author: MR. CHIEF JUSTICE TURNAGE

text:
    MONTANA BANK OF CIRCLE, N.A., a corporation, Plaintiff and Counterdefendant and Respondent, v. RALPH MEYERS & SON, INC., a corporation, and Keith Meyers, Defendants, Counterplaintiffs and Third-Party Plaintiffs and Appellants.
    No. 88-326.
    Submitted Feb. 3, 1989.
    Decided Feb. 23, 1989.
    769 P.2d 1208.

      James A. Patten, Patten Law Firm, Billings, for defendants, counterplaintiffs and third-party plaintiffs and appellants.
    Kyle A. Gray, James M. Ragain, Holland & Hart, Billings, for plaintiff and counterdefendant and respondent.
   MR. CHIEF JUSTICE TURNAGE

delivered the Opinion of the Court.

This lawsuit is a debt collection and foreclosure action against the principal Ralph Meyers and Sons (Corporation) and its surety and guarantor, Keith Meyers (Meyers) individually, with additional counts by plaintiff Montana Bank of Circle (Bank) alleging fraud, wrongful conversion and controlling stockholder individual liability (piercing the corporate veil). Defendants counterclaimed against the Bank and filed a third-party suit against the bank holding company, Montana Banksystem, Inc. (MBI), for breach of the implied covenant of good faith and fair dealing.

The District Court, Seventh Judicial District, McCone County, sitting without a jury, granted summary judgment in favor of the plaintiff Bank on Counts I (default), II (foreclosure of security interest), and VII (individual liability) of its complaint, establishing both defendants’ liability on the underlying note and dismissing all other claims. The summary judgment dismissed the counterclaim and third-party action as well.

The District Court based its summary judgment on the surety and guaranty documents which were signed by Meyers and which the court ruled were in effect at the time the corporation defaulted on its note. Defendants appeal.

The issue on appeal is whether there is any genuine issue of material fact precluding summary judgment on Meyers’contentions that he is not personally liable for the default of his corporation and that the Bank acted in bad faith toward him individually.

We affirm.

I. THE SURETY AND GUARANTY AGREEMENTS

Corporation borrowed $293,000 from the Bank on September 30, 1986, and signed a promissory note and security agreement evidencing the debt. Prior to this occasion, the course of dealing between the parties is outlined below:

7-25-83 Loan with $200,00 Guaranty

6-11-84 Loan with Security & $500,000 Surety Agreements

10-30-84 $100,000 Surety Agreement

11-20-84 $150,000 Surety Agreement

6-06-85 $120,000 Loan with Surety Agreement

10-07-85 $300,000 Loan with Security Agreement

9-30-86 $293,000 Loan in Question

All of the above loans were repaid prior to the September 1986 loan in question.

The October 7, 1985, loan was repaid in September 1986 with proceeds from the loan in question. No surety or guaranty documents were executed contemporaneously with the October 1985 loan or the September 1986 loan. Bank argues that none were necessary because the surety documents that had previously been executed between the parties all expressly stated that they were “open and continuing” in nature, covering all indebtedness of the principal whenever or however incurred.

Meyers contends that each surety was attached to a specific note and should be exonerated as a matter of law when each note was repaid; since no surety agreement was executed at the time of the September 1986 loan, he argues that he is not personally liable for the corporate default. Thus, the legal question becomes, what exonerates a surety under this contract?

The specific language relied on by Bank is as follows:

“SURETY AGREEMENTS

“For a valuable consideration, Borrower [the corporation] and surety [Keith Meyers] jointly, severally, and unconditionally are bound to pay to the Bank, its successors or assigns, on demand, in lawful money of the United States of America, any and all indebtedness of the Borrower to Bank, as follows:

“3. Nature of Surety’s Undertaking. The liability of Surety shall be open and continuous for so long as this surety agreement is in force. Surety intends to be responsible at all times for the performance of all obligations of Borrower to Bank within the limits of Section 1. Thus, no payments made upon Borrower’s indebtedness will discharge or diminish the liability of Surety for any and all remaining and succeeding indebtedness of Borrower to Bank. The liability of Surety will be enforceable against both the separate and community property of Surety whether now owned or hereafter acquired.

“5. Duration of Surety Agreement. This surety agreement will take effect when received by Bank, without the necessity of any acceptance by Bank, and will continue in full force until such time as Surety notifies Bank in writing, at the branch or office of Bank to which this surety agreement is delivered in the first instance, of Surety’s election to terminate the same. [Emphasis added.]

“GUARANTY

“The undersigned hereby absolutely and unconditionally guarantees prompt payment when due and at all times thereafter of any and all existing and future indebtedness and liability of every kind, nature and character (including all renewals, extensions and modifications thereof) from the Borrower to the Bank, howsoever and whensoever created, or arising, or evidenced, or acquired-, and the undersigned waives notice of the acceptance of this Guaranty and of any and all such indebtedness and liability.

“This Guaranty is made and shall continue as to any and all such indebtedness and liability of the Borrower to the Bank incurred or arising prior to receipt by the Bank of written notice of the terminations hereof from the undersigned . . [Emphasis added.]

Meyers relies on § 28-11-413, MCA, which reads:

“Effect of performance or offer of performance on surety’s liability. Performance of the principal obligation or an offer of such performance, duly made as provided in this code, exonerates a surety.”

Meyers argues that “performance of the principal obligation” means payment of each note. Thus, he argues that each surety obligation was exonerated as he repaid each outstanding loan, contrary to the express language in the contract.

Bank argues that when the contract is silent as to termination, the statute will apply to terminate the suretyship for the debts of the principal which have been repaid. However, the statute would not supply the date or method of termination when the unambiguous written contract expresses that termination may only be effected by written notice.

We affirm the lower court’s finding that the sureties were not exonerated by operation of law under § 28-11-413, MCA.

Meyers raises exoneration as defined under § 28-11-413, MCA, as his third affirmative defense in his amended answer and counterclaim dated February 18, 1988. However, the contracts which he signed expressly waive his right to exoneration in that manner: Paragraph #3 “. . . Thus, no payments made upon Borrower’s indebtedness will discharge surety’s obligation ...” (Emphasis added.)

We conclude that this is a valid waiver of rights. Because it is not a constitutional right, nor a waiver in violation of public policy, Meyers was entirely free to contract away his right to the statutory exoneration of his suretyship, which he did. See, Kelly v. Lovejoy (1977), 172 Mont. 516, 565 P.2d 321 (waiver may be proved by a course of acts or conduct so as to induce the belief that the intention and purpose was to waive); and Thiel v. Johnson (Mont. 1985), [219 Mont. 271,] 711 P.2d 829, 42 St.Rep. 2010 (waiver may be express or implied).

A similar waiver under a guaranty contract occurred in Riverside Nat. Bank v. Manolakis (Okla. 1980), 613 P.2d 438. We find the analysis in Manolakis persuasive. In that case, the guarantor argued that his obligations were satisfied by operation of law because the creditor bank had failed to seek a deficiency judgment against the principal within ninety days as per Oklahoma statutory law. Such failure released the principal. However, the court concluded that the guarantor was still liable, saying:

“What defenses remain available to a guarantor under [the statute] . . . must be determined by the terms of the guaranty contract, i.e., by the breadth of the guarantor’s promise. In the case before us, the guarantor, by the clear provisions of his promise, expressly waived all of the available [statutory] defenses.”

Manolakis, 613 P.2d at 439.

Meyers likewise waived his statutory defenses available to him as a surety and no exoneration is effected in this case under § 28-11-413, MCA.

However, this Court finds the central question here is not merely one of exoneration, but more realistically, what was the nature of the relationship between the parties. Meyers, Corporation and Bank began a course of dealing, based on a series of written contracts, to establish a line of credit for the benefit of Corporation. As is standard banking practice in Montana, Bank would not loan such large amounts of money to a closely-held family corporation without a personal guaranty or surety from the major individual stockholder. The intent of the parties to aid corporation by lending money but to protect Bank with personal guaranties is entirely clear from the written documents which establish this relationship.

Based on this relationship, we find no alternative but to affirm the lower court’s findings that the surety agreements are in effect and Meyers is in fact personally liable for the default of Corporation. We affirm that the sureties dated October 30,1984 for $100,000; November 20, 1984 for $150,000; and June 6, 1985 for $120,000 were in effect and cumulatively cover the $293,000 default. However, the surety dated June 11, 1984, for $500,000 fails as a matter of law because Meyers did not sign it in his individual capacity on the line designated for the surety. It was not duly executed. Thus, the contract fails.

As noted above, Paragraph 3 of the agreement outlining the nature of surety’s undertaking states, “The liability of surety shall be open and continuous for so long as this agreement is in force . . . Thus, no payments upon Borrower’s indebtedness will discharge the liability of surety for any and all remaining and succeeding indebtedness of Borrower to Bank.” This express language must be given effect until terminated. Paragraph #5 states termination is only effected when surety notifies Bank in writing. Additionally telling is the fact that in triple size, bold face, capital letters directly above Meyers’ signature it reads, “EFFECTIVE UNTIL TERMINATED IN THE MANNER SET FORTH . . . ABOVE,” negating any possibility that the termination clause was merely adhesive language. Meyers admits he gave no such written termination to Bank. To have Meyers be individually liable for the line of credit established by Corporation and evidenced by the guaranty and four sureties is the obvious and expressed intent of the parties.

Meyers sought to introduce parol evidence as to his contrary intent to have each surety agreement be “note specific,” i.e., for the suretyship to be released and start anew as each debt was repaid. Although his counsel admitted at the hearing on summary judgment that each document is clear and unambiguous on its own, he argued that when taken as a series of transactions, they create an ambiguity as to Meyers’ intent regarding the continuing nature of his liability. Thus, he argues that ambiguity should either be resolved against the Bank as makers of the documents, or by allowing him to introduce parol evidence.

The lower court found no ambiguity in the documents, the same was admitted by both counsel, and refused all parol evidence of contrary intent. We agree. The rule has long been that where no ambiguity exists in the written documents, no parol evidence may be taken, Nordlund v. School District (Mont. 1987), [227 Mont. 402,] 738 P.2d 1299, 44 St.Rep. 1183, and the duty of the court is simply to apply the language as written.

