text:
    DOROTHY LOUGH, Plaintiff and Appellant, v. INSURANCE COMPANY OF NORTH AMERICA and Liberty Mutual Fire Insurance Co., jointly and severally, Defendant and Respondent.
    No. 89-549.
    Submitted March 14, 1990.
    Decided March 23, 1990.
    789 P.2d 576.

      Jerrold L. Nye argued, Nye & Meyer, Billings, for plaintiff and appellant.
    Jon T. Dyre argued, Crowley Law Firm, Billings, for defendant and respondent.
   JUSTICE BARZ

delivered the Opinion of the Court.

The District Court of the Thirteenth Judicial District, Yellowstone County, granted Liberty Mutual Fire Insurance Company’s motion for summary judgment in this case involving alleged violations of the Unfair Trade Practices provisions of the Montana insurance code. Dorothy Lough appeals the order of the District Court granting Liberty Mutual’s motion. We reverse and remand.

Appellant was injured in an elevator located in the College Park Professional Building in Billings. Montgomery Elevator Company maintained the elevator and was insured by Liberty Mutual. Ragner and Lynda Martinsen owned the building and were insured by Insurance Company of North America (INA). Appellant incurred medical bills for the treatment of her injury. In response to appellant’s claims against them for her injuries, both insurance carriers asserted the other’s insured was at fault. Several months after her injury, appellant obtained counsel to pursue her claims and a lawsuit was filed.

Liberty Mutual voluntarily contributed $1,500 toward appellant’s medical bills on behalf of its insured although it disclaimed any liability on the part of its insured and later flatly denied liability. Appellant filed suit against Montgomery and the Martinsens alleging negligence. Appellant was able to negotiate a settlement with Montgomery and the Martinsens in the underlying lawsuit. In the release concurrently executed, appellant accepted $10,000 in consideration for the same. It is significant that appellant reserved the right to pursue bad faith claims against both INA and Liberty Mutual. Neither Liberty Mutual nor Montgomery Elevator contributed to payment of the $10,000 settlement. Only appellant executed the release although all parties executed the subsequent stipulation dismissing the action.

Appellant filed a separate lawsuit against Liberty Mutual and INA claiming both engaged in deceptive trade practices by failing to investigate and negotiate settlement of her claim in good faith. INA settled with appellant after which the District Court granted Liberty Mutual’s motion for summary judgment.

The dispositive issue on appeal is whether a third party claimant may maintain a bad faith action against an insurer after settling with the insured when liability has not been established in the underlying case. Appellant contends respondent was not entitled to judgment as a matter of law because the District Court misapplied § 33-18-242, MCA, to the facts of this case.

Respondent argues appellant failed to satisfy the two conditions precedent to filing a bad faith claim:

1) disposition of the underlying claim by settlement or judgment; and

2) establishment of liability by settlement or judgment.

Respondent contends no settlement occurred between appellant and its insured, Montgomery Elevator, because neither Montgomery Elevator nor Liberty Mutual contributed any part of the $10,000 settlement paid to appellant. Because appellant’s execution of the release constituted an abandonment of her claims against Montgomery, respondent maintains appellant failed to satisfy the first of two prerequisites to a bad faith claim in that no settlement was reached with the insured. We disagree. Respondent participated in negotiation of the settlement and agreed to dismissal of the underlying cause. Thus, appellant’s claims against both Montgomery and the Martinsens were settled.

The second of two prerequisites for a bad faith claim, respondent asserts, is that liability be established in the underlying settlement or judgment. In other words, prior to assertion of a bad faith claim, judgment must be rendered in favor of the plaintiff upon trial of the matter or in the settlement process the insured or insurer must acknowledge the insured’s liability. Respondent claims Montgomery’s clear denial of liability contained within the release precludes appellant’s claim in the instant case.

Although both parties rely heavily on this Court’s decision in Fode v. Farmers Insurance Exchange (1986), 221 Mont. 282, 719 P.2d 414, we conclude that § 33-18-242, MCA, enacted in 1987, is controlling. By adopting respondent’s argument and affirming the District Court, this Court would be ignoring the plain meaning of the statute and imposing a condition precedent not contemplated by the legislature.

Section 33-18-242, MCA, permits a third party claimant to bring an independent cause of action against an insurer for violation of Subsections (1), (4), (5), (6), (9) or (13) of § 33-18-201, MCA. Those subsections allow third party claimants to recover damages from insurers that:

“(1) misrepresent pertinent facts or insurance policy provisions relating to coverages at issue;

“(4) refuse to pay claims without conducting a reasonable investigation based upon all available information;

“(5) fail to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed;

“(6) neglect to attempt in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear;

“(9) attempt to settle claims on the basis of an application which was altered without notice to or knowledge or consent of the insured;

“(13) fail to promptly settle claims, if liability has become reasonably clear, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage; ...”

Section 33-18-201, MCA.

Section 33-18-242(6)(b), MCA, requires settlement or entry of judgment on the underlying claim prior to instigation of the bad faith claim. That section does not require that liability of the insured be established as a condition precedent to the bad faith litigation.

Appellant in this case alleges violations of Subsection 4, which requires no showing of reasonably clear liability, and Subsection 6, which does. The District Court erred in granting respondent’s motion for summary judgment on the basis that appellant failed to establish reasonably clear liability prior to suit. We reverse and remand for further proceedings consistent with this opinion.

Reversed and remanded.

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


source: Caselaw Access Project

author: JUSTICE BARZ JUSTICE McDONOUGH

license: Public Domain

text:
    STATE OF MONTANA, Plaintiff and Respondent, v. MARK CHARLES BALDWIN, Defendant and Appellant.
    No. 89-136.
    Submitted on Briefs Jan. 18, 1990.
    Decided March 2, 1990.
    As Amended on Denial of Rehearing April 12, 1990.
    789 P.2d 1215.

      James C. Bartlett, Hash, O’Brien & Bartlett, Kalispell, for defendant and appellant.
    Marc Racicot, Atty. Gen., Elizabeth S. Baker, Asst. Atty. Gen., Helena, Ted O. Lympus, County Atty., Thomas J. Esch, Deputy, Kalispell for plaintiff and respondent.
   JUSTICE BARZ

delivered the Opinion of the Court.

Mark Baldwin appeals his conviction for criminal possession of dangerous drugs with intent to sell in the District Court of the Eleventh Judicial District, Flathead County. The District Court sentenced appellant to twenty years in the Montana State Prison, with five years suspended, imposed a $20,000 fine and designated appellant a dangerous offender. We affirm.

Appellant raises three issues on appeal:

1. Can probable cause for issuing a search warrant be based in part on documents obtained through an investigative subpoena the application for which contained material false statements?

2. Did the District Court erroneously deny appellant’s motion to suppress evidence seized during execution of a search warrant issued upon inadequate probable cause?

3. Did the District Court properly designate appellant a dangerous offender?

Deputy Flathead County attorney, Thomas J. Esch, applied for an investigative subpoena duces tecum for power and telephone records for appellant’s residence at 420 Sharon Road in Kalispell. Included in the application was a tip received by the Flathead County Sheriff’s Department in 1983 regarding appellant’s alleged involvement in cocaine importation. The tipster stated appellant would travel to Seattle to pick up a quantity of raw lumber shipped from Colombia. This shipment allegedly concealed cocaine. Joint observation by the Sheriffs Department and the Drug Enforcement Administration revealed that appellant did indeed travel to Seattle but was unable to collect the delivery described. Documentation of the shipment showed it contained raw Colombian lumber.

