text:
    GINA L. MORTON, Plaintiff and Appellant, v. M-W-M, INC., a Montana corporation, Defendant and Respondent.
    No. 93-443.
    Submitted on Briefs December 22, 1993.
    Decided February 1, 1994.
    51 St.Rep. 39.
    263 Mont. 245.
    868 P.2d 576.

      For Plaintiff and Appellant: John F. Lynch, Lynch Law Firm, Great Falls.
    For Defendant and Respondent: Richard Dzivi and Tonja D. Schaff, Richard Dzivi, P.C., Great Falls.
   CHIEF JUSTICE TURNAGE

delivered the Opinion of the Court.

Plaintiff Gina L. Morton (Morton) appeals from a decision of the Eighth Judicial District Court, Cascade County. The court entered summary judgment in favor of the defendant, M-W-M, Inc. (M-W-M), owner of Burger King Franchise No. 1666 in Great Falls, Montana, after concluding that there were no disputed issues of fact and that an agent at the company’s franchise had good cause to terminate Morton’s employment as an assistant manager. We reverse and remand.

The issues on appeal are rephrased as follows:

1. Whether the District Court erred by granting summary judgment to M-W-M after concluding there were no disputed issues of fact and concluding good cause existed for Morton’s termination from the Burger King franchise;

2. Whether Morton mitigated any damages allegedly due her by working full-time at another job after her termination from Burger King.

Morton began employment with M-W-M’s franchise, Burger King No. 1666, in Great Falls during September 1989. She worked her way up through the ranks in less than a year, earning an assistant manager position on May 18, 1990. Her written performance evaluations at Burger King were mostly exceptional with no less-than-satisfactory work traits mentioned. Her position at Burger King was part-time, and the unofficial policy there offered Morton a very flexible work schedule dependent in part on her husband’s work schedule and the child-care needs of their family.

As a matter of unwritten policy, the general manager of Burger Kang No. 1666, Matt Blazicevich (Blazicevich), voluntarily agreed to schedule Morton for work according to her scheduling requests. Morton was the sole part-time assistant manager.

Vacation time offered by Burger King came in one of two forms: paid leave or unpaid time off. Frequently, employees would request unpaid time off by leaving a note with Blazicevich. He often would then voluntarily refrain from scheduling the employee according to the employee’s request.

During April of 1992, Morton requested vacation time; Blazicevich responded that if Morton were to wait until May, she would be eligible for two weeks vacation. Paid leave vacation for managers at Burger King was offered at two weeks for two years of service, and Morton was nearing the second anniversary of the date she was promoted to assistant manager. On April 20, then, Morton left a note with Blazicevich requesting the first two weeks of May 1992, off for the purpose of attending to her family’s needs while her husband was in job training. Her note further requested that she work the following shifts during May: Tuesday and Wednesday, the 19th and 20th; and Saturday and Sunday, the 30th and 31st. Blazicevich scheduled her accordingly. On the same day, April 20, 1992, Morton filled out an application to work a second job at the Black Angus restaurant.

Historically the Burger King franchise permitted moonlighting as long as the second job did not conflict with the Burger King work schedule and as long as the second job did not involve a Burger King competitor. Near the end of April 1992, Blazicevich learned from a neighbor that one of his Burger King employees was moonlighting at the Black Angus restaurant in Great Falls. Blazicevich went to the Black Angus on May 4, 1992; he saw Morton working. On the next day, when Morton went into Burger King to pick up her paycheck, Blazicevich terminated her employment without explanation. She initiated wrongful discharge proceedings.

M-W-M moved the court for summary judgment, stating that the following discrepancies enabled Blazicevich to terminate Morton for good cause: she did not make herself available for part-time work, she was working for a competitor of Burger King, and she was dishonest. M-W-M also alleged that Morton suffered no damages as a result of her termination from employment, because she was employed at the Black Angus.

Morton stated that she followed Burger King policy when requesting and obtaining her vacation and that she originally requested vacation time to attend to her family’s needs while her husband was in training. After obtaining the vacation time, she found a babysitter for her children and interviewed for the Black Angus job on April 30. She got the job and started work there on May 1st, 1992. Additionally, Morton contended that the Black Angus restaurant is not a competitor of Burger King.

The District Court granted summary judgment to M-W-M. Morton appeals.

ISSUE 1

Did the District Court err by granting summary judgment to M-W-M after concluding there were no disputed issues of fact and concluding good cause existed for Morton’s termination from employment?

Our standard of review when considering an appeal from a summary judgment decision is the same as that which was faced by the district court under Rule 56, M.R.Civ.R Minnie v. City of Roundup (1993), 257 Mont. 429, 431, 849 P.2d 212, 214. Summary judgment is proper when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Rule 56, M.R.Civ.P. Summary judgment is never a substitute for a trial on the merits. Krieg v. Massey (1989), 239 Mont. 469, 471, 781 P.2d 277, 278.

The party seeking summary judgment bears the burden to show the court that it has met the standards set forth in Rule 56, M.R.Civ.P. D’Agostino v. Swanson (1990), 240 Mont. 435, 442, 784 P.2d 919, 924. The court must review both the pleadings and the record before it in making its decision. D’Agnostino v. Schapp (1988), 230 Mont. 59, 748 P.2d 466, citing Rule 56(c), M.R.Civ.P. When examining the record, any factual inferences which can be drawn must be resolved in favor of the nonmoving party. Krieg, 781 P.2d at 278; Cereck v. Albertsons, Inc. (1981), 195 Mont. 409, 637 P.2d 509.

If the moving party has met its burden of proof, the nonmoving party has the burden of showing that a genuine issue of material fact exists or that the moving party is not entitled to judgment as a matter of law. Krieg, 781 P.2d at 278; Rumph v. Dale Edwards, Inc. (1979), 183 Mont. 359, 600 P.2d 163. The nonmoving party may not rely solely on the allegations stated in its pleadings. Drug Fair Northwest v. Hooper Enterprises, Inc. (1987), 226 Mont. 31, 33, 733 P.2d 1285, 1287. Instead, when raising the allegation that disputed issues of fact exist, the nonmoving party has an affirmative duty to respond by affidavits or other sworn testimony containing material facts that raise genuine issues; conclusory or speculative statements will not suffice. Barich v. Ottenstror (1976), 170 Mont. 38, 42, 550 P.2d 395, 397.

The summary judgment in the instant case is based on the lower court’s findings of fact and conclusion that there were no disputed issues of fact. These findings and conclusion are not supported by the record. In order to articulate the disputed issues, we first examine the law surrounding Morton’s wrongful discharge claim.

Under the Wrongful Discharge from Employment Act a valid ground for maintaining a cause of action against a former employer is when the employee’s “discharge was not for good cause and the employee had completed the employer’s probationary period of employment.” Section 39-2-904(2), MCA. The act defines good cause as “reasonable job related grounds for dismissal based on a failure to satisfactorily perform job duties, disruption of the employer’s operation, or other legitimate business reasons.” Section 39-2-903(5), MCA. Deposition testimony by Blazicevich and Morton establishes that Morton was not terminated for unsatisfactory performance and that she had passed her probationary period of employment. The issue, therefore, is whether Morton’s termination was justified by a legitimate business reason.

This Court has previously defined legitimate business reason as “a reason that is neither false, whimsical, arbitrary or capricious, and it must have some logical relationship to the needs of the business.” Kestell v. Heritage Health Care Corp. (1993), 259 Mont. 518, 525, 858 P.2d 3, 7, 50 St.Rep. 919, 922, citing Buck v. Billings Montana Chevrolet, Inc. (1991), 248 Mont. 276, 281-82, 811 P.2d 537, 540. As we stated in Kestell, 858 P.2d at 7-8:

It is well settled in our pre-[wrongful discharge]Act cases that courts should not intrude in the day-to-day employment decisions of business owners. ... An employer’s legitimate right to exercise discretion over whom it will employ must be balanced, however, against the employee’s equally legitimate right to secure employment. ... The balance should favor an employee who presents evidence, and not mere speculation or denial, upon which a jury could determine that the reasons given for his termination were false, arbitrary or capricious, and unrelated to the needs of the business. [Citations omitted].

When considering M-W-M’s motion for summary judgment, the court first entertained M-W-M’s assertion that no disputed issues of fact existed. The court specifically asked counsel for Morton whether any disputes of fact were involved in this case; Morton’s counsel replied that there were none.

That reply was erroneous. The record before us is brief, consisting of various court filings and certain pieces of discovery including two depositions, one from Blazicevich and one from Morton. After reviewing the record, we conclude that contrary to the District Court’s findings, material issues of fact exist, including whether Morton’s vacation request was made according to Burger King policy; whether the Black Angus is a competitor of Burger King; and whether Morton misled her employer to obtain vacation time to work at a second job. The District Comb’s findings of fact relating to the above disputed issues are not supported by the record and are, therefore, clearly erroneous. See Interstate Prod. Credit Ass’n v. DeSaye (1991), 250 Mont. 320, 820 P.2d 1285.

Where the record shows genuine issues of fact and the parties relate widely divergent reasons for Morton’s termination, the trier of fact must resolve those issues and determine whether Morton was fired for good cause. See Dare v. Montana Petroleum Marketing Co. (1984), 212 Mont. 274, 282, 687 P.2d 1015, 1019. Here, each party argues the above disputed facts in each respective brief. We conclude that in this record there are material fact issues that cannot be disposed of by summary judgment and this issue is remanded for proceedings consistent with this opinion.

ISSUE 2

Did Morton mitigate any damages allegedly due her by working full-time at a restaurant after her termination from Burger King?

In its conclusions of law the District Court states:

Plaintiff mitigated any damages she may have been entitled to if this Court would have found a wrongful discharge. Plaintiff is a full-time employee at the Black Angus Restaurant, earning more than she earned at Burger Kang No. 1666. Accordingly, even if Plaintiff was wrongfully discharged, she suffered no damages, rendering Defendant, M-W-M Inc., entitled to summary judgment.

