children, including two 160-acre wooded parcels, one-half of the 360-acre parcel of timber land harvested by Clifford and his son, and the 120-acre farm at issue, is crossed out with an “X.” The marginalia states, “See Minutes” and both Clifford’s and Mary’s initials appear in the margin.

The first Trust Minute gives Mary’s property to her two children. It is signed by Mary and dated November 14,1991. The following two Minutes give each of Clifford’s children a separate parcel of property. These Minutes are signed by Clifford and dated November 14, 1991. The last Minute gives the 120-acre farm, which is in dispute, to Mary. It is signed by Clifford Dern and dated November 14,1991. All of the Minutes were signed by either Mary or Clifford Dern on the same day. The marginalia in Article 3 of the Trust is dated November 15,1991, and initialed by both Mary and Clifford Dern. These facts alone indicate that Clifford and Mary were acting together when they amended the Trust.

Because the instructions in the Trust Minutes (requiring both settlors’ signatures) differ from the language in Article 2 of the Trust (requiring that the settlors “act together”), there is an ambiguity within the Trust document as to how the Trust may be amended. Therefore, extrinsic evidence may be examined to determine the intent of the parties to the Trust. Ellingson Agency, Inc. v. Baltrusch (1987), 228 Mont. 360, 365, 742 P.2d 1009, 1012.

Thompson, who sold the Trust to the Derns, was asked to come to the Dern Farm for the purpose of making the amendments to the Trust. He instructed the Derns to make the amendments via the Minutes and assisted Clifford Dern in writing out the property descriptions in the Minutes.

The Derns signed the Minutes one after the other in each other’s presence and in the presence of and upon the instruction of their trust advisor, Thompson. The Derns deleted the original allocation of properties in the Trust document the next day in Thompson’s presence. Both Clifford and Mary initialed and dated the deletion and the marginalia which read “See Minutes.” The District Court was correct in holding that the Trust could be modified by the settlors acting together through the use of the Minutes as called for in Article 2 of the Trust. The above facts indicate that the two settlors were, in fact, “acting together” when they amended the Trust via the Minutes.

In conclusion, I find it extremely curious that the Court turns a blind eye to the fact that, although all four Trust Minutes were signed by only one settlor, the first three minutes were honored. Nevertheless, this Court invalidates the fourth minute for the reason that it does not contain both signatures. Apparently the Court reads the Trust as requiring that every fourth minute be signed by both settlors.

I would affirm the District Court’s conclusion that the fourth Trust Minute was validly executed.

JUSTICES HUNT and TRIEWEILER join in the foregoing dissent.


source: Caselaw Access Project

author: JUSTICE GRAY

license: Public Domain

text:
    STATE OF MONTANA, ex rel. STATE COMPENSATION MUTUAL INSURANCE FUND, Plaintiff and Respondent/Cross-Appellant, v. GEORGE BERG, d/b/a BERG LUMBER CO., and BERG LUMBER, INC., Defendants and Appellants/Cross-Respondents.
    No. 95-389.
    Submitted on Briefs July 18, 1996.
    Rehearing Denied December 12, 1996.
    Decided November 14, 1996.
    53 St.Rep. 1098.
    279 Mont. 161.
    927 P.2d 975.

      For Appellants: Robert J. Emmons; Emmons & Sullivan, Great Falls.
    For Respondent: Laurence A. Hubbard; State Compensation Mutual Insurance Fund, Helena; Robert James; James, Gray & McCafferty, Great Falls.
   JUSTICE GRAY

delivered the Opinion of the Court.

George Berg, d/b/a Berg Lumber Co. and Berg Lumber, Inc. (Berg) appeals from the denial by the Tenth Judicial District Court, Fergus County, of his motions for a new trial and to vacate the judgment and enter judgment in his favor. The State of Montana, ex rel. State Compensation Mutual Insurance Fund (State Fund), cross-appeals from the judgment entered by the District Court and, in particular, from its order denying the State Fund’s motion for a directed verdict. We affirm on the appeal, reverse on the cross-appeal and remand.

We restate the issues on appeal and cross-appeal as follows:

1. Did the District Court abuse its discretion in denying Berg’s motion for a new trial which was based on juror misconduct?

2. Did the District Court abuse its discretion in denying Berg’s motion for a new trial which was based on failure to instruct the jury on the definition of “misrepresent?”

3. Did the District Court abuse its discretion in denying Berg’s motion to vacate the judgment and enter judgment in his favor which was based on the State Fund’s failure to plead constructive fraud with sufficient particularity?

4. Did the District Court abuse its discretion in denying Berg’s motion to vacate the judgment and enter judgment in his favor which was based on a statute of limitations bar to the constructive fraud claim?

5. Did the District Court err in denying the State Fund’s motion for a directed verdict which was based on the existence of a disputable presumption of employee status?

FACTUAL AND PROCEDURAL BACKGROUND

Berg owns and operates a lumberyard, sawmill and planing operation in Lewistown, Montana. Montana law requires him to provide workers’ compensation insurance and unemployment insurance for his employees. Berg’s workers’ compensation insurance through the State Fund authorized the State Fund to examine and audit Berg’s payroll records, general ledger, disbursements, vouchers, contracts, tax reports and all other books, documents and records at any reasonable time.

In February of 1989, the Unemployment Insurance Division of the Montana Department of Labor and Industry (Department) requested an audit of Berg’s operations as a result of an unemployment insurance benefits claim filed by Tim Murnion (Murnion). Murnion claimed to have been employed by Berg, but no wage credits based on employment by Berg were on file with the Unemployment Insurance Division. Mike Knecht (Knecht), a Department field representative, was assigned to conduct an unemployment insurance audit of Berg’s operations for the January 1, 1987, through December 31, 1988, period and a workers’ compensation audit of those operations for the July 1, 1987, through September 30, 1988, period. The workers’ compensation audit period was subsequently extended to December 31, 1988. Between the beginning of Knecht’s audit of Berg’s operations on February 22, 1989, and December of 1990, when he conducted a physical inspection of Berg’s operations, Knecht visited the sawmill six or seven times.

