text:
    GREG D. AND NANCY COURCHANE, Plaintiffs and Appellants, v. RONALD L. AND SUSAN K. KUNTZ, and Flynn Realty, Inc., a Montana Corporation, Defendants and Respondents.
    No. 90-209.
    Submitted on Briefs Aug. 16, 1990.
    Decided Oct. 15, 1990.

    246 Mont. 216.
    806 P.2d 12.
    Robert D. Morrison, Morrison, Young, Melcher, Brown & Richardson, Havre, for plaintiffs and appellants.
    William Conklin, Great Falls, James O’Brien, Missoula, for defendants and respondents.
   JUSTICE SHEEHY

delivered the Opinion of the Court.

Greg and Nancy Courchane appeal from the judgment of the District Court, Twelfth Judicial District, Hill County, dismissing their claims against Flynn Realty, Inc. pursuant to Rule 41(e), M.R.Civ.R We affirm the District Court.

The sole issue raised by appellants is whether the District Court properly interpreted Rule 41(e) to prohibit the addition of a new defendant to an action more than three years after its commencement.

On February 1, 1985, Ronald and Susan Kuntz conveyed their Havre home to Greg and Nancy Courchane by warranty deed. Sometime after the sale, Courchanes discovered the sewer system of the home to be defective. Courchanes instituted an action against the Kuntzes on October 17, 1986, alleging fraud and negligent misrepresentation as to the condition of the sewer system. In the original complaint, Courchanes asserted that “prior to the conveyance of said real property the [Kuntzes], through their agent, represented to the [Courchanes] that the plumbing in the house was in good working condition ...”

In the original complaint, Flynn Realty, Inc., andits employee, Kim Cripps, were not named as party defendants. Not until December 28, 1989, when Courchanes filed an amended complaint, was Flynn Realty joined as a party defendant. In the amended complaint, Courchanes asserted that Flynn Realty, through its salesperson, made fraudulent and negligent representations as to the sewer condition, after failing to make any prior inquiry of the Kuntzes or other previous owners as to any sewer problems.

Flynn Realty thereupon filed its motion to dismiss pursuant to Rule 41(e), M.R.Civ.R, asserting that it was not served with summons within three years of the commencement of the action. The District Court, stating the rule to be clear and mandatory, granted Flynn Realty’s motion. This appeal ensued.

Courchanes contend that Rule 41(e) should not apply as a basis for dismissal of their action against Flynn Realty in this instance. Courchanes assert they did not realize a cause of action against Flynn Realty existed until January 29, 1988, when Kuntzes answered the first of plaintiff’s interrogatories. In those answers, Kuntzes admitted that no representations or instructions as to the sewer system had ever been made by Kuntzes to Flynn Realty or its employees.

Courchanes assert that until discovery revealed Flynn Realty’s culpability, Courchanes could not have reasonably known that the representations were made by Flynn Realty without having made any independent investigation as to the sewer system.

Courchanes contend that Rule 41(e) applies only to parties known, and should not be applied in a situation such as this, where a party defendant was not known. Courchanes cite Livingston v. Treasure County (1989), 239 Mont. 511, 781 P.2d 1129, 1131, for the premise that “Rules of Civil procedure are to be construed in a manner that secures the just, speedy and inexpensive determination of lawsuits on their merits.” Courchanes assert that it was error for the District Court to dismiss Flynn Realty on a technical point rather than to allow the action to proceed and be settled on its merits.

We do not agree with the Courchanes’ reasoning. In the original complaint, Courchanes allege that the representations regarding the sewer system were made by the Kuntzes “through their agent.” By this statement, it is clear that Courchanes knew the origin of the misrepresentations on October 17, 1986, the date the original complaint was filed. As soon as the sewer problems were manifested, Courchanes were put on notice that Flynn Realty, through the statements of its employee, was responsible for the misrepresentation that the plumbing was up to par. Nothing prevented Courchanes from setting forth an alternative hypothetical claim as allowed by Rule 8(e)(2), M.R.Civ.R, against Flynn Realty in the original complaint of October 17, 1986. When Courchanes became aware of their injury, they had the burden of pursuing their remedies against the person or persons responsible in a timely manner. By waiting until December 28, 1989, Courchanes were prohibited from joining an obvious party defendant in the action. Rule 41(e) reads in part:

“No action heretofore or hereafter commenced shall be further prosecuted as to any defendant who has not appeared in the action or been served in the action as herein provided within 3 years after the action has been commenced, and no further proceedings shall be had therein, and all actions heretofore or hereafter commenced shall be dismissed by the court in which the same shall have been commenced, on its own motion, or on the motion of any party interested therein, whether named in the complaint as a party or not ...” (Emphasis added.)

Flynn Realty was not served nor did it appear within 3 years of the action’s commencement. To allow Flynn Realty to be joined after three years had elapsed would not have been timely, and Courchanes have not stated or alleged any legal excuse or reason to invoke the equity of a court for their failure to join Flynn Realty in the time frame required. By their own testimony, Courchanes had from the January 29, 1988 answers to interrogatories, when they claim they first discovered Flynn Realty’s misrepresentations until October 17,1989 to properly join Flynn Realty as a defendant. The District Court properly granted Flynn Realty’s motion to dismiss.

Affirmed.

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


source: Caselaw Access Project

author: JUSTICE SHEEHY

license: Public Domain

text:
    LARRY DEEDS, et. al., Plaintiffs and Appellants, v. DECKER COAL COMPANY, Defendant and Respondent.
    No. 90-207.
    Submitted Aug. 9, 1990.
    Decided Oct. 16, 1990.
    246 Mont. 220.
    805 P.2d 1270.

      Thomas E. Towe, Towe, Ball, Enright & Mackey, Billings, for plaintiffs and appellants.
    Paul D. Miller, Holland & Hart, Billings, Sandra R. Goldman, Holland & Hart, Denver, Colo., for defendant and respondent.
   JUSTICE SHEEHY

delivered the Opinion of the Court.

Plaintiffs in this class action suit appeal the judgment of the District Court, Thirteenth Judicial District, Big Horn County, granting Summary judgment for Decker Coal Company in wrongful discharge action. We reverse the District Court and stay the proceedings pending the outcome of National Labor Relations Board proceedings.

The issues are:

1) Did the District Court err in concluding the dispute to be exempted under § 39-2-912, MCA of the Montana Wrongful Discharge from Employment Act?

2) Did appellants perfect this appeal?

The appellants in this case are 152 employees discharged by respondent Decker Coal Company for allegedly engaging in strike misconduct.

The collective bargaining agreement between Decker and its employees expired on October 1,1987. Appellants and other employees went on strike at that time. On June 24, 1988, the United Mine Workers of America, on behalf of the striking employees, made an unconditional offer to return to work, effective June 27, 1988. On June 28, 1988, Decker notified employees that approximately 80 of the striking employees would be recalled but that the remaining 152 employees would be discharged due to allegedly engaging in "serious strike misconduct.”

In November and December of 1988, the discharged employees, individually and through the UMWA, filed unfair labor practice charges with the National Labor Relations Board, claiming their discharges to be retaliatory measures based on union activities. As of the date of this appeal, the NLRB has yet to file a complaint on behalf of the discharged employees.

The discharged employees filed the complaint leading to this appeal in District Court on June 23, 1989, alleging wrongful discharge pursuant to the Montana Wrongful Discharge from Employment Act, § 39-2-901, et seq. Oral argument was held on October 25, 1989, and the court granted Decker’s motion for summary judgment on November 6, 1989, ruling the Montana Act not applicable due to exemptions contained in the Act. This appeal resulted.

Appellants contend that the District Court erred in its determination that their wrongful discharge action is exempted under § 39-2-912, MCA.

Section 39-2-912 states that Montana’s Wrongful Discharge from Employment Act does not apply to a discharge:

“(1) that is subject to any other state or federal statute that provides a procedure or remedy for contesting the dispute. Such statutes include those that prohibit discharge for filing complaints, charges or claims with administrative bodies or that prohibit unlawful discrimination based on race, national origin, sex, age, handicap, creed, religion, political belief, color, marital status, and other similar grounds.
“(2) of an employee covered by a written collective bargaining agreement or a written contract of employment for a specific term.”

Appellants maintain that no statutory exemption applies in this instance. They contend that their labor relations dispute is not exempted by the statute, as all of the statute’s exemptions are based on discrimination. We cannot interpret the statute so narrowly. Clearly, the statute’s list is not meant to be all inclusive, as shown by the term “and other similar grounds.”

