author: CHIEF JUSTICE TURNAGE JUSTICE SHEEHY, JUSTICE WEBER,

text:
    STEER, INC., Plaintiff and Respondent, v. THE DEPARTMENT OF REVENUE OF THE STATE OF MONTANA, Respondent and Appellant.
    No. 90-106.
    Submitted Oct. 25, 1990.
    Decided Dec. 11, 1990.
    803 P.2d 601.

      Eric J. Fehlig, Dept, of Revenue, Helena, for respondent and appellant.
    Bryan L. Asay, Kelley & Asay, Helena, for plaintiff and respondent.
   CHIEF JUSTICE TURNAGE

delivered the Opinion of the Court. The Department of Revenue (DOR) appeals an order of the First Judicial District Court, Lewis and Clark County, which granted tax-exempt status to cattle owned by Steer, Inc. (Steer), on the basis that the cattle were property owned by an “institution of purely public charity” under §§ 15-6-201(1) (e), and -201(2) (a), MCA. This holding reversed a prior decision of the State Tax Appeal Board (STAB). We reverse the District Court’s order.

DOR raises the following issues:

1. Did the District Court err in finding STAB’s Findings of Fact IX and XI clearly erroneous?

2. Did the District Court err by failing to remand the case to STAB for suitable findings when it found STAB’s Findings of Facts IX and XI clearly erroneous?

3. Did the District Court err when it held that tax-exempt property of an institution of purely public charity need only be owned, and not used, by the institution?

4. Did the District Court err when it found that the requirements of a purely public charity did not preclude uses that are significantly non-charitable in nature?

5. Did the District Court hold that the dissemination of religious teachings is a charitable purpose qualifying the institution for a property tax exemption, and if so, was this an error?

6. Did the District Court err when it found that the production of revenue from property is a charitable purpose qualifying the institution for a property tax exemption?

7. Did the District Court err when it found that the beneficiaries of an institution of purely public charity do not have to be persons who would otherwise be the recipients of aid from local or state Montana governments?

FACTS

Steer, a non-profit North Dakota corporation, conducts a stewardship program that raises funds, and in turn, donates these funds to member evangelical organizations. This unique stewardship program, which originated in 1956 and is currently operating in twenty-eight states, creates a three-way partnership between a donor, a farmer, and a member evangelical organization.

A donor contributes $600.00 increments to Steer, and receives a one-time tax deduction for the charitable contribution. Steer then purchases a livestock unit with each $600.00 contribution.

Steer places the livestock unit with a farmer. The farmer agrees to provide free feed and care to the livestock unit, as well as its offspring. The farmer sells the livestock’s offspring in Steer’s name, and forwards all of the profits from the sale to Steer. The farmer’s costs associated with the care of the livestock unit are tax deductible.

Steer then donates all profits, less twenty-seven percent for administrative and insurance costs, to a member evangelical organization, which can be designated by the donor or farmer. To be a member, an evangelical organization must complete an application and be approved by Steer’s Board of Directors. Once selected, the member evangelical organization must pay Steer an annual membership fee.

The livestock unit is reinvested in this stewardship program and continues to yield profit which is donated to member evangelical organizations until it is too old to produce. The old livestock is then culled and sold, whereby, again, all sale profits go to Steer for distribution to member evangelical organizations. Steer currently has approximately 100 head of cattle in Garfield County, Montana.

From 1982 to 1987, Garfield County’s Assessor classified Steer’s then approximate seventeen cattle as taxable property under § 15-6- 136, MCA, and assessed Steer $485.92 in taxes. Steer appealed to the Garfield County Tax Appeal Board for a refund on April 22,1987 — this appeal was denied. On June 29,1987, Steer further appealed to STAB.

On January 30,1989, STAB denied Steer’s appeal on the basis that Steer did “not advance a charitable purpose. The evidence establishes that the cattle are raised and sold for a profit. The profit is used to advance and further evangelical gospel and doctrine.”

Steer petitioned for judicial review on March 24,1989. On December 18, 1989, the District Court reversed and remanded STAB’s decision, and held that Findings of Fact IX and XI were clearly erroneous:

“Steer, Inc. objects to STAB’s Finding of Fact IX which states that ‘[e]ach missionary recipient has as its principal purpose the dissemination of evangelical gospel and principles.’ Because this finding ignores its commitment to providing services and goods to the needy, Steer, Inc. argues, it shows that STAB failed to look beyond the religious aspect of Steer Inc.’s organization. STAB also found in Finding of Fact XI that ‘[t]he evidence in the case establishes that the cattle and the property owned by Steer, Inc. are not used for any purpose other than the purposes set forth in the Findings of Fact above.’ These findings are clearly erroneous based upon the evidence on the record.”

The District Court further stated that STAB ignored testimony that stated that Steer’s funds were used in projects “that were charitable rather than strictly evangelistic” such as a hospital construction and educational contributions. From this decision, DOR appeals.

STANDARD OF REVIEW

We recognize that in the past this Court has interpreted § 2-4-704, MCA, the standards for judicial review of an administrative ruling, to mean that an agency’s findings of fact are subject to a “clearly erroneous” standard and agency’s conclusions of law are subject to a broader “abuse of discretion” standard. City of Billings v. Billings Firefighters (1982), 200 Mont. 421, 430, 651 P.2d 627, 632; P.W. Berry Co., Inc. v. Freese (1989), 239 Mont. 183, 188, 779 P.2d 521, 524 (Citations omitted). “[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.” Wage Appeal of Montana State Highway Patrol Officers v. Board of Personnel Appeals (1984), 208 Mont. 33, 40, 676 P.2d 194, 198 (Citations omitted). “Appellants carry the burden of showing prejudice from a clearly erroneous decision. “ Terry v. Board of Regents of Higher Education (1986), 220 Mont. 214, 217, 714 P.2d 151, 153 (Citations omitted). An agency’s conclusions of law will be reversed for abuse of discretion “[wjhere it appears that the legislative intent is clearly contrary to agency interpretation.” Billings Firefighters, 200 Mont. at 431, 651 P.2d at 632.

In the future, we will continue to use the “clearly erroneous” standard for reviewing findings of fact. However, in reviewing conclusions of law, our standard of review will be merely to determine if the agency’s interpretation of the law is correct, instead of applying the inappropriate abuse of discretion standard.

In the past, we have applied this standard when reviewing conclusions of law of the Workers’ Compensation Court. See Sharp v. Hoerner Waldorf Corp. (1978), 178 Mont. 419, 423, 584 P.2d 1298, 1301; Wassberg v. Anaconda Copper Company (1985), 215 Mont. 309, 315, 697 P.2d 909, 912; Schaub v. Vita Rich Dairy (1989), 236 Mont. 389, 391, 770 P.2d 522, 523. The reasoning for simply determining if the court’s conclusions are correct is that no discretion is involved when a tribunal arrives at a conclusion of law — the tribunal either correctly or incorrectly applies the law. For that reason, this Court concludes that our standard of review relating to conclusions of law, whether the conclusions are made by an agency, workers’ compensation court, or trial court, is whether the tribunal's interpretation of the law is correct.

Our standard of review relating to conclusions of law is not to be confused with our review of discretionary trial court rulings. This has been defined as “encompassing the power of choice among several courses of action, each of which is considered permissible.” See Aldisert, The Judicial Process, 1976, page 759.

Such rulings are usually trial administration issues, scope of cross-examination, post-trial motions, and similar rulings. The standard of abuse of discretion will be applied to these rulings.

ANALYSIS

Because we find reversible error involving two of the seven issues presented on appeal, we will limit our discussion to 1) whether the District Court erred in finding STAB’s Findings of Fact IX and XI clearly erroneous, and, 2) whether the District Court erred when it held that tax-exempt property of an institution of purely public charity need only be owned, and not used, by the institution.

1. Did the District Court err in finding STAB’S Findings of Fact IX and XI clearly erroneous?

STAB’s Findings of Fact IX and XI read as follows:

“IX
“Each missionary recipient has as its principal purpose the dissemination of evangelical gospel and principles.
‘XI
“The evidence in the case establishes that the cattle and the property owned by Steer, Inc. are not used for any purpose other than the purposes set forth in the Findings of Fact above.”

DOR asserts that the District Court incorrectly found Findings of Fact IX and XI clearly erroneous because contrary to the District Court’s holding, STAB did not ignore the fact that Steer, in part, supports charitable projects. Rather, DOR argues that STAB correctly found that Steer’s member evangelical organizations’ principal purpose is to disseminate evangelical gospel and principles. “Principal,” here, does not mean “exclusive” — STAB used the word “principal” to put into perspective Steer’s religious activities compared to its charitable activities.

Additionally, DOR argues that STAB’s Finding of Fact XI properly distinguishes that when considering whether personal property is tax-exempt under Mont. Const. Art. VIII, § 5(1), and §§ 15-6-201(l)(e) and -201(2) (a), MCA, it is the use of the personal property and not the ownership that is determinative. Here, DOR argues that Steer used its cattle exclusively as a capital investment for the production of revenue, which in turn, was donated to member evangelical organizations — Steer was not directly using the cattle as a source of food for the needy.

Finally, DOR argues that the record is void of evidence that Steer was prejudiced by STAB’s decision or that STAB made a mistake. Accordingly, DOR argues that the District Court had no basis to find Findings of Fact IX and XI clearly erroneous in light of Terry and Wage, supra.

We agree with DOR’s arguments. The record indeed contains substantial evidence to support STAB’s finding that Steer’s member evangelical organizations’ principal purpose was the dissemination of evangelical gospel and principles. This finding does not ignore the fact that Steer conducts charitable activities; it does, however, properly balance its charitable activities in relation to its primary, religious activities. Furthermore, we agree with DOR that when considering tax-exempt status, it is the use of the property that is determinative rather than the ownership of the property. See Flathead Lake Methodist Church Camp v. Webb (1965), 144 Mont. 565, 570, 399 P.2d 90, 93. Steer exclusively used the cattle as a capital investment to produce funds, which in turn, were donated to member evangelical organizations that provide beneficial services to the needy; Steer did not directly use the cattle to feed needy people. Finally, we hold that STAB’s decision did not prejudice Steer and the record does not reveal that STAB made a clearly erroneous mistake. Therefore, based on the standards of review under Terry and Wage, the District Court incorrectly found STAB’s Findings of Fact IX and XI clearly erroneous.