The court failed to note, however, that Morton’s second job at the Black Angus was presumably compatible in hours to the requirements of her first, part-time job at Burger Kang. We hold that the court’s finding was clearly erroneous because Morton could have worked both jobs concurrently and the loss of earnings she suffered as a result of termination from Burger Kang are necessarily part of her wrongful discharge claim. On remand, the issue of mitigation of damages for appellant’s loss of employment at M-W-M remains to be resolved.

Reversed and remanded.

JUSTICES HARRISON, HUNT, NELSON and TRIEWEILER concur.


source: Caselaw Access Project

author: JUSTICE WEBER

license: Public Domain

text:
    WANDA D. McDOWELL, Petitioner and Appellant, v. RANDY J. McDOWELL, Respondent and Respondent.
    No. 92-592.
    Submitted on Briefs September 16, 1993.
    Decided February 1, 1994.
    51 St.Rep. 42.
    263 Mont. 252.
    868 P.2d 1250.

      For Petitioner and Appellant: R. M. Kehew, Law Offices of R. M. Kehew, Kalispell.
    For Respondent and Respondent: Robert B. Allison, Kalispell.
   JUSTICE WEBER

delivered the Opinion of the Court.

This is an appeal from the Eleventh Judicial District, Flathead County, modifying the custody of two minor children. We affirm.

While the appellant charges thirteen different errors made by the court, we consider the following question which includes consideration of all issues raised:

Did the District Court abuse its discretion in modifying the custody of the two minor McDowell children?

The marriage of Wanda and Randy McDowell was dissolved in 1986, after five years of marriage. Two children, a girl and a boy, were born to the couple. At the time of the dissolution, Wanda McDowell was awarded custody and Randy was granted reasonable rights of visitation. At the time of the hearing on modification, the children were ages 7 and 9. Wanda has worked to a limited degree since 1980. Randy has been employed as a custodian and maintenance man for Flathead County for over eleven years.

Both Wanda and Randy re-married other people. Wanda married Jerry Harris and moved from Flathead County to Trego, Montana, in Lincoln County. Wanda and Jerry Harris separated in November of 1990, and she returned to Flathead County. Wanda testified that her children had told her that Jerry had sexually abused them. Wanda testified as to her belief that while she was in the hospital having the couple’s first child, Jerry involved both of the McDowell children in satanic rituals.

In January of 1991, Wanda sought counseling for the children based upon her belief that Jerry had sexually abused her children. The first counselor saw the children from January until June of 1991. In June, after indication that the children had been ritually abused, Wanda took the children to see a Missoula counselor. This counseling lasted several sessions at which time Wanda was advised by the counselor that she should find a facility which had special accommodations for children. Wanda then took her son to Rivendell Treatment Center in Butte. Wanda testified that she was dissatisfied with the treatment at Rivendell and because her son was expressing suicidal thoughts, she had him admitted to Shodair Hospital.

Wanda testified that she removed her son from Shodair Hospital after a short time because she believed that Hospital personnel had lied to her with regard to the Hospital’s expertise in dealing with ritually abused children. Shodair personnel testified that Wanda should not have removed her son from Shodair Hospital and such removal constituted a significant risk because of his predisposition towards suicide. Notwithstanding this advice from the personnel at Shodair Hospital, Wanda removed her son from the Hospital and then took him to Burley, Idaho where she had located a journalist whom she believed to be an expert in ritually abused children.

Before her trip to Idaho, Wanda sent Randy a letter saying that she had to disappear with the children for several years in order to protect them. It was at this point, in October of 1991, that Randy filed a Motion for Modification of Custody in the Montana District Court.

Randy received a court order dated October 9,1991 awarding him temporary custody of his children. He was subsequently able to locate Wanda and the children in Idaho. He obtained the help of Idaho authorities and took physical custody of his children on October 15, 1991. Immediately upon assuming custody of the children, Randy returned them to Shodair Hospital where they remained for treatment until January of 1992. During this stay, the children were visited each week by both parents.

A modification hearing was held on June 30 and July 1, 1992. On August 20, 1992 the District Court entered its Findings of Fact and Conclusions of Law and Order awarding custody of the children to Randy with supervised visitation for Wanda. Wanda appeals that order.

Did the District Court abuse its discretion in modifying the custody of the two minor McDowell children?

Wanda asserts that the court erroneously modified the custody of the McDowell children. She claims that she has been unable to see the children whom she raised for nine years. Randy argues that Wanda took the children out of the state in direct contravention to the custody order and that the safety and well-being of his children required an immediate change in their physical custody because of possible abuse by their step-father.

Our custody modification statute provides that when the child’s present environment endangers seriously his or her “physical, mental, moral, or emotional health” it may “in its discretion” modify a prior custody arrangement. Section 40-4-219(l)(a) and (c), MCA. Further, the district courts have discretion to modify custody when the custodial parent changes or intends to change the child’s state of residence. Section 40-4-219(l)(f), MCA.

In any custody determination, we will look to see if a district court’s findings are clearly erroneous. In re Marriage of Klose (1990), 243 Mont. 211, 793 P.2d 1311. And, unless the court has abused its discretion, we will not overturn a district court’s ruling. In re Marriage of Rolfe (1985), 216 Mont. 39, 699 P.2d 79. The testimony presented during the modification hearing was extensive. That testimony is mirrored specifically in the District Court’s findings. There is substantial evidence in the record to establish that the children here suffered forms of sexual abuse and possibly satanic ritualistic abuse.

The District Court could not determine exactly what had happened to the children and although the transcript of the hearing contains graphic detail, many questions remain unanswered as to the extent of the abuse. The court did find that Wanda’s efforts to obtain effective treatment, and to help her children, were well intentioned, but erratic to the point they endangered the children, particularly the boy. The court also found that the children’s real father, Randy, had been passive in his approach to the relationship he had with his children. The court determined that when the children were taken out of state because of possible harm from their step-father, Randy appropriately sought to protect his children.

The District Court found that there was a significant possibility that Wanda had participated in the abuse, and that she may have told the children they were required to be involved in the satanic cult. The record before us does not contain evidence to support that finding. On this aspect, the court relied upon reports from Shodair Hospital which are not a part of this record. Appellant argues that such records should never have been considered by the court without appropriate authentication. We cannot consider this argument because the appellant failed to object to the records when they were given to the District Court and were considered by the court. If a party does not object to evidence at the lower comb level, the party cannot object to it on appeal. Whiting v. State (1991), 248 Mont. 207, 810 P.2d 1177.

Wanda argues that the court did not consider the children’s preference for custodial parent. The record reveals that the court did not interview the children. 'While district courts are required to consider the best interests of the children in determining a custody arrangement, this Court has determined that a district court is not required to interview the children in every case. In re Marriage of Susen (1990), 242 Mont. 10, 788 P.2d 332. In the Susen case, the wishes of the children were specifically known. In the case before us no testimony was obtained from the children so we do not know their views regarding custody. While an interview with the children would have been preferable, the record as hereafter summarized establishes that two counselors and other qualified persons testified regarding the care and custody of the children, including the possibility of danger to them. In view of the facts as determined by the court, which clearly demonstrated that the best interests of the children required a change in custody, we conclude the court did not err in failing to interview the children.

Wanda moved for the appointment of an attorney to represent the children. The father questioned the need for such an appointment. The District Comb did not rule on the motion and did not express a reason for not making an appointment in its Findings of Fact, Conclusions of Law and Order dated August 20, 1992. Section 40-4-205, MCA(1991), in effect on the date of the order, provided as follows:

40-4-205. Representation of child. The court may appoint an attorney to represent the interests of a minor dependent child with respect to his support, custody, and visitation. The county attorney and the deputy county attorneys, if any, may not be appointed for this purpose. The court shall enter an order for costs and fees in favor of the child’s attorney. The order shall be made against either or both parents, except that if the responsible party is indigent, the costs shall be waived.

This code section was interpreted in the custody case of Milanovich v. Milanovich (1982), 200 Mont. 83, 655 P.2d 959. In interpreting the foregoing code section, in Milanovich we stated the rule regarding appointment of attorneys for children as follows:

“[T]he rule is that appointment of counsel is only necessary when the child needs an advocate to represent his position as to the issues in dispute or to insure the development of an adequately complete record concerning the best interests of the child.”

Milanovich, 200 Mont. at 89, 655 P.2d at 962; quoting In the Matter of Inquiry into J.J.S. Youth In Need of Care (1978), 176 Mont. 202, 577 P.2d 378, 381. In accordance with the Milanovich case, we have carefully reviewed the record in this case to determine if an attorney was required to represent the position of the children on the issues in dispute, or to ensure the development of an adequately complete record concerning their best interests. Following are key parts of the findings and conclusions of the District Court:

FINDINGS OF FACT

6. Several witnesses, including counselors from Shodair and the parties themselves, indicated that the children had been sexually abused and molested, probably by Mr. Harris. This abuse occurred during the mid and later part of 1990 as best can be determined...

7. References and innuendoes during the trial indicate that Mr. Harris may have been involved with a satanic cult or participated in “cultist” activities and rituals. Wanda firmly believes that the children were molested and abused by Mr. Harris in conjunction with those rituals. Randy is not so certain of the ritualistic nature of the abuse, but believes rather firmly, based upon information that he has, that, at the very least, the children were sexually abused by Mr. Harris. ...

8. In January of 1991 Wanda contacted Carol Lee, a counselor in Columbia Falls, regarding the children, and Ms. Lee did counsel the children over a period of time from January through June of 1991. During the latter part of that counseling, certain references were made to ritual abuse. Lee testified that she would have been willing, and felt competent, to continue counseling with the children but that Wanda discontinued that counseling in June when she took the children to see James Ramsey, a licensed professional counselor...

9. Wanda terminated the counseling with Mr. Ramsey, but, in August or September of that year, J. began exhibiting very bizarre, self-destructive behavior. He expressed a desire to commit suicide. As a consequence, Wanda took him to Rivendale [sic], a children’s psychiatric hospital in Butte. She decided that she did not like that facility so she took him to Shodair Children’s Hospital for treatment and evaluation. However, on September 26, 1991, Wanda removed J. from Shodair against medical advice.

11.... It should be noted that J. was potentially suicidal prior to his admission to Shodair and upon his removal from that facility by Wanda. Lisa Shipley and Sharon Center, both therapists at Shodair, felt that removing J. from Shodair under those circumstances constituted medical abuse and was potentially a serious endangerment to J. ...