There is merit, however, in appellants’ argument that no other state or federal statute providing a procedure or remedy for contesting the dispute has yet taken effect, thereby exempting this dispute. Nor can the employees be said to be exempted from the Act’s provisions by way of a collective bargaining agreement. It was the expiration of their collective bargaining agreement that set this litigation in motion.

Should the NLRB eventually decide to enter into the dispute by filing a complaint on behalf of the discharged employees, a “procedure or remedy for contesting the dispute” would be set in motion, and the statutory exemption of § 39-2-912, MCA, would apply. As yet, no such procedure has taken place, and appellants state that the District Court’s finding was erroneous.

We find that the District Court was premature in its ruling that the claims for wrongful discharge were exempted. To ensure appellants a forum in which the dispute may be resolved, this cause is reversed and remanded to the District Court, with the proceedings stayed pending NLRB action.

Respondent Decker argues that only one appellant, Larry Deeds, has perfected an appeal. Appellants’ notice of appeal is headed “Larry Deeds, et al.,” which Decker contends is insufficient to convey notice under Rule 4(c), Montana Rules of Appellate Procedure. Rule 4(c) provides that:

“The notice of appeal shall specify the party or parties taking the appeal; and shall designate the judgment, order or part thereof appealed from.
* * *
“An appeal shall not be dismissed for informality of form or title of the notice of appeal.” ,

Decker urges this Court to find that the term “et al.” is insufficient to specify the parties taking this appeal. Decker cites the U.S. Supreme Court decision in Torres v. Oakland Scavenger Co. (1988), 487 U.S. 312, 108 S.Ct. 2405, 101 L.Ed.2d 285, wherein a sharply divided Court held that Rule 3(c), Federal Rules of Appellate Procedure, (which is identical to Rule 4(c), M.R.App.P.), is jurisdictional in nature and requires the names of all parties taking part in the appeal.

We decline to follow the respondent’s interpretation of the Torres decision. We instead choose to follow the Ninth Circuit decision in National Center for Immigrants’ Rights v. I.N.S. (9th Cir. 1989), 892 F.2d 814, wherein the Circuit Court, directly addressing the use of “et al.” in the caption of the notice clearly indicated that all of the defendants were appealing the decision below. The Circuit Court noted that the Torres decision was premised on a fact pattern where one petitioner out of the sixteen plaintiffs was never named.

It would be onerous, to say the least, to require all 152 appellants in this action to be named in the notice of appeal. In the complaint filed with the District Court, the names of all of the discharged employees takes two full pages to list. In the notice of appeal, the discharged employees were denominated “Larry Deeds, et al., Plaintiffs,” which we find to be sufficient to meet the intent of Rule 4(c), M.R.App.P., and provide Decker with notice of the parties appealing. “Et al.” in this instance is a commonly-used informality, and an appeal “shall not be dismissed for informality of form or title of the notice of appeal.” Rule 4(c), M.R.App.P.

Reversed with directions to the District Court to stay proceedings in accordance with this opinion.

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


author: JUSTICE McDONOUGH JUSTICE SHEEHY JUSTICE WEBER

text:
    STATE OF MONTANA, EX REL., DIVISION OF WORKERS’ COMPENSATION, Relator, v. DISTRICT COURT of the THIRTEENTH JUDICIAL DISTRICT, and Honorable Robert W. Holmstrom, District Judge, Respondents. NATHANIAL B. BLAYLOCK, et al., Plaintiffs/Appellants, and David L. Caldwell, Plaintiff/Appellant, v. the DIVISION OF WORKERS’ COMPENSATION, The Department of Labor and Industry, and The State of Montana, Defendants/Respondents.
    Nos. 89-259, 89-298.
    Submitted June 28, 1990.
    Decided Oct. 22, 1990.
    246 Mont. 225.
    805 P.2d 1272.

      Robert C. Kelleher, Sr., and Lee R. Kerr; Kelleher Law Offices, Billings, for appellant.
    Timothy J. Whalen, Whalen and Whalen, Billings, for appellant Caldwell.
    John H. Maynard, Tort Claims Div., Chris D. Tweeten, Hughes, Kellner, Sullivan and Alke, Helena, for respondent and relator.
   JUSTICE McDONOUGH

delivered the Opinion of the Court.

This is an original proceeding of supervisory control consolidated with an appeal from a summary judgment entered in favor of the defendants by the District Court for the Thirteenth Judicial District, Yellowstone County, on the grounds that the defendants are entitled to quasi-judicial immunity. The District Court also ruled that the 42 U.S.C. § 1983 claims of unnamed plaintiffs in this class action suit are not barred by a federal court dismissal of these claims under the doctrine of res judicata. We reverse the District Court’s order and remand the case for further proceedings. The following issues are the subject of this appeal:

(1) Is the State of Montana and its Division of Workers’ Compensation protected by quasi-judicial immunity for their negligence in renewing the privilege of an employer to self-insure its workers’ compensation risk without requiring the self-insuring employer to post security to guarantee payment of benefits?

(2) Does 42 U.S.C. § 1983 provide a remedy under the due process clause for gross negligence?

(3) Does the doctrine of res judicata act to bar named plaintiffs in the federal action from bringing their § 1983 action in the state courts?

The cause of action arises from the bankruptcy of Great Western Sugar Co. (GW), a Delaware corporation. GW employed Montana workers in its sugar beet processing factory near Billings, and self-insured its Workers’ Compensation risk under Plan I of the Montana Workers’ Compensation Act, § 39-71-2101, et seq., MCA (1985).

From 1981 to 1985, Andrew Kiely and James Murphy were the Division of Workers’ Compensation (Division) employees who approved Plan I self- insurance applications. Plaintiffs’ claim that Kiely and Murphy failed to act on GW’s 1984 application for renewal. Plaintiffs farther allege that GW officials were well aware GW was losing its solvency and yet failed to provide the security required by § 39-71-2106, MCA (1985). In early 1985, GW filed a petition for bankruptcy. Plaintiffs allege that prior to the fifing, GW failed to make timely payment of benefits due claimants under the Workers’ Compensation Act, and that GW ceased making any such payments after the bankruptcy filing. In their answer, the defendants admit that they were negligent in failing to conduct an adequate review of GW’s financial condition in 1984, but deny that their negligence proximately caused the loss of plaintiffs’ benefits. The suit was consolidated into a class action, the plaintiff class consisting of those former employees of GW who lost workers’ compensation benefits as a result of GW’s bankruptcy.

The procedural history of this case is extensive. It began in the United States District Court for the District of Montana, Billings Division, where plaintiffs’ § 1983 claims were dismissed. Plaintiffs’ appeal to the Ninth Circuit was affirmed. It is now before this Court on appeal from a final judgment entered in the District Court for the Thirteenth Judicial District, Yellowstone County, pursuant to Rule 54(b), M.R.Civ.P. The District Court dismissed the state law claims of all members of the plaintiff class solely on the grounds of quasi-judicial immunity and our decision in Koppen v. Board of Medical Examiners (1988), 233 Mont. 214, 759 P.2d 173, and also dismissed the claims under 42 U.S.C. § 1983 of the ten members of the plaintiff class who were named as plaintiffs in the earlier federal case as being res judicata. It further held that the Fifth Amended Complaint states a claim for relief under 42 U.S.C. § 1983. The defendants moved for reconsideration of that portion of the Court’s order denying summary judgment as to the unnamed members of the federal plaintiff class, arguing that as a matter of federal law in the federal action, dismissal barred all potential plaintiffs despite the federal court’s failure to certify the case as a class action. The District Court held that there is no privity existing between the two groups of plaintiffs and therefore unnamed plaintiffs are not barred by the res judicata effect of the federal decision.

This portion of the appeal is now before us pursuant to a writ of supervisory control issued August 30, 1989 accepting jurisdiction to determine whether the court below erred in refusing to dismiss the § 1983 claims of the remaining members of the plaintiff class who were not named plaintiffs in the federal action. The plaintiffs appealed the District Court’s grant of summary judgment. The defendants’ writ and plaintiffs’ appeal were thereafter consolidated for oral argument.

