text:
    STATE OF MONTANA, ex rel., FALLON COUNTY, a body politic and corporate, DELANE BEACH, GARY LANG and ART KOENIG, Relator, v. DISTRICT COURT OF THE SIXTEENTH JUDICIAL DISTRICT, Fallon County, Montana, Respondent.
    No. 90-357.
    Submitted Oct. 12, 1990.
    Decided Nov 29, 1990.
    801 P.2d 610.
    Denzil R. Young, Fallon County Atty., Baker, for relator.
    Gene Huntley, Baker, for respondent.
   JUSTICE WEBER

delivered the Opinion of the Court.

Relators Fallon County and Delane Beach, Gary Lang and Art Koenig (County Commissioners of that county), herein collectively referred to as Fallon County, have filed an application for writ of certiorari requesting that this Court review the order dated December 29, 1988 of the District Court of the Sixteenth Judicial District, Fallon County, finding the relators in contempt. We grant the writ of certiorari without notice and conclude that the December 29, 1988 order of the District Court should be annulled.

The underlying case is cause No. 4852, Fallon County District Court, in which H. J. Halmans is plaintiff and the relators named herein are defendants. The District Court order of contempt was dated December 29, 1988 and was filed on January 4, 1989. The District Court file shows that the last filing or appearance prior to the December 29,1988 order was the filing of a brief dated August 9, 1983, resulting in a delay of more than five years. In its order the District Court pointed out that the matter had been deemed submitted, that it was lost in chambers and the court apologized for the delay. We conclude that it is necessary to set forth facts in some detail.

The underlying action was commenced by the filing of a complaint on October 17,1980. The complaint referred to a gravel road in Fallon County, the east end of which terminated at its intersection with state highway No. 7, about seven miles north of Baker, Montana. The plaintiff alleged that the defendants undertook to change the road by closing and abandoning the east one-quarter mile of the road and curving it back to the east to reenter state highway No. 7 approximately one-quarter mile south of the previous intersection. The complaint alleged that the change in the road and the abandonment of the previous portion was done by the defendants without regard to the controlling laws and requested a permanent injunction restraining the defendants from utilizing the altered road. After various motions, filings and other procedures, the District Court made and entered findings of fact and conclusions of law dated December 29, 1981. The court found that the defendants undertook to change the road by closing and abandoning the easterly one-fourth mile and causing it to turn south to intersect with highway No. 7, which was approximately one-quarter mile south of the previous intersection. The court found that there had been no prior petition from the freeholders for a change in the roadway and also found that the defendants altered the road without prior notice to the public as required by statute. The court did find that the defendants believed the change would be in the interest of the traveling public. In its conclusions of law, the District Court referred to § 7-14-2101(l)(a)(i), MCA (1981), which provided that the general power of the county commissioners relating to roads is to lay out, maintain, control and manage roads as provided in that section. The court quoted the portion of the section which provided that each board shall survey, view, lay out, record, open, work and maintain county roads which are petitioned for by freeholders. In addition it referred to § 7-14-2601(1), MCA (1981), which provided that any ten or a majority of the freeholders of a road district may petition the board in writing to open, establish, construct, change, abandon or discontinue any county road. The District Court then concluded that the defendants were without authority to alter the county road without having received a petition or holding the public hearing required by law. The District Court executed its undated Judgment which was filed on January 12, 1982 which decreed that the defendants had no authority to change the road by closing and abandoning and causing it to turn in the manner set forth. In addition, the judgment stated as follows:

“(2) Absent the utilization by defendants of the appropriate procedure in the future defendants are permanently enjoined from abandoning the road as it was before the indicated change and are permanently enjoined from using the road as changed. Defendants are directed to restore the road in question to its original configuration.”

The court adjudged that the defendants had no authority to attempt to abandon the road and any attempted abandonment was void. In a specific indication that it expected that the defendants would take the appropriate steps under the statute to abandon and approve the road changes, the court noted the inclement weather at that time of year and ruled that the changes required by the judgment should be done as soon as weather reasonably permitted.

The attorney for the defendants filed a motion for stay of execution on April 22, 1982. Attached to the motion was a copy of a Petition to Alter a Roadway which was signed by more than ten of the freeholders residing in the road district whereby the petitioners requested the county commissioners of Fallon County not to restore the roadway to its original right angle but to leave the roadway in the present rebuilt location. The petition pointed out that there had been no additional cost and that the disadvantage of the old approach was that it was located immediately south of the crest of a hill and created a snow problem and a traffic hazard. It pointed out that the new approach was situated at the school bus stop alleviating a traffic hazard created by vehicles coming out of the old approach and stacking up at the school bus stop. The freeholders farther petitioned the county commissioners to abandon the old right angle approach to the highway. The substance of the Motion for Stay of Execution was that a hearing had been conducted by the Board of County Commissioners even though not required by statute and that twelve people testified in favor of the change and the only opposition were Bert Halmans and John Halmans and their counsel. The motion pointed out that the county commissioners stand ready to restore the roadway as required by the order of the District Court but that the freeholders desire the present roadway pattern. The motion therefore requested a stay of execution of the judgment, and a review of the proceedings of the county commissioners to determine the adequacy of the petition and the proceedings. Notice of motion was given to opposing counsel. The District Court file does not indicate that the motion was ever considered or ruled upon by the District Court.

On July 12, 1983, the plaintiff filed an affidavit for contempt requesting that the court impose civil contempt sanctions against the defendants until they comply with the order of January 12,1982. An order to show cause was issued and served upon the defendants. Extensive briefs were filed by both sides. The matter came on for hearing before the District Court on August 3, 1983. A copy of a Resolution Granting Road Petition, dated May 17,1982, was filed by the Board of County Commissioners of Fallon County. That Resolution set forth the details of the filing of the petition by more than ten freeholders, the giving of notice as provided by statute to the public, the holding of a hearing attended by twelve of the freeholders of the road district, a notation that the petition was signed by more than twenty-five residents of the road district and also signed by twenty-one persons who are frequent users though not freeholders. The Resolution pointed out that all of the witnesses save and except H. J. Halmans and his son, John Halmans, approved the present configuration. The Board stated that it was totally familiar with the roadway and found that the petition substantially complied with the requirements of law and that no further investigation concerning the roadway was necessary. The Board then resolved that the new roadway was desired by the vast majority of freeholders, that the proceedings referred to vested the Board with jurisdiction to alter the roadway and that the petition to alter the roadway should be granted and that the old roadway was deemed abandoned. The Resolution further stated that the resolution and granting of the petition was conditioned upon review by the District Court in the civil action in which the District Court found the Board lacked jurisdiction to alter the roadway; and if the District Court should decide that the proceedings were inadequate, then the commissioners would restore the roadway to its original condition. Following the hearing, briefs were submitted, the last of which was the brief previously mentioned which was filed on August 9, 1983. Nothing further took place in the cause for more than five years when the District Court issued its order of December 29, 1988, finding the defendants in contempt of court. The contempt order provided that the defendants may purge themselves by the payment of attorney fees and costs, payment of damages in the amount of $1,000, and abiding by the original court order. It is from that order of contempt that the proceedings in certiorari are brought to this Court. In that order the District Court stated that after a prior hearing in this cause the court enjoined the defendants from changing a county road from its prior location without following the procedure provided by law and that the defendants failed to abide by that court order. No reference was made in the Order to the proceedings on the part of the defendants to comply with the statutory requirements for abandonment and construction of a new road, and no reference to the petition, notice, and resolution adopted by the defendants or the notice of the 1983 hearing.

This Court has now been furnished with a copy of the transcript of the proceedings before the District Court on August 3, 1983. We note in particular that the transcript was prepared and certified on August 17, 1990 and filed with the Clerk of the District Court on August 27, 1990. As a result it is apparent that after a delay of more than five years the judge of the District Court did not have available for his review the same transcript which we have considered.

After a careful review of the file, we are not able to determine if the District Court had the opportunity of considering the various motions and instruments which had been filed, including the petition filed by the freeholders and the resolution adopted by the Board of County Commissioners. From the order of contempt of the court, it appears likely that none of these matters came to the District Court’s attention.

The transcript shows that the Chairman of the Board of County Commissioners testified in the August 3, 1983 hearing. He testified that he had relied upon a letter from the Highway Department of the State of Montana which reviewed the safety aspects of the former approach and pointed out that the desired safe stopping distance was 1050 feet but that the old approach only gave 700 feet. The chairman testified as to the public hearing, the matters presented and the conclusions reached on the part of the Board of County Commissioners. He testified that the county attorney had asked the state to perform a survey on the comers and angles as contained in the copy of the letter. The chairman further testified that the proceedings which the county commissioners had taken were conducted upon the advice of the county attorney and that the county attorney had advised them that the proceedings gave them jurisdiction to alter the roadway.