Based on the results of Knecht’s audit, the State Fund sued Berg in Lewis and Clark County on January 17,1992. It alleged that Berg did not properly remit workers’ compensation insurance premiums in that he (1) failed to make payments for individuals improperly treated as independent contractors rather than employees; (2) under-reported employees’ wages; and (3) misclassified employees’ wages. Berg moved for a change of venue to Fergus County and the motion was granted. In March of 1993, the State Fund moved to amend its complaint to add actual and constructive fraud claims and the District Court granted the motion over Berg’s objections. Berg answered the amended complaint by generally denying the State Fund’s allegations and asserting the statute of limitations and estoppel as affirmative defenses. The parties conducted discovery and filed numerous pretrial motions. The District Court ruled on the motions and entered a pretrial order prepared by trial counsel for both parties.

After several trial dates were scheduled and vacated, a jury trial began on June 27, 1994, in Lewistown, Montana. The State Fund moved for a mistrial and change of venue, contending that it could not get a fair trial in Fergus County. The District Court declared a mistrial, but denied the State Fund’s motion for change of venue.

The second trial began on June 6, 1995. At the conclusion of the State Fund’s case-in-chief, the District Court granted its motion for a directed verdict on Berg’s liability for workers’ compensation premiums for the first quarter of 1991 in the amount of $13,333.49. At the end of the trial, the State Fund moved for a directed verdict on the employee status of certain individuals Berg claimed were independent contractors. The State Fund argued that Berg had presented insufficient evidence to rebut the presumption of employee status for the question to go to the jury. The District Court denied the motion.

The jury ultimately returned a special verdict finding that Berg committed constructive fraud in dealing with the State Fund and misrepresented payroll, employee status and employee duties by misclassifying his employees. The jury awarded $305,857.46 in damages to the State Fund. The District Court added the $13,333.49 directed verdict amount to the jury’s award and entered judgment for the State Fund for $319,190.95.

Berg obtained new counsel and moved for a new trial and to vacate the judgment and enter judgment in his favor. He premised the new trial motion on alleged juror misconduct and instructional error. His motion to vacate the judgment and enter judgment in his favor was based on the State Fund’s alleged failure to plead constructive fraud with sufficient particularity and a statute of limitations bar to the constructive fraud claim. The District Court denied Berg’s motions.

Berg appeals from the denial of his postjudgment motions and the State Fund cross-appeals from the District Court’s denial of its motion for a directed verdict. Additional facts are provided below as necessary for our resolution of the issues before us.

DISCUSSION

1. Did the District Court abuse its discretion in denying Berg’s motion for a new trial which was based on juror misconduct?

Berg contended in his new trial motion that juror misconduct by juror James Carroll (Carroll) constituted irregularity in the proceedings of the jury. He supported his motion with an affidavit from juror Robert Flinders (Flinders). According to Flinders, Carroll said to him, on several occasions during the trial, “That’s it; [t]hat’s all I need to hear; [i]t’s all over.” Flinders also stated that Carroll pointed to another juror during several recesses and said, “That’s one we’ll have to convince.” Flinders either ignored Carroll’s statements or told Carroll to be quiet.

In denying Berg’s new trial motion, the District Court concluded that Carroll’s conduct was not an external influence on the jury but was, if anything, an internal influence for which a juror affidavit could not be used to impeach the verdict. The court determined, therefore, that Flinders’ description of Carroll’s conduct did not provide a basis on which it could grant a new trial.

We review a district court’s denial of a motion for a new trial to determine whether the district court abused its discretion. State v. Kelman (1996), 276 Mont. 253, 260, 915 P.2d 854, 859; State v. Brogan (1995), 272 Mont. 156, 160, 900 P.2d 284, 286. Whether certain conduct is an internal or external influence on the jury is a question of law, however. See Geiger v. Sherrodd, Inc. (1993), 262 Mont. 505, 510, 866 P.2d 1106, 1109. We review a district court’s conclusions of law to determine whether they are correct. Topco, Inc. v. State Dept. of Highways (1996), 275 Mont. 352, 357, 912 P.2d 805, 808.

The grounds on which a new trial may be granted are statutorily defined in Montana. Section 25-11-102, MCA, provides in relevant part:

The former verdict or other decision may be vacated and a new trial granted on the application of the party aggrieved for any of the following causes materially affecting the substantial rights of such party:
(1) irregularity in the proceedings of the court, jury, or adverse party or any order of the court or abuse of discretion by which either party was prevented from having a fair trial;
(2) misconduct of the jury. Whenever any one or more of the jurors have been induced to assent to any general or special verdict or to a finding on any question submitted to them by the court by a resort to the determination of chance, such misconduct may be proved by the affidavit of any one of the jurors.

Motions for a new trial based on irregularity in the proceedings of the jury under § 25-11-102(1), MCA, may be made “on affidavits or on the minutes of the court;” new trial motions based on jury misconduct under § 25-11-102(2), MCA, must be made “only on affidavits.” Section 25-11-104, MCA.

At the outset, we note the District Court’s observation — in its order denying Berg’s motion for a new trial based on Flinders’ affidavit— that it was difficult to determine whether Berg was proceeding under subsection (1) or (2) of § 25-11-102, MCA. It is no more apparent to us on appeal. Therefore, we will address Berg’s reliance on the Flinders affidavit under both subsections.

Section 25-11-102(1), MCA

Berg contends that Flinders’ affidavit relating the “prejudgment remarks” Carroll made to him indicates Carroll’s disregard of the District Court’s daily admonitions to the jury not to discuss the case among themselves. According to Berg, that conduct constitutes an irregularity in the jury proceedings which prevented him from having a fair trial and entitles him to a new trial under § 25-11-102(1), MCA.