Esch also made part of his application a statement made by appellant’s ex-wife during a 1984 deposition taken in the course of their dissolution to the effect that appellant “is and always has been a drug dealer”. Additionally, the Flathead County Attorney in February, 1987, reported an anonymous tip that appellant concealed a hydroponic marijuana cultivation operation in his garage. After compiling the above data, Sgt. Rick Hawk of the Flathead County Sheriff’s Department then contacted a confidential informant whose statements were included in the application for investigative subpoena. According to this informant, appellant remodeled his garage so that it appeared to contain an apartment. However, a false wall in the building concealed appellant’s marijuana growing operation. Appellant reportedly had three associates, one of whom provided the initial cash investment. Each of the other two possessed 2,500 marijuana plants. Appellant reportedly had 2,500 mature plants, located both in his house and the garage, and 2,500 “starts.” The informant’s information derived primarily from a source close to appellant although the informant observed the grow operation in October or November of 1987.

Electricity usage records from Pacific Power and Light Company and telephone records from Northwestern Telephone Company were obtained from the subpoenas issued pursuant to the first application. The second application for an investigative subpoena duces tecum contained additional facts.

Records subpoenaed from Pacific Power and Light Company indicated that appellant’s residence was not heated by electricity. In addition, the account for 42014 Sharon Road was in the name of Mike Barker. Barker was also listed as the guarantor on appellant’s account. On Pacific Power and Light records appellant listed his employment as “disabled.” Sgt. Hawk drove by appellant’s residence at 420 Sharon Road and verified that an addition to the garage located on the property bore the number 42014. Esch set forth further information gleaned from public records, specifically a warranty Deed, and thus stated in his application that appellant paid $10,000 cash and other consideration for the property at 420 Sharon Road. The application further stated that appellant, although without visible means of support, obtained “clear title” to this property.

Based upon respondent’s second application, the District Court issued subpoenas to Pacific Power and Light Company for 42014 Sharon Road, Montana Power Company for 420 and 42014 Sharon Road, Safeco Title Company and First Interstate Bank. In his application for a warrant to search Mark Baldwin’s residence for evidence of criminal possession of dangerous drugs and paraphernalia, Sgt. Hawk included information in addition to the above:

“Affiant is an officer with the Flathead County Sheriff’s Department and has been so employed for 13 years.

“That he is currently assigned as Sergeant in charge of the Special Investigations Division of the Sheriff’s Department which primarily investigates drug offenses and has been thus engaged in drug investigations for the past 4 years.

“Affiant has an advanced certificate from the Montana Police Officers Standards Training Council (POST), and has approximately four years of investigative experience in general investigations with the Flathead County Sheriff’s Department prior to his appointment to Special Investigations. Affiant has continued his education by attending police schools including the United States Drug Enforcement Agency Advanced Drug Investigation School, The Montana Law Enforcement Academy (MLEA) Drug Commanders School and the Harris and Assoc. Drug Enforcement Seminar. Affiant also maintains membership in 2 professional organizations which are the International Narcotics Enforcement Officers Association, and the American Canadian Drug Conference. In addition this affiant has personally investigated in excess of 300 drug cases.

“Further investigation revealed that there is a natural gas line to the property. On 9-9-88 an investigative subpoena was served on Montana Power Company, records received as a result, indicate that both the house and shop have natural gas heating and hot water.

“That records obtained by subpoena from First Interstate Bank show that Mark purchased the property on Sharon Rd. from Jerry and Geri Galloway for $35,000.00, putting $7,750.00 as down payment, leaving a balance of $27,250. On 10-1-86 Mark paid the Galloways $10,000 dollars, and started making $350.00 per month payments. On 3-1-88 Mark paid off the Whitefish Credit Union and assumed the loan at the 1st Interstate Bank.

“That in a Residential Loan Application dated 2-5-88 and signed by Mark, he listed his employment as Treasure/Bookkeeper or Kokanee Const. Corp. box 952, Kalispell, Mt. which he stated is a holding company. This affiant contacted the Montana Corporations Bureau who advised that Kokanee Const, was incorporated on 3-5-80 as a general construction company and was involuntarily dissolved on 12-15-82. There were no annual reports filed. This affiant then checked the current phone book, both white and yellow pages, and the Polk’s city directory, neither of which had a listing. This affiant then contacted the Kalispell Chamber of Commerce which has never heard of Kokanee Const., and the Montana Assoc, of Contractors which advised that Kokanee does not have a Contractors License in the state of Montana.

“That despite evidence as listed above that Mark Baldwin has no employment it appears that he was able to raise a substantial sum of money in 17 months to put down on and make payments on the property he purchased.

“That the average consumption of electricity for all of Pacific Power and Light’s residential customers for 1987 was 1000 to 1110 KWH per month.

“That this affiant contacted Gary Mahugh the Member Service Advisor for Flathead Electric Cooperative who stated that the average usage of electricity for family of four is around 1000 to 1100 KWH per month, but should drop to 600 to 800 KWH per month if there is no electric heat or hot water.

“That Mark Baldwin’s residential electricity use in kilowatt hours as determined from PP&L records is as follows.

AUGUST 1987 1713
SEPT. 1987 1629
OCT. 1987 1640
NOV. 1987 1742
DEC.' 1987 1931
JAN. 1988 2125
FEBRUARY 1988 862
MARCH 1988 1395
APRIL 1988 1592
MAY 1988 1001
JUNE 1988 1373
JULY 1988 1510
AUG. 1988 1884

The average usage for the above months is 1565 KWH per month.

“The average KWH for the same months listed above for the apartment which is attached to the garage was 1157 KWH per month. The garage also has natural gas heat and hot water and had a separate average electricity usage for the above months of 1771 KWH per month.

“The information obtained from Montana Power Company shows that there was gas consumption during the entire time period listed above, meaning that the gas furnace and hot water heaters were in a working condition and had not been replaced by electrical appliances, which might account for the higher than average electricity consumption.

“This affiant knows from training and experience that when growing a large number of plants in an enclosed space ventilation is required. Visual observation and photographs of the Baldwin property show two of what appear to be gas appliance vents on the back part of the shop roof. There is also a revolving louver ventilating fan in the same area. There is what appears to be a power vent for a fan located on the back wall of the shop near the top.

On 9-20-88 this affiant contacted a neighbor of Mark Baldwin’s who confirmed that Baldwin is a bachelor, has no commercial enterprise operating from his garage, and told the neighbor that he is disabled. The neighbor was not able to note an obvious disability. The neighbor also has not observed any one residing in the apartment in the garage

“The pattern of electrical use and financial expenditures without an obvious income is consistent with, and fully supports the information from the anonymous and confidential informants that Mark Baldwin is growing and selling marijuana.”

Upon execution of the search warrant, the sheriff’s Department seized, among other things, approximately 663 marijuana plants, equipment for growing marijuana plants and other drug paraphernalia. Appellant was charged by information with criminal possession of dangerous drugs with intent to sell, in violation of § 45-9-103(1), MCA. The District Court denied appellant’s motion to suppress evidence obtained upon execution of the search warrant based on lack of probable cause.