In the plaintiff’s opposition to the petition for certiorari, he points out that the petition did not state the “owners affected” and “whether the owners who can be found consent thereto” as required by § 7-14-2602, MCA. He also argues that the commissioners did not cause an investigation to be made of the feasibility, desirability and cost as required under § 7-14-2603, MCA, and did not make a finding as to the amount of damages sustained by each owner.

As mentioned, the proceedings suggest that the District Court did not consider any of the matters presented at the hearing nor the various papers filed with it, including the petition and resolution. The transcript also demonstrates that the Board of County Commissioners had the benefit of the letter from the Montana Highway Department and that the commissioners not only were familiar with the road, but engineered it to determine whether the road was safe.

Our careful review of the transcript and the record has caused us to conclude there was not a basis for the issuance of the order of contempt by the District Court. We conclude the record demonstrates that the defendants had followed the procedure originally suggested by the District Court in the abandonment of the old road and approval of the changed road.

We note that the Judgment filed in the District Court on January 12, 1982 pointed out that the defendants are permanently enjoined from abandoning the road as it was before the indicated change, and were permanently enjoined from using the road as changed “absent the utilization by defendants of the appropriate procedure.” It may be that the parties will conclude that it is appropriate to request the District Court to dissolve any injunction.

This opinion shall constitute a judgment under the statute specifically annulling the contempt order dated December 29, 1989, which found the relators in contempt.

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


source: Caselaw Access Project

author: CHIEF JUSTICE TURNAGE

license: Public Domain

text:
    SEBENA PAVING, INC., d/b/a BIG SKY PAVING, Plaintiff and Appellant, v. GALLATIN AIRPORT AUTHORITY, Defendant and Respondent.
    No. 90-369.
    Submitted on Briefs Oct. 19, 1990.
    Decided Dec. 5, 1990.
    801 P.2d 614.

      Calvin L. Braaksma, Landoe, Brown, Planalp & Kommers, P.C., Bozeman, for plaintiff and appellant.
    Edmund P. Sedivy, Jr., Morrow, Sedivy & Bennett, Bozeman, for defendant and respondent.
   CHIEF JUSTICE TURNAGE

delivered the Opinion of the Court.

Plaintiff Sebena Paving, Inc., (Sebena) bid on a construction contract with defendant Gallatin Airport Authority. In a summary judgment the District Court for the Eighteenth Judicial District, Gallatin County, upheld the award of the contract to another bidder. Sebena appeals. We affirm.

Sebena raises two issues on appeal. Our conclusion that the District Court did not err in allowing the Gallatin Airport Authority to accept the modified bid of Pioneer Ready Mix makes it unnecessary that we consider the second issue, whether the court erred in precluding Sebena from seeking damages.

In March and April of 1988, the Gallatin Airport Authority (GAA) solicited bids on a construction project for airport improvements. As a federally-assisted program of the Department of Transportation, the contract was subject to certain goals for participation by minority-owned business enterprises (MBEs) and woman-owned business enterprises (WBEs). All bids were required to include a “Schedule of Participation” showing that 2 percent of the work would be performed by MBEs and 4 percent of the work would be performed by WBEs.

The bids were opened on April 13, 1988. Pioneer Ready Mix (Pioneer) had submitted the low bid. Pioneer’s bid provided that the goals of participation by MBEs and WBEs would be met by using Bozeman Sand and Gravel as a WBE for electrical trench and conduit work and as an MBE for seeding work. Apparently there was some uncertainty as to whether a WBE, by virtue of being owned by a woman, also qualified as an MBE. After consulting the Federal Aviation Authority Civil Rights Office in Seattle, Washington, GAA decided that Pioneer’s “Schedule of Participation” showing Bozeman Sand and Gravel as both a WBE and an MBE was not acceptable. Pioneer submitted a substituted “Schedule of Participation” on April 15,1988, listing Bozeman Sand and Gravel only as a WBE, and adding LA Construction as an MBE. The amount of Pioneer’s bid did not change. The contract was awarded to Pioneer.

Sebena, the next lowest bidder, filed this suit in District Court, arguing that it submitted the lowest conforming bid and that it should have been awarded the contract. On cross-motions for summary judgment, the District Court held that GAA acted within its discretion in accepting the bid of Pioneer.

Did the District Court err in allowing the Gallatin Airport Authority to accept the modified bid of Pioneer Ready Mix?

Summary judgment is proper when there are no disputed issues of material fact and where the moving party is entitled to judgment as a matter of law. Rule 56(c), M.R.Civ.P. Our standard of review of a summary judgment is whether the trial court abused its discretion. First Interstate Bank of Kalispell v. Wann (1988), 235 Mont. 111, 113, 765 P.2d 749, 750. In this case, the parties agree that there are no disputed issues of material fact. They do not agree on the application of the law to those facts.

Sebena asserts that Pioneer’s original bid should have been rejected and that no modification should have been allowed. Schedule I, attached to the invitation to bid provided that “[b]ids that do not contain a Schedule [of participation by MBEs and WBEs] or bids containing a schedule that is incomplete shall be considered as nonresponsive and shall be rejected.” Sebena argues that Pioneer’s bid should be considered nonresponsive under that provision.

In Martel Const. v. Montana State Bd. of Examiners (1983), 205 Mont. 332, 668 P.2d 222, this Court held that state officers have the power to waive immaterial irregularities in any bid offered. Sebena argues that Martel no longer controls because new statutes and administrative regulations have been enacted since it was decided. Specifically, § 18-4-303, MCA, a part of the Montana Procurement Act, provides in part that

“(4) Bids must be unconditionally accepted without alteration or correction, except as authorized in this chapter. Bids must be evaluated based on the requirements set forth in the invitation for bids ...
“(6) The contract must be awarded with reasonable promptness by written notice to the lowest responsible and responsive bidder whose bid meets the requirements and criteria set forth in the invitation for bids ...”

Sebena maintains that the present statute and rules are similar to those which governed in Chas. N. White Const. Co. v. Dept. of Labor (N.D. Miss. 1979), 476 F.Supp. 862. In that case, which was distinguished in Martel, the administrative agency had determined that a bid which did not contain written acknowledgment of receipt of addenda to the invitation for bids was nonresponsive. The court held that the determination of nonresponsiveness was not error which would permit the issuance of an injunction. White, 476 F.Supp. at 867.

The standard of review used in White was the limited review of the decision of an administrative agency. White, 476 F.Supp. at 866. That standard does not apply here because there has been no intermediate agency review. The standard of review of procurement decisions under the federal statutes and rules for WBE and MBE participation has been expressed as follows:

“[C]ourts should not overturn any procurement determination unless the aggrieved bidder demonstrates that there was no rational basis for the agency’s decision ... [The court’s] inquiry must fully take into account the discretion that is typically accorded officials in the procurement agencies by statutes and regulations. Such discretion extends not only to the evaluation of bids submitted in response to a solicitation but also to determination by the agency with respect to the application of technical, and often esoteric, regulations to the complicated circumstances of individual procurements.
“Only when the court concludes that there has been a clear violation of duty by the procurement officials should it intervene in the procurement process and proceed to a determination of the controversy on the merits.”

M. Steinthal & Co. v. Seamans (D.C. Cir. 1971), 455 F.2d 1289, 1301 and 1303.

In entering its summary judgment for GAA, the District Court stated that

“[t]he facts of this case indicate the necessity that some discretion be permitted for a granting agency to carry on its business; it should have the power to exercise discretion, so long as it stays within reasonable bounds of fairness and efficiency.”

We agree with the statement of the District Court. Section 18-4-303(5), MCA, specifically provides that corrections for inadvertent errors in bids may be permitted. As GAA points out, Pioneer’s bid properly showed 2 percent participation by MBEs and 4 percent participation by WBEs. On its face, the “Schedule of Participation” was complete. Only after conferring with the FAA Civil Rights Office in Seattle did GAA determine that a substituted “Schedule of Participation” would be required. We conclude that Pioneer’s original bid contained a complete schedule and that the bid was not “nonresponsive” to the invitation to bid.

We hold that the rule expressed in Martel still stands: state officials have discretionary power to waive immaterial irregularities in any bid offered. Further, we conclude that the irregularity in Pioneer’s bid was immaterial. This is not to say, as Sebena suggests, that goals for MBE and WBE participation are immaterial. The original bid from Pioneer, on its face, met the MBE and WBE participation goals. The bid that was accepted also met those goals. Pioneer’s willingness to amend its bid shows that it was not attempting to avoid complying with the goals for participation by minority-owned and woman-owned businesses.

Sebena also argues that not only was it improper to fist Bozeman Sand and Gravel as both a WBE and an MBE, but that Bozeman Sand and Gravel was not qualified as either. Bozeman Sand and Gravel’s qualification as a WBE was determined from a list of certified “Disadvantaged Business Enterprises” promulgated by the Montana Department of Highways. There are administrative procedures for third-party challenges to such certification of a business. See 49 C.F.R. § 23.55. There is nothing in the record to indicate that Sebena followed those procedures. We hold that, having failed to exhaust its administrative remedies, Sebena is now barred from challenging Bozeman Sand and Gravel’s certification.

