text:
    ROBERT O’CONNOR, Plaintiff and Appellant, v. J.R. LEWIS, E.A. Atkinson and Riverside Investment, Defendants and Respondents.
    No. 88-205.
    Submitted on Briefs June 30, 1989.
    Decided July 25, 1989.
    776 P.2d 1228.

      Bruce E. Lee, Billings, for plaintiff and appellant.
    Karl G. Knuchel, Knuchel & McGregor, Livingston, for defendants and respondents.
   MR. JUSTICE GULBRANDSON

delivered the Opinion of the Court.

The plaintiff, Robert O’Connor, brought an action based upon a contract seeking $55,000 plus interest from the defendants, J.R. Lewis, E.A. Atkinson, and Riverside Investment. Plaintiff also sought to foreclose on an alleged equitable mortgage on the MN Ranch or, in the alternative, to set aside the transfer of the MN Ranch as fraudulent upon creditors. The District Court of the Fourteenth Judicial District, Musselshell County, found in part that plaintiff held no security or equitable interest in the MN Ranch and that the transfer of the MN Ranch was not fraudulent as to creditors. Plaintiff appeals. We affirm.

The following two issues are presented for review:

1. Did the District Court err in finding that the plaintiff did not hold an equitable mortgage nor a vendor lien in the MN Ranch?

2. Did the District Court err in finding that the transfer of the MN Ranch from one defendant to another was not fraudulent as to creditors?

In 1979, J.R. Lewis, the defendant, and Robert O’Connor, the plaintiff and the half-nephew of Lewis, joined together in an effort to develop a housing project in Decker, Montana. The understanding between the two parties was that Lewis would provide the money for the project and O’Connor would draft plans, confer with public authorities, and hire and supervise contractors and laborers. Both parties also understood that any profits from the development project would be divided between them. The parties established a joint checking account in which Lewis would deposit the necessary money to fund the housing project. Initially, the parties lived on and operated from the Murphy Ranch that Lewis was purchasing.

The housing development project eventually failed, yet O’Connor remained on the ranch and acted as a ranch hand. Lewis eventually realized that he was about to lose the Murphy Ranch and therefore instructed O’Connor to locate and purchase another ranch smaller in size in which he could move his livestock and equipment. O’Connor negotiated and ultimately purchased the MN Ranch with funds provided by Lewis. Lewis did not enter into any of the conferences or negotiations regarding the purchase of the MN Ranch. Without informing Lewis, O’Connor instructed the real estate agent to put his name on the deed to the MN Ranch. Lewis was not immediately aware of this action by O’Connor.

O’Connor eventually moved all of Lewis’s livestock and equipment to the new location. Lewis was not present at the MN Ranch much of the time, either because of illness or because of his business venture in Alaska. In the meantime, O’Connor proceeded to improve the MN Ranch. He designed and arranged for the construction of fences, water and sewer lines, corrals, a shop building, a small office building, a horse barn and a house. O’Connor issued checks for these expenditures from the joint bank account funded by Lewis.

In May, 1984, Lewis and O’Connor disagreed over personal matters and the status of the MN Ranch. In an effort to resolve their disputes, Lewis and O’Connor met in the Musselshell County Courthouse on May 14, 1984 and negotiated and executed a document titled “Agreement to Settle Dispute.” The Agreement provided that Lewis would pay O’Connor $20,000 at the execution of the agreement, $30,000 on or before June 5, 1984, and $25,000 at a time not expressly stated in the Agreement. In consideration for the payment, O’Connor executed and delivered to Lewis a quitclaim deed to the MN Ranch. Shortly thereafter, Lewis deeded the MN Ranch to E.A. Atkinson. Atkinson, now the wife of Lewis, recorded the deed on the same day, May 14 , 1984.

Lewis paid O’Connor the $20,000 at the execution of the agreement, but did not pay the remaining $55,000 as agreed upon and as specified in the “Agreement to Settle Dispute.” O’Connor therefore brought an action against the defendants seeking the remaining amount due, and seeking to foreclose on an alleged equitable mortgage or vendor lien on the MN Ranch, or in the alternative to set aside the transfer of the MN Ranch from Lewis to Atkinson as fraudulent to creditors. In its March 13, 1988 judgment, the District Court ordered Lewis to pay the principal sum of $55,000 together with interest of six percent per annum from May 14, 1984 to October 1, 1985 and the rate of ten percent per annum from October 1, 1985 and until paid. The District Court also ordered Lewis to pay the costs of the suit in the amount of $1,673.20. The District Court found that O’Connor did not have an equitable mortgage in the MN Ranch nor did Lewis transfer the MN Ranch for the purpose of defrauding creditors. O’Connor appeals the District Court’s findings regarding the equitable mortgage and the transfer of the MN Ranch.

The first issue raised on appeal is whether the District Court erred in finding that O’Connor did not hold an equitable mortgage nor a vendor lien in the MN Ranch.

O’Connor argues that the quitclaim deed and the “Agreement to Settle Dispute,” when construed together, constitute a bungled lay attempt at creating a mortgage at law. O’Connor then argues that while the documents do not constitute a mortgage as required by the statute, § 71-1-107, MCA, they nonetheless constitute an equitable mortgage. We disagree.

The quitclaim deed, dated May 14, 1984, states that in consideration for the sum of ten and no/100 dollars ($10.00), Robert O’Connor conveys, remises, releases and forever quitclaims unto J.R. Lewis and to his heirs, and assigns all right, title and interest in and to the subject real estate situated in Musselshell County, Montana. The pertinent portions of the “Agreement to Settle Dispute” states that

“the parties agree to the following statement setting out the mutual promises and obligations thereto:

“1. Conditioned specifically on the performance of Lewis set forth below, O’Connor shall quit claim all his right, title, and interest without warranty to the . . . [MN Ranch] located in Musselshell County, Montana ....
“This quit claim also applies to chattels and articles of personal property . . . .”

The agreement further specified that Lewis shall pay O’Connor a total of $75,000, $20,000 at the execution of the agreement, $30,000 on or before June 5, 1984, and $25,000 at a time not expressly stated in the agreement. This agreement was also dated May 14, 1984.

The nature of the transaction between O’Connor and Lewis depends upon the parties’ intent at the time the documents were executed. In establishing this intent, the courts first must examine both the documents and the circumstances surrounding the execution of documents. Boysun v. Boysun (1962), 140 Mont. 85, 88, 368 P.2d 439, 440. O’Connor argues that the language “ [conditioned specifically on the performance of Lewis set forth below, O’Connor shall quit claim all his right, title, and interest without warranty to Lewis . ...” is a reservation by O’Connor or a grant by Lewis of security. The transaction that occurred between the parties and the circumstances surrounding the transaction do not warrant such a conclusion.

The record is undisputed that O’Connor negotiated and purchased the MN Ranch in response to Lewis’s request and with money provided by Lewis. The record also shows that O’Connor directed the real estate agent to put the title of the MN Ranch in his name without Lewis’s permission. Lewis was thus not immediately aware of this action by O’Connor. The record also clearly shows that a disagreement arose between Lewis and O’Connor over personal matters and over the status of the MN Ranch which prompted them to execute the “Agreement to Settle Dispute.”

The facts outlined above, contrary to O’Connor’s assertions, do not give O’Connor a security in the MN Ranch in the form of an equitable mortgage. While this Court recognizes equitable mortgages, see, e.g., Bermes v. Sylling (1978), 179 Mont. 448, 587 P.2d 377; Amsterdam Lumber, Inc. v. Dyksterhouse (1978), 179 Mont. 133, 586 P.2d 705, the facts in this case do not warrant the application of this doctrine. An equitable lien, or equitable mortgage, will be invoked by the courts when an intended security interest proves defective. The application of this doctrine therefore prevents the lender from suffering an inequitable loss. Amsterdam Lumber, Inc., 179 Mont, at 140, 586 P.2d at 709. However, written evidence must exist which indicates that the grantor’s intent was to subject the real property to a security interest in favor of a lender. Amsterdam Lumber, Inc., 179 Mont, at 140, 586 P.2d at 709.

In the present case, the undisputed facts indicate that the parties’ intent behind the execution of the documents was to settle a dispute between them, hence the title of the document “Agreement to Settle Dispute.” Although O’Connor agrees that this set of facts is not the typical situation in which a court would invoke an equitable mortgage, he nonetheless attempts to argue that the “ideology” behind an equitable mortgage should be applied in this case. We cannot agree. The purpose behind an equitable mortgage is to prevent an inequitable outcome. In light of the documents and the surrounding circumstances, an inequity has not resulted in this case. Further, the facts do not suggest that the parties ever intended to invest a security interest in O’Connor. On the contrary, the facts indicate that neither a sale nor a mortgage was intended by the parties, but instead a contract that settled the disputes between the parties. Therefore, as the District Court correctly stated, the only question remaining is whether the “Agreement to Settle Dispute” is valid.

In determining that the Agreement was valid, the District Court found that the Agreement contained an offer, an acceptance, consideration and that neither party was incompetent nor acting under undue influence. The District Court therefore concluded that the Agreement was a binding and valid contract. The evidence clearly supports the District Court’s findings and conclusions. We therefore hold that the District Court did not err in determining that a valid contract existed and that O’Connor did not hold an equitable mortgage in the MN Ranch.

Plaintiff also attempts to argue that if this Court determines that an equitable mortgage did not exist, then it should nonetheless find that an equitable lien arises by virtue of § 71-3-1301, MCA. Notwithstanding the inherent problem with O’Connor’s argument — an “equitable” lien arising by virtue of a statute — O’Connor’s vendor lien argument also fails for the same reason as outlined above. The transaction involved in this case involves neither a sale nor a mortgage, but merely an agreement to settle a dispute. Thus we hold that the District Court did not err in finding that O’Connor held no security interest whatsoever in the MN Ranch.

The second issue raised on appeal is whether the District Court erred in finding that the transfer of the MN Ranch from one defendant to another was not fraudulent as to creditors.

O’Connor argues that the District Court erred when it found that the transfer of the MN Ranch from Lewis to Atkinson was not fraudulent. Specifically, O’Connor argues that the District Court erroneously relied upon § 31-2-311, MCA, instead of § 31-2-314, MCA, and therefore the District Court failed to determine whether Lewis conveyed the MN Ranch with the intent to defraud creditors.