The lower court also enforced the express language of the guaranty which held Meyers individually liable to the extent of $200,000. We agree. The operative language is substantially the same as the sureties discussed above.

A guarantor differs from a surety in that a surety holds primary liability equal with that of the original borrower. However, a guarantor does not become liable until an intervening act occurs, such as a default of the original borrower. Compare §§ 28-11-401 and 28-11-101, MCA; see also, Stensvad v. Miners & Merchants Bank of Roundup (1979), 183 Mont. 160, 598 P.2d 1083.

In the instant case, Bank exhausted its remedies against Corporation and the collateral. Thus, it was ripe to proceed against Meyers as both a surety and a guarantor.

We note here that had the above-mentioned surety documents failed legally as per Meyers’ argument that they were exonerated, their language still would have effected a guaranty against Meyers individually under the facts of this case. Because Montana has no comparable exoneration statute for guaranties as it does for sureties, and because Bank had already sought recovery against the Corporation, and the collateral after a default, at the very least Meyers would be a guarantor under all of the duly-executed documents. In its broadest sense, every suretyship includes a guaranty. Suretyship, Simpson (1977). Thus, the operative language in these surety agreements also effectuated a guaranty. The District Court is affirmed on that issue.

II. BAD FAITH

The District Court summarily dismissed defendants’ bad faith claims against both the Bank and MBI. We affirm.

Defendants’ contentions fail both as a matter of factual proof and as a matter of law. Meyers named certain livestock and equipment as collateral for his loans in the security agreements he executed. However, immediately after procuring the loan in question, Meyers sold the collateral to pay off a debt to Saul Stone, a New York stockbroker, for losses he incurred in the futures market. Additionally, Meyers applied the proceeds from the corporate loan to the same debt. It is undisputed-that Meyers took these actions without advising the Bank of his intent to do so and, in fact, did not advise the Bank of his actions until the Corporation was about to default.

In his deposition, Meyers testified that the facts amounting to the Bank’s bad faith (and MBI as being “inextricably intertwined” to the Bank) were (1) failing to renegotiate the defaulted note with the Corporation, (2) publishing slanderous statements about Meyers in the District Court complaint, and (3) spreading rumors about Meyers’ financial inability in order to “shut him down” in his ranching/ business community.

This Court has never held that a Montana bank is under a duty to renegotiate a defaulted loan and Meyers is unable to point to case law anywhere which so holds. That argument is without merit. Because there is no evidence that a duty exists, Bank is entitled to summary judgment. First Trust Co. of Montana v. McKenna (1980), 188 Mont. 534, 614 P.2d 1027. See also, Central Bank of Montana v. Eystad (Mont. 1985), [219 Mont. 69,] 710 P.2d 710, 42 St.Rep. 1850 (the bank has no duty to renew or extend the note indefinitely); § 28-1-1211, MCA (bank need only act in a commercially reasonable manner); First Nat’l Montana Bank of Missoula v. McGuiness (Mont. 1985), 217 Mont. 409, 705 P.2d 579, 42 St.Rep. 1288 (the exercise of good business sense does not constitute bad faith).

Likewise, Meyers’ second argument pertaining to the “bad faith filing of fictitious and slanderous claims” printed by Bank in its complaint is also without merit. It has long been held that statements made in a judicial proceeding are absolutely immune and a cause of action for defamation cannot be predicted thereon. Section 27-1-804(2), MCA; see Bollinger v. Jarrett (1965), 146 Mont. 355, 406 P.2d 834 (“[T]here is no libel because any publication made in a judicial proceeding is privileged”). Bank and MBI were entitled to summary judgment on that issue.

Lastly, is the question of certain rumors which Meyers alleges that Bank instigated against him in order to put him out of business. This allegation fails both factually and legally, Because of the long and involved facts, we choose to discuss the legal aspects of this issue instead.

The relationship between the parties was defined by their Montana underlying commercial contracts. Based on those underlying contracts, two crucial facts come to light: (1) Bank did not breach the contracts; (2) Meyers breached the contracts.

It can be said fairly that the underlying contracts subsumed the entirety of the relationship between Bank and Meyers. They had no course of dealing or external relationship, absent their commercial contract. Thus, Montana law requires an initial finding that Bank breached that contract to have liability for bad faith and conduct attach.

Since the Bank had not breached the underlying contract (promissory note and security agreement), it cannot be said that Bank acted unreasonably and in bad faith. Nordlund v. School Dist. No. 14 (Mont. 1987), [227 Mont. 402,] 738 P.2d 1299, 44 St.Rep. 1183, and Maxwell v. Sisters of Charity of Providence (D.Mont. 1986), 645 F. Supp. 937.

Additionally, “it is a well-settled rule of contract law that a party who commits the initial breach cannot complain of a subsequent breach.” Malloy v. Judge’s Foster Home (Mont. 1987), [229 Mont. 317,] 746 P.2d 1073, 44 St.Rep. 1996. Meyers committed the initial breach when he secretly sold the Bank’s collateral and is barred from subsequently claiming the Bank treated him unfairly and in bad faith on their contract.

Based on the conduct of the parties with regard to the underlying contracts, no liability can attach for bad faith. Summary judgment in favor of the Bank was proper.

Meyers’ attempt to hold MBI, the bank holding company, liable for bad faith is baseless. He admitted at hearing that he and his corporation had no independent relationship with MBI into which the covenant could be implied. But, he argued that the Bank owed him a duty of good faith as its customer and MBI was likewise bound by this duty because it is “inextricably intertwined” with the Bank.

Meyers was unable to put forth any Montana law to support his contention that an affiliation between two parties may transfer one party’s duty of good faith onto another party. Likewise, Meyers brought forth no evidence by way of affidavit or deposition testimony, or otherwise, to prove a relationship between MBI, the Bank and himself.

MBI argues that summary judgment for them was proper on this count because of Meyers’ failure of proof. The summary judgment hearing was the time for Meyers to put forth the evidence of these relationships, if any existed. We agree.

Meyers and his corporation had a bank-customer relationship with Bank. However, no evidence was presented which suggested this was a special or fiduciary relationship onto which the covenant is applied under Tribby v. Northwestern Bank of Great Falls (Mont. 1985), 217 Mont. 196, 704 P.2d 409, 42 St.Rep. 1133.

There was no evidence that Bank encouraged the loans, advised Meyers or acted as his confidant. To the contrary, Meyers admitted he deliberately did not tell the bank of his corporate conduct until it was over. MBI cannot be held liable for bad faith under these facts. Summary judgment was proper.

The appellate standard of review of a summary judgment is the same as that used by the trial court. In order for summary judgment to issue, the movant must show that there is no genuine issue as to all material facts. Bindrim v. University of Montana (Mont. 1988), [235 Mont. 199,] 766 P.2d 861, 45 St.Rep. 2316. Based on the foregoing credible evidence, Bank and MBI have met their burden. We conclude that no genuine issues of material fact exist.

Judgment affirmed.

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


source: Caselaw Access Project

author: MR. JUSTICE GULBRANDSON

license: Public Domain

text:
    STATE OF MONTANA, Plaintiff and Respondent, v. ELWYN LAWRENCE PETERSON, Defendant and Appellant.
    No. 88-515.
    Submitted on Briefs Jan. 19, 1989.
    Decided Feb. 23, 1989.
    769 P.2d 1221.

      Gary L. Spaeth and John H. Bohlman, Red Lodge, for defendant and appellant.
    Marc Racicot, Atty. Gen., Kathy Seeley, Asst. Atty. Gen., Helena, Michael Alterowitz, County Atty., and Kent E. Young, Deputy County Atty., Red Lodge, for plaintiff and respondent.
   MR. JUSTICE GULBRANDSON

delivered the Opinion of the Court.

Appellant Elwyn Lawrence Peterson appeals the judgment of the Thirteenth Judicial District, Carbon County, finding him guilty of driving or being in actual physical control of a vehicle upon the ways of this state open to the public, in violation of § 61-8-401(l)(a), MCA.

Peterson was arrested on September 5, 1986, near Silesia, Montana. Shortly after 7:00 a.m. that morning, a motorist stopped at the weigh station located on 1-90 between Billings and the exit to Silesia. The motorist notified GVW Officer Rudy Gerke that there was “a drunk in an old brown Dodge right behind him.” Officer Gerke then went to the side of the highway to look for the car. Approximately one minute later the motorist yelled “Here he comes” and the officer saw what he identified as a brown Dodge coming at him. While the officer did not get a good look at the driver, he noticed the driver appeared to be slumped over the steering wheel. Officer Gerke managed to see that the first four numbers of the license plate were 10-14, before he was forced to jump into the ditch, out of the way of the oncoming car. The officer observed the vehicle then veered and nearly went into the median before passing from the field of view. Officer Gerke then relayed the information he had to the Montana Highway Patrol.

Shortly before 9:00 a.m. that morning, Mike Schmang, an adult probation officer, noticed a brown car in the ditch near Silesia. Officer Schmang notified the Carbon County Sheriff’s Office of the accident and then went to examine the vehicle. Shortly thereafter, Montana Highway Patrol Officer Lance Bourquin responding to Officer Gerke’s report of a drunk driver arrived at the scene. Officer Bourquin noted the license plate number on the vehicle was 10-14696. Based upon Peterson’s admission that he had been driving the vehicle and his failure to pass field sobriety tests, Officer Bourquin placed Peterson under arrest.

Peterson was subsequently convicted in Justice Court. He appealed to the District Court which also found him guilty. He now appeals the judgment of the District Court on the ground that sufficient evidence did not exist to sustain his conviction for driving or being in actual physical control of a vehicle upon the ways of this state open to the public.

Initially, we note our function on such an appeal is whether there is substantial credible evidence “to support the defendant’s guilt beyond a reasonable doubt.” State v. Longacre (1975), 168 Mont. 311, 313, 542 P.2d 1221, 1222. We find substantial credible evidence exists in this case to sustain the conviction.