I. Quasi-judicial Immunity

First, we will address the issue of whether the State and the Division are protected by quasi-judicial immunity for their admitted negligence in renewing the privilege of an employer to self-insure its workers’ compensation risk without requiring the self-insuring employer to post security to guarantee payment of benefits. Our determination will actually be considerably narrower than the issue presented to us and in addition does not reach any consideration of causation. Central to this determination is the nature of the functions to be performed by the Division in this case. For immunity to apply the function of the Division must be quasi-judicial rather than administrative or ministerial. Our review of past cases points out that the distinction between these functions is anything but clear:

“Experience teaches that few, if any, ministerial officers are not called upon to exercise some judgment or discretion in the performance of their official duties ....
“As distinguishing between acts quasi-judicial and acts ministerial in their character, the following definitions we think correctly state the law: ‘Quasi-judicial functions are those which he midway between the judicial and ministerial ones. The lines separating them from such ... are necessarily indistinct; but, in general terms, when the law, in words or by implication, commits to any officer the duty of looking into facts, and acting upon them, not in a way which it specifically directs, but after a discretion in its nature judicial, the function is termed quasi-judicial....
“ ‘Administerial act may perhaps be defined to be one which a person performs in a given state of facts, in a prescribed maimer, in obedience to the mandate of legal authority, without regard to or the exercise of his own judgment upon the propriety of the act done ....
“ ‘...In the same line, a ministerial act has also been defined as an act performed in a prescribed legal manner, in obedience to the law or the mandate of legal authority, without regard to, or the exercise of, the judgment of the individual upon the propriety of the acts being done ..[Citations omitted.]

State ex rel. Lee v. Montana Livestock Sanitary Board (1959), 135 Mont. 202, 206, 339 P.2d 487, 489-490. In granting the defendants summary judgment, the District Court relied on this Court’s decision in Koppen, where we held that the Board of Medical Examiners was immune from suit for allegedly failing to respond to complaints about a doctor’s fitness to practice medicine and to limit or revoke his license to practice medicine under the common-law theory of quasi- judicial immunity. In Koppen we pointed to the discretion of the Board to weigh information, the fact that it could not revoke or suspend a license without giving notice and an opportunity for hearing, that such a hearing would be governed by the Montana Administrative Procedure Act and that the decision reached would be subject to judicial review, as factors in determining that the acts performed by the Board came within the statutory definition of “quasi-judicial function” found at § 2-15-102 (10), MCA:

“ ‘Quasi-judicial function’ means an adjudicatory function exercised by an agency, involving the exercise of judgment and discretion in making determinations in controversies ...” (Emphasis added.) Section 2-15-102(10), MCA. See Koppen, 759 P.2d at 176.

The case before us is distinguishable from Koppen. In Koppen, the Board allegedly failed to respond to complaints, adversarial in nature, that it received regarding a physician’s fitness to practice medicine and to take remedial action. Koppen, 759 P.2d at 174. We noted that the action or inaction by the Board in Koppen was its. decision not to revoke or limit the physician’s license or initiate such action when faced with complaints concerning his professional conduct. Koppen, 759 P.2d at 176. There was no allegation that the Board failed to even consider the complaints.

Here, we first note that there is no controversy from the outset as in Koppen. The facts merely involve the filing of an application rather than an adversarial setting involving a dispute or controversy. We conclude that immunity does not attach because the Division is not expressly designated a quasi-judicial board, see § 2-15-124, MCA, see generally Title 2, Chapter 15, MCA, nor was it performing a quasi-judicial function as will be discussed below. The following statutes are relevant to our determination of the nature of the Division’s function in this case:

“39-71-2101 (1985): Requires Plan I employers to furnish satisfactory proof to the division of their solvency and financial ability to pay the compensation and benefits in this chapter.
“39-71-2102 (1985): Employer ‘shall fileproofofhis solvency within the time and in the form as may be prescribed by the rules or orders of the division.’
“39-71-2104 (1985): Every Plan I employer ‘shall, at least 30 days before the expiration of each fiscal year, renew his application to be permitted to continue to make such payments as aforesaid directly to his employees for the next ensuing fiscal year ...’
“39-71-2106 (1985): ‘The division may require any employer who elects to be bound by compensation Plan I to provide a security deposit,... The division is liable for the value and safekeeping of all such deposits or securities and shall, at any time, upon demand of a bondsman or the depositor, account for the same and the earnings thereof.’
“39-71-2108 (1985): TJpon the failure of the employer to pay any compensation provided for in this chapter upon the terms and in the amounts and at the times when the same becomes due and payable, the division shall, upon demand of the person to whom compensation is due, apply any deposits made with the division to the payment of the same, and the division shall take the proper steps to convert any securities on deposit with the division or sufficient thereof into cash and to pay the same upon the liabilities of the employer accming under the terms of this chapter, and the division shall, when necessary, collect and enforce the collection of the liability of all sureties upon any bonds which may be given by the employer to insure the payment of his liability ...’ ” (Emphasis added.)

The following administrative rules, corresponding to these statutes, are also pertinent to our determination:

“24.29.702 ELECTION TO BE BOUND BY COMPENSATION PLAN NO. 1 ELIGIBILITY (1) Any employer ... may elect to be bound as a self-insurer under plan No. 1, if in accordance with 39-71-2102, MCA, the employer... submits, on forms provided by the division, satisfactory proof of solvency and financial ability to pay ... and if, in accordance with 39-71-2103, MCA, the division finds the employer ... to have the necessary finances ....
“24.29.702A SOLVENCY AND ABILITY TO PAY (1) Proof of solvency and financial ability to pay compensation, benefits and liabilities is required. Employers ... must demonstrate financial stability by providing audited financial statements that upon analysis indicate sufficient security, as determined by the division, to protect the interests of injured workers. These shall consist of analysis of financial conditions, current and historical, including, but not limited to, the following factors: quick ratio, current ratio, current liabilities to net worth, current liabilities to inventory, total liabilities to net worth, fixed assets to net worth, collection period, inventory turnover, assets to sales, sales to net working capital, accounts payable to sales, return on sales, return on assets, return on net worth, contingent liabilities, comparison to industry standards, income from ongoing operations and corporate bond rating. Only an employer ... meeting financial standards acceptable to the division shall be granted permission to be bound as a plan No. 1 self-insurer ....
“24.29.702B WHEN SECURITY REQUIRED (1) Security must be deposited with the division by the employer... on order of the division under the following conditions:
“(a) Every employer... must deposit security with the division. The deposit requirement may be waived in whole or in part by the division for individual employers ... only who provide substantive evidence that the full amount of the deposit is not needed. This evidence shall consider criteria for solvency and ability to pay as set forth in ARM 24.29.702A.
“(b) The employer ... no longer has the solvency or ability to pay compensation, benefits, and liabilities as determined under standards applied in ARM 24.29.702A.
“(c) The employer ... does not have sufficient securities on deposit with the division under section 39-71-2107, MCA, to meet current liabilities, in addition to all other liabilities ....”
24.29.702 ARM. The statutory scheme for approval of plan No. 1 insurers further distinguishes this case from Koppen. The statutes governing the Board of Medical Examiners provide that “the board may make an investigation whenever it is brought to its attention that there is reason to suspect” that a particular doctor is unfit to practice medicine or is guilty of unprofessional conduct. See §§ 37-3-323 and 37-3-322, MCA. Here, the statutory scheme mandates that the Division at least review a self-insurer’s financial condition. Admittedly the statutes and administrative rules grant the Division discretion in renewing GW’s application as a plan No. 1 self-insurer. However, in this case the Division never exercised this discretion to determine GW’s eligibility to self-insure its risk under plan No. 1. Rather, there was an admitted complete failure by the Division to undertake any of the review necessary to make such a determination. Thus, the negligence occurred at a stage where the Division’s function was entirely ministerial:

“Official action, the result of performing a certain specific duty arising from designated facts, is a ministerial act.... Another way of expressing the same thought is that a duty is to be regarded as ministerial when it is a duty that has been positively imposed by law, and its performance required at a time and in a manner, or upon conditions which are specifically designated; the duty to perform under the conditions specified not being dependent upon the officer’s judgment or discretion .... And that a necessity may exist for the ascertainment, from personal knowledge or from information derived from other sources, of those facts or conditions, upon the existence or fulfillment of which, the performance of the act becomes a clear and specific duty, does not operate to convert the act into one judicial in its nature.” (Emphasis added.)

Meinecke v. McFarland (1949), 122 Mont. 515, 522, 206 P.2d 1012, 1015. [Citations omitted.] The discretion afforded by the statutes and rules in this case was never exercised, rather, the Division breached its underlying duty, mandated by the statutory scheme for plan No. 1 insurance, to investigate GWs eligibility to self-insure. Such act was purely ministerial, Meinecke, supra, and cannot be a basis for invoking quasi-judicial immunity:

“Accordingly, to be entitled to immunity the state must make a showing that such a policy decision, consciously balancing risks and advantages, took place. The fact that an employee normally engages in ‘discretionary activity’is irrelevant if, in a given case, the employee did not render a considered decision ...”

Johnson v. State (1968), 69 Cal.2d 782, 73 Cal.Rptr. 240, 249, n. 8, 447 P.2d 352, 361, n. 8.

