text:
    In the Matter of the ESTATE OF LEMPI MATTILA, Deceased.
    No. 85-408.
    Submitted on Briefs Jan. 30, 1986.
    Decided May 9, 1986.
    718 P.2d 343.

      Jenkins Law firm, Kelly A. Jenkins, Helena, Richardson & Richardson, George Richardson, Butte, for appellant.
    John F. Iwen, Clarke M. Dawson, Alexander & Baucus, Great Falls, for respondent.
   MR. JUSTICE WEBER

delivered the Opinion of the Court.

llene Cox appeals from an order of the District Court for Cascade County which dismissed her petition to be appointed as special administrator of this estate. We affirm.

We restate the issues as follows:

1. Did the District Court err by excluding certain documents and testimony from evidence?

2. Did the District Court err in granting the motion to dismiss llene Cox’s petition for appointment as special administrator?

The estate of Lempi Mattila, who died in 1983 at the age of 76, includes the estate of her older brother William, who predeceased her by ten days. She was the sole devisee under William’s will. Lempi Mattila’s devisees are her seven second cousins, one of whom, Gilbert Myllynaki (Gilbert) was named as co-personal representative in her will, along with Evan Grey (Evan), the husband of another of the second cousins. llene Cox is also one of the surviving second cousins. She petitioned to be appointed special administrator of Lempi Mattila’s estate, alleging a conflict of interest on the part of Evan and Gilbert, arising from the following:

A year and a half before William Mattila died, he executed a limited power of attorney giving Evan and Gilbert the power to handle his social security and Medicare matters. He was then 79 years of age and living in a nursing home. Several months later, and about thirteen months before William Mattila died, Evan and Gilbert signed a warranty deed as his attorneys-in-fact. The deed purported to convey William Mattila’s 400-acre ranch near Belt, Montana, to Gilbert and his brother, another of the second cousins. Both the power of attorney and the warranty deed were recorded.

llene Cox argues that the ranch property should be claimed as part of Lempi Mattila’s estate, which now includes all of William Matifla’s estate. She has filed a civil suit against Evan and Gilbert in which she seeks 2.2 million dollars in damages arising from the transfer of title to the ranch. However, she did not intervene in the probate of this estate until after the final account had been filed and approved and the court had authorized the co-personal representatives to distribute the assets of the estate. After that time, she filed this petition, asking to be appointed special administrator. She did not ask that distribution of the estate be stayed. Evan and Gilbert moved to dismiss because llene Cox’s petition was not timely, because the probate court did not have jurisdiction to set aside the property transaction, and because llene Cox had already filed a separate suit on this issue. The District Court, after a hearing, granted the co-personal representatives’ motion to dismiss llene Cox’s petition. She appeals.

I

Did the District Court err by excluding certain documents and testimony from evidence?

The District Court sustained an objection to asking the attorney for the estate whether the co-personal representatives had asked him to investigate the validity of the questioned deed. The reasons for the objection and the ruling were not stated. We affirm the District Court’s ruling because of the attorney-client privilege set forth at Section 26-1-803, MCA.

The District Court refused to admit into evidence the power of attorney and deed which llene Cox contends suggest that the transfer of the ranch was invalid. The court held that both documents were irrelevant. However, it agreed to take judicial notice of the file in the separate action brought by llene Cox against the co-personal representatives. That file contains both documents. Any prejudice caused by the court’s failure to admit those documents into evidence was therefore negated.

II

Did the District Court err in granting the motion to dismiss llene Cox’s petition for appointment as special administrator?

Montana’s statutory provision for appointment of a special administrator, Section 72-3-701, MCA, provides that:

“A special administrator may be appointed:
“(1) informally by the clerk on the application of any interested person when necessary to protect the estate of a decedent prior to the appointment of a general personal representative or if a prior appointment has been terminated as provided in 72-3-522;
“(2) in a formal proceeding by order of the court on the petition of any interested person and finding, after notice and hearing, that appointment is necessary to preserve the estate or to secure its proper administration, including its administration in circumstances where a general personal representative cannot or should not act. If it appears to the court that an emergency exists, appointment may be ordered without notice.”

This estate is being probated informally. The proper procedure for informal appointment of a special administrator is set out in subsection (1) above. The record does not indicate that llene Cox moved to be appointed special administrator prior to the appointment of a personal representative, nor has the appointment of the co-personal representatives been terminated. The procedure followed in this case was, instead, the one described in subsection (2) for formal proceedings.

llene Cox relies heavily on the case of Matter of Estate of Sauter (Mont. 1980), 615 P.2d 875, 37 St.Rep. 1425, to support her position that she should be appointed as a special administrator of this estate. In Sauter, this Court held that a special administrator should be appointed where the personal representative had a conflict of interest regarding a claim purported to be an asset of the estate. That case differed from this one in several respects. In Sauter, the matter of whether the claim should be pursued was holding up the progress of probate of the estate. Sauter, 615 P.2d at 877. In this case, probate of the estate has been completed to the point of distribution of assets, which has already been approved by the court. llene Cox has requested and received notice of proceedings in this estate under Section 72-3-106, MCA. She made no objection to the final account or to the proposed distribution. In Sauter, the claim had been reduced to a lawsuit before the decedent’s death. Sauter, 615 P.2d at 876. Here, although the deed transferring the ranch was signed and filed over 13 months before William Mattila’s death, its validity was apparently not questioned until after the deaths of both William and Lempi Mattila and the completion of administration of both estates. There is no unanimity among the devisees as to the propriety of the transfer of the ranch. Four of the seven devisees have consented to the transfer. Finally, at the hearing in this matter, testimony as to the circumstances surrounding the signing of the deed was presented by William Mattila’s attorney. He testified that Mr. Mattila was present when the deed was signed, and that Mr. Mattila wished to transfer the property to Gilbert and his brother. The attorney testified that he mistakenly advised the parties that the power of attorney held by Gilbert and Evan authorized them to sign the deed on behalf of William Mattila. llene Cox did not present any evidence to rebut this testimony.

Montana’s statutory provision governing who may be appointed as a special administrator is found at Section 72-3-702, MCA:

“(1) If a special administrator is to be appointed pending the probate of a will which is the subject of a pending application or petition for probate, the person named executor in the will shall be appointed if available and qualified.
“(2) In other cases, any proper person may be appointed special administrator.”
“Proper person” is not defined in the statutes. The District Court found that llene Cox was not a “disinterested party” in its order dismissing her petition for appointment as special administrator. In view of the facts, we agree that she was not a “proper person” under the statute.

The determination of questions regarding the appointment of a special administrator is a matter of discretion with the trial court. Sauter, 615 P.2d at 878. We conclude that there will be no injustice done if llene Cox is not appointed special administrator of this estate. She has not shown that Evan and Gilbert cannot or should not distribute the cash assets remaining in the estate, and she is not barred from pursuing her separate action regarding transfer of the ranch. We affirm the District Court’s dismissal of her petition for appointment as special administrator.

Affirmed.

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


source: Caselaw Access Project

author: MR. JUSTICE MORRISON

license: Public Domain

text:
    DUANE ALEX POPP, JR., Plaintiff and Respondent, v. JOHN GOUNTANIS and George Frank, Defendants and Appellants.
    No. 85-610.
    Submitted on Briefs March 28, 1986.
    Decided May 9, 1986.
    718 P.2d 340.

      Gerald J. Neely, Billings, for defendants and appellants.
    Moses Law Firm, Stephen Moses, Billings, for plaintiff and respondent.
   MR. JUSTICE MORRISON

delivered the Opinion of the Court.

Defendant George Frank appeals the judgment of the Thirteenth District Court, County of Yellowstone, awarding the sum of $50,082.20 plus interest to plaintiff Duane Popp in a breach of contract action. We affirm.

In April, 1982, an oral lease was entered into by the parties, whereby Popp was to plant and harvest crops upon land owned by George Frank and John Gountanis. Under the terms of the agreement, two-thirds of the crops would go to Popp, one-third to Frank and Gountanis; Popp was to cover all expenses, with the exception of fertilizer for which he would contribute two-thirds of the cost.

In May of 1982, Popp planted 800 acres of barley on the land, which was harvested in August of 1982, with Frank and Gountanis’ share being delivered to a Billings elevator. In the fall of 1982, Popp planted 766 acres of winter wheat. This crop was included as security for a loan Popp obtained from the Yellowstone Bank of Laurel to cover his operating expenses.

In early 1983, the federal government established the payment in kind program (PIK). The intent of PIK was to reduce the nation’s surplus of certain crops by awarding benefits to farmers for not producing such crops. Popp attempted to enroll the land under the lease from Frank and Gountanis in the PIK program, but was informed by the Agricultural Stabilization and Conservation Service (ASCS) that he must have a written lease to be eligible. On March 7, 1983, Frank and Gountanis filed an application with the ASCS, and the land being farmed by Popp was approved for PIK benefits.

