text:
    IN THE MATTER OF THE PATERNITY OF M.J.S., CHARLES BRODZKI, Petitioner and Appellant, v. DEPARTMENT OF PUBLIC HEALTH AND HUMAN SERVICES, and ANNA M. SMITH, Defendants and Respondents.
    No. 98-038.
    Submitted on Briefs April 30, 1998.
    Decided June 9, 1998.
    1998 MT 144.
    55 St.Rep. 571.
    960 P.2d 308.
    289 Mont. 249.
    See C.J.S. Children Out-of-Wedlock § 72.

      For Appellant: Charles Brodzki, Pro Se, Bozeman.
    For Respondents: Lonnie J. Olson, Special Assistant Attorney General, Department of Public Health and Human Services, Child Support Enforcement Division, Helena.
   JUSTICE LEAPHART

delivered the Opinion of the Court.

¶1 Charles Brodzki (Charles), appearingpro se, appeals from the decision of the Eighteenth Judicial District Court, Gallatin County, affirming the decision of the Administrative Law Judge (ALJ) holding that Montana Child Support Enforcement Division (CSED) had jurisdiction to commence paternity proceedings, denying Charles’ requests for discovery and ordering Charles to submit to blood testing. Affirmed.

Background

¶2 Charles and Anna M. Smith (Anna) co-habitated in Florida in 1994 and 1995. CSED alleges that their live-in relationship lasted from August 1994 until sometime at the end of February 1995, at which time Anna moved out. Both Charles and Anna testified that they engaged in sexual relations during the time that they lived together. The ALJ found that the probable period of conception of M.J.S. was between February 13,1995 and March 26,1995. Anna testified that she had sex with Charles during that time. Charles testified, however, that the parties stopped having sexual relations around January 28, 1995.

¶3 This case commenced on March 29,1996, when CSED received an interstate transmittal, including a paternity affidavit of Anna, from the State of Rhode Island. The transmittal named Charles as the alleged father of M. J. S., a minor child. On May 14,1996, CSED issued a Notice of Parental Responsibility to Charles containing the Rhode Island transmittal and a second, Montana affidavit of paternity. Thereafter, Charles denied paternity and requested an administrative hearing.

¶4 At a pre-hearing conference, Charles requested discovery of his own automobile insurance records concerning a claim Anna had filed with his insurance company in Florida. Charles also requested Anna’s medical records from Rhode Island. The ALJ explained that she did not have jurisdiction outside Montana, but that Charles could request subpoenas and serve them on his insurer and Anna. Charles did not serve subpoenas in accordance with the rules of procedure. Thereafter, Charles filed a motion to reconsider his discovery requests. The ALJ denied the motion, determining that the information sought was not relevant to the limited issue which she has jurisdiction to determine — whether there is a reasonable probability that Charles engaged sexual intercourse with Anna during the probable period of conception.

¶5 The administrative hearing was held on December 10th and 16th. At the hearing, the ALJ, on her own motion, excluded the Montana paternity affidavit of Anna. The ALJ, however, allowed CSED to proceed with the paternity action based on Anna’s testimony at the hearing and the interstate transmittal which contained the Rhode Island affidavit of paternity. On December 13th, Charles moved to dismiss based on lack of subject matter jurisdiction for failure of CSED to have a paternity affidavit in compliance with § 40-5-232, MCA. The ALJ denied the motion on December 16th. On March 19,1997, the ALJ issued a Paternity Blood Test Decision and Order finding that there was a reasonable probability that Charles engaged in sexual intercourse with Anna dining the probable period of conception and allowing CSED to issue a subpoena ordering Charles to submit to paternity blood testing.

¶6 Charles moved to stay enforcement of the Paternity Blood Testing. The ALJ did not rule on Charles’ motion. However, on April 17,1997 Charles filed his Petition for Judicial Review of the ALJ’s Paternity Blood Testing Order to the District Court. At the District Court, Charles argued that he was denied discovery and that CSED lacked subject matter jurisdiction to proceed with the paternity action. Following briefing and oral argument, the District Court affirmed the ALJ’s decision. It is from the District Court’s order that Charles appeals. Charles presents two issues on appeal:

¶7 1) Did the ALJ abuse her discretion in denying Charles’ discovery requests?

¶8 2) Did CSED have subject matter jurisdiction pursuant to § 40-5-232, MCA?

Discussion

I

¶9 1) Did the ALJ abuse her discretion in denying Charles’ discovery requests?

¶10 An administrative hearing to establish paternity is a contested case and is subject to the provisions of the Montana Administrative Procedure Act of Title 2, Chapter 4, MCA. The agency’s rules of practice provide for discovery, but require that the parties have approval from the ALJ before conducting discovery. The parties must inform the ALJ at the prehearing conference of the proposed type of discovery and information which they seek to discover. At the prehearing conference, Charles requested his insurance records and Anna’s medical records. The ALJ explained that she did not have jurisdiction to obtain the out-of-state records, but that Charles could request them via subpoenas. A long discussion ensued between the ALJ and Charles regarding the relevancy of Charles’ discovery requests. The ALJ explained that she has limited jurisdiction to decide the issue of whether the parties engaged in sexual intercourse during the probable period of conception and that any evidence presented must be relevant to that issue. Although some confusion resulted from the discussion of subpoenas, the record reveals that Charles did not serve subpoenas on his insurance company and Anna in compliance with the rules. Furthermore, when Charles moved the ALJ to reconsider his discovery requests, the ALJ determined that the records were not relevant and denied his motion.

¶11 Charles argues that the administrative rules require that discovery be made available to the parties and that the rules should be construed liberally to allow such discovery. Charles further argues that he established the relevancy of his insurance records in his motion for reconsideration.

¶12 CSED argues that the entire purpose of the administrative hearing is for the ALJ to determine whether there is a reasonable probability that the alleged father engaged in sexual intercourse with the mother during the probable time of conception and that if the ALJ determines there is such a “reasonable probability” she may allow the agency to issue a subpoena requiring the alleged father to take a blood test. CSED further argues that the information sought by Charles is outside the scope of the hearing.

¶13 Section 40-5-233(b), MCA, provides that “[i]f the department determines after a review of a sworn statement that there are sufficient facts to establish a reasonable probability of paternity or nonpaternity as claimed by the requesting party, the department shall issue a subpoena ordering the alleged father ... to submit to blood testing.” Based on testimony from several witnesses as to when Anna moved out of Charles’ home, Anna’s Rhode Island affidavit of paternity, and her testimony at the hearing, the ALJ determined that there was a reasonable probability that the parties engaged in sexual relations during the relevant time period.

¶14 The ALJ explained that Charles was not entitled to Anna’s medical records for two reasons. First, the records are confidential and can only be obtained through a district court order or Anna’s consent. Second, the only medical information pertinent to the limited issue before the ALJ is the date of birth of the child. The ALJ determines a probable range of dates of conception by subtracting the normal period of gestation, 266 to 294 days, from the birthdate. Based on the date of birth of M.J.S., November, 26, 1995, the ALJ determined that the probable date of conception was between February 13,1995 and March 26,1995. The relevant medical information, the birth certificate and the paternity affidavit containing the date of birth, were provided to Charles. Therefore, we determine that the District Court did not abuse its discretion in affirming the decision of the ALJ denying Charles’ request for Anna’s medical records.

¶ 15 Moreover, we agree with the decision of the ALJ that the insurance records sought by Charles were not relevant to the question of whether the probability of sexual relations was reasonable. Rather, they dealt with whether Anna disclosed to the insurance company that Charles is the alleged father of M.J.S. We determine that the District Court did not abuse its discretion in affirming the decision of the ALJ denying Charles’ discovery requests.

II

¶16 2) Did CSED have subject matter jurisdiction pursuant to § 40-5-232, MCA?

¶17 Section 40-5-232(5), MCA, provides that

[t]he department shall commence proceedings to establish paternity by serving on an alleged father a notice of parental responsibility. The department may not serve the notice unless it has:
(a) a sworn statement claiming that the alleged father is the child’s natural father;
(b) evidence of the existence of a presumption of paternity under 40-6-105; or
(c) any other reasonable cause to believe that the alleged father is the child’s natural father.