While our analysis here is limited to common-law quasi-judicial immunity, the “exercise of judgment and discretion” required by § 2-15-102(10), MCA, to invoke such immunity is analogous to the discretionary function exception to the Federal Tort Claims Act (FTCA), 28 U.S.C. § 2680(a). Under this exception the FTCA does not waive the immunity of the United States for claims based upon negligence of government employees exercising or performing discretionary functions on the part of a federal agency, regardless of whether the discretion is abused. 28 U.S.C. § 2680(a); see Dalehite v. United States (1953), 346 U.S. 15, 73 S.Ct. 956, 97 L.Ed. 1427; United States v. Varig Airlines (1984), 467 U.S. 797, 104 S.Ct. 2755, 81 L.Ed.2d 660. While suits cannot be maintained against the United States for acts falling under this exception, such acts must involve the “permissible exercise of policy discretion”:

“[T]he discretionary function exception will not apply when a federal statute, regulation, or policy specifically prescribes a course of action for an employee to follow. In this event, the employee has no rightful option but to adhere to the directive. And if the employee’s conduct cannot appropriately be the product of judgment or choice, then there is no discretion in the conduct for the discretionary function exception to protect.” (Emphasis added.)

Berkovitz v. United States (1988), 486 U.S. 531, 536, 108 S.Ct. 1954, 1958, 1959, 100 L.Ed.2d 531, 540-541. The facts in Berkovitz are similar to the facts here. In Berkovitz the plaintiff alleged that the National Institutes of Health’s Division of Biologic Standards (DBS) negligently failed to require certain tests prior to issuing a manufacturer’s license to produce a polio vaccine. Prior to issuing a product license, statutory and regulatory provisions required DBS to receive all data the manufacturer was required to submit regarding the product, to examine the product, and to make a determination that the product complies with safety standards. Berkovitz, 486 U.S. at 542, 108 S.Ct. 1961. The plaintiff alleged that DBS decided to issue a license without having first received the required test data, thus immunity did not bar his claims:

“Rather, the claim charges a failure on the part of the agency to perform its clear duty under federal law. When a suit charges an agency with failing to act in accord with a specific mandatory directive, the discretionary function exception does not apply.”

Berkovitz, 486 U.S. at 544, 108 S.Ct. 1963. For similar reasons, the immunity we recognized in Koppen is inapplicable in this case. In Koppen, the Board exercised a quasi-judicial function in deciding not to take action in the face of adversarial complaints against a doctor. Here, there was no discretion exercised by the Division regarding renewal or non-renewal of GW’s status; rather, there was a complete failure at the administrative level to conduct the necessary preliminary review of GW’s financial condition that would enable the Division to make a decision to not renew. The duties imposed by the statutory scheme on the Division’s employee were purely investigative, ministerial and administrative. Because the Division failed to perform its duty to review or examine GW’s application as prescribed by statute, and because simply performing this duty does not involve the use of quasi-judicial discretion, the Division is not protected by quasi-judicial immunity at this stage. The Division has simply not functioned as such under these facts.

II. Section 1983 Claims

Plaintiff’s constitutional claims are based on 42 U.S.C. § 1983, which provides:

“Section 1983. Civil action for deprivation of rights
“Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory or the District of Columbia, subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress ....”

With respect to defendants’ appeal regarding the effect of res judicata on plaintiffs’ claims under 42 U.S.C. § 1983 and whether this section provides a remedy under the due process clause for gross negligence, we note that it is now settled that states and their agents are not “persons” for the purposes of § 1983:

“... it does not follow that if municipalities are persons then so are States. States are protected by the Eleventh Amendment while municipalities are not, Monell, 436 U.S., at 690, n. 54, 98 S.Ct., at 2035, n. 54, and we consequently limited our holding in Monell ‘to local government units which are not considered part of the State for Eleventh Amendment purposes,’ ibid. Conversely, our holding here does not cast any doubt on Monell, and applies only to States or governmental entities that are considered ‘arms of the State’ for Eleventh Amendment purposes

“Obviously state officials literally are persons. But a suit against a state official in his or her official capacity is not a suit against the official but rather is a suit against the official’s office. Brandon v. Holt, 469 U.S. 464, 471, 105 S.Ct. 873, 877, 83 L.Ed.2d 878 (1985). As such, it is no different from a suit against the State itself ... [citations omitted]

“We hold that neither a State nor its officials acting in their official capacities are ‘persons ■under’ § 1983 ...”

Will v. Michigan Department of State Police (1989), 491 U.S. 58, 109 S.Ct. 2304, 2311-2312, 105 L.Ed.2d 45. The plaintiffs have no § 1983 claim against the defendants in this case.

There being no quasi-judicial immunity afforded to the Division and there being no valid claims under 42 U.S.C. § 1983, the case is remanded for further proceedings on the plaintiffs’ remaining claims.

REVERSED AND REMANDED.

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

JUSTICE SHEEHY

specially concurring:

I concur with the result in this case, but not for the reasons assigned by the majority. The state argues that it is immune here because its agents were engaged in quasi-judicial functions, i.e., issuing, suspending or revoking licenses, permits and certificates, and evaluating and passing on facts. These functions are statutorily designated as quasi-judicial. Section 2-15-102(10), MCA. The state had a reasonable expectation that Koppen would control this case, since Koppen had insulated from suit the State Board of Medical Examiners on a theory of quasi-judicial immunity. Koppen v. Board of Medical Examiners (1988), 233 Mont. 214, 759 P.2d 173.

A correct result based on legal principles should see the majority backing off completely from any immunity attributed to ministerial quasi-judicial acts or non-acts of state public officials. Then this Court would be applying the true public policy of this state, that the state is not immune from suit for the torts of its agents except where the legislature has specifically provided by law by a % vote of each house of the legislature. Art. II, § 18, Montana State Constitution.

The legislature has acted to provide judicial immunity, distinguished from quasi-judicial immunity in § 2-9-112, MCA. That statute provides immunity for acts or omissions of the judiciary, and limits “judiciary” to courts established under Art. VII of the State Constitution. There is no statutory provision excepting quasi-judicial acts of agencies from responsibility in tort law. That kind of immunity was gratuitously afforded by this Court in Koppen and not by act approved by %’s of each house of the legislature.

Because of Koppen, the majority, to achieve a proper result, are forced to distinguish between agencies deciding not to act (Koppen) and agencies simply not acting (this case). Thus, the majority hold an agency is still immune if it decides to do nothing, regardless of the merits of taking action, or the overwhelming duty of the agency to act. Yet, in this case, the inaction of the state employees to revoke or limit Great Western’s status as a self-insurer was in itself a type of decision.

In Koppen, I concurred with the result not because exercising a quasi- judicial function merited immunity, but because the claim of the plaintiffs was too remote from state action or inaction to incur tort liability. It is easy to apply that logic here. In Koppen, the inaction of the state was not foreseeable as a proximate cause of the wrongs later committed by the doctor. In this case, the inaction of the state employee to assure the solvency of a self-insurer foreseeably caused the harm to the plaintiffs. The issuance by the state of a license to a medical doctor is not a guarantee that the doctor will not malpractice; but on the other hand, the failure of the state to rein in an insolvent self-insurer will certainly and foreseeably wreak damage on its injured employees.

Nonetheless, I welcome the result here, for whatever reason given by the majority. Slowly, oh slowly, this Court is inching back from the harsh grants of state immunity in Peterson v. Great Falls School District (1989), 237 Mont. 376, 773 P.2d 316 [8 Ed Law 61]; Bieber v. Broadwater County (1988), 232 Mont. 487, 759 P.2d 145; State ex rel. Eccleston v. Third Judicial District Court (Mont. 1989), [240 Mont. 44,] 783 P.2d 363, 46 St.Rep. 1929 [8 Ed Law 146g] and Miller v. Fallon County (Mont. 1989), [240 Mont. 241,] 783 P.2d 419,46 St.Rep. 2087, [8 Ed Law 147]. See Mitchell v. University of Montana (Mont. 1989), [240 Mont. 261,] 783 P.2d 1337,46 St.Rep. 2109; Koch, et al. v. Yellowstone County (Mont. 1990), [243 Mont. 447,] 795 P.2d 454, 47 St.Rep. 1312.

JUSTICES HUNT and HARRISON concur in the foregoing specially concurring opinion of JUSTICE SHEEHY.