13. Shodair determined, upon evaluating the McDowell children [after their return by Randy to Shodair in October, 1991], that it would be best if both children remained at Shodair and they did remain there from mid-October until late January 1992. During the three months that they were at Shodair, the children had weekly visits and family sessions with both parents. The therapists testified that the family sessions between the children, Randy and Marie, were appropriate and appeared to be helpful to the children. On the other hand, the weekly family sessions with Wanda were frequently inappropriate in that Wanda interjected topics into the conversation that were considered improper by the therapists ...

14. The therapists from Shodair felt strongly that Randy and Marie were in a better position to provide an appropriate, nurturing and therapeutic home environment for the children than Wanda was.

16. The children were discharged in January, 1992 and have resided with Randy McDowell since that time. They are enrolled in school in Smith Valley School, a rural school just a few miles west of Kalispell. Both children are progressing adequately in school and appear to be doing well and have adjusted to that environment, as well as to the McDowell family home.

17. Dr. Matthew Bosley, a Kalispell pediatrician, testified that he has treated the McDowell children on numerous occasions over the last several years. He testified that the children, particularly J., were generally hyperactive and ill-behaved when they were in their mother’s custody, and that he had noted an extreme change in their behavior from prior to their treatment at Shodair. Dr. Bosley believes that Randy and Marie are appropriate parents and that the children seem to have improved since the change of custody.

CONCLUSIONS OF LAW

2. The erratic behavior and inconsistent treatment of the children by Wanda, the removal of the children from the state of Montana and from Shodair without Court approval and against medical advice ... constitute a serious physical, mental, moral and emotional endangerment to the children.

3. The apparent improvement of the children physically and emotionally since the temporary change of custody in October of 1991 makes it clear that any trauma that might have been caused to the children by virtue of such change of custody has been far outweighed by the benefits that the children have received from that change.

4. Based upon the above considerations and the Findings of Fact, the Court concludes that the Respondent, Randy J. McDowell, should be awarded the custody of the minor children.

We have reviewed the extensive testimony on the part of various experts with regard to the children and their best interests as well as the testimony of the parents. We conclude there is substantial and largely uncontradicted evidence to support the above-quoted Findings of Fact and Conclusions as well as the remaining Findings of Fact and Conclusions of the District Court. Applying the Milanovich tests, we conclude that the record demonstrates the children did not need an advocate to represent their position as to the issues in dispute, as those issues were carefully and completely presented. Next, we conclude that the record without question demonstrates that there was the development of an adequately complete record concerning the best interests of the children. We hold that the District Court did not err in its failure to appoint counsel for the children.

Our attention has been directed to In the Matter of Gullette (1977), 173 Mont. 132, 566 P.2d 396. Gullette was a contested guardianship proceeding, rather than a proceeding under the termination of marriage and child custody provisions as involved in the present case. However, we carefully consider Gullette because of the serious nature of the alleged abuse and because of the legal questions this case raises in terms of future application. The alleged abuse here was ritual sexual abuse, now a felony in Montana. Section 45-5-627, MCA (1993).

In Gullette, while discussing the need for counsel to represent children in a contested guardianship case, this Court held as follows:

We find the reasoning of the Oregon court in In the Matter of D. to be the most workable solution to the problem presented and hold that where custody is in serious dispute, the court shall appoint independent counsel for the child or make a finding stating the reasons that such appointment was unnecessary. [Cases cited.]

Gullette, 173 Mont. 140, 566 P.2d at 400.

As pointed out in Gullette, there is no statutory provision with regard to the appointment of counsel in contested guardianship cases. The Court extensively discussed the need for counsel in those proceedings as well as in serious marital custody cases. We recognize the contradiction between our current holding and the foregoing holding in Gullette which states that the court shall appoint independent counsel or make a finding stating the reasons the appointment was unnecessary. The court did neither in the present case.

The requirement of Gullette extends beyond the statutory requirements of § 40-4-205, MCA. We also point out that the Milanovich case was subsequent in date to Gullette. In addition, § 40-4-205, MCA, was amended in 1993 without any change in the first sentence which states that “the court may appoint an attorney to represent the interests of a minor dependent child with respect to the child’s support, custody, and visitation.” In order to eliminate the contradictions between Gullette and Milanovich, we expressly overrule the holding in Gullette.

For assistance in future cases, however, we emphasize again that the alleged abuse to the children in this case was severe and involved allegations of ritual sexual abuse. In 1993, Montana enacted § 45-5-627, MCA, as a criminal felony statute which provides that a person commits the offense of ritual abuse of a minor if the person engages in various conduct such as sexual intercourse, mutilation or sacrifice of animals and other specifically defined conduct. In consideration of future cases of alleged ritual abuse, we emphasize that the parties and courts should carefully consider the possible need for separate counsel to represent the children as well as the possibility of appointment of a guardian ad litem.

We conclude that the record contains substantial and extensive evidence to support the conclusions of the District Court with regard to custody. We hold the District Court did not abuse its discretion in changing custody of the children.

Affirmed.

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


author: JUSTICE TRIEWEILER CHIEF JUSTICE TURNAGE

text:
    IN RE THE MARRIAGE OF RICK A. MAEDJE, Petitioner and Appellant, and KIM A. MAEDJE, Respondent and Respondent.
    No. 92-614.
    Submitted on Briefs October 28, 1993.
    Decided February 1, 1994.
    51 St.Rep. 47.
    263 Mont. 262.
    868 P.2d 580.

      CHIEF JUSTICE TURNAGE concurred in part, dissented in part, and filed an opinion.
    JUSTICES NELSON and GRAY concurred in the opinion of CHIEF JUSTICE TURNAGE.
    For Petitioner and Appellant: Thomas W. Trigg, Missoula.
    For Respondent and Respondent: Neil M. Leitch, Missoula.
   JUSTICE TRIEWEILER

delivered the Opinion of the Court.

Appellant Rick A. Maedje petitioned the District Court for the Fourth Judicial District in Missoula County to dissolve his marriage to Kim A. Maedje. A trial was conducted by a Special Master in December 1991, and a decree of dissolution was entered by the District Court on June 25, 1992. The court distributed the marital estate based on the Special Master’s recommended findings of fact and conclusions of law. Rick’s motion to amend the decree was deemed denied pursuant to Rule 59(g), M.R.Civ.P. From the decree and denial of his motion to amend, Rick appeals.

We affirm in part and reverse in part.

The issues on appeal are restated as follows:

1. Were the court’s findings regarding the increase in value of the Inyokern property during the parties’ marriage clearly erroneous?

2. Did the court err in its distribution of the marital estate?

Rick and Kim Maedje were married on June 8,1989, in Salt Lake City, Utah. A petition for dissolution was filed by Rick on April 30, 1991. At the time of trial, Rick was 52 years old and was employed as a pilot for Sky West Airlines. He had worked as a commercial pilot for over 20 years. Kim was 34 years old at the time of trial and had previously worked as a horse trainer and grocery store checker. No children were born during the parties’ 22 month marriage.

Both Rick and Kim had previously been married and each brought substantial real and personal property into the marriage. Among those assets were Rick’s properties located in Tehachapi and Inyokern, California, and Kim’s interest in property located in Caliente, California. Prior to their marriage, Rick and Kim resided together at Tehachapi and then lived at Inyokern during part of 1989 and 1990, where Kim conducted a horse training and boarding business.

During their marriage, the parties sold the Tehachapi, Inyokern, and Caliente properties, and purchased two pieces of property in Montana: 28 acres located on Nine Mile Road near Huson, and the Blue Bird Mobile Home Park in Hamilton. The Nine Mile property was purchased with proceeds from the sale of the Inyokern property in March 1990. In April 1991, just prior to their separation, the Hamilton property was purchased with proceeds from the sale of the Tehachapi property and a loan secured by the Nine Mile property.

At trial, a Special Master for the District Court valued the marital estate based primarily on testimony from the parties and their experts. After adopting the Special Master’s recommended findings of fact and conclusions of law, the District Court apportioned the marital estate and entered a decree of dissolution on June 25, 1992. The court awarded Kim the tangible personal property she brought into the marriage and the proceeds from the sale of the Caliente property. Rick was awarded his premarital personal property, two undeveloped parcels of real property, and his retirement account and shares of Sky West stock. These property distributions are not challenged on appeal.

At issue in this appeal are the court’s valuation of the appreciation of the Inyokern property during the parties’ marriage, and its allocation of the increased value realized from the sale of both the Inyokern and Tehachapi properties.

The court found that the value of the Inyokern property as of the date of the parties’ marriage was $96,000 and that it was sold ten months later for $125,000. Therefore, the court concluded that the property had increased in value by approximately $29,000 during the time the parties were married. The court also found that the Tehachapi property was appraised in November 1988 at $171,000 and sold in February 1991 for $250,000. The court determined that this represented an increase in value of approximately $3000 per month, and concluded that the property increased in value by $58,000 from the date of the marriage to the date the property was sold. The court specifically found the following with respect to these increases in value:

Although there was considerable testimony submitted that Kim is and has been a hard worker during the marriage, it is highly probable that neither Kim nor Rick’s improvements to property may have significantly contributed to the increase in value during the course of the marriage. Rather, it appears that the increase was primarily attributable to appreciation.

The court concluded that the parties should share equally in the increased value in these two properties and determined that an equitable division of property would be to award Kim the Nine Mile property, valued at $55,000, free of all encumbrances. The court stated that this reflected “her contributions to the marriage and her portion of the increase in value of both Tehachapi and Inyokern during the course of the marriage.” Rick was awarded the Hamilton mobile home park and was ordered to pay the mortgage on the Nine Mile property which secured the outstanding loan on the Hamilton property.

Rick moved to alter or amend the judgment, but this motion was deemed denied on September 9,1992. From the decree and the denial of the motion to amend, Rick appeals.

STANDARD OF REVIEW

The distribution of the marital estate is governed by § 40-4-202, MCA. This statute vests the district court with broad discretion to apportion the marital estate in a manner which is equitable to each party under the circumstances. In re Marriage of Rock (1993), 257 Mont. 476, 850 P.2d 296; In re Marriage of Collett (1981), 190 Mont. 500, 621 P.2d 1093.