Charles asserts that, because Anna’s Montana affidavit was excluded by the ALJ, CSED lacked subject matter jurisdiction pursuant to § 40-5-232, MCA. CSED, on the other hand, asserts that since other reasonable cause existed, the lack of Anna’s Montana affidavit did not deprive CSED of jurisdiction to bring the paternity action.

¶18 The ALJ excluded Anna’s Montana affidavit because it contained many defects and questions regarding its authenticity. However, the ALJ further determined that Anna’s Rhode Island affidavit of paternity and Anna’s testimony at the hearing were sufficient to allow the case to proceed. CSED argues that the ALJ properly relied on the Rhode Island affidavit and Anna’s testimony for two reasons. First, the statute does not require that the affidavit be a Montana affidavit and, second, CSED satisfied the “other reasonable cause to believe” alternative of § 40-5-232(5), MCA.

¶19 We agree with CSED that § 40-5-232(5), MCA, does not require that the statement of paternity be sworn to in Montana. Rather, we conclude that Anna’s Rhode Island affidavit of paternity, which alleges Charles is the father, satisfied the requirement of § 40-5-232, MCA, thus allowing the department to commence proceedings. Thus, we do not reach the issue of whether CSED satisfied the “other reasonable cause to believe” alternative. We conclude that the ALJ did not abuse her discretion in holding that CSED had jurisdiction to commence the paternity proceedings. We affirm.

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

      . We note that the District Court characterized its opinion as both affirming the decision of the ALJ, and dismissing the petition for judicial review. Upon review of the decision, we determine that the District Court affirmed the decision of the ALJ and improperly characterized its opinion as dismissing the petition.


source: Caselaw Access Project

author: JUSTICE GRAY

license: Public Domain

text:
    UNIFIED INDUSTRIES, INC., Plaintiff and Appellant, v. WALTER D. EASLEY, et al., Defendants and Respondents.
    No. 97-666.
    Submitted on Briefs February 18, 1998.
    Decided June 9, 1998.
    1998 MT 145.
    55 St.Rep. 574.
    961 P.2d 100.
    289 Mont. 255.

      See C.J.S. Appeal and Error § 619.
    For Appellant: John D. Greef, Attorney at Law, Hamilton.
    For Respondents: Jeffrey B. Hays; Recht, Hays & Hayes, Hamilton.
   JUSTICE GRAY

delivered the Opinion of the Court.

¶ 1 Unified Industries, Inc. (Unified) sued numerous defendants, under several legal theories, seeking the declaration of an easement across their property to property it owns and an injunction prohibiting them from obstructing its use of the easement. Defendants Arthur J. Frank, William J. Harris, Gloria E. Harris, Kent Olsen, Laura Olsen, Kevin J. Robinson, and Kathy A. Robinson (Specified Defendants) moved for summary judgment and the Twenty-First Judicial District Court, Ravalli County, granted the motion. Judgment was entered accordingly, Unified appeals, and we affirm.

¶2 We rephrase the issues raised on appeal as follows:

¶3 1. Did the District Court err in concluding that Unified had been transacting business in Montana without a certificate of authority from the Montana Secretary of State?

¶4 2. Did the District Court err in concluding that Unified was transacting business illegally?

¶5 3. Did the District Court err in concluding that Unified was equitably estopped from claiming a prescriptive easement based on use during the statutory five-year period?

BACKGROUND

¶6 Unified is a nonprofit Utah corporation organized in 1979. It has “members” rather than shareholders; its members are Apostolic United Brethren. Unified acquired certain properties in Montana in 1982, some of which had been owned by another nonprofit corporation which also had “members,” and subsequently allowed its members to build houses on the properties, as had the previous corporate owner. One of Unified’s properties had a deeded right of access over Bitterroot Ridge Road and another had a deeded right of access over both Bitterroot Ridge Road and Bourne Lane. Other properties acquired by Unified in the same area did not have deeded access via either of the roads, but Unified’s members residing on those properties used the roads to travel to Pinesdale for many years. In 1994, the defendants discovered that members who live on Unified’s properties without deeded access used Bitterroot Ridge Road and Bourne Lane to travel to Pinesdale and blocked both roads with locking cables.

¶7 In April of 1995, Unified obtained a certificate of authority to transact business in Montana from the Montana Secretary of State. It subsequently filed a complaint — and later an amended complaint — seeking a declaration that its members had established either a public or private prescriptive easement across Bitterroot Ridge Road and Bourne Lane, that the roads were public, or that the members had an easement by grant and requesting an injunction prohibiting obstruction of the members’ use of the easement. Several of the defendants filed confessions of judgment and others filed a combined answer and demand for jury trial.

¶8 Depositions were taken and, thereafter, the Specified Defendants moved for summary judgment. The District Court granted the motion concluding that, although Unified was not barred from maintaining the action for lack of a certificate of authority, it was equitably estopped from claiming a prescriptive easement because it had been illegally transacting business in Montana. The District Court also concluded that, with the exception of Unified’s deeded right of access to two parcels, the Specified Defendants were entitled to judgment as a matter of law on Unified’s other theories of access. Judgment was entered accordingly and Unified appeals from those portions of the District Court’s order on summary judgment which relate to its prescriptive easement claim.

STANDARD OF REVIEW

¶9 We review a district court’s ruling on summary judgment de novo, applying the same Rule 56(c), M.R.Civ.P, criteria applied by the district court. Montana Metal Buildings, Inc. v. Shapiro (1997), 283 Mont. 471, 474, 942 P.2d 694, 696 (citation omitted). The moving party must establish the absence of genuine issues of material fact and entitlement to judgment as a matter of law. Montana Metal Buildings, 283 Mont. at 474, 942 P.2d at 696 (citation omitted). If the moving party satisfies its burden, the party opposing summary judgment must present substantial and material evidence that raises a genuine issue of material fact. Montana Metal Buildings, 283 Mont. at 474, 942 P.2d at 696 (citation omitted). We review conclusions of law to determine whether the district court’s interpretation of the law is correct. Ash Grove Cement Co. v. Jefferson County (1997), 283 Mont. 486, 491-92, 943 P.2d 85, 89 (citation omitted).

DISCUSSION

¶10 1. Did the District Court err in concluding that Unified had been transacting business in Montana without a certificate of authority from the Montana Secretary of State?

¶11 Section 35-2-820(1), MCA, provides that a corporation may not transact business in Montana until it has obtained a certificate of authority from the secretary of state. Section 35-2-820(2), MCA, lists activities which do not constitute transacting business, including owning real or personal property that “does not produce income or is not used in the performance of a corporate function.” In their motion for summary judgment, the Specified Defendants argued that Unified had owned property that was used in performing a corporate function for a number of years prior to obtaining a certificate of authority and, therefore, Unified was transacting business illegally in Montana under § 35-2-820, MCA.

¶ 12 The District Court concluded that Unified’s acquisition of real property rights constituted the transacting of business in Montana under § 35-2-820(2), MCA, because one of Unified’s corporate functions — as stated in its amended Articles of Incorporation — was to act as a holding company for real estate. Unified argues on appeal that it was not transacting business and, therefore, the District Court’s conclusion was erroneous. The Specified Defendants respond that Unified conceded in the District Court that it was transacting business in Montana and, even if it did not concede the issue, Unified should not be permitted to raise this issue for the first time on appeal.

¶13 The record reflects that, in opposing summary judgment, Unified did not specifically argue that it was not transacting business in Montana. Instead, Unified argued that, while § 35-2-821(1), MCA, prohibits a foreign corporation transacting business in Montana from maintaining a court proceeding until it obtains a certificate of authority from the secretary of state, it had obtained a certificate of authority prior to instituting this action and was authorized to maintain this proceeding.

¶14 We conclude that Unified’s statement in the District Court that “[a] foreign corporation transacting business in this state may maintain a proceeding in any court of this state after obtaining a certificate of authority,” followed immediately by an affirmative statement that Unified had a certificate of authority, is an implicit concession that it was transacting business in Montana. Moreover, Unified did not respond to the Specified Defendants’ summary judgment argument that it was transacting business. In our view, this failure to respond also constitutes an implicit concession that it was, in fact, transacting business in Montana during the time period in which it acquired and held real property here. Thus, Unified did not argue in the District Court that it was not transacting business in Montana.