Sometime in early March, 1983, Popp became aware that Frank and Gountanis had enrolled the land in the PIK program. About the same time, Popp’s doctor informed him that he had a heart condition and recommended that Popp quit farming. Shortly thereafter, Popp met with Gountanis to discuss distribution of the PIK benefits and to inform Gountanis that he would be quitting farming. No agreement was reached as to the PIK benefits, and Gountanis understood Popp to mean he was immediately getting out of farming, which was not Popp’s intent. Following the meeting, Popp contacted his lawyer and the parties quit communicating.

On April 25, 1983, ASCS sent notice to the parties that 1608 acres had been approved for PIK benefits, such amount having been based upon the acreage farmed during 1980 and 1981 by the previous tenant. One of the requirements under the program was that the crop growing on the approved land be destroyed by July 15, 1983. Popp planned to hay the crop, which was permissible under the regulations; Gountanis made arrangements to have sheep graze the crop, under the belief that Popp had quit farming and abandoned the lease.

In early July, prior to the time Popp planned on haying the wheat, he was informed that about 3500 head of sheep were in grazing on the wheat. Without Popp’s knowledge, Gountanis had arranged for the sheep to graze the crop, and subsequently a contractor was brought into further destroy the crop and disc the entire acreage at a cost of $11,579.46, which was paid by Frank and Gountanis.

Although ASCS was aware of the dispute between the parties, Frank and Gountanis received the entirety of the PIK benefits, which amounted to $82,465.07. Popp filed suit, alleging Frank and Gountanis breached the lease agreement, and that he was entitled to two-thirds of the PIK benefits, two-thirds of the amount received for permitting the sheep to graze, and his costs in planting the crop.

Following a bench trial, the District Court entered judgment in favor of Popp. The findings of fact and conclusions of law reveal that Popp was awarded $50,082.20, which included two-thirds of the PIK benefits plus two-thirds of the grazing fee less the plowing expense incurred by Frank and Gountanis. Popp was also awarded $8,180.76 in interest expenses which had accrued on his unpaid loan since the date the PIK benefits were awarded to Frank and Gountanis.

Defendant Frank appeals the District Court judgment, and raises the following issues:

1. Whether as a matter of law, the failure of Popp to appeal the decision of the government not to include him in PIK payments can be collaterally attacked?

2. Whether as a matter of law, a lease which requires a percentage of crops to go to a tenant, but which does not contemplate later federal benefits, requires the tenant to share in those federal benefits when the fruits of his labor do not create any entitlements under the federal program?

3. Whether as a matter of law, accrued interest on obligations not necessarily related to the farming of the Frank/Gountanis property are an item of damages upon Frank/Gountanis’s failure to pay over PIK proceeds?

The first issue is whether Popp’s failure to appeal the decision of the ASCS that he was not eligible for PIK benefits precluded him from collaterally attacking that determination in state district court. We support the District Court finding that the PIK program could not be used to destroy Popp’s contract rights.

There is no dispute that Popp was entitled to some of the PIK benefits. The minutes of the ASCS County Committee meeting March 16, 1983, reflect that fact, as does the testimony of committee director Harold Morrison, who testified that ASCS was uncertain of Popp’s share and determined that settlement between the parties was not ASCS’s affair. All of the PIK benefits were therefore awarded to Frank and Gountanis. Popp’s subsequent filing of a lawsuit was not a collateral attack on the ASCS determination. Rather the amended complaint shows it was a breach of contract action against Frank and Gountanis.

The next issue raised by Frank is whether the oral lease granting two-thirds of the crops to Popp also required that Popp receive two-thirds of the PIK benefits. Both parties agree that awards made under federal programs, such as PIK, were not contemplated at the time the lease was executed. Frank’s contention is that the amount of PIK benefits was determined by the acreage cultivated by the previous tenant, 1608 acres, and Popp received a windfall because he planted a crop on only 766 acres.

The evidence in the record reveals that Frank and Gountanis were landlords and Popp was their tenant. Popp used his own equipment, paid his own expenses, furnished the growing wheat as collateral for a loan, and had possession of the land. As a tenant, Popp had an estate in the land and the right of possession to the entire crop until delivery was made to the landlords. Davis v. Burton (1952), 126 Mont. 137, 246 P.2d 236; 21 Am.Jur.2d Crops Section 35.

That Popp chose to plant wheat on only 766 acres does not affect the fact he had an interest in the remainder of the land. PIK was designed to pay farmers for not producing a crop. In this case, PIK benefits were awarded to Frank and Gountanis as record owners of the 1608 acres which did not produce a crop. However, Popp had an estate in the land for the duration of his tenancy, and the award to Frank and Gountanis was in derogation of Popp’s interest. We find no error in the District Court determination that Popp was entitled to two-thirds of the PIK benefits under the lease terms.

The District Court awarded Popp $8,180.76 to cover the amount of accrued interest on his outstanding bank loan dating from the failure of Frank and Gountanis to pay Popp his two-thirds share of the PIK benefits. Frank asserts this was error because Popp maintained only one account which covered living expenses as well as other farming operations. Therefore, the loan balance was not solely attributable to the farming of the Frank and Gountanis property. We disagree.

The District Court found that Popp’s inability to satisfy the loan balance of $32,694.92 was directly related to Frank and Gountanis’ refusal to pay Popp his two-thirds share of the PIK benefits. Frank and Gountanis received payment for their PIK bushels in December, 1983, at which time Popp’s share became certain. Had Popp received his proper share, he would have been able to pay the loan entirely and avoid further interest charges. The accrued interest on Popp’s loan balance from that date was clearly part of his damages and we uphold the District Court award.

The judgment of the District Court is affirmed.

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


text:
    JOHN B. EDWARD, Barry M. Edward; Ross B. Edward; J. Brent Edward; Annette E. Stephenson; Schneiter Enterprises, Ltd., a limited partnership; Thair Q. Schneiter; Cheryl Ann Schneiter; C.M. Coffee: and Virginia N. Coffee, Plaintiffs and Respondents, v. F.S. PRINCE, Defendant and Appellant.
    No. 85-629.
    Submitted on Briefs March 13, 1986.
    Decided May 9, 1986.
    Rehearing Denied June 19, 1986.
    719 P.2d 422.
    Poore, Roth, & Robinson, James A. Poore, Jr., Butte, for defendant and appellant.
    Sandall, Cavan, Smith, Howard & Grubbs, James L. Sandall, Billings, for plaintiffs and respondents.
   MR. JUSTICE MORRISON

delivered the Opinion of the Court.

Defendant appeals the October 8, 1985, order of the Sixteenth Judicial District Court, County of Rosebud, granting summary judgment in favor of plaintiffs. We affirm.

Plaintiffs brought this action to cancel overriding royalties assigned to F.S. Prince and J.R. Mulliner in 1952 alleging a cloud on plaintiff’s royalty title. At the time of trial only Prince remained as a defendant.

In 1952, plaintiff’s predecessors in interest, George Schneiter and John B. Edward & Son, Inc. were owners of the land and mineral rights in question. J.R. Mulliner & F.S. Prince, partners in a Salt Lake City, Utah, law firm, were retained to negotiate an oil and gas lease with the Owanah Oil & Development Corporation (Owanah). In August 1952, a meeting was held in the law firm’s office in Salt Lake City, attended by George and Bernice Schneiter, John and Donna Edward, J.R. Mulliner, and Francois de Gunzburg, Owanah’s executive vice-president. Prince was not at the meeting.

The purpose of the meeting was to go over the lease terms, which had been drawn by Mulliner. The lease was a standard oil and gas lease granting Owanah the right to exploration upon the lessor’s land for a term of 10 years with the lessor to receive $2 per acre in delayed rental; additionally, the lessors retained an one-eighth royalty interest in the oil and gas produced from the land.

Paragraph 11 of the lease required Owanah to commence drilling within one year of the date of the lease, and further provided, “[attached hereto and by reference made a part hereof is exhibit A, which said exhibit has been concurrently executed by the parties hereto.” The date on the lease was August 21, 1952, and it was signed by George and Bernice Schneiter, John Edward and Francois de Gunzburg. John Edward acknowledged the lease before a notary public in Montana on October 14, 1952.

Exhibit A of the lease provided in part:

“In addition to the royalty to be paid as set out in the printed portion of this Oil and Gas Lease, Lessee agrees to pay to Lessor a one per cent (1%) overriding royalty on all oil produced and saved from the entire acreage set forth in this Oil and Gas Lease.”

The date on Exhibit A was August 21, 1952, however, “August” was crossed out and “October” handwritten above. The signing parties were the same as on the lease. The signatures of the Schneiters and de Gunzburg were acknowledged before a notary public in Utah on October 21, 1952. The signature of Edward was acknowledged in Montana on October 3, 1952.