2. Did the District Court err when it held that tax-exempt property of an institution of purely public charity need only be owned, and not used, by the institution?

Steer, through its innovative stewardship program, provides a valuable service by raising funds which, in turn, are donated to needy people world-wide. However, the fact that Steer’s unique fund-raising method produces worthwhile results through its member evangelical organizations does not negate its tax obligations under Montana constitutional and statutory mandate. We have already held that Steer’s use of its cattle as a capital investment was determinative in deciding that it did not qualify for a tax-exemption based on being an “institution of purely public charity.” We feel, however, that this case requires us to further clarify “institutions for purely public charity.”

In order to receive tax-exempt status, Steer’s cattle must qualify as “institutions of purely public charity’ under Mont. Const. Art. VIII, § 5(1), and §§ 15-6-201(1) (e) and -201(2) (a) MCA.

The primary focus is whether “institution” means entity or property.

Mont. Const. Art. VIII, § 5(1) provides:

“(1) The legislature may exempt from taxation:
“(a) Property of the United States, the state, counties, cities, towns, school districts, municipal corporations, and public libraries, but any private interest in such property may be taxed separately.
“(b) Institutions of purely public charity, hospitals and places of burial not used or held for private or corporate profit, places for actual religious worship, and property used exclusively for educational purposes.
“(c) Any other classes of property. [Emphasis added.]”

Section 15-6-201(1) (e), MCA, provides:

“(1) The following categories ofproperty are exempt from taxation:
“(e) institutions of purely public charity [Emphasis added]”.

Section 15-6-201(2) (a), MCA, provides:

“(2)(a) The term ‘institutions of purely public charity includes organizations owning and operating facilities for the care of the retired or aged or chronically ill, which are not operated for gain or profit.”

Exemptions from property taxation are to be strictly construed. Cruse v. Fischl (1918), 55 Mont. 258, 265-66, 175 P. 878, 881; Town of Cascade v. Cascade County (1926), 75 Mont. 304, 308, 243 P. 806, 807; Flathead Lake Methodist Camp v. Webb (1965), 144 Mont. 565, 573, 399 P.2d 90, 94-95; Old Fashion Baptist Church v. Montana Dep't of Revenue (1983), 206 Mont. 451, 455, 671 P.2d 625, 627. Taken together, the Montana Constitution and the Montana legislative acts intend “institutions” to mean property or place employed for purely public charitable purposes or activities rather than an entity. The cattle are property and tax is imposed on property. If it is charitable property in its purpose and employment and not for profit or gain of income, taxes áre not imposed. Here, the cattle’s employment was for the gain of income, and therefore, the cattle are taxable.

Mont. Const. Art. VIII, § 5(1) provides that the legislature may exempt property from taxation. The exemptions of property from taxation is clearly left to the discretion of the legislature and as noted, are to be strictly construed. The history and provisions of § 15-6-201, MCA, reflect the many times when this section of the code has been amended to add property to the list of exempted items, which includes such items as residences of the clergy to a bicycle used for personal transportation of the owner. The judiciary may not add livestock to the list of exemptions. Accordingly, we reverse the District Court and hold that Steer’s cattle do not qualify as “institutions of purely public charity,” and therefore, are not tax-exempt.

Reversed.

JUSTICES HARRISON, BARZ, HUNT and MCDONOUGH concur.

JUSTICE SHEEHY,

dissenting:

The majority take a very narrow view of the charitable exemption from taxation provided by our State Constitution and our statutes. The majority interpretation of that exemption gives it a twist that will certainly be a troublemaker in the future.

First, we must recognize that the constitutional and legislative language is imprecise. Montana Constitution, Art. VIII, § 5(l)(b), provides:

“(1) The legislature may exempt from taxation:
“... (b) Institutions of purely public charity, hospitals and places of burial not used or held for private or corporate profit, places for actual religious worship, and property used exclusively for educational purposes.”

With regard to the meaning of the constitutional exemption for purely public charity institutions, the intent is open to argument. While other clauses of the constitutional permission for tax exemptions refer to property of the entities, with respect to charity organizations it merely exempts “institutions.” It could be argued and some members of this Court think that the exemption is only to the “institution” as an entity, and not to the property of the institution. That position is akin to arguing that the taxation exemption is applicable to an abstraction, the entity, and not to its property, which has a physical existence.

The majority opinion rejects that argument, holding that the Constitution and the legislature intended “institutions” to mean property or place and not the entity itself. That position, of course, is correct. Having reached the proper interpretation of the imprecise language, however, the majority then reverse their logic, holding that the entity’s property is taxable. On the one hand, the majority hold that the property of an institution is what is intended to be exempted though held by a purely public charity; on the other hand, they take away that exemption by holding the property of such an institution is taxable.

What that position means for other property held by purely public charities is threatening. One can think of examples. If a donor gives shares of corporate stock to a purely public charity, and the charity holds the stock for income to accomplish its purposes, under the logic of the majority the stock itself is taxable as property, unless other statutory provisions intervene. The donor of a bed to a purely public charity, to be used by the charity to acquire income for the charity’s purposes would find the bed also taxable, although in Bozeman Deaconess Foundation v. Gallatin County, (1968), 151 Mont. 143, 439 P.2d 915, this Court held that such property was not taxable. (Of course, a bed in a charity organized for the care of the retired, the aged or the chronically ill is specifically exempted under § 15-6-201(2)(a), MCA, but what of a bed used by a charity to gain funds for the homeless or needy transients?)

Judge McCarter, sitting in the District Court in this case, saw the issue quite clearly. She said: “The question is whether Steer, Inc. is a purely charitable organization pursuant to § 15-6-201(l)(e), MCA. Necessarily, the definition of a purely charitable organization is crucial to answering this question.” Such a simple and direct statement of the issue, if followed by the majority, would have led to a correct conclusion. If the institution is truly a purely charitable organization, it and its property are entitled to exemption from taxation as intended, I submit, by the constitutional framers and the legislature.

The fact that the charity holds its property to gain income which in turn is used for charitable purposes should not destroy the exemption. This Court indicated that solution in Bozeman Deaconess Foundation v. Gallatin County, supra, 151 Mont. at 148, 439 P.2d 915. This Court said:

“To qualify as a charity does not require that it have an exclusive relationship to the poor, and its charitable status is not destroyed by the charging of fees for admission and maintenance. The case of Fredericka Home for the Aged v. San Diego County, 35 Cal.2d 789, 221 P.2d 68, summarizes the modern view of these points:
“ ‘The concept of charity is not confined to the relief of the needy and destitute, for “aged people require care and attention apart from financial assistance, and the supply of this care and attention is as much a charitable and benevolent a purpose as the relief of their financial wants.” (Citing case.) So the charge of fees by such an institution as a home for the aged will not necessarily prevent its classification as charitable if such sums “go to pay the expenses of operation and not to the profit of the founders or shareholders,” for all persons may “under certain conditions be proper objects of charity.” (Citing cases.)’
“These same authorities demonstrate that neither its public nature nor its standing as a charity is destroyed by the admission requirements imposed. Such requirements apply to all of a particular class and are consistent with charitable methods, motives and purposes.”

No one can demonstrate for me a substantial difference between charging fees by an institution in its home for the aged (which fees go to pay the expenses of operation and not to the profit of the founders or the shareholders) and the holding of property by such a charitable organization to gain income, which in turn “go[es] to pay the expenses of operation and not to the profit of the founders and shareholders.” Indeed, there is no difference. Bozeman Deaconess, supra.

The proper rule in this case should be that once an institution is shown to be one of purely public charity, without dispute, then its property, of whatever kind, is not subject to taxation under the exemption granted by the Constitution and our legislature.

On another point, the Department of Revenue has argued strenuously that the purpose of Steer, Inc. in the use of its property in this case was to disseminate its religion, and that therefore the plan violated the First Amendment if a tax exemption were granted. The majority opinion is silent on this subject, and I hope by implication, quite properly, rejects that contention. The Department argued that dissemination of religion was the “principal” objective of Steer, Inc. in its plan. STAB, in its Finding of Fact No. IX stated that: “each missionary recipient has as its principal purpose the dissemination of evangelical gospel and principles.” On that basis, the Department claimed that the First Amendment was violated. The District Court disagreed with the Department’s contention, pointing out that there was substantial testimony from Steer, Inc. about how its funds were used by its member organizations and that charitable purposes other than the dissemination of religion were involved. There is no reason to deny the exemption even though the “charity may be devoted to bringing people into religious influence,” as long as the hinds are truly used for what all recognize as charitable purposes not necessarily bound by religion, the aid of the poor, the homeless, the aged, the ill, and the misfortunate. Flathead Lake Methodist Camp v. Webb (1965), 144 Mont. 565, 399 P.2d 90.

Another argument of DOR of no merit is its contention that the tax exemption should not be allowed if the charitable activities take place out of Montana. DOR is in the farcical position of claiming a parochial reason for its anti-parochial stance.

It is my view that the District Court should be affirmed.

JUSTICE WEBER,

dissenting:

I join in all aspects of the dissent of Justice Sheehy. In addition to the elements of his dissent, I desire to comment on a fundamental aspect of the majority opinion.