As a general rule, the use of juror affidavits is confined exclusively to cases alleging misconduct of the jury under § 25-11-102(2), MCA. Rieger v. Coldwell (1992), 254 Mont. 507, 512, 839 P.2d 1257, 1260 (citing Rasmussen v. Sibert (1969), 153 Mont. 286, 293, 456 P.2d 835, 839). In Rasmussen, we held:

[J]uror affidavits are not permissible in support of a motion for new trial under subd. 1 of section 93-5603 [now § 25-11-102, MCA]; their use is confined exclusively to cases of misconduct of the jury under subd. 2 of that statute. ...
We base this holding, in part, on statutory language. Section 93-5603, R.C.M. 1947 [now § 25-11-102, MCA], sets forth the grounds on which a new trial may be granted. Only on the ground mentioned in subd. 2, i.e. juror misconduct, are juror affidavits authorized as proof. The following statute, section 93-5604, R.C.M. 1947 [now § 25-11-104, MCA], provides that affidavits may be used in support of a motion for new trial under subd. 1 and that they must be used under subd. 2 and three other subdivisions. It is clear to us that the affidavits referred to therein, with the sole exception of juror affidavits specifically authorized under subd. 2 of section 93-5603 [now § 25-11-102, MCA], are affidavits of counsel, potential witnesses on retrial, court reporters, and others with knowledge of the facts on which the grounds for a new trial are based. ...

Rasmussen, 456 P.2d at 839 (emphasis added).

Berg contends, however, that Ahmann v. American Fed. Sav. & Loan Ass’n (1988), 235 Mont. 184, 766 P.2d 853 (overruled on other grounds), allows consideration of the Flinders affidavit in support of his § 25-11-102(1), MCA, new trial motion. In Ahmann, the alleged irregularity in the proceedings did not involve alleged juror misconduct; rather it concerned conduct of a bailiff in a conversation with one of the jurors. Ahmann, 766 P.2d at 856. We noted our Rasmussen holding that affidavits of counsel, court personnel and potential witnesses on retrial are permissible to support a new trial motion under § 25-11-102(1), MCA, but affidavits of jurors are not .Ahmann, 766 P.2d at 856-57. We concluded, however, that, where the only two people with personal knowledge of the alleged irregularity are a juror and the individual who committed the alleged infraction, juror affidavits would be admissible under § 25-11-102(1), MCA; under such facts, it would be irrational to permit the use of the bailiff’s affidavit, but not the juror’s. Ahmann, 766 P.2d at 857. We also observed that the bailiff’s conduct constituted an outside influence on the jury for which a juror affidavit properly could be considered pursuant to Rule 606(b), M.R.Evid., and warned that only the facts regarding the alleged irregularity, and not any allegations relating to the effect of such an irregularity on the jurors’ thought processes, were admissible even in a situation like that before us in Ahmann. Ahmann, 766 P.2d at 857.

Ahmann is distinguishable from the situation presently before us. The irregularity asserted by Berg in this case involves allegedly improper communications from one juror to another. It does not involve conduct or communications between a nonjuror and a juror. Therefore, the limited and carefully drawn Ahmann exception to the Rasmussen prohibition against use of a juror affidavit in support of a § 25-11-102(1), MCA, motion for a new trial is not applicable here.

We conclude that the Flinders affidavit could not be considered in conjunction with Berg’s motion for a new trial under § 25-11-102(1), MCA.

Section 25-11-102(2), MCA

Berg’s motion for a new trial also was premised on his contention that Carroll’s remarks constituted juror misconduct under § 25-11-102(2), MCA. In denying Berg’s motion, the District Court noted the general prohibition against using juror affidavits to impeach the verdict contained in Rule 606(b), M.R.Evid., and determined that the Flinders affidavit did not fall within the exceptions to that general prohibition under which it could consider the affidavit. On appeal, Berg claims that the misconduct set forth in Flinders’ affidavit was an external influence on the jury and, therefore, that Rule 606(b), M.R.Evid., permits consideration of the affidavit.

“[A] juror may not testify as to ... the effect of anything upon that or any other juror’s mind or emotions as influencing the juror to assent or dissent from the verdict or indictment or concerning the juror’s mental processes in connection therewith.” Rule 606(b), M.R.Evid. Insofar as is relevant to Berg’s argument here, however, a juror may testify about what occurred during jury deliberations when the information pertains to whether extraneous prejudicial information was improperly brought to the jury’s attention or whether any outside influence was brought to bear on any juror. Rule 606(b), M.R.Evid.; Kelman, 915 P.2d at 859; Brogan, 900 P.2d at 287. Thus, while juror affidavits may not be used to impeach a verdict based on internal influences on the jury, such as a mistake of evidence or misapprehension of the law, they can provide the basis for overturning a judgment where external prejudicial information is brought to the jury’s attention or external influence is exerted on the jury. Kelman, 915 P.2d at 860 (citing Brogan, 900 P.2d at 287).

We must determine, therefore, whether the conduct of juror Carroll set forth in Flinders’ affidavit was an external influence on the jury so as to permit consideration of the Flinders affidavit. Examples of external prejudicial information brought to the jury’s attention or external influence exerted on the jury include a juror’s telephone call obtaining information with regard to previous litigation by the plaintiff, visiting the scene of an accident, or bringing a newspaper article about the trial into the jury room for the jurors to see. Kelman, 915 P.2d at 860 (citations omitted). Juror Carroll’s remarks to Flinders are not similar in any way to the clearly external matters described in Kelman. Indeed, those remarks by one juror to another contain no external information and, because they relate solely to juror Carroll’s thoughts about the evidence presented and another juror, they do not constitute an external influence on the jury. We conclude, therefore, that the Flinders affidavit describing juror Carroll’s statements did not fall within an exception to the general prohibition against use of juror affidavits to impeach a verdict contained in Rule 606(b), M.R.Evid.