On August 22, 1952, an “Assignment of Overriding Royalty” granting a royalty interest to F.S. Prince was signed by George and Bernice Schneiter and John Edward. This document, acknowledged before J.R. Mulliner on the same date, provided in part:

“WHEREAS, by Oil and Gas Lease dated August 21,1952, Assignors leased said land to Owanah Oil and Development Corporation, for the purpose of exploring and drilling for oil and gas, and
“WHEREAS, by reason of said lease Assignors retained an oil and gas royalty interest in the production that may be produced, saved and sold from said above-described lands,
“NOW THEREFORE, in consideration of the sum of Ten Dollars ($10.00) and other good and valuable consideration, receipt of which is hereby acknowledged, the Assignors do hereby sell, assign, transfer, convey and set over unto F.S. PRINCE, of 81.7 Continental Bank Building, Salt Lake City, Utah, hereinafter called Assignee, an overriding royalty of one-fourth (Vi) of one percent (1%) of the value, at the field market price at the time of production of the oil and/or gas that may be produced, saved and sold from the above-described land.
“Assignors do hereby represent that they are the owners of the one-fourth (Vi) of one percent (1%) overriding royalty herein assigned and have full legal right to transfer the same. Assignors, however, do not guarantee or warrant title to the lands, lease or royalties except that Assignors do warrant and guarantee title to said lands, lease and royalties as to acts of their own commission.”

An identical assignment was concurrently executed by the same parties in favor of Mulliner.

Owanah failed to commence drilling within one year, and the lease was terminated on November 4, 1953. Several other companies leased the land for exploration purposes, with oil eventually being discovered in 1981. On March 5, 1982, Barry Edward, John Edward’s son, sent Prince a letter requesting his signature on a quit claim deed to eliminate Prince’s royalty interest which was still of record. Prince refused to sign, and plaintiffs brought suit to quiet title.

Depositions were taken of John and Donna Edward, and Prince. At the time of filing of the complaint, both George Schneiter and J.R. Mulliner were dead.

Prince’s deposition testimony revealed the following: that his partner, Mulliner, drafted the lease and assignments; that Prince had no recollection of the assignments; that Prince recalled a conversation with George Schneiter sometime in 1952 in which Schneiter promised to give Prince a royalty interest as a fee for handling upcoming litigation in which Schneiter expected to be involved; that Prince successfully defended Schneiter in the lawsuit but never received any sort of compensation other than the royalty assignment. John Edward’s deposition testimony revealed that at the meeting in 1952, J.R. Mulliner explained to the Edwards that the 1% overriding royalty had nothing to do with the 12 Vk % landowner royalty, and that the overriding royalty interests were going to Mulliner and Prince for their work in putting together the lease.

Following discovery, plaintiffs moved for summary judgment; a hearing was held on the motion August 6, 1985. The District Court entered a memo opinion and order on September 23, 1985, granting summary judgment in favor of plaintiffs, finding that Prince’s royalty interest was an overriding royalty which had terminated with the termination of the Owanah lease. The sole issue on appeal is whether the District Court erred in granting plaintiffs’ motion for summary judgment.

Prince asserts the assignment is ambiguous, and may be interpreted as giving him a non-terminating, perpetual royalty interest. We disagree. The language Prince claims is ambiguous is contained in the conveyance clause which grants to Prince “an overriding royalty of one-fourth (Vi) of one per cent (1%) of the value ... of the oil and/or gas that may be produced, saved and sold from the above-described land” (Emphasis added.) Prince asserts the reference to “above-described land” may be interpreted to assign him a perpetual royalty interest rather than an overriding royalty terminating concurrent with the lease termination.

Section 70-1-513, MCA, provides that a grant of real property is to be interpreted under the same principles governing the interpretation of contracts. Section 28-3-202, MCA, provides: “The whole of a contract is to be taken together so as to give effect to every part if reasonably practicable, each clause helping to interpret the others.”

Looking to the disputed assignment, we note that the reference to “above-described land” in the conveyance clause does raise a possible ambiguity, however, when the other language in the assignment is considered, the intent of the grantors becomes clear. Following the conveyance clause, the document provides, “Assignors . . . are the owners of the one-fourth (Vi) of one per cent (1%) overriding royalty herein assigned and have full legal right to transfer the same.” Preceding the conveyance clause are two specific references to the lease with Owanah. Giving effect to each clause in the assignment results in the conclusion that Prince was granted an overriding royalty interest which arose under the lease with Owanah and terminated with the termination of the lease.

The great weight of authority is that an overriding royalty is an interest carved out of the lessee’s interest and cannot be of greater duration than the lease. See Kunz, The Law of Oil & Gas, Section 63.2 (1978); Williams & Meyers, Manual of Oil & Gas Terms, at 606-7 (1985); Brown, The Law of Oil & Gas Leases, (2d ed.), Section 17.01 (1958). In Homestake Exploration Corp. v. Schoregge (1928), 81 Mont. 604, 615, 264 P. 388, 392, this Court stated:

“An overriding royalty is a given percentage of the gross production payable to some person other than the lessor or persons claiming under him. It occurs where some owner of the working interest contracts to deliver a part of the gross production to another, usually his assignor. Such contracts are more frequently found as a reservation in an assignment of a lease. The provision creates in the owner of such royalty an interest in the lease . . .”

In the present case, Exhibit A attached to the lease granted a 1% overriding royalty to the landowners, who thereafter assigned Vi of the 1% overriding royalty to Prince. The language in Exhibit A and the assignment to Prince reveal that an overriding royalty interest of 1% was carved out of Owanah’s working interest.

Section 28-3-203, MCA, provides that several contracts relating to the same matters and made as substantially one transaction are to be taken together. In this case, the lease incorporated by reference Exhibit A, which created the overriding royalty interest. The assignment to Prince includes language that his assignors were owners of the overriding royalty interest of which he received a Vi interest. Taken together, these documents clearly show Prince received an overriding royalty interest which terminated with the termination of the Owanah lease in 1953.

The District Court is affirmed.

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


author: MR. JUSTICE WEBER

text:
    MURLAND W. SEARIGHT and Virginia Searight, Plaintiffs and Respondents, v. MICHAEL CIMINO, Defendant and Appellant.
    No. 85-388.
    Submitted on Briefs March 13, 1986.
    Decided May 13, 1986.
    718 P.2d 652.
    Hash, Jellison, O’Brien & Bartlett, James C. Bartlett, Kalispell, for defendant and appellant.
    John H. Bothe, Columbia Falls, for plaintiffs and respondents.
   MR. JUSTICE WEBER

delivered the Opinion of the Court.

Mr. Cimino appeals from a judgment entered against him in the District Court for Flathead County. The judgment enforced a contract provision which required Mr. Cimino to pay part of the construction costs for an airstrip. We affirm.

The issues are:

1. Did the court properly rule that paragraph 14 C of the parties’ contract for deed obligated Mr. Cimino to pay half the airstrip construction costs?

2. Did the court err in setting the amount due from Mr. Cimino to the Searights?

In July 1979 the Searights agreed to sell Mr. Cimino a parcel of real property located north of Columbia Falls, Montana, under a contract for deed. Alleging that Mr. Cimino had failed to make scheduled payments on time, the Searights sought to enforce the default provisions of the contract. A lawsuit ensued, ultimately resulting in full payment by Mr. Cimino and reinstatement of the contract by the District Court.

In this separate action, the Searights seek to enforce paragraph 14 C of the contract. That paragraph provides that Mr. Cimino will pay half the costs of construction of an airstrip to be built across Northfork Road from his property, on the Searight property. The case was tried to the court sitting without a jury in April 1984, and in May 1985, judgment for $9,247 plus interest was entered in favor of the Searights.

I

Did the court properly rule that paragraph 14 C of the parties’ contract for deed obligated Mr. Cimino to pay half the airstrip construction costs?

Paragraph 14 C provides:

“Sellers have plans to construct an air strip on the land in Section 7 lying West of the Northfork Road, commencing at approximately the Northwest corner of said Section. Purchaser agrees that if Sellers do construct such air strip, with appropriate taxi ways, turnouts and parking areas, he will contribute fifty (50) percent of the cost, his share not to exceed $15,000.00 toward such construction costs which sum may be added to the balance at that time due on this Contract. In consideration of such payment Purchaser shall be entitled to the free use of said air strip so long as it is in existence, which right shall continue so long as Sellers own said property and Sellers shall secure said right to Purchaser in the event they sell the property on which the air strip is constructed. If Sellers do not complete construction of said air strip by January 1, 1984 this provision shall be null and void.”

Mr. Cimino argues that he is not obligated to contribute to the costs of building the airstrip for several reasons.

First, he states that construction of the airstrip was not fully completed on January 1, 1984 and that appropriate taxiways, turnouts, and parking areas were not provided. This Court will not overturn a district court’s finding of fact which is supported by substantial credible evidence. Rose v. Rose (Mont. 1982), 201 Mont. 86, 651 P.2d 1018, 1020, 39 St.Rep. 1971, 1974. Mr. Searight testified at the hearing that these conditions of paragraph 14 C were met. Mr. Cimino failed to present any evidence to the contrary. We affirm the District Court’s finding that the Searights completed construction of the airstrip in accord with the terms and conditions of the contract for deed.