The majority opinion in Issue 1 concludes that STAB’s Findings of Fact IX and XI are correct, and therefore overrules the conclusion of the District Court. In substance Finding of Fact IX found that each missionary recipient to whom Steer, Inc. contributed had as its principal purpose the “dissemination of evangelical gospel and principles.” In substance Finding of Fact XI concluded that the cattle and property owned by Steer, Inc. were not used for any other purpose than set forth above in the Findings of Fact. The conclusion of fact to be drawn from these two Findings is that STAB found that the cattle owned by Steer, Inc. were used for the principal purpose of the dissemination of evangelical gospel and principles. The substance of the majority opinion comment on this aspect is as follows:

“... Rather, DOR argues that STAB correctly found that Steer’s member of evangelical organizations’ principal purpose is to disseminate evangelical gospel and principles. ‘Principal’ here does not mean ‘exclusive’ — STAB used the word ‘principal’ to put into perspective Steer’s religious activities compared to its charitable activities.
“We agree with DOR’s arguments. The record indeed contains substantial evidence to support STAB’s finding that Steer’s member evangelical organizations’ principal purpose was the dissemination of evangelical gospel and principles. This finding does not ignore the fact that Steer conducts charitable activities; it does, however, properly balance its charitable activities in relation to its primary, religious activities. ... (Emphasis supplied.)”

STAB bases its entire analysis on an invalid assumption that religious activities cannot be charitable. The majority opinion has fallen into the same error when it concludes that the Finding properly balances the charitable activities of STAB in relation to its primary, religious activities. To state the conclusion in a different way, the assumption is that charitable activities cannot include religious activities. The assumption that charitable principles or purposes somehow exclude religious principles or purposes is incorrect.

In order to demonstrate that the assumed contradiction is not correct, I will review some basic Christian religious principles. The gospel according to Matthew, Chapter 25 starting atverse 31 (Revised Standard Version of the Bible) describes the last judgment when Jesus Christ returns:

“When the Son of man [Jesus Christ] comes in his glory, and all the angels with him, then he will sit on his glorious throne. Before him will be gathered all the nations, and he will separate them one from another as a shepherd separates the sheep from the goats, and he will place the sheep at his right hand, but the goats at the left. Then the King (Jesus Christ) will say to those at his right hand, ‘Come 0 blessed of my Father, inherit the kingdom prepared for you from the foundation of the world; for I was hungry and you gave me food, 1 was thirsty and you gave me drink, I was a stranger and you welcomed me, I was naked and you clothed me, I was sick and you visited me, I was in prison and you came to me.’ Then the righteous will answer him, ‘Lord, when did we see thee hungry and feed thee, or thirsty and give thee drink? And when did we see thee a stranger and welcome thee, or naked and clothe thee? And when did we see thee sick or in prison and visit thee?’ And the King will answer them, ‘Truly, I say to you, as you did it to one of the least of these my brethren, you did it to me.’”

From the foregoing, we may conclude that a principle of Christianity is that Jesus Christ will judge Christians upon the manner in which they treat the least of people. More specifically, the gospel establishes the religious principle that Christians are to feed the hungry, to give drink to the thirsty, to clothe the naked, to visit the sick and those in prison. We may therefore conclude that the feeding of the hungry, the clothing of those without clothes, and the caring for the sick are essential principles of the Christian religion. Note that these also constitute charitable activities.

The evidence in this case with regard to the religious basis for the activities of Steer, Inc. and the missionary recipients was all presented by Steer, Inc. No contrary information was presented by any opposing parties. It is true the evidence did establish that Steer, Inc. as well as the missionary recipients have a strong set of Christian principles which motivate and guide them. As I trust appears from the foregoing gospel quotation, the obligation felt by believers in Christianity that they are to feed the hungry, clothe the naked, and care for the sick and visit those in prison does not convert those activities into some form of religious activity which thereby becomes a non-charitable activity.

This is recognized in the holdings of the District Court which are now reversed by the majority opinion. The District Court pointed out that Finding of Fact IX ignored the commitment to provide services and goods to the needy by STAB’s failure to look beyond the religious aspect of the organization. The District Court correctly saw that religious activities can also properly be charitable activities, and that charitable activities can of course include religious activities, such as providing for the needy.

In accord with the above described Christian religious principles, Mother Theresa and a number of women working with her provide food, clothing and shelter for the poorest of the poor in cities throughout the world. They do so based upon the above quoted gospel principle that when they do this for the least of human beings, they are doing it for Jesus Christ. Would those religious principles disqualify their charitable activities from tax exemption?

In his dissent, Justice Sheehy has clearly set forth the error on the part of the majority in assuming that the property of an institution of public charity is subject to tax. I conclude that the majority also makes a foundational error when it assumes that religious principles of Steer, Inc. and its missionary recipients disqualifies their activities from being classed as charitable.

I too would affirm the District Court.

JUSTICE SHEEHY joins in the foregoing dissent.


source: Caselaw Access Project

author: JUSTICE HARRISON

license: Public Domain

text:
    STATE ex rel. RONALD W. EGELAND, Plaintiff and Respondent, v. THE CITY COUNCIL OF CUT BANK, MONTANA, LEO SCHAEFER, PHILIP (PHIL) CHEETY, FRANCES STRYREN and ED SNOECK, as Members of the City Council, and EUGENE O. BOYLE, City Treasurer of the City of Cut Bank, Montana, a Municipal Corporation, Respondents and Respondents. MELVIN SHULAND, HERITAGE BUILDERS, INC., ABERCROMBIE PIPE LINE & SERVICES, INC., Interplead Defendants, D.A. DAVIDSON & CO., Interpled Defendant and Respondent, LELAND FREED, Interpled Defendant and Appellant.
    No. 90-226.
    Submitted on Briefs Nov. 1, 1990.
    Decided Dec. 11, 1990.
    803 P.2d 609.

      Dennis McCafferty, James, Gray & McCafferty, Great Falls, for interpled defendant and appellant.
    Keith Strong, Dorsey & Whitney, Great Falls, for respondents and respondents.
   JUSTICE HARRISON

delivered the Opinion of the Court.

This action originated in the District Court of the Ninth Judicial District, Glacier County, Judge Henry Loble presiding. Ronald W. Egeland sought a Writ of Mandamus ordering the City of Cut Bank to pay interest on SID bonds. The parties to this appeal, Leland Freed and D.A. Davidson & Co., were interpled defendants in the action. Freed asserted claims against D.A. Davidson and both parties moved for summary judgment. From grant of summary judgment to D.A. Davidson, Freed appeals. We affirm.

The single issue is whether the District Court erred in granting summary judgment to D.A. Davidson & Co. on the basis that Freed’s cross-claims were barred by the statute of limitations.

I.

On February 26, 1982, Ronald Egeland and Leland Freed formed Glacier Development Limited Partnership for the purpose of developing a subdivision in Cut Bank, Montana. Freed and Egeland were limited partners.

For sewer and water construction work, Glacier Development received SID bonds as payment from the City of Cut Bank. Egeland opened an account at D.A. Davidson and on August 23,1983, Egeland pledged the SID bonds to D.A. Davidson to secure his personal margin account loan in the amount of $103,125. On December 21,1983, Freed advised D.A. Davidson that Egeland had no authority to make personal use of the bonds which were the property of Glacier Development. D.A. Davidson responded that it held an interest in the bonds superior to Freed’s interest.

Two actions were filed involving Freed. On January 16, 1985, Freed filed suit against Egeland and judgment was entered on July 9, 1987, giving all of the limited partnership’s interest in the bonds to Freed.

The present action was initiated on January 22, 1985, when Egeland filed a mandamus petition to force the City of Cut Bank to pay interest on the SID bonds. The City of Cut Bank answered Egeland’s petition and petitioned to interplead the parties who claimed an interest in the bonds.

On March 3,1987, the District Court entered an order interpleading defendants D.A. Davidson and Freed and requesting them to file a responsive pleading in the matter. Freed filed his responsive pleading on March 16,1987, alleging that he and Glacier Development had an interest in the bonds superior to claims by any other party. Freed also accused D.A. Davidson of “willful, wanton, and conscious disregard of known duties,” “bad faith,” and “oppression.”

Freed moved for summary judgment on June 9,1988. The next day D.A. Davidson cross-moved for summary judgment against Freed on the basis that it had no actual notice of Freed’s claim to the bonds.

The District Court granted summary judgment to D.A. Davidson on the ground that Freed’s claims were time barred. Using December 21,1983, as the triggering date, the court applied a three-year statute of limitations to Freed’s “bad faith” claim, and a two-year statute of limitations to Freed’s “conversion” claim.

On March 26,1990, D.A. Davidson and the City of Cut Bank settled their claims, and this appeal of the summary judgment ruling followed.

II.

Freed presents four arguments to support his contention that cross-claims against D.A. Davidson are not time barred. First, he argues that in relation to his claim of bad faith the statute of limitations did not begin to run until October 25, 1985, when D.A. Davidson first examined the documents showing that Egeland was not the owner. Freed reasons that until then, D.A. Davidson could not have acted in bad faith because it believed that the bonds belonged to Egeland. The District Court considered this argument, but determined that the latest possible date for purposes of the statute of limitations was December 21,1983, when Freed demanded the bonds from D.A. Davidson.

The statute of limitations for “bad faith” or “breach of the covenant of good faith and fair dealing” is the three-year statute applicable to torts, § 27-2-204(1), MCA. Kitchen Krafters v. Eastside Bank (Mont. 1990), [242 Mont. 155,] 789 P.2d 567, 570, 47 St.Rep. 602, 605; Tynes v. Bankers Life Company (1986), 224 Mont. 350, 357, 730 P.2d 1115, 1120. The statute of limitations begins to run when a claim accrues:

“(a) a claim or cause of action accrues when all elements of the claim or cause exist or have occurred, the right to maintain an action on the claim or cause is complete, and a court or other agency is authorized to accept jurisdiction of the action;
“(b) an action is commenced when the complaint is filed.
“(2) Unless otherwise provided by statute, the period of limitation begins when the claim or cause of action accrues. Lack of knowledge of the claim or cause of action, or of its accrual, by the party to whom it has accrued does not postpone the beginning of the period of limitation.”