¶ 15 The general rule in Montana is that this Court will not address either an issue raised for the first time on appeal or a party’s change in legal theory. Day v. Payne (1996), 280 Mont. 273, 276, 929 P.2d 864, 866 (citation omitted). The basis for the general rule is that “it is fundamentally unfair to fault the trial court for failing to rule correctly on an issue it was never given the opportunity to consider.” Day, 280 Mont. at 276-77, 929 P.2d at 866 (citation omitted).

¶16 Unified argues in this regard that, even if it is arguingthatit was not transacting business for the first time on appeal, that issue falls within the exception to the general rule set forth in Jones v. Fireman’s Fund Insurance Company (Cal. Ct. App. 1969), 76 Cal.Rptr. 97, 99 (citations omitted). Under Jones, a court may address an issue raised for the first time on appeal “where the facts are not disputed and the issue merely raises a new question of law.” Jones, 76 Cal.Rptr. at 99 (citations omitted). Indeed, that exception to the general rule is “well recognized” in California. See Jones, 76 Cal.Rptr. at 99 (citations omitted).

¶17 Unfortunately for Unified, however, it is changing its theory on appeal in Montana, rather than in California, and we have not adopted the California exception. Moreover, we decline to do so here. This Court addresses only issues which are legal or equitable; we are not fact finders. Adopting the California exception would effectively swallow our general rule against addressing new issues or changes in legal theory on appeal. Furthermore, it is our view that the California exception is not fair to trial courts who ruled on the legal issues presented to them and who could then find themselves held in error on an issue or theory they had no opportunity to address.

¶ 18 Finally, Unified argues that the Specified Defendants raised the transacting business issue in the District Court in their brief in support of summary judgment and, therefore, the issue is not newly raised on appeal. While it is true that the Specified Defendants raised the issue, Unified’s argument misses the mark. The point is that Unified did not controvert the Specified Defendants’ contention that it was transacting business. Unified having failed to do so in the District Court, we will not allow it to raise the issue here for the first time. Therefore, we decline to address this issue further.

¶19 2. Did the District Court err in concluding that Unified was transacting business illegally?

¶20 The District Court concluded that, under § 35-2-820, MCA, Unified had been transacting business in Montana illegally prior to April 24,1995, when it obtained its certificate of authority. Unified argues that the District Court’s conclusion is incorrect as a matter of law under § 35-2-821(5), MCA. Unified did not raise this argument in opposing summary judgment, however, and as discussed above, we will not address an issue raised for the first time on appeal or a party’s change in theory. See Day, 280 Mont. at 276, 929 P.2d at 866 (citation omitted).

¶21 Unified contends that we should consider § 35-2-821(5), MCA, on appeal because it relied on § 35-2-821(1), MCA, in the District Court. According to Unified, relying on one subsection of the controlling statute in the District Court should be sufficient to preserve for appeal an issue under a different subsection. In this regard, it argues that, unlike the defendants in Farm Credit Bank of Spokane v. Hill (1993), 266 Mont. 258, 879 P.2d 1158, it presented the controlling statute to the District Court and, therefore, Farm Credit Bank is inapplicable.

¶22 In Farm Credit Bank, the Hills did not raise a certain federal statute as a basis for dismissal at the district court but, on appeal, argued that the district court should have sua sponte applied the statute. Farm Credit Bank, 266 Mont. at 262-63, 879 P.2d at 1160. We stated that “[w]hen a party argues for the application of a statute for the first time on appeal, the party raises a new set of questions that were not presented to the district court; and this Court will not find the district court to have erred on an issue that was ‘not presented to or ruled on by the lower court.’ ” Farm Credit Bank, 266 Mont. at 263, 879 P.2d at 1161 (quoting Hanley v. Department of Revenue (1983), 207 Mont. 302, 307, 673 P.2d 1257, 1259). As a result, we declined to address the Hills’ arguments regarding the statute. Farm Credit Bank, 266 Mont. at 263, 879 P.2d at 1161.

¶23 Unified’s argument that Farm Credit Bank is inapplicable here is without merit. As was the case in Farm Credit Bank, Unified’s arguments to the District Court under § 35-2-821(1), MCA, involved a legal issue entirely distinct from the issue it presents to this Court under § 35-2-821(5), MCA. Section 35-2-821(1), MCA, provides that “[a] foreign corporation transacting business in this state without a certificate of authority may not maintain a proceeding in any court in this state until it obtains a certificate of authority.” Unified argued below that, because it had obtained a certificate of authority in 1995, it was authorized to maintain the present action. Unified argues on appeal, however, that the District Court’s conclusion that it was transacting business illegally was erroneous under § 35-2-821(5), MCA, which provides that “[n]otwithstanding the provisions of subsections (1) and (2), the failure of a foreign corporation to obtain a certificate of authority does not impair the validity of its corporate acts or prevent it from defending any proceeding in this state.” This argument that subsection (5) validates Unified’s transacting of business prior to having obtained a certificate of authority is totally separate and distinct from that made in the District Court.

¶24 Unified’s arguments to this Court under a different subsection of § 35-2-821, MCA, present a new set of legal questions and it would be unfair to fault the District Court for failing to rule correctly on questions it was never given the opportunity to consider. See Farm Credit Bank, 266 Mont. at 263, 879 P.2d at 1161 (citation omitted). Moreover, we will not address a party’s change in theory on appeal. See Day, 280 Mont. at 276, 929 P.2d at 866 (citation omitted). We decline to address this issue.

¶25 3. Did the District Court err in concluding that Unified was equitably estopped from claiming a prescriptive easement based on use during the statutory five-year period?

¶26 The District Court concluded that Unified was equitably estopped from claiming a prescriptive easement based on use during a period when it was illegally transacting business in Montana. It further concluded that equitable estoppel prohibited Unified’s claim of a prescriptive easement based on use by the prior owner which also was a foreign corporation transacting business illegally in Montana. As a result, the District Court concluded that Unified had failed to establish a five-year period of prescriptive use and, therefore, its claimed prescriptive easement failed as a matter of law.

¶27 The Specified Defendants raised the equitable estoppel issue in their motion for summary judgment in the District Court; Unified did not respond. Similarly, Unified waited until its reply brief on appeal to argue that the elements of equitable estoppel were not met and, consequently, that the District Court erred in granting summary judgment to the Specified Defendants on that basis.

¶28 As discussed above, a party may not raise a new issue or change its theory on appeal. See Day, 280 Mont. at 276, 929 P.2d at 866 (citation omitted). Nor, as we repeatedly have stated, may a party raise an issue for the first time in its reply brief. See, e.g., State v. Hagen (1997), 283 Mont. 156, 159, 939 P.2d 994, 996 (citations omitted); EBI/Orion Group v. Blythe (1997), 281 Mont. 50, 57, 931 P.2d 38, 42 (citation omitted); Loney v. Milodragovich, Dale & Dye, P.C. (1995), 273 Mont. 506, 512, 905 P.2d 158, 162 (citation omitted); see also Rule 23(c), M.R.App.P. For both of these reasons, Unified’s argument that the elements of equitable estoppel were not satisfied is not properly before this Court and we decline to address it.

¶29 Affirmed.

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


author: JUSTICE NELSON

text:
    SEYPAR, INC., a Florida corporation, Plaintiff and Appellant, v. WATER AND SEWER DISTRICT NO. 363, Defendant and Respondent.
    No. 97-153.
    Submitted on Briefs July 17, 1997.
    Decided June 11, 1998.
    1998 MT 149.
    55 St.Rep. 578.
    960 P.2d 311.
    289 Mont. 263.

      See C.J.S. Municipal Corporations § 1805.
    For Appellant: Michael J. Lilly, Berg, Lilly, Andriolo & Tollefsen, Bozeman.
    For Respondent: Michael E. Wheat, Julieann McGarry, Cok, Wheat & Brown, Bozeman.
   JUSTICE NELSON

delivered the Opinion of the Court.