Next, Mr. Cimino argues that the purpose of the contract was frustrated and the consideration on the part of the Searights failed because the airstrip is open to general public access. It is true that Mr. Searight testified that the airstrip is open to public use, “at own risk.” Mr. Cimino contends that a purpose of paragraph 14 C, by its terms, is that the airstrip will be available only to him and the Searights. The District Court did not rule on this question. We find nothing in paragraph 14 C to support Mr. Cimino’s position. In the absence of proof to support this contention, we conclude that the contract was not breached by allowing other parties access to the airstrip.

Mr. Cimino also attempts to raise defenses to enforcement of the contract. He cites the Searights’ knowledge that he built his own akstrip following the previous litigation, points out that this action was commenced before work on the Searight airstrip was completed, and describes the amounts listed as expenses for construction of the Searight airstrip as “padded.” He contends that Mr. Searight breached a duty to act in good faith and deal fairly in the performance and enforcement of the contract, that specific performance (ordering him to pay half the construction costs) is not appropriate because the Searights have unclean hands, and that the Searights should be barred from obtaining enforcement of the contract under a theory of promissory estoppel, based on their position in the previous action. Mr. Cimino neither presented witnesses nor mustered persuasive evidence in support of any of these defenses when he presented them to the District Court, and his arguments are not persuasive now.

The District Court found, from the evidence before it:

“[t]hat the Defendant, Michael Cimino, prior to executing the aforesaid Contract for Deed, advised Plaintiffs that he did not wish to have an airstrip constructed on the piece of real property that he was purchasing and offered to pay one-half of the construction costs if the Plaintiffs built the airstrip on their real property adjoining that parcel sold to the Defendant. That the Plaintiffs had intended on constructing an airstrip on one of their parcels of real property as Plaintiff, Murland Searight, is a professional pilot and intended on utilizing the North Ford [sic] airstrip in his business activities. That the airstrip was constructed for the benefit of both Plaintiffs and Defendant, and at no time has the Defendant ever notified plaintiffs of his intention not to utilize the airstrip.”

There was also evidence that, when Mr. Cimino paid off the balance on the contract for deed, he paid, without objection, $1,450 toward airstrip construction costs which had been submitted to him at that time. The District Court concluded that Mr. Cimino was bound by the terms of the parties’ contract, including paragraph 14 C, and that “[i]t is immaterial to Defendant’s contract obligations that he chose to build his own air field, and it is immaterial which of the parties commenced construction of their air field first.” We conclude that Mr. Cimino has not proven any reason to excuse him from performance under paragraph 14 C of the contract.

We affirm the District Court’s conclusion that Mr. Cimino was obligated under the contract to pay half the cost of construction of the airstrip.

II

Did the court err in setting the amount due from Mr. Cimino to the Searights?

At the hearing, Mr. Searight testified as to the expenses incurred in constructing and preparing the airstrip. He submitted construction bills in support of his testimony. He did much of the work himself, and stated that he based the amounts of his charges on estimates from other contractors. While Mr. Cimino questions the amounts of Mr. Searight’s charges, he presented no evidence of proper charges for the work. The District Court found:

“[t]hat the Plaintiffs completed the airstrip in accord with the terms and conditions of the aforesaid Contract for Deed. The plaintiffs have incurred a total of $18,494.00 in the construction of the airstrip, of which the Defendant has made no payments. Prior to incurring said amount of $18,494.00, there were costs in the construction of the airport in the amount of $2,900.00, and the parties shared equally in said costs Pursuant to Paragraph 14 C, the Defendant, Michael Cimino, agreed to pay one-half of the amounts Plaintiffs incurred which totals $9,247.00.”

We conclude that there is substantial credible evidence to support the finding of the District Court as to the amount Mr. Cimino owes as his share of the airstrip construction costs.

Affirmed.

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


author: MR. JUSTICE MORRISON MR. JUSTICE SHEEHY,

text:
    RONALD V. FODE, Plaintiff and Appellant, v. FARMERS INSURANCE EXCHANGE, a Reciprocal or Interinsurance Exchange, organized and existing under and by virtue of the laws of the State of California, Defendant and Respondent.
    No. 85-352.
    Submitted Dec. 9, 1985.
    Decided April 25, 1986.
    Rehearing Denied June 19, 1986.
    719 P.2d 414.

      Whalen & Whalen, Timothy J. Whalen argued, Billings, for plaintiff and appellant.

      Crowley Law Firm, Peter F. Habein argued, Billings, for defendant and respondent.
   MR. JUSTICE MORRISON

delivered the Opinion of the Court.

This is an appeal from summary judgment entered in the Thirteenth Judicial District Court in favor of defendant. We reverse and remand.

Appellant, Ronald Fode was involved in a three car accident on November 30, 1984. Respondent, Farmers Insurance insured one of the other drivers. The degrees of liability for the accident have yet to be determined.

Fode notified Farmers Insurance of the property damage he sustained. Farmers refused to settle the claim. Fode alleges that Farmers refused to settle because its investigation of the accident showed their insured was not liable, when he clearly was. Farmers Insurance alleges it was willing to settle for twenty percent of what Farmers viewed total damage to be. A letter was sent by Farmers to Fode denying any legal liability on the part of its insured and refusing to pay any part of Fode’s claim. As this is an appeal from summary judgment, the factual dispute has not been resolved.

Fode asks this Court to recognize the common law duty of good faith and fair dealing without reference to the unfair claim settlement practices statute, Section 33-18-201, MCA. Rather, the appellant rests his case upon obligations imposed by statute generally. Section 28-1-201, MCA, provides:

“General duty of care. Every person is bound, without contract, to abstain from injuring the person or property of another or infringing upon any of his rights.”

Section 28-1-203, MCA, provides:

“Enforcement of obligations arising by operation of law. An obligation arising from operation of law may be enforced by civil action or proceeding or in the manner provided by law.”

The Legislature recognized that certain obligations were owed by an insurer to an insured and therefore enacted Section 33-18-201, MCA, which seeks to prohibit certain unfair claims practices. Generally that section compels an insurer to be prompt in handling the claim, to conduct a reasonable investigation, to deny coverage within a reasonable time, to offer a reasonable amount in settlement, and to effectuate a prompt, fair and equitable settlement once liability has become reasonably clear.

In Klaudt v. Flink (1983), 202 Mont. 247, 658 P.2d 1065, 40 St.Rep. 64, this Court recognized that the obligations created under Section 33-18-201, MCA, contemplated a tort remedy for their breach. This holding satisfies the mandates of general obligation imposed by Section 28-1-201, MCA, and the enforcement section, 28-1-203, MCA.

Respondent argues that no obligation is owed from an insurer to a tort victim at common law, citing Marzolf v. Hoover (D. Mont. 1984), 596 F.Supp. 596. There the Federal District Court said:

“In Count III of her Amended Complaint, the plaintiff asserts the existence of a common law duty running from an insurer to a third-party claimant, a duty separate and independent from the obligation imposed upon an insurer by Section 33-18-201, M.C.A. (1979). No such duty, however, exists under Montana law, and Klaudt v. Flink, supra, does not alter this conclusion. Granted, a fiduciary duty runs from the insurer to its insured by virtue of the contract of insurance extant between the two, see, Thompson v. State Farm Mutual Automobile Ins. Co., [(1973), 161 Mont. 207, 505 P.2d 423], but the only duty running from an insurer to a third-party claimant is that imposed upon the insurer by Section 33-18-201, M.C.A. (1979). Accordingly, I find that Count III of plaintiff’s Amended Complaint fails to state a claim cognizable under Montana law.”

The rule articulated by the Federal District Court is the general rule. However, this Court does not, in this case, hold that no duties run from an insurer to a tort victim. We only decide in this case that such duties have been recognized by the Legislature in enacting Section 33-18-201, MCA. The Legislature has sufficiently articulated the obligations and this Court will not interfere. Where the Legislature fails to take cognizance of important legal obligations and fails to provide the appropriate remedies, this Court will not hesitate to act. However, such is not the case in this instance.

Appellant Fode, in an effort to strengthen his argument, relies upon Section 25-10-303, MCA, which provides, in part:

“In an action involving solely the recovery of property damages arising out of the ownership, maintenance, or use of a motor vehicle, in which the plaintiff secures a judgment equal to or greater than the amount of damages claimed by the plaintiff in his last written offer to the defendant or his agent prior to the filing of the cause of action, the court shall allow plaintiff’s reasonable attorney’s fees

The purpose of this statute is to encourage good faith negotiation. It acts, where property damages only are involved, as an additional remedy to remedies resulting from violation of obligations owed under Section 33-18-201, MCA. In this action, no judgment has been obtained in the underlying case and the statute has no application.

Section 33-18-201, MCA, is limited to situations where the insurer engages in the proscribed conduct as a “general business practice”. In Klaudt, supra, we recognized that multiple acts by the insurer could occur in the handling of a single claim. Therefore, the provisions of Section 33-18-201, MCA, have general application and it would be confusing for the Court to recognize a separate cause of action, outside the unfair claims settlement practices procedure.