Section 27-2-102, MCA. Freed advised D.A. Davidson on December 21, 1983, that Egeland had no authority to pledge the bonds, and at that time D.A. Davidson asserted a superior interest in the bonds. After D.A. Davidson refused to surrender the bonds to Freed, Freed could have filed a claim, whether or not D.A. Davidson believed that it had a right to hold the bonds. As pointed out by the District Court, Freed’s cause of action could have been said to have accrued even earlier, on August 23,1983, when D.A. Davidson acquired the bonds. Lack of knowledge of one’s legal rights or even the facts upon which a cause arises does not toll the statute of limitations in non-malpractice actions. Payne v. Stratman (1987), 229 Mont. 377, 381, 747 P.2d 210, 212-13. We uphold the District Court’s determination that December 21, 1983 was the date when Freed’s bad faith claim accrued.

III.

Secondly, Freed argues that his claim against D.A. Davidson is not a cross-claim, but “simply an answer or defense” to Egeland’s claim of ownership of the bonds. Freed maintains that a limitations period should not be imposed with regard to his answer or response as an interpleader. Therefore, the statute of limitations was tolled on October 25, 1985, when the City named D.A. Davidson and Freed as interpled defendants. This date was within two years of December 21,1983, when D.A. Davidson rejected Freed’s claim to the bonds.

We have examined Freed’s pleadings and affirm the District Court’s conclusion that they constitute affirmative cross-claims, rather than answers or defenses. Freed calls his pleadings of March 16, 1987, “Claims of Interpled Defendant Leland Freed,” and labels allegations against D.A. Davidson as “Leland Freed’s Claim Against D.A. Davidson.” He does not refer to the allegations as defenses or responses to Egeland’s claims. Thus by his own admission, Freed filed an affirmative cross-claim, not an answer or response.

IV.

Next Freed asserts that his cross-claim relates back to the same conduct, transaction, or occurrence set forth in the complaint filed by Egeland on January 22, 1985, a date within the applicable statute of limitations. In other words, the statute of limitations regarding Freed’s claims was tolled by the filing of Egeland’s complaint.

Cross-claims are governed by Rule 13(g), M.R.Civ.R:

“Cross-claim against coparty. A pleading may state as a cross-claim any claim by one party against a coparty arising out of the transaction or occurrence that is the subject matter either of the original action or of a counterclaim therein or relating to any property that is the subject matter of the original action. Such crossclaim may include a claim that the party against whom it is asserted is or may be fiable to the cross-claimant for all or part of a claim asserted in the action against the cross-claimant.”

Most of the cases concerning the relation back issue involve counterclaims, although the rationale of those decisions is equally applicable to cross-claims. Appelbaum v. Ceres Land Co. (D. Minn. 1981), 546 F.Supp. 17, 20, aff’d, (8th Cir. 1982), 687 F.2d 261. In some jurisdictions, a counterclaim relates back to the date of the filing of the complaint in the action if it arises out of the same transaction or occurrence. See, e.g., Employers’ Fire Insurance v. Love It Ice Cream (1983), 64 Or.App. 784, 670 P.2d 160, 163; Doxey-Layton Co. v. Clark (Utah 1976), 548 P.2d 902, 906. As stated by a Washington court, “A counterclaim is not barred by the statute of limitations if the counterclaim would not have been barred by the statute of limitations at the commencement of the action in which it is pleaded.” Logan v. North-West Insurance Co. (1986), 45 Wash. App. 95, 724 P.2d 1059, 1061.

Other jurisdictions hold that a counterclaim does not relate back to the date the complaint was filed. See, e.g., W. J. Kroeger Co. v. Travelers Indemnity Co. (Ariz. 1975), 541 P.2d 385, 387-88; Rochester American Insurance Co. v. Cassel Truck Lines (1965), 195 Kan. 51, 402 P.2d 782, 784-86. Federal courts distinguish between counterclaims and cross-claims that seek to somehow reduce the amount a plaintiff can recover, such as by recoupment, contribution, or indemnity, and claims that seek affirmative relief. U.S. for Brothers Builders Supply v. Old World Artisans (N.D. Ga. 1988), 702 F.Supp. 1561, 1569. “Defensive claims generally relate back, while affirmative claims must satisfy the applicable statute of limitations.” Appelbaum, 546 F.Supp. at 20; see also Hurst v. U.S. Department of Education (10th Cir. 1990), 901 F.2d 836, 837-38.

In Montana, this Court has not addressed the issue of when the statute of limitations is tolled concerning the filing of a cross-claim pursuant to Rule 13(g), M.R.Civ.R We have determined that a counterclaim or third-party complaint tolls the statute of limitations when it is filed, rather than when a motion for leave to amend an answer and file other claims is filed. Engine Rebuilders, Inc. v. Seven Seas Import-Export (1980), 189 Mont. 236, 239, 615 P.2d 871, 872.

Our holding in Engine Rebuilders implies that a counterclaim or cross-claim for affirmative relief tolls the statute of limitations when it is filed and does not relate back to the date the initial complaint was filed. We therefore adopt the federal rule. A counterclaim, cross-claim, or third-party complaint for affirmative relief, other than a defensive claim where the defendant attempts to offset the amount a plaintiff can recover, such as by recoupment, contribution, or indemnity, must comply with the applicable statute of limitations.

Freed urges that the relation back doctrine of Rule 15(c), M.R.Civ.R, as interpreted by this Court in Tynes v. Bankers Life Co. (1986), 224 Mont. 350, 730 P.2d 1115, applies. See also Priest v. Taylor (1987), 227 Mont. 370, 740 P.2d 648. In Tynes for the purposes of the statute of limitations an amended complaint adding a second plaintiff was held to relate back to the date the original plaintiff filed his complaint. Rule 15(c), M.R.Civ.R provides in part:

‘Whenever the claim or defense asserted in the amended pleading arose out of the conduct, transaction, or occurrence set forth or attempted to be set forth in the original pleading, the amendment relates back to the date of the original pleading.”

The rule made in Tynes is inappropriate here. First of all, Rule 15(c) applies to an amended pleading, not a cross-claim filed for the first time. Secondly, in Tynes, even though a second plaintiff was added, since the cause of action arose out of the same “conduct, transaction, or occurrence,” the defendant was already on notice of adverse claims and was not prejudiced. Here the original petition filed January 22, 1985, involved only Egeland and the City of Cut Bank. D.A. Davidson and Freed were not joined as defendants until March 3, 1987, and D.A. Davidson had no notice of Freed’s cross-claims until March 16,1987. As stated in Tynes, “[statutes of limitation exist in order to insure that a defendant receives adequate notice of the claim against it. They provide a defendant with the opportunity to adequately defend.” Tynes, 224 Mont. at 358, 730 P.2d at 1120. Contrary to Freed’s assertion, D.A. Davidson was not put on notice of Freed’s cross-claims against it by Egeland’s petition for a Writ of Mandamus ordering the City to pay interest on the SID bonds.

Further, Freed’s claims do not arise out of the same “conduct, transaction, or occurrence” because Egeland’s suit involved the failure of the City to pay interest on the SID bonds, while D.A. Davidson and Freed were interpled as possible stakeholders to the bonds. Freed’s claims against D.A. Davidson arose out of D.A. Davidson’s refusal to release the SID bonds to Freed. See Walstad v. Norwest Bank of Great Falls (1989), 240 Mont. 322, 324-326, 783 P.2d 1325, 1327-1328. We conclude that Freed’s cross-claims do not relate back to the date of Egeland’s original complaint on the basis of the Tynes decision or Rule 15(c), M.R.Civ.P.

V.

Freed’s last contention is that a five-year limitations period applies to a “competing interest in personal property.” An action for claim and delivery of personal property is provided for by §§ 27-17-101 to -405, MCA. Freed asserts that a five-year limitations period applies to such a claim pursuant to § 27-2-231, MCA, which is a catch-all statute for “relief not otherwise provided for.” However, the statute controlling a claim and delivery action is § 27-2-207, MCA:

‘Within 2 years is the period prescribed for the commencement of an action for:
“(1) injury to or waste or trespass on real or personal property;
“(2) taking, detaining, or injuring any goods or chattels, including actions for the specific recovery of personal property.”

Freed’s cross-claim was not filed within the two-year limitations period for a claim and delivery action.

The judgment of the District Court is affirmed.

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

JUSTICE HUNT did not participate in this decision.


author: JUSTICE HUNT

text:
    KEVIN OLSON and PAM OLSON, Plaintiffs and Respondents, v. E.G. LONG, Defendant and Appellant.
    No. 90-259.
    Submitted Sept. 13, 1990.
    Decided Dec. 11, 1990.
    801 P.2d 1340.

      Terry L. Seiffert, Billings, for defendant and appellant.
    Stephen R. Brown, Jr., Morrison, Young, Melcher, Brown & Richardson, Havre, for plaintiffs and respondents.
   JUSTICE HUNT

delivered the Opinion of the Court.

E. G. Long appeals from the order of the Twelfth Judicial District, Hill County, denying his motion for change of venue. We affirm.

The sole issue raised on appeal is whether venue properly lies in Hill County.

The respondents commenced an action in Justice Court in Hill County, Montana, where they reside, against the appellant for the return of a security deposit, rent diminution, and attorney fees. The appellant was served with service of process in Yellowstone County, Montana, where he resides. He timely filed a motion to dismiss or in the alternative for change of venue under Rules 3(A)(1) and 3(B) of the M. J.C.Civ.R The Justice Court denied the Motion pursuant to § 25-31-202, MCA. Trial was held in Justice Court and judgment entered against the appellant.

The appellant filed notice of appeal to the Twelfth Judicial District Court. He then filed a motion for change of venue. The court denied the appellant’s motion for change of venue, stating that the motion should properly have been made at the appellant’s first appearance. Appeal is taken from that order.

Does venue in this action properly lie in Hill County?

A rental agreement was executed between the appellant and the respondent on November 9, 1987. It stated in part:

“Upon termination of the tenancy, Landlord will within 30 days deliver to Tenant a written list of any deductions from the Security Deposit and payment of the balance due to Tenant. Said list and payment will be mailed to the new address of Tenant provided to landlord prior to moving.”