Appellant waived his right to a jury trial and agreed to a bench trial upon stipulated facts. The District Court found appellant guilty as charged. Following a pre-sentence investigation, the District Court sentenced appellant to twenty years in the Montana State Prison with five years suspended and a dangerous offender designation, and fined him $20,000.

Respondent filed two applications for investigative subpoenas on consecutive days. Appellant maintains both applications contained stale information and that the second set forth material false conclusions derived from public records. Appellant likens an investigative subpoena to a search warrant in terms of the foundation required before either properly issues. Appellant endorses a rule excluding from a search warrant application evidence derived from an investigative subpoena issued despite the absence of a compelling state interest.

Respondent asserts that the scope of an investigative subpoena is less intrusive than that of a search warrant, thus limiting the availability of Fourth Amendment remedies. The respective statutory provisions authorizing search warrants and investigative subpoenas bolster this contention. Law enforcement officials may use investigative subpoenas to compel the presence of witnesses or the production of documents. Clearly this section does not contemplate the “search of a person, object, or place . . .’’or the seizure of “instruments, articles or things ...” and therefore is not as intrinsically intrusive as a search warrant. Section 46-5-101, MCA.

Section 46-4-301, MCA, sets forth the criteria for issuance of an investigative subpoena. A judge properly issues an investigative subpoena “[whenever the attorney general or a county attorney has a duty to investigate alleged unlawful activity . . and “it appears upon the affidavit [submitted] . . . that the administration of justice requires [the subpoena] to be issued.”

Conversely, a search warrant application

(a) states that an offense has been committed;

(b) states facts sufficient to show probable cause for issuance of the warrant;

(c) particularly describes the place, things, or persons to be searched; and

(d) particularly describes the things to be seized.

Section 46-5-202(1), MCA. The prerequisites for obtaining a search warrant are more stringent than those for acquiring an investigative subpoena.

Furthermore, the relief from improper issuance of an investigative subpoena is either dismissal of the subpoena or limitation of its scope. Section 46-4-303, MCA. Evidence derived from an improperly issued search warrant may be excluded during the trial of the criminal defendant. State v. Rydberg (Mont. 1989), [239 Mont. 70,] 778 P.2d 902, 46 St.Rep. 1519.

Underlying both remedies is the balance between protection of individual privacy rights and the compelling state interest in investigating and prosecuting unlawful activity. The District Court in the instant case had ample evidence from which to conclude the administration of justice required issuance of the subpoenas. The second application for subpoena duces tecum contained financial misinformation. Specifically, it stated that appellant paid the sellers of his residence $10,000 in addition to his down payment. This resulted from Sgt. Hawk’s misreading of a warranty deed executed by sellers in favor of appellant. The warranty deed set forth the consideration paid as $10.00 which Sgt. Hawk read as $10,000. The only significant information derived from the second group of subpoenas was a record of power utilized in appellant’s building located behind his residence. The erroneous conclusions contained within the application regarding appellant’s financial status did not invalidate the remaining information. We decline to extend the remedy provided by the exclusionary rule to investigative subpoenas. Appellant’s power records were properly considered in issuing the search warrant.

Our function is not to review de novo the magistrate’s determination that probable cause existed justifying the issuance of a search warrant. State v. Sundberg (Mont. 1988), [235 Mont. 115,] 765 P.2d 736, 741, 45 St.Rep. 2235, 2240. Rather, we must presume the magistrate properly issued the search warrant after subjecting the application to the totality of the circumstances test. Sundberg, 765 P.2d at 739-41; Illinois v. Gates (1983), 462 U.S. 213, 103 S.Ct. 2317, 76 L.Ed.2d 527, reh’g. denied 463 U.S. 1237, 104 S.Ct. 33, 77 L.Ed.2d 1453 (1983). “The burden of proving that the search and seizure were unlawful shall be on the defendant.” Section 46-13-302(4), MCA. Appellant in this case failed to meet this burden.

Appellant’s contention of illegality is twofold. First, appellant maintains that the materially false conclusions derived from public records and set forth in the search warrant application undermine the showing of probable cause. Secondly, appellant asserts certain information included in the search warrant was stale and therefore insufficient to establish probable cause. We find probable cause existed excluding the financial data. Sgt. Hawk set forth in the application a pattern of criminal behavior — a frustrated attempt to complete a cocaine transaction, a history of selling illegal drugs and cultivation of marijuana plants. Sgt. Hawk’s informant stated that appellant grew marijuana in his home and in his garage. The informant also stated an addition purported to be a separate apartment was attached to the garage. Sgt. Hawk drove by the residence and verified this information noting also the appliance vents and ventilating fans located on the structure which were consistent with the ventilation required for an enclosed growing operation. A neighbor stated that appellant carried on no commercial enterprise at this location nor did another individual reside in the apartment.

Appellant argues that Sgt. Hawk failed to set forth average electricity consumption by marijuana growers and asserts the kilowatts used by appellant were less than this average. We find this argument less than persuasive. Utility records demonstrated that three separate locations on appellant’s property consumed more power individually than a family of four. This information adequately demonstrated probable cause for a search warrant to issue under the totality of the circumstances test.

Appellant finally maintains the District Court erred in designating him a dangerous offender pursuant to § 46-18-404(1), MCA, which provides:

“[t]he sentencing court shall designate an offender a nondangerous offender for purposes of eligibility for parole under part 2 of chapter 23 if:

“(a) during the 5 years preceding the commission of the offense for which the offender is being sentenced, the offender was neither convicted of nor incarcerated for an offense committed in this state or any other jurisdiction for which a sentence to a term of imprisonment in excess of 1 year could have been imposed; and

“(b) the court has determined, based on any presentence report and the evidence presented at the trial and the sentencing hearing, that the offender does not represent a substantial danger to other persons or society.”

The District Court made the following observations upon sentencing appellant:

“The record before this Court indicates a long term involvement with drugs.

“In the 1984 sworn statement you were described as a Defendant and as having been a drug dealer.

“The confidential informants that advised the arresting officer, in 1988, stated that you had been involved in a — in growing marijuana in your house and shop for a period of three years.

“The exhibits introduced today, a receipt for some $2,482.78 worth of hoods, visqueen, halogen lights and so forth, is dated September 10th, 1986.

“So that indicates to this Court that you have clearly been growing marijuana in excess of the three years submitted by the confidential informant.

“The large scale and degree of sophistication of growing systems indicate to this Court that not only has it been in operation for quite some time, but I believe it’s a reasonable conclusion that you would still be growing and selling marijuana and would likely continue to do so for some time in the future if it had not been for the intervention of the Flathead County Sheriff’s Office and particularly of Sergeant Hawk.

“This despicable and reprehensible crime represents a substantial contribution to a major plague upon society, the growing of dangerous drugs for sale.

“The correctional policy of the State of Montana is to protect society by preventing crimes from punishment and rehabilitation. The extent of your commercial drug operation dictates the necessity of long term protection of society.

“It’s the sentence and judgment of this Court that you are sentenced to twenty years in the Montana State Prison. The Defendant is to receive credit for time served. This will protect society from your poisonous propensities for the maximum period allowed by law and will shut down your elicit drug farming for as long as the legislature permits for your crime.

“In addition there is imposed a fine of $20,000 which represents but a fraction of the evil profits that you undoubtedly have obtained from your marijuana growing.