Section 31-2-311, MCA, states that “[e]very conveyance made . . . by a person who is or will be thereby rendered insolvent is fraudulent as to creditors without regard to his actual intent if the conveyance is made . . . without a fair consideration.” The District Court found that O’Connor did not demonstrate that the “transfer was made for the purpose, or had the effect, of rendering the Defendant J.R. Lewis insolvent.” The record clearly supports this finding. O’Connor does not dispute this finding, but instead argues that the District Court erroneously applied § 31-2-311, MCA, to this case in lieu of § 31-2-314, MCA.

Section 31-2-314, MCA, states that “[e]very conveyance made . . . with actual intent, as distinguished from intent presumed in law, to hinder, delay or defraud either present or future creditors is fraudulent as to both present and future creditors.” O’Connor then argues that the evidence indicates that Lewis had actual intent “to hinder, delay, or defraud” creditors. We disagree.

O’Connor correctly notes that actual fraudulent intent may be established by circumstantial evidence. Montana Nat’l Bank v. Michels (Mont. 1981), [_Mont__,] 631 P.2d 1260,1262-63, 38 St.Rep. 334, 337. O’Connor then relies upon the “badges of fraud,” which this Court has previously applied when determining whether a conveyance is fraudulent and therefore whether it should be set aside. These “badges of fraud” include lack of consideration for the conveyance, transfer of the debtor’s estate, relationship between transferor and transferee, pendency or threat of litigation, secrecy or hurried transaction, insolvency or indebtedness of the transferor, departure from the usual method of business, the retention by the debtor of possession of the property, and the reservation of benefit to the transferor. Montana Nat’l Bank, [_Mont, at_,] 631 P.2d at 1263, 38 St.Rep. at 337. However, we must emphasize that these “badges of fraud,” if found, do not necessarily constitute fraud per se, but instead merely afford grounds of inference from which the court or jury are authorized to conclude that a transaction surrounded by them is fraudulent. Montana Nat’l Bank, [_Mont. at_,] 631 P.2d at 1263, 38 St.Rep. at 337 (citing Humbird v. Arnet (1935), 99 Mont. 499, 512, 44 P.2d 756, 761). Despite O’Connor’s assertions that the majority of these badges are met in this case, the record supports the findings and conclusions of the District Court that Lewis did not convey the MN Ranch with the intent to defraud creditors. We therefore affirm the District Court.

Affirmed.

MR. CHIEF JUSTICE TURNAGE and MR. JUSTICES SHEEHY, HUNT and McDONOUGH concur.


source: Caselaw Access Project

author: MR. CHIEF JUSTICE TURNAGE

license: Public Domain

text:
    R.H. GROVER, INC., a Montana corporation, Plaintiff, Respondent and Cross-Appellant, v. FLYNN INSURANCE COMPANY, a Montana corporation, Defendant and Appellant.
    No. 88-441.
    Submitted July 20, 1989.
    Decided July 25, 1989.
    Rehearing Denied Aug. 11, 1989.
    777 P.2d 338.

      Jardine, Stephenson, Blewett & Weaver; William D. Jacobsen argued, Great Falls, for defendant and appellant.
    Worden, Thane & Haines, Martin King argued, Missoula, for plaintiff, respondent and cross-appellant.
   MR. CHIEF JUSTICE TURNAGE

delivered the Opinion of the Court.

Defendant Flynn Insurance appeals a jury verdict and judgment entered in favor of plaintiff in the Fourth Judicial District, Missoula County. The jury returned a verdict March 22, 1988, in the amount of $106,866, to which the district judge added $54,194.28 in prejudgment interest. The District Court denied Flynn’s motions for summary judgment, directed verdicts on many issues and for judgment N.O.V. Flynn appeals.

R.H. Grover, Inc. (Grover) cross-appeals the District Court’s denial of Grover’s bill of costs. The District Court found that Grover’s bill of costs in the amount of $4,406.50 was not filed timely under § 25-10-501, MCA.

We affirm.

This case went to the jury on a general verdict form, over the objection of defense counsel, with instructions on the following six separate causes of action:

1) negligent misrepresentation;

2) general negligence;

3) negligent failure to procure insurance;

4) contractual failure to procure insurance;

5) breach of third party beneficiary contract; and

6) promissory estoppel.

Defense counsel moved for directed verdicts, which were denied, on each of the last five claims arguing that plaintiff’s only proper claim was negligent misrepresentation and that it was barred as a matter of law. Defendant continues to dispute the applicability of the last five claims sent to the jury.

Thus, the issues on appeal as stated by defendant’s counsel are as follows:

Whether the District Court committed reversible error by:

“1. Giving the case to the jury on a general verdict form which contained one or more inapplicable legal theories;
“2. Refusing to grant Flynn judgment as a matter of law on Grover’s claim of negligent misrepresentation;
“3. Giving Instruction #15 over objection of defense counsel regarding an agent’s liability;
“4. Refusing Flynn’s proposed Instruction #38 instructing that liability could not exceed the policy limits; and
“5. Allowing Grover $54,194.28 in prejudgment interest.”

The issue on cross-appeal is whether it was error to deny Grover’s bill of costs as untimely.

The following facts are not contested.

Grover is a mechanical and plumbing contractor. In 1978-1979 Grover became associated with Fire Protection Analysis, Inc. (Fire Protection). Grover later subcontracted with Fire Protection for the design of fire protection systems (ceiling sprinklers, etc.) to be installed in four major construction projects around Montana.

Problems later arose with these projects. Grover did not pay Fire Protection in full, asserting that it had incurred extensive costs due to Fire Protection’s errors and omissions. Fire Protection sued Grover for final payment. Grover counterclaimed for damages due to negligence. As a result, Fire Protection allowed a judgment to be entered in favor of Grover in the amount of $106,866 as compensation for those problems.

Prior to design and construction, Fire Protection had procured for Grover a certificate of professional liability insurance (E & 0 coverage) from its insurance agent, Flynn. The certificate was dated August 21, 1979, and listed Grover as the certificate holder, Fire Protection as the insured, policy limits of $400,000 and an expiration date during September of 1980. The certificate specifically listed professional liability insurance issued by CNA Insurance Company as Policy Number AEP 821 357 which covered Fire Protection for its errors and omissions up to $400,000.

The certificate was prepared erroneously by a Flynn employee. Fire Protection did not have professional liability insurance and never had any such coverage or policy.

In exchange for not executing on the judgment against Fire Protection, Grover was assigned all proceeds which may result from Fire Protection’s action against Flynn. Grover then proceeded against Flynn directly.

The issues of legal liability, reliance, and damages were disputed and litigated at trial. Grover later stipulated its damages were $106,866 as evidenced by the judgment in the underlying suit.

I. General Verdict Form

Flynn cites Martin v. N.P. Ry. Co. (1915), 51 Mont. 31, 149 P. 89, for the proposition that it is reversible error to let a verdict rendered on a general verdict form stand if one or more of the legal theories was improper.

In Martin, the plaintiff plead one cause of action (negligence) in four separate counts. The court struck Count III as being too indefinite to impose a duty and submitted the remaining three counts of negligence on a general verdict to the jury which returned a verdict for the plaintiff.

On appeal, this Court held that Counts I and IV likewise should have been stricken for insufficient evidence. In reversing the verdict based on the general verdict form, this Court stated:

“We are unable to agree . . . that if the complaint contains one good count. . . the jurors . . . founded their verdict upon it, rather than upon the counts which fail to state facts sufficient to warrant recovery.
“A fair and impartial trial comprehends a trial upon issues properly submitted, and, when different theories of the same case are placed before a jury, it is impossible to know upon which the general verdict is made to depend.”

Martin, 149 P. at 91.

Flynn argues that this 1915 case is good law in Montana and controls on this issue.

Grover maintains that requiring a general verdict form is within the sound discretion of the trial court, pursuant to Rule 49(a), M.R.Civ.P. (“a court may require a jury to return a special verdict”) and that reversal requires proof of abuse of discretion.

In support of the argument that no abuse of discretion can be shown, Grover argues, first, that all legal theories were properly submitted because credible evidence supported each theory; and second, that if a general verdict contains one viable theory on which the entire verdict could stand, the verdict ought not be reversed. Grover cites Dunlap v. GMC (App. 1983), 136 Ariz. 338, 666 P.2d 83 (“General verdict will be upheld when several counts, issues, or theories are submitted to the jury if the evidence on one count, issue or theory is sufficient to sustain the verdict”); and Jenkins v. C. & E. Ry. (1972), 5 Ill.App.3d 954, 284 N.E.2d 392 (“where several causes of action have been alleged and a general verdict results, the verdict will be sustained against a general motion for directed verdict or a motion N.O.V. if there are one or more good causes of action or counts to support it”). We do not agree.

We conclude that Martin is not controlling on this issue because it was decided prior to the adoption of the new rules of civil procedure in 1961. Therefore, the special verdicts known to courts in 1915 may have been different than those now allowed under Rule 49(a). However, we find the reasoning applied in Martin persuasive and conclude that it was error to submit these six issues to the jury on a general verdict form.

The trial court must allow only those claims supported by the evidence to go to the jury. If there is a factual question as to the applicability or validity of particular claims, the preferred solution is to submit the claims to the jury on a special verdict form as allowed under Rule 49(a). Such procedure makes a record more easily reviewable by this Court, thus protecting the rights of both parties.

A motion for directed verdict is properly granted when there is an absence of any evidence to warrant sending the case to the jury. Britton v. Farmers Ins. Group (1986), 221 Mont. 67, 721 P.2d 303. Under this standard of review we conclude that it was error to submit the last four claims to the jury.

As was argued vehemently by defense counsel during motions for directed verdicts on the last four claims, the record is devoid of the critical elements of a contract. Fundamentally lacking was evidence of offer and acceptance, as well as exchange of consideration between Flynn and Grover, or even between Flynn and Fire Protection regarding the professional liability insurance policy.

The record is clear that in 1979 Fire Protection did not request Flynn to procure professional liability insurance and did not pay any premiums for such a policy. It is impossible to find that Flynn’s erroneous certificate created a “contract” under which they were bound to procure insurance. Thus, the contractual failure to procure insurance claim must fail as a matter of law.

We also conclude based on the foregoing analysis that it is impossible to imply that Flynn had a “duty” to procure insurance under these facts. Issuing the certificate cannot create a “duty” to procure insurance at a later date. Rather, Montana law requires a client’s request to procure certain insurance, followed by an agent’s commitment to do the same to put the agent under a “duty” to procure. Lee v. Andrews (1983), 204 Mont. 527, 667 P.2d 919. The claim of negligent failure to procure insurance also fails for want of proof. Absent a duty, there can be no negligent failure to procure insurance.