Berg also contends that § 25-11-102, MCA, requires a new trial in cases where the substantial rights of a party have been affected. We need not address this contention, however, given our conclusion above that Carroll’s conduct was not an external influence and, therefore, that the jury verdict cannot be impeached via Flinders’ affidavit.

Finally, Berg argues that the conduct of juror Carroll reflected in Flinders’ affidavit constituted a prejudgment of the case which violated both the statutory proscription contained in § 25-7-402, MCA, and the District Court’s daily admonitions thereunder that discussions between jurors could occur only at the conclusion of the case and in the presence of all of the jurors. Recognizing that we have not previously addressed juror misconduct of this type, Berg urges us to follow California’s lead on this issue and conclude that Carroll’s conduct prejudiced his constitutional right to a fair and impartial jury so as to require a new trial. Berg relies primarily on In re Hitchings (Cal. 1993), 860 P.2d 466; Andrews v. County of Orange (Cal.Ct.App. 1982), 182 Cal. Rptr. 176; and Deward v. Clough (Cal.Ct.App. 1966), 54 Cal. Rptr. 68. Andrews is the most analogous factually to the case presently before us.

In Andrews, juror affidavits were submitted in support of a motion for a new trial based on juror misconduct. Andrews, 182 Cal. Rptr. at 180. Among the information disclosed in the juror affidavits was a possible prejudgment of the case by one juror in contravention of the statutorily-required admonition by the trial court. Andrews, 182 Cal. Rptr. at 183. As a necessary prerequisite to determining whether the plaintiffs had been deprived of a fair trial, the California court reviewed applicable California law regarding the use of juror affidavits to impeach a verdict. Under Cal. Evid. Code § 1150, “any otherwise admissible evidence” could be submitted to impeach a verdict based on “statements made, or conduct, conditions, or events occurring, either within or without the jury room, of such a character as is likely to have influenced the verdict improperly.” Andrews, 182 Cal. Rptr. at 180 n.4. The only limitation on evidence admissible to impeach a verdict under California law is that no evidence may be submitted regarding the “effect of such statement, conduct, condition, or event upon a juror either in influencing him to assent to or dissent from the verdict or concerning the mental processes by which it was determined.” Andrews, 182 Cal. Rptr. at 180 n.4. Having determined that the juror affidavits could be used to impeach the verdict, the court concluded that a juror had prejudged the case and the plaintiffs had not received a fair trial. Andrews, 182 Cal. Rptr. at 184.

Andrews clarifies that California law regarding the use of juror affidavits differs significantly from Montana law. Under California law, juror affidavits generally are admissible to impeach a verdict regarding obj ective conduct or events either in or out of the jury room which may have influenced the verdict improperly; the only limitation is that an affidavit cannot be used to establish the effect of such conduct or events on a juror’s decision regarding the verdict or on the jury’s mental processes in reaching the verdict. In Montana, on the other hand, juror affidavits generally cannot be used to impeach a verdict regarding either matters occurring dinring the jury’s deliberations or the effect of conduct or events on a juror’s decision regarding the verdict or the mental processes by which the verdict was determined. Rule 606(b), M.R.Evid. The only exception to the general prohibition is narrowly drawn and, as we have concluded above, inapplicable here. Thus, while Andrews is factually similar to the case presently before us, the significant differences between California law and Montana law regarding the use of juror affidavits preclude its application here.

We conclude that the District Court did not abuse its discretion in denying Berg’s motion for a new trial under § 25-11-102, MCA.

2. Did the District Court abuse its discretion in denying Berg’s motion for a new trial which was based on failure to instruct the jury on the definition of “misrepresent?”

Question No. 2 on the special verdict form asked the jury whether Berg misrepresented payroll, employee status and employee duties by misclassifying his workers to the State Fund. The jury responded in the affirmative. Berg moved for a new trial based on the District Court’s failure to instruct the jury on the definition of the word “misrepresent,” maintaining that the District Court and all trial counsel, including his own, were at fault in this regard. The District Court denied Berg’s motion. We review a district court’s denial of a motion for a new trial to determine whether the district court abused its discretion. Kelman, 915 P.2d at 859; Brogan, 900 P.2d at 286.

We note, at the outset, that Berg did not offer an instruction defming the word “misrepresent.” Rule 51, M.R.Civ.P, provides that “[n]o party may assign as error the failure to instruct on any point of law unless that party offers an instruction thereon.” Where no instruction was offered by the party asserting a trial court’s failure to instruct, the party is precluded from assigning error in that regard. Werre v. David (1996), 275 Mont. 376, 394, 913 P.2d 625, 636; State v. Courchene (1992), 256 Mont. 381, 388, 847 P.2d 271, 275.

Berg urges that, notwithstanding his failure to offer an appropriate instruction, the “plain error” doctrine applies. Under very limited circumstances, the plain error doctrine permits review of errors not objected to at trial which result in substantial injustice by denying a party a fair trial. Geiger, 866 P.2d at 1108 (citing Rule 103(d), M.R.Evid.; Halldorson v. Halldorson (1977), 175 Mont. 170, 573 P.2d 169); Guertin v. Moody’s Market, Inc. (1994), 265 Mont. 61, 67, 874 P.2d 710, 714. However, “ ‘[p]lain error’ generally involves an act or omission of a more serious nature than ‘reversible error,’ and only on rare occasion is the former doctrine invoked in civil cases.” Geiger, 866 P.2d at 1108 (quoting Reno v. Erickstein (1984), 209 Mont. 36, 42, 679 P.2d 1204, 1207-08).