Affirmed.

JUSTICES BARZ, SHEEHY, HUNT and WEBER concur.


author: JUSTICE WEBER JUSTICE HARRISON,

text:
    FIRST SECURITY BANK OF GLENDIVE, a Montana banking corporation of Glendive, Montana, Plaintiff, Respondent and Cross- Appellant, v. LARRY J. GARY and MARY GARY, Husband and Wife; R.H. Schwartz Construction Specialties, Inc., a Montana corporation of Glendive, Montana, Defendants, Appellants and Cross-Respondents. FIRST SECURITY BANK OF GLENDIVE, a Montana banking corporation of Glendive, Montana, Plaintiff, Respondent and Cross- Appellant, v. GARY DATSUN, INC., a Montana corporation of Glendive, Montana, Defendant, Appellant and Cross-Respondent.
    No. 89-113.
    Submitted April 24, 1990.
    Decided Sept. 6, 1990.
    Rehearing Denied Oct. 30, 1990.
    798 P.2d 523.

      Gene Huntley, Baker, for defendants, appellants and cross-respondents.
    Thomas Monaghan, Lucas & Monaghan, Miles City, for plaintiff, respondent and cross-appellant.
   JUSTICE WEBER

delivered the Opinion of the Court.

This is an appeal from a judgment notwithstanding the verdict (NOV) entered by the District Court for the Seventh Judicial District, Dawson County. The judgment NOV nullified a jury verdict of over $1.2 million for Larry and Mary Gary. In addition, the District Court decided that punitive damages would not be awarded and entered judgment in favor of First Security Bank on its claims in the amount of $314,272.96 plus interest from date of trial. Larry J. Gary, Mary Gary, and Gary Datsun, Inc., appeal. First Security Bank cross-appeals. We reverse and remand for retrial.

The issues upon which we base our opinion are:

1. Did the District Court err in ruling that there was insufficient evidence to support the jury verdict?

2. Was the judgment denying punitive damages improper?

3. Was Gary Datsun, Inc., properly added as a real party in interest on the counterclaims?

4. Was the jury’s award of damages proper?

In 1977, Larry Gary owned an automobile sales and repair business in Glendive, Montana. He and his wife, Mary, did both their personal and business banking with First Security Bank of Glendive (Bank). Larry Gary wanted to expand his business to include a dealership franchise. He consulted with Bank officers about this plan and received advice and encouragement.

In September 1977, the Bank certified a floor plan financing agreement with Larry Gary to the Nissan Corporation. This floor plan financing, essential for the operation of the business, would allow Larry Gary to use a line of credit from the Bank to pay Nissan for vehicles shipped to the dealership. When the vehicles were sold, Larry Gary would use the proceeds to repay the Bank. Nissan granted Larry Gary a franchise contingent on Gary constructing an approved dealership building.

Gary required financing to construct the building and sought the Bank’s assistance. On December 14, 1978, the Bank committed to loan $168,000 for the purpose of constructing the dealership facility. The original promissory note, signed by both Larry and Mary Gary and secured by a mortgage on the building, was to be paid and converted to a long term mortgage insured by the Small Business Administration by June 14, 1979.

On December 27, 1978, Larry Gary and Schwartz Construction (Schwartz) entered into a building contract which specified that Schwartz would complete the building by April 30,1979, for $163,000. The Bank had recommended Schwartz, another of its customers, to Gary. The Garys contended at trial that the Bank pressured them into contracting with Schwartz for the Bank’s benefit.

Larry Gary encountered numerous difficulties with Schwartz during the building’s construction. These difficulties, their causes, and the attempts to resolve them constituted the bulk of the evidence at trial. The Garys presented evidence that Schwartz initially staked the building in the wrong location, causing additional expense to move utilities; that Schwartz constructed the building with a leaky roof which ruined insulation; that, in violation of the building contract, Schwartz began building lower level rest rooms with ceilings only six feet high; that Schwartz failed to complete the building even remotely within the contractual time period; and that they were forced to finish the building themselves after Schwartz walked off the job.

On July 25, 1979, the Gary Datsun business was incorporated as Gary Datsun, Inc. The officers of the corporation were Larry Gary, president; Mary Gary, secretary/treasurer; and Phyllis Gary (Larry Gary’s mother), vice-president. In August, the Bank made a $7,000 loan to Gary Datsun, Inc.

In September 1979, the dealership building still had not been completed. The corporate minutes of Gary Datsun, Inc., showed that Larry and Mary Gary conveyed all business assets of Gary Datsun to the corporation on September 7, 1979. This was done without the written consent of the Bank as required under the floor plan financing agreement: “Dealer will not lease, pledge, mortgage, encumber or lien any Inventory in which Bank has an interest hereunder ... without Bank’s prior written consent.” On September 19,1979, without notice to the Garys, the Bank took interest due on the building construction loan from the business account of Gary Datsun.

Starting October 1, 1979, Gary Datsun, Inc., no longer made deposits to its account with the Bank, and instead made its deposits in an account with another bank. The Bank discovered this change in banking, and as of November 16, 1979, cancelled its floor plan financing agreement with Larry Gary. Under the agreement either party could cancel at any time upon notice to the other party. Gary Datsun, Inc., eventually obtained financing from another bank at a higher rate of interest. The Garys state in their briefs that the corporation was dissolved involuntarily in 1986, but the record does not demonstrate that dissolution.

The Bank brought suit against Gary Datsun, Inc., on the $7,000 promissory note dated August 10, 1979. It brought separate suit against Larry and Mary Gary to foreclose the mortgage securing the $168,000 promissory note. The Garys counterclaimed alleging fraud, constructive fraud, breach of a fiduciary relationship, and breach of a covenant of good faith and fair dealing. The two cases were consolidated. An appeal to this Court was filed after a dispute arose over whether Gary Datsun, Inc., could be added as a counterclaim plaintiff. See First Sec. Bank of Glendive v. Gary (1986), 221 Mont. 329, 718 P.2d 1345. On remand, the District Court determined that Gary Datsun, Inc., was a real party in interest as to the counterclaims.

By agreement of the parties, only the counterclaims of Larry J. Gary, Mary Gary and Gary Datsun, Inc., were tried. Essentially the defendants admitted that the claims of the Bank against them were valid, subject to any judgment on their counterclaims.

The jury was given two special interrogatories. The first asked:

“Is the plaintiff, First Security Bank, liable to defendants Larry J. Gary or Mary Gary or Gary Datsun, Inc., because of fraud or constructive fraud or breach of fiduciary relation or bad faith as defined in the Court’s instructions?”

The jury answered “Yes.” The jury awarded defendants Larry and Mary Gary a total of $355,000 in special damages, $800,000 in general damages, and $50,000 in emotional damages. The jury did not award Gary Datsun, Inc., any damages.

The second special interrogatory asked:

“Is the First Security Bank hable to Larry J. Gary, Mary Gary or Gary Datsun, Inc. for punitive damages?”

The jury answered “Yes.” Under § 27-1-221, MCA, that finding made necessary a further hearing before the jury on the amount of punitive damages to be awarded. After the verdict was read, the court determined that it would reconvene later on Sunday morning for the punitive damages hearing.

At the 10:00 a.m. Sunday morning session, counsel and the court first met in chambers. Counsel for the Bank informed the Court of his belief that there would be a run on the Bank if its precarious financial position were disclosed in the hearing on punitive damages. The court ruled as a matter of law that no punitive damages would be allowed. It dismissed the jury and requested briefing of motions before it would enter judgment.

After briefing, the court granted the Bank’s motion for judgment NOV. It also entered judgment for the Bank on the mortgage foreclosure and the promissory note. This appeal followed.

I.

Did the District Court err in ruling that there was insufficient evidence to support the jury verdict?

Four theories were presented as bases for the claims for damages against the Bank - fraud, constructive fraud, breach of the covenant of good faith and fair dealing, and breach of a fiduciary duty. The special interrogatories did not require the jury to specify under which theory it found the Bank liable. The court granted the motion NOV on the grounds of lack of evidence to support the verdict.

In considering a motion for judgment NOV, the evidence must be viewed in a light most favorable to the non-moving party. Nicholson v. United Pacific Ins. Co. (1985), 219 Mont. 32, 37, 710 P.2d 1342, 1345. The motion must be denied if a prima facie case has been made out, and if there is substantial conflict in the evidence, the motion cannot be granted. Nicholson, 710 P.2d at 1345.

In its answer to the cross-complaint, the Bank admitted “that a fiduciary relationship existed between [itself] and defendants Gary.” The jury was instructed that although a fiduciary relationship does not ordinarily arise when a bank transacts business with a depositor or other customer, “[a] fiduciary relationship and duty of disclosure may be created when a customer relies upon the bank for advice on financial matters” and that “[t]he fiduciary relationship implies that the principal has reposed some trust or confidence in the fiduciary, and the fiduciary is bound to exercise the utmost good faith, loyalty and honesty toward his principal.”