¶1 Plaintiff Seypar, Inc. (Seypar), appeals from a May 9,1995 Summary Judgment Order issued by the Fifth Judicial District Court, Madison County, holding that Defendant Water and Sewer District No. 363 (the District) had legal authority to assess a $500 sewer hook-up inspection fee for each of Seypar’s 70 condominium units as well as the court’s January 6,1997 Findings of Fact and Conclusions of Law and January 30, 1997 Judgment holding that the amount of the fee was reasonable. We affirm.

¶2 Seypar raises the following issues on appeal:

¶3 1. Did the District Court err when it concluded, as a matter of law, that the District had legal authority to assess and collect sewer hook-up inspection fees as a condition precedent to the hook-up of Seypar’s condominium units to the District’s sewer system?

¶4 2. Is the District Court’s finding that the District’s $500 sewer hook-up inspection fee charged for each of Seypar’s 70 condominium units was reasonable clearly erroneous?

FACTUAL AND PROCEDURAL BACKGROUND

¶5 On October 29,1993, Seypar, Inc. (Seypar), a Florida corporation with its principal place of business in Big Sky, Montana, filed a three count complaint in the Fifth Judicial District Court, Madison County, against Water and Sewer District No. 363, Rural Improvement District No. 305, and the Montana Department of Health and Environmental Sciences (DHES). However, Seypar settled all issues regarding its Second and Third Claims against DHES; therefore, DHES was dismissed as a party to this action. Furthermore, Rural Improvement District No. 305 (RID 305) was dismissed as a party to this action when Water and Sewer District No. 363 (the District) was substituted in its place after the District acquired all assets and assumed all liabilities of RID 305. Consequently, the District remained the sole defendant and Seypar’s First Claim remained the final issue to be resolved.

¶6 On September 16,1994, Seypar and the District filed an agreed statement of facts, which is summarized as follows:

¶7 By resolution of the Gallatin County Commissioners dated August 23,1971, RID 305 was created pursuant to Title 16, Chapter 16, RCM (1947) (as amended), for the purpose of constructing, maintaining, repairing, operating and expanding a sanitary sewage treatment facility in the Big Sky Recreational Area. RID 305 remained in existence until the District acquired all assets and assumed all liabilities of RID 305 in February, 1994. While in existence, RID 305 was governed by a three member Board of Trustees who in 1985 adopted and began charging a $300 sewer hook-up inspection fee, and, subsequently, raised this fee to $500 in 1989. The sewer hook-up inspection was conducted by the District Engineer to ensure that a private connection to the public sewer system was done correctly and complied with required specifications.

¶ 8 Seypar purchased certain real property in Madison County from The Association of Unit Owners of Deer Lodge Condominium, Inc., under the supervision and approval of the Fifth Judicial District Court, Madison County, Cause No. 7457. For approximately twenty years, the real property had been the site of Deer Lodge Condominiums, a 126 unit condominium complex that discharged its sewage waste into RID 305’s sewer system and paid monthly sewage assessments fees. However, the Deer Lodge Condominiums were condemned and razed prior to Seypar’s purchase of the real property. On February 24,1989, the court, in Cause No. 7457, issued a supplemental supervisory order related to the purchase of the real property which provided, in part, that The Association of Unit Owners of Deer Lodge Condominium, Inc.’s utility hook-up service rights for the demolished Deer Lodge Condominiums would remain vested and an asset for redevelopment and/or resale of the property.

¶9 On December 11,1991, Seypar submitted a preliminary site plan to the Big Sky Architectural Committee for the design and construction of 70 condominium units on the real property, commonly known as the Big Horn Condominiums. The Big Sky Architectural Committee reviewed the site plan and issued a permit for Phase I, Units 1-13 only; Seypar commenced and completed construction of these units in 1992. Subsequently, the Big Sky Architectural Committee issued permits for Phase 2, the next 18 units, and Phase 3, the next 17 units; Seypar commenced and completed construction of these units in 1993 and 1994, respectively. From the record, it is apparent that Seypar completed construction of the remaining 22 units in 1995.

¶10 Rather than using the existing Deer Lodge Condominiums sewer lines which ran from each individual condominium to the District’s collection system, Seypar constructed its own sewer feeder lines to connect to the District’s collection system. As a condition precedent to the sewer hook-ups for each phase of construction, Seypar was required to pay a $500 sewer hook-up inspection fee per unit, which it paid under protest, first to RID 305 and then to the District after the District acquired all assets and assumed all liabilities of RID 305 in 1994 (hereinafter, both RID 305 and the District are collectively referred to as “the District”).

¶ 11 On October 17,1994, the parties, relying on their agreed statement of facts, filed cross-motions for summary judgment concerning Seypar’s remaining first claim for relief which requested that the District Court declare the District’s assessment of the sewer hook-up fees illegal, order the District to refund those fees Seypar paid under protest, and prohibit the District from assessing Seypar any future sewer hook-up fees associated with Seypar’s reconstruction of the Big Horn Condominium units. On May 9,1995, the District Court issued an order denying Seypar’s motion and granting the District’s motion. While the District Court addressed several related issues raised by the parties, Seypar only appeals that part of the court’s summary judgment order wherein the court held that, as expressly set forth in § 7-12-2120(1), MCA, as well as by analogy to § 7-12-4133, MCA, and § 7-13-4304(3), MCA, the District acted within its legal authority when assessing an inspection fee for Seypar’s initial hook-ups to the District’s sewer line and that the District would not be prohibited from assessing future inspection fees for future sewer hook-ups.

¶12 Because the District Court found a genuine issue of material of fact as to whether the District’s $500 sewer hook-up inspection fee assessed against each condominium unit was reasonable, the court denied both parties’ motions for summary judgment on this issue and set a date for a non-jury hearing. Subsequent to the hearing on this issue, wherein testimony was heard and exhibits were received, the court entered findings of fact and conclusions of law on January 6, 1997, concluding that the $500 sewer hook-up inspection fee was reasonable because Seypar failed to rebut a presumption of reasonableness concerning the fee. On January 30,1997, the court entered judgment in favor of the District, dismissing Seypar’s complaint with prejudice; releasing from protest all of Seypar’s sewer hook-up inspection fees paid to the District to be applied and used by the District as it deemed appropriate; and assessing costs of $135. Seypar appeals from both the District Court’s order granting the District summary judgment and the court’s subsequent judgment in the District’s favor.

DISCUSSION

¶13 1. Did the District Court err when it concluded, as a matter of law, that the District had legal authority to assess and collect sewer hook-up inspection fees as a condition precedent to the hook-up of Seypar’s condominium units to the District’s sewer system?

¶14 Seypar argues that the District, a multi-county rural improvement district including areas within both Madison and Gallatin Counties, is administered by three trustees who have the same powers to administer as do county commissioners in single county districts. See § 7-12-2123, MCA. Seypar notes that nothing in §§ 7-12-2101, et seq., MCA, specifically authorizes the District to charge sewer hook-up inspection fees, and, therefore, is without power to do so. Rather, Seypar asserts that just as in RAE Subdivision v. Frank J. Trunk & Son (1991), 251 Mont. 22, 823 P.2d 845, the District here is only authorized to raise revenue by strictly following the statutes which govern its operation and conduct. Relying on Miller v. Yellowstone County (1988), 234 Mont. 193, 761 P.2d 829, Seypar maintains that the District only had two options for raising revenue and under either option the statutory procedure providing for notice, hearing, and objection must be followed. Seypar contends that the whole cost of maintaining, preserving or repairing improvements should have been assessed to the entire District and paid by the property owners through taxes, under § 7-12-2120, MCA, or, alternatively, paid by an improvement district maintenance fund under § 7-12-2162, MCA.

¶15 Seypar requests that we reverse the District Court’s Order granting the District summary judgment. Seypar asserts that the District Court erred, as a matter of law, in concluding that the District had legal authority to assess and collect sewer hook-up inspection fees against Seypar for three reasons. First, the fees charged to Seypar and paid under protest, are not levied in accordance with either § 7-12-2120, MCA, or § 7-12-2162, MCA.