JUSTICE WEBER

dissenting:

Great Western Sugar Company (GW) was a self insurer for workers’ compensation purposes. GW became insolvent and unable to pay its liabilities. The majority opinion describes the unfortunate position of the plaintiff workers who had been unable to collect their workers’ compensation benefits from GW. Having been unable to collect those benefits from GW, the plaintiffs have sued the Division of Workers’ Compensation and the State of Montana. The State has admitted negligence through the Division of Workers’ Compensation in failing to conduct an adequate review of GW’s financial condition. The State does deny that such negligence was the cause of the loss of plaintiffs’ benefits. The majority has concluded that the admitted failure to examine reports submitted by GW is negligence, that such failure was ministerial, and as a result the Division and State can be held responsible. I disagree with that conclusion.

I conclude that the majority has disregarded this Court’s holding in Koppen v. Board of Medical Examiners (1988), 233 Mont. 214, 759 P.2d 173. I can find no meaningful distinction between the present case and Koppen. As a result I conclude that under the Koppen holding, there is quasi-judicial immunity so far as the Department and the State are concerned.

In his special concurrence, Justice Sheehy reached the same conclusion. He points out that the functions of the Department in this case come within those functions which are statutorily designated as quasi-judicial under § 2-50-102(10), MCA. I agree with his analysis up to that point. I do not agree with his desire to overrule Koppen. I do conclude that there is no distinction between Koppen and the present case.

The majority attempts to distinguish Koppen by suggesting there was no dispute in the present case as there was in Koppen. The majority concludes that immunity does not attach because the Division was not expressly designated a quasi-judicial board nor was it performing a quasi-judicial function. The majority emphasizes that the Division never exercised any discretion because it just failed to undertake any review of the materials submitted to it. As a result the majority concludes that the negligent failure to review was ministerial. The key majority statement is the following:

“Because the Division failed to perform its duty to review or examine GW’s application as prescribed by statute, and because simply performing this duty does not involve the use of quasi-judicial discretion, the Division is not protected by quasi-judicial immunity at this stage. The Division has simply not functioned as such under these facts.” (Emphasis supplied.)

I do not believe that Koppen supports that view. In the opinion in Koppen, 233 Mont. at 215, 759 P.2d at 174, the majority stated:

“According to the complaint, the Board had received complaints about Dr. Kauffman’s fitness to practice medicine but failed to respond to them. The complaint characterized this as a failure by the Board to discharge its duty under § 37-3-202, MCA ...” (Emphasis added.)

The majority in Koppen, 233 Mont. at 217-18, 759 P.2d at 175, further stated:"

The District Court was correct in concluding that the Board is entitled to quasi-judicial immunity from suit ... The Board’s quasi-judicial immunity is derived from the common law, which we hold to be controlling here.”

The Koppen majority, 233 Mont, at 219,759 P.2d at 176, further stated with regard to the Board of Medical Examiners:

“The discretion vested in the Board to weigh the information relative to Dr. Kauffman rendered it a quasi-judicial body. This is also evident from the statutes dictating the procedures to be followed ... The task performed by the Board thus comes within the statutory definition of‘quasi-judicial function’ found at § 2-15-102 (10), MCA.” (Emphasis added.)

Following are the key holdings, for our purposes, of Koppen:

“The action or inaction by the Board under attack in this case is its decision not to strip Dr. Kauffman of his license when faced with complaints concerning his professional conduct. The Board’s decision whether to initiate administrative proceedings against a doctor is analogous to a prosecutor’s decision whether to initiate court proceedings against an alleged criminal. We concur with the reasoning in Butz that the Board’s discretion might be distorted if it is not immune from suit for damages arising from such a decision. We hold, therefore, that in the exercise of its quasi-judicial authority, the Board is entitled to the absolute immunity afforded executive officials under the rule in the Butz decision.” (Emphasis added.)

Koppen, 233 Mont, at 219, 759 P.2d at 176. In substance Koppen had contended that the Board of Medical Examiners had received complaints but failed to respond to them. That negligent failure to respond is directly comparable to the negligent failure to study the reports in the present case. I find no factual distinction between Koppen and the present case. In Koppen the Board of Medical Examiners failed to do anything. In the present case the Division failed to do anything. In both cases there was a failure to perform a mandated duty. If the majority opinion in this case is correct, then it seems that we have in effect overruled Koppen, at least in part.

I disagree with the majority analysis which concludes that while the statutes and rules grant discretion to the Division in renewing GW’s application, the Division never exercised the discretion to determine GW’s eligibility to self insure. As a result the majority concluded that the complete failure by the Division to undertake any review thus becomes ministerial. The majority concludes that the discretion afforded by the statutes and rules was never exercised and that such failure to exercise was purely ministerial. I do not believe that conclusion can be reached, based upon Koppen-, and I also disagree with the fundamentals of that analysis.

Koppen this Court pointed out that quasi-judicial immunity is comparable to prosecutorial immunity in that it is not based upon the statutes of Montana, but upon the common law. Koppen then referred to the common law of quasi-judicial immunity as set forth in the Butz United States Supreme Court decision. Koppen then quoted the following from Butz:

“Judges have absolute immunity not because of their particular location within the Government but because of the special nature of their responsibilities. This point is underlined by the fact that prosecutors — themselves members of the Executive Branch — are also absolutely immune.
“We also believe that agency officials performing certain functions analogous to those of a prosecutor should be able to claim absolute immunity with respect to such acts. The decision to initiate administrative proceedings against an individual or corporation is very much like the prosecutor’s decision to initiate or move forward with a criminal prosecution.” (Emphasis added.)

Koppen, 233 Mont. at 218-19, 759 P.2d at 176 (quoting Butz v. Economou (1978), 438 U.S. 478, 98 S.Ct. 2894, 2913, 2915, 57 L.Ed.2d 895). If the majority is correct in concluding that the failure to exercise discretion was purely ministerial, then apparently that rationale would apply to prosecutors as well. Under that rationale, a prosecutor could be sued for his negligent failure to initiate prosecution. I conclude that the failure to discharge a duty is not a ministerial act.

I conclude that the failure to respond to complaints on the part of the Board of Medical Examiners in Koppen is directly comparable to the failure on the part of the Division of Workers’ Compensation to examine the materials filed with it by GW in the present case. I would therefore conclude that under Koppen we are required to hold there is quasi-judicial immunity as to the defendants named in this case.


author: JUSTICE HUNT

text:
    STATE OF MONTANA, Plaintiff and Respondent, v. MATTHEW AMES EDMUNDSON, Defendant and Appellant.
    No. 90-132.
    Submitted July 13, 1990.
    Decided Oct. 23, 1990.
    246 Mont. 241.
    805 P.2d 1289.

      C.F. Mackay, Anaconda, for appellant.
    Marc Racicot, Atty. Gen., Jennifer Anders, Asst. Atty. Gen., Helena, Larry Nistler, County Atty., Robert S. Anderson, Deputy, Poison, for respondent.
   JUSTICE HUNT

delivered the Opinion of the Court.

This appeal follows a hearing in the District Court of the Twentieth Judicial District in and for the County of Lake revoking defendant’s conditional release from the Montana State Hospital. We affirm.

The following issues are presented for review:

1. Whether the District Court erred when it allowed hearsay evidence to be admitted under the regular conducted activities exception.

2. Whether there was sufficient evidence before the court upon which to base its order of revocation.

Defendant, Matthew Ames Edmundson, was originally charged with the crime of deliberate homicide in violation of § 45-5-102(l)(a), MCA (1983). On March 17, 1989, the defendant was found unfit to stand trial and was civilly committed to the Montana State Hospital at Warm Springs (Warm Springs). The trial was suspended until defendant was fit to proceed. The District Court ultimately found defendant not guilty of deliberate homicide by reason of mental disease or defect. Subsequently, at a separate hearing on October 13, 1989, the court conditionally released defendant from Warm Springs pursuant to § 46-14-303, MCA. The court ordered that the conditions of the release, among others, would be that he would reside at the Harbinger House and participate in the Lamplighter House day treatment program, both of Kalispell, for a five year term; that he would abide by all house rules and refrain from any inappropriate behavior to his peers.

On November 20, 1989, approximately one month after defendant’s admission to the home, Daniel George, Harbinger House and Lamplighter director, informed the Lake County Attorney of defendant’s inappropriate behavior which violated the conditional release. Later that same day, the State of Montana moved to revoke defendant’s conditional release based on these violations. Following a revocation hearing, the District Court found that “the conditions of defendant’s release have not been fulfilled and that the safety of the defendant and others in the community would be threatened if his conditional release were continued.” Accordingly the District Court revoked defendant’s conditional release and recommitted him to Warm Springs. Defendant appeals this order.