Berg relies on State Bank of Townsend v. Maryann’s, Inc. (1983), 204 Mont. 21, 664 P.2d 295, in contending that the District Court’s failure to instruct the jury on the definition of the word “misrepresent” affected his right to a fair trial. His reliance on State Bank of Townsend is misplaced.

In State Bank of Townsend, the trial court had prepared an extensive pretrial order which included agreed facts and both parties’ contentions. State Bank of Townsend, 664 P.2d at 298. It appeared from the jury instructions that the theory of the defendants’ case had changed during the course of the trial, resulting in confusion on the part of both the attorneys and the trial court regarding the law of the case. State Bank of Townsend, 664 P.2d at 298. As a result, contradictory and confusing instructions were given to the jury and we were unable to determine what the jury had been instructed to do or what the jury had done. State Bank of Townsend, 664 P.2d at 298-99. Despite the absence of adequate objections to the instructions, we applied the plain error doctrine because the error affected the substantial right of both parties to instructions which correctly set forth a legal basis for assessing damages, as well as an understandable method of computing the amount of such damages. State Bank of Townsend, 664 P.2d at 300.

Here, there was no change in legal theory over the course of trial and no resulting contradictory and confusing jury instructions. Moreover, both parties had a significant amount of time to review proposed jury instructions and submit additional instructions as needed. Trial counsel simply failed to propose an instruction defining “misrepresent” in the ordinary course of events.

In addition, Berg helped draft the special verdict form containing the word “misrepresent” and did not object to it. A district court will not be put in error for a ruling or procedure in which the appellant acquiesced or participated, or to which the appellant made no objection. In re Pedersen (1993), 261 Mont. 284, 287, 862 P.2d 411, 413.

We decline to apply the plain error doctrine to the case presently before us. We conclude that the District Court did not abuse its discretion in denying Berg’s new trial motion which was based on instructional error.

3. Did the District Court abuse its discretion in denying Berg’s motion to vacate the judgment and enter judgment in his favor which was based on the State Fund’s failure to plead constructive fraud with sufficient particularity?

In his motion to vacate the judgment, Berg argued that the State Fund failed to sufficiently plead constructive fraud in its amended complaint. The District Court denied his motion and determined that, when the amended complaint was filed, Berg was put on notice regarding the allegations of constructive fraud and that he was not prejudiced due to a lack of actual notice or understanding of the allegations regarding constructive fraud. The District Court concluded that the pleadings were not so defective as to require that the judgment in favor of the State Fund be vacated.

We review a trial court’s discretionary rulings, such as trial administration issues, rulings on posttrial motions and similar rulings, to determine if the trial court abused its discretion. Van Loan v. Van Loan (1995), 271 Mont. 176, 178, 895 P.2d 614, 615 (citing Montana Rail Link v. Byard (1993), 260 Mont. 331, 337, 860 P.2d 121, 125).

Constructive fraud is statutorily defined in Montana as:

(1) any breach of duty which, without an actually fraudulent intent, gains an advantage to the person in fault or anyone claiming under him by misleading another to his prejudice or to the prejudice of anyone claiming under him; or
(2) any such act or omission as the law especially declares to be fraudulent, without respect to actual fraud.

Section 28-2-406, MCA. Pursuant to Rule 9(b), M.R.Civ.P., the circumstances constituting fraud must be stated with particularity. To establish a prima facie case of actual fraud, the party asserting the claim must present proof of nine elements: (1) a representation; (2) its falsity; (3) its materiality; (4) the speaker’s knowledge of its falsity or ignorance of its truth; (5) the speaker’s intent that it should be acted upon by the person and in the manner reasonably contemplated; (6) the hearer’s ignorance of its falsity; (7) the hearer’s reliance upon its truth; (8) the hearer’s right to rely upon it; and (9) the hearer’s consequent and proximate injury or damage. Davis v. Church of Jesus Christ (1993), 258 Mont. 286, 293, 852 P.2d 640, 644 (citing Lee v. Armstrong (1990), 244 Mont. 289, 293, 798 P.2d 84, 87). A claim of misrepresentation or constructive fraud requires similar proof, except that the plaintiff need not prove the fifth element relating to intent to deceive or dishonesty of purpose. Davis, 852 P.2d at 644 (citing Lee, 798 P.2d at 88).

The State Fund’s claim against Berg for constructive fraud was pleaded as follows:

COUNT VI
CONSTRUCTIVE FRAUD § 28-2-406, MCA
27. Plaintiff incorporates by reference Counts I through V, as though fully set forth herein, and by way of further allegation states as follows:
28. [Berg], without actual intent to commit fraud, did engage in a pattern of under-reporting and non-reporting of payroll, employee status and employee duties in an effort to reduce the proper premium payments which should have been made to Plaintiff, which did mislead the Plaintiff to its prejudice. Said conduct amounts to constructive fraud pursuant to § 28-2-406, MCA.
29. [Berg’s] conduct has caused damage to the Plaintiff in excess [sic] Four Hundred Two Thousand Three Hundred Twenty And 05/100 ($402,320.05) dollars, the exact amount to be proven at trial.

In previous Counts incorporated by reference in the constructive fraud claim, the State Fund alleged that Berg obtained a workers’ compensation insurance policy from the State Fund which required him to submit timely payroll reports, remit payment of premiums billed and allow the State Fund to audit his books and records to determine whether proper payroll reports and premiums were submitted and paid. It also alleged that an audit of Berg’s operations completed on or about July 19,1991, resulted in Berg being billed an additional $390,131.56 for premiums due for the periods audited. Finally, the State Fund alleged that Berg’s conduct constituted a pattern of misrepresentation.

Berg contends that the State Fund’s amended complaint is defective because not all elements of a constructive fraud claim are alleged with particularity. However, the appropriate interplay between the “particularity” requirement of Rule 9(b), M.R.Civ.P., and Montana’s “notice pleading” rule is well established.