Upon occupancy, the respondents delivered a security deposit in the amount of $300. On March 8, 1989, the respondents received a statement of deductions from their security deposit. On June 12, 1989, they filed a complaint in Justice Court in Hill County. The appellant contested the Hill County venue on the grounds that the performance of the agreement took place in Yellowstone County, the defendant resides in Yellowstone County, and that the obligation to pay, if there indeed was one, was incurred in Yellowstone County.

While defendant resides in Yellowstone County, and the property that is the subject of the litigation is located in Yellowstone County, performance of the agreement is not limited to the venue of the residence of the owner and the situs of the property under these facts. Section 25-31-202, MCA, controls actions based on contract or other obligation. That section provides as follows:

‘When the defendant or all of the defendants, if there be more than one, reside in another county than that in which the right of action accrues and the action be for damages for violation of an express or implied contract or for money due on an express or implied contract, debt, note, or account, the action may be commenced and, subject to the right to change the place of trial, as provided in part 3 of this chapter, may be tried in the county in which such contract or obligation is to be or was to have been performed or such money is to be or was to have been paid or in which the defendant or any one of the defendants resides; and the county in which the obligation is incurred shall be deemed to be the county in which it is to be performed or paid unless there is a special contract to the contrary.”

In the present case, because the contract states that the landlord shall remit the deposit to the tenants’ new address, the place of performance is Hill County. The deposit return is a material contract provision. It specifies an obligation of one of the parties. The appellant’s agreement to send the deposit to the respondents’ new address is a “special contract.” Venue is properly in Hill County.

Affirmed.

CHIEF JUSTICE TURNAGE and JUSTICES SHEEHY, HARRISON, MCDONOUGH, BARZ and WEBER concur.


author: JUSTICE HARRISON JUSTICE WEBER

text:
    LAINE P. CARROLL, Claimant and Respondent, v. WELLS FARGO ARMORED SERVICE CORPORATION, Employer, and CNA INSURANCE COMPANY, Defendant and Appellant.
    No. 90-269.
    Submitted on Briefs Nov. 1, 1990.
    Decided Dec. 11, 1990.
    802 P.2d 618.

      Larry W. Jones, Garlington, Lohn & Robinson, Missoula, for defendant and appellant.
    Erik B. Thueson, Thueson Law Office, Helena, for claimant and respondent.
   JUSTICE HARRISON

delivered the Opinion of the Court.

This is an appeal from the Workers’ Compensation Court of the State of Montana. We affirm.

The issues presented by appellant are:

1. Whether the Workers’ Compensation Court exceeded its jurisdiction on remand by increasing claimant’s disability award under §§ 39-71-705, -708, MCA (1985), from 35% to 60%.

2. Whether the Workers’ Compensation Court failed to follow this Court’s instructions on remand when it failed to assign a disability percentage to each of the disability factors it considered.

3. Whether there is substantial evidence to support the lower court’s disability award.

On June 25, 1987, claimant, Laine P. Carroll, filed his Petition for Hearing in the lower court in which he alleged the appellants, Wells Fargo Armored Services Corporation and CNA Insurance Company, owed certain benefits in excess of those offered. Following a hearing, the lower court, on October 28,1988, filed its order in which it entitled claimant to a 35% permanent partial disability award. Claimant appealed the Workers’ Compensation Court’s final decision. In Carroll v. Wells Fargo (1989), 240 Mont. 151, 783 P.2d 387, we reversed in part, affirmed in part and remanded this case to the Workers’ Compensation Court. Our particular instructions on remand governing the permanent partial disability award, which this appeal focuses on, were as follows:

“Because the court only discussed the claimant’s actual wage loss and failed to discuss any of the other criteria, we hold that the court’s decision is not supported by substantial evidence.
“A review of the cases decided under §§ 39-71-705, -708, MCA (1985), reveal in all some discussion of the necessary factors.
‘We vacate the Workers’ Compensation Court’s award under §§ 39-71-705, -708, MCA (1985), and remand to the Workers’ Compensation Court for a redetermination of benefits consistent with the requirements of §§ 39-71-705, -708, MCA (1985).”

Carroll at 154-55, 783 P.2d at 390.

On remand, after the parties submitted briefs, the Workers’ Compensation Court held claimant was entitled to a 60% disability award. From the lower court’s order on remand, appellant takes this appeal. No additional facts were admitted in the record on remand and so a complete discussion of all material facts can be found in Carroll at 153, 783 P.2d at 389.

The first issue is whether the court exceeded its jurisdiction on remand by increasing Carroll’s disability award from 35% to 60%. Appellant argues that our holding in Carroll was intended to require the court, on remand, to only discuss the factors it previously considered in determining the prior 35% disability award. Appellant further argues that our holding in Carroll was not meant to allow the court to redetermine the disability award based on this new discussion. In Carroll at 154-55, 783 P.2d at 390, we held that the court’s 35% disability award was not supported by substantial evidence and remanded the cause to the Workers’ Compensation Court for a redetermination of benefits consistent with the requirements of §§ 39-71-705, -708, MCA(1985). On remand the court followed these instructions, redetermined claimant’s benefits and calculated a 60% disability award.

Appellant has misinterpreted our plain and unambiguous holding in Carroll. Our instructions to the Workers’ Compensation Court, without a doubt, was to redetermine benefits consistent with the cases decided under §§ 39-71-705, -708, MCA (1985) which require a discussion of certain necessary factors. The Workers’ Compensation Court properly followed our instructions on remand and we, therefore, hold that the court did not exceed its jurisdiction on remand by increasing Carroll’s disability award from 35% to 60%.

Next, we must determine whether the court failed to follow instructions on remand by not assigning a disability percentage to each disability factor it considered when making the disability award.

Appellant argues that we instructed the lower court on remand to quantify in percentages the weight given to each permanent partial disability factor and include a discussion of how each specific percentage was reached. Appellant contends that it would be impossible for this Court to give a meaningful review of the lower court’s permanent partial disability award without such quantification. We disagree.

Appellant would have us believe that workers’ compensation law is a particular system or branch of physics, complete with forces analogous to friction, gravity and momentum, statutory laws like those of Newton and Archimedes; all interwoven in a calculus mesh of case law. To be sure, workers’ compensation law is a social science which necessarily includes human factors and to break workers’ compensation law down into separate percentages would simply deny this fact. Once again, our instructions on remand were plain and unambiguous leaving no room whatsoever for appellant’s erroneous interpretation.

After reading our instructions on remand, the Workers’ Compensation Court entered its order and gave its rationale for refusing to reduce its disability award to numbers.

We have intentionally avoided trying to quantify in percentages the considerations given to the above permanent partial disability factors. The reasons for not doing so are that there is no precedent, either in statute or case law as to how such quantification might be done and secondly, assessing mathematical precision to the individual characteristics of each injured worker would inevitably provide “windfalls” to some and punitively low awards to others. While formulas, per se, have a certain attraction of simplicity and speed, they negate the flexibility of dealing with each case as a person, not a mathematical component. To be sure, it is something of an inexact science, but is nonetheless more in keeping with the “earning capacity’ considerations of the statutes. We do not think it inappropriate to consider certain mathematical considerations that might apply in terms of dollars per hour wages, pre-and post-injury, or percent of labor market pre-and post-injury, but we decline to make such numbers absolute for the reasons noted.

We hold that the Workers’ Compensation Court did not fail to follow our instructions on remand.

The last issue is whether the court’s 60% disability award is supported by substantial evidence. In determining claimant’s disability under §§ 39-71-705, -708, MCA(1985), the court must consider the claimant’s age, education, work experience, pain and disability, actual wage loss, and loss of future earning capacity. Holton v. F. H. Stoltze Land and Lumber Co. (1981), 195 Mont. 263, 266, 637 P.2d 10, 12. The record shows that the court properly considered and discussed all the required factors in determining claimant’s 60% disability award under §§ 39-71-705, -708, MCA (1985).

It is well established that permanent partial disability benefits under §§ 39-71-705, -708, MCA (1985), indemnify the claimant for possible loss of future earning capacity. McDanold v. B.N. Transport, Inc. (1984), 208 Mont. 470, 476, 679 P.2d 1188, 1191. The court, in its Order on Remand, discussed all the required disability factors and it was apparent from this discussion that the court properly regarded claimant’s “earning capacity impairment” as the primary concern in calculating the permanent partial disability award under §§ 39-71-705, -708, MCA (1985).

In its Order on Remand, the court analyzed actual wage loss. The court stated that although claimant’s actual wage loss was approximately 35% “his likely wage loss is more than 35 percent.” The court also considered how claimant’s limited work experience might adversely impact his future earning capacity:

“At the time of the injury, claimant was earning $5.35 per hour and the entry-level pay for the light-duty jobs [which] he is now capable of earning [is] the minimum wage of $3.80 to $4.50 per hour. This Court concludes that with his work experience limited to heavy labor jobs he can no longer perform, his possible future earning capacity will be decreased substantially.”

The court also noted that the economic impact of one’s injuries can be reduced by one’s learning skills and education. “Unfortunately, the claimant has a limited education and learning skills ...” which translates to an adverse impact on his future earning capacity. The court next analyzed how age was pertinent to possible future loss of earning capacity:

“(T)he longer the person is on the labor market the more economic losses he will suffer, all other factors being equal. However, a younger individual who can be retrained or has transferable skills will be able to ameliorate some of his post-injury earning losses in the long run through additional training.”

The court concluded that claimant’s future loss of earning capacity would substantially increase for his remaining 35 years of expected employment. The court based this conclusion on the fact that claimant was approximately thirty years old with limited transferable skills.

As for pain and disability, the court noted how these factors would affect claimant’s future loss of earning capacity:

“[A] man who is injured has limited physical abilities and will have a harder time competing than an uninjured individual. He may have difficulty in retaining employment in bad times, or in getting new employment, if he has an occasion to change jobs.”

The court then considered the facts that (1) claimant’s injury was to his low back; (2) this injury caused claimant continual pain; (3) this pain removed him from employment in heavy to medium-labor positions; (4) claimant cannot lift more than twenty-five pounds; (5) he cannot remain in any one position for any appreciable length of time; and (6) must avoid twisting, bending and repetitive lifting activities. Based on these facts and considerations the court concluded that “claimant’s continuing pain will make his future loss of earning capacity substantial.”