The contractual claim for a third-party beneficiary contract likewise fails for lack of evidence regarding the critical elements of a contract under this analysis. The record is devoid of any evidence regarding offer and acceptance, intent to create a contract for Grover’s benefit and consideration. This claim is not supported by the evidence.

Grover also asserted a claim of promissory estoppel. Grover claimed that Flynn’s certificate was a promise that the insurance policy existed. Once Flynn promised that, Grover argues, it should be estopped from denying the same. We do not agree. The certificate cannot be a contract or a promise. Flynn Insurance has promised nothing by issuing the certificate. The promissory estoppel claim likewise should have been dismissed under defendant’s motion for directed verdict for lack of evidence of a “promise.”

Based on the foregoing discussion, we conclude at least these four claims were submitted erroneously to the jury on the general verdict form. This Court disapproves of counsel pleading and urging the submission to juries of claims for which there is no basis in admissible evidence. More certainly, this Court will find error when a trial court allows juries to consider a claim when no law or fact exists in support thereof.

The error committed under the facts of this case was not reversible error.

Rule 61, M.R.Civ.P., provides:

“Harmless error. No error in either the admission or the exclusion of evidence and no error or defect in any ruling or order or in anything done or omitted by the court or by any of the parties is ground for granting a new trial or for setting aside a verdict or for vacating, modifying, or otherwise disturbing a judgment or order, unless refusal to take such action appears to the court inconsistent with substantial justice. The court at every stage of the proceeding must disregard any error or defect in the proceeding which does not affect the substantial rights of the parties.”

Our careful review of the record and analysis of the applicable law as stated above leads us to conclude that the trial judge did not commit reversible error in any of the issues raised by appellant. Therefore, we omit any discussion regarding the contested jury instructions. We affirm the District Court’s judgment and order in its entirety based on the following analysis.

We hold that substantial injustice would occur by denying Grover’s jury verdict based on the remaining two claims: general negligence and negligent misrepresentation. Specifically, we note the record as it refers to general negligence.

Grover asserted that Flynn Insurance committed general negligence which damaged Grover apart from and in addition to the issuance of the faulty certificate. We agree. The record is replete with such evidence: inadequate supervision of an employee new to the job, failure to follow other established internal office procedures which would have caught the error immediately and failure to notify Grover.

The District Court gave the jury instruction No. 40, “You are instructed that Flynn Insurance Agency was negligent.” This instruction was equivalent to a directed verdict on the issue of the negligence of appellant Flynn. Having been directed as a matter of law that they will find Flynn negligent in its issuance of the certificate of professional liability insurance, the jury had only left to decide if there was a causal connection between Flynn’s negligence and Grover’s damages which were stipulated to be $106,866. Based on these facts, we conclude that the jury verdict is based on the law and substantial credible evidence. Reversal of the verdict would constitute substantial injustice to Grover. However, in the absence of a directed verdict on Flynn’s negligence, reversal would be mandated under this general verdict form.

Thus, under the facts of this case, and under the standard set forth in Rule 61, the errors committed by the trial judge regarding the general verdict form were not reversible error.

At this juncture, we must discuss Flynn’s contention that the damage award must still be overturned as a matter of law.

Flynn argues that notwithstanding the directed verdict, Grover is not entitled to any damages because its claims are barred as a matter of law by the statute of limitations. The jury was instructed on the various claims that the applicable limitations were two years (negligent misrepresentation), three years (negligence), five years (oral contract) and eight years (actions founded upon a written instrument). Flynn argues that these instructions were reversible error because all claims should hinge on the two year limitation, which had expired.

Based on our discussions in White v. Lobdell (1984), 208 Mont. 295, 678 P.2d 637, the parties below agreed that the statute of limitations for negligent misrepresentation claims is two years. See White, 678 P.2d at 642 and § 27-2-203, MCA. This limitation begins to run when the plaintiff “discovers” the misrepresentation. Section 27-2-203, MCA. Under Mobley v. Hall (1983), 202 Mont. 227, 657 P.2d 604, “discovery” occurs when the plaintiff acquires such facts as would reasonably prompt inquiry or action.

Grover argues that his March 19, 1984, complaint was filed timely. Regarding the date of discovery, Grover testified to the jury that he did not discover that the certificate was erroneous until 1983, well within the two year limitation. Grover argues that the jury must decide if a claim is time-barred when conflicting evidence as to the date of accrual of the action is presented. Hill v. Squibb (1979), 181 Mont. 199, 592 P.2d 1383. The jury found in favor of Grover and he asserts that this verdict should be upheld.

Flynn asserts that the verdict should be stricken as a matter of law because “discovery” occurred at least by January 1982 and thus the claim was time-barred under the two year limitation. Flynn introduced into evidence a letter dated in January 1982 which was written to Grover by Fire Protection’s attorney. The letter generally sought a settlement rather than a trial of the dispute between Fire Protection and Grover and stated “. . . assuming you win, you will collect nothing since we have no insurance . . .” This letter was all that Flynn introduced regarding “discovery.” From there it made only conclusory arguments that the letter necessarily constituted discovery of such facts as would lead a reasonable person to inquiry. (Regarding this letter, Grover testified that he simply did not understand the letter to mean this certificate which he held was inaccurate.)

In its appellate brief, Flynn further argued that since all of Grover’s claims were based upon Flynn’s erroneous representation, all claims are barred by the same two year statute of limitations which expired in January of 1982, two months prior to Grover’s complaint being filed.

We do not agree. However, we do not find Grover’s version of the events persuasive either.

The liability of Flynn could be characterized properly as founded on an instrument in writing (thus bearing an eight year limitation on the action), however it need not necessarily be characterized so. The action for general negligence (the record is replete with evidence of Flynn’s negligence) is controlled by the three year limitation found in § 27-2-204, MCA. The jury was instructed properly on that limitation. Further, as discussed above, the trial judge directed a verdict on the issue of general or ordinary negligence. We conclude under this analysis that Grover’s action is not barred as a matter of law and that the jury verdict was lawful. We reject Flynn’s plea to overturn the verdict.

II. Prejudgment Interest

Prejudgment interest can be awarded by the trial judge pursuant to § 27-1-211, MCA, when the following three criteria are met: (1) there is an underlying monetary obligation; (2) the amount of recovery is certain or capable of being made certain by calculation; and (3) the right to recovery vests on a particular day.

Flynn asserts that there is no monetary obligation until the jury determines liability. Palmer v. Farmers Insurance Exchange (Mont. 1988), [233 Mont. 515,] 761 P.2d 401, 45 St.Rep. 1694 (“when liability is contested . . . the conditions [of § 27-1-211] fail since no monetary obligation exists until the day the jury determines the degrees of comparative negligence. The right to recover does not vest until the jury returns its verdict.”)

Flynn also asserts that Grover contested the amount of damages as being above and beyond the $106,866 judgment. Flynn contends that Grover is trying to have its cake and eat it too with regard to whether or not these damages are a fixed amount.

Grover distinguishes Palmer in that there are no issues of comparative negligence in the case at bar (thus there would be no later reduction in the damages) and asserts that the fixed amount of the previous judgment on a particular day satisfies this entire statute. The trial court agreed with Grover.

We conclude there is no error in the trial court’s analysis of this issue. The parties stipulated during trial as to the amount of Grover’s damages on the underlying suit (those damages attributable to Fire Protection’s negligence regarding the sprinkler system designs). That amount was reflected in the $106,866 default judgment against Fire Protection. That judgment was rendered December 31, 1982. These facts certainly fulfill all three requirements of § 27-1-211, MCA.

Prejudgment interest was awarded properly.

CROSS-APPEAL

Bill of Costs

Section 25-10-501, MCA, reads in pertinent part:

“The party in whose favor judgment is rendered and who claims his costs must deliver to the clerk and serve upon the adverse party, within 5 days after the verdict or notice of the decision of the court or referee or, if the entry of the judgment on the verdict or decision be stayed, then before such entry is made, a memorandum of the items of his costs and necessary disbursements in the action or proceeding, which memorandum must be verified by the oath of the party, his attorney or agent, or the clerk of his attorney . . .”

Verdict was rendered March 22, 1988, and judgment was entered upon it on March 30, 1988. Grover received the judgment on April 4, 1988, and filed its bill of costs on April 5, 1988.

The District Court struck Grover’s bill as untimely because it was not filed within five days after the verdict. We agree.

Grover relied on Funk v. Robbin (1984), 212 Mont. 437, 689 P.2d 1215, wherein this Court allowed costs under § 25-10-501, MCA, the bill for which was filed long after the decision of the court was rendered. That case quoted Poeppel v. Fisher (1977), 175 Mont. 136, 572 P.2d 912, as follows:

“This Court has held that the five-day period allowed for filing of a memorandum of costs and disbursements is computed from the day the court enters judgment, not from the day the court orally announces its decision.”

Poeppel, 572 P.2d at 1221.

Funk and Poeppel are not controlling on this issue because they involved bench trials. The statute and the case at bar both deal with jury verdicts. By taking matters under advisement, the trial judge has more latitude than a jury as to when it will render its decision. Thus, the announcement of a decision by the bench is not comparable to the jury rendering its decision. Lastly, we note that even in Funk and Poeppel, the bill for costs was filed prior to entry of the judgment.

Grover’s bill was properly stricken.

In summary, we conclude the errors committed by the trial court regarding the general verdict form are not reversible error and therefore, affirm the District Court’s judgment based on the jury verdict. We find no error in the District Court’s other evidentiary rulings. Likewise, the trial court’s rulings awarding prejudgment interest and denying Grover’s bill of costs were correct. The District Court’s judgment is affirmed in its entirety.

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


author: MR. JUSTICE HARRISON

text:
    JAMES P. HEDEGAARD, Claimant and Appellant, v. KNIFE RIVER COAL MINING CO., Employer, and State Compensation Insurance Fund, Defendant and Respondent.
    No. 88-583.
    Submitted on Briefs April 27, 1989.
    Decided July 25, 1989.
    776 P.2d 1225.

      Lloyd E. Hartford, Billings, for claimant and appellant.
    Patricia Bell, Crowley Law Firm, Billings, for defendant and respondent.
   MR. JUSTICE HARRISON

delivered the Opinion of the Court.