“Taking into consideration the Defendant’s lack of any prior criminal record, his present health, his family background, there is hereby suspended five years from the sentence leaving fifteen years to serve with the balance on formal probation for parole.

“The Montana Code Annotated, Section 46-18-404 provides that a sentencing Court shall, for parole purposes, designate an offender non-dangerous if he has no other felony convictions during the preceding five years and the Court has determined, based on the presentence report and evidence presented at trial and the sentencing hearing, that the offender does not represent a substantial danger to other persons or society.

“This Court holds that the Defendant, Mark Baldwin, is not eligible to be designated as a non-dangerous offender because his large quantity possession of dangerous drugs, marijuana, with intent to sell, does represent a substantial danger to prospective large numbers of other persons who would use this dangerous drug and the Defendant represents a substantial danger to society because of his possession with intent to sell this drug.

The District Court adequately set forth factors from which it could determine appellant constituted a substantial danger to others.

Affirmed.

CHIEF JUSTICE TURNAGE and JUSTICES HARRISON and WEBER concur.

JUSTICE McDONOUGH

dissenting:

I disagree. The application for the search warrant fails to establish probable cause which must be shown before the government can legally search a citizen’s home and personal effects.

The duty to conduct evaluations of evidence supplied by law enforcement authorities and to determine whether permission to search a citizen’s home should be given, belongs to the judiciary. In making this determination the courts examine the “totality of the circumstances” surrounding the State’s allegations in the application for the search warrant. Illinois v. Gates (1983), 462 U.S. 213, 103 S.Ct. 2317, 76 L.Ed.2d 527; State v. Kelly (1983), 205 Mont. 417, 668 P.2d 1032. The courts should only give permission to conduct a search when these “circumstances” establish probable cause.

Probable cause, which defines the point at which the individual’s interest in privacy must yield to the governmental interest in investigating criminal behavior, is a practical, nontechnical concept of criminal procedure. It is not a prima facie showing of criminal activity, but rather only requires a showing of its probability. State v. Sundberg (Mont. 1988), [235 Mont. 115,] 765 P.2d 736, 45 St.Rep. 2235. In order to determine whether there was probable cause to issue a search warrant, we must look only at information contained in the four corners of the application. State v. Jensen (1985), 217 Mont. 272, 704 P.2d 45. An examination of the application in the present case leads to the conclusion that sufficient probable cause did not exist.

An application in the form of an affidavit for a search warrant, must set forth facts which demonstrate that a law is being violated at the time the warrant is issued. State v. Walston (Mont. 1989), [236 Mont. 218,] 768 P.2d 1387, 46 St.Rep. 309. One reason for this rule is to prevent present or continuing harassment of a suspect due to past criminal allegations or transgressions. The police should not be given blanket authority to search a citizen’s home on the basis of allegations which do not support the conclusion that criminal activity is presently occurring. The facts here do not support such a conclusion and were, therefore, improperly relied upon.

The application contains references to numerous instances of unlawful involvement with drugs by the appellant. However, the allegations contained in these references occurred long before the search warrant was issued. For example, the application states that in 1983, the appellant was involved in the importation of cocaine. It also contains an allegation made by Baldwin’s ex-wife, during a bitterly contested divorce proceeding in 1984, that he “is and always has been a drug dealer.”

The search warrant was issued on October 3, 1988. Therefore, the above two allegations, which were made approximately four years earlier, do not establish that appellant was involved in any illegal activity in close proximity to the time of the issuance of the warrant. The other alleged, instances of criminal activity occurred months before the search warrant was issued. According to the application, the Flathead County Attorney received an anonymous tip concerning appellant’s illegal activities on February 25, 1987. This tip was given almost two years before his house was searched. The final observation of appellant’s alleged marijuana operation apparently occurred in October or November of 1987 — a full year before the search occurred.

This information is not sufficient to establish probable cause and therefore is not legally sufficient to uphold the search warrant. Before a search warrant can be issued, it is incumbent upon the State to show that the alleged criminal conduct is occurring at the present time. State v. Walston (Mont. 1989), [236 Mont. 218,] 768 P.2d 1387, 46 St.Rep. 309.

A further shortcoming of the application is its failure to set forth factors apprising the court of the anonymous informant’s reliability. According to the application, the investigating officer relied upon information obtained through a “confidential informant.” The affidavit does not, however, contain any information which would tend to bolster the informant’s credibility or apprise the court of the officer’s reasons for believing the informant was trustworthy. Jones v. United States (1960), 362 U.S. 257, 80 S.Ct. 725, 4 L.Ed.2d 697; State v. Seaman (Mont. 1989), [236 Mont. 466,] 771 P.2d 950, 46 St.Rep. 512.

This omission is a major flaw to the affidavit. The information was obtained by the informant through a friend. Apparently, the informant never personally observed the marijuana growing operation. Despite the inherently unreliable nature of this hearsay, the investigating officer never offered any evidence establishing the informant’s basis of knowledge or reliability.

In lieu of this information, the officer sought to corroborate the anonymous tip with independent evidence obtained through the power company and the appellant’s financial records. During this investigation, the police officer misread a term in a contract for deed and as a result of this mistake, wrongfully apprised the court of the appellant’s financial condition. This mistake, which significantly exaggerated the amount of money spent by the defendant, requires that all references to his financial dealings be excised from the affidavit. This information cannot be used to establish probable cause on the later motion to suppress before the District Court. State v. Nanoff (1972), 160 Mont. 344, 502 P.2d 1138; Franks v. Delaware (1978), 438 U.S. 154, 98 S.Ct. 2674, 57 L.Ed.2d 631.

The investigating officer also subpoenaed the appellant’s utility records. These records indicated that the appellant consumed an unusually large amount of electricity. Because an indoor marijuana growing operation uses high-powered solar lamps, the investigating officer reasoned that this high electricity use was indicative of such illegal activity. This information was included within the affidavit to bolster the information supplied by the anonymous tip. The officer also, through a personal viewing of the house, observed ventilating fans on the shop.' These fans, it is argued, further corroborate the belief that the appellant had a large scale growing operation.

However, this information alone does not establish the probability of any illegal activity. The electrical consumption and the ventilating fans are equally indicative of normal, everyday activity, such as a home welding operation. The officer failed to compare the appellant’s electrical consumption with that of the previous owners and therefore failed to satisfactorily establish that the power usage was extraordinarily high. This information has at best, only minor corroborative effect.

As a whole, the information contained in the affidavit, after examining the “totality of the circumstances,” does not establish probable cause. The false financial information indicating the appellant had access to large sums of money was properly excised from the affidavits. However, the stale information contained within the application, which was at least a year old, was improperly relied upon. Had this information been properly excised, the affidavit would not have met the “totality of the circumstances” test. When this information is taken out, the only facts left which provide any indication of illegal activity, are that the appellant used a large amount of electricity, that his garage was equipped with an extensive ventilating system and the statement of a neighbor that the appellant operated no commercial enterprise on his property. This information under a “totality of the circumstances” analysis does not meet the standard necessary to allow the government to search a citizen’s home.

The application for the search warrant is insufficient as a matter of law, because it relies upon stale information which is several years old, a mistaken reading of the appellant’s financial records, and unsubstantiated rumors. This is inherently weak evidence and it does not meet the necessary threshold of probable cause. Therefore, this case should be reversed and remanded with instructions to suppress the evidence seized pursuant to the issued search warrant.