The standard of review employed by this Court in marital property division cases is whether the district court’s findings of fact are clearly erroneous. In re Marriage of McLean / Fleury (1993), 257 Mont. 55, 849 P.2d 1012. When there is substantial credible evidence to support the court’s findings and judgment, this Court will not alter the trial court’s decision unless there is an abuse of discretion. In re Marriage of Scoffield (1993), 258 Mont. 337, 852 P.2d 664.

I.

Were the court’s findings regarding the increase in value of the Inyokern property during the parties’ marriage clearly erroneous?

Rick contends that the court’s findings in regard to the appreciation of the Inyokern property during the time that the parties were married is clearly erroneous. Therefore, he asserts that the property distribution scheme, which is based in part on the Inyokern property’s appreciation, is inequitable.

Rick does not challenge the court’s methodology for calculating the appreciation of premarital property during the parties’ marriage. However, he contends that the figures used by the court to calculate the appreciation of the Inyokern property were purely speculative and are not supported by substantial credible evidence.

We agree with this contention. The District Court’s findings of fact numbered 23 and 24 address the valuation of the Inyokern property. Those findings state as follows:

23. Petitioner testified that he believed Inyokern’s value as of June 1989 was $103,000. Respondent testified that Petitioner told her the property was worth between $85,000-$90,000 as of June 1989.
24. Averaging the values given by the parties, the Special Master recommends that the value as of date of marriage be established at $96,000. Thus the increase in the value of this property from the date of marriage to the date of sale is approximately $29,000.

After reviewing the record, we conclude that there was no factual basis in the record for these findings. When Rick testified, he stated that he did not know the value of the Inyokern property in June 1989, but that he had sold ten acres of it for $105,000 in 1983. There is no indication what relationship that ten acres had to the 19.2 acres of Inyokern property which Rick brought into the marriage in June 1989. Although it is unclear whether a portion of Inyokern was actually sold or whether this was a lease option which ultimately fell through, there is no evidence that Rick stated that Inyokern was worth $103,000 in 1989.

Furthermore, when Kim was asked about the value of the Inyokern property in 1989, she gave the following answers to the following questions during the course of her testimony:

Q. (BY MR. LEITCH) Moving along here, Kim, regarding the Inyokern property, you state in the [proposed] Findings that in June of‘89 it was valued at $85,000. Where did that figure come from?
A. That figure I had gotten from — and I think it is more of a guesstimation on the price that Rick wanted to sell it to the Hackers for. They lived right next door to us. And originally I had always heard —
MR. NEWCOMER: Objection, speculation.
THE COURT: Sustained.
Q. Okay. But you said that it was valued at $90,000 by Rick, not $85,000?
A. Well, it was speculation on our part. We thought 85 to 90 and that’s how I feel about it. It is hard when you are not real estate agents, and we are not even talking about an appraisal here. We are talking about two people talking.
MR. NEWCOMER: Your Honor, I would object to this line of questioning as simply eliciting speculation as to value.

In other words, in order to arrive at the value of the Inyokern property at the time the parties were married so that it could determine the amount by which the property appreciated during the marriage, the court averaged a figure which it erroneously attributed to the testimony of Rick with a figure thrown out by Kim based on total speculation. The result was an average of $96,000, which has no factual basis in the record.

In In re Marriage of Luisi (1988), 232 Mont. 243, 756 P.2d 456, we stated that, when valuing the assets in a marital estate, the court is free to adopt any valuation of property which is supported by the record. However, in this instance the court’s findings are based largely on speculation, and we have made clear that speculation, conjecture, inference, or guess do not constitute credible factual evidence. Graham v. Rolandson (1967), 150 Mont. 270, 435 P.2d 263.

We conclude that the court’s findings were not supported by substantial credible evidence, and therefore, its calculation of the appreciation of the Inyokern property during the parties’ marriage was clearly erroneous. The judgment of the District Court with respect to the valuation of the Inyokern property is vacated and we remand this case to the District Court for a proper determination of the amount by which the Inyokern property appreciated during the parties’ marriage.

II.

Did the court err in its distribution of the marital estate?

Rick contends that the court erroneously awarded Kim the Nine Mile property as compensation for her share of the appreciation of Inyokern and Tehachapi because she did not contribute significantly to the appreciation of those pre-acquired properties which Rick brought into the marriage. He asserts that even if Kim did contribute to the value of Tehachapi, the court’s award ofhalf of the appreciation of both properties was disproportionate to the value of her contributions. Finally, he claims that the court should not have ordered him to pay the mortgage on the Nine Mile property because Kim testified that she would be willing to pay it if she were awarded the property.

Section 40-4-202(1), MCA, sets forth the factors which must be considered by the court before distributing property acquired before the marriage. That section provides in relevant part that:

In dividing property acquired prior to the marriage ... the court shall consider those contributions of the other spouse to the marriage, including:
(a) the nonmonetary contribution of a homemaker;
(b) the extent to which such contributions have facilitated the maintenance of this property; and
(c) whether or not the property division serves as an alternative to maintenance arrangements.

In this instance, the record demonstrates that the court considered Kim’s contributions to the marriage, including specific contributions she made to the properties in question. Based on testimony by the parties and other witnesses, the court found that Kim had made substantial nonmonetary contributions to the marriage. There was testimony that, among other things, Kim had remodeled and painted buildings on the parties’ various properties, performed daily housekeeping activities, and kept the marital financial records. Furthermore, although a request for maintenance was made in the response to the petition for dissolution, no maintenance was awarded. Although the court found that the increase in the value of the Inyokern and Tehachapi properties “was primarily attributable to appreciation,” it concluded that due to her contributions to the marriage, she was entitled to half of the appreciation in value of those properties.

Although the evidence does not indicate that Kim’s contributions resulted in any significant increase in the value of the properties in question, the record does support the finding that Kim contributed in some fashion to the maintenance and appreciation of these properties. We conclude that this evidence supports the District Court’s allocation of these assets according to the considerations required by § 40-4-202, MCA.

Therefore, we hold that the court did not abuse its discretion when it awarded Kim half of the appreciated value of the Inyokern and Tehachapi properties. Although Kim had stated that she would pay the mortgage on the Nine Mile property, it was within the court’s discretion to award her this property unencumbered as compensation for her share of the marital estate.

This case is reversed in part and remanded for a proper determination of the amount by which the Inyokern property appreciated during the parties’ marriage. The distribution of the marital estate is affirmed subject to any adjustments necessary to reflect the corrected value of appreciation on the Inyokern property.

JUSTICES HARRISON, HUNT and WEBER concur.

CHIEF JUSTICE TURNAGE

concurring in part and dissenting in part:

I concur with the majority opinion on Issue 2.1 respectfully dissent from the majority opinion on Issue 1.

The majority opinion reverses the District Court and remands this case for determination of the amount by which the Inyokern property appreciated during the parties’ marriage. The majority opinion concludes that the District Court’s findings of fact numbered 23 and 24, relating to the valuation of the Inyokern property, have no factual basis in the record and, therefore, are clearly erroneous.

With the exception of finding 23, in that the figure $103,000 should have been $105,000, findings 23 and 24 are not clearly erroneous.

A review of the record in this case is enlightening and clearly supports the findings of the District Court. The record consists of:

(1) Over 1200 pages of transcribed depositions and trial testimony;

(2) Over 70 exhibits introduced at trial;

(3) Over 94 pages of discovery documents;

(4) Two large district court files containing 122 separate filings of documents.

The setting of this conjugal war commenced on June 8,1989, with the marriage of the parties and escalated commencing April 30,1991, when the petitioner Rick Maedje (Rick) filed for a dissolution of his marriage to Kim Maedje (Kim). This marital war has continued for nearly three years and may well continue much longer now that the majority has reversed the District Court.

From a review of this record, it is readily apparent that the special master who presided in this case exercised the highest standards of judicial conduct and patience. The special master was faced with a most complex and difficult trial that consumed many judicial hours, three substitutions of counsel and involved parties that, charitably speaking, were on many occasions difficult.

The property that the special master was required to consider in arriving at an equitable distribution of the marital estate consisted of many items of personal property too numerous to mention and six parcels of real estate located in California and Montana, each of which had a substantial value that needed to be determined.

The majority of this Court reverses and remands this case, thereby prolonging the marital conflict for an indefinite period of time. The sole reason is the majority’s conclusion that there is no factual basis in the record to support the master’s findings of a value, as of June 8, 1989 (the date of the parties’ marriage), for a parcel of land of approximately twenty acres located in Kern County, California, and the amount of its appreciation during the marriage of the parties. This Court is asking a new trier of fact to perform an impossible task in trying to establish a value for this parcel of land nearly five years after the marriage.

It is apparent from the record that Rick was determined to avoid testifying concerning the value of the Inyokem property as well as to values of other property to be considered in the marital estate. An example of Rick’s avoidance of offering evidence of values of properties is his response to an August 13,1991 order of the court requiring the parties to set forth an inventory of the property involved in the marital estate and the values thereof. By Document 37 in the District Court file, Rick’s response states an inventory of all property owned by the parties jointly or separately. Rick lists eighty-three separate items of property, including the Inyokern property, and states for his response to the court that the value of each of the said eighty-three items is to him “unknown.”

The special master’s Conclusion of Law No. 6 states: “The value of the gross marital estate is approximately $520,385. The debt against this estate is approximately $167,000, resulting in a net marital estate of $353,385.”

The special master in Conclusion of Law No. 9 stated that the value of the Inyokem property increased approximately $29,000 from the date of marriage to the date of sale and that the parties should share equally in the $29,000 increase in value. Therefore, the special master awarded $14,500 of the increase to Kim. The majority of this Court now finds that there is nothing in the record to substantiate this conclusion of law. I disagree.

There is no dispute in the record that the Inyokem property sold on March 26,1990, for $125,000; $55,500 was paid as a down payment and the balance of $69,500 was received by Rick in the form of a note and deed of trust. Rick’s Exhibit l-B-4.