The record shows that the court separately considered and discussed each disability factor in making its disability award. The court discussed how each factor, as a function of the facts specific to claimant’s situation, impacted claimant’s earning capacity. The court, based on this discussion, concluded that each and every disability factor had an overall negative impact on claimant’s future loss of earning capacity and awarded claimant a 60% disability rating. We find no error. We hold that substantial evidence supports the court’s 60% permanent partial disability award.

The last matter concerns attorney’s fees. In Carroll at 157, 783 P.2d at 391, we remanded this cause to the lower court for a proper determination of claimant’s attorney’s fees under § 39-71-611, MCA (1985), after finding that appellant denied claimant compensation. However, appellant filed its notice of appeal to this Court before the lower court on remand ruled on costs and appropriate attorney’s fees. As such, we again remand to the Workers’ Compensation Court for a determination of costs and attorney’s fees, including those incurred on appeal, in accordance with this opinion and its prior companion opinion.

The Workers’ Compensation Court in all other respects is affirmed.

CHIEF JUSTICE TURNAGE and JUSTICES SHEEHY and McDonough concur.

JUSTICE WEBER

specially concurring:

I can understand the confusion on the part of the appellants in this case. In rereading Carroll v. Wells Fargo (1989), 240 Mont. 151, 783 P.2d 387, the basic question appeared to be whether or not there was an appropriate justification for the 35% permanent partial disability award. There was nothing to indicate at that time that such award might not be high enough. The concern expressed was whether or not all of the appropriate factors had been considered. It was not unreasonable for the appellants to assume that the issue was whether or not the 35% was properly justified.

As pointed out in the majority opinion, the Workers’ Compensation Court reviewed all of the appropriate factors and then awarded an increased 60% permanent partial disability award. Under these circumstances, our power of review is quite limited. I therefore accept the affirming of the 60% award.

However, I believe the Workers’ Compensation Court failed to properly consider the fundamental issue before it. When studying the two opinions, it is not possible to determine why the original award was 35% and the next 60%, all on the same facts. If the Workers’ Compensation Court failed to consider certain factors and as a result concluded that an increase was appropriate, it should have so stated. As it is, it is in some degree contradictory to go through the same factors which previously should have been considered, and come out with an entirely different award without any explanation of the reason for the distinction. I would have preferred a remand to the Workers’ Compensation Court for an explanation of the distinctions between the two awards.


author: JUSTICE SHEEHY

text:
    THE MONTANA DEPARTMENT OF REVENUE, Appellant and Respondent, v. KAISER CEMENT CORPORATION, Respondent and Appellant.
    No. 90-278.
    Submitted Nov. 15, 1990.
    Decided Dec. 11, 1990.
    803 P.2d 1061.

      Michael S. Lattier, Gough, Shanahan, Johnson & Waterman, Helena, for respondent and appellant.
    Geralyn Driscoll, Dept, of Revenue, Helena, for appellant and respondent.
   JUSTICE SHEEHY

delivered the Opinion of the Court.

On its face, § 15-8-601, MCA, allows the Montana Department of Revenue (DOR) to reassess property for taxation if originally the property escaped taxation, was erroneously assessed, or was omitted from taxation.

The power of DOR to reassess such property appears to be limited under § 15-8-601 to property still under the ownership or control of the same person who owned it when it escaped taxation, was erroneously assessed or omitted from taxation.

Relying on that limitation, the State Tax Appeal Board (STAB) granted summary judgment to Kaiser Cement Corporation, in effect annulling the assessment revisions by DOR for the tax years 1983, 1984 and 1985. The Department of Revenue appealed the STAB decision to the District Court, Fifth Judicial District, Jefferson County. The District Court reversed the STAB decision and remanded the cause to STAB for a decision on the merits, subject to the right of Kaiser to appeal under a Rule 54(b), M.R.Civ.P certification. Kaiser has appealed to this Court, and on consideration we affirm the order of the District Court.

In the years pertinent here, Kaiser operated a cement plant near Montana City, in Jefferson County, and mined limestone from a nearby quarry to make its cement. The tax in dispute in this case is mine net proceeds property tax on the minerals severed from the limestone quarry.

Kaiser filed a return and statement of net proceeds for the tax years 1983, 1984 and 1985. For 1983, it reported a negative value of its mining activity of $29,854.00; for 1984, a negative value of $57,563.00; andfor 1985, a negative value of$75,463.00. The Department reviewed the returns on receipt and on or before July 1 in each succeeding year, transmitted to its agents in Jefferson County, a statement listing the assessed value of the net proceeds in 1983 at a zero value, for 1984 at a value of $6,539.13, and for 1985, again a zero value.

The Department later audited Kaiser’s returns by examining its books and records in its office in San Francisco, California. Based on its audit, the Department determined that the mine net proceeds value of Kaiser for 1983 was $871,844.00; for 1984, $822,764.00; and for 1985, $499,301.00. After the audit, but before the Department issued the revised assessment, Kaiser sold its Jefferson County operations to Ash Grove Cement West. The Department issued its revised assessments on January 28, 1988.

Following the notification to Kaiser of the revised assessment, there was an exchange of information between the parties, and the Department conducted an assessment review conference respecting the revisions. Thereafter the Department issued a final determination of the mine net proceeds by a letter to Kaiser dated May 2, 1988. The final figures for the three years were those reported above.

Kaiser appealed to STAB and moved for summary judgment, contending that it was no longer the owner of the cement plant and quarry. STAB granted summary judgment based on the motion, and the Department, as we said, appealed to the District Court, which reversed the STAB decision.

The mine net proceeds tax in Montana has a hoary history. It was enacted by the territorial government in 1864, and later incorporated in the 1889 Constitution. Though variously amended, the net proceeds tax is now codified at § 15-23-501 et seq., MCA.

(There are a number of statutes to which we will be referring in this Opinion. To avoid clutter, and for ease of reference, we attach as an addendum to this Opinion the statutes or pertinent parts thereof which must be considered in this case.)

The mine net proceeds tax arises because of the difficulty in arriving at a fair value of mining property. It is a tax created in lieu of an ad valorem property tax. (Pfizer v. Madison County (1973), 161 Mont. 261, 266, 505 P.2d 399.) The mine net proceeds tax is one of seven centrally assessed taxes; that is, the taxpayers’ returns are sent to the state office of the Department of Revenue instead of to the individual county offices.

At the outset, the mine net proceeds tax is self-assessed. The owner of a producer mine must on or before March 31 each year make out a statement of the gross yield or value of the metals and minerals produced by the mine in the preceding calendar year for which the statement is made. Section 15-23-502, MCA. Against the gross yield or value in dollars and cents, the mine owner (or lessee or operator) is allowed certain deductions set out in §§ 15-23-502 and 15-23-503, MCA. The Department of Revenue is required to calculate from the returns the net proceeds in the mine yielded to the person engaged in mining. Section 15-23-503, MCA. The value so determined is then transmitted to the Department’s agent in each county as the assessed value of the net proceeds from mines. Section 15-23-106, MCA. The taxes and any penalties assessed on mine net proceeds are a hen upon the interest of the operator of the mine, on the machinery and equipment used in operating the mine, and may also be collected by a civil suit. Section 15-23-504, MCA.

As a check on the returns made by mine operators for the purpose of net proceeds, the Department of Revenue was given the power at any time to examine the records of such mine owners or operators to verify the statements made in the returns. Section 15-23-521, MCA.

When the Department of Revenue assesses the mine net proceeds under § 15-23-101, MCA, it must then notify the owner in writing of the assessed value it has determined. Section 15-23-102, MCA. Upon such notice, the taxpayer may demand a review of the validity of the assessment. Thereafter there may be an assessment review conference, not subject to the Montana Administrative Procedure Act, but including the right of discovery prior to any assessment revision conference. Section 15-23-102(2)(b), MCA. An appeal from the final decision may be taken to the State Tax Appeal Board. Section 15-23-102(2)(c), MCA.

The conflict in this case arises from § 15-8-601, MCA. It provides that whenever the Department of Revenue discovers that any taxable property of any person has escaped assessment, been erroneously assessed, or been omitted from taxation, the Department may assess the same, provided the property is under the ownership or control of the same person who owned it at the time it escaped assessment, was erroneously assessed, or was omitted from taxation. The same statute provides a ten year statute of limitation for such revised assessments.

Section 15-8-601, MCA, is a general statute, applicable to all taxable property. It appears to conflict with provisions specifically relating to centrally assessed property in that § 15-23-107, MCA, provides that “whenever the valuation of centrally assessed property is revised under 15-8-601, or 15-23-102(2)” the Department must notify its county agent of the revised assessment. Moreover, if the Department determines that a taxpayer has incorrectly reported a value for taxes, including mine net proceeds taxes, the Department’s county agents, after notification by the Department shall add interest to the tax at a certain rate. Section 15-23-115, MCA. Finally, with respect to centrally assessed properties, no deficiencies may be assessed or collected unless notice of the additional tax proposed is mailed within five years of the date the return was filed. Section 15-23-116, MCA.

In its printed notices of revisions to Kaiser, and especially in its letters of January 28, 1988, and May 2, 1988, the Department advised Kaiser that the revised assessments were being issued under § 15-8-601, MCA. Kaiser relies on these statements, and insists that because it is no longer the owner of the cement plant and quarry, and was not at the time the revisions were issued, that it cannot be held liable for the additional taxes. It relies particularly on W. R. Grace and Company v. Department of Revenue (1989), 238 Mont. 439, 779 P.2d 470. There this Court stated that for a revised or additional assessment under § 15-8-601, MCA, the taxable property must have “escaped assessment” and “must remain under the ownership and control of the same person who owned or controlled it at the time it escaped assessment.” (779 P.2d at 476) Kaiser also contends that in Grace, this Court distinguished the net proceeds tax from a self-assessing tax, and stated that the ten-year limitation in § 15-8-601,MCA, is applicable. (779 P.2d at 476)

With respect to the applicable statute of limitations, and the conflict between §§ 15-8-601 and 15-23-116, MCA, the Department points out that the Grace opinion related to tax years 1977 and 1978, before the enactment of § 15-23-116, MCA. But we do not find any real conflict under Grace and other cases cited by Kaiser, because we determine that the legislative intent in view of all the statutes applicable allows the procedure followed by the Department in this case, and that to hold otherwise would lead to absurd results.