In this case the appellant Fode has alleged that liability is “reasonably clear” but has not alleged that the insurer’s conduct constituted a “general business practice”. We recognize pleadings should be liberally construed and do not require that all statutory requirements be alleged for a complaint to be good. Pleadings should be construed in the manner consistent with the spirit of modern rules of civil procedure and with an eye toward achieving justice for the parties. See Morse v. Espeland (Mont. 1985), [215 Mont. 31] 696 P.2d 428, 42 St.Rep. 251.

Appellant Fode may have a cause of action pursuant to the provisions of Section 33-18-201, MCA. The “general business practice” provision can either be satisfied by showing specific instances of conduct on the part of the insurer which violate the mandates of Section 33-18-201, MCA, or by providing expert testimony from attorneys, adjusters or others knowledgeable regarding the claims practices of the insurer. Furthermore, one need not show that liability has become “reasonably clear” to show a violation of all sections of Section 33-18-201, MCA. The “reasonably clear” requirement is necessary to show a violation of Subsections 6 and 13 of the statute, but other provisions may also be violated and give rise to a cause of action in tort.

We find that the appellant’s allegations contained in his complaint should be presented to the District Court to determine whether a cause of action has been stated under Section 33-18-201, MCA. We vacate the summary judgment entered by the District Court and remand for proceedings in conformity with the views herein expressed.

As noted previously this bad faith case is being pursued although the degrees of liability for the accident have yet to be determined. Under the holding in Klaudt v. Flink, supra, the procedure is authorized. At the time we decided Klaudt v. Flink the majority of jurisdictions did not permit the bad faith action to proceed until the underlying action was concluded. The majority opinion stated:

“However, at this point, we must differ with the position adopted by the other jurisdictions which allow an action such as this to be prosecuted only after the insured’s liability has been adjudicated. We believe that the action may be filed and tried before, concurrent with, or after liability has been determined. We see no problems with the possibility of contrary findings in the two actions, the doctrine of res judicata, collateral estoppel or the like because different issues are involved in the two cases . . .”

More than three years have elapsed since our decision in Klaudt. Experience in the field teaches us that a change in procedure is necessary. The insurance company is put in a difficult position by having to defend a bad faith case before the underlying case has been determined. Discovery of the insurer’s file in a bad faith case raises difficult “work product” and “attorney-client” problems affecting the underlying case. The practice also allows for undue leverage to be exerted by forcing the insurer to face the prospect of two lawsuits with the additional costs incurred for defense.

The legislature enacted the unfair trade practices section of the Montana Insurance Code to correct abuses being practiced by insurers. The undue delay of claims worked to the advantage of insurers who did not have to pay prejudgment interest and worked to the disadvantage of innocent tort victims who were forced to wait for recoupment of their loss. However, the procedural rule adopted in Klaudt unfairly works a prejudice to insurers. The system must be balanced. All parties should be accorded fair and just treatment under the law.

For the foregoing reasons we hold that all proceedings in a bad faith case, alleging violations of the code which require a showing that liability be reasonably clear, are suspended until the liability issues of the underlying case have been determined either by settlement or judgment. Our holding applies to this case and all others involving the same issue.

The bad faith case may be filed to toll the statute of limitations and to expedite ultimate disposition but no discovery may be engaged. A favorable judgment for the plaintiff in the District Court is sufficient to trigger discovery in the bad faith case. Plaintiff need not await the outcome of the District Court decision on appeal.

This case is remanded to the District Court for proceedings under the unfair trade practices section of the Insurance Code. However, all proceedings are suspended until liability has been determined in the underlying case.

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

MR. JUSTICE SHEEHY,

dissenting:

I dissent from the majority opinion although I agree that the summary judgment entered by the District Court must be vacated.

For the purposes of this dissent, the term “third party claimant” means a person whose property has been damaged or who has received personal injuries caused by an insured driver. In this case the third party claimant is Fode. The term “insured” refers to David Michael Fiedler, the driver of the other automobile in this case. The term “insurer” refers to Farmers Insurance Exchange, which issued a policy of liability insurance to David Michael Fiedler.

At 5:00 p.m. on the afternoon of December 1, 1984, Fode was operating his vehicle in the center lane of the three lanes provided for southbound traffic on Main Street in the Billings Heights. He was driving at approximately 25 miles per hour, about IV2 car lengths behind a pickup truck operated by Fiedler. The roadway was icy, with a light cover of snow and it was just beginning to get dark. As the vehicles approached an intersection, a vehicle from the northbound lane of traffic attempted to make a left turn across the lane of traffic occupied by Fiedler, who was followed by Fode. The left turning vehicle lost control, missed the turn and stopped at the right hand curb in Fiedler’s direction of travel. Fiedler swung out to the left to avoid the left turning vehicle and Fode followed suit. Fiedler, however, attempted to return to the right hand lane, lost control, skidded into the center dividing strip of Main Street, spun again and crossed to the right hand side of Main Street, where he struck the curb and the telephone pole. In that position, Fode’s vehicle struck the Fiedler vehicle.

On December 7, 1984, Fode called Hoglum, the adjuster for Farmers Insurance Group, the insurer in this case. Hoglum informed Fode by telephone that the position of Farmers Insurance Group was that it was in no way liable to Fode for the damages to his automobile (he does not seek personal injury damages) and that he should see his lawyer. Fode’s testimony is that he was always willing to negotiate away from 100% of his claim but that the insurer denied his claim in its entirety.

Fode sued the insurer claiming a breach of duty under common law on the part of the insurer to negotiate with him. The District Court did not look to whether issues of material fact existed but dismissed his claim on summary judgment, stating:

“The plaintiffs claim in this case is premised on an alleged breach of duty arising under the common law. Because the court finds that no such duty exists, there is no need to determine whether issues of material fact exist as to an alleged breach of duty. Accordingly the scope of the court’s inquiry is confined to determining whether defendant Farmers Insurance Exchange is entitled to summary judgment as a matter of law.”

The primary issue for us on this appeal, therefore, is whether there is a common law right of action for failure to negotiate against the insurer in this case. If such an action does exist, then certainly material issues of fact exist as to whether FIG should have negotiated with Fode prior to his commencing suit.

The majority gives no consideration to this issue raised by Fode, but looks instead to a statutory duty imposed upon insurers under Section 33-18-201, MCA. In so doing, the majority moves with too much speed and too little thought given to a substantive issue of law raised by Fode, whether there exists a common law duty upon an insurer to negotiate with a third-party claimant.

In at least two Workers’ Compensation cases, this Court has recognized a common law obligation of insurers to refrain from intentional torts and unfair practices in settlement and negotiation of claims. In Hayes v. Aetna Fire Underwriters (1980), 187 Mont. 148, 609 P.2d 257, we approved an action against an insurer for alleged intentional torts of fraud, conversion and intentional infliction of emotional distress, inspite of the exclusivity clause of the Workers’ Compensation Act. Section 39-71-411, MCA. In Vigue v. Evans Products Company (1980), 187 Mont. 1, 608 P.2d 488, we again permitted a common law action against the Workers’ Compensation carrier for fraud, conversion, economic duress and bad faith.

In Lipinski v. The Title Insurance Company (1982), 202 Mont. 1, 655 P.2d 970, we held expressly that insurance companies have a duty to act in good faith with their insureds and that this duty exists independently of the insurance contract and independent of statute. 202 Mont. at 15, 655 P.2d at 977. In Lipinski, we held that a title insurer breached the implied duty of good faith in failing to defend the insured’s title when it was attacked.

In Weber v. Blue Cross of Montana (1982), 196 Mont. 454, 643 P.2d 198, Justice Weber stated:

“[a] cause of action may sound in tort although it arises out of a breach of contract, if a defaulting party, by breaching the contract, also breaches a duty which he owed to the other party independently of the contract.”

196 Mont. at 463, 643 P.2d at 203.

Is there a basis now to find a duty on the part of the insurer to negotiate with Fode regarding his property damage independent of contract? Certainly. The duty arises out of the adoption in Montana of the mandatory insurance law. Section 61-6-301, MCA.

Before the adoption of the mandatory liability insurance law, a motorist whose vehicle was damaged by the driver of another insured vehicle, if the insurer was unwilling to negotiate with the third party claimant, had to sue the insured driver personally in order to establish liability and his right to the insurance proceeds from the insurer. It was unfortunately the case that many insurers, in order to force settlements or to avoid paying at all, refused to negotiate with third parties unless suit was brought by the third party for property damages. It was this unfair practice which led the legislature to the adoption of Section 25-10-303, MCA, referred to in the majority opinion, which provides that if a plaintiff secures a judgment equal to or greater than the amount of property damages claimed by him, he is entitled to reasonable attorney fees.

Moreover, because the presence of insurance was a matter of grace on the part of the insured this Court and others were careful not to allow a third party plaintiff to name the insurance company as a defendant because of the possibility that the trier of fact might be prejudiced if the fact of insurance were known.

Before mandatory liability insurance, whether the owner and operator of a motor vehicle carried liability insurance was a matter of his business acumen, and the insurance policy was issued to the insured for the purpose of protecting his liability. After mandatory liability insurance, however, the party sought to be protected by law is not the insured, but the injured claimant. Mandatory liability insurance laws are passed by legislatures to protect the general traveling public by requiring all drivers to carry liability insurance.

