author:
JUSTICE McDONOUGH JUSTICE HARRISON,
      JUSTICE TRIEWEILER

text:
    In the MATTER of the ADJUDICATION of the EXISTING RIGHTS to the Use of all the WATER, Both Surface and Underground, within the YELLOWSTONE RIVER above and Including Bridge Creek in Gallatin, Park, Sweet Grass, and Stillwater Counties, Montana.
    No. 91-140.
    Submitted on January 23, 1992.
    Decided May 7, 1992.
    49 St.Rep. 413.
    253 Mont. 167.
    832 P.2d 1210.

      For Appellant: R. Mark Josephson, Josephson & Fredricks, Big Timber.
    For Respondent: Marc Racicot, Attorney General, Helena; George Schunk, Assistant, Helena; Donald MacIntyre, Dept, of Natural Resources, Helena; Robert N. Lane, Dept. Fish, Wildlife & Parks, Helena; Blake Watson (argued), Barry M. Hartman, Robert L. Klarquist, John R. Hill, Jr., Patrick Barry, U.S. Dept, of Justice, Washington, D.C.; Doris S. Poppler, U.S. Attorney, Billings; Jody Miller, Office of General Counsel, Dept, of Agriculture, Missoula; John C. Chaffin, Office of Field Solicitor, Dept, of the Interior, Billings; Daniel F. Decker, Confederated Salish & Kootenai Tribes, Pablo, David Pengelly, Knight, Maclay & Maser, Missoula; Ann E. Wilcox, Billings; John W. Duncan, Joplin.
    For Amicus Curiae: Bruce R. Toole (argued) and Janice L. Rehberg (argued), Crowley Law Firm, Billings (Tiegen); Michael E. Zimmerman (argued) and Susan J. Callaghan, Montana Power Co., Butte; W.G. Gilbert, Jr. and W.G. Gilbert, III, Dillon (MacKenzie); John North and Lon J. Maxwell, Dept, of State Lands, Helena.
   JUSTICE McDONOUGH

delivered the Opinion of the Court.

This is an appeal from an order of the Water Court forfeiting appellants’ water rights for failing to timely file a claim pursuant to § 85-2-226, . The Water Court upheld the constitutionality of § 85-2-226, MCA, finding that its application works as a forfeiture and not an abandonment. The appellants, whose water rights were dismissed, request this Court to reverse the Water Court and declare § 85-2-226, MCA, unconstitutional. We affirm.

We will review the following issues.

I. Does'Article IX, Section 3, of the Montana Constitution protect pre-1973 water rights from legislative forfeiture?

II. Does § 85-2-226, MCA, violate the due process clauses of Article II, Section 17, of the Montana Constitution and the Fourteenth Amendment of the United States Constitution?

III. Does forfeiture of water rights under § 85-2-226, MCA, constitute a taking without just compensation in violation of Article II, Section 29, of the Montana Constitution and the Fifth and Fourteenth Amendments of the United States Constitution?

IV. Does § 85-2-226, MCA, violate the equal protection clauses of Article II, Section 4, of the Montana Constitution and the Fourteenth Amendment of the United States Constitution?

V. Does § 85-2-226, MCA, constitute an impairment of contracts in violation of Article II, Section 31, of the Montana Constitution and Article I, Section 10, of the United States Constitution?

This action was initiated sua sponte through order of the Chief Water Judge, the late Judge W.W. Lessley, on August 3,1988. The law governing Montana’s water rights adjudication required pre-1973 water claims to be filed with the Department of Natural Resources by 5:00 p.m. on April 30, 1982, or be conclusively presumed abandoned. Sections 85-2-221 and 226,. The Water Court consolidated 109 late claims filed in Yellowstone River Basin above and including Bridger Creek (Basin 43B). Opportunity was provided each of the late claimants in Basin 43B, as well as other similarly situated late claimants from around the state to participate in the proceedings.

As could be expected, numerous interested parties responded. Briefs were filed, oral arguments presented and proposed findings of fact and conclusions of law accepted by the Water Court. On July 17, 1989, the Water Court issued an order that as paraphrased below included:

(1) Section 85-2-226, MCA, acts as a forfeiture statute that results in the involuntary loss of a water right caused by the failure of an owner to timely file his claim as required by statute.
(2) By order of the Montana Supreme Court, December 7,1981, to be timely received, a water claim must be actually received and filed -with the Department of Natural Resources by 5:00 P.M. on April 30, 1982, claims received thereafter are forfeited and declared null and void.
(3) Section 85-2-226, MCA, survives constitutional challenge on due process, equal protection, and impairment-of-contracts grounds.
(4) Section 85-2-226, MCA, does not conflict with Article IX, Section 3(1) of the Montana Constitution.
(5) Provisions were made for evidentiary hearings providing the Water Court opportunity to make individual determinations of whether specific claims were timely filed.

On December 17,1990, final judgment was entered pursuant to Rule 54(b), M.R.Civ.P., finding the late filed claims of Basin 43B to be conclusively abandoned under § 85-2-226, . From this judgment an appeal was filed by Kenneth D. and Donna L. Laubach, Robert B. and Connie Malcolm, the Boulder River Ranch, Inc., Carmine B. and Francine S. Rizzotto and the Jumping Rainbow Ranch, all late claimants in Basin 43B (hereinafter collectively referred to as appellants).

Each of the appellants exercised their right to an evidentiary hearing and alleged different factual circumstances for having filed late. Evidence was presented by each appellant of a historical and continued use of water for varied beneficial purposes. All appellants contend they in no way have “abandoned” their rights. The Water Court determined that each had filed late and under § 85-2-226, MCA, had forfeited their claim.

I.

Does Article IX, Section 3, of the Montana Constitution protect pre-1973 water rights from legislative forfeiture?

Article IX, Section 3, of the Montana Constitution provides in its entirety:

Water rights.(l) All existing rights to the use of any waters for any useful or beneficial purpose are hereby recognized and confirmed.
(2) The use of all water that is now or may hereafter be appropriated for sale, rent, distribution, or other beneficial use, the right of way over the lands of others for all ditches, drains, flumes, canals, and aqueducts necessarily used in connection therewith, and the sites for reservoirs necessary for collecting and storing water shall be held to be a public use.
(3) All surface, underground, flood, and atmospheric waters within the boundaries of the state are the property of the state for the use of its people and are subject to appropriation for beneficial uses as provided by law.
(4) The legislature shall provide for the administration, control, and regulation of water rights and shall establish a system of centralized records, in addition to the present system of local records.

The appellants contend that subsection (1) provides a guarantee of existing water rights and any statutory scheme that obviates that guarantee is against public policy. The Montana Constitution is alleged to extend to the legislature the power to affirm and preserve existing water rights but not the power to forfeit or extinguish them.

We have held that “[to the extent of beneficial use] the 1972 constitutional recognition of water rights is effective and will be sustained”. McDonald v. State (1986), 220 Mont. 519, 722 P.2d 598. However, we have also held that Article IX, Section 3(1):

prevents the State from affecting rights vested at the time the Constitution was adopted other than through the exercise of Constitutionally provided powers such as eminent domain, Mont. Const. Art. II, Sec. 17, or the general police power, and without affording due process of law, Mont. Const. Art. I, sec. 17.

Department of State Lands v. Pettibone (1985), 216 Mont. 361, 702 P.2d 948. Pettibone recognizes that the State’s ability to affect existing and recognized water rights survives the adoption of Article IX, Section 3(1), of the Montana Constitution.

The United States Supreme Court held:

Even with respect to vested property rights, a legislature generally has the power ... to condition their continued retention on performance of certain affirmative duties. As long as the... duty imposed is a reasonable restriction designed to further legitimate legislative objectives, the legislature acts within its powers in imposing such... duties, (citations omitted) United States v. Locke (1985), 471 U.S. 84, 105 S.Ct. 1785, 85 L.Ed.2d 64.

We conclude that Article IX, Section 3(1), of the Montana Constitution does not establish that pre-1973 water rights are immune from sovereign powers. These rights, like other property rights, are protected against unreasonable state action; however, they have not been granted indefeasible status. Furthermore, we conclude that consistent with Article IX, Section 3(1), of the Montana Constitution, the State Legislature may enact constitutionally sound regulations including the requirement for property owners to take affirmative actions to maintain their water rights.

II.

Does § 85-2-226, MCA, violate the due process clauses of Article II, Section 17, of the Montana Constitution and the Fourteenth Amendment of the United States Constitution?

Section 85-2-226, MCA, states in full:

Abandonment by failure to file claim. The failure to file a claim of an existing right as required by 85-2-221 establishes a conclusive presumption of abandonment of that right.

The appellants contend the conclusive presumption of § 85-2-226 , violates due process because it fails to provide an opportunity to rebut the presumption of abandonment. The appellants rely on the United States Supreme Court ruling that the Due Process Clause forbids denying an individual a right on the basis of an irrebuttable presumption when that presumption is not necessarily or universally true in fact. Vlandis v. Kline (1973), 412 U.S. 441, 93 S.Ct. 2230, 37 L.Ed.2d 63.

The appellants note that abandonment, as historically defined by this Court, has always at least required a showing of non-use. Tucker v. Jones (1888), 8 Mont. 225, 19 P. 571; 79 Ranch, Inc. v. Pitsch (1983), 204 Mont. 426, 666 P.2d 215. Appellants argue that their failure to file is related to various mistakes and has absolutely nothing to do with non-use. Because the appellants have maintained continuous and beneficial use of their water rights, they allege that the presumption of abandonment for failure to timely file is neither necessarily nor universally true in fact and that therefore, § 85-2-226, MCA, is constitutionally infirm.