JUSTICES HUNT and SHEEHY concur in the foregoing dissent.


author: CHIEF JUSTICE TURNAGE

text:
    ANITA M. CONN, Claimant and Respondent, v. QUALITY INN, Employer, and State Compensation Insurance Fund, Defendant and Appellant.
    No. 89-555.
    Submitted on Briefs Jan. 25, 1990.
    Decided Feb. 22, 1990.
    789 P.2d 1213.

      Laurence Hubbard, State Comp. Ins. Fund, Helena, for defendant and appellant.
    Julio K. Morales, Missoula, for claimant and respondent.
   CHIEF JUSTICE TURNAGE

delivered the Opinion of the Court.

The Montana Department of Labor and Industry, Workers’ Compensation Division, ruled that the statute of limitations barred respondent Anita M. Conn’s compensation claim. The Workers’ Compensation Court reversed that decision, and her employer, Quality Inn, and its insurer, the State Compensation Insurance Fund, now appeal. We affirm.

The appellants raise the single issue of whether the Workers’ Compensation Court erred in holding that the claimant was entitled to an extension of the statute of limitations under § 39-71-601(2), MCA (1985), because she did not become aware of her disability until she actually lost wages.

Anita Conn suffered two injuries during her employment as a maid at the Quality Inn in Missoula, Montana. Sometime between January and March of 1986, she tripped over a vacuum cleaner cord injuring her back and hip. On June 22, 1987, she tripped over a bedspread injuring the same area. Neither injury caused Conn to miss work, but she suffered sporadic pain which increased following the second injury.

Shortly after the second injury, Conn sought medical help. Her condition initially responded to treatment, but in the summer of 1988, her work load escalated, and the pain returned with greater severity. Although she was taking medication, Conn’s pain continued to increase and eventually began to interfere with her job performance. In early November of 1988, Conn quit work on her doctor’s advice.

On November 4, 1988, Conn filed a workers’ compensation claim for the second accident, and on December 21 she filed for the first accident. Because Conn had not filed within the twelve-month statute of limitations, she requested a waiver under § 39-71-601(2), MCA (1985), alleging that she was not aware of her disability until her doctor advised her to quit work. The Division disallowed the waiver reasoning that Conn knew that she was injured and that the injury affected her job performance prior to the running of the statute of limitations. The Workers’ Compensation Court reversed the Division’s determination holding that “disability,” as referred to in the waiver provision, requires a loss of earnings occasioned by the injury.

We begin by setting out the applicable law. The reviewing court may reverse an agency’s conclusions of law when they are an abuse of discretion. An abuse of discretion results when an agency’s interpretation of the law is clearly contrary to the legislative intent. Swan Corp. v. Department of Revenue (1988), 232 Mont. 210, 213-214, 755 P.2d 1388, 1390, [45 St.Rep. 998, 1000]. This Court applies a de novo standard in reviewing the Workers’ Compensation Court’s interpretation of the law. Wear v. Buttrey Foods Inc. (Mont. 1988), [234 Mont. 477,] 764 P.2d 139, 140, 45 St.Rep. 2063, 2064. We agree with the Workers’ Compensation Court that the present issue is the proper definition of “disability” as used in § 39-71-601(2), MCA (1985), a purely legal question.

This case falls under the 1985 workers’ compensation statutes. See Act approved April 14, 1987, ch. 464, § 72(2), 1987 Mont. Laws 1092, 1129 (the 1987 revision of the workers’ compensation statutes applies to injuries occurring after June 30, 1987). In the 1985 statute of limitations for workers’ compensation claims the legislature provided that:

“(1) In case of personal injury or death, all claims shall be forever barred unless presented in writing to the employer, the insurer, or the division, as the case may be, within 12 months from the date of the happening of the accident, either by the claimant or someone legally authorized to act for him in his behalf.

“(2) The division may, upon a reasonable showing by the claimant of lack of knowledge of disability, waive the time requirement up to an additional 24 months.”

Section 39-71-601, MCA (1985) (Emphasis added.).

The present question is, what did the legislature intend when it used the term “disability” in § 39-71-601(2), MCA (1985)?

Legislative intent it determined by first looking to the plain meaning of the statutes. Thiel v. Taurus Drilling Ltd. (1985), 218 Mont. 201, 205, 710 P.2d 33, 35. The Workers’ Compensation Court appropriately looked to the legislature’s statutory definition of “disability.”

“A worker is disabled when his ability to engage in gainful employment is diminished as a result of impairment.... Disability is not a purely medical condition. Disability may be temporary total, permanent total, or permanent partial as defined in 39-71-116.” Section 39-71-121, MCA (1985) (Emphasis added.).

“ ‘Temporary total disability’ means a condition resulting from an injury as defined in this chapter that results in total loss of wages. . .”

Section 39-17-116(19), MCA (1985) (emphasis added).

“ ‘Permanent total disability’ means a condition resulting from injury as defined in this chapter that results in loss of actual earnings or earning capability . . . .”

Section 39-71-116(13), MCA (1985) (Emphasis added.).

“ ‘Permanent partial disability’ means a condition resulting from injury as defined in this chapter that results in the actual loss of earnings or earning capability . . . .”

Section 39-71-116(12), MCA (1985) (Emphasis added.). The plain language of the statutes leaves no doubt that a disability occurs only when the claimant suffers a loss in the ability to engage in gainful employment. The definitive indicator of a loss in ability is a loss in wages, present or future.

Conn had no such loss until she quit work on her doctor’s advice. She knew that she had been injured on the job and that the injuries affected her ability to work, but she continued to work and earn undiminished wages. She had no indication that she could not continue to work, though with some inconvenience, until her doctor advised her to quit in November of 1988. We agree with the Workers’ Compensation Court that she had no knowledge of her disability until that time and, therefore, is entitled to the twenty-four month extension under § 39-71-601(2), MCA (1985).

The appellants argue that the Workers’ Compensation Court erred by not applying the three-part test adopted by this Court in Bowerman v. Employment Security Commission, but we disagree. In Bowerman, we held that in workers’ compensation cases of latent injury, the statute of limitations in § 39-71-601, MCA (1985) “does not begin to run until the claimant, as a reasonable man, should recognize the (1) nature, (2) seriousness and (3) probable, compensable character of his latent injury.” Bowerman (1983), 207 Mont. 314, 319, 673 P.2d 476, 479 (enumeration added). The issue presented to the Workers’ Compensation Court involved only the last element of the Bowerman test, the compensable nature of the injury. See Dodd v. Champion Inter’l. Corp. (Mont. 1989), [239 Mont. 236,] 779 P.2d 901, 905, 46 St.Rep. 1649, 1654. The court correctly decided that issue according to the plain meaning of the statute. We will not hold the Workers’ Compensation Court in error for failing to ritualistically recite the elements of Bowerman.

The appellant asks this Court to award attorney fees and costs as authorized by § 39-71-611, MCA (1985), and a twenty percent increase in benefits as authorized by § 39-71-2907, MCA (1985). This request is premature and is denied. Both statutes require a finding that the claim is compensable. But see Dodd, 779 P.2d at 905, 46 St.Rep. at 1654. We hold only that the claim is not barred by the statute of limitations and make no determination as to whether Conn suffered a compensable injury.