Before mandatory liability insurance, it was assumed that jurors or other triers of fact should not know of the presence of insurance and therefore the insurance company should not be mentioned in any proceedings relating to the liability action. Now, however, every jury or trier of fact must know that insurance is indeed involved because of the mandatory law. Formerly, some motorists carried liability insurance out of a sense of public duty. Now, all must carry liability insurance because of public policy.

Thus, it was stated in Ferguson v. Employers Mutual Casualty Company (1970), 254 S.C. 235, 174 S.E.2d 768, 771:

“The primary purpose of compulsory motor vehicle liability insurance is to compensate innocent victims who have been injured by the negligence of financially irresponsible motorists. Its purpose is not like that of ordinary liability insurance to save harmless the tortfeasor himself. The injured person’s rights against the insurer are not derived through the insured as in the case of voluntary insurance. They are statutory and become absolute on the occurrence of an injury covered by the policy.”

We have upheld the constitutionality of the compulsory automobile liability insurance statutes. State of Montana v. Turk (1982), 197 Mont. 311, 643 P.2d 224.

Once we understand the true focus of the mandatory liability insurance law we can look with a different light at Section 28-1-203, MCA, which provides:

“Enforcement of obligations arising by operation of law. An obligation arising from operation of law may be enforced by civil action or proceeding or in the manner provided by law.”

Under Section 28-1-203, MCA, a person entitled to enforce an obligation has two remedies, (1) a civil action or (2) a proceeding authorized by law. The majority in this case has confined Fode to the “manner provided by law,” in Section 33-18-201, MCA, without, explaining why he is not also entitled to a civil action.

A second reason for my dissent is the unnumbered rule of civil procedure promulgated by the majority which halts proceedings against an insurer in a bad faith case and suspends discovery. That the unnumbered rule is ill-advised may be shown in that it springs from no issue raised by the parties in this case, it is unbriefed and unargued, and comes like a bolt from the blue to an unsuspecting, unprepared bar. The unnumbered rule conflicts with statutes and with certain numbered Rules of Civil Procedure.

The first conflict with a statute is the adoption of the rule itself. Section 3-2-702, MCA, requires that before any rules of procedure are adopted by us they should first be considered and prepared by an advisory commission. Here the advisory commission is by-passed. The precipitous action of the majority is justified by their statement that “experience in the field teaches us that a change in procedure is necessary.” The statement is unsubstantiated by reference to cases in our files or by citation to studies done elsewhere.

The unnumbered rule of the majority conflicts with the remedy adopted by the legislature in 1985 following Klaudt v. Flink, supra. Section 33-18-241, MCA, provides:

The trial of a claim or action against an insurer for lack of good faith in its handling or settlement of an insurance claim may not be consolidated with a trial of the underlying claim if:

“(1) the lack of good faith claim is against a party different for the party against whom the underlying claim is made; and
“(2) the parties have not stipulated to consolidation of the trial of the lack of good faith and the underlying claim.” (Emphasis added.)

Thus a remedy for Klaudt, supra, has already been provided by the legislature. Under Section 32-18-241, MCA, where a third party claim against an insured is combined with a third party claim against the insured’s carrier the trials of the two causes must be separated. The legislature made no such provision where an insured sues his own carrier both for bad faith and for the underlying obligation. But, under the rule adopted by the majority now, an insured may not proceed in the same suit against his own carrier to discovery and other proceedings until the liability portion is first determined. Thus does the majority force the insured into two trials. Under the rule adopted by the majority, the earlier cases we have decided in favor of insureds in bad faith cases, Lipinski, supra; Weber, supra, and First Security Bank v. Goddard (1979), 181 Mont. 407, 593 P.2d 1040; and others would have required two trials rather than the one trial, the decision of which came to us on appeal. It is on that basis that the unnumbered rule adopted by the majority is ill-considered and ill-advised.

The unnumbered rule conflicts with Rule 23(d), M.R.Civ.P. which gives to the District Court the power to make appropriate orders respecting the course of proceedings in cases before it; with Rule 18(a), M.R.Civ.P., which permits a party to join as many legal or equitable claims or both as he has against an opposing party; and it raises havoc with Rules 26 to 38, M.R.Civ.P., which relate to discovery.

The unnumbered rule will not wreck the tort system, of course, because the tort system is broader by far than cases against insurers. It will however, substantially increase the costs to litigants of litigation against insurers for breach of the implied covenant of good faith and fair dealing.

A third reason for my dissent is the implication in the majority opinion that a bad faith case against an insurer requires proof of a general business practice of unfair claims settlement or deceptive acts.

The holding of the federal district court in Marzolf v. Hoover (D. Mont. 1984), 596 F. Supp. 596, was incorrect when it stated that “the only duty running from an insurer to a third party claimant is that imposed upon the insurer by Section 33-18-201, MCA (1979).” The federal district court ignored, as does the majority in this case, the provisions of Section 33-18-102, MCA, which establishes the duty upon insurers not to engage in even a single unfair or deceptive act or practice. That statute provides:

“No person shall engage in this state in any trade practice which is defined in this chapter as or determined pursuant to this chapter to be an unfair method of competition or an unfair or deceptive act or practice in the business of insurance.” (Emphasis added.)

That statute, by its terms, is limited to a single act or practice.

Section 33-18-102, MCA, is prohibitory in nature, and was enacted for the protection of the public. It has been the law of this State at least since 1912 that where a statute “makes a requirement, or prohibits a thing, for the benefit of a person or class of persons, one injured by reason of a violation of it is entitled to maintain an action against him by whose disobedience he has suffered an injury.” Melville v. Butte-Balaklava Copper Co. (1913), 47 Mont. 1, 130 P. 441.

It is plain as day that a single breach of the statute constituting an unfair or deceptive act or practice by an insurer, toward an insured or a third party claimant, which causes injury, gives rise to an action against the insurer; and further, if the breach is oppressive, malicious or fraudulent, it will also give rise to a claim for exemplary damages, since a criminal penalty may be attached. State ex rel. Larson v. District Court (1967), 149 Mont. 131, 423 P.2d 598.

A violation by an insurer of Section 33-18-102, MCA, constitutes a misdemeanor as defined in Section 33-1-104, MCA, as follows:

“Each violation of any provision of this code, except 33-30-1012, with respect to which violation a greater penalty is not provided by other applicable laws of this state shall, in addition to any administrative penalty otherwise applicable thereto upon conviction in a court of a competent jurisdiction of this state be punishable by a fine of not less than $50 or more than $1,000 or by imprisonment in the county jail for not less than 30 days or more than 90 days or by both such fine and imprisonment.” (Emphasis added.)

The California Supreme Court without referring to whether a criminal penalty attached as our insurance cases do in Montana, determined that a single deceptive act or practice was sufficient to give rise to a cause of action in Royal Globe Insurance Company v. Superior Court, Etc. (1979), 23 Cal.3d 880, 153 Cal.Rptr. 842, 592 P.2d 329, 336:

“It seems clear to us that this issue is not independent of the matters we have discussed above. If, as we conclude, the act affords a private party, including a third party claimant, a right to sue an insurer for violating subdivision (h), it is inconceivable that the Legislature intended that such a litigant would be required to show that the insurer committed the acts prohibited by that provision ‘with such frequency as to indicate a general business practice.’ There would be no rational reason why an insured or a third party claimant injured by an insurer’s unfair conduct, knowingly performed, should be required to demonstrate that the insurer had frequently been guilty of the same type of misconduct involving other victims in the past . . . .”

Under Section 33-18-201, MCA, it is an unfair claims settlement practice to refuse to pay claims without conducting a reasonable investigation based upon all available information; to fail to acknowledge and act reasonably and promptly on communications with respect to claims arising out of insurance policies; and to neglect to attempt in good faith to effectuate a prompt, fair and equitable settlement of a claim in which liability has become reasonably clear. For each of these unfair practices, an issue of fact exists in this case under the complaint brought by Fode. Farmers Insurance Exchange is prohibited under Section 33-18-102 from engaging in a single one of any of those practices defined in the subsequent section. Therefore, without having to prove a general business practice, Fode has at least a statutory right, and probably a common law right to pursue Farmers Insurance Group without first establishing by another suit in another action against another party that liability is reasonably clear. The majority errs when it remands the case for further proceedings to allege and prove a general practice of unfair claims settlement practices.

Under the facts alleged by Fode, Farmers Insurance Exchange is forcing Fode to sue the insured and to establish liability before it will negotiate his claim. It is this very kind of action that brought about the adoption by the legislature of Section 25-10-303, MCA, as we said above. We should acknowledge that Fode’s complaint is sufficient now, and remand to determine the necessary issues of fact in one action.

MR. JUSTICE HUNT concurs in the above dissent.


author: MR. JUSTICE SHEEHY

text:
    KATHRYN ANN BUSHNELL, Plaintiff and Appellant, v. GENE E. COOK, Fred Bell, Cook-Bell Real Estate, Story Hills East, a Montana partnership, and James A. Bos, Clarence R. Brown, Kenneth R. Brown, William H. Erwin, Donn R. Erwin, et al., Defendants and Respondents.
    No. 85-125.
    Submitted April 22, 1986.
    Decided May 15, 1986.
    718 P.2d 665.