The Montana Legislature has defined, for the limited purpose of establishing existing water rights, that failure to file a claim will be construed as abandonment of that claim. Section 85-2-226,. While this definition of abandonment does not appear to parallel this Court’s previous definition of abandonment, it is within the province of the legislature to enact such a definition. Legislatures can enact substantive rules of law that treat property as forfeited under conditions that the common law would not consider sufficient to indicate abandonment. United States v. Locke (1985), 471 U.S. 84, 106, 105 S.Ct. 1785, 1798, 85 L.Ed. 64 citing Hawkins v. Barney’s Lessee, (1831) 5 Pet. 457, 467, 8 L.Ed. 190.

All water claimants were provided more than ample notice and given expanded opportunity to file a claim. Section 85-2-226, MCA, makes clear that failure to file in a timely fashion establishes that the water right claimant has abandoned their right. We cannot say that it is impermissible for the legislature to construe a failure to file as the intention of the water right holder to discontinue use of that right.

In Vlandis, the Connecticut Legislature created a conclusive presumption that a student was an out of state resident for tuition purposes if his address at the time of admission or in the year preceding admission was out of state. The Supreme Court determined this to be impermissible because students were not provided opportunity to rebut the presumption and because pre-admission addresses did not necessarily prove nor disprove residency. Vlandis makes it abundantly clear that:

a statute creating a presumption which operates to deny a fair opportunity to rebut it violates the due process clause of the Fourteenth Amendment. (Citations omitted.) Vlandis v. Kline, 412 U.S. at 446, 93 S.Ct. at 2233.

However, § 85-2-226, MCA, does not operate, as did the Connecticut statute, to deny opportunity to rebut. Water right claimants in Montana were all properly notified and had the opportunity to rebut the presumption of abandonment by filing a claim. In contrast, the Connecticut students had no recourse whatsoever and could do nothing to prevent the triggering of the presumption.

The Court, in Vlandis, noted that a student’s address at the time of admission was an arbitrary method of determining residency.

Other examples of when the Supreme Comb has struck down laws creating impermissible conclusive presumptions include a law providing that teachers are unable to perform their duties when they are more than 4 months pregnant, Cleveland Board of Education v. LaFluer (1974) 414 U.S. 632, 94 S.Ct. 791, 39 L.Ed.2d 52; and that unwed fathers are unfit to be parents, Stanley v. Illinois (1972) 405 U.S. 645, 92 S.Ct. 1208, 31 L.Ed.2d 551. These presumptions, as in Vlandis, created factual conclusions as a matter of law which the court ruled could only be accurately made through individualized determinations. As such, the conclusions were arbitrary and not necessarily true. In the instant case, the legislative definition of abandonment, as used in § 85-2-226, MCA, does not require any individualized determinations. The definition applies the same to all people who filed after the deadline. The only individualized determination necessary is to establish whether the deadline was met. Hearings are already provided by the Water Court for this purpose. Finally, the appellants argue that:

The State’s interest in administrative ease and certainty cannot, in and of itself, save the conclusive presumption from invalidity under the Due Process Clause where there are other reasonable and practicable means of establishing the pertinent facts on which the state’s objective is premised. Vlandis v. Kline, 412 U.S. at 451, 93 S.Ct. 2236.

Unlike the cases cited above where hearings are a more reasonable and necessary alternative; no more reasonable alternative is provided or necessary in the instant case. The appellants suggest that the presumption should be rebuttable and merely shift the burden to the late claimants to prove they did not in fact abandon their rights. The legislature chose not to create a rebuttable presumption, a constitutionally permissible decision.

We conclude the conclusive presumption created by § 85-2-226, MCA, is valid -under the Due Process Clause.

The Water Court, in reliance on the United States Supreme Court, ruled that despite the use of the word abandonment, § 85-2-226, MCA, is a forfeiture statute. United States v. Locke (1985), 471 U.S. 84, 205 S.Ct. 1785, 85 L.Ed.2d 64; Texaco, Inc. v. Short (1982), 454 U.S. 516, 102 S.Ct. 781, 70 L.Ed.2d 738. Locke involved the constitutionality of section 314(c) of the Federal Land Policy and Management Act of 1976 (FLPMA), 43 U.S.C. 1744(c), which required holders of mining claims to file, prior to December 31 of every year, a notice of intention to continue holding the mining claim. Locke filed notice one day past the deadline and his claim (worth several million dollars) was deemed abandoned. Locke challenged the constitutionality of the law on several grounds including that the statute created an irrebuttable presumption which violated due process.

Section 314(c) of FLPMA provides:

The failure to file such instruments as required... shall be deemed conclusively to constitute an abandonment of the mining claim....

Locke argued that the failure to timely file a claim should not extinguish the claim, but merely shift the burden to the claimant to prove the claims were not abandoned. The Supreme Court held:

Although § 314(c) is couched in terms of a conclusive presumption of “abandonment”, there can be little doubt that Congress intended §314 (c) to cause a forfeiture of all claims for which the filing requirements ... had not been met.
“§ 314(c) presumes nothing about a claimant’s actual intent; the statute simply and conclusively deems such claims to be forfeited .... there is nothing to suggest that ... Congress was in any way concerned with whether a particular claimant’s tardy filing or failure to file indicated an actual intent to abandon the claim. Locke, 471 U.S. at 98,103, 1-5 S.Ct. at 1794, 1797.

Finally, in Locke, the Court held that forfeiture statutes are “not subject to the individualized hearing requirement of such irrebuttable presumption cases as Vlandis v. Kline ...’’Locke, 471 U.S. at 103, 105 S.Ct. 1797.

The appellants argue that Locke is not controlling and attempt to distinguish Locke on several grounds. They argue that § 314(c) FLPMA, was enacted for a different purpose, does not effect a constitutionally recognized and confirmed right such as Montana’s water rights, and that it fulfills the policies being promoted by FLPMA while the policies of the Water Use Act of Montana are not fulfilled by § 85-2-226, . We disagree. The interests of the federal government recognized in Locke and the interests of Montana, with regards to water rights, are similar. Section 85-2-226, MCA, uses nearly identical language as § 314(c) FLPMA, and we agree with the Water Court that Locke is controlling.

The Supreme Court, in Texaco, Inc., provided a framework for the constitutional analysis of a file or forfeit statute. Texaco, Inc. (1982), 454 U.S. 516, 102 S.Ct. 781, 70 L.Ed.2d 738. The framework was adopted inboth its “substantive and procedural dimensions,” and we adopt it here. Locke 471 U.S. at 103, 105 S.Ct. at 1797. In Texaco, Inc., the Supreme Court upheld the Indiana “Mineral Lapse Act” which required that a statement of claim be filed on any mineral interest that had been unused for 20 years or the interest would be extinguished. The Supreme Court held that a forfeiture statute must provide all procedural safeguards constitutionally due and that it must be a legitimate exercise of the state’s police power such that the substantive effect of the statute does not work an impermissible intrusion on constitutionally protected rights. Texaco Inc. v. Short (1982), 454 U.S. 516, 102 S.Ct. 781, 70 L.Ed.2d 738.

Montana has a long tradition of strictly adhering to the procedural requirements of hearing and notice. Ball v. Gee (1990), 243 Mont. 406, 795 P.2d 82. In Ball, we held that “the forthright command of the due process clause; [is] one deprived of his property must be given notice and an opportunity to defend.” Ball, 243 Mont. at 413, 795 P.2d 82.

The sufficiency of the publication of notice concerning the filing deadline has not been challenged by the appellants. Notification of the deadline was published in all of Montana’s daily newspapers and in at least one newspaper in each Montana county in July of 1979, April of 1980 and again in April of 1981. Notice was posted conspicuously in each county courthouse. Finally, notice was included with all statements of property tax, mailed by county treasurers, in 1979, 1980, 1981, and 1982. When the filing deadline was extended from January 1,1982 to April 30,1982, notice was published once per week for three successive weeks in all Montana daily newspapers and a weekly newspaper in each county. Notice of the extension was also posted conspicuously in every county courthouse. In addition, the Department of Natural Resources published and distributed more than 10,000 copies of a document regarding how and when to file a claim. Representatives of the Water Court traveled to numerous meetings across the State to further discuss the manner, method, and filing date for claims. Judge Lessley noted that of the 205,000 claims filed statewide, more than 98% were filed on time. Such notice indisputably satisfies due process requirements.

The appellants contend that § 85-2-226, MCA, operates in a manner that deprives those with a vested property right an opportunity to have their day in court before that right is divested. The appellants argue that before they can be said to have abandoned their water right, they should have opportunity to a hearing where they can show good cause for late filing and demonstrate that they have not in fact abandoned their right.

All of the claimants had 35 months to file their claim. The filing requirements were straightforward, and demanded only that a water user document historical use. Adequate opportunity was provided each of the claimants to show that they did not intend to abandon or forfeit their water rights. Furthermore, the Water Court provided an opportunity for all late claimants to request an evidentiary hearing to determine if the deadline had in fact been missed. We conclude that § 85-2-226, MCA, complies with the requirements of procedural due process.

We have already stated that the legislature has the power to mandate that rights be terminated if their holders do not take the affirmative action required by the legislature. The Court in Locke noted that the United States is the owner of the underlying fee title of all public lands and as such maintains broad powers over the terms and conditions for which public land is used. Locke, 471 U.S. at 104, 105 S.Ct. at 1797. Similarly, the State of Montana owns the 'underlying fee to all of the water in the State and thereby retains substantial regulatory power over water rights. Art. IX, Sec. 3(3), 1972 Mont.Const.; State v. McDonald, 220 Mont. 519, 524, 772 P.2d 598. However, the regulatory power must be exercised consistent with principles of substantive due process.