Claimant James P. Hedegaard appeals from the Workers’ Compensation Court’s limited conversion of his biweekly benefits to a lump sum award. We affirm in part, reverse in part and remand for proceedings consistent with this opinion.

Claimant is permanently totally disabled as the result of a back injury he suffered in 1980 and for which he has been receiving biweekly disability benefits. In May of 1986, claimant petitioned the Workers’ Compensation Court for a partial lump sum award of $9,181.27 to enable him to pay off the loan on his 1984 Ford LTD. Before the petition was heard, the 1984 Ford was repossessed.

Claimant and his wife were left without reliable transportation when their 1980 Ford Pinto was destroyed by fire. In December, 1987, claimant financed the purchase of a new Buick automobile for approximately $12,900. Additionally, during this time claimant retained new counsel. Claimant’s new attorney failed to amend the petition request of $9,181.27 for an amount sufficient to pay off the new Buick. During the hearing, the Workers’ Compensation Court refused to allow any amendment of the $9,181.27 petition request. However, the court concluded that the claimant was entitled to a lump sum award for the purchase of the 1987 Buick:

“[Finding of Fact]
“8. If the claimant is not awarded the requested lump sum, the 1987 Buick will be repossessed. Claimant and his wife need reliable transportation.
“[Conclusion of Law]
“2. Claimant is entitled to receive an advance on his compensation in the amount of $9,181.27. The insurer may recover the advance by reducing his weekly compensation by $20.00 per week.”

Claimant requested attorney’s fees based upon an hourly fee of $225 multiplied by 171.05 hours which his attorney claims were spent in pursuit of the lump sum award, notwithstanding that his attorney missed at least three deadlines for exchanging exhibits, preparing a final pretrial order and following the court’s orders relative to the issues to be tried. The court denied the request of $38,486.25 in attorney’s fees and awarded an attorney fee based upon the 33% contingent fee agreement.

Claimant presents the following issues for our review:

1. Did the Workers’ Compensation Court abuse its discretion by awarding a partial lump sum advance of $9,181.27, rather than the $12,900 needed to pay off the 1987 Buick?

2. Did the Workers’ Compensation Court abuse its discretion by granting respondent a weekly recoupment of $20 per week from the claimant’s disability benefits?

3. Did the Workers’ Compensation Court abuse its discretion by refusing to award attorney’s fees without considering the documentation at an evidentiary hearing?

Issue No. 1

Did the court abuse its discretion by refusing to award sufficient funds to pay off the 1987 Buick? We conclude it did. The amount awarded, $9,181.27, was initially requested by claimant’s original counsel to pay off the 1984 Ford LTD which was subsequently repossessed. This sum originally included $1,836.25 in attorney’s fees.

Claimant financed the purchase of a new automobile for an amount the court concluded was not unreasonable. The Court also concluded claimant was entitled to a lump sum award because the claimant needed reliable transportation. Additionally, the court awarded the full $9,181.27 for the purchase of the automobile, and made a separate award of attorney’s fees, even though the court earlier refused to allow any amendment of the petition request.

While we recognize the court’s need to require adherence to pretrial orders, the facts of this case do not justify a denial of funds sufficient to pay off the automobile loan. This purpose of the lump sum request was known to the respondent since May of 1986, and no prejudice would have resulted had the court allowed the claimant to amend his petition. Additionally, the court did amend the petition, without objection by respondent, when it awarded the full $9,181.27 toward payment of the automobile loan.

The parties agree that, under these facts, the “best interest” of the claimant test determines whether the lump sum award is proper. In light of the court’s determination that the claimant’s best interests dictate that he is entitled to a lump sum award to pay off his automobile loan, we conclude it was unreasonable and an abuse of discretion to limit the award to an amount which is insufficient to meet that need.

Issue No. 2

Did the Workers’ Compensation Court abuse its discretion in granting respondent a weekly recoupment of $20 per week from the claimant’s disability benefits?

Claimant argues the insurer is only entitled to recoup advances at the distal end of the claim or at the time of full and final settlement. We disagree.

The Workers’ Compensation Court concluded the insurer should be able to recover the advance through a reduction of the biweekly payments. This same conclusion was reached earlier by the Workers’ Compensation Court in Lecher v. Montana Physician’s Service and Fireman’s Fund, WWC No. 8503-2956, Volume VI, No. 325 (filed August 21, 1985). There the court reasoned at Conclusion of Law No. 5:

“It is not sufficient for a claimant to simply request a lump sum with credit to the defendant from the distal end of the claimant’s entitlement. There may be factual situations in the past and in the future where that is an appropriate Court ordered award. However, most claimants are already on an extremely tight budget and simply planning on having a greatly reduced income or no income at some point in the distant future is not debt management nor is it a plan. Generally, claimant should anticipate a biweekly repayment to the defendant over their estimated lifetime entitlement.”

A claimant is not entitled to double recovery of both a lump sum advance and the biweekly payments. Since a lump sum advance is merely the whole or partial conversion of a claimant’s biweekly payments, the insurer is entitled to recover the advance. Additionally, the Workers’ Compensation Judge considered the claimant’s best interests, including his present and future income, and concluded the lump sum advance, offset by a $20 per week recoupment would meet the claimant’s best interests. The Workers’ Compensation Court, quoted Willoughby v. Arthur G. McKee and Co. (1980), 187 Mont. 253, 257, 609 P.2d 700, 702:

“The criteria determinative of the advisability of conversion to a total or partial lump sum award have generally been held to be . . the best interests of the claimant, his family and for the best interests of the public . . [Citations omitted.] The existence of a ‘pressing need’ and/or ‘outstanding indebtedness’ has likewise been held to be relevant criterion . . . [Citation omitted.]”

We conclude the court’s decision was supported by substantial evidence and did not constitute an abuse of discretion when it allowed the insurer a weekly recoupment of the lump sum advance prior to a final settlement.

Issue No. 3

Did the Workers’ Compensation Court abuse its discretion by refusing to award attorney’s fees without considering the documentation at an evidentiary hearing?

On November 3,1988, the court entered its findings of fact, conclusions of law, and judgment in which it awarded claimant reasonable costs and attorney’s fees pursuant to § 39-71-612, MCA. The order read in part:

“If the defendant or the claimant believes the amount due the claimant’s attorney is unreasonable, then each has 30 days from the date of this Order to file a Motion for Evidentiary Hearing Regarding Reasonableness of Attorney Fees . . .
“Thus, unless counsel can convince the Court otherwise, we are inclined to award the 33 percent contingency fee . . .”

On November 23,1988, claimant’s attorney filed a Memorandum of Time and Costs in which he requested $38,486.25 in attorney’s fees and $993.50 in costs, but he did not request an evidentiary hearing. Respondent filed an objection to the Memorandum and requested an evidentiary hearing. On December 8, 1988, the court awarded attorney’s fees based upon the contingency fee agreement and stated that the claimant had not convinced him that any greater fee should be awarded.

Claimant now argues the court abused its discretion because it did not hold an evidentiary hearing on the requested attorney fees. Claimant relies on our recent decision in Honey v. Stoltze Land and Lumber Co. (Mont. 1989), [236 Mont. 86,] 769 P.2d 42, 46 St.Rep. 202, as requiring an evidentiary hearing before attorney’s fees above the contingency agreement may be denied. We disagree.

The requested attorney’s fees in Honey were denied by the Workers’ Compensation Court, without any consideration, simply because the attorney did not request an evidentiary hearing. We reversed because we concluded the claimant’s attorney was not required to request an evidentiary hearing before the court could consider the evidence under the Wight guidelines. Wight v. Hughes Livestock Co., Inc. (1983), 204 Mont. 98, 664 P.2d 303. In the present case, however, the evidence was considered and the court determined the requested fees were unreasonable. There was no abuse of discretion in denying the requested attorney’s fees.

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

MR. CHIEF JUSTICE TURNAGE and MR. JUSTICES SHEEHY, WEBER, GULBRANDSON and HUNT concur.


author: MR. JUSTICE SHEEHY MR. JUSTICE WEBER

text:
    FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF MISSOULA, a Corporation, Plaintiff and Appellant, v. STEVE R. ANDERSON and Jean M. Anderson, Defendants and Respondents.
    No. 89-002.
    Submitted on Briefs April 6, 1989.
    Decided July 25, 1989.
    Rehearing Denied Aug. 25, 1989.
    777 P.2d 1281.

      David J. Dietrich, Boone, Karlberg & Haddon, Missoula, for plaintiff and appellant.
    Samuel M. Warren, Worden, Thane & Haines, Missoula, for defendants and respondents.
   MR. JUSTICE SHEEHY

delivered the Opinion of the Court.

First Federal Savings and Loan Association of Missoula appeals from an order of the District Court, Fourth Judicial District, Missoula County, dismissing First Federal’s complaint to foreclose on a Deed of Trust on real property against Steven R. and Jean M. Anderson.

The principal issue in this case is whether the decision of this Court in First State Bank of Forsyth v. Chunkapura (1987), [226] Mont. [54], 734 P.2d 1203, is applicable to the facts of this case. We hold that Chunkapura applies, and that First Federal Savings and Loan may not procure from the District Court a deficiency judgment on foreclosure of the Deed of Trust in this case.

There is a procedural problem that needs our first attention. First Federal filed its verified complaint in the District Court on November 23, 1987. The complaint alleged that Steve R. Anderson and Jean M. Anderson had delivered over to First Federal Savings and Loan a promissory note for $38,250.00. As security for the note, the Andersons delivered to the American Land Title Company of Missoula, as trustee, a Deed of Trust to real property in the city of Missoula, conditioned on the full performance of the obligations of the promissory note and the Deed of Trust by the Andersons. The Andersons had defaulted in their payments on the note, and on the date of the filing of the complaint, owed to First Federal $34,365.45 with interest at 10% per annum from June 1, 1987. The verified complaint asked for judgment against the Andersons in the amount of the indebtedness not paid, accrued interest, late charges, costs of the suit, and attorney fees.

The verified complaint further prayed that the Deed of Trust be foreclosed as a mortgage on the real property, and that the real property be sold by the county sheriff; that the purchasers at the sale have the right of immediate possession thereto, subject only to the redemption rights of the Andersons; and that if the proceeds of the sale be insufficient to satisfy the judgment as prayed for, that any deficiency remaining be entered as a deficiency judgment against the Andersons.