By statute (§ 1-2-102) and by case law, in the construction of statutes, those relating to particular subjects outweigh those related to general subjects. Department of Revenue v. Davidson Cattle Company (1980), 190 Mont. 326, 620 P.2d 1232. The statutes which relate to centrally assessed property, and particularly those which relate to mine net proceeds taxes, are entitled to greater deference here than the general provisions contained in § 15-8-601, MCA.

In searching for the legislative intent, as we must in the construction of statutes, if the general and particular provisions are inconsistent, the latter are paramount to the former. O’Connell v. State Board of Equalization (1933), 95 Mont. 91, 25 P.2d 114; and the latter will prevail over the former to the extent of any necessary repugnancy between them. In re Stevenson’s Estate (1930), 87 Mont. 486, 289 P. 566. Reasonable constructions must be adopted if possible, with deference shown to the interpretation given to the statutes by the officers or agencies charged with its administration. Department of Revenue v. Puget Sound Power and Light Company (1978), 179 Mont. 255, 587 P.2d 1282.

The specific provisions of statutes relating to mine net proceeds taxes must supersede any repugnancy in the ownership provisions of § 15-8-601, MCA. The DOR may audit for the purpose of determining the taxable value of net proceeds of mines. Section 15-8-104, MCA. It must calculate from the returns the net proceeds of the mine yielded to the person engaged in mining, § 15-23-503, MCA. It may “at any time” examine the records of any person pertaining to the yield of ore or mineral products so as to verify the statements. Section 15-23-521, MCA. It may revise the valuation of centrally assessed property under §§ 15-8-601 or 15-23-102 (2), MCA. (Section 15-23-107, MCA.) It may conduct an assessment review conference. Section 15-23-102 (2)(b), MCA. The Department has but five years from the date the return was filed to assess and collect any deficiency. Section 15-23-116, MCA. The foregoing provisions are so specific relating to centrally assessed mine net proceeds taxes that the legislature could not have intended the ownership provision of § 15-8-601, MCA, to apply as in this case.

Especially, this case demonstrates the absurd result that might follow if we were to agree with Kaiser. Kaiser filed its 1986 mine net proceeds return on March 5, 1987, and sold the mine on April 17, 1987. Under Kaiser’s interpretation, it would be possible for such a mine owner to report a negative value or zero value for its mine net proceeds for a taxable year, sell its property, and be exempt from any revised taxation following an audit of the true result. The District Court put it fairly succinctly in stating:

“What the Board, in this reviewing court’s view did, was fail to harmonize or reconcile the § 15-8-601, MCA, with the Centrally Assessed Property Tax Statutes (Title 15, Chapter 23, MCA). Moreover, its order violates the statutory construction concept of the specific over the general, the result being that if the order stands, this State literally has no workable generally assessed property tax system, having created a number of meaningless acts.
“This Court cannot believe that such was the legislature’s intent when it adopted the Centrally Assessed Property Statutes as an integral part of the tax structure. The mine net proceeds tax is a part of that structure. Darby Spar v. Department of Revenue, 217 Mont. 376, [705 P.2d 111 (1985)], is one of a half-dozen cases confirming this principle.
“The process of reporting, auditing and assessing and statute of limitations, as provided for in Title 15, Chapter 23, is rendered meaningless by the Board adopting the taxpayer’s literal interpretation of § 15-8-601, MCA.”

We wish in this case to clarify, as we did in Steer v. Department of Revenue [245 Mont. 470,] 803 P.2d 601 (1990), the standard of review pertinent in this cause. We have before us a pure question of law. Kaiser suggests that in reviewing STAB’s decision, this Court will determine whether STAB’s conclusion of law constitutes an abuse of discretion. This Court is the final Montana arbiter of questions of law, and it is free to rule as its determines the law to be. Particularly this is applicable to administrative legal conclusions:

“That conclusion of law is a determination of a legal question, which when reviewed by a court is subject to a broader scope of review than are findings of fact made by an administrative agency. City of Billings v. Billings Firefighters (1982), 651 P.2d 627, 200 Mont. 421. The expertise of courts in determining legal questions supersedes the deference owed to administrative determinations.”

Department of Revenue v. Gallatin Outpatient Clinic, Inc. (1988), 234 Mont. 425, 429, 763 P.2d 1128, 1130.

We affirm the decision of the District Court, and agree with its order that this cause be remanded to the State Tax Appeal Board for the determination of the cause on its merits.

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

ADDENDUM

“15-23-101. Properties centrally assessed. The department of revenue shall centrally assess each year:
“(4) the net proceeds of mines and of oil and gas wells;
“15-23-102. Independent appraisal option -notice of assessment -opportunity for conference-appeal....
“(2)(a) After assessing property under 15-23-101, the department shall notify the owner and any purchaser under contract for deed of such property, in writing, of the assessed value it has determined.
“(b) Within 20 days following notification, the taxpayer may demand a review of the validity of the department’s assessment. The department shall conduct an assessment review conference, which is not subject to the contested case procedures of the Montana Administrative Procedure Act. However, a party has the right of discovery prior to any assessment revision review conference. Upon consideration following such conference, the department may revise the assessment.
“(c) Appeals from the final decision may be taken to the state tax appeal board.
“15-23-106. Transmission to the counties. (1) On or before July 1, the department shall transmit to its agent in each county a statement listing:
“(d) the assessed value of the net proceeds and royalties from mines and oil and gas wells in the county, as determined under 15-23- 503, 15-23-505, 15-23-515, 15-23-603, and 15-230-605; and ...
“15-23-107. Amended assessment — transmission to counties. Whenever the valuation of centrally assessed property is revised under 15-8-601 or 15-23-102(2), the department shall, within 15 days following the final decision or order, transmit a statement of the revised assessment to its agent or the county officer then having custody of the assessment book in the county where the property is located. The revision shall be immediately entered in the assessment book.
“15-23-116. Statute of limitations. (1) Except as otherwise provided in this section, no deficiency may be assessed or collected with respect to the year for which a return is filed unless the notice of additional tax proposed to be assessed is mailed within 5 years from the date the return was filed. For the purposes of this section, a return filed before the last day prescribed for filing is considered as filed on the last day. If the taxpayer, before the expiration of the period prescribed for assessment of the tax, consents in writing to an assessment after that time, the tax may be assessed at any time prior to the expiration of the period agreed upon.
“15-23-501. Taxation of mines. All mines and mining claims, both placer and rock in place, containing or bearing gold, silver, copper, lead, coal or other valuable mineral deposits, after purchase thereof from the United States, shall be taxed as all other land is taxed. All machinery used in mining and all property and surface improvements upon or appurtenant to mines and mining claims which have a value separate and independent of such mines or mining claims and the annual net proceeds of all mines and mining claims shall be taxed as other personal property.
“15-23-521. Examination of records by department. The department of revenue may at any time examine the records of any person specified in this part as the records may pertain to the yield of ore or mineral products or deposit in order to verify the statements made by the person. If from the examination or from other information, the department finds any statement or any material part of a statement willfully false or fraudulent, the department must assess in the same manner as provided for in 15-23-503 or 15-23-515.
“15-8-601. Assessment revision — conference for review.
“(1) Whenever the department of revenue discovers that any taxable property of any person has in any year escaped assessment, been — erroneously assessed, or been omitted from taxation, the department may assess the same provided the property is under the ownership or control of the same person who owned or controlled it at the time it at the time it escaped assessment, was erroneously assessed, or was omitted from taxation. All such revised assessments must be made within 10 years after the end of the calendar year in which the original assessment was or should have been made.”


author: CHIEF JUSTICE TURNAGE

text:
    IN THE MATTER OF B.N. and T.N., and M.M., A.M. and T.G.M., Youths in Need of Care.
    No. 90-297.
    Submitted on Briefs Oct. 26, 1990.
    Rehearing Denied Jan. 15, 1991.
    Decided Dec. 11, 1990.
    802 P.2d 1244.

      Joseph R. Massman, Massman Law Firm, Helena, for appellants, Father and Paternal Grandparents.
    William P. Driscoll, Gough, Shanahan, Johnson and Waterman, Helena, for appellant — Mother.
    Mike McGrath, County Atty., Leo J. Gallagher, Deputy County Atty., Marc Racicot, Atty. Gen., Elizabeth L. Griffing, Asst. Atty. Gen., J. Mayo Ashley and Randi Hood, Public Defenders, Helena, for respondent.
   CHIEF JUSTICE TURNAGE

delivered the Opinion of the Court.

R.N.M. (mother) and T.N. (father), parents of B.N. and T.N., appeal the judgment of the First Judicial District, Lewis and Clark County, which terminated their custodial rights of their children and awarded legal custody to the Montana Department of Family Services. The paternal grandparents of the children also join in the appeal. We affirm.

The issue presented on appeal is whether the record lacked substantial evidence to support the District Court’s order to terminate the natural parents’ custodial rights of their two children.

The mother and father married in 1980. The marriage produced two daughters, B.N., born November 7, 1980, and T.N., born October 27, 1981. The marriage also marked the beginning of a ten-year history of family turmoil and parental neglect as recorded by the Lewis & Clark County Department of Family Services (Department).

In 1980 and just thirty-two days following B.N.’s birth, the Department began receiving reports lodged against either one or both of the parents for parental neglect. Three months following T.N.’s birth, T.N. was hospitalized for “failure to thrive.”

In 1982, Dr. Robert J. Bateen, a clinical psychologist, evaluated mother and father at the request of the Child Protective Services. Dr. Bateen found that mother had a low IQ of seventy-six and that she was an “overwhelmed mother who was lacking in skills.” Dr. Bateen found that father had an even lower IQ of fifty-nine, rendering him a mental age of a first or second grader. Dr. Bateen also established father’s history of physical violence through accounts given by mother.