A statute must be reasonably related to a permissible legislative objective to satisfy substantive due process guarantees. State v. Turk (1982), 197 Mont. 311, 643 P.2d 224. The 1972 Montana Constitution mandates that the legislature “establish a system of centralized records.” There can be no doubt that § 85-2-226, MCA, was enacted for a permissible legislative objective.

However, the appellants challenge whether or not § 85-2-226, MCA, is reasonably related to the objective of adjudicating water rights. It is contended that the Montana Constitution is a mandate for the preservation of water for the use of Montanans and the recognition and confirmation of all existing water rights. Section 85-2-226, MCA, allegedly fails to be reasonably related to the these objectives, because its operation results in the elimination of existing water rights.

Before water rights can be adjudicated state wide, it is essential that existing rights first be firmly established. Section 85-2-226, MCA, is a reasonable means of compelling comprehensive participation, extinguishing duplicative and exaggerated rights, and ridding local records of stale, unused water claims. These are all necessary to meet the objective of adjudicating Montana’s water. Furthermore, the filing duty is neither burdensome, unreasonable nor unrelated to the legitimate and proper legislative objectives as provided above. We note that neither the Supreme Comb nor other states addressing the constitutionality of statutes requiring filing, have found the filing requirement to be more than a minimal burden. U.S. v. Locke (1985), 471 U.S. 84, 105 S.Ct. 1785, 85 L.Ed.2d 64; Texaco, Inc. v. Short (1982), 454 U.S. 516, 102 S.Ct. 781, 70 L.Ed.2d 738; In re the Adjudication of the Water Rights of the Upper Guadalupe Segment of the Guadalupe River Basin (Tex. 1982), 642 S.W.2d 438; Matter of Chumstick Creek Drainage Basin (Wash. 1985), 694 P.2d 1065. In Locke, the Court held:

Appellees failed to inform themselves of the proper filing deadline and failed to file in timely fashion the documents required by federal law. Their property loss was one appellees could have avoided with minimal burden:

We therefore conclude that § 85-2-226, MCA, satisfies the guarantees of substantive due process.

III.

Does forfeiture of water rights under § 85-2-226, MCA, constitute a taking without just compensation in violation of the Montana and United States Constitutions?

The threshold inquiry for the takings claim is whether § 85-2-226, MCA, is a constitutionally valid exercise of the state’s police power. We note that, in addition to being a separately raised issue, the inquiry was part of the Texaco, Inc. analysis for constitutional validity of a forfeiture statute as described above.

The police power of the state is that which enables states to pass regulations for the health, safety and general welfare of the people. Yellowstone Valley Electric v. Ostermiller (1980), 187 Mont. 8, 608 P.2d 491. The police power regulation:

must be reasonably adapted to its purpose and must injure or impair property rights only to the extent reasonably necessary to preserve the public welfare. (Citation omitted.) ... Compensation is due ... in cases which exceed regulation or impairment and there is an appropriation of property which amounts to a taking or deprivation of property for public use. Yellowstone Valley Electric, 187 Mont. at 15,16 Am. Jur.2d Constitutional Law § 586.

It is undisputed that “quantification of the total water rights in the State of Montana is an expressed and necessary objective under the constitutional mandate for centralized records and is within the police power of the state. (Citation omitted.) McDonald v. State (1986), 220 Mont. 519, 529, 722 P.2d 598, 604. However, the appellants contend that § 85-2-226, MCA, constitutes an unconstitutional taking because invalidating existing water rights for failure to file extends beyond what is reasonably necessary to preserve the public welfare.

The taking argument fails for much the same reasons that the statute fulfills the guarantees of substantive due process. The filing requirement of § 85-2-226, MCA, could have been fully satisfied without any deprivation of the owner’s interest in and enjoyment of their property. The act of filing on time is not an unreasonable nor onerous burden and it does not deprive appropriators of the right to use water. It is the failure to file on time, not the action of the State, that causes a property right to be extinguished. Texaco, Inc. v. Short (1982), 454 U.S. 516, 102 S.Ct. 781, 70 L.Ed.2d 738;In re Adjudication of the Water Rights of the Upper Guadalupe Segment of the Guadalupe River Basin (Tex. 1982), 642 S.W.2d 438; Matter of Chumstick Creek Drainage Basin (Wash. 1985), 694 P.2d 1065. The deprivation occurs only as a result of the appropriators neglect or the neglect of their predecessors.

In Locke, the Supreme Court held:

it was their failure to file on time — not the action of Congress — that caused the property right to be extinguished. Regulation of property rights does not “take” private property when an individual’s reasonable, investment-backed expectations can continue to be realized as long as he complies with reasonable regulatory restrictions the legislature has imposed. Locke, 471 U.S. at 107 [105 S.Ct. at 1799]. (Citations omitted.)

In Texaco Inc., the Court held:

In ruling that private property may be deemed to be abandoned and to lapse upon the failure of its owner to take reasonable actions imposed by law, this Court has never required the State to compensate the owner for the consequences of his own neglect. Texaco, Inc., 454 U.S. at 530 [102 S.Ct. at 792],

We conclude, water rights, when forfeited under § 85-2-226, MCA, are forfeited as a result of owner negligence and not as a result of excessive and unreasonable state action. Section 85-2-226, MCA, does not result in taking property without just compensation and therefore the Water Court is affirmed.

We further conclude that § 85-2-226, MCA, is a proper exercise of the police power, satisfies all of the guidelines necessary to enact a forfeiture statute and complies with all aspects of due process as required by the Montana Constitution and the Constitution of the United States.

IV.

Does § 85-2-226, MCA, violate the equal protection clause of the Montana Constitution?

“When a statute is challenged on equal protection grounds, the first step is to identify the classes involved and determine whether the classes are similarly situated.” Matter of C.H. (1984), 210 Mont. 184, 198, 683 P.2d 931, 938. The appellants contend the arbitrary deadline enforced by § 85-2-226, MCA, is an arbitrary date that unreasonably divides water claimants into two classes. One class retains their water right while the other class, late claimants, lose theirs without opportunity to show good cause for late filing. The appellants suggest that this classification discriminates against persons like themselves, who in good faith attempted to meet the statutory requirements.

We are not persuaded and do not find that § 85-2-226, MCA, creates different classes. All claimants were treated equally, provided equal notice, and given equal opportunity to file by the given deadline. The classification the appellants rely on is created by the appellants’ own negligence. We conclude that § 85-2-226, MCA, was applied evenhandedly to all water claimants. Therefore, the equal protection challenge fails and the Water Court is affirmed.

V.

Does § 85-2-226, MCA, constitute an impairment of contracts in violation of Article II, Section 31, of the Montana Constitution and Article I, Section 10, of the United States Constitution?

The appellants maintain § 85-2-226, MCA, renders invalid water rights upon which “substantial contractual relationships are based” and therefore violates the impairment of contracts clause. The appellants make no discemable argument nor provide an example of any contract alleged to be impaired.

Montana has adopted a three part test to determine whether legislation has violated the impairment of contracts clause. Western Energy Company v. Genie Land Company (1987), 227 Mont. 74, 737 P.2d 478; Neel v. First Federal Savings and Loan Association (1984), 207 Mont. 376, 675 P.2d 96; Energy Reserves Group, Inc. v. Kansas Power and Light Co. (1983), 459 U.S. 400, 103 S.Ct. 697, 74 L.Ed.2d 569. “The threshold inquiry is whether the state law has, in fact, operated as a substantial impairment of the contractual relationship.” Western Energy Co., 227 Mont. at 82, 737 P.2d 478. (Citations omitted.) Implicit in this inquiry is the existence of a contract. The appellants have failed to demonstrate the existence of any specific contract let alone its impairment. This is fatal to appellants’ claim.

We conclude § 85-2-226, MCA, does not impair contracts in violation of the United States and Montana Constitutions. The Water Court is affirmed.

CHIEF JUSTICE TURNAGE and JUSTICES HUNT, WEBER and THE HONORABLE LEONARD H. LANGEN, District Judge, sitting for JUSTICE GRAY, concur.

JUSTICE HARRISON,

dissenting.

I dissent. Few cases have come before this Court of more import to the citizens of this State, particularly those who make their living through agriculture, than this case. Without water farms and ranches in this State economically cannot exist. It is my position that under Article IX, Section 3 of the Montana Constitution, pre-1973 water rights are protected from legislative forfeiture. Article IX, Section 3 provides in its entirety:

Water rights. (1) All existing rights to the use of any waters for any useful or beneficial purpose are hereby recognized and confirmed.
(2) The use of all water that is now or may hereafter be appropriated for sale, rent, distribution, or other beneficial use, the right of way over the lands of others for all ditches, drains, flumes, canals, and aqueducts necessarily used in connection therewith, and the sites for reservoirs necessary for collecting and storing water shall be held to be a public use.
(3) All surface, underground, flood, and atmospheric waters within the boundaries of the state are the property of the state for the use of its people and are subject to appropriation for beneficial uses as provided by law.
(4) The legislature shall provide for the administration, control, and regulation of water rights and shall establish a system of centralized records, in addition to the present system of local records.

Appellants contend that subsection (1) provides a guarantee of existing water rights and any statutory scheme that obviates that guarantee is against the public policy of Montana. I agree. The constitution gives the power to the legislature to affirm and preserve existing water rights, but I disagree with the holding of the majority in that it does not give the legislature the power to affirm or extinguish existing water rights.