Peterson presents two arguments as to why we should find he was unable to exercise sufficient control over the vehicle to sustain his conviction. First, he was not the driver of the vehicle on the trip from Billings to Silesia, nor at the time it ran into the ditch. At trial Peterson testified that one Robert “Fuzzy” Routon was giving him a ride home from a party in Billings when a deer in the roadway forced them into the ditch. After the accident, Peterson remained in the vehicle while Routon hitchhiked back to Billings to get help to pull the vehicle out of the ditch. Peterson then crawled from the back seat, where he had been sleeping, to the front seat to wait for Routon and went back to sleep. Peterson testified he was unable to obtain Routon to testify at trial, because Routon was out of the state looking for work.

Peterson’s second argument is that he was not physically in a position to actually control the vehicle when the officers arrived and arrested him. He contends the evidence shows the vehicle was off the highway, was turned off, and he was not behind the steering wheel or in a position to exert “actual physical control” over the vehicle.

Our examination of the record discloses several conflicts with these arguments. First, Peterson admitted on two separate occasions that he was the driver of the vehicle. Both Officers Schmang and Bourquin testified that Peterson admitted at the scene of the accident that he was the driver of the vehicle when it left the highway. Further, when Peterson was processed at the Sheriff’s Office he again acknowledged he had been driving the vehicle. Both officers also testified they did not see any evidence at the scene that there had been anyone else there, prior to their arrival.

The fact Peterson was able to obtain an affidavit from Routon after the completion of the trial, stating he was the driver of the vehicle at the time it left the highway, is not convincing. This assertion directly conflicted with Peterson’s admission on two separate occasions before law enforcement officers that he was the driver. In denying the appellant’s motion for a new trial, the District Court examined the effect of the affidavit on the case. It found that Peterson was not diligent in obtaining Routon’s presence for trial or in seeking a continuance when it was apparent he would not be available for trial. Further, this evidence was merely cumulative support of Peterson’s contention at trial that he was not the driver of the vehicle. When the evidence presented at trial is conflicting,

“[I]t is the function of the trier of the facts, in this case the trial judge, to determine the credibility of the witnesses and the weight to be given their testimony and he may pick and choose which of the witnesses are to be believed from a consideration of all the evidence.”

Longacre, 542 P.2d at 1222.

Here the trial court had the testimony of three law enforcement officers regarding a description of the manner in which the vehicle was driven and where it came to rest. The officers testified that Peterson made separate admissions that he was driving the vehicle and that the vehicle belonged to Peterson. The evidence showed that Peterson was unable to pass field sobriety tests and had ingested both alcohol and prescription drugs which react to alcohol. We find such evidence constitutes substantial credible evidence sufficient to support the judgment of the court.

Regarding Peterson’s claim in his brief that he was not in a position to exert “actual physical control” over the vehicle, we find the evidence was to the contrary. Upon approaching the vehicle, Officer Schmang testified he observed the appellant in the driver’s seat, slumped over to the right, with his feet in the area of the pedals. The vehicle was not running, but Peterson himself testified he had the keys in his pocket.

Peterson contends this Court should follow the decisions of other courts finding control over the vehicle is lacking where the defendant pulls off the traveled portion of the road and either turns off the vehicle or takes the keys out of the ignition. State v. Zavala (1983), 136 Ariz. 356, 666 P.2d 456; State v. Smelter (1984), 36 Wash.App. 439, 674 P.2d 690; State v. Bugger (1971), 25 Utah 2d 404, 483 P.2d 442. We decline to accept such precedent as controlling, particularly under the facts of this case. Rather, we look to Montana precedent for when a person may be found to have actual physical control of a vehicle. See, State v. Ruona (1958), 133 Mont. 243, 321 P.2d 615; State v. Taylor (1983), 203 Mont. 284, 661 P.2d 33. In Taylor, the defendant was found stuck in a barrow pit off a Billings street with the vehicle running and the lights on. There the Court stated:

“Just as a motorist remains in a position to regulate a vehicle while asleep behind its steering wheel, so does he remain in a position to regulate a vehicle while asleep behind the steering wheel of a vehicle stuck in a borrow [sic] pit. He has not relinquished regulation of or control over the vehicle. It does not matter that the vehicle is incapable of moving. Movement of a vehicle is not required for ‘actual physical control.’ State v. Ruona, supra.

Taylor, 661 P.2d at 34.

Here Peterson was found in the driver’s seat of a vehicle which had run off the road, with the keys to the vehicle in his pocket. In such a position he could regulate the movements of the vehicle. Appellant attempts to counter these findings by claiming he was lying down in the front seat and was not in a position to exercise “actual physical control.” We find the evidence introduced at trial supports a finding that the appellant was in the driver’s seat, but instead of slumping forward onto the steering wheel, he slumped to his right onto the middle of the seat. It would be ludicrous to rest the question of whether a person is in a position to exercise control over a vehicle upon the luck of a person as to the direction one falls when they “pass out.”

Appellant further asserts this Court should endorse a policy decision found in the Zavala case encouraging a person, who believing his driving impaired pulls completely off the highway, turns off the key and sleeps until sober before proceeding. Such a responsible action should not subject a person to the possibility of being arrested for being in control, according to the appellant. Zavala, 136 Ariz. at 359, 666 P.2d at 459.

We disagree. The better policy is that a person should ascertain his ability to drive before climbing behind the wheel and terrorizing the roadways of this state. Further, the evidence does not support a finding that this was the situation in the present case. Peterson acknowledged he had left a party in Billings around 7:00 a.m. to go home to Silesia, twenty-four miles away. Along the way, eyewitness testimony established whoever was driving the car was seriously impaired and a hazard to anyone on or near the roadway. After driving over twenty miles in an impaired state, the driver of the vehicle finally ended up stuck in the ditch after running over a delineator post and off the highway. There was no turnout or intersecting road at the point where the vehicle left the roadway. Fortunately, no one was injured. We agree with the State’s brief that no public policy exists which rewards that kind of luck.

The judgment of the District Court is affirmed.

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


text:
    STATE OF MONTANA, Plaintiff and Respondent, v. ALEXANDER COURVILLE, Defendant and Appellant.
    No. 88-175.
    Submitted Jan. 12, 1989.
    Decided Feb. 27, 1989.
    769 P.2d 44.
    Benjamin R. Anciaux, Poison, for defendant and appellant.
    Marc Racicot, Atty. Gen., Betsy Brandborg, Asst. Atty. Gen., Helena, Larry Nistler, Co. Atty., Mark Stermitz, Deputy Co. Atty., Poison, for plaintiff and respondent.
   MR. CHIEF JUSTICE TURNAGE

delivered the Opinion of the Court.

Alexander Courville was convicted of aggravated burglary and sexual intercourse without consent in the Twentieth Judicial District, Lake County. Courville appeals the conviction of aggravated burglary.

The issues on appeal are stated as follows:

1. Whether the trial court erred by not directing a verdict in favor of defendant on the aggravated burglary charge; and

2. Whether the trial court erred by not allowing defendant to introduce evidence at trial of the victim’s past crimes, wrongs and other acts?

We affirm.

T.B. was awakened in the upstairs bedroom of her home at about 4:00 a.m. on the morning of August 22, 1987, by a noise downstairs. She went downstairs in her nightgown and found Courville in her house, sitting on her couch with his shoes off. T.B. recognized Courville immediately because he had been an acquaintance of the family for many years.

T.B. noticed that Courville was obviously upset and appeared to have been drinking. He pleaded with T.B. to stay and talk to him because he was upset. T.B. explained to him that she was sick, she had been at the hospital earlier to get a shot of Demerol for her severe migraine headache, she was tired from the drug and needed to go back to bed. The trial testimony conflicted at this point as to whether or not T.B. actually told Courville to get out of the house. However, Courville stood up and began walking. T.B. assumed he was walking toward the door to leave, and she went upstairs, returning to bed.

T.B. was awakened again in a short time by Courville sitting on her bed and shaking her awake. Her two-year-old son was in bed with her. The testimony again conflicted at this point as to where Courville was and what dialogue passed between them. T.B. gave slightly different accounts of this. She appeared confused at trial, and her memory was not strong due to the ensuing events, her drowsiness, and the effect of the drug.

However, T.B. testified that she turned her back to Courville and dozed off again. She was awakened the next time by Courville choking her and yelling at her. He choked her several times and demanded that she strip so that he could have sex with her. She refused and was choked again. She testified that under fear for her life, she undressed. She persuaded him not to have intercourse with her, but while she was naked Courville fondled her entire body and put his fingers in her vagina and rectum.

T.B. attempted to leave the bedroom for varying excuses, but Courville followed her through the house and twice took her back to the bedroom to repeat this process. Finally, at about 7:00 a.m., T.B. was able to get out of the house with her son and another child she was babysitting, under the excuse of needing to take the other child home to her mother and needing to get on the road for a trip they had planned to Glacier Park.

T.B. went straight to Vanessa Jones’s house, the mother of the child she was babysitting. Vanessa testified that T.B. appeared on her doorstep about 7:00 a.m. with the kids and was shaking and totally upset. Her throat, chest and arms were covered with bruises. T.B. related the entire story to Vanessa, who also knew Courville. Vanessa persuaded T.B. to get some sleep at Vanessa’s house and encouraged her to turn Courville in to the police.

Five days later, Vanessa went to the Poison Police Department with this story and gave a statement to the police. The next day, T.B. came in herself and related the story. T.B. was still quite bruised and her injuries were photographed by the investigating officer. However, T.B.’s version of the events varied slightly at trial from the story she related to the police that day.

Originally, T.B. gave a statement that she told Courville several times to go home and get out of the house and the next thing she remembered was waking up to him choking her. At trial, she could not remember specifically telling him to leave, but rather just understood that he was leaving when she told him she was sick and he got up and walked toward the door. Additionally, T.B. later remembered some intervening events in her bedroom between her falling asleep the first time and when Courville first began choking her.