Larry Gary testified that Mr. Lilejord, President of the Bank, encouraged him to pursue a Datsun dealership. He testified that Datsun’s approval for the franchise was contingent upon his building a new Datsun sales facility. He testified that Miss Remillard, the loan officer at the Bank, told him, in effect, that he must hire Schwartz as the contractor on this job. The Bank admittedly did not disclose to Gary that Schwartz had outstanding loans from the Bank. The Garys contended that Schwartz was in a precarious financial position which later resulted in bankruptcy.

Miss Remillard testified that she vetoed inclusion in the building contract of a penalty clause to be applied in case Schwartz did not complete the building on time. She also testified that she exercised the authority to decide when and how much Schwartz was paid and that it was the Bank’s responsibility to insure that money was not paid out before work was completed. Ten percent of the money was to be withheld until construction was completed. Additionally, a specific cost breakdown had been prepared with respect to each major component of the building. However, by September 1979, the Bank notified the Garys that there was not enough money left in the building account to complete the building.

Viewing the evidence in the light most favorable to the Garys, we conclude that there was substantial evidence from which a jury could have concluded that the Bank breached a fiduciary duty to the Garys in requiring Larry Gary to hire Schwartz as the contractor on the building, in failing to require Schwartz to properly complete the building within the contractual time frame, and in disbursing building funds without adequately protecting the Garys. Damages for those breaches could include the costs of completing the building and losses caused by the delay in its completion. Without considering the other theories of liability offered by the Garys, we hold that the entry of judgment NOV was reversible error and that this case must be remanded for retrial. For the reasons explained below under Issue IV, we do not reinstate the jury’s verdict.

II

Did the District Court err in refusing to submit the issue of punitive damages to the jury?

The controlling law on punitive damages is set forth at § 27-1-221(6) and (7), MCA:

“(6) Liability for punitive damages must be determined by the trier of fact, whether judge or jury.
“(7)(a) Evidence regarding a defendant’s financial affairs, financial condition, and net worth is not admissible in a trial to determine whether a defendant is liable for punitive damages. When the jury returns a verdict finding a defendant hable for punitive damages, the amount of punitive damages must then be determined by the jury in an immediate, separate proceeding and be submitted to the judge for review as provided in subsection (7)(c). In the separate proceeding to determine the amount of punitive damages to be awarded, the defendant’s financial affairs, financial condition, and net worth must be considered.
“(c) The judge shall review a jury award of punitive damages, giving consideration to each of the matters listed in subsection (7)(b). If after review the judge determines that the jury award of punitive damages should be increased or decreased, he may do so. The judge shall clearly state his reasons for increasing, decreasing, or not increasing or decreasing the punitive damages award of the jury in findings of fact and conclusions of law, demonstrating consideration of each of the factors listed in subsection (7)(b).”

The second special interrogatory required the jury to determine if the Bank was liable for punitive damages, and the jury answered ‘Yes” to that second interrogatory. Under the statute, the District Court should have held an immediate, separate proceeding for the determination of the amount of punitive damages, but failed to do so. As a result, the District Court determination that no punitive damages would be allowed was premature and not allowed under the statute. We hold that the finding that the Garys were not entitled to punitive damages was reversible error.

III.

Was Gary Datsun, Inc., properly added as a real party in interest on the counterclaims?

Rule 17(a), M.R.Civ.R, provides that “Every action shall be prosecuted in the name of the real party in interest.” The “real party in interest” is the party who has the right sought to be enforced. 3A J. Moore, Federal Practice, § 17.02 at 42 (1989). The District Court ruled that Gary Datsun, Inc., was a real party in interest on the counterclaims originally brought by Larry and Mary Gary individually, noting that the counterclaims run to the benefit of Gary Datsun, Inc.

As discussed below -under Issue IV, the evidence at trial showed that a large portion of the damages claimed under the counterclaims were suffered by Gary Datsun, Inc. We hold that Gary Datsun, Inc., is a real party in interest and was properly joined.

IV.

Is the jury’s award of damages proper?

The jury allocated all damages to the Garys individually. The record shows that the Garys’ attorney argued that this would be proper because the corporation was closely held and had been dissolved by the time of trial. We cannot agree with that position.

A corporation has a separate and distinct identity from its stockholders. Wortman v. Griff (1982), 200 Mont. 528, 534, 651 P.2d 998, 1001. The general rule is that stockholders may not sue upon a cause of action belonging to their corporation. Malcom v. Stondall Land and Investment Company (1955), 129 Mont. 142, 145-46, 284 P.2d 258, 260. As this Court has stated, such a reverse piercing of the corporate veil would allow persons who have incorporated to invoke the corporate entity only when it would be to their advantage.” Moats Trucking Co. v. Gallatin Dairies (1988), 231 Mont. 474, 477, 753 P.2d 883, 885.

The Garys argue that at the time of trial, Gary Datsun, Inc., had been involuntarily dissolved, and that Larry Gary and Mary Gary, as the primary stockholders and the trustees for creditors and stockholders, were entitled to all damages. Under § 35-6-104(5), MCA, the directors of an involuntarily dissolved corporation shall hold the corporation’s property in trust. The record is devoid of evidence of the dissolution of the corporation and of the status of Larry Gary and Mary Gary with regard to the dissolved corporation. Whether the stockholders of a corporation are entitled to any of the corporate assets depends upon the extent and nature of the claims which may be properly made against the corporation. In view of the fact that Gary Datsun, Inc., failed as a going business, the possibility of other claimants, including creditors, is clearly present.

The only evidence in the present case supporting the $800,000 awarded in general damages was a calculation of lost profits submitted by an expert witness for the Garys. He gave $899,072 as the present value (at time of trial) of the Gary Datsun dealership’s lost profits for the years 1979 to 1986. During those years, Gary Datsun, Inc., owned the business, not Larry and Mary Gary personally. As a result, there was an absence of any proof of lost profits by Larry Gary and Mary Gary.

In a similar manner, the evidence in support of special damages consisted of cancelled checks written on the account of Gary Datsun, Inc. Again this demonstrates damages, if any, only as to the corporation and not as to the Garys individually. We therefore hold that the award of general and special damages to Larry J. Gary and Mary Gary was improper and that it constitutes reversible error.

Because of our answers to the issues set forth above and our ruling that this case must be retried, we need not discuss the other issues raised on appeal and cross-appeal. In view of the potential offset should the Garys be successful in a new trial on their counterclaims, we conclude that it would not be appropriate to affirm the judgment in favor of the Bank on its claims. We therefore reverse on that aspect as well. This matter is remanded to the District Court for the Seventh Judicial District, Dawson County, for retrial.

CHIEF JUSTICE TURNAGE and JUSTICES BARZ and HON. TED MIZNER, District Judge, sitting for JUSTICE McDONOUGH, concur.

JUSTICE HARRISON,

dissenting:

I would reinstate the jury’s verdict which was set aside by the District Court, provide an off-set to the damages in favor of the Garys for the amounts of the notes held by the Bank, and terminate the case without further reference to a jury for punitive damages. I base this opinion on two grounds: (1) the error in not submitting punitive damages to the same jury is now incurable; and (2) the purpose of punitive damages, by way of punishment to the Bank cannot be effectuated because that Bank has now gone out of existence.

It is unbelievable to me how the District Court dispensed with the punitive damages question. The record shows that the jury held that the Garys were entitled to punitive damages, and the District Court, upon a mere suggestion of counsel for the Bank that a punitive damage award would cause a run on the Bank, refused to submit the issue to the jury which was sitting there waiting to go on. This error is especially grievous, because if the jury had awarded excessive damages, damages that the District Court could not accept, the court had the right to reduce those damages or to remit them altogether upon later review.

In this case, the Bank’s argument in seeking to reverse the verdict or remand for a new trial is that the damages accrued to the corporation and not to the Garys personally, and therefore a new trial is required to separate the damages due the corporation from the damages due to the Garys. However, here the jury found no damages in this case for the corporation, and awarded all the damages to the Garys. The majority’s reversal of the verdict in favor of the Garys for a new trial on that ground does violence to what has happened in this case.

The record indicates that the Bank made a letter agreement with Larry and Mary Gary to provide floor plan financing for their Datsun franchise in Glendive. It also acted as their agent in obtaining financing from the SB A for a building in which the business was to be located. Although the Bank admitted a fiduciary relationship in its pleadings, the court allowed the question of whether a fiduciary relationship existed between the Garys and the Bank to go to the jury. This was totally unnecessary, and the jury obviously determined this issue in favor of the Garys. The Bank provided financing under two notes, one for $7,000 signed by Gary Datsun Inc., which with interest came to $13,894.28 when the court rendered judgment. The second note signed by Larry and Mary Gary for $150,455.13 for which the court rendered judgment with interest and costs came to the sum of $300,378.68.