Here, each of the appellants exercised his or her rights to the evidentiary hearings and each alleged different factual circumstances for having filed late (i.e., improper address on the claim form, lessor’s neglect, and owner’s absence). Evidence was presented by each appellant of a historical and continued use of water for various beneficial uses. The appellants contended that they in no way had “abandoned” their water rights. The court determined that each had filed late under § 85-2-226, MCA, and, therefore, had forfeited his or her claim. Examining the testimony of each of the appellants, I would have found a factual exception and, therefore, would not have declared the law constitutional. I do not find that the constitution delegates the power of forfeiture or extinguishes existing rights, but as I read it, it affirms and attempts to preserve those existing rights. The fact that the legislature is mandated to complete a record of all existing rights does not give the legislature the power to extinguish rights that are implicitly confirmed by our constitution.

DELEGATE DAVIS:... The whole purpose, just for the purpose of the journal, is to establish, in the first sentence, that all existing water rights are recognized and confirmed — so no one will get any idea that we’re trying to take away any vested or existing rights. ... [Emphasis added.]

Verbatim Transcript, Montana Constitutional Convention, Vol. V, p. 1302 (1971-1972).

Here, the appellants argue that public policy of protecting existing rights by preserving the present and existing system of local control is further supported by the constitutional mandate of Article IX, Section 3(4), which establishes the centralized system “in addition to the present system...”

Two cases of this Court since the 1972 Constitutional Convention: General Agric. Corp. v. Moore (1975), 166 Mont. 510, 534 P.2d 859, and McDonald v. State (1986), 220 Mont. 519, 722 P.2d 598, are cases, which, in my opinion, reaffirm the public policy of our constitution that confirms all water rights acquired under the 1889 constitution. Therefore, I would find that the legislature has acted unconstitutionally by enacting and adjudicating a procedure that abolishes a right granted by the Montana Constitution. Also, I would hold that any legislative act that operated to extinguish the pre-1973 water rights that had been confirmed by the 1972 constitution is contrary to the intent of the framers and, therefore, against public policy.

In addition, the appellants argue, and I agree, that abandonment, as historically defined by this Court, has always required at least a showing of non-use. See Tucker v. Jones (1888), 8 Mont. 225, 19 P. 571; 79 Ranch, Inc. v. Pitsch (1983), 204 Mont. 426, 666 P.2d 215. In those cases it is argued that the failures of those plaintiffs to file was related to various mistakes that had nothing to do with non-use. Here, the appellants have maintained continuous and beneficial use of their water rights. Failing to timely file does not imply that appellants have ceased to beneficially use their water rights. The majority adopted a presumption of abandonment for failure to timely file; this presumption is neither necessary nor true in fact, and for that reason § 85-2-226, MCA, is constitutionally infirm.

In the instant case, the respondents contend that the Water Corut’s characterization of § 85-2-226, MCA, as a forfeiture statute, is accurate and fully supported by the United States Supreme Court. United States v. Locke (1985), 471 U.S. 84, 105 S.Ct. 1785, 85 L.Ed.2d 64; Texaco, Inc. v. Short (1982), 454 U.S. 516, 102 S.Ct. 781, 70 L.Ed.2d 738.1 cannot agree with the respondents’ assertion that both Locke and Texaco, Inc. refute the appellants’ argument that an irrebuttable presumption exists in § 85-2-226,.

Locke involves the constitutionality of § 314(c) of the Federal Land Policy and Management Act of 1976, 43 U.S.C. § 1744(c), which requires holders of mining claims to file, prior to December 31st of each year, a notice of intention to continue holding the mining claim. In Locke, Locke filed a notice one day past the deadline and his claim was deemed “abandoned.” Locke challenged the constitutionality of the law on several grounds, including that the statute created an irrebuttable presumption which violated due process. Section 314 of FLPMA provides: “[Fjailure to file such instruments as required ... shall be deemed conclusively to constitute an abandonment of the mining claim.” Locke argued that the failure to timely file a claim should not extinguish the claim, but merely shift the burden to the claimant to prove the claim was not abandoned. There the Supreme Court held, “[ajlthough § 314(c) is couched in terms of a conclusive presumption of‘abandonment,’ there can be little doubt that Congress intended § 314(c) to cause a forfeiture of all claims for which the filing requirements ... had not been met.” Locke, 471 U.S. at 98, 105 S.Ct. at 1794, 85 L.Ed.2d at 78.

In my opinion, the Locke decision is distinguishable and, therefore, not controlling. First, the appellants in their arguments, distinguish the purposes of FLPMA and Montana’s Water Use Act. The purpose of FLPMA as articulated in Locke is allegedly to rid the federal lands of stale claims and to extinguish unused interest. In this case, to the contrary, the purpose of Montana law is to recognize and confirm all existing water rights. Second, the interests subject to the federal statute are not constitutionally recognized and confirmed as are the Montana interests. Third, the Montana statute allegedly fails to further the purpose of the Water Use Act and is, therefore, against the interest and the welfare of Montana’s citizens. Section 314(c) allegedly complies with the goals of FLPMA and furthers the interest being pursued. Fourth, § 85-2-226, MCA, operates in judicial proceedings while the federal statute does not. Fifth, the federal statute was characterized as a forfeiture statute which the appellants contend our Montana statute is not.

In addition, the interest of the federal government recognized in Locke and the interest in Montana with regard to water rights, it is argued, are similar. The majority concludes that § 314(c) and § 85-2-226, MCA, are nearly identical and that the Supreme Court’s analysis should be controlling. In Locke, the Supreme Court delineated a three-point test to determine when the forfeiture statute passes constitutional muster. Two parts of the test address substantive and procedural due process. The third part of the test asks the question whether the legislature has the power to mandate that rights be terminated if the holders do not take affirmative action required by the legislature. In other words, part three asks if § 85-2-226, MCA, is a lawful exercise of the State’s police power.

I would hold that the statute does not satisfy the applicable constitutional test determined by Locke, and I would note there is a considerable difference between an unpatented mining claim and a water right that has been historically recognized by this Court prior to the majority’s opinion.

I would, therefore, reverse and remand this matter to the Water Court for further hearings on the fact situations presented by the appellants.

JUSTICE TRIEWEILER

specially concurring.

I agree with the result arrived at by the majority. However, I am unable to agree with everything that is said in the majority opinion.

My particular concern is with Part II of the majority opinion. I cannot as easily as the majority reconcile the U.S. Supreme Court’s decisions in Vlandis v. Kline (1973), 412 U.S. 441, and United States v. Locke (1985), 471 U.S. 84. To me these decisions are inconsistent. Vlandis would seem to require reversal of the Water Court decision forfeiting appellant’s water rights because § 85-2-226, MCA, creates an irrebuttable presumption of abandonment which is not universally true. However, in Locke the Supreme Court calls an abandonment a forfeiture and thereby arrives at a different result. Since Locke is the more recent and factually specific case, I agree that it is controlling on the due process issue. However, I do not agree with the reasoning in Locke, nor do I agree with the majority’s willingness to so easily distinguish Vlandis.


source: Caselaw Access Project

author: JUSTICE WEBER

license: Public Domain

text:
    MELISSA HEDGES, A minor by and through PATRICIA HEDGES, her Guardian ad Litem, Plaintiff and Appellant, v. SWAN LAKE AND SALMON PRAIRIE SCHOOL DISTRICT NO. 73, CAROL FIELD, and DOES 1 through 10, Defendants and Respondents.
    No. 92-014.
    Submitted on briefs Apr. 30, 1992.
    Decided May 28, 1992.
    49 St.Rep. 469.
    253 Mont. 188.
    832 P.2d 775.

      For Appellant: H, James Oleson, Oleson Law Firm, Kalispell.
    For Respondent: Todd A. Hammer, Warden, Christiansen, Johnson & Berg, Kalispell.
   JUSTICE WEBER

delivered the Opinion of the Court.

Plaintiff, Melissa Hedges, appeals from the order of the District Court for the Twentieth Judicial District, Lake County, granting summary judgment to the defendants. We reverse and remand.

The issues for our review are:

1. Did the District Court err in holding that the defendants were immune from suit for negligence under § 2-9-III, MCA (1991)?

2. Did the District Court err in denying Ms. Hedge’s motion for reconsideration?

This case was previously before this Court on appeal from an order granting summary judgment on February 28, 1990. Hedges v. Swan Lake and Salmon Prairie School Dist. No. 73 (1991), 248 Mont. 365, 812 P.2d 334, [9 Ed.Law 78,] (Hedges I). As stated in Hedges I, plaintiff Melissa Hedges (Ms. Hedges) was a student at the Swan Lake Elementary School in Lake County, Montana. Defendant, Carol Field (Ms. Field), a teachers was supervising the playground and had instructed Ms. Hedges to mark where shot puts landed. Ms. Hedges was marking a previous shot put when she was struck by another shot put which had been thrown by Ms. Field. Ms. Hedges was injured and filed a complaint against Ms. Field and the Swan Lake and Salmon Prairie School District, No. 73 (School District).

Defendants moved for summary judgment on the grounds of immunity under § 2-9-111, MCA (1989). The parties also argued the issue of whether immunity had been waived by the defendants’ purchase of liability insurance which the School District had purchased. The District Court granted defendants’ motion for summary judgment and held the defendants were immune under § 2-9-111,

Plaintiff, Melissa Hedges, appeals from the order of the District Court for the Twentieth Judicial District, Lake County, granting summary judgment to the defendants. We reverse and remand.

The issues for our review are:

1. Did the District Court err in holding that the defendants were immune from suit for negligence under § 2-9-111, MCA (1991)?