However, she testified unequivocally that she did not invite him into the house, nor the bedroom, she did not encourage him, she did not want to have sex with him and she did not consent to his acts. All accounts of the story reveal the fact that Courville threatened her: “If you don’t do it, I’ll kill you,” and “Vanessa will find you dead here tomorrow” and “you keep your mouth shut about this or I’ll come back and hurt you again.”

Courville was charged by information on September 11, 1987, with sexual intercourse without consent and aggravated burglary. Prior to trial, the State made motions in limine to exclude evidence of T.B.’s sexual conduct and history of her criminal record. Both motions were unopposed by defense counsel and were granted by the judge. The jury returned a verdict of guilty on both counts in February, 1988, and Courville was sentenced to twenty years with none suspended for Count I, sexual intercourse without consent, and twenty years with ten suspended on Count II, burglary, with an additional ten years for aggravated burglary, all to run consecutively. Courville does not appeal his conviction on Count I.

Courville appeals the trial court ruling that T.B.’s character had not been put in issue by her own inconsistent statements, thus prohibiting his use of “other bad acts” evidence against her, and denying his motion for a directed verdict on the burglary charge.

I.

Character evidence is generally inadmissible. Rule 404(a), M.R.Evid. However, Rule 608, M.R.Evid., does permit character evidence under specific circumstances: when the witness’s character for truthfulness has been put in issue and then only if the offered evidence goes to the witness’s veracity. But specific instances of misconduct of a witness for the purpose of attacking the witness’s credibility may not be proved by extrinsic evidence. Rule 608(b). Rule 609 specifically prohibits admission of evidence that a witness has been convicted of a crime for purposes of attacking the credibility of the witness. See for discussion, Sloan v. State (Mont. 1989), [236 Mont. 100,] 768 P.2d 1365, 46 St.Rep. 214, 216.

In this case, the defendant argued that the victim’s inconsistencies in some of the details of her story put her character at issue. He thus wanted to prove she was untruthful with testimony, some from other witnesses, that she had been accused of stealing money from Vanessa at one time and that T.B. herself had a criminal record. However, counsel’s efforts were misguided on this issue. This testimony is not probative of truthfulness, and T.B.’s character was not put at issue. The judge properly ruled that the door was not open to this sort of testimony.

We decline to rule that an inconsistent statement in a victim’s account of the sexual assault on her automatically puts her character in issue, thus opening the door for- evidence of any past misconduct. The ruling of the trial court to that effect was not an abuse of discretion. In State v. Maxwell (1982), 198 Mont. 498, 647 P.2d 348, we held that inconsistencies in a victim’s statements regarding sexual intercourse without consent do not necessarily render her testimony inherently incredible. The jury is to remain the fact finder and the proper body to weigh the credibility of each witness:

“Only in those rare cases where the story told is so inherently improbable or is so nullified by material self-contradictions that no fair-minded person could believe it may we say that no firm foundation exists for the verdict based upon it.”

Maxwell, 647 P.2d at 351.

Under these circumstances, defense counsel is not allowed to attack the victim’s character in general, but rather is allowed to impeach the witness’ testimony based on her prior inconsistent statements. Counsel impeached in this case and the jury was left to weigh her credibility in light of all disputed details.

The jury always has an easy remedy for incredible testimony: they are free to reject it. Obviously, in this case, the jury did not reject T.B.’s testimony. Rather, the jury concluded that T.B. was worthy of belief despite her inconsistencies.

Rulings on evidence are left to the sound discretion of the trial judge and will not be overturned on appeal absent a showing that the trial judge abused his discretion. Cooper v. Rosston (Mont. 1988), [232 Mont. 186,] 756 P.2d 1125, 45 St.Rep. 978. Courville has not made that showing. We affirm the lower court’s denial of “other bad acts” testimony.

II.

Courville also contends that the State’s case-in-chief was deficient on the elements of burglary and, thus, it was an abuse of discretion for the trial court not to direct a verdict in favor of Courville on that count. We disagree.

Section 45-6-204, MCA, defines burglary as follows:

“(1) A person commits the offense of burglary if he knowingly enters or remains unlawfully in an occupied structure with the purpose to commit an offense therein.

“Burglary is aggravated if the perpetrator inflicts bodily injury to any person during his entry, crime or flight thereafter.”

“Enters or remains unlawfully” is defined in Section 45-6-210, MCA, which reads in pertinent part: “A person enters or remains unlawfully . . . when he is not licensed, invited or otherwise privileged to do so.”

This statute is worded in the disjunctive; thus evidence that Courville either entered or remained unlawfully with an intent to commit an offense therein warrants denial of his motion. The testimony at trial conflicted as to whether or not T.B. locked her door that night. However, it is clear that Courville entered her house without permission to do so. His unlawful entry coupled with his further felony conduct satisfied the State’s burden of proving every element of the burglary charge.

A verdict of acquittal may be directed in favor of the defendant only if no evidence exists upon which to base a guilty verdict. See State v. Matson (Mont. 1987), [227 Mont. 36,] 736 P.2d 971, 44 St.Rep. 874; State v. Whitewater (Mont. 1981), [___ Mont. ___,] 634 P.2d 636, 38 St.Rep. 1664; and Section 46-16-403, MCA. The foregoing testimony of T.B. regarding Courville’s entry was sufficient for the case to go to the jury. Courville’s motion was properly denied.

Courville further argued that even if he actually entered unlawfully, he was invited to remain on the premises, thus negating any criminal conduct. Trial testimony conflicted as to whether T.B. invited Courville to sleep downstairs on her couch that night because he was obviously upset and needed a place to stay. T.B. testified that she did not mind if he stayed on her couch but did not specifically remember inviting him. Even had the jury found that T.B. may have invited Courville to sleep downstairs on her couch, that invitation certainly did not include going up to her bedroom in order to choke and sexually assault her. Such conduct exceeds any reasonable privilege and the trial court properly let the burglary charge go to the jury for determination. See also State v. Manthie (1982), 197 Mont. 56, 641 P.2d 454; State v. Watkins (1974), 163 Mont. 491, 518 P.2d 259 (“when a person exceeds the limits of his privilege ... he thereby transforms his original invited presence into a trespass that can form the basis of a burglary charge.”)

Based on the foregoing evidence, Courville fails to convince this Court that the trial court committed error.

Judgment affirmed.

MR. JUSTICES HARRISON, McDONOUGH, SHEEHY and WEBER concur.


text:
    BARRY ENGRAV, Plaintiff and Appellant, v. MOREY CRAGUN, Granite County Sheriff, Defendant and Respondent.
    No. 88-282.
    Submitted Dec. 9, 1988.
    Decided Feb. 27, 1989.
    769 P.2d 1224.

      Berry Engrav, Missoula, pro se.
    Marc Racicot, Atty. Gen., Paul D. Johnson, Asst. Atty. Gen., Helena, J. Allen Bradshaw, Granite County Atty., Philipsburg, for defendant and respondent.
   MR. CHIEF JUSTICE TURNAGE

delivered the Opinion of the Court.

Barry Engrav, proceeding pro se, appeals the order of the District Court of the Third Judicial District, Granite County, denying his request for records of the Granite County Sheriff’s Department. Appellant requested records of the daily log of phone calls, case files of criminal investigations, pre-employment investigations, and lists of arrested persons. The sheriffs office denied the request, and the District Court upheld the sheriffs denial, finding that the right of privacy of those people on the requested lists and investigation reports held a right of privacy which outweighed the public right to know.

The issue on appeal is:

Whether the District Court properly denied the plaintiff access to the requested information on the grounds that the right of privacy of the individuals outweighed the public right to know?

Appellant is a University of Montana student and a lifetime resident of Granite County who is interested in researching and reporting on various aspects of Granite County law enforcement. He requested information concerning records in the Granite County Sheriffs office. These were: (1) daily log of telephone calls, (2) case files of criminal investigations, (3) pre-employment investigation reports, and (4) a list of persons arrested since January 1, 1987.

Appellant alleged that the phone log and list of radio calls were important to determine the rate of crime reported by the public, the response of the sheriff’s department to those reported crimes, and the seriousness of the reported crimes. He alleged that the case files for criminal investigations were important because:

“Without access to case files of criminal investigations, Plaintiff is unable to assess the quality of the Defendant’s investigative procedures and the rate of solved crimes.”

Appellant requested pre-employment investigation materials because without them he would not be able to determine the adequacy of the defendant’s hiring policies or the quality of personnel hired by the defendant. He wanted to see if the policies were up to the standards that taxpaying citizens were entitled to.

Lastly, appellant wanted the list of persons arrested since January 1, 1987, to investigate the quality of care given to incarcerated inmates.

Respondent, Granite County Sheriff, denied these requests by Engrav.

The issue is whether the District Court properly denied the requests for the daily telephone logs, all criminal investigatory files, active and inactive pre-employment investigatory files, and arrest records, declaring that the right of privacy outweighed the public right to know. The Constitution of the State of Montana states two conflicting rights. Article II, § 9, states:

“No person shall be deprived of the right to examine documents or to observe the deliberations of all public bodies or agencies of state government and its subdivisions, except in cases in which the demand of individual privacy clearly exceeds the merits of public disclosure.”

Article II, Section 10, reasserts an individual’s right to privacy: “The right of individual privacy is essential to the well-being of a free society and shall not be infringed without the showing of a compelling state interest.”

When reading the transcript from the Constitutional Convention for the 1972 Montana Constitution, it is clear that the framers, in wording Article II, § 9, took painstaking care to consider both the public right to know and an individual’s right of privacy. Volume VII, Mont. Const. Conv. at 2483-2498. The primary concern of the delegates to the convention was in enacting an article which gave the public the power to request information from government agencies and public bodies. The convention delegates specifically inserted the words “except in cases in which the demand of individual privacy clearly exceeds the merits of public disclosure.”

“The committee intends by this provision that the right to know not be absolute. The right of individual privacy is to be fully respected in any statutory embellishment of the provision as well as in the court decision that will interpret it. To the extent that a violation of individual privacy outweighs the public right to know, the right to know does not apply.....”

Volume II, Mont. Const. Conv. at 632.