Affirmed.

JUSTICES HUNT, SHEEHY, BARZ and WEBER concur.


author:
JUSTICE BARZ
      JUSTICE HARRISON,

text:
    TED J. DAY and Doris D. Day, Plaintiffs, Appellants, and Respondent, v. MONTANA POWER COMPANY, Defendant, Appellant, and Respondent.
    No. 89-285.
    Submitted Dec. 12, 1989.
    Decided March 20, 1990.
    Rehearing Denied April 12, 1990.
    789 P.2d 1224.

      Arthur W. Ayers, Jr. argued and Michael G. Alterowitz argued; Ayers & Alterowitz, Red Lodge, for plaintiffs, appellants and respondents.
    Patrick T. Fleming argued and Robert T. O’Leary argued, Butte, for defendant, appellant and respondent.
   JUSTICE BARZ

delivered the Opinion of the Court.

A jury in the District Court for the Second Judicial District, Silver Bow County, awarded Ted and Doris Day damages resulting from a fire caused by the negligence of Montana Power Company’s (MPC) employee. The jury awarded $350,000 to both Days for property destruction, $25,000 to Doris Day for personal injury and $450,000 to Ted Day for emotional distress. From this verdict, MPC appeals the $450,000 emotional distress award and Days cross appeal. We reverse in part and affirm in part.

In the process of installing underground electrical service to an adjacent structure, MPC employee Mark Dickhausen negligently ruptured a gas service line leading to TJ’s Family Restaurant in Red Lodge. Natural gas migrated along the underground service line, accumulated in the restaurant and was later ignited, presumably by a pilot light. The resulting fire and explosion completely destroyed the restaurant owned by plaintiffs Ted and Doris Day.

In an action filed February 24, 1987, the Days claimed damages for destruction of property, emotional distress, nervous shock and mental anguish, loss of their established way of life, punitive damages based on MPC’s violation of the covenant of good faith and fair dealing, lost profits and for Doris Day’s physical injury and suffering. The District Court permitted Days to amend their complaint and base their punitive damage claim on MPC’s negligence in violating provisions of the Natural Gas Pipeline Safety Act of 1968, 49 U.S.C.App. §§ 1671 et seq. (1982).

Days moved to compel discovery of MPC’s claim file arguing that the file lacked the status of a privileged communication. Subsequent to hearing on the matter, the District Court ruled in favor of MPC. Several months later, Days requested the issuance of subpoenas duces tecum to C.J. Woods and Byron Mazurek respectively. Both were employed by'MPC in its Claims Department. The subpoenas demanded production of all “memoranda, reports, letters, photographs, sketches, interviews, written estimates or evaluations and all other documents or copies thereof” prepared in relation to the fire at TJ’s. Upon MPC’s failure to produce a report prepared by Byron Mazurek, Days moved that MPC be held in contempt. The District Court denied the motion.

On December 2, 1988, the jury returned a verdict awarding the Days $350,000 for the destruction of the restaurant building, its contents, lost profits and related expenses; $25,000 to Doris Day for physical injury and suffering; and $450,000 to Ted Day for emotional distress, nervous shock and mental anguish. The jury found the Days were not entitled to either punitive damages or damages for loss of their established way of life. Following entry of judgment, MPC moved for judgment notwithstanding the verdict, relief from judgment and reduction of award, all of which were denied by the District Court.

The following issues are raised on appeal and cross appeal:

1. Did the negligent act of MPC’s employee substantially invade a legally protected interest of Ted Day thus justifying an award of damages for emotional distress?

2. If this Court adopts Restatement (Second) of Torts § 46 (1965), as the standard for recovery of emotional distress damages would Ted Day be entitled to the same?

3. Did Ted Day introduce sufficient evidence to sustain an award of damages for his emotional distress?

4. Did the District Court properly instruct the jury regarding apportionment of damages?

5. Did MPC waive its right to attack the jury award of $450,000 to Ted Day for emotional distress, and, if not, was such award grossly disproportionate to any detriment established at trial?

6. Did the District Court err in refusing to instruct the jury on MPC’s possible violation of the Natural Gas Pipeline Safety Act of 1968?

7. Did Days waive their right to attack the jury’s refusal to award them damages for loss of their established way of life by failing to move for a new trial?

8. Did MPC waive its claim of privilege regarding the report prepared by Claims Representative Byron Mazurek thereby requiring production of such report?

9. Should Days’ appeal be dismissed either because it is a conditional appeal or because Days failed to comply with the Montana Rules of Appellate Procedure?

The first group of issues concern the propriety of an award of emotional distress damages and related jury instructions. We will briefly review Montana law in this area. Although Montana has not yet recognized the tort of intentional infliction of emotional distress, this Court has indicated that “where [defendant’s] conduct has been so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized community ...” then it may allow recovery for the same. Frigon v. Morrison-Maierle, Inc. (1988), 233 Mont. 113, 760 P.2d 57, 63-64. (quoting Restatement (Second) of Torts § 46, Comment d (1965)). We have narrowly construed the tort of negligent infliction of emotional distress. Versland v. Caron Transport (1983), 206 Mont. 313, 322-23, 671 P.2d 583, 588.

“Emotional distress under Montana law has been and remains primarily an element of damages rather than a distinct cause of action.” Frigon, 760 P.2d at 63. By statute, plaintiffs may recover in tort actions “the amount which will compensate for all the detriment proximately caused [by the defendant’s actions], whether it could have been anticipated or not.” Section 27-1-317, MCA. In the matter of recovery for emotional distress absent physical injury, this Court has imposed an additional test: “[W]hether tortious conduct results in a substantial invasion of a legally protected interest and causes a significant impact upon the person of plaintiff. (Emphasis in original.)” Johnson v. Supersave Markets, Inc. (1984), 211 Mont. 465, 473, 686 P.2d 209, 213.

In Johnson we adopted both the reasoning of the Oregon Court of Appeals in Meyer v. 4-D Insulation Co., Inc. (1982), 60 Or.App. 70, 652 P.2d 852, and the species of the case approach utilized by that court in order to allow emotional distress damages to stand where defendant violated plaintiff’s constitutional rights. Johnson, 686 P.2d at 213. We note, however, that on facts substantially similar to those of the instant case, the Meyer court denied recovery for emotional distress. Meyer sued 4-D Insulation claiming its negligent installation of insulation adjacent to a wood stove flue pipe ignited a fire resulting in damage to Meyer’s home. Meyer, 652 P.2d at 853. Meyer alleged no physical injury and the Court of Appeals refused to permit recovery of emotional distress damages where “[pjlaintiff . . . pleaded only negligently caused damage to his property . . .” Meyer, 652 P.2d at 857.

This Court has permitted plaintiffs to recover for their emotional distress as an element of damages in certain underlying actions: (1) private nuisance (French v. Ralph E. Moore, Inc. (1983), 203 Mont. 327, 661 P.2d 844); (2) violation of certain constitutional rights (Johnson, Stensvad v. Towe (1988) 232 Mont. 378, 759 P.2d 138; and (3) breach of the covenant of good faith and fair dealing (Gibson v. Western Fire Ins. Co. (1984), 210 Mont. 267, 682 P.2d 725; Dunfee v. Baskin-Robbins, Inc. (1986), 221 Mont. 447, 720 P.2d 1148; Safeco Ins. Co. v. Ellinghouse (1986), 223 Mont. 239, 725 P.2d 217).