The Andersons responded to the verified complaint, through their counsel, by filing a motion to dismiss under Rule 12(b)(6), M.R.Civ.P. upon the grounds that the complaint failed to state a claim against the defendants upon which relief could be granted.

Further responding to the motion to dismiss, the Andersons filed an affidavit in which they recited that they had purchased the property in 1978 through a loan procured from First Federal; that for seven years, commencing 1978 and ending January, 1986, the Andersons had used and occupied the dwelling as a principal residence; that for approximately 18 months, while the property was for sale, they had rented the real estate to various individuals to continue to make payments to First Federal; and that in June, 1987, the Andersons decided they could no longer keep the property and requested Federal to accept a deed in lieu of foreclosure. In the meantime, the Andersons had purchased a second home.

First Federal filed a memorandum objecting to the motion to dismiss and in it relied on facts in the Anderson affidavit, including (1) that commencing in January, 1986, the Andersons no longer used or occupied their dwelling as a principal residence; (2) that for approximately 18 additional months they had rented the property to various individuals; and (3) that First Federal’s role was not as a “vendor” but as a lender for the purchase of the property by the Andersons.

First Federal further requested a hearing on the motion to dismiss which the District Court granted and set for November 4, 1988. In the meantime, however, the court issued its opinion and order dismissing the complaint on November 1, 1988.

In rendering its opinion of dismissal, the District Court obviously relied on references to the Andersons’ affidavit, including that the Andérsons had offered to give a deed in lieu of foreclosure; that the Andersons resided in the property for over seven years; and that First Federal was not entitled to a deficiency judgment although the real property was no longer occupied by the original obligors, who were using the real estate as rental property.

The order of dismissal entered by the District Court does not specifically refer to Rule 56, M.R.Civ.P. It is, however, obvious that the District Court had converted a Rule 12(b)(6) motion to dismiss into a Rule 56 motion for summary judgment. This Court has held that when a district court intends to convert a Rule 12 motion to dismiss into a Rule 56 motion for summary judgment, that it should give notice to the parties of its intention to consider materials outside the pleadings. Gebhardt v. D.A. Davidson and Company (1983), 203 Mont. 384, 661 P.2d 855.

It is true that in ordinary circumstances this Court requires that when a district court intends to treat a motion to dismiss as a motion for summary judgment under our Rules of Civil Procedure, that it must first give notice to the parties of its intention to do so. Gebhardt, supra. The reason for our requirement is that opportunity is then given to the party opposing summary judgment or the motion to dismiss to produce additional facts by affidavit or otherwise which would establish a genuine issue of material fact and so preclude summary judgment under Rule 56. In this case, however, First Federal, in responding to the motion to dismiss and the affidavit supplied in connection therewith, adopted from and relied on certain facts from the affidavit on which to base their argument to the District Court that Chunkapura does not apply to this case and that First Federal was entitled to a summary judgment.

Trust indentures (or as they are sometimes known; deeds of trust or trust deeds), used as security instruments in Montana, are creatures of the “Small Tract Financing Act of Montana”, §§ 71-1-301, -321, incl., MCA. From the verified complaint, the facts alleged in the Anderson affidavit as relied on and adopted by First Federal and the applicable statutes gave the court sufficient basis on which to rule as to whether Chunkapura applied in this case. In like manner, these facts are sufficient for this Court to make a ruling on appeal. Although the District Court erred in not giving the notice required that it intended to treat the motion to dismiss as a motion for summary judgment, the matter will not be reversed or remanded to the District Court when the eventual result in the District Court would be the same. In Re Marriage of Cannon (1985), 215 Mont. 272, 697 P.2d 901; Kirby Company of Bozeman, Inc. v. Employment Security Division of Montana (1980), 189 Mont. 1, 614 P.2d 1040.

We proceed now to the principal issue in this case, whether our decision in Chunkapura precludes a deficiency judgment against the Andersons.

The deed of trust in this case was issued pursuant to the authority of the Small Tract Financing Act of Montana, enacted in 1963. In Chunkapura, this Court had occasion to interpret that Act as to whether a deficiency of judgment could be obtained against the borrowers, after a sale of the mortgaged property (for want of a better term, we will refer to the real estate in this case as the “mortgaged property”; under § 71-1-305, MCA, a trust indenture is deemed to be a mortgage on real property and subject to all laws relating to mortgages on real property except to the extent that such laws are inconsistent with the Small Tract Financing Act of Montana). Before the adoption of the Act, there was only one form of mortgage foreclosure in Montana (§ 71-1-222, MCA) and that procedure allowed a deficiency judgment against the mortgagor unless a power of sale was utilized under § 71-1-223, MCA. Chunkapura noted:

“The banking and lending industry came to the legislature in 1963, contending that the ‘one action rule’ and the attendant right of redemption and right of possession rules hampered the financing of improvements on small tracts in Montana because banks and investors were unwilling to invest in mortgages when on default their funds would be tied during the period of redemption. A quid pro quo was proposed to the legislature: the legislators would give up their deficiency rights on default, if the borrowers would give up their rights of possession and redemption. The result was the adoption by the legislature of the Small Tract Financing Act of Montana, originally limited to tracts of three acres, but now may involve tracts as large as fifteen acres.”

734 P.2d at 1205.

This Court held in Chunkapura, that under the Small Tract Financing Act, even though the beneficiary of a trust indenture could foreclose on the trust indenture by judicial procedure as provided by (§ 71-1-304(3), MCA). Nevertheless, the provisions of § 71-1-317, MCA, providing that a deficiency judgment was not allowed, applied to all uses of the trust indenture. On rehearing, we modified that holding saying:

“In Chunkapura, we have before us only a trust deed related to an occupied, single family residential property. It is suggested by amicus First Interstate Bank of Missoula that our opinion should be limited in effect to the kind of security before us in Chunkapura, and similar cases involving residential property. We agree.”

734 P.2d at 1210-1211.

First Federal argues that because the Andersons no longer occupy the property themselves, and in fact, rent the premises, that they are not entitled to the benefit of the Chunkapura holding that deficiency judgments are not allowed. On that point, we disagree with First Federal, and uphold the decision of the District Court that Chunkapura does apply.

When First Federal accepted a trust indenture for the mortgaged property, the trust deed related to an occupied, single-family residential property. At the time of its proposed foreclosure by First Federal, the property remained a single-family residential property, albeit sometimes occupied by renters. The property fits the Chunkapura exception and we hold that First Federal may not obtain a deficiency judgment against the Andersons after the sale of the mortgaged property. Hand in hand with that holding, as in Chunkapura, the Andersons are not entitled either to a right of possession after 10 days from the sale, or to a right of redemption for a period of one year.

First Federal also argues that dismissal of its foreclosure action was improper because First Federal may have wished to foreclose on personal as well as real property, and that the foreclosure action was the vehicle for such action. However, nothing of this appears of record, or in the pleadings, and we give no weight to that argument.

The Andersons also argue that because First Federal supplied the finances which enabled the Andersons to enter into the purchase of the subject property that Andersons are entitled to the protection of § 71-1-232, MCA, which precludes a deficiency judgment on foreclosure of a purchase money mortgage. Our interpretation of that statute is that a mortgagee who is not the vendor of the property, but who assumes the status of a mortgagee to secure a loan used for the purchase is not prohibited from a deficiency judgment under § 71-1-232, MCA. Aetna Life Insurance Company v. Slack (1988), [232] Mont. [250], 756 P.2d 1140.

There is a side issue to this case relating to attorney fees. The Andersons contend that the appeal by First Federal in this case was premature, and that First Federal should have waited to appeal until the court determined the Andersons’ rights to attorney fees after the dismissal. First Federal, on the other hand, contends that the issue of attorney fees was not necessary to the final judgment and that the appeal is not premature.

Neither party is entirely correct on this issue. Under § 71-1-320, MCA, in the event of a foreclosure of a trust deed by advertisement and sale, the total of the reasonable attorney fees and trustee fees shall not exceed 5% of the amount due on the obligation, both principal and interest, at the time of the trustee’s sale. In this case, First Federal had requested attorney fees and alleged the sum of $2,500 as a reasonable fee, in addition to further fees if the case was contested. That request would exceed the 5% limitation in § 71-1-320, MCA. On the basis of reciprocity, § 28-3-704, MCA, the Andersons are entitled to reasonable attorney fees in the District Court and on appeal, to be fixed by the District Court, in addition to the usual costs. On foreclosure, First Federal is entitled to its attorney and trustee fees granted by § 71-1-320, MCA.

The order of dismissal by the District Court is affirmed.

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

MR. JUSTICE WEBER

specially concurs and dissents as follows:

I have reviewed Chunkapura. While I dissented, I agree with the majority conclusion that a deficiency judgment is not allowed in the present case under the precedent of Chunkapura.

The majority opinion quotes from that portion of Chunkapura which noted that the banking and lending industry came to the legislature in 1963 and proposed a quid pro quo under which the banking industry would give up deficiency rights in return for the giving up by borrowers of the right of possession and redemption. I conclude that the record in the present case and the record in Chunkapura do not demonstrate the presence of any such exchange. I have reviewed the Small Tract Financing Act and find nothing to indicate any such quid pro quo. I dissent from the conclusion based on a claimed exchange of benefits which is not substantiated by the record.

I also dissent from the conclusion that First Federal is only entitled to attorney fees and trustee fees in the aggregate not exceeding 5% of the amount due on the obligation. Section 71-1-320, MCA, in relevant part states:

“Reasonable trustees’ fees and attorneys’ fees to be charged to the grantor in the event of foreclosure by advertisement and sale shall not exceed, in the aggregate, 5% of the amount due on the obligation, both principal and interest, at the time of the trustee’s sale.” (Emphasis supplied.)

The statutes demonstrate that the 5% limitation applies only where the lender seeks to foreclose by advertisement and sale through a trustee under a deed of trust. That was not the procedure followed in the present case. Here the complaint was filed in the District Court for judicial foreclosure. The statutes allow First Federal to proceed through judicial foreclosure as described in § 71-1-311, MCA. First Federal here was entitled to proceed with judicial foreclosure even though Chunkapura may establish a limitation on deficiency judgment. The summary judgment denied that procedure to First Federal. The effect of the decision is to dismiss the judicial foreclosure which does not have a 5% limitation and then to apply the limitation. I do not agree with that reasoning.