The State’s only witness at the revocation hearing was Daniel George. Much of Mr. George’s testimony was based on regularly written reports of behavioral problems and counseling sessions kept in the regular course of business of the Harbinger House and prepared by a staff therapist. The court allowed this testimony over hearsay objections of defense counsel. According to a recorded entry of October 26,1989, Mr. George testified that defendant, upon admission, was fully advised of the house rules, both orally and in writing. The house rule on curfew required that residents be in the rooms by 10:00 p.m. with lights out by 11:00 p.m. Defendant reportedly violated the curfew rule by getting up in the middle of the night on several occasions, despite staff warnings, to watch television with the sound off. Mr. George testified that although defendant’s behavior did not necessarily disturb anyone, it was clinically significant in light of a history of possible auditory hallucinations, or messages, he received from television, as well as his violence surrounding the use of the television.

Another condition of defendant’s release required defendant to “abstain from all acts of violence or inappropriate behavior toward his peers in the said programs, the mental health staff in the programs, or the community at large.” At the revocation hearing, Mr. George described defendant’s inappropriate behavior toward women in the group home. Mr. George testified that the defendant had a habit of glaring at, or staring down women in an intimidating manner. At one point a staff member overheard defendant refer to women as “f ---, mind controlling bitches” and how he could get better if he got “laid.” In addition, defendant wrote a song about the murder which he occasionally sang to the women residents. The group home manager overheard defendant singing the song, the partial lyrics of which are “I killed her and the whore deserved it, if I had to do it over, I wouldn’t change a thing.” In further violation, defendant was reportedly talking about the murder, describing the event in graphic detail, to the other residents as well as a member of the community. One woman resident became so frightened of defendant that she moved out of the Harbinger House.

Despite counseling by his therapist and warnings that the above behavior was inappropriate because it was disruptive and unsettling for other residents, the defendant did not alter his behavior appropriately. Furthermore, the group home manager overheard defendant talking to himself on the back porch while he was alone. He reportedly said “I can’t do it, I can’t do it, not right now.” This reported incident led Mr. George to conclude that, despite medications, the defendant was responding to auditory hallucinations which indicated that he required a much more structured environment than that offered by the group home.

Following the revocation hearing, the District Court ordered that defendant’s conditional release be revoked. We hold the District Court properly revoked defendant’s conditional release.

As his first assignment of error, defendant argues that the District Court incorrectly admitted hearsay testimony into evidence. We disagree.

Rule 803(6), M.R.Evid. provides for the admissibility of hearsay if the testimony is from records of regularly conducted activities:

“(6) Records of regularly conducted activity. A memorandum, report, record, or data compilation, in any form, of acts, events, conditions, opinions, or diagnosis, made at or near the time of the acts, events, conditions, opinions, or diagnosis, if kept in the course of a regularly conducted business activity, and if it was the regular practice of that business activity to make the memorandum, report, record, or date compilation, all as shown by the testimony of the custodian or other qualified witness, unless the sources of information or the method or circumstances of preparation indicate lack of trustworthiness. The term ‘business’ as used in this paragraph includes business, institution, association, profession, occupation, and calling of every kind, whether or not conducted for profit.”

The District Court established that the recorded entries from which Mr. George testified were made in the regular course of business of the Harbinger House. The entries were recorded by defendant’s primary therapist, Randy Moddrell, whose duty it was to make sure that any reported behavioral problems were recorded in defendant’s file. The entries were recorded when the incidents were fresh in the therapist’s mind, thereby reinforcing their degree of trustworthiness. We find that the records from which Mr. George testified were records of regularly conducted activities, and, therefore his testimony was excepted from the hearsay ban of Rule 802, M.R.Evid., as an exception under Rule 803(6), M.R.Evidence.

Defendant asserts that by admitting the hearsay testimony, the District Court denied defendant due process of law. Defendant argues that he was not able to confront his accusers as is guaranteed by the Sixth Amendment of the United States Constitution. Defendant’s argument is misplaced. The confrontation clause of the Sixth Amendment only attaches to criminal proceedings. Defendant was adjudged clinically insane and committed to the Montana State Hospital. Subsequently, the District Court conditionally released defendant to the Harbinger House for treatment. The revocation hearing was a summary hearing to determine if defendant violated his conditional release to the Harbinger House rather than to establish criminal culpability. The revocation hearing concerning the re-commitment of defendant to Warm Springs was a civil proceeding just as was the prior hearing to conditionally release defendant from Warm Springs. Sections 46-14-301, MCA, et seq. pertain to the commitment, discharge, release, and re-commitment of a person to the Montana State Hospital. When read together, these sections of this statute characterize the revocation proceeding as civil in nature. This is not a criminal case. Defendant has not been accused of committing a crime. The guarantees afforded by the Confrontation Clause do not attach to revocation hearings of this type which are civil in nature. We hold that the testimony offered by Mr. George was properly admitted based on the traditional indicia of reliability that these records of regularly conducted activity bear, and that defendant was not denied due process of law when the District Court admitted the subject testimony.

Defendant’s next assignment of error is that the District Court’s determination that the defendant violated the conditions of his release was not substantiated by sufficient evidence. The revocation statute, § 46-14-304, MCA, mandates that the court immediately recommit any person who has violated the conditions of his or her release and when the safety of the person and others so requires. The evidence that the court relies on pursuant to § 46-14-304, MCA, must satisfy the court that the conduct of the person on release has not been in keeping with the conditions of the release agreement. In State v. Kern (1984), 212 Mont. 385, 389, 695 P.2d 1300, 1302, we applied this reasonable standard in a hearing revoking defendant’s probation and we now find that it is also an appropriate standard for the hearing revoking defendant’s conditional release from Warm Springs.

The record before us, as established by Mr. George’s testimony, clearly shows that defendant has violated the group home’s curfew rule several times by getting up late at night to watch television, even after repeated warnings. In addition, defendant was in violation of his conditional release calling for appropriate behavior by frightening the female residents and staff with his graphic details of the murder he committed and his talk about “mind controlling bitches” and “getting laid” and his staring intimidation of women residents.

The evidence is credible, reliable and well grounded within an established hearsay exception. The evidence upon which the District Court based its determination to revoke defendant’s conditional release was sufficient to establish that defendant persistently violated at least two conditions of his release even after staff warnings. More importantly, the testimony regarding defendant’s bizarre behavior raised serious questions as to the safety of other group home residents and the community in general.

Affirmed.

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


author: JUSTICE WEBER

text:
    STEVEN G. BOYD and JERRI BOYD, Husband and Wife, and Montana Medical Oxygen & Supply, Inc., a Montana Corporation, Plaintiffs and Appellants, v. STATE MEDICAL OXYGEN & SUPPLY, INC., a Montana Corporation; Larry R. Williams; Mark C. Hungerford; and Brian R. Cloutier, Defendants and Respondents.
    No. 90-010.
    Submitted on Briefs Aug. 30, 1990.
    Decided Oct. 23, 1990.
    246 Mont. 247.
    805 P.2d 1282.

      Lon J. Dale, Jon R. Binney, Milodragovich, Dale & Dye, Missoula, for plaintiffs and appellants.
    Dexter L. Delaney and P. Mars Scott, Mulroney, Delaney & Scott, Missoula, for respondent.
   JUSTICE WEBER

delivered the Opinion of the Court.

Plaintiffs, Montana Medical Oxygen and Supply, Inc., and Steven and Jerri Boyd (the Boyds), brought suit against defendants, State Medical Oxygen and Supply, Inc., Larry Williams, Mark Hungerford, and Brian Cloutier (State Medical), for damages for breach of contract, breach of the implied covenant of good faith and fair dealing, and conversion. State Medical brought a cross-claim against the Boyds for damages for breach of contract, breach of the implied covenant of good faith and fair dealing, and actual or constructive fraud. Following a jury trial in the District Court for the Eleventh Judicial District, Flathead County, the jury returned a verdict against the Boyds on the Boyds’ claims, and against State Medical on State Medical’s claims. Thus, no damages were awarded to either side. The District Court then denied the Boyds’ motion for a new trial. The Boyds appeal. We affirm.

The issues are:

1. Are plaintiffs entitled to a new trial because the District Court erred in rejecting plaintiffs’ special verdict form and replacing it with the court’s own general verdict form?

2. Are plaintiffs entitled to a new trial because the District Court improperly admitted testimony of defendants’ expert?