Transcript Volume III, Page 50, sets forth Rick’s testimony on direct examination concerning this sale:

Q. So then in 1990 did you sell the Inyokem property?

A. Yes.

Q. Okay. And when did you put it on the market?

A. It was in the early winter, I believe.

Q. Okay. And it sold March 26,1990?

A. Yes.

Q. And about how much did you receive? How much did you receive for it?

A. The selling price was 125,000.

This testimony not only sets forth the sale of the property for $125,000 on March 26,1990, but also provides testimony from the owner of the property upon which the court can draw a lawful inference that this property was placed on the market in the early winter of 1989-90. Therefore, by inference in October 1989, some four months after the marriage, Rick must have placed a value of at least $125,000 on this property because it sold for that sum in March of 1990. Most certainly the buyer did not offer to pay more than the asking price. From this sale, Rick has been receiving $736 a month on the unpaid balance. (Transcript Volume III, Page 162.)

Rick’s Exhibit 9 establishes that he had agreed to sell the Inyokern property for $105,000 in 1983 but that the sale failed in 1985. Transcript Volume V, Page 136, sets forth the question directed to Rick by the court and his response. This portion of the transcript tells us that Rick did at this time put a value on Inyokern and the value was $105,000. Undoubtedly the court’s erroneous figure of $103,000 in its findings should have been $105,000.

Rick’s testimony establishes that he therefore did put a value on that property which the court could use as an inference of value when he had offered no other assistance to the court in providing a June 8, 1989 value. In response to a question from the court, Rick testified, Transcript Volume V, Page 136:

Q. Can you tell me the value of the Inyokern property as of June 1989?
A. The only thing I can go on there is I had sold ten acres of it with the main barns and the corrals and arena and mobile on it for 105,000 to Lloyd and Beverly Hacker (phon.) in 1983 and that’s the only value that I could put on it. [Emphasis added.] [Note that this is the sale which failed.]

Kim testified as to a value of the Inyokern property, a value that she had obtained from Rick, the owner of the property. This testimony and the testimony of Rick provides substantial credible evidence upon which the court arrived at a value of the Inyokern property and the increase in value during the marriage. This evidence supports the court’s findings 23 and 24 whereby the court averaged the $90,000 value given by Kim with the testimony given by Rick that the value was $103,000 [sic] and subtracted that amount from the $125,000 sale price, arriving at an increase in value of $29,000.

Kim testified on direct examination concerning the value of the Inyokern property, Transcript Volume IV, Pages 153-55:

Q. Okay. And in June of ‘89 did Rick tell you what he thought it was worth?
A. Yeah, approximately.
Q. And how much was that?
A. Approximately 85 to 90,000 is what we thought it would sell for. Both of us. It was both of our impression that it would be right around that, that that would be its selling price, once it was —
Q. Was it then sold in April of 1990?
A. Uh-huh.
Q. And do you know how much it was sold for?
A. I believe it was 125.1 think that this is wrong, the 120. That should be —
Q. Sold for 120 to 125,000?
A. Yeah.
Q. Okay.
A. I think we put the low ends on — both 85 and 120 here. It looks that way to me.
Q. Okay. Assuming it was sold for $90,000 — or excuse me, it was valued at $90,000 by Rick in June of ‘89 and then sold for 125,000 in 1990, March, what sort of an increase in value would that give us?
A. Well, it would be 35, and then split in half, it is 17,5.
Q. Okay, but you said that it was valued at 90,000 by Rick, not 85?
A. Well, it was speculation on our part. We thought 85 to 90 and that’s how I feel about it. It is hard when you are not real estate agents, and we are not even talking about an appraisal here. We are talking about two people talking.
MR. NEWCOMER: Your Honor, I would object to this line of questioning as simply eliciting speculation as to value.
THE COURT: I think she has been asked and answered this same question.
MR. LEITCH: I think so, too. I am responding to the objection. I think it is an admission against interest and I think under the Rules of Evidence it comes under what he valued the property at at that time.
THE COURT: Well, I will overrule the objection, but move on, because I think that information is in.

The record in this case is not a perfect example of how property should be valued and appraised; however, it does provide the court a substantial credible record upon which to base the findings of fact and the conclusions of law. It must be remembered that the court is responsible for providing an equitable distribution of the marital estate, and such was accomplished in this case. This case will soon be three years in duration. It has consumed countless hours of court time, involved five different lawyers resulting from three substitutions of counsel, and attorney liens filed against both Rick and Kim.

The amount involved in this case in view of the totality of the property is minimal. The court’s erroneous finding of $103,000 as the value set in Rick’s testimony when the value should have been $105,000, is of a trivial nature when viewed in light of the significant amounts of property in this case and therefore does not warrant any remand or reversal on that point. Areversal and remand undoubtedly will result in prolonged District Court litigation and, in all probability, further appeal to this Court. The time has now arrived to bring to a conclusion the marital war between Rick and Kim. I would affirm the District Court.

JUSTICE NELSON concurs with the concurring and dissenting opinion of Chief Justice Turnage.

JUSTICE GRAY concurs with the concurring and dissenting opinion of Chief Justice Turnage.


author: JUSTICE GRAY

text:
    WILLIAM T. “BILL” HOWELL AND JENSEN HOWELL AND GRANGE INSURANCE ASSOCIATION, Plaintiffs, v. THE STATE OF MONTANA, and its agent, THE MONTANA POTATO IMPROVEMENT ASSOCIATION, Defendants, Third-Party Plaintiffs, Respondents and Cross-Appellants, v. MONTANA INSURANCE GUARANTY ASSOCIATION, Third-Party Defendant and Appellant.
    No. 93-254.
    Submitted on Briefs December 22, 1993.
    Decided February 1, 1994.
    51 St.Rep. 53.
    263 Mont. 275.
    868 P.2d 568.

      For Appellant: Robert J. Phillips, Phillips & Williams, Missoula.
    For Respondents (Cross-Appellants): William L. Crowley, Boone, Karlberg & Haddon, Missoula.
   JUSTICE GRAY

delivered the Opinion of the Court.

This complex litigation between the State of Montana, the Montana Potato Improvement Association, the Montana Insurance Guaranty Association, and others has spanned fifteen years. In the present appeal, we are asked to determine whether the State has a valid indemnification claim against the guaranty association for $360,000 previously paid to an insurance company in settlement. We affirm the determination of the Fourth Judicial District Court, Missoula Comity, that the State’s indemnification claim is a covered claim but conclude that the claim is statutorily limited to $300,000. A brief summary of the procedural history is necessary to understand the issues currently before us.

In 1979, several Washington potato farmers filed suit against William and Jensen Howell (the Howells) for selling seed potatoes infected with ring rot. They also filed against the Montana Potato Improvement Association (Potato Association) for certifying the seed potatoes and against two Washington warehouses. A Washington jury found the Potato Association and the two warehouses jointly and severally hable in various degrees for $485,653.82 in damages and $1,451.06 in costs. The Howells were not found negligent, but the Washington court ordered the Howells to indemnify one of the warehouses because of a breach of warranty claim.

In June of 1981, the First Judicial District Court, Lewis and Clark County, issued a declaratory judgment finding that the Potato Association was an agent of the State and holding that the State’s insurer, Glacier General Assurance Company (Glacier General), had a duty to defend and indemnify the Potato Association under the insurance contract between the State and Glacier General. The Washington plaintiffs subsequently filed their judgments with the First Judicial District Court and, in an order issued in August of 1983, that court recognized the validity of the foreign judgments against the Potato Association in the total amount of $485,653.82, plus costs and interest.

In October of 1983, the Washington plaintiffs assigned their interests in the judgments to the Howells. The Howells used funds provided under a reservation of rights agreement by their insurer, Grange Insurance Association (Grange Insurance), to purchase the assignments. When Glacier General failed to pay the judgments, the Howells and Grange Insurance filed the present action in the Fourth Judicial District Court, Missoula County, seeking to enforce the judgments against the State, the Potato Association and Glacier General.

After Glacier General was declared insolvent in the spring of 1985, the Montana Insurance Guaranty Association (MIGA) intervened to defend the State and the Potato Association under a reservation of rights, pursuant to §§ 33-10-101 et seq., MCA, of the Montana Insurance Guaranty Association Act (the Act). On April 30,1987, the State, the Potato Association and MIGA entered into a written agreement concerning the defense and indemnity of Grange Insurance’s claims against the three parties (1987 Agreement).

On October 6,1988, the District Court granted summary judgment in favor of the State, the Potato Association and MIGA and against the Howells and Grange Insurance. It concluded that only Grange Insurance, and not the Howells, owned the foreign judgments and that, pursuant to the Act, an insurance company could not collect from either MIGA or the insureds of an insolvent insurance company. This Court concluded on appeal that, although the definition of “covered claim” found in § 33-10-102(2)(b), MCA, does not include any amount due an insurer and, therefore, prohibited Grange Insurance from collecting from MIGA, the Act did not absolve the tortfeasors from judgments. Therefore, we reversed the summary judgment entered in favor of the State and the Potato Association. Howell v. Glacier Gen. Assurance Co. (1989), 240 Mont. 383, 387, 785 P.2d 1018, 1020 (Howell I). We directed the court to enter judgment against the Potato Association and to determine the amount of damages for which the State was liable.

After the case was remanded, the District Court granted a motion by the State and the Potato Association (collectively hereafter the State) to file a third-party complaint against MIGA. The third-party complaint alleged that:

[A]s was determined in a prior declaratory action, Cause No. 44186 ..., the State and [the Potato Association] were insureds of Glacier under the contract issued by Glacier. Also, as was determined in Cause No. 44186, Glacier owed the [Potato Association] a duty to defend and indemnify it under the terms of the applicable Glacier Insurance Company policy for the matters alleged by Grange Insurance. ...
Under the provisions of the Montana Insurance Guarantee Act,... [MIGA] stands in the shoes of Glacier and [MIGA] has all rights, duties and obligations of Glacier concerning the State or the [Potato Association].
One purpose of the Guarantee Act is to avoid financial loss to insureds of insolvent insurers. Allowing an insurance company such as Grange Insurance to recover from the insured while refusing to allow the insured recovery from [MIGA] defeats this purpose of the Guarantee Act.