MR. JUSTICE GULBRANDSON joins in the foregoing dissent.


author: MR. JUSTICE GULBRANDSON

text:
    LILLIAN H. MABERRY; William K. McBurney and Ethel E. McBurney, husband and wife; and John W. McBurney and Sally D. McBurney, husband and wife, Plaintiffs and Appellants, v. GARY W. GUETHS and Eva E. Gueths, husband and wife, Defendants and Respondents.
    No. 89-19.
    Submitted on Briefs June 8, 1989.
    Decided July 25, 1989.
    Rehearing Denied Aug. 25, 1989.
    777 P.2d 1285.

      J.H. Morrow, Morrow, Sedivy & Bennett, P.C., Bozeman, for plaintiffs and appellants.
    Torger Oaas, Lewistown, Sherman V. Lohn, of counsel, Missoula, for defendants and respondents.
   MR. JUSTICE GULBRANDSON

delivered the Opinion of the Court.

Appellants sought a District Court order declaring void deeds by which respondents the Gueths claimed title to portions of certain abandoned railway lines. The District Court for the Tenth Judicial District, Fergus County, ruled that the Gueths held fee simple title to the property. We affirm.

The issues are:

1. Did the trial court err in finding that the railroad held fee title to the land, and not only a right-of-way easement?

2. Did the trial court err in not finding that the Gueths were collaterally estopped from claiming fee title to the land in question?

3. Did the trial court err in failing to grant appellants’ motions to amend findings, for new trial, and to alter the judgment?

The appellants own land in Fergus County, Montana, across which a railroad line has existed since about the year 1912. In 1978, the Chicago, Milwaukee, St. Paul and Pacific Railroad Company (railroad company) filed for bankruptcy and was authorized to abandon all railroad lines west of Miles City, Montana, including this line. The railroad tracks, ties, and other improvements were removed. The Gueths, through the bankruptcy court, obtained a deed to the abandoned property from the railroad company.

Appellants filed a complaint in District Court, alleging that the railroad company held the lands in question as an easement for railroad purposes and that the abandonment of the lands for railroad purposes resulted in a reversion to them, the adjoining landowners. The Gueths’ position was that the railroad held a fee simple estate in the land and that the use or non-use of the property for railroad purposes had no bearing on the railroad’s interest in the land. Basing its decision on the language of the deeds by which the railroad claimed title, the court ruled in favor of the Gueths.

I.

Did the trial court err in finding that the railroad held fee title to the land, and not only a right-of-way easement?

The appellants cite Chicago, M. & St. P. Ry. Co. v. Portland (1918), 54 Mont. 497, 172 P. 541, as authority. In that case, this Court held that a strip of land owned by the railroad company in Lewistown was a mere easement. Appellants argue that the railroad company should not be allowed to have claimed in that case that its interest was a mere easement and to claim in this case that its interest is a title in fee. However, the appellants have not shown that the instrument of conveyance in Chicago was any of the three deeds involved here. Also, Chicago involved a portion of a railroad line which crossed a public street, not privately-owned land. That aspect was one reason given for the result reached by the Court.

The appellants also cite a number of cases from other states which have held that once a railroad abandons a strip of land for railroad purposes, title to the strip reverts to the owners of the adjacent land. But there is a split of authority on this question, depending in many cases upon the particular language of the conveyance involved. As discussed at Annot., 6 A.L.R.3d. 973, 976-77 (1966):

“Most cases dealing with conveyances to railroad companies fall into two general categories: (1) Those that grant ‘land’ and those that grant a ‘right.’ In the former group are those which contain language by which the grantor grants and conveys a strip, piece, parcel, or belt of land. In the latter group are those in which the language purports to convey a right of way, or other right or privilege with respect to using the property ....
“The courts have found little difficulty with those conveyances whereby a grantor, by appropriate words of conveyance, unqualifiedly conveyed a strip of land to a railroad in the usual form of conveyance, nor have they generally found difficulty with those where a properly described right of way or easement over a designated tract of land was granted in the instrument of conveyance
“There appears to be considerable conflict in the cases as to the construction of deeds purporting to convey land, where there is also a reference to a right of way. Some of the conflict may arise by virtue of the twofold meaning of the term ‘right of way,’ as referring both to land and to a right of passage. In some cases, particularly where the reference to right of way is in the granting clause, or where there are other relevant factors, the courts have held that an easement only was intended. In other cases, the deed is held to convey a fee simple estate in the land, the courts generally basing their holdings on the ground that the granting clause governs other clauses in the deed, that the reference to right of way did not make the deed ambiguous (therefore barring extrinsic evidence from consideration), or that the reference to right of way was to land and did not relate to the quality of the estate conveyed.

Other cases purporting to grant land contain language relating to the purpose for which the land conveyed is to be used. Some cases hold that such language is merely descriptive of the use to which the land is to be put and has no effect to limit or restrict the estate conveyed; in others, the position is taken that such language indicates an intention to convey an easement only and not a fee. Many cases appear to turn upon the nature of the reference to purpose, the location of the reference in the deed, and the presence of other factors and provisions bearing on the question of intent.”

The appellants point out that the subject deeds refer, in their legal descriptions of the strip of property, to the strip as one hundred feet wide and “50 feet of such width on each side of the centerline of the railway.” The legal descriptions also refer to the strip as “the above described Right of Way.” However, there are several aspects of the deeds which lead us to conclude that they conveyed land, not easements. The granting and habendum clauses refer to land, not a right, The trial court quoted the granting clause of one of the deeds, which read:

“. . . has granted bargained, sold, and conveyed, and by these presents does grant, bargain, sell, and convey unto the said party of the second part, its successors and assigns forever, all that certain strip, belt, or piece of land lying and being in Fergus County, Montana, particularly described as follows, to-wit:”

The trial court stated, and the record confirms, that the other two deeds contain granting clauses identical to the one quoted in all material respects. The court noted that none of the granting clauses contain language limiting the title conveyed to anything other than an estate in fee. The trial court concluded that the deeds were general form warranty deeds of the type used in the unrestricted transfer of real property in Montana.

The court also quoted the habendum clause of one of the three deeds, which it stated is identical in all material respects to the habendum clauses of the other two deeds. The record supports that statement. The quoted clause was:

“Together with all and singular tenements, hereditaments and appurtenances, thereunto belonging or in anywise appertaining. TO HAVE AND TO HOLD, all and singular, the said premises, together with the appurtenances unto said second party, and to its successors and assigns FOREVER.”

The court stated that under Montana law, use of language like that used in the habendum clause is evidence of an intent to convey a fee simple estate.

The language relating to use as a railroad right of way is merely descriptive as to use and not as a limitation on the grant. We conclude that the references upon which appellants rely do not overcome the clear intent of the granting clauses and the habendum clauses that the railroad receive title in fee. We hold that the District Court did not err in concluding that the railroad company held fee title to the land.

II.

Did the trial court err in not finding that the Gueths were collaterally estopped from claiming fee title to the land in question?

Appellants base this argument on the Chicago case. They assert that Chicago represents a final judgment on the issue in dispute here, and that the Gueths are in privity with the railway company involved in that case. But as discussed above under Issue I, the Chicago case has not been shown to have involved the same deeds as those involved here and, unlike this case, it involved a portion of a railroad line crossing a public street. We hold that the trial court did not err in holding the Gueths were not collaterally estopped from claiming fee title to the property.

III.

Did the trial court err in failing to grant appellants’ motions to amend findings, for new trial, and to alter the judgment?

Following the District Court’s entry of judgment in this case, appellants filed and served their combined motions to amend findings, for new trial, and to alter the judgment. The Gueths did not file a response to the motions within the ten days allowed under Rule 59(c), M.R.Civ.P. Appellants moved the court that the motions be deemed admitted and well-taken as allowed under Rule 2(b) of the Uniform District Court Rules. In response to a notice of hearing on the motions, the Gueths filed a brief and it was agreed that the matter would be submitted to the court without oral argument. The court then denied the motions. Appellants argue that this denial was error under the rules.

Rule 2(b), Uniform District Court Rules, provides:

“Failure to File Briefs. Failure to file Briefs may subject the motion to summary ruling. Failure to file a Brief within five days by the moving party shall be deemed an admission that the motion is without merit. Failure to file an Answer Brief by the adverse party within ten days shall be deemed an admission that the motion is well taken. Reply Briefs by movant are optional and failure to file will not subject a motion to summary ruling.”

While the Gueths’ failure to file a brief in the time allowed them is, under Rule 2(b), to be viewed as an admission by them that the motions are well-taken, the rule does not require the District Court to grant the unanswered motions. The rule states that failure to file a brief “may” subject such a motion to summary ruling. We hold that the rule does not remove the discretion of the District Court to grant or deny unanswered motions as it sees fit.

Affirmed.

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


author: MR. JUSTICE SHEEHY MR. JUSTICE McDONOUGH, MR. JUSTICE HUNT,

text:
    STATE EX REL., GREAT FALLS TRIBUNE COMPANY, INC., a Montana corporation, Applicant, v. MONTANA EIGHTH JUDICIAL DISTRICT COURT, CASCADE COUNTY, Hon. John M. McCarvel, District Judge, Respondent. STATE EX REL., GREAT FALLS TRIBUNE COMPANY, INC., a Montana corporation, Applicant, v. DISTRICT COURT, CASCADE COUNTY, Hon. John M. McCarvel, District Judge, Respondent.
    No. 89-67 and 89-94.
    Submitted July 13, 1989.
    Decided July 26, 1989.
    777 P.2d 345.

      Peter Michael Meloy argued, Meloy Law Firm, Helena, for applicant.
    Marc Racicot, Atty. Gen., Dorothy McCarter argued, Asst. Atty. Gen., Helena, Patrick L. Paul, County Atty., Great Falls, Russell K. Jones and Keith Douglass, Spokane, Wash., for respondent.
   MR. JUSTICE SHEEHY

delivered the Opinion of the Court.

In these consolidated cases, we conclude that under Montana law, the public and press have a right of access to attend judicial hearings conducted to determine whether probation rights of convicted persons should be revoked; but that in a proper case such as this, a district court may close such a judicial hearing to the public and press under state law without thereby offending the federal constitution. When such hearings are properly closed to the public and press, no member of the public or representative of the press may interrupt the due course of such a hearing in a manner which might defeat the reason for closure. Such an interruption of a properly closed judicial hearing constitutes a contempt of the court.