¶16 Second, Seypar argues that under § 7-12-2120(2), MCA, the District is specifically prohibited from assessing fees to an individual lot owner which are not assessed against all remaining lot owners. Seypar argues that the District Court erred by ignoring § 7-12-2120(2), MCA, and instead focusing on § 7-12-2120(1), MCA. Seypar contends that § 7-12-2120(1), MCA, imposes a duty upon the District to maintain the improvements created within its boundaries and empowers the District to take steps to fulfill this duty, but does not grant the District revenue raising authority. Rather, Seypar contends that only § 7-12-2120(2), MCA, addresses the District’s revenue raising authority. Furthermore, Seypar asserts that the reference in § 7-12-2120(2), MCA, to § 7-12-2108, MCA, does not empower the District to assess sewer hook-up inspection fees, and, moreover, the District did not follow the procedure of notice, hearing and objection in establishing the fees as required by § 7-12-2108, MCA.

¶17 Third, Seypar argues that the District Court erred when it relied, by analogy, on § 7-12-4133, MCA (authority of municipalities to regulate an individual landowner’s connection to sewer lines), and § 7-13-4304, MCA (authority of municipalities to charge fees for those connections). Rather, Seypar asserts that these two statutes support Seypar’s position, not the District’s, because each specifically authorizes the collection of fees, such as sewer hook-up inspection fees, and no similar authorization is provided to the District by §§ 7-12-2101, et seq., MCA, the statutes governing its conduct.

¶18 The District responds that the District Court correctly concluded that the District had the authority to impose sewer hook-up inspection fees. Furthermore, the District contends that the parties do not dispute that the District had legal power to assess sewer hook-up inspection fees, but rather who should pay the fees — the individual lot owner who connects to the public sewer system or all property owners in the District.

¶19 The District argues that § 7-12-2120(1), MCA, provides the District with a broad necessarily implied power to impose sewer hook-up inspection fees against an individual lot owner connecting to the District’s sewer system. The District relies on Diefenderfer v. City of Billings (1986), 223 Mont. 487, 726 P.2d 1362, and State ex rel. Swart v. Molitor (1981), 190 Mont. 515, 621 P.2d 1100, for the proposition that in the absence of express statutory authority, a “local self-governing unit” may exercise any power not prohibited by Montana law. The District asserts that while technically it is not a “local self-governing unit” established by charter, it is a political subdivision of the State and for all practical purposes operates as a “local self-governing unit.” Therefore, the District contends that despite the absence of any statute explicitly authorizing sewer hook-up inspection fees, it had the necessarily implied legal authority to impose such fees against Seypar, the individual lot owner, just as the city in Diefenderfer had to assess a surcharge against developers and the county in Molitor had to impose a review fee against individual landowners.

¶20 Additionally, the District argues that the District Court properly concluded that § 7-12-2120(2), MCA, and § 7-12-2108, MCA, do not control because these statutes provide that the cost of an improvement may be spread across the entire district when it is “of more than local or ordinary public benefit,” such as reconstruction of a sewer main, because all properties in the district are all primarily benefit-ted. See § 7-12-2108, MCA. Here, the District argues, only Seypar, an individual lot owner, is benefitting from the sewer connection, and, therefore, § 7-12-2120(1), MCA, appropriately allows for the imposition of a fee against Seypar. Furthermore, the District argues that the District Court correctly held that § 7-12-4133, MCA, and § 7-13-4304, MCA, demonstrate by analogy that the District has broad police powers to recoup from an individual property owner in a rural improvement district the cost of inspecting the individual’s private connection to the public sewer system, given that the individual’s property primarily benefits from the sewer connection.

¶21 We review de novo a district court’s summary judgment ruling by applying the same evaluation as did the district court pursuant to Rule 56, M.R.Civ.P. Montana Public Employees Assoc. v. Department of Transp., 1998 MT 17, ¶ 8, [287 Mont. 229, ¶8], 954 P.2d 21, ¶ 8 (citations omitted). In the case at bar, the parties stipulated to an agreed statement of facts, and, therefore, no genuine issues of fact exist. Accordingly, we must only determine whether the trial court correctly concluded that the District was entitled to summary judgment as a matter of law. Heath v. Montana Mun. Ins. Auth., 1998 MT 111, ¶ 9, [288 Mont. 463, ¶9], 959 P.2d 480, ¶9 (citing Loss v. Lumbermens Mut. Cas. Co. (1997), 282 Mont. 80, 81, 936 P.2d 313, 314).

¶22 We agree with Seypar that nothing in §§ 7-12-2101, et seq., MCA, the statutory sections governing rural improvement districts, specifically authorized the District to charge “sewer hook-up inspection fees.” Furthermore, nothing in §§ 7-12-2101, et seq., MCA, characterizes the District as a “local self-governing unit,” and, consequently, §§ 7-12-4133 and 7-13-4304, MCA (authorizing municipalities to regulate and charge fees for an individual landowner’s sewer connection), do not provide the District with any type of authority to charge sewer hook-up inspection fees, either directly or by analogy. Similarly, the District’s reliance onDiefenderfer and Molitor to assert that, as a local self-governing unit, it may exercise any power not prohibited by Montana law is also improper. As Seypar points out, the District is not a local self-governing unit and while its board of trustees shares the same administrative powers as county commissioners of a single county rural improvement district, § 7-12-2123, MCA, these powers are not the same as those powers the county commission exercises as a county governmental entity. Furthermore, we also point out that RAE, which Seypar relies upon, is distinguishable given that the issue presented in that case involved whether a water and sewer district had statutory authority to impose annual assessments against non-users within the district.

¶23 However, despite the inapplicability of the foregoing statutes and case law, we disagree with Seypar that the District was without power to assess sewer hook-up inspection fees against Seypar. To the contrary, § 7-12-2151, MCA, a statute overlooked by both parties, provides rural improvement districts with the authority to defray the cost of an improvement made or acquired for the benefit of the district by assessing the cost of the improvement against those benefitted. After reviewing the statutes governing rural improvement districts, we conclude that the District Court’s reliance on and the parties subsequent debate over § 7-12-2120, MCA, is misplaced considering the applicability of § 7-12-2151, MCA.

¶24 Section 7-12-2120, MCA, provides:

(1) Whenever any sanitary or storm sewers, lights or light systems, waterworks plants, water systems, sidewalks, or any other special improvements petitioned for or created by the state or federal government have been made, built, constructed, erected, or accomplished as provided in this part, it is hereby made the duty of the board of county commissioners under whose jurisdiction the district was created or supervised or directed to adequately and suitably maintain and preserve said improvements and to fully keep the same in proper repair and operation, by contract or otherwise, in such way or manner as the board shall deem suitable and proper.
(2) The whole cost of maintaining, preserving, and repairing of said improvements in any improvement district shall be paid by assessing the entire district in the method provided for by 7-12-2108. [Emphasis added.]

¶25 Section 7-12-2151, MCA, provides:

(1) To defray the cost of making or acquiring any of the improvements provided for in this part, including incidental expenses, the board of county commissioners shall assess the entire cost of the improvements against benefited lots, tracts, or parcels of land in the district, based upon the benefits received, and shall adopt one or any combination of the following methods of assessment for each improvement made or acquired for the benefit of the district:
(a) Each lot, tract, or parcel of land assessed in such district may be assessed with that part of the whole cost which its assessable area bears to the assessable area of all the benefited lots, tracts, or parcels in the district, exclusive of streets, avenues, alleys, and public places. For the purposes of this subsection (l)(a), “assessable area” means an area of a lot, tract, or parcel of land representing the benefit conferred upon the lot, tract, or parcel by the improvement. Assessable area may be less than but may not exceed the actual area of the lot, tract, or parcel.
(b) Each lot, tract, or parcel of land assessed in the district may be assessed with that part of the whole cost of the improvement based upon the assessed value of the benefited lots or pieces of land within said district, if the board determines such assessment to be equitable in proportion to and not exceeding the benefits received from the improvement by the lot, tract, or parcel.
(c) Each lot, tract, or parcel of land in the district abutting upon the street where the improvement has been made may be assessed in proportion to its lineal feet abutting the street.
(d) Each lot, tract, or parcel of land in the district served by a utility connection may be assessed an equitable lump sum for the connection based on the bid price in the applicable contract.
(2) The board may use one or any combination of methods of assessment in a single special improvement district and, if more than one improvement is undertaken, need not assess each lot, tract, or parcel in the district for the cost of all the improvements.
(3) The board in its discretion shall have the power to pay the whole or any part of the cost of any street, avenue, or alley intersection out of any funds in its hands available for that purpose or to include the whole or any part of such costs within the amount of the assessment to be paid by the benefited property in the district.