“Of primary importance in understanding the particularity requirement of Rule 9(b) is the recognition that it does not render the general principles set forth in Rule 8 entirely inapplicable to pleadings alleging fraud; rather, the two rules must be read in conjunction with each other. It should be kept in mind that Rule 8(a) requests ‘a short and plain statement of the claim’ for relief!.] ... Thus, it is inappropriate to focus exclusively on the fact that Rule 9(b) requires particularity in pleading fraud. This is too narrow an approach and fails to take account of the general simplicity and flexibility contemplated by the rules!.] ...
The sufficiency of a particular pleading under Rule 9(b) depends upon a number of variables. For example, the degree of detail required often turns on the context in which the fraud is alleged to have occurred!.] ... Perhaps the most basic consideration in making a judgment as to the sufficiency of a pleading is the determination of how much detail is necessary to give adequate notice to an adverse party and enable him to prepare a responsive pleading.” Wright & Miller, Federal Practice and Procedure: Civil § 1298, p. 406-07, 410, 415 [.]

Irving v. School Dist. No. 1-1A (1991), 248 Mont. 460, 467, 813 P.2d 417, 421 (quoting Fraunhofer v. Price (1979), 182 Mont. 7, 14-15, 594 P.2d 324, 328-29).

We focus first on the “most basic consideration” in determining the sufficiency of a pleading under the so-called Fraunhofer rule; namely, whether the State Fund’s allegations of constructive fraud were sufficiently detailed to provide Berg with adequate notice of the claim so as to enable him to prepare a responsive pleading. See Irving, 813 P.2d at 421. The State Fund alleged a constructive fraud claim based on Berg’s pattern of misrepresentation via underreporting and nonreporting of payroll, employee status and employee duties under his workers’ compensation insurance policy with the State Fund. It further alleged that Berg’s conduct reflected an effort to reduce the proper premiums he owed the State Fund and that the State Fund was misled by his conduct vis-a-vis calculation of his workers’ compensation insurance premiums. Finally, the State Fund alleged that it was damaged by Berg’s conduct in the amount of underbilled workers’ compensation insurance premiums.

Berg did not contend in the District Court, and does not contend in this Court, that the allegations provided insufficient notice of the claim or were so lacking in detail as to negate his ability to prepare responsive pleadings. Indeed, in answering the claim, he denied the allegations of constructive fraud. Berg later filed a motion for summary judgment and supporting brief on a “time limitations” issue pursuant to the policy in which he argued, in part, that his reporting practices to the State Fund were not fraudulent. Berg again denied the allegations of actual and constructive fraud in the pretrial order and stated that he did not admit any fraud. Thus, Berg’s own conduct in responding to the claim and putting the State Fund to its proof belies any notion that its allegations of constructive fraud were insufficient to provide adequate notice and enable Berg to respond.

In addition, it is appropriate to consider the context in which the fraud is alleged to have occurred in determining how much detail is required to render a pleading sufficiently particular under Rule 9(b), M.R.Civ.R Irving, 813 P.2d at 421. Here, Berg and the State Fund had been involved in an insured-insurer relationship via Berg’s State Fund workers’ compensation insurance policy for some fifteen years at the time the original complaint was filed in this case. Berg’s policy required him to timely and accurately report employee wages so the State Fund could calculate his workers’ compensation insurance premiums. His own reports, together with the findings of the audit of his operations — of which he was aware and in which he was involved — formed the basis for the State Fund’s action against him for constructive fraud. In this context, requiring more detailed allegations of constructive fraud would serve no rational purpose and would exalt form over substance. Indeed, to do so would ignore the “general simplicity and flexibility [in pleading] contemplated by the rules ....” See Irving, 813 P.2d at 421.

Berg contends that C. Haydon Ltd. v. Montana Min. Properties (1993), 262 Mont. 321, 864 P.2d 1253, overrules the appropriate interplay between Rules 8(a) and 9(b), M.R.Civ.R, which we enunciated in Irving and Fraunhofer, leaving a strict requirement that all elements of a fraud claim be pled with particularity. In C. Haydon Ltd., we agreed with the district court’s determination that the defendant failed to meet the “particularity” requirements of Rule 9(b), M.R.Civ.P., because various of its fraud allegations were contradictory, based only “on information and belief’ of defendant’s counsel, or unsupported by facts. C. Haydon Ltd., 864 P.2d at 1256. In addition, we observed that the defendant’s allegations did not address seven of the nine fraud elements at all. C. Haydon Ltd., 864 P.2d at 1256. On that basis, we held that the defendant failed to allege fraud with sufficient particularity. We reaffirmed that Rules 9(b) and 8(a), M.R.Civ.R, must be harmonized, but noted that the statement of the claim cannot be so short or plain, under Rule 8(a), M.R.Civ.R, as to defeat the purposes of Rule 9(b), M.R.Civ.P. C. Haydon Ltd., 864 P.2d at 1256-57.

Here, the State Fund’s claim for constructive fraud did not contain either contradictory allegations or “information and belief’ allegations. While perhaps “inartful,” as the District Court stated, the State Fund’s constructive fraud allegations were not so short or so plain as to defeat the particularity requirement of Rule 9(b), M.R.Civ.R, or the “most basic consideration” underlying that requirement — namely, that the allegations provide adequate notice to enable Berg to prepare responsive pleadings. Moreover, as noted above, far from overruling the Fraunhofer rule that Rules 8(a) and 9(b), M.R.Civ.R, be harmonized, C. Haydon Ltd. clarified that neither Rule 8(a) nor Rule 9(b), M.R.Civ.R, can be applied exclusively when determining whether a pleading alleges fraud with sufficient particularity. See C. Haydon Ltd., 864 P.2d at 1256-57.