2. Did the District Court err in denying Ms. Hedge’s motion for reconsideration?

This case was previously before this Court on appeal from an order granting summary judgment on February 28, 1990. Hedges v. Swan Lake and Salmon Prairie School Dist. No. 73 (1991), 248 Mont. 365, 812 P.2d 334 {Hedges T). As stated in Hedges I, plaintiff, Melissa Hedges (Ms. Hedges) was a student at the Swan Lake Elementary School in Lake County, Montana. Defendant, Carol Field (Ms. Field), a teacher, was supervising the playground and had instructed Ms. Hedges to mark where shot puts landed. Ms. Hedges was marking a previous shot put when she was struck by another shot put which had been thrown by Ms. Field. Ms. Hedges was injured and filed a complaint against Ms. Field and the Swan Lake and Salmon Prairie School District, No. 73 (School District).

Defendants moved for summary judgment on the grounds of immunity under § 2-9-111, MCA (1989). The parties also argued the issue of whether immunity had been waived by the defendants’ purchase of liability insurance which the School District had purchased. The District Court granted defendants’ motion for summary judgment and held the defendants were immune under § 2-9-111, MCA (1989), and that the purchase of liability insurance did not waive immunity. Ms. Hedges appealed. Hedges I.

This Court held that the case of Crowell v. School Dist. No. 7 (1991), 247 Mont. 38, 805 P.2d 522, was controlling, and thus, the School District was immune from suit for an act or omission of its “agent”, Ms. Field. Quoting Crowell, we stated:

any negligence on the part of the teacher was associated with action by the School District in that it was the District which established programs and curriculum, including the specific course of instruction and which offered physical education classes as a part of such instruction. We agree with the conclusion of the District Court that the claim for damages arose from the lawful discharge by Mr. Allen of an official duty associated with actions of the School District and its legislative body. We hold that Mr. Allen, the physical education teacher, is immune from suit under § 2-9-111, MCA.
Crowell, 805 P.2d at 524. We find no factual or legal distinction between Crowell and the present case. (Emphasis in original).

Hedges I, 812 P.2d at 335. Thus, in Hedges I, we held that the School District and teacher were immune from suit under § 2-9-111, MCA (1989). However, based on our holding in Crowell, we also held that the purchase by the School District of liability insurance waived its immunity to the extent of the coverage granted by pertinent insurance policies. In Hedges I we reversed and remanded to the District Court.

On May 24,1991, the day after the decision inHedges I was issued, the Governor of Montana signed into law Senate Bill 154, significantly amending § 2-9-111, MCA. The amended statute was given a retroactive applicability date to all cases not reduced to final judgment on or before May 24, 1991.

On remand, following the amendment of the statute, the defendants again moved for summary judgment. The District Court considered the amended statute, but again granted summary judgment for the defendants, this time stating:

In granting Defendants’ summary judgment motion, this Court holds that the law of this case as established by [.Hedges 7] has been modified by the legislative enactment signed into law May 24, 1991. The Defendants are immune from the claims stated in Plaintiff’s suit because of Sec. 2-9-111, MCA, and that said immunity has not been waived by the liability insurance because of the retroactive amendment to said statute enacted by the legislature before this cause was reduced to final judgment.
In so holding, this Court rejects the argument of Plaintiff that the legislative amendments to Sec. 2-9-111, MCA changed the immunity provided to Defendants. This Court concludes that the rationale of the Supreme Court in applying the facts of this case to the controlling law as set forth in Crowell... would result in the same holding of immunity for all of the Defendants herein regardless of whether Sec. 2-9-111, MCA is construed either before or after the May 24,1991 amendments thereto. This court holds that the legislative changes to the first three sections of said statute did not remove or limit the immunity which resulted from the purchase of liability insurance. The Defendants are therefore now entitled to Summary Judgment as a matter of law on all claims in Plaintiff’s Complaint. (Citations omitted). (Emphasis added).

Ms. Hedges appeals.

I

Did the District Court err in holding that the defendants were immune from suit for negligence under § 2-9-111, MCA (1991)?

Ms. Hedges maintains that the District Court was wrong in holding that defendants were immune for negligence under the amended immunity statute, § 2-9-111, MCA (1991). She contends that the immunity that existed under Hedges I no longer exists under the amended statute, and the defendants are liable for their negligent acts. She maintains that subsection (3) of § 2-9-111, MCA, has been significantly revised and thus, a teacher is no longer immune for her negligent acts. She maintains that under the old § 2-9-111(3), MCA, a “member, staff or agent” (emphasis added) of a legislative body was immune under certain conditions, and that the newly amended statute limited that immunity to only a “member or staff’, and excluded agents. She points out that under Hedges I this Court held that Ms. Field was an agent of the School District and was thus, immune under the statute as it then existed, as well as under Crowell. Thus, she maintains that since Ms. Field is an agent she does not fall under the cloak of immunity granted under § 2-9-111(3), MCA(1991).

The defendants maintain that the District Court correctly interpreted § 2-9-111, MCA (1991). They maintain that a teacher performing official duties “associated with” the legislative acts of her school board is immune. Defendants point out that the old law, § 2-9-111(3), MCA (1989), stated that the lawful discharge of one’s duty had to be “associated with” the introduction or consideration of legislation or action by the legislative body. They further point out that the new law states that the lawful discharge of an official duty must be “associated with” legislative acts of the legislative body. § 2-9-111(3), MCA(1991). Therefore, defendants contend that the legislature’s retention of the words “associated with” indicates the intention to retain the immunity as it was granted and has been interpreted under § 2-9-111(3), MCA (1989). Defendants contend that one’s actions need only be associated with legislative acts.

Finally, defendants acknowledge that Ms. Field was considered an “agent” by the parties as well as the courts in Hedges I. However, they also contend in this appeal that Ms. Field was “staff’ of the legislative body, and thus, she fits under the purview of §2-9-111(3), MCA(1991).

Section 2-9-111, MCA (1991) provides:

(1) As used in this section:

(a) the term “governmental entity” means only the state, counties, municipalities, school districts, and any other local government entity or local political subdivision vested with legislative power by statute;
(b) the term “legislative body’ means only the legislature vested with legislative power by Article V of The Constitution of the State of Montana and that branch or portion of any other local governmental entity or local political subdivision empowered by law to consider and enact statutes, charters, ordinances, orders, rules, policies, resolutions, or resolves;
(c) (i) the term “legislative act” means:
(A) actions by a legislative body that result in creation of law or declaration of public policy;
(B) other actions of the legislature authorized by Article V of The Constitution of the State of Montana; or
(C) actions by a school board that result in adoption of school board policies pursuant to 20-3-323(1);

(ii) the term legislative act does not include administrative actions undertaken in the execution of a law or public policy.

(2) A governmental entity is immune from suit for a legislative act or omission by its legislative body, or any member or staff of the legislative body, engaged in legislative acts.

(3) Any member or staff of a legislative body is immune from suit for damages arising from the lawful discharge of an official duty associated with legislative acts of the legislative body.

(4) The acquisition of insurance coverage, including self-insurance or group self-insurance, by a governmental entity does not waive the immunity provided by this section.

... (Emphasis added).

Defendants are incorrect in their contention that the immunity granted in the old statute was retained by the amended statute. The legislature stated the purpose of the act as follows:

AN ACT CLARIFYING THAT STATUTORY LEGISLATIVE IMMUNITY EXTENDS ONLY TO LEGISLATIVE BODIES OF GOVERNMENTAL ENTITIES AND ONLY TO LEGISLATIVE ACTIONS TAKEN BY THOSE BODIES; CLARIFYING THAT GOVERNMENTAL ENTITIES ARE NOT IMMUNE UNDER THE LEGISLATIVE IMMUNITY STATUTE FOR NONLEGISLA-TIVE ACTIONS; CLARIFYING THAT THE ACQUISITION OF INSURANCE DOES NOT WAIVE IMMUNITY; AMENDING SECTION 2-9-111, MCA; AND PROVIDING AN IMMEDIATE EFFECTIVE DATE AND A RETROACTIVE APPLICABILITY DATE. (Emphasis added).

This Court has recently addressed the statutory amendment in Dagel v. City of Great Falls (Mont. 1991), [250 Mont. 224,] 819 P.2d 186, 191, 48 St.Rep. 919, 921-922, [10 Ed.Law 343]. Dagel was a constructive discharge case in which the plaintiff alleged that harassment by her supervisor, an employee of the City of Great Falls, led to her constructive discharge. The City of Great Falls and the supervisor claimed immunity under § 2-9-111, MCA (1989). In holding the defendants were not immune, this Court stated:

Section 2-9-111, MCA (1991), significantly changed the statute and therefore modified the theories expressed in the various immunity cases as well as in Crowell with regard to insurance. First, under the new statute, a legislative body is not immune from the negligent acts of its employees. § 2-9-lll(l)(c), MCA(1991). Second, the purchase of insurance does not waive immunity. § 2-9-222(4), MCA (1991). (Emphasis added).

Dagel, 819 P.2d at 191.

In this case, the “governmental entity’ is the School District, § 2-9-lll(l)(a), MCA (1991), and the “legislative body” is the school board, § 2-9-lll(l)(b), MCA (1991). With respect to school boards, a “legislative act” has been defined as:

actions by a school board that result in adoption of school board policies pursuant to § 20-3-323(1);

§ 2-9-lll(l)(c)(i)(C), MCA(1991). Section 20-3-323(1), MCA, provides:

(1) The trustees of each district shall prescribe and enforce policies for the government of the district. In order to provide a comprehensive system of governing the district, the trustees shall:
(a) adopt the policies required by this title; and
(b) adopt policies to implement or administer the requirements of the general law, this title, the policies of the board of public education, and the rules of the superintendent of public instruction.