Section 7-12-2151, MCA (1985) (emphasis added)(amendedin 1993 to include an additional method of assessment, “(l)(d) Each lot, tract, or parcel of land in the district may be assessed an equal amount based upon the total cost of the improvement.” Sec. 1, Ch. 269, L. 1993).

¶26 To interpret a statute, we first look to the plain meaning of the words it contains. When the statutory language is clear and unambiguous, the statute speaks for itself, and, consequently, we will not use other means of interpretation. “In the search for plain meaning, ‘the language used must be reasonably and logically interpreted, giving words their usual and ordinary meaning.’ ” Werre v. David (1996), 275 Mont. 376, 385, 913 P.2d 625, 631 (citations omitted). In other words, we must simply “ascertain and declare what is in terms or in substance contained therein, not to insert what has been omitted or to omit what has been inserted.” Section 1-2-101, MCA.

¶27 While § 7-12-2120, MCA, sets forth the duty of county commissioners to “maintain,” “preserve” or “repair” an improvement and mandates that the costs associated therewith shall be assessed against the entire district and paid through property owners’ taxes, § 7-12-2151, MCA, provides that the cost of “making” or “acquiring” an improvement shall be assessed through a variety of methods against only those lots, tracts, or parcels of land in the district that are benefitted. Furthermore, § 7-12-2153(1), MCA (1985), provides:

The cost and expense connected with and incidental to the formation of any special improvement district, including the cost of preparation of plans, specifications, maps, or plats; engineering, superintendence, and inspection; preparation of assessment rolls; and the other incidental expenses described in 7-12-2101(7) shall be considered a part of the cost and expenses of making the improvements within such special improvement district.

In turn, § 7-12-2101(7)(a), MCA, provides that the term “incidental expenses” includes “the compensation of the [District] engineer for work done by him[.]”

¶28 The issue before us involves a fee assessed against each of Seypar’s private sewer connections to the District’s public sewer system to cover the costs associated with the District Engineer’s inspection of these connections. As such, these individual sewer hook-ups cannot be characterized as “maintenance,” “preservation” or “repair” of the District’s existing sewer system, and, therefore, § 7-12-2120, MCA, does not apply. See Miller, 234 Mont. at 195, 761 P.2d at 830 (holding that replacement of a water main to provide nine times the capacity of the existing main was reconstruction, not maintenance, and, therefore, the county commissioners erred by assessing the entire cost against the district under § 7-12-2120, MCA, rather than creating a new special improvement district). Rather, each hook-up constitutes an improvement made to the District’s sewer system, and, therefore, the provisions of § 7-12-2151, MCA, apply.

¶29 In this case, the District Board of Trustees determined that each private sewer connection to the District’s public sewer system primarily benefitted the individual property owner that constructed the private sewer connection. The District required the District Engineer to inspect each private sewer connection made to the District’s public sewer system to ensure that the connection complied with certain specifications. To defray the cost of each sewer hook-up inspection, the District assessed the cost of the required inspection of these private sewer connections against the individual property owner as the primary beneficiary of the improvement rather than assessing all property owners within the District. Accordingly, Seypar, as an individual property owner constructing private sewer connections to the District’s public sewer system for each of its 70 condominium units was assessed a sewer hook-up inspection fee for each unit.

¶30 To require all the property owners in the District to pay for a portion of the inspection cost for each new private connection to the District’s public sewer system, as Seypar suggests is proper, would allow an individual property owner to reap a large benefit at the expense of all other property owners within the District. Such a result would violate the provisions of § 7-12-2151, MCA, which authorizes a rural improvement district to choose from a variety of assessments methods to defray the costs of making or acquiring an improvement to ensure an equitable result for all property owners in the district. Therefore, we conclude that § 7-12-2151, MCA, provided the District with the legal authority to assess sewer hook-up inspection fees against Seypar, individually, as the primary beneficiary of the improvement. By assessing only Seypar for these inspection fees, the District reached an equitable result.

¶31 “This Court will uphold the decision of a district court, if correct, regardless of the lower court’s reasoning in reaching its decision.” Hagan v. State (1994), 265 Mont. 31, 35, 873 P.2d 1385, 1387 (citations omitted). Therefore, we hold that the District Court correctly concluded that the District acted within its legal authority when assessing an inspection fee for each of Seypar’s initial hook-ups to the District’s public sewer system and that the District would not be prohibited from assessing future inspection fees for future sewer hook-ups. Accordingly, we affirm the District Court’s grant of summary judgment in the District’s favor.

¶32 2. Is District Court’s finding that the District’s $500 sewer hook-up inspection fee charged for each of Seypar’s 70 condominium units was reasonable clearly erroneous?

¶33 Seypar argues that the District Court’s conclusion that the District’s $500 sewer hook-up inspection fee was reasonable is clearly erroneous. Relying in part on State v. Police Court (1923), 68 Mont. 435, 219 P. 810, Seypar asserts that the sewer hook-up inspection fee is analogous to city license fees, and, therefore, may not exceed the cost of license issuance, incidental inspection, and supervisory expenses. Seypar contends that the District Court failed to undertake a cost analysis concerning the relationship between fee revenue and the costs of regulation which would have revealed the amount it paid in sewer hook-up inspection fees exceeded the amount the District paid its engineer to conduct the inspections. Therefore, Seypar requests that we reverse the District Court’s judgment and direct the court to declare the $500 sewer hook-up inspection fee unreasonable, and, therefore, void.

¶34 Relying on Associated Students v. City of Missoula (1993), 261 Mont. 231, 862 P.2d 380 (holding that a presumption of constitutional validity attaches to city ordinances), as did the District Court, the District responds that a presumption of validity attached to the District’s assessment of a $500 sewer hook-up inspection fee. The District asserts that Seypar failed to present evidence sufficient to rebut the presumption that the $500 fee was reasonable. Therefore, the District argues that the Court correctly concluded that the $500 sewer hook-up inspection fee was reasonable.

¶35 Although the District Court concluded, as a matter of law, that the $500 sewer hook-up inspection fee was reasonable, we point out that the “reasonableness” of the inspection fee is a question of fact. Therefore, it was for the District Court sitting without a jury, as the trier of fact, to weigh the evidence and judge the credibility of the witnesses in determining whether this fee is reasonable. See Dean v. Austin Mut. Ins. Co. (1994), 263 Mont. 386, 389, 869 P.2d 256, 258. We review a district court’s findings of fact to determine whether those findings are clearly erroneous. Daines v. Knight (1995), 269 Mont. 320, 324, 888 P.2d 904, 906.

¶36 As explained previously, relying on statutes or case law involving municipalities and other local self-governing units is not proper given that the District is not a “local self-governing unit.” Consequently, we will not compare the District’s sewer hook-up inspection fee to a city license fee nor will we recognize a presumption of validity concerning the District’s sewer hook-up inspection fee. Rather, to determine whether the District’s $500 sewer hook-up inspection fee assessed against each of Seypar’s 70 condominium units was reasonable, we consider the provisions of § 7-12-2151, MCA, the statute authorizing the District to impose these assessments.

¶37 Section 7-12-2151, MCA, provides in pertinent part:

(1) To defray the cost of making or acquiring any of the improvements provided for in this part, including incidental expenses, the board of county commissioners shall assess the entire cost of the improvements against benefited lots, tracts, or parcels of land in the district, based upon the benefits received, and shall adopt one or any combination of the following methods of assessment for each improvement made or acquired for the benefit of the district:
(b) Each lot, tract, or parcel of land assessed in the district may be assessed with that part of the whole cost of the improvement based upon the assessed value of the benefited lots or pieces of land within said district, if the board determines such assessment to be equitable in proportion to and not exceeding the benefits received from the improvement by the lot, tract, or parcel.
(2) The board may use one or any combination of methods of assessment in a single special improvement district and, if more than one improvement is undertaken, need not assess each lot, tract, or parcel in the district for the cost of all the improvements. [Emphasis added.]