On this record, we conclude that the State Fund’s allegations of constructive fraud were sufficient to meet the requirements of Rules 8 and 9, M.R.Civ.R, and the Fraunhofer rule. We hold, therefore, that the District Court did not abuse its discretion in denying Berg’s motion to vacate the judgment which was based on the State Fund’s failure to plead constructive fraud with sufficient particularity.

4. Did the District Court abuse its discretion in denying Berg’s motion to vacate the judgment and enter judgment in his favor which was based on a statute of limitations bar to the constructive fraud claim?

Berg also based his motion to vacate the judgment on the two-year statute of limitations contained in § 27-2-203, MCA. He contended that the statute of limitations began to run on or about February 24, 1989, when Knecht began the audit of his operations, and had run prior to the State Fund filing its complaint in January of 1992. In denying the motion, the District Court rejected Berg’s statute of limitations argument both procedurally and substantively. In pertinent part, the District Court determined that the statute of limitations defense was not included in the pretrial order signed by the parties and that the pretrial order was not amended to include that defense prior to trial. We review discretionary trial court rulings to determine whether the court abused its discretion. Van Loan, 895 P.2d at 615.

A party must set forth affirmatively any statute of limitations defense in pleading to a preceding pleading. Rule 8(c), M.R.Civ.R A pretrial order entered pursuant to Rule 16(e), M.R.Civ.P., however, governs and controls the subsequent course of the lawsuit unless modified by a subsequent order. See Zimmerman v. Robertson (1993), 259 Mont. 105, 111, 854 P.2d 338, 342; Naftco Leasing Ltd. v. Finalco, Inc. (1992), 254 Mont. 89, 93, 835 P.2d 728, 731. The purpose of pretrial orders is to prevent surprise, simplify the issues and permit counsel to prepare their case for trial on the basis of the pretrial order. Zimmerman, 854 P.2d at 342 (citing Workman v. McIntyre Const. Co. (1980), 190 Mont. 5, 617 P.2d 1281). Failure to raise an issue or theory in the pretrial order may result in a waiver of that issue or theory. Nentwig v. United Industry, Inc. (1992), 256 Mont. 134, 138, 845 P.2d 99, 102.

Here, Berg pleaded the statute of limitations as an affirmative defense in answering the State Fund’s amended complaint, as required by Rule 8(c), M.R.Civ.P. Thereafter, and via a discovery response, he abandoned this theory. Specifically, in answer to an interrogatory requesting information about the statute of limitations defense he had pleaded, Berg stated that he “intend [ed] to abandon this defense.” Moreover, the pretrial order in this case, prepared by trial counsel for both parties and approved by them as to form and content, does not contain a statute of limitations defense by Berg. Given Berg’s interrogatory response, this is not surprising.

Pursuant to both its terms and Zimmerman, the pretrial order superseded the pleadings and governed the subsequent course of the action. We conclude that, because Berg did not include the statute of limitations defense in the pretrial order, he waived that defense. We hold, therefore, that the District Court did not abuse its discretion in denying Berg’s motion to vacate the judgment which was based on the statute of limitations.

5. Did the District Court err in denying the State Fund’s motion for a directed verdict which was based on the existence of a disputable presumption of employee status?

When Knecht began his audit of Berg’s operations in February of 1989, he questioned whether certain individuals were independent contractors, as Berg claimed, or employees. He investigated the status of the individuals and determined that all but twenty-three of them were independent contractors. Knecht asked Berg for additional information regarding the remaining twenty-three individuals. He told Berg that, if the required documentation was not provided, the individuals would be classified as Berg’s employees and additional workers’ compensation premiums would be owed for them. Berg did not provide any further information and Knecht classified the individuals as Berg’s employees. On that basis, the State Fund alleged that Berg owed additional workers’ compensation premiums based on the unreported wages of the twenty-three employees.

Before closing arguments at trial, the State Fund moved for a directed verdict on the issue of workers’ compensation premiums owed by Berg on the unreported wages of the individuals Knecht classified as employees but Berg contended were independent contractors. The State Fund argued that § 39-71-120(2), MCA, contains a presumption that an individual performing services for remuneration is an employee unless the requirements of § 39-71-120(1), MCA, for independent contractor status are met, and that Berg had not rebutted that presumption by presenting evidence that the twenty-three individuals were independent contractors. The District Court denied the State Fund’s motion. Although the District Court did not specifically address whether § 39-71-120(2), MCA, creates a presumption of employee status, it implicitly concluded that the statute did not contain such a presumption in denying the State Fund’s motion for a directed verdict. The District Court then allowed the jury to decide whether Berg owed premiums for the twenty-three individuals and the jury returned a verdict in Berg’s favor.

A directed verdict should be granted only when there is a complete absence of any evidence which would justify submitting an issue to a jury; all inferences which can be drawn from the evidence must be considered in a light most favorable to the opposing party. Werre, 913 P.2d at 630 (citing Pierce v. ALSC Architects, PS. (1995), 270 Mont. 97, 107, 890 P.2d 1254, 1260).

Under the law in effect during the time period covered by the workers’ compensation audit, an independent contractor was statutorily defined as “one 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 his contract and in fact; and
(b) is engaged in an independently established trade, occupation, profession, or business.

Section 39-71-120(1), MCA (1987). Pursuant to § 39-71-120(2), MCA (1987), “[a]n individual performing services for remuneration is considered to be an employee under this chapter unless the requirements of subsection (1) are met.” (Emphasis added.)

When the facts surrounding an individual’s arrangement with an employer are relatively undisputed, the question of whether the individual is an independent contractor or an employee is a question of law. Potter v. Department of Labor & Ind. (1993), 258 Mont. 476, 479, 853 P.2d 1207, 1209 (citation omitted); see also Northwest Pub. v. Department of Labor & Ind. (1993), 256 Mont. 360, 362, 846 P.2d 1030, 1031 (citation omitted). We review a district court’s conclusions of law to determine whether they are correct. Topco, Inc., 912 P.2d at 808.