During the construction of the building, the jury found that the Bank paid more to the contractor (who was indebted to the Bank) than he was entitled, did not keep a reserve of ten percent as the construction costs were advanced, and refused to apply for a renewal of SBA’s commitment for the construction of the building. The Bank claimed, and still claims in its appellate brief, that it never consented to the assignment to Gary Datsun, Inc.; yet the Bank accepted deposits in that name and certainly issued one of its notes to the corporation.

Without notice to the Garys, the Bank exercised a claimed right of set-off by taking interest due on its notes from the business account of Gary Datsun. At that point, understandably, Larry Gary decided to make deposits in another bank to prevent setoffs. Immediately the Bank sent a notice to them terminating its floor plan financing. The Garys were forced to go to another bank, and pay a higher interest rate for their financing.

The record indicates that the building was appraised somewhere in the area of $295,000. Under the judgment as it now stands, after the District Court set aside the verdict for the Garys, they will not only lose their building, but be subjected to a deficiency judgment approaching the original costs of the building.

Here, I find the evidence supported the verdict for the Garys, and base this upon my review of the final arguments made to the jury. The special damages, interest, attorneys fees, accounting fees, bank application fees, amount for completing the building, and all the other items came to $182,284, which the economist who testified placed a value at the time of trial at $413,657. No objection was made to these figures at the time of final argument, and the award of special damages to each of the Garys does not exceed that sum.

Involved here also were damages for emotional distress. Mary Gary apparently attempted to commit suicide sometime following the Bank’s actions. The jury determined that the Garys’ emotional distress was a result of the Bank’s action, and awarded each of the Garys $25,000 for emotional distress.

The jurys awards of $25,000 for emotional distress and special damages are supported by the evidence and should never have been reversed. The general damages may include projections for the business conducted by Gary Datsun, Inc. but that is not important now.

It is interesting to note that in the records of the office of the Secretary of State of the State of Montana, is a notice of involuntary dissolution dated December 8, 1986, under which the Secretary of State involuntarily dissolved the Gary Datsun corporation, which had the effect that the corporation forfeited all its rights to carry on a business within the State of Montana. When that occurs, under § 35-6-104(5), MCA, the following is the result:

“(5) In the case of involuntary dissolution, all the property and assets of the dissolved corporation shall be held in trust by the directors of such corporation and 35-1-921 or 35-2-711, whichever is appropriate, is applicable to liquidate such property and assets if necessary.”

I dissent.

JUSTICE SHEEHY and JUSTICE HUNT, join in the foregoing dissent of JUSTICE HARRISON.


author: JUSTICE SHEEHY

text:
    RUSSELL E. VAN HOOK, JR. and JANICE L. VAN HOOK, Plaintiffs and Appellants, v. CALVIN A. BAUM and WILMA J. BAUM, Defendants and Respondents.
    No. 90-005.
    Submitted July 20, 1990.
    Decided Oct. 15, 1990.
    Rehearing Denied Nov. 20, 1990.
    800 P.2d 151.

      James P. Reynolds, Reynolds, Motl & Sherwood, Helena, for plaintiffs and appellants.
    Dennis Loveless, Helena, for defendants and respondents.
   JUSTICE SHEEHY

delivered the Opinion of the Court.

Russell and Janice Van Hook appeal from the determination of the District Court, First Judicial District, Lewis and Clark County, denying appellants’ claims for contract rescission or damages. We affirm the District Court.

The issues presented by the appellants are:

1. Did the District Court err in concluding no mutual mistake of fact existed warranting rescission of the contract for the purchase of the real property?

2. Did the District Court err in concluding respondents committed no fraud, actual or constructive in the sale of the real property?

3. Did the District Court err in concluding no failure of consideration existed in the contract between the parties?

The real property involved in this case is the house and property located at Lots 8, 9 and 10 in Block 26 of the Corbin Addition, known as 1523 Broadway, Helena, Montana.

In the summer of 1981, Baums constructed a house upon the property, acting as the contractors and hiring various subcontractors. Baums built the home intending to reside there, but decided to sell when it became medically necessary for Mrs. Baum to move to a warmer climate.

The house was constructed upon a special foundation due to the fill on the property and water which tended to collect there. Baums foresaw no problem with continuing water collection upon completion.

Van Hooks executed an earnest money receipt and an agreement to purchase on December 5, 1981, and on December 30, 1981, executed a $41,500 note secured by a trust indenture. Van Hooks also signed a promissory note to the Baums for $15,400, also secured by trust indenture, payable no later than December 30, 1983, or upon the sale of the real property. Van Hooks have not paid on the note, and admit to be in default thereon.

The real property flooded on June 28, 1982, following an uncommonly large rainstorm. The property flooded again on August 21, 1983, following a similar storm. Robert Peccia, a private consulting engineer and hydrologist, using National Oceanic and Atmospheric Administration records for those dates, testified that both storms were of such extraordinary nature as to be expected to occur once every 100 years.

In January of 1983, Van Hooks wrote a letter to the Baums seeking rescission of the contract. Baums refused. Van Hooks initiated suit in June of 1984, seeking rescission, or in the alternative, damages for breach of contract. The complaint also named the City of Helena. The City later paid $10,000 to the Van Hooks as settlement, and reconstructed the storm sewer on the property. The Baums counterclaimed, seeking enforcement of the contract. Bench trial was held from July 11 through July 14, 1988. The District Court, in its order of April 5,1989, denied all claims of the Van Hooks, and granted leave to the Baums to proceed against the real property pursuant to the terms of the trust indenture. The Van Hooks made a motion to amend, which was denied. This appeal ensued.

Van Hooks first contend that a mutual mistake of fact occurred in that neither of the parties knew of the potential flooding problem, and that rescission is the proper remedy.

Mistake of fact is “an unconscious ignorance or forgetfulness of a fact, past or present, material to the contract ...” Section 28-2-409, MCA.

Section 28-2-1711 states in part:

“A party to a contract may rescind the same in the following cases only: (1) if the consent of the party rescinding... was given by mistake or obtained through duress, menace, fraud, or undue influence ...”

It is a well-established rule in Montana that in order for mutual mistake by the parties to a contract to warrant rescission, the mistake must be so substantial and fundamental as to defeat the object of the contract. Halcro v. Moon (1987), 226 Mont. 121, 733 P.2d 1305; Woodahl v. Matthews (1981), 196 Mont. 445, 639 P.2d 1165; Johnson v. Meiers (1946), 118 Mont. 258, 164 P.2d 1012. Here, Van Hooks maintain that the flooding of the property is a problem so substantial as to defeat the object of the contract. However, the evidence does not bear this out. As the District Court stated, it is not a mistake of fact that several intense and unusual storms occurred. They were “acts of God,” completely unanticipated, which caused damage to many other homes in the surrounding area. It should also be noted that corrective measures were taken by the City of Helena on the storm drain near the property in 1986 and that no flooding had occurred up to the time of trial.

Van Hooks still reside in the house. This suit was brought in apprehension of further flooding. While no one may deny that the flooding was a problem, it cannot be said to be a mistake serving to defeat the object of the parties in making the contract, any more than would an earthquake or tornado or other natural phenomenon.

Van Hooks next contend that Baums committed fraud or, alternatively, constructive fraud in the sale of the real property.

Specifically, Van Hooks contend that Baums knew of the flooding potential and misled Van Hooks by asserting otherwise. The evidence does not show that such misrepresentations were made, or Van Hooks’ reliance thereupon. The District Court stated:

“The Van Hooks and the Baums had equal knowledge of the property as far as flooding potential was concerned. Neither had knowledge that was superior to the other.
“The Van Hooks conducted an independent investigation of potential water problems including, but not limited to, potential flooding of the property. The investigation included discussing potential water flooding problems with other individuals who had knowledge of past problems, and discussing potential water flooding problems with personnel from the City of Helena. The Van Hooks knew water had caused some problems in the past, and had been so informed by neutral, disinterested third parties. The Van Hooks relied upon their own independent investigation of the property, including investigations regarding potential flooding and water problems, when they decided to purchase the real property. They did not rely upon any representations made by the Baums regarding water problems.”

As noted by the lower court, a cause of action for fraud fails when the alleged misrepresentation is not relied upon. Lowe v. Root (1975), 166 Mont. 150, 531 P.2d 674. The District Court was in the best position to determine that Van Hooks did not rely on any alleged misrepresentation. We find no error in the lower court’s holding of an absence of fraud.