3. Are plaintiffs entitled to a new trial because the District Court failed to properly instruct the jury?

Steven and Jerri Boyd, husband and wife, owned and operated a corporation known as Montana Medical Oxygen Supply, Inc. (Montana Medical). In 1983, the Federal Medicare Division initiated Medicare fraud charges against Montana Medical and Steven Boyd in federal court. These criminal charges resulted in a five year prison sentence for Steven Boyd and a $190,000 fine for Montana Medical. The federal judge agreed to review the prison sentence and fine under Rule 35 of the Criminal Rules of Civil Procedure if Steven Boyd would divest himself of all ownership in Montana Medical within 120 days. In response, Boyd executed an agreement with defendants Williams, Hungerford and Cloutier, for the sale and purchase of the assets and the assumption of certain liabilities of Montana Medical. At about the same time, the Boyds executed documents granting powers of attorney to Williams, Hungerford and Cloutier and providing them with the right to manage Montana Medical. Upon execution of these documents, the federal judge reduced Steven Boyd’s prison term to sixty days and Montana Medical’s fine to $19.00.

At about the same time as the pleas to the federal medicare fraud indictments were entered, Montana Medical and Steven Boyd were suspended from receiving Medicare reimbursements. As a result of the suspension and the criminal fines against Montana Medical, Williams, Hungerford, and Cloutier formed a new corporation, State Medical Oxygen and Supply, Inc. (State Medical), to purchase the assets of Montana Medical rather than purchasing the corporation outright. Once the federal sentences against Boyd and Montana Medical were reduced, controversy between the parties delayed the closing date. Ultimately the Boyds terminated the defendants’ powers of attorney. The Boyds claimed that defendants’ continued management of the company beyond the termination of the powers of attorney was conversion. The Boyds also claimed that State Medical refused to close the deal resulting in breach of contract and breach of the implied covenant of good faith and fair dealing.

On the other side, State Medical claimed that the Boyds had fraudulently misrepresented the financial condition of Montana Medical which resulted in Williams, Hungerford and Cloutier having to infuse massive amounts of capital into the business to keep it going. Because Steven Boyd had to divest himself of ownership of Montana Medical within 120 days of the federal sentencing, the agreements between the parties were executed before in-depth audits had been completed. Defendants claimed that the Boyds were the ones who never showed any interest in closing the deal, resulting in breach of contract and breach of the implied covenant of good faith and fair dealing.

The deal never closed and each party sought damages against the other, asserting that the other had caused the breach. The jury found against both parties and neither party recovered. The Boyds filed a motion for a new trial and the District Court denied the motion.

The Boyds claim that they are entitled to a new trial under the provisions of Rule 59(a), M.R.Civ.P., and under the provisions of § 25-11-102, MCA, subsections (1), (3) an (7). Rule 59(a) states:

“Rule 59(a). Grounds. A new trial may be granted to all or any of the parties and on all or part of the issues for any of the reasons provided by the statutes of the state of Montana.
“A motion for new trial shall state with particularity the grounds therefor, it not being sufficient merely to set forth the statutory grounds, but the motion maybe amended, upon reasonable notice, up to and including the time of hearing the motion.
“On motion for a new trial in an action tried without a jury, the court may take additional testimony, amend the findings of fact and conclusions of law or make new findings and conclusions, set aside, vacate, modify or confirm any judgment that may have been entered or direct the entry of a new judgment.”

Section 25-11-102, states in pertinent part:

“25-11-102. Grounds for new trial. The former verdict or other decision may be vacated and a new trial granted on the application of the party aggrieved for any of the following causes materially affecting the substantial rights of such party:
“(1) irregularity in the proceedings of the court, jury, or adverse party or any order of the court or abuse of discretion by which either party was prevented from having a fair trial;
“(3) accident or surprise which ordinary prudence could not have guarded against;
“(7) error in law occurring at the trial and excepted to by the party making the application.”

I

Are the plaintiffs entitled to a new trial because the District Court erred in rejecting plaintiffs’ special verdict form and replacing it with the court’s own general verdict form?

The District Court rejected the Boyds’ special verdict form, concluding that it was virtually impossible to follow and was an invitation for error. The Boyds’ special verdict form had specifically delineated each of their three causes of action requiring the jury to vote separately on each claim. The court’s general verdict form submitted to the jury stated in pertinent part:

“Plaintiffs’ claims:
“1. Upon Plaintiffs’ claims we find in favor of the Plaintiffs and award damages against the Defendant in the amount of $_.
“2. If your verdict is in favor of the Plaintiffs and includes damages for wrongful conversion of personal property, the date of conversion is found to be_and the value of the property converted on the date is $_and which value is to be included in the total amount due.”

The Boyds submit affidavits from eight of the twelve jurors, claiming that these affidavits prove that the majority of the jurors thought that they must find all three of the Boyds’ causes of action were present before they could award damages to the Boyds, and that the problem arose in establishing a date of conversion. The Boyds contend that such an interpretation by the jury was not contemplated by any of the parties or by the court at the time the court’s general verdict form was presented to the jury. The Boyds assert the juror affidavits prove the jury was misled in its duties and is an irregularity in the proceedings that prevented the Boyds from having a fair trial under § 25-11-102(1), MCA, and/or was an accident under § 25-11-102(3), MCA.

The Boyds are attempting to use juror affidavits to impeach the juror’s own verdict. Montana law on the use of juror testimony and affidavits upon an inquiry into the verdict is summarized in Rule 606(b), M.R.Evid., as follows:

“(b) Inquiry into validity of verdict or indictment. Upon an inquiry into the validity of a verdict or indictment, a juror may not testify as to any matter or statement occurring during the course of the jury’s deliberations or to the effect of anything upon his or any other juror’s mind or emotions as influencing him to assent or dissent from the verdict or indictment or concerning his mental processes in connection therewith. Nor may his affidavit or evidence of any statement by him concerning a matter about which he would be precluded from testifying be received for these purposes.
“However, as an exception to this subdivision, a juror may testify and an affidavit or evidence of any kind be received as to any matter or statement concerning only the following questions, whether occurring during the course of the jury’s deliberations or not: (1) whether extraneous prejudicial information was improperly brought to the jury’s attention; or (2) whether any outside influence was brought to bear upon any juror; or (3) whether any juror has been induced to assent to any general or special verdict, or finding on any question submitted to them by the court, by a resort to the determination of chance.”

The policy reasons behind this rale are well stated at 76 Am. Jur.2d, Trial, § 1219, which states in part:

“The rule is founded on public policy, and is for the purpose of preventing litigants or the public from invading the privacy of the jury room, either during the deliberations of the jury or afterward. It is to prevent overzealous litigants and a curious public from prying into deliberations which are intended to be, and should be, private, frank, and free discussions of the questions under consideration. Further, if after being discharged and mingling with the public, jurors are permitted to impeach verdicts which they have rendered, it would open the door for tampering with jurors and would place it in the power of a dissatisfied or corrupt juror to destroy a verdict to which he had deliberately given his assent under sanction of an oath ...
“Testimony of the jurors to impeach their own verdict is excluded not because it is irrelevant to the matter in issue, but because experience has shown that it is more likely to prevent than to promote the discovery of the truth. Hence, the affidavit of a juror cannot be admitted to show anything relating to what passed in the jury room during the investigation of the cause, or the effect of a colloquy between the court and a juror, or the arguments made to a juror by a fellow juryman.” (Emphasis added.)

The alleged misunderstanding of the jurors in this case does not fit into any of the three exceptions enumerated in Rule 606(b). Use of juror affidavits to prove irregularity or accident under § 25-11-102(1), (3), MCA, as attempted by the Boyds, is clearly improper. If a motion for a new trial is to be granted, an irregularity or accident in the jury proceedings must exist independent of juror affidavits. Harry v. Elderkin (1981), 196 Mont. 1, 6, 637 P.2d 809, 812. The Boyds present no evidence, other than the affidavits, of irregularity or accident allegedly stemming from misunderstanding by the jurors.

The District Court properly denied the Boyds’ motion for a new trial based on claims of irregularity or accident supported only by juror affidavits. We hold plaintiffs are not entitled to a new trial because the District Court rejected the plaintiffs’ special verdict form and replaced it with the court’s own general verdict form.

II

Are plaintiffs entitled to a new trial because of improper admission of testimony of defendants’ expert?

During trial testimony State Medical’s expert witness, Dr. Dennis O’Donnell, referred to a report that was done by the Arthur Anderson CPA firm in Seattle, Washington. The report was an evaluation of Montana Medical’s assets that had been done by the Arthur Anderson firm for Kalispell General’ Hospital when the hospital had considered purchasing Montana Medical.

State Medical had deposed Dr. O’Donnell approximately eighteen months prior to trial and at that time Dr. O’Donnell did not have access to the Arthur Anderson report. Thus, the Arthur Anderson report was not listed during discovery as one of the documents on which Dr. O’Donnell based his opinion as to the value of Montana Medical. During trial Dr. O’Donnell referred to the value that Arthur Anderson had placed on Montana Medical to illustrate that his value was comparable to the value arrived at by the Arthur Anderson firm. The Arthur Anderson report was not introduced as an exhibit.