Mr. Day’s claim does not fall within any of the above categories. The instant case is analogous to Semenza v. Leitzke (1988), 232 Mont. 15, 754 P.2d 509. Semenzas sought recovery of emotional distress damages when Leitzke allegedly improperly installed their mobile home. Semenza, 754 P.2d at 510. This Court affirmed the lower court’s directed verdict in favor of Leitzke, stating:

“[T]he Semenzas failed to establish a legally protected interest. They rely upon French v. Ralph E. Moore, Inc. (1983), 203 Mont. 327, 661 P.2d 844, to attempt to establish a legally protected interest in ‘a safe and comfortable home.’ However, the wrong done in French was not merely negligence but trespass to property.”

Semenza, 754 P.2d at 511-12.

We decline to extend recovery for emotional distress damages to cases where the defendant negligently damages or destroys real property and the plaintiff suffers no physical injury. MPC negligently destroyed the Days’ restaurant and Days received adequate compensation for that destruction. We therefore reverse the award of damages for emotional distress to Ted Day. We need not address the issues of sufficiency of the evidence, apportionment of damages, related jury instructions or any waiver of MPC’s right to attack the jury verdict.

We have adopted only Comment j to Restatement (Second) of Torts § 46 (1965), defining severe emotional distress. First Bank (N.A.) v. Clark (1989), 236 Mont. 195, 771 P.2d 84, 91. Section 46 concerns the tort of intentional infliction of emotional distress which we have not yet recognized as a cause of action.

Days’ next specification of error concerns the District Court’s refusal to give certain of their proffered instructions regarding punitive damages. Days contend that MPC violated provisions of the Natural Gas Pipeline Safety Act of 1968, 49 U.S.C.App. §§ 1671 et seq. (1982), and that such violations constituted presumed malice thus entitling Days to punitive damages. Specifically, Days maintain MPC failed to properly odorize gas transported through its pipelines, failed to prepare a written emergency program and lacked adequate emergency communication facilities. The District Court refused these instructions based on a lack of sufficient supporting evidence.

Although Days introduced limited evidence regarding each claimed violation, for none of the alleged infractions was the evidence sufficient to support a jury determination that the statute in question was violated. “This Court has held that instructions not supported by the evidence need not be given.” Mydlarz v. Palmer/Duncan Const. Co. (1984), 209 Mont. 325, 347, 682 P.2d 695, 706. We affirm the District Court’s refusal to give instructions related to MPC’s alleged violations of the Natural Gas pipeline Safety Act.

Days contend the jury erroneously failed to award them damages for loss of their established way of life. We affirm. Although confronted with conflicting evidence, the jury had more than sufficient evidence upon which to base its denial of an award for loss of established way of life. Ted Day testified that the restaurant never did more than break even since it was purchased in 1984, and that the Days paid their living expenses out of the monthly payments they received from the sale of the Red Lodge Cafe. Evidence showed that TJ’s Restaurant lost $43,000 in 1985 and $10,667 in 1986 up until the time of the explosion. The Days never received a salary the entire time the restaurant was operating although Doris testified she frequently worked 12 hour days.

Both Days testified that for a short period after the explosion, they were employed by a restaurant and casino in Red Lodge. Ted Day’s doctor testified that because of his pre-existing heart condition and high blood pressure, Ted Day should not work in the restaurant business. Because we affirm the jury verdict denying damages for loss of established way of life, we need not address the issue of whether Days waived their right to attack the jury verdict by failing to move for a new trial.

Days next contend MPC waived its claim of privilege regarding the report prepared by its employee Byron Mazurek and contained within its claim file. This claim is based upon MPC’s production of the remainder of the file. Because MPC produced all portions of the file except the report, Days argue this constitutes a waiver as to the report pursuant to Rule 503(a), Mont.R.Evid. Rule 503(a) states:

“A person upon whom these rules confer a privilege against disclosure waives the privilege if he or his predecessor while the holder of the privilege voluntarily discloses or consents to disclosure of any significant part of the privileged matter.”

MPC contends the only significant portion of the file was the report and that its release of other materials contained within the file did not constitute waiver of its privilege. We agree. We would also note that counsel for the Days attempted to compel production of this document during discovery at which time the District Court ruled it was privileged. Counsel for appellants later sought to obtain the document through the use of a subpoena duces tecum. While the record does not clearly reflect impropriety on the part of counsel, we will not assist in this attempt at back door discovery by reversing the order of the District Court.

Having previously denied appellant’s motion to dismiss respondents’ cross appeal, we decline reconsideration of this issue.

We reverse the award of emotional distress damages to Ted Day. We affirm the District Court’s refusal to instruct the jury on alleged violations of the Natural Gas Pipeline Safety Act, the jury’s refusal to award damages for loss of established way of life and the lower court’s ruling that MPC did not waive its claim of privilege with regard to Byron Mazurek’s report.

CHIEF JUSTICE TURNAGE and JUSTICES WEBER and Mc-DONOUGH concur.

JUSTICE HARRISON,

dissenting:

As noted in the majority opinion:

“This Court has permitted plaintiffs to recover for their emotional distress as an element of damages in certain underlying actions: (1) private nuisance (French v. Ralph E. Moore, Inc. (1983), 203 Mont. 327, 661 P.2d 844); (2) violation of certain constitutional rights (Johnson, Stensvad v. Towe (Mont. 1988), [232 Mont. 378,] 759 P.2d 138, 45 St.Rep. 1129); and (3) breach of the covenant of good faith and fair dealing (Gibson v. Western Fire Ins. Co. (1984), 210 Mont. 267, 682 P.2d 725; Dunfee v. Baskin-Robbins, Inc. (1986), 221 Mont. 447, 720 P.2d 1148; Safeco Ins. Co. v. Ellinghouse (1986), 223 Mont. 239, 725 P.2d 217).”

The majority also found that Mr. Day’s claim did not fall within any of the above categories. With this holding I must disagree.

In Johnson v. Supersave Markets, Inc. (1984), 211 Mont. 465, 473, 686 P.2d 209, 213, we noted:

“This Court adopts the species of case approach which requires a factual analysis of each case to determine whether the alleged ‘emotional distress’ merits compensation. In determining whether the distress is compensable absent a showing of physical or mental injury, we will look to whether tortious conduct results in a substantial invasion of a legally protected interest and causes a significant impact upon the person of plaintiff.” (Emphasis in original.)

In French, we found that the substantial invasion of a legally protected interest includes injury to real property. In Gibson, we found that there was no impact, except to a medical doctor’s business, and was a property interest and not a personal interest. In the case at bar, plaintiffs’ property suffered serious damage which was caused by the defendant’s negligence. The defendant clearly recognized the seriousness of the property damage when ordered to pay a judgment for that damage. I would hold that the right to be secure in one’s person, papers, and property is a legally protected interest without distinction as to the type of interest involved.

I cannot find it proper that the right to possess property without interference, or the right to pursue a lawful business, are not property rights legally protected both by the United States and Montana Constitutions. The right to pursue a lawful business is, in my opinion, a property right within both the Fifth and the Fourteenth Amendments of the Constitution and was so found in the case of United States v. Tropiano (1969), 418 F.2d 1069, 1075-76. Articles II and III of our Montana Constitution lists as one of those inalienable rights the right to “acquire, possess, protect property.”