As to constructive fraud, no evidence was introduced showing Baums were aware of flooding potential of the home upon its construction. Baums originally built the home for their personal use, and decided instead to sell it only after Mrs. Baum developed health problems requiring her to move to a warmer climate. As the District Court noted, it cannot be reasonably contended that a person would build a house where he believed it would be flooded. The District Court’s finding that the Baums were unaware of any defect, and thereby under no duty to disclose the defect, thus precluding constructive fraud claims, is supported by substantial evidence and will not be disturbed by this Court. Woodahl v. Matthews (1981), 196 Mont. 445, 639 P.2d 1165; Moschelle v. Hulse (1980), 190 Mont. 532, 622 P.2d 155.

Van Hooks contend that they are entitled to rescind due to a partial or complete failure of consideration. They state that the lower court erred in concluding the house was worth intrinsically as much at the time of trial as when originally purchased.

Section 28-2-1711, MCA, outlines the rights of parties wishing to rescind under a theory of failure of consideration:

“A party to a contract may rescind the same in the following cases only:
“(2) if, through the fault of the party as to whom he rescinds, the consideration for his obligation fails in whole or in part;
“(3) if such consideration becomes entirely void from any cause;
“(4) if such consideration, before it is rendered to him, fails in a material respect from any cause ...”

Subsections (2) and (4) are inapplicable here. Subsection (2) is premised upon the fault of the non-rescinding party, and lower court specifically found the Baums to be free from fault. Nor does subsection (4) apply, as consideration was rendered. Hooks must rely on subsection (3) for relief. The subsection states that the party may rescind if consideration becomes entirely void. Clearly, that is not the case here. Van Hooks purchased the home in 1981 for $64,900. Although appraisals varied, Van Hook stated that the house was worth approximately $62,000 in 1988. As the District Court noted, the lessened appraised values were made in apprehension that the property might flood again. Clear the District Court’s determination that there was not an adequate failure of consideration under § 28-2-1711(3) was based on evidence and law. We find substantial evidence supports the judgment. Corscadden v. Kenney (1977), 175 Mont. 98, 572 P 1234; Strong v. Williams (1969), 154 Mont. 65, 460 P.2d 90.

Affirmed.

JUSTICES HARRISON, HUNT, WEBER and McDONOUGH concur.


author: JUSTICE HARRISON

text:
    KAREN ROWE, individually, and as Guardian of Joshua Rowe and Karry Rowe; and William Bourret, the Personal Representative of the Estate of Barry R. Rowe, Deceased, Plaintiffs and Appellants, v. The TRAVELERS INDEMNITY COMPANY, a Connecticut corporation and John Doe and Richard Roe, Inc., a Montana corporation, Defendants and Respondents.
    No. 90-081.
    Submitted on Briefs Sept. 20, 1990.
    Decided Oct. 24, 1990.
    800 P.2d 157.

      Joseph R. Marra and David A. Hopkins, Marra, Wenz, Johnson & Hopkins, P.C., Great Falls, for plaintiffs and appellants.
    William Conklin and Allen P. Lanning, Conklin, Nybo, LeVeque & Murphy, PC., Great Falls, for defendants and respondents.
    Judith Bartram, Jardine, Stephenson, Blewett & Weaver, Great Falls, for John Doe and Richard Roe, Inc.
   JUSTICE HARRISON

delivered the Opinion of the Court.

This is an appeal from the Eighth Judicial District, Cascade County. Plaintiffs, the personal representative of the deceased, Barry R. Rowe, his widow, Karen Rowe, and their two children, sought a declaratory ruling that they were entitled to recover uninsured motorist benefits under two umbrella policies issued by Travelers Indemnity Company. The parties filed cross-motions for summary judgment. The District Court denied the plaintiffs’ summary judgment motion and granted summary judgment to Travelers. From this decision, plaintiffs appeal. We affirm.

The sole issue is whether the District Court erred in ruling that an umbrella policy does not constitute an automobile or motor vehicle policy which must include uninsured motorist coverage.

I.

On December 9, 1985, Barry R. Rowe was fatally injured in an automobile collision with an alleged uninsured motorist. Rowe was insured by a primary general liability insurance policy and two umbrella policies, all issued by Travelers. The policies insured Rowe’s business, Page-Werner, and Rowe and his two partners individually. The primary policy contained single liability limits of $500,000 and provided $50,000 in uninsured motorist coverage.

The other two policies, a Catastrophic Umbrella Policy (CUP), and a Personal Liability Umbrella of Security Policy (PLUS), had total liability limits of $3,000,000 and did not provide uninsured motorist coverage. The CUP policy excluded coverage for obligations imposed by the uninsured motorist law. The PLUS policy did not specifically exclude such coverage. However, Travelers refused to extend uninsured motorist coverage beyond the $50,000 it had an obligation to pay under the primary automobile liability policy.

Plaintiffs brought this action, claiming that Montana’s uninsured motorist statute, § 33-23-201, MCA, required Travelers to supply uninsured motorist coverage under each of the umbrella policies.

II.

While this is a case of first impression in Montana, several other jurisdictions have addressed the issue of whether their uninsured motorist statutes mandate issuance of uninsured motorist coverage in umbrella policies. These cases have been resolved on either of two grounds: (1) the type of uninsured motorist statute; or (2) the type of insurance. See, e.g., Bartee v. R.T.C. Transportation, Inc. (1989), 245 Kan. 499, 781 P.2d 1084; Cohn v. Pacific Employers Insurance Co. (1990), 213 Conn. 540, 569 A.2d 544.

The courts basing their decisions on the type of uninsured motorist statute have discerned two differing policy considerations and legislative intent underlying such statutes, depending on the jurisdiction. “Minimum liability” statutes require that motorists maintain a minimum level of liability insurance and, therefore, a minimum level of uninsured coverage. The policy in such states is to ensure that injured motorists can recover the same amount as would have been available from an insured motorist who maintained the minimum statutory limit of bodily injury liability coverage. Continental Insurance Co. v. Howe (Fla. App. 3 Dist. 1986), 488 So.2d 917, 919.

“Full recovery” statutes, on the other hand, require insurers to issue uninsured motorist coverage equal to the amount of bodily injury liability insurance that the policy provides. For example, if the insurance policy has limits of $50,000/$100,000 for bodily injury liability, the insurer must also provide $50,000/$100,000 in uninsured motorist coverage. The policy underlying these statutes is to “allow full recovery under the terms of any applicable policies when a person is injured by an uninsured motorist.” Continental, 488 So.2d at 919-20.

Most jurisdictions which have “full recovery” uninsured motorist statutes have concluded that since an umbrella policy includes liability coverage for motor vehicle accidents, an umbrella policy must offer an equivalent amount of uninsured motorist benefits to the insured in order to permit full recovery. See Chicago Insurance Co. v. Dominguez (Fla.App. 1982), 420 So.2d 882, Bartee v. R.T.C. Transportation, Inc. (1989), 245 Kan. 499, 781 P.2d 1084; Southern American Insurance Co. v. Dobson (La.1983), 441 So.2d 1185; Cincinnati Insurance Co. v. Siemens (Ohio App.1984), 474 N.E.2d 655. But see United Services Automobile Ass’n v. Wilkinson (N.H. 1989), 569 A.2d 749 (holding that uninsured motorist statute does not apply to umbrella policies, even though statute was “full recovery’ type).

Montana’s uninsured motorist statute provides “minimum liability” insurance:

“(1) No automobile liability or motor vehicle liability policy insuring against loss resulting from liability imposed by law for bodily injury or death suffered by any person arising out of the ownership, maintenance, or use of a motor vehicle shall be delivered or issued for delivery in this state ... unless coverage is provided therein or supplemental thereto, in limits for bodily injury or death set forth in 61-6-103 ... for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles because of bodily injury, sickness, or disease, including death, resulting therefrom.”

Section 33-23-201(1), MCA (1985). The minimum amounts of uninsured coverage which must be provided pursuant to § 61-6-103, MCA, are $25,000 for one person and $50,000 for.two persons. Montana has no requirement that uninsured coverage must equal the policy’s coverage for bodily injury liability unless the limits are not specified in the policy. See § 33-23-203, MCA.

In this case, however, both parties agree that the distinction between “minimum liability” and “full recovery” statutes is meaningless. Rather, their argument involves whether an umbrella policy is within the realm of insurance contemplated by the uninsured motorist statute.

Plaintiffs argue that the words “[n]o automobile liability or motor vehicle liability policy” in the uninsured motorist statute do not exclude umbrella insurance policies; therefore, umbrella policies must include uninsured motorist coverage because they also provide “motor vehicle liability” insurance.

Travelers contends that umbrella policies are fundamentally different from automobile liability policies since umbrella policies are intended solely to provide excess liability protection for claims against the insured by third parties. Because of this difference, an umbrella policy is not a “motor vehicle liability policy,” designed to be controlled by the uninsured motor vehicle statute.