¶38 Just as § 7-12-2151, MCA, provides the District with discretion to assess the costs of making an improvement against benefitted property in the district, the statute also provides the District with discretion to determine the amount of each assessment as well. In this regard, § 7-12-2151, MCA, does not require an exacting method by which the District must assess the cost of an improvement. To illustrate, § 7-12-2151(1), MCA, simply states that the District shall assess the cost of the improvement “based upon the benefits received,” and § 7-12-2151(l)(b), MCA, allows the District to apportion the cost of the improvement among district property owners based on the assessed value of the benefitted property “if the [district] board determines the assessment to be equitable in proportion to and not exceeding the benefits received from the improvement by the lot, tract, or parcel.” Seypar, as the plaintiff in this action and the party contesting the reasonableness of this fee had the burden of proving that the District’s fee was unreasonable. See § 26-1-401, MCA. Seypar failed to meet this burden.

¶39 The District Court received evidence and heard testimony from a number of witnesses including Terry Threlkeld, Dee Rothschiller, and Jack Schunke. Terry Threlkeld worked as the District’s Water and Sewer Systems Supervisor and District Engineer during the time the Big Horn Condominiums were under construction. He testified that part of his job duties included ensuring that the individual sewer hook-ups were in compliance with required health and safety specifications. He explained that to do this he was involved in the permit application process from start to finish — he reviewed the hook-up applications and connection plans; held meetings with DHES, utility companies, the developer, and the developer’s engineers; conducted on-site inspections; supervised the installation of new sewer service lines; and ensured that any necessary modifications to meet required specifications were completed.

¶40 Dee Rothschiller testified that, as the District’s secretary, she attended all meetings, kept meeting minutes, and was the custodian for the District’s records. Additionally, she processed all applications for private sewer connections to the District’s sewer system, delivered the applications to the District Engineer, and deposited the fees collected. She further testified that the reason for the sewer hook-up inspection fee was to cover the costs of the District Engineer’s inspection and that the increase in the fee from $300 to $500 in 1989 was due to increasing costs. She explained that she compared the District’s sewer hook-up inspection fee to other ski resort charges to make sure that the District was being fiscally responsible to the property owners in the District and that the District’s fee was low in comparison.

¶41 Seypar presented one expert witness, Jack Schunke, a licensed civil engineer who worked for Morrison-Maierle, a company hired by Seypar to handle engineering during Phase I of the Big Horn Condominiums construction. Schunke was asked to give an opinion concerning the reasonableness of the $500 sewer hook-up inspection fee. He testified that, based on his own cost analysis which only included information concerning the engineer’s inspection duties and excluded any clerical or administrative duties associated with the sewer hook-up inspection, he considered the $500 fee high, but would not testify that the fee was unreasonable.

¶42 Based on the testimony of these witnesses and others, the District Court found that the District’s $500 sewer hook-up inspection fee was reasonable. Upon review of the record, we conclude that this finding is not clearly erroneous. Nothing in the record establishes that the $500 sewer hook-up inspection fee was unreasonable — not even Seypar’s own expert witness would testify that the fee was unreasonable. Consequently, Seypar failed in its burden of proof. As we stated previously, we will affirm a district court’s decision, if correct, regardless of the district court’s reasoning in reaching its decision. Hagan, 265 Mont. at 35, 873 P.2d at 1387. Accordingly, we affirm the District Court’s judgment in favor of the District.

¶43 Affirmed.

• CHIEF JUSTICE TURNAGE, HUNT, TRIEWEILER and REGNIER concur.


author: CHIEF JUSTICE TURNAGE JUSTICE HUNT

text:
    AMERICAN MUSIC COMPANY and ZOLLIE KELMAN, Plaintiffs and Appellants, v. DENNIS L. HIGBEE, MAEETTA HIGBEE, and HIGBEE, INC., Defendants and Respondents.
    No. 97-585.
    Submitted on Briefs April 16, 1998.
    Decided June 16, 1998.
    1998 MT 150.
    55 St.Rep. 586.
    961 P.2d 109.
    289 Mont. 278.

      See C.J.S. Injunctions § 60.

      For Appellants: Steven T. Potts, Thompson, Jacobsen & Potts, Great Falls.
    For Respondents: Gregory J. Hatley, Davis, Hatley, Haffeman & Tighe, Great Falls.
   CHIEF JUSTICE TURNAGE

delivered the Opinion of the Court.

¶ 1 American Music Company and Zollie Kelman (collectively, AMC) brought this action seeking a declaratory judgment, preliminary and permanent injunctions, and specific performance of a gaming machine contract. The Eighth Judicial District Court, Cascade County, determined that injunctive relief was not proper in a breach of contract action when pecuniary compensation was contemplated and would afford adequate relief. On that basis, the court dissolved a temporary restraining order it had earlier issued. AMC appeals. We affirm.

¶2 AMC presents three issues for our review:

¶3 1. Did the District Court abuse its discretion by failing to grant a preliminary injunction prohibiting the Higbees from disconnecting and removing AMC’s machines?

¶4 2. Did the court abuse its discretion by failing to grant a preliminary injunction restraining the Higbees from purchasing their own gaming machines?

¶5 3. Did the court abuse its discretion by dissolving its preliminary injunction requiring the Higbees to deposit 40 percent of their machine receipts into a trust account pending the outcome of this litigation?

¶6 In 1990, the parties entered a written agreement concerning a casino the Higbees planned to build and operate in Great Falls, Montana. Zollie Kelman agreed to sell the Higbees a building site and to guarantee their bank loan. In return, the Higbees agreed to give Kelman’s family gaming company, AMC, an exclusive five-year right to place and maintain amusement and gambling machines in the new casino. Under the agreement, AMC would receive 40 percent of the profits from the machines and the Higbees would receive 60 percent. In 1993, the parties agreed, again in writing, to extend AMC’s exclusive agreement for an additional three years, until August 10,1998.

¶7 During the winter of 1996-97, the Higbees remodeled the casino, which was originally known as Thirsty’s but was later rechristened the Gold Dust Casino. As part of the remodeling, the Higbees wanted to offer their patrons the most up-to-date gaming machines on the market. AMC did not have available the type of machines the Higbees desired. Therefore, after some largely unfruitful discussions with Kelman, the Higbees purchased their own machines. In April 1997, they stopped paying AMC its 40 percent share of profits and began paying AMC 20 percent. Additionally, they refused in June 1997 to cooperate with AMC to renew the licenses of its machines located in the casino, and, later that month, Maeetta Higbee told Kelman to remove eight of AMC’s machines from the premises.

¶8 When AMC filed this action in June 1997, the District Court issued a temporary restraining order prohibiting the Higbees from removing or interfering with the operation of any of AMC’s gaming or amusement machines. After a show cause hearing to determine whether a preliminary injunction was warranted, the court orally dissolved the temporary restraining order and denied the application for a preliminary injunction. The court, however, allowed time for filing of additional arguments, pending receipt of which it ordered the Higbees to deposit 40 percent of their gaming machine profits into a trust account.

¶9 In response to additional motions filed, the court issued another temporary restraining order prohibiting the Higbees from removing or interfering with the operation of any of AMC’s gaming or amusement machines on their business premises. A week later, the court held another show cause hearing. As a result of the second hearing, the court dissolved its second temporary restraining order and its order requiring deposit of a percentage of the profits from the gaming machines into a trust account. AMC appeals.

ISSUE 1

¶ 10 Did the District Court abuse its discretion by failing to grant a preliminary injunction prohibiting the Higbees from disconnecting and removing AMC’s machines?

¶11 A ruling on a motion for preliminary injunction is subject to the discretion of the district court. Billings v. County Water Dist. (1997), 281 Mont. 219, 226, 935 P.2d 246, 250. This Court reviews such rulings for abuse of that discretion.

¶12 A preliminary injunction may be granted in the following circumstances:

(1) when it appears that the applicant is entitled to the relief demanded and the relief or any part of the relief consists in restraining the commission or continuance of the act complained of, either for a limited period or perpetually;
(2) when it appears that the commission or continuance of some act during the litigation would produce a great or irreparable injury to the applicant;
(3) when it appears during the litigation that the adverse party is doing or threatens or is about to do or is procuring or suffering to be done some act in violation of the applicant’s rights, respecting the subject of the action, and tending to render the judgment ineffectual;
(4) when it appears that the adverse party, during the pendency of the action, threatens or is about to remove or to dispose of the adverse party’s property with intent to defraud the applicant, an injunction order may be granted to restrain the removal or disposition;
(5) when it appears that the applicant has applied for an order under the provisions of 40-4-121 or an order of protection under Title 40, chapter 15.