      Nash, Wellcome, Frost, Guenther & Zimmer, Page Wellcome argued, Bozeman, for plaintiff and appellant.
    Morrow, Sedivy & Bennett, Edmund P. Sedivy argued, LandoeBrown Law Firm, Allan McGarvey argued, Bozeman, for defendants and respondents.
   MR. JUSTICE SHEEHY

delivered the Opinion of the Court.

The appellant, Kathy Bushnell, brought an action in the District Court of the Eighteenth Judicial District, Gallatin County against Gene Cook, Fred Bell, Cook-Bell Real Estate and the Story Hills East (SHE) partnership. The jury returned a verdict in favor of the defendants and judgment was entered in accordance with the verdict. The plaintiff moved for new trial. The District Court denied the motion. Plaintiff appeals from the judgment and denial of motion for new trial. We affirm.

Appellant raises five issues in this case.

1. Are the verdict and judgment supported by the evidence?

2. Did the court err in failing to instruct the jury on the breach of the implied covenant of good faith and fair dealing?

3. Did the court err in failing to instruct the jury on negligent misrepresentation?

4. Did the court err in failing to grant a new trial?

5. Did the court err in instructing the jury generally?

Respondent raises one issue on cross-appeal: did the court err in failing to award SHE partnership its reasonable attorney’s fees?

When Kathy Bushnell, the appellant in this case, was 22 years old, she received a settlement of about $40,000 from a car accident. Her athletics trainer put her in contact with Gene Cook of Cook-Bell Real Estate. Cook understood she wanted an investment for her money and she was relying on him to recommend a good investment. He showed her several properties, including Lot 45 of Story Hills East. The Story Hills East (SHE) development was a partnership, formed in 1973 to buy land from Winston Cox and subdivide it. Cox hired Overturf, Strand, and Associates, an architectural firm to assist him with planning and zoning. Overturf was managing partner of the SHE partnership from 1973-75 and Overturf and Cook shared the management from 1975-78. Strand was also a member of SHE partnership. In the course of getting the planned unit development approved by the Bozeman Zoning Commission, SHE hired Dr. John Montagne, a geologist to study the geology and soils of the area. Dr. Montagne warned of unstable soils in the area. However, Montagne and other experts testified that homes could be built on the soils, if special precautions were taken.

Kathy Bushnell decided to buy lot 45 of Story Hills East. She paid a total of $28,000, $20,000 down and $8,000 in installments over ten years. Cook advised Kathy that by subdividing the lot and selling it, she would maximize her investment. So in 1979, Cook put Kathy in contact with Robert Babb, Gallatin County Surveyor, to do the subdivision work. As a result the lot was divided into two lots, 45A and 45B. Thereafter, Kathy listed the lots with Radcliif Realty. Radcliif sold Lot 45A to Blackwood on April 13, 1981 for $19,000. In the fall of 1982, Radcliif received a telephone call and letter from Black-wood indicating there had been soil slippage on his lot, that he felt there were no suitable building sites on the lot and wanted his money back. As a result of this, Bushnell, Blackwood, Radcliff and Gary France, managing partner of the SHE partnership, met on December 31, 1982. They discussed various ways to settle the dispute. Eventually, they agreed to a compromise. Blackwood got his money from the developer, and was released from his contract. Bushnell got the land back, and she was released from the final payments of $5,582.80 owed to the partnership. She was also allowed to keep the payments and downpayment made by Blackwood.

In August, 1983, Bushnell filed a complaint against SHE partnership alleging damages for breach of contract or right to rescission and return of all money paid. At trial, she dropped the rescission claim and elected to keep the lot and sue for damages on the breach of contract claim.

The damages alleged by Bushnell were that the defendants failed to discover a fault line that ran through the property. However, at trial Dr. Montagne testified no fault line runs through the property. A fault does exist in the near vicinity, but Montagne testified a home properly built would not be damaged unless it was directly over or within fifty feet of the fault line.

The soil on Lot 45 has slipped downhill in places, however experts testified there were still suitable building sites on the property if adequate precautions were taken in building a home.

Bushnell alleged she was damaged because SHE partnership pastured cattle and horses on her land without paying her. However, at trial checks for pasture rent paid to Bushnell were introduced showing she had been paid for 1978, 1981, 1982. The lands were not used for pasture in 1979 or 1980.

Bushnell also alleged that the contract was breached because the SHE partnership did not finish the roads as required by the sales agreement by November 1, 1979. Cook testified that not all the roads were completed by November 1, 1979. He wrote to Bushnell in December, 1981, saying the roads had not been completed because of slowness in selling the lots. He indicated that if Bushnell decided to build a home or found a buyer, to let him know and he would tell the contractor to finish that portion of the road. Bushnell did not contact him to ask that the road be finished.

Finally, Bushnell contended that the SHE partnership encumbered her title by leasing her lot for oil and gas exploration. The leasing agent testified at trial that he approached France about leasing the area in May, 1983. France explained that the ownership of Lot 45 was in dispute. The agent requested both SHE and Bushnell sign leases, and that both would be paid. He stated the company would release the party that didn’t end up with title, but that party could keep the lease rental money. France agreed to this top leasing, but Bushnell did not. She later complained that France had encumbered her title by agreeing to the oil and gas lease.

After jury trial on issues, the jury returned a verdict in favor of defendants Cook, Bell, Cook-Bell Real Estate, and SHE partnership and against Bushnell on all issues.

Appellant’s first contention on appeal is that the judgment and verdict are not supported by the evidence. Although it is not listed as an issue, counsel also contends in his argument that the District Court erred in refusing his motion for new trial based on lack of substantial evidence to support the verdict. In reviewing the claim that the verdict and judgment were not supported by evidence, we are aware that the evidence must be viewed in the light most favorable to the prevailing party. The standard of review is whether there is substantial evidence to support the verdict. Powers Manufacturing Co. v. Leon Jacobs Enterprises (Mont. 1985), [216 Mont. 407,] 701 P.2d 1377, 1379, 42 St.Rep. 906, 908. “Substantial evidence is such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.” State v. Plouffe (1982), 198 Mont. 379, 389, 646 P.2d 533, 538. Contrary to Bushnell’s assertion that the evidence of damage to her was “basically uncontradicted,” the evidence in this case was hotly disputed throughout trial and on appeal. However, in reading the transcript in the light most favorable to the defendants it is clear that there was sufficient evidence for the jury to decide in favor of the defendants on all counts. Likewise, we find the District Court was correct in refusing to grant a new trial on the basis of lack of sufficient evidence to support the verdict.

Next appellant argues the District Court erred in refusing to instruct the jury on breach of the implied covenant of good faith and fair dealing. Appellant argues the covenant of good faith and fair dealing should be applied to Cook-Bell as real estate agents and to SHE partnership, as developers.

It was not error to refuse to give the instruction as against Cook-Bell Real Estate because it was not shown at trial that Cook had actual knowledge of claimed defects in the land necessary to constitute bad faith. Further, while knowledge may be imputed to Cook as a member of the SHE partnership, it cannot be imputed from the SHE partnership to the Cook-Bell Real Estate partnership.

It was also not error for the District Court to refuse to give the bad faith instruction against the SHE partnership. In this case, the court instructed the jury on constructive fraud as follows:

“Constructive fraud is a breach of duty which, without an actual fraudulent intent, gains advantage to the persons in fault by misleading another to her prejudice.”

The jury found no breach of duty by SHE partnership under this instruction which does not require a showing of fraudulent intent. An instruction on bad faith would require the plaintiff prove intentional concealment. If the plaintiff could not meet her burden of proof on constructive fraud, she could not meet the higher burden of proof on bad faith. Thus the instruction would have been superfluous.

Appellant also contends the District Court erred in failing to instruct on negligent misrepresentation. While the court did not instruct on negligent misrepresentation, it did instruct on constructive fraud. In Montana an action for negligent misrepresentation is an action for fraud, so the jury was adequately instructed. Falls Sand and Gravel Co. v. Western Concrete, Inc. (D. Mont. 1967), 270 F.Supp. 495, 502.

Appellant contends the District Court erred in not granting a new trial. There were two bases for a new trial. First, appellant contends the District Court erred in allowing the jury to view the property prior to the time plaintiff rested her case, and in not giving a cautionary instruction. The record shows counsel for plaintiff made no objection to jury view and did not request a cautionary instruction. This Court will not put a district court in error for a procedure to which appellant did not object. State ex rel. Department of Highways v. DeTienne (Mont. 1985), [218 Mont. 249,] 707 P.2d 534, 537, 42 St.Rep. 1557, 1559.

Second, appellant contends the District Court should have granted a new trial on the basis of newly discovered evidence as to the correct survey corner of Lot 45. She alleges that if the marker was wrong, the property line was wrong and the jury was shown the wrong lot.