Delegates to the convention carefully discussed the introduction of a specific section for the right of privacy, and subsequently created Article II, § 10. They took into consideration the fact that neither the United States Constitution nor the original Montana Constitution expressly stated a right to privacy in the bill of rights. According to the delegates, since adopting the original Montana Constitution, the right had clearly developed and should be enumerated in the Constitution.

One of the reasons that the delegates believed the right should be explicitly enumerated was that modern technology is used today to invade individual privacy, including wire taps, bugging devices, photo surveillance and computerized data banks.

Appellant declares that § 2-6-102, MCA, is the standard for the public right to know. It states that “every citizen has a right to inspect and take a copy of any public writings of this state.” Respondent argues that the governing statutes are within the Montana Criminal Justice Information Act of 1979, §§ 44-5-101 through 44-5-415, MCA, whose purpose is, in part, to establish effective protection of individual privacy in confidential and nonconfidential criminal justice information collection, storage, and dissemination.

In considering the possible conflict between the Articles of the Constitution and among the Montana statutes, it is important to remember that in all of the relevant laws the right of privacy for the individual is expressly regarded.

We adopted a two-part test in Montana Human Rights Division v. City of Billings (1982), 199 Mont. 434, 649 P.2d 1283, which determines whether a person has constitutionally protected privacy interest. The first part of the test is whether the person involved had a subjective or actual expectation of privacy. The second is whether society is willing to recognize that expectation as reasonable. In applying the test in Montana Human Rights Division, we held that there was an individual privacy interest concerning personnel records and employment applications. In that case, the Human Rights Commission requested employment information as part of an investigation of a discrimination case. Defendant City of Billings refused to relinquish the information. We held that the Human Rights Commission could require an employer to submit certain evidence concerning employee records but that the Commission had to prevent invasion into the privacy of those people whose names appeared on the employment information. The Human Rights Commission was not to divulge any of the information to outside sources. The only instance in which the Commission could do so was if it decided that a public hearing was necessary, and only then if it altered the information sufficiently to guarantee anonymity of the persons involved.

The test was also applied in Missoulian v. Board of Regents of Higher Education (1984), 207 Mont. 513, 675 P.2d 962, where the Missoulian requested information concerning job performance evaluations of the six Montana university presidents. The Board of Regents refused to submit the information, declaring that the information was within the actual expectation of the individuals’ privacy rights and that the expectation was reasonable. This Court agreed with the Board. The evaluations were self-evaluations and evaluations by Board members. It was clear that if these evaluations were open to public scrutiny, none of the evaluators would be as candid as when evaluations are confidential. Moreover, the evaluations could be used as a vindictive mechanism against university employees or presidents by those who dislike the individuals.

In applying the two-part test to the case at bar, we must first decide whether the persons involved have a subjective or actual expectation of privacy. It is clear from the expectations of the individuals involved, that there is an actual expectation of privacy. It is obvious that when individuals call the police station, they have an actual expectation of privacy for the information they give. For those citizens who are willing to report crimes that they witness but wish to remain anonymous, the expectation is actual.

Public exposure of law enforcement files relating to ongoing criminal investigations would also have a disastrous effect upon law enforcement agencies in the performance of their duty to protect the lives, safety and property of persons within their jurisdictions. If criminals and their allies could daily track the progress of investigations into their criminal activities, Montana would become a worldwide mecca for criminal entrepreneurs. The public policy of this state cannot permit this to occur.

There is an actual privacy interest where criminal investigations are concerned because investigations are conducted concerning people under scrutiny but are later dismissed from suspicion. Those persons do not expect to have their names publicized for something with which they have no actual involvement. Moreover, names of informants involved in criminal investigations, or undercover police officers, if made public, would put the lives of these people and the investigation in jeopardy.

The holding in Montana Human Rights Division established that there is an actual privacy expectation for those who apply for employment positions. They are required to disseminate information about themselves which they expect to remain private. The expectation here is actual and not subjective.

The second part of the test is whether society is willing to recognize the privacy expectation as reasonable. We hold that society does recognize the expectation.

In the case of both phone logs and criminal investigations, situations arise where the information is of a highly personal nature. These instances include cases of sexual crimes and domestic crimes where both the victims and their families should be protected from public exposure. Association with these investigations is accidental and innocent, and the privacy interest of these victims and families must be protected from further traumatic injury.

The appellant also requested pre-employment information. The sheriff properly denied the information requested. We have stated that where employment records are concerned,

“. . . [although] we are aware that much of the information contained in employment files and records is harmless or is already a matter of general knowledge, we are not persuaded that the records are entirely free of damaging information which the individuals involved would not wish and in fact did not expect to be disclosed.” Montana Human Rights Division v. City of Billings, 649 P.2d at 1287. In Missoulian, we emphasized some of the areas which would be on pre-employment and employment files. These include family and health problems, employers’ criticisms, employees’ criticisms of the employers, interpersonal relationships, and subjective view of employers. These must all be protected under constitutional privacy interests. Moreover, if the investigations are confidential, more candidness is guaranteed the sheriffs department prior to hiring new employees. This is beneficial to the public.

Section 44-5-103, MCA, specifically declares what information can be publicly disseminated. Included in “public criminal justice information” are arrest records. Section 44-5-103(12)(e)(ii), MCA. Initial arrest records are not excluded from review by the public when reviewed in cooperation with the agency which holds the information during normal business hours of the agency. Section 44-5-301(2), MCA. Section 44-5-301(1), MCA, states that all information is public with the exception of records or indexes which are “compiled by name or universal identifier from a manual or automated system . . .” In these cases, only information about convictions, deferred prosecutions, or deferred sentences is available to the public.

There appears to be a distinct conflict between §§ 44-5-103 and 44-5-301, MCA. Section 44-5-103(12) clearly states that arrest records are “public criminal justice information.” Arrest records are included in a list of public information which includes information, (a) made public by law; (b) of court records and court proceedings; (c) of convictions, deferred sentences, and deferred prosecutions; (d) of post-conviction proceedings and status; (e) originated by a criminal justice agency, including (i) initial offense reports, (ii) initial arrest records, (iii) bail records, and (iv) daily jail occupancy rosters; (f) information considered necessary by a criminal justice agency to secure public assistance in the apprehension of a suspect; or (g) statistical information. Section 44-5-103(14), MCA, specifically states that statistical information which is disseminated in the public domain is:

“. . . data derived from records in which individuals are not identified or identification is deleted and from which neither individual identity nor any other unique characteristic that could identify an individual is ascertainable.”

Although Section 44-5-103 specifically regards initial arrest records as public criminal justice information, Section 44-5-301(1) (a) declares:

“(1) There are no restrictions on the dissemination of public criminal justice information except for the following:

“(a) Whenever a record or index is compiled by name or universal identifier from a manual or automated system, only information about convictions, deferred prosecutions, or deferred sentences is available to the public.”

It is obvious that any initial arrest record is going to be compiled by name of those arrested or by another universal identifier, such as a social security number. Therefore, under § 44-5-301, the same initial arrest records which are allegedly available to the public are also restricted from public review because they enter the area of private records of individuals.

There is debate whether the information sought concerning arrest records is more beneficial subject to public scrutiny, or whether it should not be available as public criminal justice information. Individuals arrested under suspicion of committing a crime and who are subsequently released without charges or incarceration must be protected from public persecution. On the other hand, law enforcement must be under the view of the public to deter false arrests or possible discriminatory action.

In construing statutes where general terms and specific terms are in conflict, specific intent will be given priority over the general term. City of Billings v. Smith (1971), 158 Mont. 197, 490 P.2d 221; Wymont Tractor and Equipment Co. v. Unemployment Compensation Commission of Mont. (1955), 128 Mont. 501, 278 P.2d 208. The definitional statute, § 44-5-103, specifically states that arrest records are public information. Section 44-5-301 relates to any record or index which is compiled by name or universal identifier. As to initial arrest records, § 44-5-103 takes precedent. We hold that the initial arrest records are public.

It is important to keep the right of privacy of individuals in mind here. To prevent unnecessary dissemination of private information, appellant will be allowed to view and record the information pursuant to § 44-5-103(14), MCA. Section 44-5-103(14) specifically states:

“ ‘Statistical information’ means data derived from records in which individuals are not identified or identification is deleted and from which neither individual identity nor any other unique characteristic that could identify an individual is ascertainable.”

The purpose of the information sought by appellant can be accomplished without dissemination of the names of those individuals listed on the initial arrest records. He can review and disseminate the information without including the names of arrested individuals.

Privacy rights of individuals in Montana are more substantial than the rights guaranteed in the United States Constitution. Montana Human Rights Division, 649 P.2d at 1286. Before this Court will invade the individual privacy of the persons involved, a compelling state interest to do so must be found. There is no compelling state interest here which allows the dissemination of the requested information. Appellant wishes to do a study for a school research project; this is not a sufficient state interest.

Section 44-5-303, MCA, states that dissemination of confidential criminal justice information is restricted to criminal justice agencies or to those authorized by law to receive it. Appellant is neither part of a criminal justice agency nor authorized to receive the information.

Section 44-5-304, MCA, allows individuals to have access to criminal history record information for the express purpose of developing statistical information pursuant to an agreement with a criminal justice agency. The information may be disseminated according to (a) specific authorization of the information; (b) limitation on the use of the information, to research, evaluative, or statistical purposes; (c) assurance of confidentiality and security of the information; and (d) sanctions for violations of the agreement. Furthermore, pursuant to § 44-5-304(2), MCA, the agreements, research, studies and statistical information gathered from the criminal history records is subject to the review and approval by the Department of Justice. The requested arrest records are subject to the provisions of § 44-5-304.

We affirm the finding of the District Court and hold that the requested information is beyond the reach of the public sector. The information is protected under the Montana Constitution and the Criminal Justice Information Act of 1979.

Affirmed.

MR. JUSTICES HARRISON, GULBRANDSON, McDONOUGH and WEBER concur.


text:
    YVONNE SINK, Plaintiff and Appellant, v. ROBERT G. SQUIRE and Judith M. Squire, Defendants and Respondents.
    No. 88-479.
    Submitted on Briefs Jan. 12, 1989.
    Decided Feb. 27, 1989.
    Rehearing Denied March 30, 1989.
    769 P.2d 706.