The State Fund contends that the phrase “is considered to be” in § 39-71-120(2), MCA (1987), creates a statutory presumption that an individual providing services for another is an employee and not an independent contractor. Therefore, according to the State Fund, once sufficient facts are established to give rise to the presumption, the party asserting independent contractor status bears the burden of rebutting the presumption. Berg’s sole argument is that § 39-71-120(2), MCA (1987), does not create a disputable presumption of employee status because §§ 26-1-601 and 26-1-602, MCA, and Rule 301, M.R.Evid., contain an exhaustive and exclusive list of conclusive and disputable presumptions which does not include an employee status presumption pursuant to § 39-71-120(2), MCA (1987).

Rule 301, M.R.Evid., defines presumptions and generally addresses their classification and effect. All presumptions, other than conclusive presumptions, are disputable presumptions and may be controverted. Rule 301(b)(2), M.R.Evid. If a disputable presumption is not overcome by a preponderance of the evidence, the trier of fact must find the assumed fact in accordance with the presumption. Rule 301(b)(2), M.R.Evid.

Section 26-1-601, MCA, states that “[t]he following presumptions are conclusive” and then specifically lists three conclusive presumptions; subsection (4) provides that any other presumption which, by statute, is expressly made conclusive is a conclusive presumption. Thus, § 26-1-601, MCA, limits conclusive presumptions to those listed therein or expressly set forth in other statutes.

The language of § 26-1-602, MCA, which addresses disputable presumptions, is markedly different. It states that “[a]ll other presumptions are ‘disputable presumptions’ and may be controverted by other evidence.” Section 26-1-602, MCA. The statute then states “[t]he following are of that kind,” and provides a listing of thirty-eight disputable presumptions.

We have not previously addressed whether the list of disputable presumptions contained in § 26-1-602, MCA, is exhaustive. Certainly, the language of § 26-1-602, MCA, which provides that “[t]he following are of that kind [disputable presumptions]” does not indicate an intent that the list be exhaustive or exclusive. Moreover, while our Commission on Rules of Evidence provided a table of statutory conclusive presumptions, statutory disputable presumptions and common law disputable presumptions, the Compiler’s Comments clarify that the list of presumptions in that table “is not intended as an authority for whether or not any particular presumption exists, but only as a research guide to presumptions generally.” Part Compiler’s Comments, Title 26, chapter 1, part 6, Table D-Presumptions. The Comments further state that “[t]his list is intended only as an aid to Montana judges and lawyers, and the inclusion or exclusion from this table of any particular presumption should have no effect on a court’s treatment of that particular presumption.” Part Compiler’s Comments, Title 26, chapter 1, part 6, Table D-Presumptions. We conclude, therefore, that the absence of the § 39-71-120(2), MCA (1987), “is considered to be” language in the § 26-1-602, MCA, enumeration of disputable presumptions does not establish that the phrase at issue here is not a disputable presumption.

Moreover, in interpreting § 39-71-120(2), MCA (1987), we look first to the plain meaning of the words it contains. Werre, 913 P.2d at 631 (citing Clarke v. Massey (1995), 271 Mont. 412, 416, 897 P.2d 1085, 1088); Gulbrandson v. Carey (1995), 272 Mont. 494, 500, 901 P.2d 573, 577. Where the language is clear and unambiguous, the statute speaks for itself and we will not resort to other means of interpretation. Werre, 913 P.2d at 631 (citing Clarke, 897 P.2d at 1088). “In the search for plain meaning, ‘the language used must be reasonably and logically interpreted, giving words their usual and ordinary meaning.’ ” Werre, 913 P.2d at 631 (citations omitted).

“Consider” means to think about, regard or classify. Webster’s Third New International Dictionary 483 (1971). Therefore, an individual who performs services for another person may be thought about, regarded or classified as an employee unless the requirements for independent contractor status are met. A reasonable and logical interpretation of the phrase “is considered to be” leads us to conclude that this phrase in § 39-71-120(2), MCA (1987), creates a disputable presumption of employee status and the District Corut erred in concluding to the contrary.

In order for the State Fund to rely on the employee status presumption contained in § 39-71-120(2), MCA (1987), it necessarily must have established that the individuals it contended were employees had performed services for Berg for remuneration. See § 26-1-401, MCA. Berg does not dispute that the State Fund did so. Having satisfied this threshold requirement, the State Fund became entitled to the presumption that the twenty-three individuals were Berg’s employees. Section 39-71-120(2), MCA(1987). Thereafter, the burden shifted to Berg to rebut the presumption by presenting evidence establishing that the individuals were independent contractors pursuant to § 39-71-120(1), MCA (1987), and our cases thereunder. Section 26-1-602, MCA; Rule 301(b)(2), M.R.Evid.

As noted above, Berg’s sole contention in responding to the State Fund’s cross-appeal is that § 39-71-120(2), MCA (1987), does not constitute a disputable presumption of employee status and, therefore, that he bore no burden of establishing that the twenty-three individuals were independent contractors. We have concluded otherwise. Because Berg did not dispute the fact that the twenty-three individuals had performed services for him for remuneration and because he does not argue that he met his burden of establishing independent contractor status for the individuals in question, Rule 301(b)(2), M.R.Evid., and Potter required the District Court to direct a verdict as a matter of law that the twenty-three individuals were Berg’s employees in accordance with the presumption contained in § 39-71-120(2), MCA (1987). Therefore, we hold that the District Court erred in denying the State Fund’s motion for a directed verdict which was based on the existence of a disputable presumption of employee status.

Affirmed in part, reversed in part, and remanded for further proceedings consistent with this opinion.

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