Courts have discussed the unique nature of umbrella policies, which are a continuation of an underlying primary policy. Thompson v. Grange Insurance Ass’n. (1983), 34 Wash.App. 151, 660 P.2d 307, 311. Umbrella policies “provide at a modest cost broad coverage for catastrophic losses, and excess coverage over and above any type of primary coverage....” United Services Automobile Ass’n, 569 A.2d at 753. While the excess coverage of an umbrella or catastrophe policy protects an insured and his business against liability from third parties, the uninsured motorist protection of the underlying primary policy does not involve liability claims against the insured from third parties. Matarasso v. Continental Casualty Co. (1981), 82 A.D.2d 861, 440 N.Y.S.2d 40, 41.

However, we need go no further than our own statutes to determine whether an excess or umbrella policy is a “motor vehicle liability policy” as contemplated by the uninsured motorist statute. A “motor vehicle liability policy” is defined as:

“an owner’s or operator’s policy of liability insurance, certified as provided in 61-6-133 or 61-6-134 as proof of financial responsibility and issued, except as otherwise provided in 61-6-134, by an insurance carrier duly authorized to transact business in this state, to or for the benefit of the person named therein as insured.”

Section 61-6-103(1), MCA (1985). The “motor vehicle liability policy” must “designate by explicit description or by appropriate reference all motor vehicles with respect to which coverage is thereby to be granted.” Section 61-6-103(2)(a), MCA (1985). With respect to excess coverage; the statute provides:

“(8) Any policy which grants the coverage required for a motor vehicle liability policy may also grant any lawful coverage in excess of or in addition to the coverage specified for a motor vehicle liability policy and such excess or additional coverage shall not be subject to the provisions of this part. With respect to a policy which grants such excess or additional coverage the term ‘motor vehicle liability policy’ shall apply only to that part of the coverage which is required by this section.”

Section 61-6-103(8), MCA (1985) (emphasis added). The statutory definition of “motor vehicle liability policy” does not include excess insurance, such as an umbrella policy. Thus, an umbrella policy could not constitute a “motor vehicle liability policy” as envisioned by the uninsured motorist statute.

A majority of courts which have addressed this issue have concluded that umbrella policies are not “motor vehicle liability policies” as defined by their uninsured motorist statutory schemes, similar to Montana’s. See O’Hanlon v. Hartford Accident and Indemnity Co. (3d Cir. 1981), 639 F.2d 1019 (interpreting Delaware law); Trinity Universal Ins. Co. v. Metzger (Ala. 1978), 360 So.2d 960; Furlough v. Transamerica Insurance Co. (2 Dist. 1988), 203 Cal.App.3d 40, 249 Cal.Rptr. 703; Cohn v. Pacific Employers Ins. Co. (1990), 213 Conn. 540, 569 A.2d 544; Continental Insurance Co. v. Howe (Fla. App. 3 Dist. 1986), 488 So.2d 917, reh’g denied 494 So.2d 1151, (interpreting Rhode Island law); Cincinnati Insurance Co. v. Miller (1 Dist. 1989), 190 Ill.App.3d 240, 137 Ill.Dec. 755, 546 N.E.2d 700, reh’g denied 129 Ill.Dec.2d 562, 140 Ill.Dec. 669, 550 N.E.2d 554; United Services Automobile Ass’n v. Wilkinson (N.H.1989), 569 A.2d 749; Matarasso v. Continental Casualty Co. (1981), 82 A.D.2d 861, 440 N.Y.S.2d 40; Moser v. Liberty Mutual Insurance Co. (Okla. 1986), 731 P.2d 406; MacKenzie v. Empire Insurance Co. (1989), 113 Wash.2d 754, 782 P.2d 1063.

As we have stated previously, the purpose of the uninsured motorist statute, for those who elect such coverage, is to recompense innocent persons injured through the negligence of motorists who, because they are uninsured and not financially responsible, cannot be made to respond in damages. See Guiberson v. Hartford Casualty Insurance, Inc. (1985), 217 Mont. 279, 289, 704 P.2d 68, 74; see also Horace Mann Insurance v. Hampton (1989), 235 Mont. 354, 357, 767 P.2d 343, 344 (stating purpose of Mandatory Liability Protection Act).

However, reading §§ 33-23-201 and 61-6-103, MCA, together, the statutes clearly apply only to primary automobile insurance, not to a commercial umbrella policy issued to protect the insured from liability to third parties. If the legislature desires uninsured motorist coverage to equal liability coverage from any source, it may amend the statute accordingly.

When no genuine issue exists as to any material fact, the moving party is entitled to summary judgment as a matter of law. Rule 56(c), M.R.Civ.P; Blaskovich v. Noreast Development Corp. (Mont. 1990), [242 Mont. 326,] 790 P.2d 977, 978, 47 St.Rep. 740, 742. The party asserting summary judgment has the burden of demonstrating that no genuine issue of material fact exists. Once this is established, the burden shifts to the other party to show otherwise. Rule 56(e), M.R.Civ.P. We hold that Montana’s uninsured motorist statute does not require an insurer to provide uninsured motorist coverage in an excess or umbrella policy. Since a genuine issue of material fact has not been demonstrated, the District Court did not err in denying summary judgment to plaintiffs and granting defendant’s motion for summary judgment.

Our ruling does not mean that an insurer may not offer additional uninsured motorist coverage as part of a primary policy or umbrella policy.

Affirmed.

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

       Section 33-23-204(2), MCA, enacted in 1987, specifically refers to Title 61, Chapter 6 of the Code in defining “motor vehicle liability policy.”


text:
    BRADLEY H. ARMSTRONG, Petitioner and Appellant, v. STATE OF MONTANA, Department of Justice, Respondent and Respondent.
    No. 90-237.
    Submitted on Briefs Aug. 23, 1990.
    Decided Nov. 1, 1990.
    800 P.2d 172.
    Erik Rocksund, Columbia Falls, for petitioner and appellant.
    Ed Corrigan, Deputy Flathead County Atty., Kalispell, Marc Racicot, Atty. Gen., Peter Funk, Asst. Atty. Gen., Helena, for respondent and respondent.
   JUSTICE SHEEHY

delivered the Opinion of the Court.

Bradley H. Armstrong appeals from an order of the District Court of the Eleventh Judicial District, Flathead County, denying Armstrong’s request that his right to drive be reinstated. We reverse the District Court.

The sole issue raised on appeal is whether the District Court erred in its upholding of the implied consent suspension of Armstrong’s driver’s license in light of the State’s concession that the arresting officer lacked legal basis to stop Armstrong’s vehicle.

In the early hours of February 21, 1990, Columbia Falls Police Officer Dale Stone made a stop of Bradley H. Armstrong’s vehicle. Armstrong was subsequently arrested for being in actual physical control of a vehicle while under the influence of alcohol, in violation of § 61-8-401, MCA. Armstrong refused to submit to a chemical test of his breath to determine blood alcohol content, and his license was seized pursuant to § 61-8-402, MCA, the implied consent law.

The DUI charge was dismissed shortly thereafter, as the State conceded that the arresting officer did not have reasonable grounds to stop Armstrong’s vehicle.

On February 27, 1990, Armstrong filed an appeal and petition to reinstate his license pursuant to § 61-8-403, MCA. In the March 19, 1990 hearing, Armstrong stipulated to his refusal to submit to a breathalyzer test after the arrest. The State stipulated the officer did not have reasonable grounds to stop Armstrong. However, the State contended that probable cause developed after the stop to indicate that Armstrong was driving under the influence of alcohol. The State attempted to frame the issue as whether the officer, in his role as a public safety officer, had a valid investigative or safety reason to stop Armstrong as he drove down an alleyway at 2:30 am., from which reasonable grounds subsequently developed to arrest Armstrong for DUI. Alternatively, the State argued the license suspension provision of § 61-8-402, MCA, to be an administrative act, separate and distinct from the criminal offense. The District Court concurred with the State’s latter approach, and ruled from the bench that suspension under § 61-8-402, MCA, “is an administrative act that doesn’t depend for its execution upon the lawfulness of the initial stop,” and therefore denied Armstrong’s petition. This appeal resulted.

This Court has stated previously that refusal to submit to a chemical test for blood alcohol content is an issue separate and distinct from the criminal action of driving while intoxicated. Gebhardt v. State (1989), 238 Mont. 90, 775 P.2d 1261; In re Blake (1986), 220 Mont. 27, 712 P.2d 1338; Petition of Burnham (1985), 217 Mont. 513, 705 P.2d 603. The suspension of a license is subject to review under § 61-8-403, MCA, which states:

“The department shall immediately notify any person whose license or privilege to drive has been suspended or revoked, as herein-before authorized, in writing and such person shall have the right to file a petition within 30 days thereafter for a hearing in the matter in the district court in the county wherein such person resides or in the district court in the county in which this arrest was made. Such court is hereby vested with jurisdiction and it shall be its duty to set the matter for hearing upon 10 days’ written notice to the county attorney of the county wherein the appeal is filed and such county attorney shall represent the state, and thereupon the court shall take testimony and examine into the facts of the case, except that the issues shall be limited to whether a peace officer had reasonable grounds to believe the person had been driving or was in actual physical control of a vehicle upon ways of this state open to the public, while under the influence of alcohol, whether the person was placed under arrest, and whether such person refused to submit to the test. The court shall thereupon determine whether the petitioner is entitled to a license oris subject to suspension as heretofore provided. (Emphasis added.)”