      Jack Yardley, Yardley & Yardley, Livingston, for plaintiff and appellant.
    Chester Lloyd Jones, Jones & Hoffman, Virginia City, for defendants and respondents.
   MR. JUSTICE GULBRANDSON

delivered the Opinion of the Court.

Appellant Yvonne Sink appeals from the dismissal by the Fifth Judicial District Court, Madison County, of her action to set aside the previous judgment of the court in Civil Action No. 7448 for lack of jurisdiction due to improper service. The court by its dismissal upheld its previous judgment awarding a tax deed to respondents. We reverse the court’s dismissal and order the tax deed awarded in the prior action set aside as void for lack of jurisdiction.

Appellant raises the following issues on appeal:

1. Did the publication of the summons for publication without a court seal amount to an improper service thereby denying the District Court jurisdiction over the tax deed action?

2. Did the respondents fail to exercise due diligence to determine appellant’s current place of residence prior to mailing the summons for publication and complaint to the incorrect address?

The appellant Yvonne Sink, together with her husband James Sink, purchased a 10.293 acre lot in Madison County from The Shining Mountains North (a limited partnership) in the mid 1970’s. Thereafter, Yvonne and James separated. She then moved from Anchorage, where she had been living with her husband prior to their separation, to the San Francisco Bay area. Upon separation, they orally agreed that Yvonne would make the regular payments on the property while James would pay the property taxes. Yvonne continued to make payments on the property until 1983. At that time the balance owing on the property was paid in full, and she and her estranged husband received a warranty deed to the property from Shining Mountains. James Sink subsequently conveyed his interest in the property to Yvonne by a quitclaim deed dated on March 9, 1987. Shining Mountains remained the owner of record, however, because Yvonne failed to record her deed with the Madison County Clerk and Recorder’s Office. Yvonne testified she was unaware of any requirement to record her ownership before she herself sold the property.

Although Yvonne diligently made payments until the amount owing on the property was paid in full, James Sink failed to pay the taxes assessed on the property. Consequently, the Treasurer of Madison County (County Treasurer) issued a Certificate of Tax Sale on July 22, 1981 for failure to pay the $91.40 in taxes assessed against the property in 1980. Yvonne testified she received no actual notice of these delinquent taxes.

On March 26, 1985, the respondents, Robert and Judith Squire, paid all the taxes, penalties, and interest assessed and outstanding against the property from 1980 to date. The total paid amounted to $609.71. The County Treasurer thereafter assigned the Tax Sale Certificate to them. The Squires then instituted Civil Action No. 7448 against Yvonne and James Sink in order to acquire a tax deed to the property.

The Sheriff stated by way of a Sheriff’s Return (which erroneously failed to name the parties and to give the date the Sheriff was unable to locate them) that he was unable to locate the Sinks in Madison County, and thus he could not serve the complaint and summons upon them. The Squires’ attorney then filed an affidavit requesting an order for service of summons by publication. The Clerk of Court granted this requested order and issued a summons for publication on April 26, 1985. This summons failed to list the name or address of the plaintiffs’ attorney. The attorney for the plaintiffs signed an affidavit attesting to the mailing of a copy of this summons for publication.

A second summons for publication later was signed on May 2, 1985 and then published for three consecutive weeks in the Madisonian, a local county newspaper. This latter published summons correctly listed the name and address of the plaintiffs’ attorney and contained the Clerk of Court’s signature, although it did not have a court seal. The plaintiffs, however, did not mail this legally correct May 2nd version to Yvonne and James Sink at their last determined address in Homer, Alaska.

Defendants failed to appear or answer the summons within the twenty day period following service of the summons. The District Court then entered a default judgment against the Sinks on June 18, 1985 and issued a tax deed to the Squires. When Yvonne Sink subsequently learned of this default judgment, she filed the instant action requesting the District Court to declare the default judgment in Civil Action No. 7448 void for lack of jurisdiction because of improper service upon defendants. The District Court ruled that the plaintiffs substantially complied with the spirit and purpose of the service requirements and that the court therefore had jurisdiction over Civil Action No. 7448. Consequently, the District Court dismissed the present case. Yvonne Sink appeals from the court’s determination that jurisdiction existed in Civil Action No. 7448 and from the court’s subsequent dismissal of this case.

At the outset, we note that the most egregious error affecting the jurisdiction of the District Court to hear this case was the plaintiffs’ failure to mail to the defendants a copy of the summons for publication with the name and address of plaintiffs’ attorney on it. This issue was not raised by Yvonne Sink on appeal. However, an examination of the record reveals that the District Court took judicial notice of the facts of the prior Civil Action No. 7448 and the parties stipulated to the admission of these facts into the record. These facts give rise to the jurisdictional error to which we now turn our attention.

Rule 4 D(5)(e), M.R.Civ.P. requires a plaintiff to mail a copy of the summons for publication and complaint to a defendant’s place of residence. The content and form of this summons for publication must comply with the mandatory requirements set forth in Rule 4C(2), M.R.Civ.P. These requirements are as follows:

“The summons shall be signed by the clerk, be under the seal of the court, contain the name of the court and the names of the parties, be directed to the defendant, state the name and address of the plaintiff’s attorney, if any, otherwise the plaintiff’s address, and the time within which these rules require the defendant to appear and defend, and shall notify him that in case of his failure to do so judgment by default will be rendered against him for the relief demanded in the complaint. (Emphasis added.)”

The summons for publication sent to the defendants on April 26, 1985 failed to fully comply with these mandatory requirements. Plaintiffs had an attorney, yet the summons for publication actually sent to the defendants failed to state the name and address of plaintiffs’ attorney. The summons for publication actually published corrected this omission, but a copy of this latter published summons was not mailed to the defendants.

The Court has previously required strict and literal compliance with the statutory procedures required for constructive service. E.g., Shields v. Pirkle Refrigerated Freight Lines, Inc. (1979), 181 Mont. 37, 44, 591 P.2d 1120, 1124, citing from 62 Am.Jur.2d Process § 68. As this Court has previously stated:

“It is the settled judicial policy of this state that more accurate observance, with regard to compliance with provisions of the statutes, is required in constructive service than in personal service; also that less presumption in favor of jurisdiction of a court, upon rendition of judgment, is indulged in when the judgment is based upon constructive service than when based upon personal service.”

Holt v. Sather (1928), 81 Mont. 442, 448, 264 P. 108, 111. Such compliance with mandatory service requirements is essential to jurisdiction. Consequently, this Court will uphold the jurisdiction of a District Court despite a failure to comply with all mandatory service requirements only when the plaintiff affirmatively shows that there is absolutely no possibility of prejudice from the failure. See, e.g., Holt, 264 P. at 111.

No such showing was made in this case. The possibility exists that James and/or Yvonne Sink did not know where to send their response because of the omission of the name and address of the plaintiffs’ attorney on the copy of the summons for publication mailed to them. The District Court thus erred in dismissing the present case which challenged the court’s jurisdiction over Civil Action No. 7448. We hold that the plaintiffs’ failure to comply with this mandatory service requirements prevented the District Court from obtaining jurisdiction to hear and render a judgment in Civil Action No. 7448. We therefore need not discuss those jurisdictional errors raised by Yvonne Sink on appeal.

The judgment of the District Court in this case is reversed and the prior judgment and tax deed issued in Civil Action No. 7448 ordered set aside as void for lack of jurisdiction.

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


author: MR. JUSTICE HARRISON

text:
    BEE BROADCASTING ASSOCIATES, a Montana limited partnership, By and Through ROSE COMMUNICATIONS, INC., a Montana corporation and the limited partnership’s sole general partner, Plaintiff and Respondent, v. WILLIAM REIER, Karen L. Reier and Does I through X, inclusive, Defendants and Appellants.
    No. 88-488.
    Submitted on Briefs Jan. 12, 1989.
    Decided Feb. 27, 1989.
    769 P.2d 709.

      William L. Madden, Goetz, Madden & Dunn, Bozeman, for defendants and appellants.
    E. Eugene Atherton, E. Eugene Atherton, P.C., Kalispell, for plaintiff and respondent.
   MR. JUSTICE HARRISON

delivered the Opinion of the Court.

This case comes to us on appeal after a dismissal of plaintiff’s complaint in the Eighteenth Judicial District, Gallatin County, the Honorable Thomas A. Olson presiding. Appellants appeal the lower court’s denial of Rule 11, M.R.Civ.P., sanctions. We affirm.

Briefly, the facts are as follows: On March 23, 1983, respondent, Bee Broadcasting, obtained a permit from the Federal Communications Commission (hereinafter FCC) to construct television station KCTZ, Channel 7, in Bozeman, Montana. However, respondent failed to begin construction within the time permitted and requested an extension. On August 7, 1984, the FCC denied the extension and canceled the permit. Respondent petitioned for reconsideration. On September 27, 1984, appellant, Karen Reier, filed an opposition to respondent’s Motion for Reconsideration, supporting the FCC’s initial denial of a time extension and expressing an interest in applying for the station assignment once it again became available for public application. Thereafter, the parties filed numerous pleadings and counterpleadings before the FCC.

On June 15, 1987, appellant William Reier appeared before the Bozeman City Commission to protest the issuance of a conditional use permit for construction of microwave and satellite antennas on a building used in connection with the television studio and offices. The offices were to be used by KCTZ. The commission granted the permit on June 22, 1987.

On July 28, 1987, respondent filed an action in the District Court against appellants alleging tortious interference with prospective business relations. In response, appellants filed a comprehensive motion to dismiss, for summary judgment and for sanctions. Appellants asserted that their conduct before the FCC and the Bozeman City Commission was protected by an absolute privilege of free speech under Art. II, § 7, Mont. Const. (1972) and Section 27-1-804, MCA. In turn, respondent urged the court to adopt a “sham exception” to the general rule resembling that accepted in federal antitrust cases. See, Eastern Railroad Conference v. Noerr Motors (1961), 365 U.S. 127, 81 S.Ct. 523, 5 L.Ed.2d 464 (protected free speech unless the activity “is a mere sham to cover what is actually nothing more than an attempt to interfere directly with the business relationships of a competitor . . .” Noerr Motors, 365 U.S. at 144, 81 S.Ct. at 533.)