The complaint sought a declaratory judgment that MIGA was obligated to indemnify the State for monies paid to Grange Insurance.

By this time, the amount of the judgment had increased through accruing of interest to well over a million dollars. Grange Insurance offered to settle for $360,000; the State offered to pay $180,000, provided that MIGA would match that figure. MIGA declined, maintaining that our decision in Howell I had absolved it of any liability to Grange Insurance. On June 22,1992, the District Court approved a settlement resolving all claims between Grange Insurance, the State and the Potato Association for $360,000.

The State then filed a motion for summary judgment against MIGA for indemnification of the $360,000 settlement amount, plus costs and certain attorney’s fees; MIGA responded with a cross-motion for summary judgment. The District Court granted summary judgment for the State, concluding that MIGA was liable for the $360,000 settlement amount under both the Act and the 1987 Agreement. The District Court denied the State’s request for attorney's fees. Both parties appeal.

Our standard in reviewing a grant of summary judgment is the same as that initially utilized by the trial court. McCracken v. City of Chinook (1990), 242 Mont. 21, 24, 788 P.2d 892, 894. Summary judgment is appropriate when the pleadings, depositions, and other documents on file demonstrate that no genuine issue of material fact exists and that the moving party is entitled to judgment as a matter of law. Rule 56(c), M.R.Civ.P. Both parties agree that no genuine issues of material fact exist; indeed, both moved for summary judgment in the District Court on that basis. Therefore, our review is whether the District Court correctly interpreted the law. Mooney v. Brennan (1993), 257 Mont. 197, 199, 848 P.2d 1020, 1022.

The first issue before us is whether the State’s claim against MIGA for indemnification of the $360,000 paid out as settlement monies in an action to enforce judgments against the State is a “covered claim” as defined by the Act. MIGA raises two arguments to support its contention that the State’s claim is not covered. First, it asserts that the claim has been paid and, therefore, cannot constitute a covered claim. Second, it asserts that the Act prohibits insurance companies from recovering against MIGA and the claim in the hands of the State is, in effect, an insurance subrogation claim. We will examine each argument in turn.

The Act is patterned after the Post-Assessment Property and Liability Insurance Guaranty Association Model Act, which has been enacted in some form in forty-three states. Palmer by Diacon v. Montana Ins. Guar. Ass’n (1989), 239 Mont. 78, 81, 779 P.2d 61, 63; §§ 33-10-101 et seq., MCA, Part Compiler’s Comments. The statutorily-stated purposes of the Act are:

• to provide a mechanism for payment of covered claims under certain insurance policies to avoid excessive delay in payment;
to avoid financial loss to claimants or policyholders because of the insolvency of an insurer-,
• to assist in the detection and prevention of insurer insolvencies; and
• to provide an association to assess the cost of such protection among insurers.

Section 33-10-101(2), MCA (emphasis added). The Act also provides that it is to be liberally construed to effectuate the above purposes and that the stated purposes constitute an aid and guide to interpretation. Section 33-10-101(4), MCA.

MIGA is the nonprofit association of insurance companies statutorily created to carry out the purposes of the Act; membership in MIGA is a prerequisite to transacting insurance business in Montana. Section 33-10-103, MCA. Once an insurer is declared insolvent, MIGAsteps into the shoes of the insolvent insurer and “is considered the insurer to the extent of its obligation on the covered claims and to that extent has all rights, duties, and obligations of the insolvent insurer as if the insurer had not become insolvent.” Section 33-10-105(l)(b), MCA.

MIGA’s primary statutory duty, insofar as relevant to this appeal, is to pay covered claims arising under an insurance policy issued by the insolvent insurer and unpaid prior to the insolvency. Section 33-10-105(l)(a)(i), MCA, and Commission Notes thereto. A “covered claim” is defined in pertinent part as:

an unpaid claim, including one for unearned premiums, which arises out of and is within the coverage and not in excess of the applicable limits of an insurance policy to which this part applies issued by an insurer, if such insurer becomes insolvent after July 1,1971....

Section 33-10-102(2)(a), MCA. On appeal, MIGA primarily argues that the State’s claim is not “unpaid” because Grange Insurance’s claim has been paid by the State — albeit in the reduced settlement amount of $360,000. This contention incorrectly identifies the actual “claim” at issue here.

Under the State’s third-party complaint, the State, as the policyholder, sought indemnification under its insurance policy with Glacier General of settlement monies it had paid to Grange Insurance in the action brought to enforce judgments against it. The policy with Glacier General provided:

[Glacier General] shall pay on behalf of the insured all sums which the insured shall become legally obligated to pay on account of any claim for breach of duty made against the insured if such negligent act, error or omission is committed during the policy period ... and [Glacier General] shall have the right and duty to defend any suit against the insured seeking damages on account of such breach of duty ....

In the 1981 declaratory judgment, the First Judicial District Court concluded that Glacier General had a duty to defend and indemnify the Potato Association under the terms of Glacier General’s insurance contract with the State and stated that the Potato Association “shall be indemnified by Glacier General. ...” In the present action, the District Court determined that the State’s claim for indemnity “arises out of and is within the coverage and not in excess of the applicable limits” of the insurance policy between the State and Glacier General. MIGA does not dispute the question of coverage under Glacier General’s policy on appeal.

Furthermore, the State’s claim against MIGA for indemnification is, indeed, “unpaid” under the Act. MIGA’s focus on the original claims — those originally held by the Washington plaintiffs and ultimately held by Grange Insurance — is misplaced. The only claim now before us is the State’s indemnity claim against MIGA for $360,000. As discussed above, the claim arises out of and is within the coverage of the State’s insurance policy with Glacier General. Glacier General, the State’s insolvent insurer, did not pay this claim. Therefore, in the hands of the State as the policyholder asserting a claim under its policy, this claim remains “unpaid.”

As emphasized above, the purpose of the Act is for MIGA to pay “covered claims” in order to avoid financial hardship for both policyholders and other claimants when an insurance company becomes insolvent. As an immediate result of Glacier General’s insolvency, the State has suffered a direct loss of $360,000. It is undisputed that Glacier General would have been liable to the State in this amount had it not been declared insolvent. Upon Glacier General’s insolvency, MIGA assumed the duties and obligations of Glacier General to the extent of “covered claims,” including the duty to indemnify the State for the monies paid to Grange Insurance. Any other result would run contrary to the stated purpose of the Act to protect “policyholders” from insolvent insurers and would completely deprive the State of the benefit of its insurance contract with Glacier General.

The cases cited by MIGA to support its argument that the State’s claim was “paid” are distinguishable. In Florida Ins. Guar. Ass’n v. Dolan (Fla. App. 1978), 355 So.2d 141, an injured skier asserted a claim for $70,000 and obtained a judgment in that amount against a ski resort. The resort’s insurer subsequently became insolvent and, faced with the threat of execution against the property, the ski resort placed $70,000 in an escrow account to which the skier had absolute and unconditional access. The injured skier then asserted a claim against the Florida Insurance Guaranty Association (FIGA). In that case, the Florida appellate court held that the skier’s claim was not covered because it was not an unpaid claim. Dolan, 355 So.2d at 142. The injured party had been paid the $70,000 and was not entitled to a double recovery.

In this case, the injured Washington plaintiffs have been paid and, under Dolan, would not be allowed to recover against MIGA. In Dolan, the Florida corut did not consider the question of whether the ski resort had a claim against FIGA; the ski resort was not a party to the suit. Therefore, although Dolan does not apply to our situation, it clarifies the meaning of “unpaid” in the definition of a covered claim. The adjective “unpaid” eliminates situations like Dolan, where a stranger to the insurance policy seeks some type of double recovery. It does not apply to this case, where an insured has paid out settlement monies and seeks indemnification from MIGA under its insurance policy and the Act.

MIGA also relies on King Louie Bowling Corp. of Missouri v. Missouri Ins. Guar. Ass’n (Mo. App. 1987), 735 S.W.2d 35, which is factually similar to the case before us but, nonetheless, mandates a result opposite from that urged by MIGA. In King Louie, the injured plaintiffs refused to file suit against the Missouri guaranty association when the bowling alley’s insurance company became insolvent. The bowling alley settled the claims and then filed claims against the association for indemnification. The Missouri Court of Appeals first explained that the purpose of the guaranty act was to protect insureds from the effects of insolvent insurers, a purpose which would be frustrated if an insured facing a judgment was denied protection from the association. King Louie, 735 S.W.2d at 39. However, the insurance policy between the bowling alley and the insolvent insurance company did not provide for indemnification if a lawsuit was voluntarily settled before the insured became legally obligated to pay. Therefore, because the association stood in the shoes of the insurer, the association was not obligated to indemnify the bowling alley. King Louie, 735 S.W.2d at 40.

We are faced with the opposite situation in this case. It is undisputed that Glacier General would have been obligated to indemnify the State if it had not become insolvent. Moreover, unlike the bowling alley in King Louie, the State was legally obligated to Grange Insurance because of the judgments entered against it and our opinion in Howell 7. As a result, King Louie does not support MIGA’s contention that the State does not have a valid claim for indemnification. We conclude that the State’s claim for indemnification is “unpaid” as defined by the Act, arises out of and is within the coverage of an insurance policy to which the Act applies and, thus, by definition, is a “covered claim.”

MIGA also argues that the claim is essentially an insurance subrogation claim and, therefore, under § 33-10-102(2)(b), MCA, the State cannot seek indemnity from MIGA. We disagree. Section 33-10-102(2)(b), MCA, provides:

“Covered claim” shall not include any amount due a reinsurer, insurer, insurance pool, or underwriting association, as subrogation recoveries or otherwise.

MIGA concedes that neither the State nor the Potato Association is a reinsurer, insurer, insurance pool or underwriting association.

The rules of statutory construction require the language of a statute to be construed according to its plain meaning; if the language is clear and unambiguous, no further interpretation is required. GBN, Inc. v. Dep’t of Revenue (1991), 249 Mont. 261, 265, 815 P.2d 595, 597. Applying those principles, we conclude that § 33-10-102(2)(b), MCA, does not apply to this claim. The State is asserting its claim as the insured, the policyholder, under its insurance policy with Glacier General.