In the materials submitted to the District Court on the summary judgment motion there are no facts which demonstrate a relationship between the alleged negligence of Ms. Field in throwing the shot put, and the adoption by the trustees of the School District of policies as defined in § 20-3-323(1), MCA. We conclude there were no actions by the School Board which resulted in the adoption of School Board policy under the facts of this case. As a result, there was no legislative act as defined in § 2-9-lll(l)(c)(i)(C), MCA (1991). We conclude that the alleged negligence of Ms. Field did not arise from the lawful discharge of an official duty associated with legislative acts as provided in the amended immunity statute. We further conclude that under the immunity statute, there is no immunity for the School District or any member or staff of the School District under the facts of this case. We hold that the District Court erred in its holding that the defendants were immune from suit for negligence under § 2-9-111, MCA (1991).

Ms. Hedges has also raised an issue as to whether the District Court erred in denying her motion for reconsideration. In light of our holding on the first issue, we will not address this question.

Reversed and remanded for further proceedings consistent with this opinion.

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


author: JUSTICE McDONOUGH JUSTICE HUNT

text:
    ADELINE GARCIA, Claimant and Appellant, v. STATE COMPENSATION MUTUAL INSURANCE FUND and MONTANA DEPARTMENT OF LABOR AND INDUSTRY, Defendants and Respondents.
    No. 91-490.
    Submitted on briefs Feb. 6, 1992.
    Decided May 21, 1992.
    49 St.Rep. 440.
    253 Mont. 196.
    832 P.2d 770.

      For Claimant and Appellant: Don Edgar Burris, Billings.
    For Defendants and Respondents: Michael P. Heringer, Billings.
   JUSTICE McDONOUGH

delivered the Opinion of the Court.

Adeline Garcia appeals from a judgment of the Workers’ Compensation Court which held that she was not entitled to compensation beyond the amount paid.

Although several issues are submitted on appeal, we find only one necessary for our review:

Whether substantial credible evidence supports the Workers’ Compensation Court’s determination that Garcia was not entitled to compensation beyond the amount paid.

On July 18,1988, Garcia was injured while filing some documents in the bottom drawer of a filing cabinet while employed by the Department of Labor and Industry. On August 16, 1988, Dr. Lovitt performed a lumbosacral fusion at the LS-S1 level of Garcia’s spine. Garcia has not returned to work since July 18,1988. It is undisputed that Garcia has a long history of back problems. The State Fund first refused but then accepted Garcia’s claim and made payments under the reservation of rights in § 39-71-608, MCA. After an investigation was completed, it terminated the claimant’s benefits.

Garcia filed a petition with the Workers’ Compensation Court contesting the termination of benefits. A trial was held on March 4, 1991. The hearing examiner executed a proposed judgment on August 8, 1991. The Workers’ Compensation Judge adopted the proposed findings of fact and conclusions of law and proposed judgment of the hearing examiner. This appeal followed.

Our standard for reviewing a decision of the Workers’ Compensation Court is to determine if there is substantial evidence to support the findings and conclusions of that court. Where there is substantial evidence to support the Workers’ Compensation Court, this Court cannot overturn the decision. Coles v. Seven Eleven Stores (1985), 217 Mont. 343, 347, 704 P.2d 1048, 1050; Wood v. Consolidated Freightways (1991), 248 Mont. 26, 28, 808 P.2d 502, 504.

I

The Workers’ Compensation Court found that Garcia began suffering from low back pain in the mid-1970’s. She was eventually diagnosed with degenerative disk disease, which is a wear and tear process that occurs with aging. On June 10, 1986, Garcia was seen by Dr. Teal for a gradual increase in pain over the past decade. She was treated with medication, physical therapy and exercise. On October 26, 1987, she began seeing Dr. Lovitt. On June 17, 1988, Garcia and Dr. Lovitt discussed the possibility of surgery. On July 18, 1988, the day of the injury, Garcia saw Dr. Lovitt. They again discussed the possibility of surgery. Dr. Lovitt considered Garcia’s July 18,1988 visit as a flare-up in her continuing symptoms. As noted above, Garcia underwent surgery on August 16, 1988.

The Workers’ Compensation Court, in its conclusions of law, found that Garcia was within the course and scope of her employment on July 18, 1988, when she suffered an injury as defined in § 39-71-119, MCA (1987). This statute provides in part:

39-71-119. Injury and accident defined. (1) “Injury’ or “injured” means:
(a) internal or external physical harm to the body;...
(2) An injury is caused by an accident. An accident is:
(a) an unexpected traumatic incident or unusual strain;
(b) identifiable by time and place of occurrence;
(c) identifiable by member or part of the body affected; and
(d) caused by a specific event on a single day or during a single work shift...

The Workers’ Compensation Court concluded the definition of injury retains the pre-1987 requirement of “an unexpected traumatic accident” or “unusual strain.” Gaumer v. State Compensation Fund (1990), 243 Mont. 414, 795 P.2d 77. The court also found that the fact that an employee is suffering from or afflicted with preexisting disease or disability does not preclude compensation if the disease or disability is aggravated or accelerated by an industrial accident. Birnie v. U.S. Gypsum, Co. (1958), 134 Mont. 39, 328 P.2d 133; Rumsey v. Cardinal Petroleum (1975), 166 Mont. 17, 530 P.2d 433; Shepard v. Midland Foods, Inc. (1983), 205 Mont. 146, 666 P.2d 758.

However, the Workers’ Compensation Court found that “compensable injury’ and “disability’ were two separate considerations. Hall v. Cigna Insurance Co., (1991), 248 Mont. 484, 812 P.2d 1262. In Hall, the claimant sustained several separate injuries over a period of years while employed with different employers and while doing separate activities. Hall alleged right knee, left ankle, and back pain were attributable to injuries sustained while working for ARCO. Hall at 488, 812 P.2d at 1264. We held that Hall did not demonstrate by a preponderance of the evidence that his current medical condition was attributable to his employment with ARCO. Hall at 489, 812 P.2d at 1265.

The Workers’ Compensation Court concluded that the entitlement to disability benefits must be supported by a preponderance of the medical evidence. The burden of proof is on the claimant to prove the work-related incident as a contributory cause to her disability. Gierke v. Associated Indemnity Corporation (1986), 224 Mont. 446, 454, 730 P.2d 1143, 1148. The Workers’ Compensation Court found, and the medical record bears out, that Garcia and Dr. Lovitt discussed surgery prior to July 18,1988. On July 18,1988, Dr. Lovitt noted the same continuing symptoms. The plaintiff did not present any evidence to support her position that her surgery or disability was causally related to the July 18, 1988 injury.

II

Garcia argues that the Workers’ Compensation Court violated her right to due process and equal protection of the law. The basis of the argument is that, in holding Garcia was not entitled to any benefits beyond the amount paid, the court exceeded the issue of whether or not Garcia was injured. Therefore, Garcia was deprived of her right to notice and opportunity to be heard.

One of the issues presented by the parties to the hearing examiner was whether Garcia suffered a compensable industrial injury arising out of and/in the course of her employment. The Workers’ Compensation Court found in Garcia’s favor on that issue. In Garcia’s complaint and in her contention number one of the pretrial order, Garcia claimed she was entitled to continued temporary total disability payments from the insurer. Thus, the Workers’ Compensation Court did not exceed the scope of the issues in concluding Garcia was not entitled to benefits beyond the amount paid.

Garcia argues that the Workers’ Compensation Court, in holding she was not entitled to any benefits beyond the amount paid, denied her due process. The essence of her argument is that she was without notice that the disability issue would be tried. However, as stated above, Garcia’s first contention in the pretrial order was that of whether or not she was entitled to temporary total disability payments. Evidence that Garcia’s disability was not related to her injury was presented by the depositions of Dr. Lovitt and Garcia approximately one month before the hearing. The Workers’ Compensation Court made a finding on this issue.

The dissent argues that the Workers’ Compensation Court exceeded its jurisdiction by deciding issues not raised by the parties. The hearings examiner approved a pretrial order which was signed by the parties. He noted at the hearing that the order would govern the proceedings. ARM 24.5.318 governs pretrial practice before the Workers’ Compensation Court and provides for the pretrial conference and order. The order set forth the uncontested facts, the issues to be determined, and both parties’ contentions. The relevant portions are as follows:

E. Statement of Issues to be Determined by the Court.

1. Whether Petitioner suffered a compensable industrial injury arising out of/and in the course of her employment on or about July 18, 1988 ...

F. Petitioner’s Contentions:

1. Petitioner has been, and continues to be, temporarily totally disabled as a result of the incident of July 18, 1988 ...

G. Defendant’s Contentions:

2. Claimant has a long history of back problems. Her surgery and back problems are related to her history of back problems not to anything that occurred on or about July 18, 1988. Likewise, the medical records reflect that claimant decided to have surgery on her back prior to the time of her alleged injury.

Further, the depositions of Dr. Lovitt and Garcia were submitted to the hearings examiner.

One of the purposes of the pretrial order is to specify the legal theories and contentions of fact upon which the parties are proceeding. A pretrial conference is held to promote organization and management of the case. We must balance here the integrity of the order and the adaptability of the proceedings. Case v. Abrams (10th Cir. 1965), 352 F.2d 193.

Unlike pleadings, usually based on information and belief, the pre-trial order defining the issues is the result of discovery in which, as this order recites ... both parties know the testimony of the other’s witnesses. The pre-trial order supersedes the pleadings and becomes the governing pattern of the lawsuit.