Cause No. 89-067 arises from an underlying judicial proceeding in the District Court, Eighth Judicial District, Cascade County, wherein the Hon. John M. McCarvel, was presiding. On a date purposely not specified here, District Judge McCarvel ordered that a proceeding for the revocation of the probation of a certain person be closed to the public. After the incidents occurred which are reported hereafter, the Great Falls Tribune, a corporation distributing a newspaper in Great Falls, Montana, filed its application in this Court for a writ of supervisory control directed against the District Court to order the transcript of the revocation hearing to be made available to the Tribune, and to direct the district Judge to refrain and desist from closing future revocation proceedings, subject to the rulings of this Court on circumstances which might justify closure.

Cause No. 89-094 is based on an application by Great Falls Tribune Company, Inc. for a writ of review of an order issued by District Judge McCarvel requiring the Tribune reporter, Melody Perkins, to appear before him to show cause why she should not be held for direct contempt of the court. The application in this Court was filed while the contempt proceedings in the District Court were pending but the hearing on contempt was held as scheduled and in the District Court Judge McCarvel adjudged Melody Perkins guilty of contempt and fined her in the sum of $300.00.

We ordered the two cases consolidated for oral argument and decision.

Essentially, the issues presented in the consolidated cases are these:

1. Whether the public and press have a right of access to attend probation revocation hearings.

2. Whether the District Court erred in closing the probation revocation hearing without first conducting an evidentiary proceeding in which the public and press could participate and without making findings of the reasons for closure as required by the state and federal constitutions.

3. Whether Melody Perkins was properly found in contempt.

The transcript of the revocation proceedings in this particular case has been, and still is, under seal. The following facts, however, may be stated, either from express disclosure ordered by us or from a transcript of the contempt proceeding.

Melody Perkins, a reporter for the Great Falls Tribune, assigned to cover the county courthouse, entered District Judge McCarvel’s courtroom to observe a probation revocation proceeding already underway. Before she entered, and before the revocation proceeding commenced, court and counsel had met in chambers concerning the probation proceeding, and thereafter, in open court, the following occurred:

“MR. JONES: Thank you, Your Honor. The first matter, I request this be a closed hearing, that all non-necessary persons leave the courtroom, and that the bailiff maintain the security of the courtroom during the hearing. We have stated our reasons previously to Your Honor.
“THE COURT: Do you want to put them on the record now, or do you prefer not to?
“MR. JONES: I prefer not to. I would be happy to make a record, but I prefer not to do it in open court. Your Honor is aware of our reasons, I believe. Thank you.
“THE COURT: You are concerned for the safety of the person involved; is that it?
“MR. JONES: Yes, Your Honor.
“THE COURT: All right. All those in the courtroom who are not going to participate in this hearing will be asked to leave.
“MS. SCHULKE: Does that include the members of our office, Your Honor?
“THE COURT: No, not the County Attorney’s office.
“MS. SCHULKE : Can other members of Probation and Parole be here if they wish to?
“THE COURT: Yes. Mary Fay, you can stay if you want.
“MR. JONES: Who is Mary Fay?
“MS. SCHULKE: A probation and parole officer here in Great Falls.
“MR. JONES: All right. Thank you, Your Honor.”
At the time that Melody Perkins had entered the courtroom, the decision to close the proceeding, as reported above, had already been made and the probation revocation hearing itself was ongoing. When she entered, the following occurred:
“MS. SCHULKE: Your Honor, I recognize a member of the press here. I don’t know her name, but she’s from the Tribune.
“THE COURT: This hearing is closed.
“MS. MELODY PERKINS: Okay.”
Melody Perkins left the court and thereafter telephoned her employer. She was instructed by the city editor of the Tribune, Tom Kotynski, to return to the court and there make a request for the grounds of the closure and for a continuance of the proceeding so that the Tribune could contact its attorney. Perkins returned as instructed, and re-entered the courtroom, accompanied by Tom Grimm, a television reporter. At this point, the following occurred:
“THE COURT: Just a minute—
“MS. MELODY PERKINS: Excuse me. As a representative of the Great Falls Tribune, I would like to know on what grounds this hearing has been closed.
“THE COURT: Will you step out? Both of you step out.
“MS. MELODY PERKINS: Your Honor, as a representative —
“THE COURT: Do you want me to call the sheriff and have him put you out?
“MS. MELODY PERKINS: The Tribune requests —
“THE COURT: Will you call the bailiff?
“MS. MELODY PERKINS: We will leave, Your Honor. Our attorney is being consulted, however.
“MR. JONES: Your Honor, I also noticed video-tape cameras at the doors here. I don’t know if that’s —
“MR. DOUGLASS: It’s a concern how sound-proof the doors are. If the video cameras are right up to the doors with microphones, if they can hear through, or —
“THE COURT: I don’t know.
“MS. SCHULKE: Someone from the sheriff’s office will be here.
“THE COURT: Get ahold of that guy with the TV camera there. See him out there, the guy with the TV camera?
“THE BAILIFF: Yes.
“THE COURT: I want to find out if he recorded any of this testimony, and tell him he had better not be using it.
“THE BAILIFF: Yes.
“THE COURT: Have him brought in here, will you?
“MR. TOM GRIMM: I’m Tom Grimm, Channel 3.
“THE COURT: Do you have a recorder on that camera?
“MR. TOM GRIMM: I haven’t captured anything that happened in this room.
“THE COURT: Oh, all right.
“MR. JONES: You are just looking through your lens?
“MR. TOM GRIMM: I can’t hear anything in the hall what’s going on inside here.
“THE COURT: Okay.
“MR. TOM GRIMM: Can I go?
“THE COURT: Yes.
“MR. PAT PAUL: That other gentleman was an attorney with another firm in town, and I told him it was closed.
“THE COURT: What?
“MR. PAT PAUL: The other gentleman, he was an attorney with one of the firms in town, and I asked him to leave. Do you want these guys to stick around [referring to staff members of the sheriff’s office]?
“THE COURT: Yes.”

When the Great Falls Tribune filed its application in this Court for a writ of supervisory control, the Attorney General responded by filing a motion for a review of the transcript of the probation revoca; tion proceeding in camera. The transcript covered the proceeding in court and also the discussions which had occurred in chambers with the court before the revocation hearing. The Tribune objected to the consideration of the sealed transcript by this Court on the grounds that the Tribune would be at a disadvantage as to the argument regarding the propriety of the closure. Later this Court excerpted and made available to all parties the portions of the sealed transcript above quoted.

Ten days after the revocation hearing, District Judge McCarvel issued an order directed to Melody Perkins requiring her to show cause why she should not be cited for contempt. Tom Grimm, the television reporter was not cited. Melody Perkins appeared before Judge McCarvel on the date required, where after a hearing, she was found guilty of contempt and fined $300.00.

RIGHT OF ACCESS TO PROBATION REVOCATION HEARINGS

The United State Supreme Court recognizes a First Amendment right of public access to criminal trials. Richmond Newspapers, Inc. v. Virginia (1980), 448 U.S. 555, 100 S.Ct. 2814, 65 L.Ed.2d 973; Globe Newspaper Company v. Superior Court (1982), 457 U.S. 596, 102 S.Ct. 2613, 73 L.Ed.2d 248. The Supreme Court has also held that the Sixth Amendment right to a fair trial is a right personal to the defendant and not to the public. Gannett Company, Inc. v. DePasquale (1979), 443 U.S. 368, 99 S.Ct. 2898, 61 L.Ed.2d 608. Although the Supreme Court has not yet interpreted the First Amendment to require public access to civil trials, several federal courts of appeals have taken that step. Publicker Industries, Inc. v. Cohen (3d Cir. 1984), 733 F.2d 1059, 1070; Matter of Continental Illinois Securities Litigation (7th Cir. 1984), 732 F.2d 1302, 1308; Brown and Williamson Tobacco Corp. v. F.T.C. (6th Cir. 1983), 710 F.2d 1165, cert.den. 465 U.S. 110, 104 S.Ct. 1595, 80 L.Ed.2d 127 (1984).

Here, the Attorney General points out that a probation revocation hearing is not a criminal proceeding, State v. Watts (Mont. 1986), [221 Mont. 104,] 717 P.2d 24, 43 St.Rep. 670; State v. Robinson (1980), 190 Mont. 145, 619 P.2d 813, and argues that because a probation revocation proceeding involves neither the guilt of the defendant nor the imposition of sentence, the interest of the defendant in obtaining a fair trial plays no part in such a proceeding. Accordingly, the Attorney General contends that the primary interest that competes with the public right to know in this type of proceeding is the probationer’s right of privacy.

The state constitution of Montana contains in Art. II, § 9, the “right-to-know” provision as follows:

“No person shall be deprived of the right to examine documents or to observe the deliberations of all public bodies or agencies of state government and its subdivisions, except in cases in which the demands of individual'privacy clearly exceed the merits of public disclosure.”

We held in State ex rel. Tribune v. District Court (1980), 186 Mont. 433, 608 P.2d 116, that the foregoing constitutional provision speaks for itself and applies to all persons and all public bodies of the state and the subdivisions without exception. Moreover, the provision applies to civil judicial proceedings, Cox v. Lee Enterprises, Inc. (1986), 222 Mont. 527, 723 P.2d 238, 43 St.Rep. 1476. Since the days of the Bannack statutes, the sittings of all courts by statute in Montana have been required to be public. Section 3-1-312, MCA.

It is clear to us, therefore, that the public and the press have the right under state law to attend and observe with limited exception the hearings of the courts of this state. The press also enjoys this right through its individual representatives and because of its surrogate role for the public. Richmond Newspapers, Inc. v. Virginia (1980), 448 U.S. at 572, 573, 100 S.Ct. at 2825, 65 L.Ed.2d at 987. The state exception to this right occurs only in cases in which the demands of individual privacy clearly outweigh the merits of public disclosure. Art. II, § 9, supra.

RIGHT OF THE PUBLIC AND THE PRESS TO PARTICIPATE IN THE CLOSURE DECISION

This Court received the transcript of the probation revocation proceeding from the District Court under seal. The transcript was examined by us in camera and upon such examination we determined not to grant the motion of the Great Falls Tribune to unseal the transcript record. Instead, we directed the parties to brief the issues in these cases by assuming as a premise the following facts:

“The District Court closed the revocation hearing to the press and public to protect a person from harm which might otherwise occur if the revocation was made public.”