Additionally, MIGA argues that our decision in Howell I requires us to conclude that the State’s claim is not a covered claim. We disagree. In Howell I, we explicitly stated that the Act prohibited an insurance company, Grange Insurance, from recovering subrogation benefits from MIGA based on § 33-10-102(2)(b), MCA. We also stated that Grange Insurance was not prohibited from recovering from the State and the Potato Association as tortfeasors. Howell I,785 P.2d at 1020. We did not address the issue of whether the State and the Potato Association could recover from MIGA on a separate indemnification claim. As emphasized above, the present claim arises from the State’s third-party complaint against MIGA based on the State’s insurance contract with Glacier General; the third-party complaint was filed after our decision iaHowell I and is unrelated to the issues resolved in that case.

In sum, we conclude that the State’s claim against MIGA for indemnification of the $360,000 is a “covered claim” under § 33-10-102(2)(a), MCA. As a result, we need not discuss issues raised by the State concerning the contractual waiver of MIGA’s defenses and alleged constitutional violations. However, two final issues remain for our review: we must determine whether the Act limits MIGA’s liability to $300,000 for this claim and whether the State is entitled to certain attorney’s fees.

Regarding the limitation issue, the District Court recognized that § 33-10-105(l)(a)(ii), MCA, limits MIGA’s liability for each covered claim to $300,000. It reasoned, however, that the original claims against the Howells involved ten separate plaintiffs and concluded that the statutory limitation did not apply. We conclude that the court erred.

As discussed above, the State holds and asserts one covered claim against MIGA — the indemnification claim which would have been submitted to Glacier General under its insurance contract absent Glacier General’s insolvency. Section 33-10-105(l)(a)(ii), MCA, is clear and unambiguous: it expressly limits MIGA’s liability to $300,000 for each covered claim. We conclude, therefore, that the State’s indemnification claim is limited to $300,000.

As a final matter, the State argues that it is entitled to recover attorney’s fees incurred in defending against the claims of Grange Insurance after MIGA withdrew its defense. On February 15, 1990, this Court denied the petition for rehearing in Howell I, which held that Grange Insurance could not recover from MIGA. One month later, MIGA sent notice to the State and the Potato Association that it was withdrawing its defense in the matter, asserting that this Court’s decision in Howell I absolved it of any further obligation to indemnify the State or the Potato Association as a result of the claims made by Grange Insurance.

Regarding this issue, the District Court concluded that, under the Act, MIGA had a duty to defend the insured and to accept a reasonable settlement offer in appropriate cases. It then determined that MIGA’s decision to withdraw its defense based on Howell I was in bad faith because Howell I did not address the issue of MIGA’s obligation to the State. Therefore, the court concluded that MIGA breached the 1987 Agreement and violated the Act by refusing to defend the State. However, the District Court went on to explain that § 33-10-110, MCA, which grants MIGAimmunity from liability for all actions done in the performance of its duties, provided MIGA with complete immunity from damages resulting from the breach of a statutory or contractual duty.

The longstanding rule in Montana is that, absent statutory or contractual authority, attorney’s fees will not be awarded. Goodover v. Lindey’s, Inc. (1992), 255 Mont. 430, 445, 843 P.2d 765, 774; Bitney v. School Dist. No. 44 (1975), 167 Mont. 129, 137, 535 P.2d 1273, 1211; Ehly v. Cady (1984), 212 Mont. 82, 100, 687 P.2d 687, 696. If such authority exists, the awarding of attorney's fees is a matter of the district court’s discretion. Grenfell v. Duffy (1982), 198 Mont. 90, 96, 643 P.2d 1184, 1187. Our review of a district court’s legal conclusion that no basis for attorney’s fees exists, however, is plenary. See Steer, Inc. v. Dep’t of Revenue (1990), 245 Mont. 470, 474-75, 803 P.2d 601, 603.

It is clear that neither the State’s insurance policy with Glacier General, the 1987 Agreement, nor the Act specifically authorize an award of attorney’s fees to the State. The State does not contend otherwise. Thus, the State has not established a basis upon which attorney’s fees ordinarily could be awarded in Montana.

The State argues, however, and the District Court agreed, that MIGA violated the Act and breached the 1987 Agreement by withdrawing its defense. Thus, according to the State, the damages it sustained in the form of attorney’s fees incurred in defending against the Grange Insurance judgments are recoverable. In this case, we need not address whether the District Court correctly found breaches of both MIGA’s statutory and contractual duties. Regardless of whether MIGA breached the 1987 Agreement or violated the Act, the District Court correctly determined that the State is not entitled to recovery of the attorney’s fees it seeks.

We note initially that the attorneys fees sought do not come within the statutory definition of a covered claim contained in § 33-10-102, MCA. Glacier General’s policy does not contain an attorneys fees provision; thus, the fees do not “arise out of’ and fall “within the coverage” of an insurance policy to which the Act applies. Section 33-10-102(2)(a), MCA. Therefore, MIGA’s statutory duty to pay covered claims does not apply to these attorneys fees.

In addition, the attorneys fees sought by the State are in the nature of damages for breach of both statutory and contractual duties separate and apart from its covered claim. However, nothing in the Act imposes liability on MIGA for such damages. Indeed, we agree with the District Court that § 33-10-110, MCA, provides MIGA with immunity from liability for the attorneys fees in this case. Section 33-10-110, MCA, provides:

[tjhere shall be no liability on the part of and no cause of action of any nature shall arise against any member insurer, the association or its insurance producers or employees, the board of directors, or the commissioner or his representatives for any action taken by them in the performance of their powers and duties under this part.

Statutes must be construed according to the plain meaning of their language. Norfolk Holdings, Inc. v. Dep’t of Revenue (1991), 249 Mont. 40, 43, 813 P.2d 460, 461. Further, it is our duty to interpret individual sections of an act in such a manner as to ensure coordination with the other sections of the act. State v. Meader (1979), 184 Mont. 32, 37, 601 P.2d 386, 389. In doing so, a statute will not be interpreted to defeat its evident object or purpose; the legislative objective is of prime consideration in interpreting statutes. Lewis and Clark County v. Dep’t of Commerce (1986), 224 Mont. 223, 227, 728 P.2d 1348, 1351.

On its face, § 33-10-110, MCA, could be read to preclude the assertion of any liability against MIGA, even the statutory obligation to pay covered claims imposed by § 33-10-105(l)(a), MCA. Such an interpretation, however, would render the entirety of the Act, and its primary purpose of avoiding financial loss to claimants or policyholders caused by the insolvency of an insurer, a nullity. See Lewis and Clark, 728 P.2d at 1351. We decline to interpret § 33-10-110, MCA, in such a manner.

On the other hand, the legislature clearly intended to preclude liability for, and claims based on, actions taken by MIGA in the performance of its duties. Section 33-10-110, MCA. Reading this statute together with the purposes of the Act and MIGA’s clear statutory duty under § 33-10-105, MCA, to pay covered claims, we conclude that the legislature intended to preclude liability against MIGA for claims other than “covered claims” as defined in the Act.

Although we have not interpreted § 33-10-110, MCA, previously, other states have concluded that similar versions of the guaranty act provide immunity for guaranty associations from those claims which do not qualify as “covered claims.” In Pannell v. Missouri Ins. Guar. Ass’n (Mo. App. 1980), 595 S.W.2d 339, for example, the insured brought a claim against the Missouri Insurance Guaranty Association for “vexatious refusal to pay,” a statutory cause of action under the Missouri Insurance Code. In concluding that the trial court erred in submitting the claim to the jury, the Missouri Court of Appeals focused on the tightly restricted authority of the association that required it to pay only “covered claims” and the immunity provision that insulated the association from liability for actions taken by it in the performance of its powers and duties. Pannell, 595 S.W.2d at 352.

In Vaughn v. Vaughn (Wash. App. 1979), 597 P.2d 932, the Washington court held that damages for bad faith did not constitute a “covered claim” under the guaranty act. Therefore, the guaranty association was not liable for such damages. Vaughn, 597 P.2d at 934. The Maryland Court of Appeals similarly concluded that although attorney’s fees were available under the Public Information Act, the immunity provision of the guaranty act precluded an award of attorney’s fees against the Maryland Insurance Guaranty Association. A. S. Abell Publishing Co. v. Mezzanote (Md. 1983), 464 A.2d 1068, 1075.

Further, in Isaacson v. California Ins. Guar. Ass’n (Cal. 1988), 750 P.2d 297, the insured sued the California Insurance Guaranty Association (CIGA) for compensatory and punitive damages under three tort theories. The Supreme Court of California held that the legislative intent behind California’s Guaranty Act indicated that CIGA was immune from tort liability for its conduct relating to the handling of the claims under all three theories. Focusing on CIGA’s limited authority to disburse funds only for “covered claims” and to collect only those funds necessary for the payment of “covered claims,” the court reasoned that CIGA did not stand in the shoes of the insolvent insurer for all purposes, but only regarding “covered claims.”

Finally, we agree with the rationale expressed by the Mississippi Supreme Court in Bobby Kitchens, Inc. v. Mississippi Ins. Guar. Ass’n (Miss. 1989), 560 So.2d 129. In concluding that the immunity provision precluded punitive damages against the guaranty association, the Mississippi court explained:

It does appear that MIGA received protection from the statutory limitations and restrictions ... This protection is not unintended by the legislative enactment.... The sole purpose of the statute [the act] is to protect the insured from insolvent insurance companies and to require the financially healthy insurance companies to involuntarily contribute to protect the public. The statutes are of good purpose. Because of MIGA’s involuntary nature the Legislature rightfully placed limitations on the liabilities of Association members.

Bobby Kitchens, 560 So.2d at 135.

Applied to this case, MIGA is liable for the covered claim under the State’s insurance policy with Glacier General, as provided in §§ 33-10-102 and -105, MCA. MIGA is not, and cannot be, liable for the attorney’s fees requested by the State because those fees do not constitute a covered claim, as defined in § 33-10-102, MCA, and MIGA is immune from other liability for its actions pursuant to § 33-10-110, MCA. We hold that the District Court did not err in concluding that the State could not recover the attorney’s fees it incurred in defending against Grange Insurance.