Later in 1982, the Department received a report alleging that father was physically abusing his wife and his oldest daughter, B.N. This report was followed by the October 27, 1982, filing of an abuse complaint lodged against father by a social worker of the Department, who was at St. Peter’s Hospital when B.N. was receiving treatment for contusions, bruising, and swelling to the head area, injuries allegedly inflicted by father.

No legal action was pursued against the parents at this time as mother decided to live apart from father, and father consented to evaluation and treatment at Montana State Hospital in Warm Springs. Upon his release from this hospital, however, the Department received reports that father had returned to living at the family residence, contrary to an informal agreement between the Department and the parents.

On April 14, 1983, the State petitioned the District Court for temporary custody and temporary investigative authority regarding B.N. and T.N., based on further reports of father’s violent behavior and both parents’ neglectful behavior toward their children. The children were temporarily placed in foster care, but were eventually returned to their mother, who then departed with the children to Wyoming in August of 1983. Following mother’s departure, father petitioned for dissolution of marriage on September 7, 1983.

The petition for temporary custody and temporary investigative authority resulted in a court-ordered custody investigation by Rita Pickering of Lewis & Clark County Human Services. In her report to the court, dated February 17, 1984, Pickering recommended that 1) mother be given custody of the children while she continues professional counseling to improve and monitor her parenting skills, and, 2) father be given supervised visitation rights. Pickering’s report stated that mother had few developed parenting skills, but she had the potential and desire to learn to care for her children. Pickering’s report further stated that father’s “history of poor frustration control” created a potentially dangerous situation for the children.

In August of 1984, mother and father signed a custody agreement which granted mother sole custody of the children ánd granted father supervised visitation rights. On January 16,1985, the court dissolved the parents’ marriage incorporating the custody agreement into the decree. No further action was pursued with regard to the petition for temporary custody and temporary investigative authority, and it was eventually dismissed on July 7, 1987.

From the time of the custody agreement through 1988, father, along with his parents, regularly contested mother’s refusal to grant father supervised visitation rights and questioned if mother was providing adequate care to the girls. These disputes resulted in three petitions to enforce visitation rights. Meanwhile, mother entered a common-law marriage with B.M., a long-haul truck driver, and had three more children: M.M., bom June 16, 1986; A.M., bom Febmary 18, 1988; and T.M., bom August 19, 1989. Mother, B.M. and all the children resided mainly in Idaho and Washington at this time, but eventually moved to Helena in 1989.

In July, 1988, the State filed a second petition for temporary custody and investigative authority based upon an incident involving mother’s brother and his girlfriend of Helena. On July 16, 1988, mother and B.M. left the children (except T.M., who was not yet born), with mother’s brother and his girlfriend so mother could accompany B.M. on a long-haul tmcking trip. Mother assured her brother that they would return in several days. She gave her brother and his girlfriend $20.00 to cover the costs associated with the children’s care, and left clothing for the children, some covered with human feces and so filthy that the clothing was discarded. Additionally, T.N. had head lice, which had been left untreated by mother. Mother and B.M. did not return for the children for one month.

Following a preliminary investigation, records of the Department revealed that several reports of neglect and abuse were lodged against the family while living in Idaho and that Idaho welfare workers reported a consistent lack of success in working with mother and B.M. to remedy the problems.

On August 4,1988, the District Court granted the State temporary custody of all the children and temporary investigative authority. B.N. and T.N. were placed in foster care with their paternal grandparents. In December of 1988, all parties stipulated to the entry of a treatment plan. B.M. and mother recovered custody of M.M. andA.M. a few days before Christmas of 1988. On January 18, 1989, the District Court adjudicated all the children as youths in need of care.

B.M. and mother once again became parents when T.M. was born on August 19, 1989. Following his birth, the treatment plan was extended to include T.M. as well. Currently, mother and B.M. continue to have custody of M.M., A.M., and T.M., and are complying with the treatment plan. The District Court approved the treatment plan on March 14, 1989.

Mother and B.M., however, did not recover physical custody of B.N. and T.N., and they continued to reside in the home of their paternal grandparents until October 27, 1989. While living with their grandparents, the girls began therapy with Mary Grace Black, a licensed clinical social worker, who assessed that both girls had suffered physical, emotional, and sexual abuse while residing with their mother and B.M. While living with their grandparents, the girls’ school attendance and performance improved; however, further problems ensued.

Initially, father resided with the paternal grandparents when they assumed physical custody of the girls. However, following the children’s disclosures that father sexually abused them, father was forced to move out of the grandparents’ home. The children were then removed from the paternal grandparents’ home on October 27,1989, when it was discovered that, on one occasion, they had allowed father to see the children unsupervised following the children’s disclosures of sexual abuse. Currently, T.N. and B.N. are living with a maternal aunt in Billings. According to Mary Grace Black, the children are continually improving emotionally and are responding well to their new environment.

The State petitioned to terminate parental rights of mother and father on November 7,1989. A hearing was held in District Court on January 25, January 30, and February 2, 1990. Several witnesses testified that they felt that mother and B.M. need longterm counseling, that it was doubtful that mother could be an effective parent to all five of her children at this time, and that father was not capable of parenting B.N. and T.N. at this time.

On March 20, 1990, the District Court terminated the parental custodial rights of mother, father and B.M. and awarded permanent custody of B.N. and T.N. to the Montana Department of Family Services. The District Court granted visitation rights to the parents and paternal grandparents under the supervision and directives of the Lewis and Clark Department of Family Services. From this decision, mother, father, and the paternal grandparents appeal.

Did the record lack substantial evidence to support the District Court’s order to terminate the natural parents’ custodial rights of their two children?

The District Court ordered that “[t]he parental custodial rights of [mother, father, and B.M.] in and to the youths, [B.N. and T.N.], and to their property, are hereby terminated.” (Emphasis added.) The court then awarded “permanent legal custody’ to the Department and gave the Department the right to place the children in foster care. The court also awarded supervised visitation rights to the parents and grandparents.

The State, in its brief, properly addresses that, upon a superficial reading of the order, confusion exists with regard to the District Court’s intent — did the court intend to terminate the parties’ parental rights or did the court intend to grant the State long-term custody? Termination of parental rights involves severing the parent- child legal relationship and after such action, the parents have no right to notice or consent to the adoption of the child. Section 41- 3-611, MCA. And, the term “permanent custody” vests the person or agency with such custody the right to “consent to the adoption of [the child].” 11.5.508, ARM. Furthermore, under § 41-3-609, MCA, three requirements must be satisfied to terminate parental rights: 1) the child must be adjudicated a youth in need of care, 2) a court-approved treatment plan must be violated or deemed unsuccessful, and 3) the conduct or condition causing the problem cannot be rectified within a reasonable amount of time. The termination of parental rights results in the natural parents losing all rights to the child, including visitation rights. Section 41-3-611(1), MCA; Matter of C.P. (1986), 221 Mont. 180, 183, 717 P.2d 1093, 1095.

An award of long-term custody, however, does not fully sever a parent’s rights with regard to the child:

“An award of long-term custody does not totally terminate the rights of the natural parent. In the present case, although mother’s visitation rights are restricted, she may still visit her child, and may possibly petition for less restricted visitation in the future. Additionally, mother may at some point in the future petition the District Court to regain custody of R.T.L.P.”

Matter of R.T.L.P. (1989), 238 Mont. 384, 391, 777 P.2d, 892, 896. Under § 41-3-406, MCA, an award of long-term custody to the State only requires that the child be found to be “abused, neglected or dependent.” The pertinent term to these facts, “abused or neglected child,” is defined as “a child whose normal physical or mental health or welfare is harmed or threatened with harm by the acts or omissions of his parent or other person responsible for his welfare. Section 41-3-102(2), MCA.

Upon reviewing the record, it is clear that neither the State nor the District Court intended to fully sever the parties’ parental rights to B.N. and T.N., although the court unfortunately used the words “termination” and “permanent custody” in its order. During the hearing, the State asserted that in its request for permanent custody, it did not “envision a total termination of the parental rights of either the father or the mother,” and recognized the necessity of continued visitation with the parents and grandparents. The District Court awarded supervised visitation rights to mother, father and paternal grandparents, this visitation award being inconsistent with terminating parental rights. And, in its conclusions of law, the District Court cited § 41-3-406, MCA, the statute providing for long-term custody, as authority for its actions. Most noteworthy, as the State asserts in its brief, the District Court’s order did not authorize the Department to allow the adoption of B.N. and T.N.; the order merely gave the Department custody of the children.

Based on the above we hold that the District Court in its order, intended to grant the State long-term custody. Accordingly, substantial evidence must exist in the record to support the premise that the children were abused, neglected, or dependent under §§ 41-3-102(2), and 41-3-406, MCA. Clearly, the ten-year history of family turmoil as previously recited in this opinion provides substantial, if not overwhelming evidence that B.N. and T.N. were abused, neglected or dependent while in the custody of mother. In fact, we believe that the evidence supports terminating the parental rights of mother and father, even though this harsher result was not the District Court’s intent.

And unfortunately, while evidence reflects that the paternal grandparents made a noble attempt to provide a stable environment to the girls while in their foster care, evidence also reflects that because of father’s accessibility to the children and the bad relations between mother’s and father’s families, the children’s physical or mental health or welfare are threatened with harm. Therefore, the children still qualified as abused, neglected, or dependent. Furthermore, it is the child’s best interest, not the parents’ or grandparents, that is the paramount concern in child custody matters. Matter of V.B. (1987), 229 Mont. 133, 136, 744 P.2d 1248, 1250 (Citations omitted). From reviewing the record, we believe that at the present time, it is in the best interest of B.N. and T.N. to be placed in a foster home. We therefore affirm the District Court’s order.

Affirmed.

JUSTICES HARRISON, BARZ, HUNT and MCDONOUGH concur.