The Boyds allege surprise as grounds for new trial pursuant to § 25-11-102(3), MCA. The Boyds claim that the report was not made available to them through the discovery process, and that they did not have knowledge that Dr. O’Donnell would be using the report in any way during his testimony.

The Boyds argue that under Rule 26(e)(1) and (2), M.R.Civ.P., State Medical had a duty to supplement Dr. O’Donnell’s responses to his deposition and reveal that Dr. O’Donnell had obtained access to the Arthur Anderson report subsequent to Dr. O’Donnell’s deposition.

Rule 26(e)(1) and (2) provide:

“Rule 26(e). Supplementation of responses. A party who has responded to a request for discovery with a response that was complete when made is under no duty to supplement his response to include information thereafter acquired, except as follows:
“(1) Aparty is under a duty seasonably to supplement his response with respect to any question directly addressed to (A) the identity and location of persons having knowledge of discoverable matters, and (B) the identity of each person expected to be called as an expert witness at trial, the subject matter on which he is expected to testify, and the substance of his testimony.
“(2) A party is under a duty seasonably to amend a prior response if he obtains information upon the basis of which (A) he knows that the response was incorrect when made, or (B) he knows that the response though correct when made is no longer true and the circumstances are such that a failure to amend the response is in substance a knowing concealment.” (Emphasis added.)

Each of seven criteria enumerated in Ewing v. Esterholt (1984), 210 Mont. 367, 373, 684 P.2d 1053, 1057, must be met before surprise can be the basis of a new trial. The Boyds are unable to establish two of the Ewing criteria which state in pertinent part: the facts from which the surprise resulted had a material bearing on the case, and the result of a new trial will probably be different. (Emphasis added)

Dr. O’Donnell testified at trial that he had formulated his opinion prior to the time that he received the Arthur Anderson report and that the report did not in any way affect his analysis or conclusion.

Since the Boyds are unable to show that the surprise had a material bearing on the case and that the result of a new trial will probably be different, we hold that the Boyds are not entitled to a new trial because of improper admission of testimony of State Medical’s expert.

Ill

Are plaintiffs entitled to a new trial because the District Court failed to properly instruct the jury?

The Boyds claim the District Court failed to properly instruct the jury on three different issues of law, namely:

(A) the District Court failed to instruct the jury on termination of power of attorney,

(B) the District Comb gave improper warranty instructions to the jury,

(C) the District Court improperly refused plaintiffs’ proffered instruction on fraudulent conveyances.

A

Are plaintiffs entitled to a new trial because the District Court failed to instruct the jury on termination of power of attorney?

The District Court gave plaintiffs’ proposed instructions 1 and 2 on power of attorney.

Proposed Instruction No. 1 stated:

“A power of attorney is an instrument in writing by which one person, as principal, appoints another as his agent and confers upon him the authority to perform certain specified acts or kinds of acts on behalf of the principal.”

Proposed Instruction No. 2 stated:

“An agent can never have authority, either actual or ostensible, to do an act which is and is known or suspected by the person with whom he deals to be a fraud upon the principal.”

Section 28-10-409, MCA.

The court refused to give plaintiffs’ proposed instruction No. 5 which stated:

“Unless the power of the agent is coupled with an interest in the subject of the agency, it is terminated as to every person having notice thereof by its revocation by the principal.”

Section 28-10-802, MCA.

The court agreed with State Medical that the jury would have no independent understanding of what an “agent coupled with an interest is.” For that reason, there was undefined legal terms which rendered the instruction ambiguous or perhaps unintelligible. We agree.

The Boyds argue that the termination of the power of attorney was central to their claim of conversion and that a failure of the court to give an instruction on the termination of power of attorney resulted in the inability of the jury to establish a date of conversion. The Boyds offer the juror affidavits as evidence of their contention. As already discussed under the first issue, juror affidavits may not be used to impeach a jury verdict. No other evidence was presented to indicate that the failure to give the proffered instruction substantially prejudiced the Boyds. In fact the Boyds specifically offered into evidence a document entitled “Termination of Power of Attorney” dated March 2, 1984. The jury did not need to be instructed regarding the power of attorney when they had the actual document in evidence to review.

We hold the District Court did not err in refusing to give plaintiffs’ proffered instruction on termination of power of attorney.

B

Are the plaintiffs entitled to a new trial because the District Court gave improper warranty instructions to the jury?

The District Court gave the three following instructions, offered by State Medical, on warranties:

“No. 25: One who sells or agrees to sell personal property knowing that the buyer relies upon his advice or judgment thereby warrants to the buyer that neither the seller nor any agent employed by him in the transaction knows the existence of any fact concerning the thing sold which would, to his knowledge, destroy the buyer’s inducement to buy.”

Section 30-11-213, MCA.

“No. 26: A warranty is an engagement by which a seller assures to a buyer the existence of some fact affecting the transaction, whether past, present, or future.”

Section 30-11-209, MCA.

“No. 27: One who sells or agrees to sell personal property as his own thereby warrants that he has a good and unencumbered title thereto.”

Section 30-11-211, MCA.

The instructions were taken from Chapter 11 of Title 30 which applies to Sales. Section 30-11-224, MCA, states: “This part shall not apply to sales subject to the Uniform Commercial Code.” The parties agreed in the Agreement to Purchase that the Uniform Commercial Code -Bulk Transfers, § 30-6-101 et seq., MCA, would apply.

The Uniform Commercial Code deals extensively with warranties in §§ 30-2-312 through -318, MCA. The giving of Non-Uniform Commercial Code warranty instructions in a Uniform Commercial Code case may be a technical defect, but mere technical defects in the instructions, if considered as a whole, are not grounds for a new trial unless affecting the substantial rights of the party alleging the defect. State v. DeTienne (1985), 218 Mont. 249, 256, 707 P.2d 534, 538. The party alleging the defect must show that the instructions were prejudiced before a new trial may be granted. Flynn v. Siren (1986), 219 Mont. 359, 363, 711 P.2d 1371, 1373. Where the jury instructions, taken as a whole, state the law applicable to the case, the giving of the instruction is not grounds for a new trial. Id.

We have compared the challenged instructions with the Uniform Commercial Code warranty statutes and conclude the instructions do not misstate the law. Absent a misstatement of the law, the Boyds are unable to establish prejudice or interference with their substantial rights. We hold that the giving of the warranty instructions is not grounds for a new trial.

C

Are the plaintiffs entitled to a new trial because the District Court improperly refused plaintiffs’ proffered instruction on fraudulent conveyances?

Plaintiffs’ proffered instruction No. 23 stated:

“Every conveyance made and every obligation incurred with actual intent, as distinguished from intent presumed in law, to hinder, delay, or defraud either present or future creditors is fraudulent as to both present and future creditors.”

Before an instruction can be given on fraudulent conveyances, there must be a showing that a conveyance occurred and a showing that the conveyance was intended to defraud the creditors. No such showing was made in this case. A conveyance for the purpose of fraudulent conveyances includes “every payment of money, assignment, release, transfer, lease, mortgage, or pledge of tangible or intangible property and the creation of any lien or encumbrance.” Section 31-2-301(2), MCA. The District Corut determined that no evidence of a conveyance had been presented and so the instruction was improper. The Boyds argue that the security interest that the Boyds gave to the Small Business Administration (SBA) was a conveyance under the statute and the court had erroneously applied its own definition of conveyance when it stated that a security interest is not a conveyance. It is true that under § 31-2-301(2), MCA, the SBA’s security interest is a conveyance. However there was no evidence presented that the giving of the security interest was fraudulent. The Boyds themselves are the ones who gave the security interest to the SBA prior to any involvement with State Medical. The Boyds then gave a security interest to state Medical. This security interest does not in any way affect the SBA’s perfected security interest and no evidence was presented to indicate that the giving of a security interest to State Medical was intended to defraud the SBA. The Boyds argue that State Medical took possession of assets owned by Montana Medical with the intent to defraud the SBA of its security interest. The transfer of possession of assets to third parties does not affect the SBA’s perfected security interest and there is no evidence that there was any intent to deprive the SBA of its superior position as creditor. We conclude that the plaintiffs have failed to prove a fraudulent conveyance. We hold the court correctly refused to give an instruction on fraudulent conveyances.

Affirmed.

CHIEF JUSTICE TURNAGE and JUSTICES SHEEHY, McDONOUGH and HARRISON concur.