After extensive briefing and oral argument, the lower court dismissed the complaint for failure to establish a prima facie case, concluding that appellants’ actions were protected free speech. While the court acknowledged the case law supporting a “sham exception” to free speech rights, it rejected an application in the instant case absent legislative action. The request for sanctions was denied. Appellants appeal from this denial, asserting the complaint was frivolous and the case law absolutely inappropriate to the circumstances.

Rule 11, M.R.Civ.P., provides in pertinent part:

“Every pleading, motion, or other paper of a party represented by an attorney shall be signed by at least one attorney of record in his individual name, whose address shall be stated . . . The signature of an attorney or party constitutes a certificate by him that he has read the pleading, motion, or other paper; that to the best of his knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law, and that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation ... If a pleading, motion, or other paper is signed in violation of this rule, the court, upon motion or upon its own initiative, shall impose upon the person who signed it, a represented party, or both, an appropriate sanction . . .”

More stringent than the original good faith formula, Rule 11 imposes an “objective reasonableness” standard designed to prevent needless litigation and avoid waste. Fed.R.Civ.P. 11 advisory committee note. Accordingly, an attorney must make a reasonable inquiry into the facts and law which serve as the basis for his complaint. A party need not be correct in his view of the law. Rather, “[t]he pleader, at a minimum, must have a ‘good faith argument’ for his or her view of what the law is, or should be.” Zaldivar v. City of Los Angeles (9th Cir. 1986), 780 F.2d 823, 831.

The respondent asserted a “sham exception” to the free speech rights claimed by appellants. Though readily applied in antitrust cases, the lower court denied its application in the instant case, finding that “without legislative action, the court is reluctant to limit or punish free speech.” Contrary to appellants’ assertions, the lower court did not reject respondent’s claim “out of hand,” nor find the assertion so inappropriate as to constitute a frivolous or unreasonable claim. Rather, the court requested briefing and argument to further educate on the merits of the issue. Only after inquiry did the District Court reject respondent’s claim and dismiss the complaint. The granting of a motion to dismiss is not dispositive on the issue of sanctions.

The decision to order sanctions in a given case rests within the sound discretion of the district court. State ex rel. Sorenson v. Roske (Mont. 1987), [229 Mont. 151,] 745 P.2d 365, 44 St.Rep. 1854; Schmidt v. Colonial Terrace Associates (Mont. 1986), [223 Mont. 8,] 723 P.2d 954, 43 St.Rep. 1489. The record reveals no abuse of discretion.

Affirmed.

mr. justices McDonough, sheehy, gulbrandson and WEBER concur.


author: MR. JUSTICE WEBER

text:
    ROBERT L. ANTONICK, Plaintiff and Appellant, v. GORDON B. JONES, Defendant and Respondent.
    No. 88-260.
    Submitted Jan. 19, 1989.
    Decided Feb. 28, 1989.
    769 P.2d 1240.

      Patrick F. Hooks, Hooks & Budewitz, Townsend, for plaintiff and appellant.
    Cordell Johnson, Gough, Shanahan, Johnson & Waterman, Helena, for defendant and respondent.
   MR. JUSTICE WEBER

delivered the Opinion of the Court.

This is an appeal by plaintiff and appellant, Robert L. Antonick from a judgment in favor of defendant and respondent, Gordon B. Jones. The District Court for the First Judicial District, Lewis and Clark County, found that no partnership existed between Mr. Antonick and Mr. Jones. The court ruled in favor of Mr. Jones on his counterclaim alleging that Mr. Antonick must repay certain amounts of money which he had drawn from the checking account, and also money which he accepted from patients after the relationship was terminated. The District Court also found that Mr. Antonick did not fraudulently issue four “paid in full” receipts to certain patients. From this judgment Mr. Antonick appeals, and Mr. Jones cross-appeals on the issue of fraud. We affirm.

The issues are:

1. Did the District Court err in concluding that no partnership existed?

2. Did the District Court err in concluding that Mr. Jones is entitled to reimbursement by Mr. Antonick?

3. Did the District Court err in concluding that Mr. Antonick did not fraudulently issue paid in full receipts?

Mr. Antonick and Mr. Jones are physical therapists who have known each other since high school. In 1959 Mr. Antonick began the physical therapy department at St. Peter’s Hospital in Helena, Montana. Mr. Jones began his practice in Butte, Montana, at Butte Community Hospital.

In the early 1960’s Mr. Jones moved to Helena and the two men formed a partnership for a short time. Mr. Antonick operated the physical therapy department at St. Peter’s Hospital and Mr. Jones operated the physical therapy department at St. John’s Hospital. They paid expenses, then split the profits. This partnership was amicably terminated after less than a year.

Beginning in 1973 Mr. Jones operated the Shodair Hospital Physical Therapy Department (Shodair) in Helena, Montana, on a contract basis. He received 65% of the total business billed out of that department. Shodair furnished the space, most of the equipment, and office personnel.

Mr. Antonick had been operating St. Peter’s physical therapy department. In 1973 he bought a ranch near Townsend, Montana, and moved to Townsend. He commuted to Helena and worked at St. Peter’s until 1980, when he quit, intending to retire. However, in less than a year he began doing part-time physical therapy work in Townsend.

In the spring of 1982, Mr. Antonick began working for Mr. Jones at Shodair on a contract basis. Initially, "he worked for Mr. Jones three afternoons a week, but increased this to five afternoons a week while maintaining a morning physical therapy practice in Townsend. Mr. Antonick was paid a base amount calculated at six patients times the charge for a patient visit. The amount he received varied from $2860 to $3660 per month.

In the fall of 1983, Shodair decided to change the operation of its physical therapy department so that it would no longer be a department of Shodair. Mr. Jones separated from Shodair and began merely leasing space and equipment from Shodair. Mr. Jones signed a lease with Shodair, and became responsible for billing his own patients. On November 1, 1983, the arrangement essentially became a private practice. Mr. Antonick continued to work at this office under the new arrangement.

Following the change on November 1, 1983, Mr. Jones opened a new checking account for the business. None of the funds from his former checking account were transferred to the new account. While opening the account, a bank employee, Linda Opie, filled out a signature card. The card was for “Physical Therapy and Rehabilitative Services,” and the square for partnership was marked with an “X”. Linda Opie testified that she normally fills out a card based on information given by the customer, but she did not remember what occurred in this case. Mr. Jones testified that he did not tell Linda Opie to mark the partnership square. Ms. Opie testified that in opening an account for a partnership, a partnership form would be filled out; however, none was found in the bank files. Four people were authorized to sign checks on this new account: Mr. Jones and his wife, and Mr. Antonick and his wife.

Mr. Jones also established a line of credit with the bank up to $25,000, upon which $17,000 was actually drawn. Mr. Jones was personally liable on this loan. Mr. Jones dealt with the bank president, Dan Johnson, who testified that he dealt with Mr. Jones as an individual and that the bank regarded the transaction as one with a sole proprietorship. Mr. Johnson testified that a partnership financial statement and financial statements from each partner would be required to transact business with a partnership.

The physical therapy practice was renamed “Physical Therapy and Rehabilitative Services” (PTRS) and all of the paperwork, including checks, forms, office stamps, and stationary bore the title “Physical Therapy and Rehabilitative Services, Gordon B. Jones, L.P.T. — Robert L. Antonick, L.P.T.”

During the entire time that the two men worked together, from 1982 through February 1986, partnership income tax returns were never prepared nor filed. No partnership income was ever reported on a K-l form. Mr. Antonick filed an individual income tax return for these years, including a Schedule C, which is for a sole proprietor. Mr. Jones issued to Mr. Antonick a form 1099 for each of the years 1982, 1983, 1984, and 1985. Form 1099 is issued to an independent contractor, showing the amounts paid in compensation on a contract basis.

Workers’ compensation insurance carried on PTRS employees listed both Mr. Jones and Mr. Antonick as insureds. In 1985 Mr. Antonick filled out a professional liability insurance policy. He listed himself as self-employed, and did not mark the space for partnership. When Mr. Jones filled out a similar application he described himself as a self-employed individual. He listed four physiotherapists as employees and one physiotherapist as an independent contractor.

Mr. Jones testified that he orally agreed to pay Mr. Antonick $3000 per month under the new arrangement. Mr. Antonick drew a total of $40,000 from PTRS in 1984. For the year of 1985, Mr. Antonick’s compensation was $59,350. Mr. Jones testified that at the beginning of 1985, when Mr. Antonick requested a raise to $60,000 per year, he simply agreed. Mr. Antonick denies this conversation. In each of the years 1984 and 1985, the amounts drawn from month to month varied.

In August, 1985, Mr. Jones incorporated, becoming a professional corporation. At that point he offered Mr. Antonick an employment agreement. Later, he had a similar agreement prepared by an attorney. In regard to these offers Mr. Jones testified that he wanted Mr. Antonick to join the practice full-time. However, Mr. Antonick did not sign either of these agreements.

In January 1986, Mr. Antonick wrote four checks to himself for a total amount of $21,259. He filled out the check stubs calling the payments “contract payment,” “bonus,” and “bonus.” One check stub was left blank. When Mr. Jones learned of these checks in early February, the parties terminated their relationship.

I

Did the District Court err in concluding that no partnership existed?

The standard of review on appeal is whether the district court findings are clearly erroneous. Rule 52(a), M.R.Civ.P. “If there is substantial credible evidence to support the findings, those findings are not clearly erroneous.” Parker v. Elder (1988), [233 Mont. 75,] 758 P.2d 292, 293, 45 St.Rep. 1305, 1307. We have examined the record and conclude that the determinations of the District Court are supported by substantial credible evidence. We therefore affirm each District Court ruling.