“The standard for determining whether newly-discovered evidence is sufficient reason for a new trial is governed by the statute, Section 25-11-102(4), MCA, which provides that the newly-discovered evidence must be that which the applicant could not with reasonable diligence have discovered and produced at the trial. Whether to grant or deny a new trial is within the sound discretion of the trial court. Fredricksen v. Fredericksen (Mont. 1980), [185 Mont. 548,] 605 P.2d 1135, 1137, 37 St.Rep. 191, 193, and will not be overturned absent a showing of manifest abuse of that discretion. Giles v. Flint Valley Forest Products (1979), 179 Mont. 382, 588 P.2d 535, 538. Every presumption is indulged that the movant for a new trial on the ground of newly-discovered evidence could have secured the testimony for the former trial, and the movant must negative any negligence on his part. In Re Colbert’s Estate (1904), 31 Mont. 461, 80 P. 248. The movant must show that such evidence came to his knowledge since the trial and that even through diligence it was not discovered earlier; it must also appear that its materiality will probably produce a different result on trial and it is not merely cumulative or only tending to impeach. State v. Estep (1936), 103 Mont. 78, 61 P.2d 830.”

Walter v. Evans Products Co. (Mont. 1983), [207 Mont. 26,] 672 P.2d 613, 616, 40 St. Rep. 1844, 1847.

In this case appellant did not show that she could not have discovered the new evidence with reasonable diligence, and that the new evidence would produce a materially different result. We hold the District Court did not abuse its discretion in refusing to grant a new trial.

Appellant claims the District Court erred in instructing the jury generally. In reviewing the jury instructions, we must consider them in their entirety and in light of the evidence introduced at trial. Brown v. North American Manufacturing Co. (Mont. 1978), 176 Mont. 98, 114, 576 P.2d 711, 721. Viewed in their entirety, the instructions fairly instructed the jury on the issues presented by the evidence.

Finally we turn to the issue on cross-appeal. Did the District Court err in failing to award attorneys fees to SHE partnership? SHE partnership sought attorneys fees under the election of remedies paragraph of the contract for deed between Bushnell and SHE partnership. It states:

“It is understood and agreed that the forfeiture privilege, a remedy in case of default above, under paragraph 9-a-c, shall not be exclusive and the Seller reserves the right to sue for specific performance or breach of contract if it elects not to exercise the forfeiture or foreclosure clauses above. In the event of litigation under this paragraph, the Buyer agrees to pay a reasonable attorney’s fee for an [sic] on behalf of the Seller’s attorney.”

Attorneys fees are not available to SHE partnership under this section because this action was not instituted pursuant to the default provision of the contract.

We affirm the judgment of District Court in all respects.

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


author: MR. JUSTICE HARRISON

text:
    BARBARA SITZMAN, Petitioner and Appellant, v. JAKE SHUMAKER, Respondent and Respondent. JAMES H. SITZMAN, Petitioner and Appellant, v. JAKE SHUMAKER, Respondent and Respondent.
    Nos. 85-259, 85-260.
    Submitted Jan. 30, 1986.
    Decided May 15, 1986.
    718 P.2d 657.

      Kelly & Kelly, Patrick J. Kelly argued, Terry J. Hanson, Miles City, for petitioner and appellant.
    Crowley, Haughey, Hanson, Toole & Dietrich, William J. Mattix, Billings, argued, for respondent and respondent.
   MR. JUSTICE HARRISON

delivered the Opinion of the Court.

This is an appeal from a summary judgment of the District Court in the Seventh Judicial District of the State of Montana, in and for Prairie County. We reverse and remand for trial.

The plaintiff, James Sitzman, worked for the defendant, Jake Shumaker, performing general ranch labor. The two men did not get along. Shumaker often called Sitzman a “son-of-a-bitch” and “idiot”. Sitzman did not respond to these names at first, but eventually began shouting back.

The day Sitzman was injured, he and Shumaker were working together. Shumaker asked Sitzman if the calf feeders were full. Sitzman responded by telling Shumaker that the first one was half full, the second about three-quarters full, and the third one was about two-thirds full. Shumaker exploded, saying “I believe you, you god damn idiot. Can’t you just say, ‘yes’ or ‘no’?” Later in the morning, Shumaker asked Sitzman if he wanted to work on the tractor. Sitzman respondent, “Yeah, sure, no problem. Let’s go to work on it.” Shumaker again exploded, saying, “you god damn son-of-a-bitch. Why can’t you just say ‘yes’ or ‘no’?” When Sitzman replied, “Don’t call me an s.o.b.,” Shumaker walked over to him and struck him several times in the face. Sitzman pushed Shumaker to the ground. Shumaker then picked up a four-foot length of two-inch pipe and held it over his head. Sitzman asked Shumaker not to hit him, and turned to walk away. Shumaker hit Sitzman on the back of the head and when Sitzman turned to protect himself, hit him on the front of the head, knocking him to the ground, unconscious. Sitzman suffered severe injuries, including a fractured skull. The extensive head injuries have altered the course of his life.

Sitzman applied for and was granted temporary total disability wage and medical benefits under the Workers’ Compensation Act. He brought this action in the District Court to recover damages caused by Shumaker’s attack. His wife, Barbara, brought an action for loss of consortium, society, support, comfort and companionship of her husband due to his injuries. Shumaker moved for summary judgment.

Judgment was granted in both actions for the stated reason that because of Sitzman’s application for and receipt of Workers’ Compensation benefits, their remedies were exclusive to the Workers’ Compensation Act. Upon stipulation of the parties, the Sitzmans’ actions were consolidated for purpose of appeal.

The issue presented for review by Sitzmans is whether receipt of Workers’ Compensation benefits by them results in an election pursuant to Section 39-71-411, MCA, thereby barring them from a common law tort action against employer Shumaker.

Summary judgment is proper only when there is a genuine issue of material fact and the movant is entitled to prevail as a matter of law. Cereck v. Albertson’s (1981), 195 Mont. 409, 411, 637 P.2d 509, 510. The lower court, in granting summary judgment, reasoned that by filing for benefits under the Workers’ Compensation Act “Sitzman became subject to the provision of the Act and more specifically Section 39-71-411, MCA.”

The exclusivity clause, found in Section 39-71-411, MCA, provides in pertinent part:

“For all employments covered under the Workers’ Compensation Act or for which an election has been made for coverage under this chapter, the provisions of this chapter are exclusive.”

The election referred to in Section 39-71-411, MCA, however, is the election to come under the Act made by an employer not specifically covered by the Act pursuant to Section 39-71-401(2), MCA. It has no reference to an employee seeking to recover for injuries suffered as a result of an assault and battery committed personally by the employer upon the employee who also may have filed for and received Workers’ Compensation benefits.

Ordinarily, when an employee is injured in the work place due to negligence or accident, his remedy is exclusive to the Workers’ Compensation Act. Noonan v. Spring Creek Forest Products (Mont. 1985), [216 Mont. 221,] 700 P.2d 623, 625, 42 St.Rep. 759, 762. Common law damages are not available under Section 39-71-411, MCA, for injuries negligently or accidentally inflicted by an employer. Negligence claims should be dismissed on this ground. Such are not the facts in this case — Sitzman’s injuries are not the result of negligence or accident.

The question then becomes whether there is a permissible exception under Section 39-71-411, MCA, for the tort inflicted by Shumaker upon Sitzman.

This Court has said:

“The ‘intentional harm’ which removes an employer from the protection of the exclusivity clause of the Workers’ Compensation Act is such harm as is maliciously and specifically directed at an employee . . . out of which such specific intentional harm the employee receives injuries as a proximate result.”

Great Western Sugar v. District Court (1980), 188 Mont. 1, 7, 610 P.2d 717, 720. There is evidence that Sitzman suffered intentional harm maliciously and specifically directed at him by Shumaker. It is not reasonable to suppose the legislature intended to give statutory protection in the form of immunity from suit to an employer who hits his employee in the head with a pipe while the employee is carrying out his employment duties.

The egregiousness of these circumstances removes the exclusivity bar for an employee. In a manner similar to injury by a fellow employee, Section 39-71-413, MCA, where the legislature provided for coverage from an intentional injury, under the facts of this case, we provide for such coverage where the injury is by the employer.

There are sound policy reasons for reaching this decision. The purpose of the Worker’s Compensation Act is to protect both the employer and the employee by incorporating a quid pro quo for negligent acts by the employer. The employer is given immunity from suit by an employee who is injured on the job in return for relinquishing his common law defenses. The employee is assured of compensation for his injuries, but foregoes legal recourse against his employer. To allow an employer to personally commit an assault and battery upon an employee and hide behind the exclusivity clause of the Workers’ Compensation Act is to disregard the purpose of the Act. Other employers would have to pay for his protection. In effect, he would have bought the right to hit his employees. That is not a quid pro quo. The law does not allow a wrongdoer to benefit from his wrongs.

Consequently we hold that a narrow exception to the exclusiveness of the compensation remedy exists where the employer personally commits an assault and battery upon an employee.

The summary judgment is reversed and the case is remanded for trial consistent with the findings of this Court.

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