Case, at 195.

The question before us is whether the pretrial order can be construed to include the issue of whether Garcia was entitled to compensation beyond the amount paid. The trial court has wide discretion in matters of pretrial practice. See Moore v. Sylvania Electronic Products, Inc. (3rd Cir. 1972), 454 F.2d 81, Ely v. Reading Co. (3rd Cir. 1970), 424 F.2d 758, and Davis v. Duplantis (5th Cir. 1971), 448 F.2d 918.

As stated by the Eighth Circuit:

We are satisfied that the trial court properly interpreted the issues raised by the pleadings. In any event the appellant by the pre-trial order was fully advised of the presence in the case of the oral contract of insurance issue, and is in no position to claim that it was misled as to the issues to be tried.

American Surety Company of New York v. Williford (8th Cir. 1957), 243 F.2d 494, 497. We find that Garcia was advised by the pretrial order of the presence of the disability issue, and cannot claim surprise.

Ill

In its findings of fact, the Workers’ Compensation Court found that Dr. Lovitt had not been requested to prepare an impairment rating and could not state a date that Garcia could have reached maximum healing following surgery. Garcia contends that the issue of maximum healing and a subsequent impairment evaluation was not before the court and should not have been decided.

Even though Garcia contests the court’s finding on Dr. Lovitt’s testimony regarding the impairment rating and maximum healing, she argues that she was deprived of the right to a determination on the issue of maximum healing and an impairment rating, denying her due process. Garcia argues that a determination of maximum healing is mandatory. Garcia relies on Wood v. Consolidated Freightways (1991), 248 Mont. 26, 808 P.2d 502 for the proposition that a determination of maximum healing is mandatory. However, Wood involved the question of whether the claimant was permanently partially disabled or totally disabled after receiving a work related injury. Not whether he was disabled from a work-related injury. We conclude under these facts such a determination was not necessary.

For the reasons stated above, we conclude substantial credible evidence existed to support the findings and conclusions of the Worker’s Compensation Court.

Affirmed.

CHIEF JUSTICE TURNAGE and JUSTICE HARRISON, GRAY and WEBER concur.

JUSTICE HUNT

dissenting.

I dissent. The majority’s opinion denies Garcia the opportunity to present evidence relating to the extent of her disability. The Workers’ Compensation Court exceeded its jurisdiction by deciding issues not raised by the parties. The issue before the Workers’ Compensation Court was whether Garcia suffered a compensable industrial injury arising out of her scope of employment on July 18, 1988. The court properly ruled that Garcia met the requirements of an “injury” as defined in § 39-71-119, MCA (1987). The Workers’ Compensation Court, however, went one step further and ruled that her injury on July 18, 1988, did not result in any disability which entitled her to compensation beyond the amount paid.

Garcia did not receive any notice or have any opportunity to present evidence relating to the extent of her disability. Garcia’s attorney only presented a case on whether she suffered a compensable industrial injury. The fact that the issue was phrased in terms of “compensable injury” did not notify Garcia that the extent of compensation was an issue. As a result, there was no evidence relating to Garcia’s “maximum healing” which is necessary for her to continue receiving temporary total disability benefits. Section 39-71-701(4), MCA. The State Fund was allowed to stop paying Garcia benefits without a determination that she had achieved “maximum healing.” Moreover, an impairment rating cannot be obtained until Garcia reaches “maximum healing.” The Workers’ Compensation Court decided the issue without any evidence presented by Garcia relating to her physical impairment, or its affect on her earning capacity, because she did not have notice that the issue would be decided.

I would reverse and remand to the Workers’ Compensation Court to allow Garcia to present evidence relating to the extent of her disability.

JUSTICE TRIEWEILER concurs in the foregoing dissent.


author: JUSTICE GRAY

text:
    CITY OF BOZEMAN, a municipal corporation and a political subdivision of the State of Montana, Plaintiff and Appellant, v. MARC RACICOT, Attorney General for the State of Montana, and GALLATIN COUNTY, a political subdivision of the State of Montana, Defendants and Respondents.
    No. 91-462.
    Submitted on briefs Dec. 12, 1991.
    Decided May 21, 1992.
    49 St.Rep. 435.
    253 Mont. 204.
    832 P.2d 767.
    For Appellant: Bruce E. Becker, Bozeman City Attorney, Bozeman.

      For Respondent: Marc Racicot, Attorney General, Helena; Peter Funk, Assistant Attorney General, Helena; and Michael Salvagni, Gallatin County Attorney, Bozeman.
   JUSTICE GRAY

delivered the Opinion of the Court.

The City of Bozeman appeals from a decision and order of the District Court of the First Judicial District, Lewis and Clark County. The District Court’s ruling upheld an opinion by the Attorney General that the board of county commissioners of Gallatin County, and not the city commission of Bozeman, has final authority to approve subdivisions that are within the three-mile area immediately outside Bozeman’s corporate limits. We affirm.

The issue on appeal is whether the District Court erred in concluding that Bozeman’s city commission does not have final authority to approve subdivisions that are within the three-mile area immediately outside Bozeman’s corporate limits.

Bozeman has a commission-manager form of government. It also is a first-class city, as defined in § 7-1-4111, MCA. Bozeman and Gallatin County created the joint Bozeman City-County Planning Board in 1957. The Planning Board’s jurisdictional area includes the area within Bozeman’s corporate limits and the area up to four and one-half miles outside its corporate limits. Bozeman and Gallatin County have adopted the same master or comprehensive development plan and city/county subdivision regulations for the Planning Board’s jurisdictional area. Both claim final authority to approve subdivisions within the three-mile area immediately outside Bozeman’s corporate limits (“three-mile area”).

Bozeman and Gallatin County jointly requested an opinion of the Attorney General on the following question:

Does the board of county commissioners or the city commission, pursuant to section 7-3-4444, MCA, have final authority to approve subdivisions that are within the three-mile area immediately outside the corporate limits of the city when it has a commission-manager form of government?

The Attorney General answered the question as follows:

The board of county commissioners has final authority to approve subdivisions that are within the three-mile area immediately outside the corporate limits of the city when the city has a commission-manager form of government.

43 Op. Att’y Gen. No. 26 (July 20, 1989).

Bozeman filed a complaint for declaratory judgment seeking to have the Attorney General’s opinion overruled. It requested the District Court to order that it has final authority to regulate subdivisions in the three-mile area under § 7-3-4444, MCA. The court determined that the Attorney General correctly interpreted § 7-3-4444, MCA, concluding that the statute does not give Bozeman the claimed extraterritorial authority. This appeal followed.

The parties agree that the resolution of this case is strictly a matter of statutory interpretation. The District Court’s decision and order will be upheld if the court’s interpretation of the law is correct. Steer, Inc. v. Dept. of Revenue (1990), 245 Mont. 470, 803 P.2d 601.

The District Court began its analysis by examining the Montana statutes which generally define a municipality’s authority to regulate subdivisions beyond its corporate limits. Section 76-2-310, MCA, provides in pertinent part:

(1) The local city or town council or other legislative body which has adopted a master plan pursuant to chapter 1 may extend the application of its zoning or subdivision regulations, or both, beyond its limits in any direction but not in a county which has adopted such regulations within the contemplated area.
(2) (a) A city of the first class as defined in 7-1-4111 may not extend the application of its zoning or subdivision regulations, or both, more than 3 miles beyond its limits ....

In addition, § 76-2-311, MCA, provides:

(1) Any city or town council or other legislative body may thereafter enforce such regulations in the area to the same extent, as if such property were situated within its corporate limits, until the county board adopts a master plan pursuant to chapter 1 and accompanying zoning or subdivision resolutions, or both, which include the area.
(2) As a prerequisite to the exercise of this power, a city-county planning board whose jurisdictional area includes the area to be regulated must be formed ....

Standing alone, §§ 76-2-310 and 76-2-311, MCA, may appear to give Bozeman final authority to approve subdivisions within the three-mile area. Section 76-2-312, MCA, however, states that “[a] city or town which has as its plan of government the commission-manager plan shall be excluded from the provisions of 76-2-310 and 76-2-311 which define extraterritorial authority to review proposed subdivisions.” The District Court concluded that § 76-2-312, MCA, takes away the extraterritorial authority over subdivisions that Bozeman, with a commission-manager form of government, otherwise would have pursuant to §§ 76-2-310 and 76-2-311, MCA. It further determined that because Bozeman was excluded from the provisions of §§ 76-2-310 and 76-2-311, MCA, the question of which governmental body has final authority to approve subdivisions in the three-mile area must be answered by reference to the Montana Subdivision and Platting Act, §§ 76-3-101 through 76-3-614, MCA.

The District Court then reviewed § 76-3-601, MCA, which provides in part:

(2). . . .
(b) When the proposed subdivision is situated entirely in an unincorporated area, the preliminary plat shall be submitted to and approved by the governing body of the county. However, if the proposed subdivision lies within 1 mile of a third-class city or town or within 2 miles of a second-class city or within 3 miles of a first-class city, the county governing body shall submit the preliminary plat to the city or town governing body or its designated agent for review and comment.
(3) This section and 76-3-604, 76-3-605, and 76-3-608 through 76-3-610 do not limit the authority of certain municipalities to regulate subdivisions beyond their corporate limits pursuant to 7-3-4444.