In the stated premise, we did not use the term “physical harm” but counsel for the Tribune interpreted correctly that that was what was meant. Counsel conceded on oral argument that such an assumed premise would be a proper reason for the court to order closure of the proceeding.

The Tribune, however, argues along other lines as to the propriety of the closure. It contends that before the closure was ordered, the court should have provided some notice to the public of its intention to close; then conduct an evidentiary hearing in which the public and press can participate; and, make express findings of fact as to the reasons for the closure. The Tribune points to the rule in the Court of Appeals of the Third Circuit, where no order closing civil or criminal proceedings may be entered by any federal district court judge until notice of the closure is given to the press and public. U.S. v. Criden (3d Cir. 1982), 675 F.2d 550. The lack of such a rule here, contends the Tribune, causes the Tribune to bear the burden of attacking the propriety of the District Court’s decision to close, when that burden should have-remained on the particular defendant involved.

The argument of the Great Falls Tribune finds precedent in State ex rel. Daniel Paul Smith v. District Court, Eighth Judicial District (1982), 201 Mont. 376, 386, 654 P.2d 982, 988. In Smith, we determined that a closure of a pretrial suppression hearing should occur only if there were a “clear and present danger” to defendant’s fair trial and no reasonable alternative means could be utilized to avoid the prejudicial effect of such information. The holding in Smith modified, to some extent, our previous holding in Great Falls Tribune v. District Court, supra, which adopted a strict and irreparable necessity stándard for closure, “where the demands of individual privacy clearly exceeded the merits of public disclosure.” 186 Mont, at 441, 608 P.2d at 119. However, with respect to the right-to-know provision of the Montana Constitution, this Court stated in The Missoulian v. Board of Regents of Higher Education (1984), 207 Mont. 513, 529, 675 P.2d 971:

“However, the right to know is not absolute. The more specific closure standard of the constitutional and statutory provisions requires this Court to balance the competing constitutional interests in the context of the facts of each case, to determine whether the demands of individual privacy clearly exceed the merits of public disclosure. Under this standard, the right to know may outweigh the right of individual privacy, depending on the facts.” (Emphasis in original.)

Whenever the court must determine whether a privacy interest is protected under the state constitution, we apply a two-part test: (1) whether the person involved had a subjective or actual expectation of privacy; and, (2) whether society is willing to recognize that expectation as reasonable. Montana Human Rights Division v. City of Billings (1982), 199 Mont. 434, 441, 649 P.2d 1283, 1287. Applying that test here, when the District Court determined that the person involved must be protected from physical harm arising from participation in the proceeding, the subjective expectation of that person to privacy was established. The second prong of the test is met because the risk to the person’s individual safety from disclosing adverse information to the public would compel a reasonable person to recognize the expectation of privacy.

It should be noted that the competing interests here differ in large respect from competing interests involved in other cases. Thus, in Great Falls Tribune, supra, the right to know was weighed against the defendant’s right to a fair trial. In State ex rel. Daniel Smith, supra, this Court held that the defendant’s right to a fair trial would be paramount to the public’s right to know if disclosure of the pretrial suppression hearing would affect his fair trial. In The Missoulian v. Board of Regents (1984), 207 Mont. 513, 675 P.2d 962, 967, the Board of Regents was required to balance the public’s right to know against the individual’s right of privacy with respect to employment evaluations. There the right of individual privacy was held to be paramount.

It is true, however, that the law requires that if closure of a portion of a judicial proceeding is necessary, the procedure imposing the least restriction on the public right to know should be followed. In The Missoulian v. Board of Regents, supra, this Court did address possible alternatives to closure of job performance evaluation meetings, and determined that there was no adequate alternative which would preserve the privacy of the individual and at the same time prevent the evaluations from being effective. That kind of consideration applies to the case at bar. Any leaking out of the information would endanger the physical safety of a person involved. There were no reasonable alternatives that the District Court could follow here. For that reason, we hesitate to adopt the Third Circuit rule that notice must be given of all potential closure decisions, and would rather allow the district courts to proceed on an ad hoc basis to make the decision in accordance with the facts and circumstances facing the district courts at the time. Justice Rehnquist (now Chief Justice) in Gannett Company, Inc. v. DePasquale (1979), 443 U.S. at 405, 99 S.Ct. at 2918, 61 L.Ed.2d at 637, in cautioning that there was no set procedure to be employed by a trial court to determine whether or not a part of the trial court should be closed, stated:

“. . . To the contrary, in my view, and, I think, in the view of the majority of this Court, the lower courts are under no constitutional constraint either to accept or reject these procedures. They remain, in the best tradition of our federal system, free to determine for themselves the question of whether to open or close the proceeding. Hopefully they will decide the question by accommodating competing interests in a judicious manner but as far as the constitution is concerned, the question is for them and not us to resolve.”

From the foregoing discussion, it will be seen that there is no reason now for this Court to reverse the closure order of the District Court. The Tribune concedes that the reason for closure was proper. The additional relief requested by the Tribune in the application for supervisory control is likewise not suitable in the present context. The application for supervisory control must therefore be denied.

We come, therefore, to the question of whether the decision of the District Court in the contempt proceedings should be affirmed, modified or reversed.

Usually on a petition for a writ of certiorari to review a contempt order, if we did not have before us the aggrieved person, we would be constrained to dismiss the application. Here, however, we adopt as a premise that through the contempt order, the Great Falls Tribune itself is the aggrieved entity.

On an application of a writ of certiorari to review a contempt order of the District Court, our review is limited to an examination of the record to determine whether the District Court acted within its jurisdiction, and whether the evidence supported the finding and order of contempt. Schneider v. Ostweld (1980), 190 Mont. 29, 617 P.2d 1293. In such a review, we are limited to the record compiled before the District Court. State ex rel. Sell v. District Court (1916), 52 Mont. 457, 158 P. 1018.

The record here is clear. The District Court had ordered a closure for a probation revocation proceeding because of the possibility that if information developed in the proceeding became known to the public, there was danger of harm to a person involved. All sides admit that the order of closure was providently granted.

Melody Perkins, as a reporter for the Great Falls Tribune, entered the courtroom where the revocation hearing was ongoing, and was then advised by the District Court that the proceedings had been closed. The reporter said, “Okay,” and retreated from the courtroom.

At this point, no person, including representatives of the press, had any right to intrude further upon the judicial proceeding unless within the number of those persons excepted under the closure order of the court. Notwithstanding, Melody Perkins, on the direction of her editor, re-entered the court in the company of another person, interrupted the judicial proceeding, and eventually left the courtroom on the threat of expulsion by the District Court through a bailiff.

Other options were open to Melody Perkins and the Great Falls Tribune when first she learned of the closure and left the courtroom. She, or a representative of the Tribune, could have gone to the district judge, in chambers or in open court following the closed hearing, and requested the reasons for closure. A letter could have been written to the district judge following the closed hearing requesting the reasons. A petition for a writ filed in this Court (a procedure followed here by the Tribune) would have resulted, as it did, in disclosure of the reasons for closing the hearing. We affirm the right of the public and the press to learn from the District Court the reasons for closure when the demands of individual privacy clearly exceed the merits of public disclosure. That right, however, is not so broad as to include interruption of the closed proceeding itself, especially when interruption at a critical time might void the reason for the closure.

Under § 3-1-402, MCA, every judicial officer has the power to preserve and enforce an order in his immediate presence and in a proceeding before him when he is engaged in the performance of an official duty, and to compel obedience to his official orders. For the effectual exercise of those powers, a judicial officer may punish for contempt. Section 3-1-403, MCA.

Contempt of a court of justice or a proceeding therein occurs through “disorderly, contemptuous or insolent behavior toward a judge while holding the court, tending to interrupt the due course of a trial or other judicial proceeding;” “a breach of the peace tending to interrupt the due course of a trial or other judicial proceeding;” or “disobedience of any lawful judgment, order or process of the court.” Section 3-1-501, MCA. (Emphasis added.)

Under the statutes, the District Court Judge here acted within his jurisdiction on a contempt charge for a disorderly action that occurred before him which tended to interrupt his judicial proceeding and which appeared to be in disobedience to his order that the hearing was closed. The penalty is within the provisions of § 3-1-519, MCA. Under the circumstances, the judgment of contempt must be sustained, as no grounds can be found to justify the issuance of a writ of certiorari directing otherwise.

Accordingly, both the application for writ of supervisory control and the application for writ of certiorari are denied.

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

MR. JUSTICE McDONOUGH,

specially concurring:

I concur with the majority opinion. However, inasmuch as most hearings are closed at the request of both parties, or without objection by the non-requesting party, some accountability for such a grave discretionary step is warranted in the interest of participatory government. I favor the adoption of a rule which in essence would require the District Court Clerk to file an annual public report with this Court, stating at a minimum: (1) the number of discretionary closings, (2) the type of each case, and (3) the judge presiding. A copy of this report would be available to the public in each clerk’s office.

MR. JUSTICE HUNT,

dissenting:

I dissent and would reverse and throw out the contempt charges against the reporter. This nation was founded upon the idea that all governmental proceedings should be conducted in the open under the scrutiny of the public eye. I therefore cannot sign the eloquent and thorough majority opinion because, however practical its reasoning, it reinforces the trend toward excluding private citizens from participation in their government.

When a judge determines that a closed hearing is appropriate, as the judge did here, it is up to him or her to ensure that members of the public cannot enter the courtroom. A member of the public entering an ineffectively closed courtroom would certainly disturb the proceedings and each entry would require a statement of the judge that the hearing was closed. Any inquiry by the citizen as to why he or she had to leave would subject him or her to contempt of court charges.

If the judge in this case had positioned a bailiff at the courtroom door or had posted a sign notifying the public that the proceeding was closed, this incident could have been prevented. If the newspaper editor, when notified of the closure, had followed the procedures set forth in the majority opinion to determine the purpose of the closure rather than sending his reporter back into the skirmish, the confrontation could have been averted. I fear that Melody Perkins was merely a pawn in the game between the press and the court.

And the consequence of this game? A case that holds that any member of the public can be ousted from a secret governmental meeting that appears to be an open meeting and subsequently cannot return to what still appears to be an open meeting and ask why. Whatever her motive or reason for returning, when she respectfully and quietly reentered the courtroom, Melody Perkins was exercising a right she had as a citizen. The exercise of that right in that manner cannot be contempt. I would dismiss and throw the whole affair out of court.