In a district court’s review of the propriety of the license suspension for failure to submit to a chemical test, the only determinations to be made by the court are:

“(1) whether the arresting officer had reasonable grounds to believe the following:
“(a) that the petitioner had been driving or was in actual physical control of a vehicle;
“(b) that the vehicle was on a way of this state open to the public; and
“(c) that the petitioner was under the influence of alcohol;
“(2) whether the individual was placed under arrest; and
“(3) whether the individual refused to submit to a chemical test. (Emphasis added.)”

Gebhardt, 775 P.2d at 1265.

There is no question in this case that Armstrong was in control of a vehicle on a way open to the public, was arrested and refused to submit to a chemical test. At issue is whether the officer had reasonable grounds to believe Armstrong was committing a traffic violation or other violation of law when he made the stop.

The right of a police officer to make a warrantless arrest is defined in § 46-6-40l(l)(d), MCA, which provides that: “A peace officer may arrest a person when he believes on reasonable grounds that the person is committing an offense or that the person has committed an offense and the existing circumstances require his immediate arrest.” The reasonable grounds for an investigatory stop of a motor vehicle may be a particularized suspicion, comprised of: (1) objective data from which an experienced officer can make certain inferences; and (2) a resulting suspicion that the occupant of the vehicle is or has been engaged in wrongdoing. State v. Gopher (1981), _ Mont. _, 631 P.2d 293, 296.

Here, there is no scintilla of objective data to justify an investigatory stop under § 46-6-401(l)(d), MCA. While a properly founded suspicion to stop for investigative detention may ripen into probable cause (State v. Lee (1988), 232 Mont. 105, 754 P.2d 512; State v. Sharp (1985), 217 Mont. 40, 702 P.2d 959), there was an admitted absence of properly founded suspicion on the part of the arresting officer in this case. Armstrong was merely driving down an alleyway late at night when he was detained. Unlike Blake (auto swerve) or Gebhardt (asleep behind wheel of mired, running vehicle), the officer here had no basis to suspect Armstrong was possibly driving under the influence at the time the stop was made.

One of the determinations the district court must make during the hearing authorized under § 61-8-403, MCA, is whether the arresting officer here had reasonable grounds to believe that the petitioner was driving while under the influence of alcohol. Clearly, the officer here did not. The District Court’s finding that reasonable grounds existed is clearly erroneous, and Armstrong’s petition should have been granted.

The significance of this decision should be clearly understood. A police officer making a legal stop of a vehicle, as for a traffic violation, for example, is not prevented by this Opinion from further determining after the legal stop that the driver is under the influence of alcohol, placing him under arrest, and then requesting that the driver submit to a chemical test under § 61-8-402, MCA.

Reversed.

JUSTICES HARRISON, WEBER, HUNT and McDONOUGH concur.


text:
    IN RE THE MARRIAGE OF PEGGY MAHAFFEY, Petitioner and Respondent, and BOYD MAHAFFEY, Respondent and Appellant.
    No. 89-572.
    Submitted on Briefs May 3, 1990.
    Decided June 7, 1990.
    801 P.2d 1335.

      Brett C. Asselstine, Great Falls, for respondent and appellant.
    E. Lee LeVeque, Great Falls, for petitioner and respondent.
   CHIEF JUSTICE TURNAGE

delivered the Opinion of the Court.

The District Court for the Eighth Judicial District, Cascade County, entered judgment dissolving the parties’ marriage and distributing marital property. Boyd Mahaffey appeals. We affirm.

The issues are:

1. Did the District Court abuse its discretion by denying Boyd Mahaffey’s motion to continue the trial for thirty days due to his bad health?

2. Did the court err in determining that the parties had entered into a common law marriage?

3. Did the court make an inequitable distribution of property?

Peggy Mahaffey (Peggy) filed a petition for dissolution of marriage from Boyd Mahaffey (Boyd) in December 1988. In his response to the petition, Boyd denied that the parties had entered into a marriage. A pretrial conference was set for May 22,1989. Boyd moved to continue the conference because he was ill and had been in the hospital. Peggy objected to a continuance and the conference was held.

Trial was set for July 7, 1989, but on July 5, Boyd moved for and was granted a continuance because he was hospitalized for high blood pressure. Trial was reset for August 4. On August 2, Boyd moved for a thirty-day continuance because of his emphysema and hypertension. That motion was denied.

At trial, Peggy presented evidence that she and Boyd had entered into a common law marriage on July 30, 1985. At that time, she was thirty- six and he was fifty-nine. No children were born of their union. Ahorne built in 1987 in Great Falls was the only marital property the court was asked to distribute. Both parties testified at trial, as did several witnesses for each side.

The court concluded that a common law marriage had been entered, that the marriage was irretrievably broken, and that Boyd should pay Peggy half the value of the marital home, or $44,892. From that judgment, Boyd appeals.

I

Did the District Court abuse its discretion by denying Boyd’s motion to continue the trial for thirty days due to his bad health?

Boyd contends that he was obviously sick at the time of trial, that he was physically and mentally unable to assist his counsel, and that he was unable to understand the proceedings and to testify coherently. He states that Peggy made no showing that she would have been prejudiced by an extension of time and that the trial court’s failure to grant the extension was an abuse of discretion.

The record shows that Boyd was present at the August 4 trial and that he testified extensively in his own behalf. Although the court noted that Boyd was ill, his illness did not prevent him from presenting his case. The motion for continuance of the August 4 court date followed several other motions for continuances by Boyd. We hold that the District Court did not abuse its discretion in denying Boyd’s motion for a further continuance.

II

Did the court err in determining that the parties had entered into a common law marriage?

To establish a common law marriage in Montana, it must be shown that parties capable of consenting to the marriage did so by mutual assent and agreement and that they established the marriage by cohabitation and repute. In re Marriage of Geertz (1988), 232 Mont. 141, 145, 755 P.2d 34, 37. Boyd argues that there was no showing that he was competent to enter into a marriage, that there was no present agreement to be married, and that Peggy did not establish the element of cohabitation and repute.

There is nothing in the record to indicate that Boyd was incompetent to consent to marriage in July 1985. In the absence of any evidence that Boyd was incompetent, we conclude that no finding was necessary on that point.

Peggy testified that she and Boyd exchanged wedding rings on July 30, 1985, intending to be husband and wife and to go through the actual ceremony later. Boyd testified that they agreed only to cohabit for the present and to marry later. Where evidence conflicts, it is the province of the finder of fact to resolve the conflict, and this Court’s function is to determine only whether substantial evidence supports the findings. In re Support of Rockman (1985), 217 Mont. 498, 501, 705 P.2d 590, 591. We conclude that substantial evidence supports the finding that Boyd and Peggy were married when they exchanged wedding rings on July 30, 1985.

Although Boyd presented testimony to the contrary, Peggy produced a number of witnesses who testified that she and Boyd lived together and held themselves out as a married couple. These included friends, family, coworkers, and the contractor who designed the new home in Great Falls. Witnesses testified that at Peggy’s daughter’s January 1988 wedding, Boyd “gave away” the bride, and the wedding invitations were issued by “Mr. and Mrs. Boyd Mahaffey.” Other witnesses testified that Boyd introduced Peggy as “my wife.” Peggy was insured on Boyd’s automobile liability coverage as Peggy Mahaffey. We conclude that substantial evidence supports the court’s findings as to cohabitation and repute.

In sum, we conclude that Peggy presented substantial evidence that she and Boyd were married by mutual agreement and that they established the marriage by cohabitation and repute. We hold that the District Court did not err in determining that the parties had entered into a common law marriage.

Ill

Did the court make an inequitable distribution of property?

Boyd maintains that an equal division of the value of the house was inequitable because this marriage was of short duration, there were no children bom of the marriage, and Peggy did not contribute to the marital assets. He argues that the house should be his alone. The parties stipulated to the division of all other property they owned.

This Court will reverse a property distribution only upon a showing that the district court has acted arbitrarily or committed a clear abuse of discretion. In re Marriage of Hall (1987), 228 Mont. 36, 39, 740 P.2d 684, 686. Peggy testified that she contributed $10,000 toward the value of the home. She produced receipts at trial totaling nearly $7,000. She further testified that she assisted in painting the interior of the home, selected carpeting and draperies, and did cooking, cleaning, housework, and laundry during the marriage. The court found that Boyd had the financial means to pay Peggy $44,892. We hold that the court did not abuse its discretion in dividing the value of the home equally between the parties.

Affirmed.

JUSTICES SHEEHY, BARZ, WEBER and McDONOUGH concur.