It next reviewed § 7-3-4444, MCA, referenced in § 76-3-601(3), MCA. Section 7-3-4444, MCA, applies only to commission-manager municipalities and states:

(1) The director of public service shall be the supervisor of plats of the municipality. He shall see that the regulations governing the platting of all lands require all streets and alleys to be of proper width and to be coterminous with the adjoining streets and alleys and that all other regulations are conformed with. Whenever he shall deem it expedient to plat any portion of the territory within the corporate limits in which the necessary or convenient streets and alleys have not already been accepted by the municipality so as to become public streets or alleys or when any person plats any land within the corporate limits or within 3 miles thereof, the supervisor of the plats shall, if such plats are in accordance with the regulations prescribed therefor, endorse his written approval thereon.
(2) No plat subdividing lands within the corporate limits or within 3 miles thereof shall be entitled to record in the recorder’s office of the county without such written approval so endorsed thereon.

The District Court concluded that § 76-3-601(2)(b), MCA, limits the extraterritorial authority of municipalities over subdivisions to “review and comment” concerning the preliminary plat except as permitted by § 7-3-4444, MCA. It further concluded that the plain language of § 7-3-4444, MCA, grants the city’s director of public service only the limited ministerial power to review plats for subdivisions in the three-mile area with respect to their technical adequacy.

Bozeman challenges the District Court’s ruling, asserting that § 76-2-312, MCA, is not a limitation on the authority of commission-manager governments; rather, it is an acknowledgment by the legislature that such municipal governments already had the extraterritorial subdivision authority under Section 91 of Chapter 152 of the Laws of 1917, now § 7-3-4444, MCA. It argues that § 76-2-312, MCA, exempts commission-manager cities from procedural requirements that other forms of municipal government have to follow in order to exercise their extraterritorial subdivision authority.

Bozeman relies on a 1970 report to the legislature that was prepared by the Montana Legislative Council. In that report, the Legislative Council referred to what is now § 7-3-4444, MCA, and stated that the statute gives commission-manager cities “authority to approve or disapprove proposed subdivisions within three miles of the city.” Montana Legislative Council, A Report to the Forty-Second Legislative Assembly, December 1970, Report No. 34, at page 10. Bozeman further argues that § 76-3-601(3), MCA, with its reference to § 7-3-4444, MCA, also supports its position that it has final authority to approve subdivisions in the three-mile area. Therefore, the success of Bozeman’s argument is conditioned upon a determination that § 7-3-4444, MCA, grants Bozeman the claimed extraterritorial subdivision authority.

Our function in construing and applying statutes is to effectuate the intention of the legislature. State ex rel. Roberts v. Public Service Comm’n (1990), 242 Mont. 242, 246, 790 P.2d 489, 492. If the legislature’s intent can be determined from the plain meaning of the words used in a statute, we will go no further. Phelps v. Hillhaven Corp. (1988), 231 Mont. 245, 251, 752 P.2d 737, 741. In addition, it is the function of the courts to ascertain and declare what in terms or substance is contained in a statute; it is not our function to insert what has been omitted or to omit what has been inserted. Gaub v. Milbank Ins. Co. (1986), 220 Mont. 424, 427, 715 P.2d 443, 445. When more than one statute applies to a given situation, such construction, if possible, is to be adopted as will give effect to all. Schuman v. Bestrom (1985), 214 Mont. 410, 415, 693 P.2d 536, 538.

Upon examining § 7-3-4444, MCA, the District Court concluded:

With these rules of statutory construction in mind, this Court finds no reference in Section 7-3-4444, MCA, granting the Bozeman City Commission final subdivision authority over lands within three miles of its corporate limits. This Court certainly recognizes that there was such a reference to that statute by the Montana Legislative Council and there is a similar reference in Section 76-3-601(3), MCA. However, references such as those made by the aforementioned statute and by the Legislative Council cannot put words into Section 7-3-4444, MCA, that are not there. If the legislature wanted Section 7-3-4444, MCA, to say that a city commission has power to approve subdivisions within three miles of its border, it should say so. That is not, however, what the statute says.

The District Court’s interpretation of § 7-3-4444, MCA, is correct. The language of the statute is clear. The statute does not refer to the city commission. Nor does it grant the city commission final authority to approve subdivisions that are within the three-mile area. The authority that is provided by the statute is granted to the city director of public service. It is limited to ensuring that the involved plat complies with all of the regulations governing platting; if the plat does comply, the director of public service must approve it.

A city with a commission-manager form of government has two statutorily authorized functions with respect to subdivisions located within the three-mile area, in addition to participating in the master plan process. First, the city’s governing body or its designated agent reviews and comments on a preliminary plat submitted to it by the county governing body under § 76-3-601(2)(b), MCA. Second, in accordance with § 7-3-4444, MCA, the city’s director of public service reviews the preliminary plat to ensure its technical adequacy. We hold that the District Court did not err in concluding that Bozeman, through its city commission, does not have final authority to approve subdivisions that are within the three-mile area immediately outside its corporate limits.

Affirmed.

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


author: JUSTICE McDONOUGH

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    BORDEN McGREGOR AND MICKEY M. McGREGOR, husband and wife, Plaintiffs and Respondents, v. RODNEY A. MADSEN and ELIZABETH ANN MADSEN, a/k/a ELIZABETH A. MADSEN, formerly husband and wife; REAS T. MADSEN and BILLIE L. MADSEN, husband and wife, Defendants and Appellants.
    No. 92-017.
    Submitted on briefs Apr. 9, 1992.
    Decided June 2, 1992.
    Rehearing Denied June 25, 1992.
    49 St.Rep. 483.
    253 Mont. 210.
    832 P.2d 779.

      For Appellant: Joseph W. Sabol, II, Bozeman.
    For Respondent: Gary R. Thomas, Thomas Law Office, Red Lodge.
   JUSTICE McDONOUGH

delivered the Opinion of the Court.

Rodney A. Madsen and Elizabeth A. Madsen, and Reas T. Madsen and Billie L. Madsen, appeal from a judgment of the Thirteenth Judicial District Court, Carbon County, in favor of Borden and Mickey M. McGregor. We affirm.

There is only one issue on appeal:

Whether the District Court erred in holding McGregors could sue Madsens on a promissory note initially secured by a junior mortgage after the holder of the senior mortgage foreclosed upon and sold the property?

In 1981, Borden and Mickey M. McGregor (McGregors) sold Rodney A. Madsen and Elizabeth A. Madsen, and Reas T. Madsen and Billie L. Madsen (Madsens) approximately 255 acres of irrigated farmland for $510,000, on a contract for deed. The Madsens made a down payment of $122,000, leaving $388,000 remaining. The annual installments were in the amount of $42,504.03. The McGregors owned the land only a short period of time before the sale and were also purchasing it on a contract for deed which included a balloon payment due in 1984. The contract for deed between the McGregors and the Madsens had a condition that in addition to the annual payments, Madsens would make the balloon payment in 1984. The amount of the balloon payment was $235,000.

The Madsens borrowed $200,000 for the balloon payment from Equitable Life Assurance Society (Equitable). The McGregors agreed to subordinate their interest to Equitable, accepting a second mortgage. The balance remaining pursuant to the contract for deed ($123,000) was converted into a promissory note and a mortgage in favor of the McGregors. By 1986, when crop and land prices fell, the Madsens defaulted on their payments to both Equitable and the McGregors. Equitable foreclosed on its mortgage and purchased the property at the foreclosure sale in August 1988 for $210,292.26.

Equitable held a deficiency judgment against the Madsens for $44,574.81. It agreed to reduce the judgment to $22,574.81 in exchange for Madsens’ relinquishment of possession and their statutory right of redemption. The McGregors initiated a foreclosure proceeding, but after Equitable’s action and foreclosure sale, sought to sue the Madsens on the promissory note. The District Court awarded the McGregors a money judgment against the Madsens on the promissory note. This appeal followed.

The issue is a question of law. In reviewing questions of law, we will decide if the lower court’s determination as to law is correct. Our review will be plenary. Steer Inc. v. Department of Revenue (1990), 245 Mont. 470, 803 P.2d 601.

The Madsens argue that the mortgage held by the McGregors is a purchase money mortgage to secure payment of the balance of the purchase price. They argue that § 71-1-232, MCA, prevents the McGregors from suing on the note. Section 71-1-232, MCA, provides:

Upon foreclosure of any mortgage, executed to any vendor of real property or to his heirs, executors, administrators, or assigns for the balance of the purchase price of such real property, the mortgagee shall not be entitled to a deficiency judgment on account of such mortgage or note or obligation secured by the same.
The parties replaced the contract for deed with a junior mortgage to allow the Madsens to obtain the financing from Equitable to pay off the 1984 balloon payment. The Madsens correctly argue this junior mortgage was a mortgage on the land to secure the payment of the balance due on the original purchase.

Section 71-1-232, MCA, is clear in its language, “upon the foreclosure of any mortgage ...” and in the case before us, the Mc-Gregors did not foreclose on the Madsens’ mortgage. There was no security left. This makes the statute inapplicable to the case at hand. The Madsens argue that the McGregors initiated a foreclosure action prior to the action on the note and that they neglected to pursue their foreclosure rights. However, the foreclosure action and sale by Equitable, through no fault of McGregors, extinguished the McGregors’ security interest in the land.

In 1st Interstate Bank of Kalispell v. Wann (1988), 235 Mont. 111, 765 P.2d 749, we upheld a summary judgment in favor of a junior lienholder, holding it was entitled to sue directly on the note after a senior lienholder extinguished the junior lienholder’s security interest. 1st Interstate at 114, 765 P.2d at 750.

We conclude that inasmuch as foreclosure of the mortgage was not available to the McGregors, they do not come within the prohibition of the above statute and are entitled to a money judgment on the promissory note.

For the reasons set forth above, the judgment of the District Court is affirmed.

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