A partnership is defined in § 35-10-201(1), MCA, as “an association of two or more persons to carry on as co-owners a business for profit.” This Court previously stated the elements necessary to establish a partnership in Bender v. Bender (1965), 144 Mont. 470, 480, 397 P.2d 957, 962:

“To establish joint venture or a partnership, it is necessary to determine the intent of the parties; such business relationships arise only when the parties intend to associate themselves as such. There must be some contribution by each co-adventurer or partner of something promotive of the enterprise. There must be a joint proprietary interest and a right of mutual control over the subject matter of the enterprise or over the property engaged therein, and there must be an agreement to share the profits. The intention of the parties has to be clearly manifested, and must be ascertained from all the facts and circumstances and the actions and conduct of the parties. (Citations omitted.)”

These elements were recently reiterated in In the Matter of the Estate of Wilbur Edward Smith (1988), [230 Mont. 140,] 749 P.2d 512, 515, 45 St.Rep. 93, 98. In that case we also stated:

“The burden of establishing a partnership is upon the person claiming a partnership exists. First National Bank of Twin Bridges v. Sant (1973), 161 Mont. 376, 386, 506 P.2d 835, 841. No person can become a partner without the consent of all partners. Section 35-10-401(7), MCA; Pulliam v. Pulliam (Mont. 1987), [226 Mont. 94,] 733 P.2d 1299, 1300, 44 St.Rep. 483, 485. The existence of a partnership depends upon the intention of the parties. Intent must be ascertained from all the facts, circumstances, actions and conduct of the parties. Gaspar v. Buckingham (1944), 116 Mont. 236, 246, 153 P.2d 892, 896.” 749 P.2d at 515.

The initial test of whether a partnership exists is the intent of the parties. Bender, 397 P.2d at 962. This inherently implies a mutual agreement or meeting of the minds. In this case there was never a written partnership agreement, and there was conflicting testimony on whether there was ever an oral agreement to form a partnership. Mr. Antonick testified that on or about November 1, 1983, they agreed to form a partnership wherein Mr. Antonick would be paid $36,000 a year and Mr. Jones would be paid $72,000 per year, and that after all expenses were paid, whatever profit remained would be split 50/50. The difference in salaries reflected the fact that Mr. Antonick worked half days. Mr. Jones acknowledges that Mr. Antonick made this proposal but denies that he agreed to it. It is the task of the trial court to resolve any conflicts in testimony. Bender, 397 P.2d at 962. In this case there is substantial credible evidence to support a finding that there was no mutual agreement to form a partnership.

However, this does not end the inquiry since a court may find a partnership was formed, although both parties deny that they intended such a relationship. In Truck Ins. Exchange v. Industrial Indemnity Co. (1984), 212 Mont. 297, 300, 688 P.2d 1243, 1244-45, this Court found that a partnership existed, stating:

“ ‘[i]f the facts bring the arrangement within the definition of a partnership, the parties cannot escape liability incident to that relationship merely by saying that no such thing exists.’ Simons v. Northern Pac. Ry. Co. (1933), 94 Mont. 355, 369, 22 P.2d 609, 614. If the intended action of the parties creates a partnership in fact, what the parties call their arrangement or intend their arrangement to be is irrelevant.”

Thus we must examine the intended action of the parties to determine if the elements of the Bender test are fulfilled.

Mr. Antonick contends that a partnership came into existence on November 1, 1983. He bases this contention on several changes which occurred at that time. A new bank account was opened on which Mr. Antonick was authorized to sign. The bank card designated the account as a partnership. The name of the business was changed to “Physical Therapy and Rehabilitative Services, Gordon B. Jones, L.P.T. — Robert L. Antonick, L.P.T.” All paperwork generated by the business bore this designation.

Mr. Antonick contends that the element of mutual control was met, citing various instances in which he participated in hiring discussions and other business decisions. Mr. Antonick specifically calls attention to his participation in discussions involving a business records system, and his unilateral decision to purchase an office computer. He refers to his involvement in having a therapy pool modified. He points out that he helped Mr. Jones search for new office space when expansion was being considered.

There is, however, conflicting evidence on the issue of joint proprietary interest and right of mutual control. The evidence demonstrated that Shodair dealt exclusively with Mr. Jones. Mr. Jones alone negotiated and signed the lease for the facility. Mr. Jones was purchasing equipment from Shodair. Additionally, First Bank dealt exclusively with Mr. Jones. The bank president, Dan Johnson, testified that he dealt with and loaned money to Mr. Jones as a sole proprietor. He testified that if he had considered the business a partnership he would have required a financial statement from each partner and from the partnership. Testimony from PTRS employees revealed that without exception they considered Mr. Jones to be the owner of the business. There was evidence presented indicating that Mr. Antonick did not have mutual control over hiring and firing decisions.

While Mr. Antonick did participate in some discussions and decisions regarding the physical therapy practice, the District Court found that the evidence as a whole did not establish a mutual proprietary interest or a right of mutual control. We conclude that there is substantial credible evidence to support this finding.

Mr. Antonick also contends that while he did not make a monetary contribution to the partnership, he did contribute something “pro-motive of the enterprise” in that he contributed his reputation and experience to the enterprise. While we note that a contribution to the enterprise need not be monetary, the District Court properly considered this factor and found that this element of the Bender test was not satisfied.

Mr. Antonick contends that the compensation he received is prima facie evidence that a partnership existed. He bases this contention on § 35-10-202(4), MCA:

“The receipt by a person of a share of the profits of a business is prima facie evidence that such person is a partner in the business, but no such inference shall be drawn if such profits were received in payment:

“(b) as wages of an employee or rent to a landlord;”

Mr. Antonick contends first, that there was a sharing of profits, and second, that unless these monies were paid as “wages of an employee,” that it is prima facie evidence of a partnership. Mr. Antonick contends that payments made to an independent contractor cannot fall under this exception. Because of our following discussion on the significance of sharing of profits, we do not find it necessary to rule on this contention.

The evidence is conflicting and close as to whether there actually was a sharing of profits. Mr. Jones testified that Mr. Antonick was entitled to a certain sum each month and that he had never agreed to split the profits with Mr. Antonick. However, Julie Curd, a Helena CPA, testified that in her opinion Mr. Antonick and Mr. Jones were sharing the profits of the business. Ms. Curd based this opinion on her study of the financial records of PTRS in which she summarized and compared Mr. Antonick’s monthly draws and the monthly bank balances. She found that Mr. Antonick’s draws were made in relation to the balance in the bank account. There was also testimony by Mr. Jones that the normal practice at month’s end was to pay all employees and part-time therapists before either Mr. Jones or Mr. Antonick took their draws.

At the end of 1984, Mr. Antonick showed Mr. Jones the amounts each had drawn for the year and proposed settling their accounts according to the proposed salaries of $36,000 and $72,000, and a splitting of the remaining profits. Mr. Jones did not agree with Mr. Antonick’s proposal or figures, but said he would get back to him. Mr. Jones testified that he did not get back to him.

The amounts of each party’s draws cannot be reconciled with either party’s theory. In 1984 Mr. Antonick drew a total of $40,000 from the business account, and Mr. Jones took $98,648. In 1985 their total amounts drawn for the year were $59,350 and $156,643, respectively. The record indicates no attempt to pay Mr. Jones twice the amount paid to Mr. Antonick. There were irregular monthly payments to Mr. Antonick, not identical in amount, and a year-end total not consistent with the claimed agreement. However, Mr. Antonick’s total annual draws for each year are not exactly the $36,000 or $60,000 which he should have received as an independent contractor. The monthly payments and year-end totals do not clearly reveal any definite compensation arrangement.

The record also indicates that the way in which Mr. Antonick was compensated did not change after November 1, 1983. It is undisputed that Mr. Antonick was compensated as an independent contractor prior to November 1, 1983. That history is relevant to a determination of whether he was an independent contractor.

The evidence on whether the parties were actually sharing profits is therefore conflicting, and the trial court did not make a specific finding on this issue. However, even if the parties were sharing profits, this is not conclusive evidence of a partnership relationship. Prima facie evidence only means that a party has met an initial burden; that evidence would not be dispositive of the partnership issue. Resolution of the present case required a review of all the facts and circumstances surrounding the disputed relationship. The District Court considered detailed and comprehensive evidence on all aspects of the business arrangement. The ultimate finding was that Mr. Antonick failed to establish by a preponderance of the evidence that a partnership existed.

We hold that there was substantial credible evidence to support the District Court’s finding that no partnership was created. Mr. Antonick concedes that if this court affirms the finding that no partnership existed, then he is not entitled to keep the money which he received from patients after the relationship was terminated. We affirm the District Court on these two judgments.

II

Did the District Court err in concluding that Mr. Jones is entitled to reimbursement by Mr. Antonick?

Mr. Antonick contends that the District Court erred in finding that Mr. Jones is entitled to reimbursement from Mr. Antonick in the sum of $16,259. Mr. Antonick wrote four checks to himself in January 1985, totaling $21,259. The court found that as an independent contractor, Mr. Antonick was entitled to keep $5,000 of that sum for services rendered in January. Because we agree with the lower court’s finding that no partnership existed, and because there is substantial credible evidence to support the finding that Mr. Antonick was to be paid $5,000 per month, we affirm the District Court’s judgment on this issue.

III

Did the District Court err in concluding that Mr. Antonick did not fraudulently issue paid in full receipts?

In May, 1986, Mr. Antonick wrote “paid in full” on the billing statements of four patients whom he had treated while he was associated with Mr. Jones. Mr. Jones contends that Mr. Antonick did this fraudulently and deceitfully, citing VanEttinger v. Pappin (1978), 180 Mont. 1, 588 P.2d 988 and § 27-1-712, MCA.

Both Mr. Jones and Mr. Antonick testified that at times each had done “pro bono” work for certain patients. Mr. Antonick testified that when he wrote “paid in full” on the statements, he received no money. He testified that he had a prior arrangement with one patient to accept insurance only in payment. He testified that the other patients were unable to pay their accounts and that it had always been his practice to “absorb” bills which patients were unable to pay.

The District Court found that the giving of these receipts failed to fulfill the elements of fraud. Substantial evidence supports that finding. We hold that the District Court did not err in this determination. Affirmed.

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