Section 27-19-201, MCA. AMC argues that a preliminary injunction was proper in this case under subsections (1), (2), and (3) above.

¶13 We disagree. As to subsection (1), it does not appear AMC is entitled to the final injunctive relief demanded. A party to a contract may choose to breach the contract and to pay damages for that breach. See § 27-1-311, MCA. Final injunctive relief may only be granted if pecuniary compensation would not afford adequate relief, it would be extremely difficult to ascertain the amount of compensation which would afford adequate relief, the restraint is necessary to prevent multiple judicial proceedings, or the obligation arises from a trust. Section 27-19-102, MCA. Here, AMC entered into agreements for the purpose of making money from gambling machines. It appears that monetary damages will provide the full relief to which AMC is entitled.

¶14 At the hearings on the preliminary injunctions, both parties admitted that the gambling machines are manufactured so that one can tell almost on a daily basis how much money is being earned and so that income from the machines can be accurately calculated “to the penny.” The parties also acknowledged that the State of Montana monitors the gamblingmachines to make sure all income is appropriately and accurately accounted for. Additionally, historical data going back to 1990 shows how much AMC has received from the gaming machines on a quarterly and yearly basis. We conclude that it would not be difficult to ascertain the amount of compensation which would afford adequate relief.

¶15 Subsection (2) provides that a preliminary injunction may be issued when it appears that the commission or continuance of some act during the litigation would produce a great or irreparable injury to the applicant. As discussed above, this case centers around which party is entitled to income from the gaming machines at the Gold Dust Casino, and it appears that pecuniary compensation will afford adequate relief. Money damages are not considered irreparable harm, because money damages may be recovered in an action at law without resort to equity. Dicken v. Shaw (1992), 255 Mont. 231, 236, 841 P.2d 1126, 1129.

¶16 As to subsection (3) of the preliminary injunction statute, we reach a similar conclusion. The Higbees’ act of ceasing to use AMC’s machines will not render any judgment for AMC ineffectual, because it appears that monetary damages will be sufficient to compensate AMC for any damages.

¶17 We hold that the District Court did not abuse its discretion in failing to grant a preliminary injunction prohibiting the Higbees from disconnecting and removing AMC’s gaming machines.

ISSUE 2

¶ 18 Did the court abuse its discretion by failing to grant a preliminary injunction restraining the Higbees from purchasing their own gaming machines?

¶19 The parties’ contract provided:

Higbee agrees not to either directly [or] indirectly purchase or cause to be purchased any coin-operated or non-coin-operated amusement or gambling games and device of the type or kind listed in this agreement, for use in Thirsty’s, during the period of time covered by this agreement and they further agree not to enter into any agreement with or authorize any third-party to place or cause to be placed any of the items of the classes and kinds described in this agreement in Thirsty’s during the term of this agreement.

AMC argues that money damages would not be an adequate remedy for breach of this clause and that an injunction is the proper remedy to enforce a negative restriction such as this one.

¶20 As part of this argument, AMC claims that inasmuch as the contract was part of a real property transaction, the rule applies that “[i]t is to be presumed that the breach of an agreement to transfer real property cannot be adequately relieved by pecuniary compensation.” Section 27-1-419, MCA. However, the matters on which injunction is here sought do not relate to any purported breach of the provisions regarding transfer of real property in the agreement between the parties.

¶21 The Higbees respond to this issue by citing the provision in the agreement that the machines supplied by AMC “shall be of the latest type.” While AMC insists that its contractual duty to supply the latest type of machines applied only to the initial machines it supplied in 1990 and was not a continuing duty, the Higbees contend that AMC’s failure to continue to supply the latest type of gambling machines is a breach of their agreement. The Higbees argue that this breach not only entitled them to suspend their performance but also precludes AMC from seeking equitable relief from the court by means of a preliminary injunction. They point out that

[a] party is not entitled to enjoin the breach of a contract by another, unless he himself has performed what the contract required of him so far as possible, and if he himself is in default or has given cause for nonperformance by defendant he has no standing in equity.

43A C.J.S. Injunctions, § 89, pp. 111-12.

¶22 In light of the Higbees’ argument, we hold that the District Court did not abuse its discretion in failing to grant a preliminary injunction restraining the Higbees from purchasing their own gaming machines.

ISSUE 3

¶23 Did the court abuse its discretion by dissolving its preliminary injunction requiring the Higbees to deposit 40 percent of their machine receipts into a trust account pending the outcome of this litigation?

¶24 The Higbees claim they are financially unable to make payments to a trust account in the amounts required by their agreement with AMC. AMC argues that this financial situation justifies the preliminary injunction. But the Higbees contend that their financial situation is a result of AMC’s failure to comply with the terms of their agreement and the resulting necessity that they purchase and pay operating costs of their own up-to-date gambling machines. They maintain that it would be inequitable to allow AMC to avoid its obligation to provide the latest gaming machines while at the same time forcing them to set aside AMC’s purported share of the profits.

¶25 AMC cites Stark v. Borner (1987), 226 Mont. 356, 359, 735 P.2d 314, 316-17. In that case, this Court upheld a preliminary injunction where it appeared that “defendants may be unable to respond in damages if plaintiffs prevail... which would render any substantial damage award plaintiffs may recover ineffectual and unrecoverable, and further that... damages... would be quite difficult or impossible to accurately determine.” In that case, inability to pay was not alleged to be a result of a breach of contract by the payee. Additionally, in Stark, inability to pay was not combined with damages which were difficult or impossible to accurately determine. In contrast, it does not appear that damages, if any, will be difficult to determine in the present case.

¶26 We hold that the District Court did not abuse its discretion in determining that AMC was not entitled to a preliminary injunction requiring a deposit of machine receipts into a trust account.

¶27 Affirmed.

JUSTICES NELSON, REGNIER and LEAPHART concur.

JUSTICE HUNT

concurring in part and dissenting in part.

¶28 I concur with that part of the majority opinion which affirms the District Court’s decision to deny the preliminary injunction prohibiting the Higbees from disconnecting and removing AMC’s gaming machines and to deny the preliminary injunction restraining the Higbees from purchasing their own gaming machines.

¶29 I dissent from that part of the majority opinion which holds that the District Court did not abuse its discretion by dissolving its preliminary injunction requiring the Higbees to deposit 40 percent of their machine receipts into a trust account pending the outcome of this litigation.

¶30 I agree with the majority opinion that an injunction preventing the Higbees from removing AMC’s gaming machines was not appropriate because monetary damages will afford full relief; it is not difficult to ascertain the amount of monetary damages necessary to afford AMC adequate relief; and Higbees’ act of ceasing to use AMC’s machines will not render any judgment for AMC ineffectual, because it appears that monetary damages will be sufficient to compensate AMC for any damages. This entire holding presumes that monetary damages will be available should AMC prevail.

¶31 However, the danger in this case is that monetary damages will not be available. As the majority opinion points out, the Higbees themselves “claim they are financially unable to make payments to a trust account in the amounts required by their agreement with AMC.” According to the terms of the statute, a preliminary injunction may be granted:

(2) when it appears that the commission or continuance of some act during the litigation would produce a great or irreparable injury to the applicant;
(3) when it appears during the litigation that the adverse party is doing or threatens or is about to do or is procuring or suffering to be done some act in violation of the applicant’s rights, respecting the subject of the action, and tending to render the judgment ineffectual[.]

Section 27-19-201, MCA. In this case, it appears that due to the Higbees’ potential inability to pay, a money judgment may be ineffectual and irreparably injure AMC. If a preliminary injunction is not entered requiring the Higbees to utilize AMC’s gaming machines, then the Higbees should be required to place 40 percent of all gaming machine profits into a trust account pending the outcome of this litigation, in order to afford some protection to AMC.

¶32 For this reason, I would reverse the District Court order dissolving its preliminary injunction requiring the Higbees to deposit 40 percent of their machine receipts into a trust account pending the outcome of this litigation.