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

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


author: JUSTICE NELSON

text:
    BILL BOYER, Plaintiff and Appellant, v. ROBIN C. SPARBOE, as Personal Representative of the Estate of Charles W. Sparboe, Deceased, Defendant and Respondent.
    No. 93-142.
    Submitted on Briefs January 7, 1994.
    Decided February 2, 1994.
    51 St.Rep. 60.
    263 Mont. 289.
    867 P.2d 1116.
    For Plaintiff and Appellant: Mark D. Parker, Parker Law Firm, Billings.

      For Defendant and Respondent: James P. Murphy, Murphy & Kirkpatrick, Billings.
   JUSTICE NELSON

delivered the Opinion of the Court.

Bill Boyer (Boyer) appeals from a judgment, entered after a bench trial, of the Thirteenth Judicial District Court, Yellowstone County, finding in favor of the defendant. We reverse.

The issue on appeal is as follows: did the District Court err when it concluded that Boyer was barred from retrieving his property from the estate due to his failure to file a creditor’s claim?

Boyer had known and been friends with the owner of Treasure State Gold and Silver (Treasure State), Charles Sparboe (Chuck), for years. In addition, Boyer and Chuck did business together for a number of years, buying and trading metals.

By 1988, Boyer had accumulated a great deal of gold and silver and was concerned about its safety. Chuck offered to store the gold and silver in his safe at Treasure State. Chuck showed Boyer the safe and told Boyer that other people stored their coins and metals there.

On June 22, 1988, Boyer brought approximately $40,000 worth of gold and silver to Treasure State. He left the gold and silver with Chuck, and received a storage receipt which itemized the property as follows:

$4,000 face 90% Quarters (4 - Buckets of 1,000.00)

15 -100 oz. Eng Ex (3 Bags of 5 Each)

500 Silver Dollars (1 Bag)

48 1 oz. U.S. Gold Eagles (2 Full Tubes 1 w/8)

1 Blue Midland Bank Bag - Price & sell what is in it

Boyer never removed the gold and silver from Treasure State.

On July 31, 1990, Chuck was murdered, and Boyer attended his funeral. About two weeks after Chuck’s death, Boyer contacted Aaron Sparboe (Aaron), Chuck’s son, with his condolences and also to discuss his [Boyer’s] property. Aaron assured Boyer that the property was in good hands, and said “[t]he only thing we might have to do is replace some of the Gold Eagles with Canadian Maple Leaves.” Aaron told Boyer to bring in the original storage receipt and he would be given his property.

Boyer talked to Aaron approximately five or six more times over the next two years, and Aaron assured him each time that his property would be returned upon the presentation of the original receipt.

Boyer did not remove Ms property immediately after Chuck’s death, as he believed, based on Aaron’s representations, that Ms property was safe. However, Boyer later decided to remove the property; he believed the metals market was “waffling back and forth” and wanted to put his money into a better investment.

Boyer was unable to locate his original receipt, but had a copy of the receipt. When Boyer went to Treasure State with the copy, Aaron and Chuck’s other son, Jim Sparboe (Jim), refused to return the property. They admitted to Boyer that they had Ms property, but said they would not release it to Boyer without an original receipt. On March 9, 1992, Boyer filed a complaint seekmg recovery of Ms gold and silver.

At the bench trial held on October 23,1992, Boyer testified that he had diligently searched for the original receipt but was unable to locate it. However, as a matter of course, he made copies of all Ms receipts and put them in a notebook at his place of busmess. He testified that he made a copy of the original receipt the day he received it. He further testified that he believed the original receipt was placed in a “tax box” and, when he moved tMee times in five years, that box was inadvertently thrown out.

Defendant Robin Sparboe (Robin), widow of Chuck and the personal representative of his estate, testified that the oMy reason she would not return Boyer’s property was because he had not brought in the original receipt. She further testified that she had absolutely no evidence that indicated Boyer had already picked up the property at issue, and admitted that the original receipt had not been returned to Treasure State. Robin said she would honor Boyer’s claim if he presented the original receipt, and testified that Treasure State had honored claims of other people who had not filed creditor’s claims with the estate.

Aaron testified at trial that he had returned stored property to people who presented original receipts without filing creditor’s claims, and that he had never refused to return property to those people. Aaron also testified as follows:

If there was a client that [Chuck] was a good friend with or somebody he knew well, they didn’t have an original receipt, I know he never would ask for it. If they said they didn’t have it with them, no big deal. He knows them. ...

He further stated that he had no evidence that Boyer had already retrieved Ms property.

Jim testified that he had allowed people with original storage receipts to retrieve their property regardless of whether they had filed creditor’s claims with Chuck’s estate. He stated that he had no evidence that Boyer had received his property. Jim further testified that the requirement that an original receipt be presented before property would be returned was not written down anywhere, but that customers were told of the requirement upon storing their property. However, there was absolutely no evidence that Boyer was told by his friend, Chuck, that an original receipt was required to be presented before Boyer could retrieve his stored property. There was also no evidence at trial that Boyer ever received the property at issue.

On November 6, 1992, the District Court entered Findings of Fact and Conclusions of Law. The court concluded that Boyer’s claim was a “deposit for exchange” pursuant to § 70-6-108, MCA, and that Boyer’s failure to file a creditor’s claim with the estate barred his claim. Section 72-3-803, MCA. Boyer moved for reconsideration on November 25, 1992, which was subsequently denied by the District Court on December 15,1992. Judgment was entered on July 8,1993; from that judgment, Boyer appeals.

Our standard of review relating to conclusions of law is whether the trial judge’s interpretation of the law is correct. Steer, Inc. v. Dep’t of Revenue (1990), 245 Mont. 470, 474-75, 803 P.2d 601, 603.

The District Court held that the storage receipt constituted a “deposit for exchange,” which necessitated the filing of a creditor’s claim with the estate. In its Memorandum filed with the Findings of Fact and Conclusions of Law, the District Court reasoned that, because Boyer did not necessarily expect to receive back the identical property he stored, a deposit for exchange was created pursuant to § 70-6-107, MCA. This created a debtor/creditor relationship under § 70-6-108, MCA; thus, the District Court reasoned, Boyer’s failure to file a creditor’s claim was fatal to his action. While the District Court’s conclusion that a “deposit for exchange” was created was correct, we have previously held that, in certain limited circumstances, a creditor may, nevertheless, not be required to file a claim with the decedent’s estate. That controlling precedent was not cited by the attorneys in this case, and the District Court failed to consider this precedent. Therefore, under the specific facts of this case, we hold that the District Court erred in concluding that Boyer was required to file a creditor’s claim and in entering judgment against Boyer.

We have previously held that an estate could be estopped from raising a claimant’s failure to file a creditor’s claim as a defense under certain, limited conditions. Northwestern Bank of Lewistown v. Estate of Coppedge (1986), 219 Mont. 473, 478, 713 P.2d 523, 526. In Coppedge, the deceased, George, and his wife, Helen, borrowed money from the Northwestern Bank for farming expenses. George and Helen signed three promissory notes and a security agreement. The notes were also secured by a guaranty from George’s mother. George died and Helen was appointed the personal representative of his estate. She provided notice to creditors as required by statute, but, Northwestern Bank never filed a creditor’s claim or commenced a court proceeding to collect its claim. However, Northwestern Bank did negotiate with the estate’s attorney for payment or renewal of the notes. Coppedge, 713 P.2d at 525.

Nearly two years after George’s death, Northwestern Bank filed a complaint seeking the unpaid amount due on the notes. The trial court entered judgment for the bank, and, on appeal, the estate claimed that the judgment against it was invalid because Northwestern Bank failed to file a creditor’s claim within the statutory time limits. Northwestern Bank countered that the estate knew of the bank’s claim. We held that:

Such knowledge, however, does not dispense with Northwestern Bank’s need to file a creditor’s claim. If Northwestern Bank can prove that the attorneys for the estate represented that because they knew of Northwestern Bank’s claim, no creditor’s claim need be filed and if the Bank relied on this representation, the estate could be estopped from raising Northwestern Bank’s failure to file a creditor’s claim as a defense. ...

Coppedge, 713 P.2d at 526. We remanded for a hearing to determine whether the estate, by or through its attorneys, represented to the Northwestern Bank that it need not file a creditor’s claim. Coppedge, 713 P.2d at 527. We note that at least one jurisdiction has adopted a similar principle of law. See Matter of Estate of Frandson (N.D. 1986), 383 N.W.2d 807.

In this case, Boyer contacted Aaron approximately two weeks after Chuck’s death and discussed his stored property. At that time, Aaron told Boyer “not to worry” and that the property was safe. Aaron told Boyer to bring in his storage receipt and the property would be returned upon demand. Robin, Aaron and Jim all testified that they had paid many other customers’ claims without the necessity of filing a creditor’s claim, even after the statutory period had expired. In addition, Chuck had returned stored property in the past without the presentation of an original receipt. There was absolutely no evidence that Chuck ever told Boyer that an original receipt was required to retrieve his property, nor is there any evidence that Boyer has, in actuality, received his property. In addition, Boyer had a valid explanation for the loss of the original receipt. Similarly, there is no question that Chuck’s estate had actual knowledge of Boyer’s claim, and that, based upon the family’s representations, Boyer assumed his claim was intact and that no creditor’s claim needed to be filed. See Coppedge, 713 P.2d at 526. Therefore, based upon the facts of this case, we hold that the estate is estopped from denying the existence and validity of Boyer’s claim and that the District Court erred in entering judgment in favor of the estate.

We wish to emphasize that the rationale behind the statutory requirement that a creditor’s claim be filed is sound and should not be easily dispensed with. However, under very limited circumstances, as in this case, where an estate has actual notice of a claim and makes representations to the claimant which lead the claimant to believe that it is not necessary to protect his claim by filing a creditor’s claim under §§ 72-3-801 et seq., MCA, the estate will not be able to use the failure to file a creditor’s claim as a defense to bar the claim.

Reversed and remanded for entry of judgment in favor of Boyer.

CHIEF JUSTICE TURNAGE, JUSTICES HARRISON, GRAY, HUNT, TRIEWEILER and WEBER concur.