This Court was correct in the cases set forth above. The facts of this case show actual physical presence of the plaintiffs at the explosion and demolition of their restaurant. This, in my opinion, is a sufficient basis to allow Mr. Day’s recovery of emotional distress damages.

The Days were clearly entitled to damages for destruction of their property, emotional distress, nervous shock, mental anguish, -and loss of their established way of life all due to the defendant’s negligence.

I would affirm the jury’s award to Mr. Day for emotional distress.

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


author: JUSTICE McDONOUGH

text:
    CLIFFORD BEIL, Plaintiff and Appellant, v. THADDEUS MAYER, Defendant and Respondent.
    No. 89-287.
    Submitted on Briefs Feb. 15, 1990.
    Decided March 27, 1990.
    789 P.2d 1229.

      Mark E. Westveer, O’Brien Law Office, Missoula, for plaintiff and appellant.
    Stacey Weldele-Wade, Worden, Thane & Haines, Missoula, for defendant and respondent.
   JUSTICE McDONOUGH

delivered the Opinion of the Court.

Plaintiff Clifford Beil appeals from a jury verdict of the Fourth Judicial District, Missoula County, finding that the defendant, Thaddeus Mayer, was not liable for damages incurred by Beil in an automobile accident. We reverse.

The issues pertinent to our review are:

1. Whether the District Court erred when it refused Beil’s motion in limine requesting the court to prohibit the disclosure to the jury of a previous settlement amount which was attained through the settlement of an injury received in a subsequent automobile collision:

2. Whether Beil waived his objection to the evidence concerning sums paid in the settlement;

3. Whether the error committed by the District Court regarding the settlement amount was harmless error.

On August 27, 1983, Beil and Mayer were involved in an automobile collision. The facts surrounding that accident are no¡t relevant to the issues now before us. However, Beil did bring a lawsuit alleging negligence on the part of Mayer. In that lawsuit Beil sought to recover damages for injuries sustained as a result of the accident.

In addition to the 1983 accident, Beil has been involved in two other automobile collisions. The first collision occurred on March 3, 1979. As a result of this accident, Beil filed a lawsuit which was eventually settled. In January of 1986, Beil was involved in another automobile accident. A lawsuit was filed, and it, like the previous litigation was settled.

When Beil filed the present lawsuit against Mayer, he sought damages for all medical expenses incurred or yet to be incurred, lost wages, loss of future earning capacity, indefinite future pain and suffering and changes in lifestyle. Before trial he sought a motion in limine to preclude the amounts of the 1979 and 1986 settlements from being admitted as evidence. He argued that this evidence was inadmissible because its disclosure would serve to prejudice the jury and that it was irrelevant and privileged.

Mayer agreed that the amount of the 1979 settlement was not relevant and therefore should not be admitted. However, he maintained that the amount of the 1986 settlement was relevant because Beil was seeking damages for future pain and suffering, future medical expense and future wages. Mayer argued that because Beil had already received compensation for future damages through the 1986 settlement, its amount was relevant to the determination of damages in the present case. He maintained that the jury should be informed of the settlement amount so that it could deduct compensation for future damages already awarded by the 1986 settlement from any monetary compensation that it might award Beil. According to Mayer, if the court did not allow this disclosure, it was possible that Beil may realize a double recovery.

The District Court agreed with Mayer and allowed him to introduce into evidence the amount of the 1986 settlement. Beil had objected to this course of action. However, after his motion in limine was denied, he stipulated to a statement of facts relative to the amount of the settlement. This statement was read to the jury during the course of the trial.

Following the trial, the jury found that Mayer was not negligent and a verdict in favor of the defendant was entered. Beil moved for a new trial and claimed that the District Court’s decision to allow the settlement amount into evidence prevented him from having a fair trial and that there was insufficient evidence to justify the jury’s verdict. Beil’s motion was denied and this appeal followed.

I

Beil maintains that evidence of the amount of the 1986 settlement award was inadmissible because it was irrelevant and prejudicial. We agree that this evidence was not relevant to any substantive issue presented in this trial.

We begin our analysis with the premise that unless otherwise provided, all relevant evidence is admissible and all evidence which is not relevant is not admissible. Rule 401, M.R.Evid. Rule 401 of the Montana Rules of Evidence defines relevant evidence as:

“. . . evidence having any tendency to make the existence of any fact that is of consequence to the determination of the action more or less probable than it would be without the evidence.”

Mayer argues that the settlement amount was relevant to the issue of damages. He maintains that the jury was entitled to know the amount of the 1986 settlement so that they could render a verdict which would correctly award Beil only damages arising out of the 1983 accident. According to his argument it was a fact question for the jury to decide how much of Beil’s future damages were attributable to the 1986 accident and how much were attributable to the 1983 occurrence. In order to make this determination, it was necessary to inform the jury of the 1986 settlement amount.

We disagree with this argument. The monetary value placed upon damages flowing from the 1986 accident has no bearing upon the injuries sustained by Beil in 1983. Damages incurred in the 1983 collision could be established through medical and testimonial evidence. The admission of evidence relating to the 1986 settlement, therefore, only served to interject immaterial, prejudicial information into the trial.

Evidence of this type is usually considered immaterial for two reasons. First, as we stated earlier, the amount of a previous settlement rarely has any relevance to the determination of damages at issue in the present trial. Second, its admission does not give the jury a true picture of the reason for the settlement amount. Oftentimes, an injured plaintiff will accept a settlement for reasons which are extraneous to the true issue at hand. For instance, an insurance policy limit can and often times does, dictate a settlement amount. See Azure v. City of Billings (1979), 182 Mont. 234, 596 P.2d 460. This information cannot, however, be revealed to the jury, and consequently it must operate on incomplete information while engaging in its deliberations. Given this fact, a previous settlement amount should not be revealed to the jury, because it only serves to result in confusion and possible prejudice against the plaintiff.

However, although the amount of a previous settlement is not generally admissible, the nature, extent and severity of a subsequent injury is often relevant to the determination of damages. A tortfeasor should only be held liable for injuries which he causes. He should not be held liable for damages sustained by the plaintiff in a subsequent accident involving a separate tortfeasor. Therefore, the nature and extent of a subsequent injury are relevant to the jury’s determination of damages and a jury can be directed to apportion damages through questions supplied on the verdict form. Bruckman v. Pena (1971), 29 Colo. App. 357, 487 P.2d 566.

Once damages have been quantified the trial court can deduct any damages for future injuries which were duplicated through separate awards for distinct injuries, if any. Azure v. City of Billings (1979), 182 Mont. 234, 596 P.2d 460. The trial court can tell the jury that it is to concern itself only with the issues before it and not speculate as to amounts of any other settlements received by plaintiff. The court may tell the jury that the court will take care of these factors at a later time after the jury has reached its verdict. Azure, 596 P.2d at 467.

II

Having found the 1986 settlement amount inadmissible, we must now determine whether Beil waived his objection to this evidence.

In order to preserve an objection for purposes of appeal, the objecting party must make an objection and state its specific grounds. The objection must appear on the record. Rule 103, M.R.Evid. As stated earlier, Beil objected to all evidence pertaining to the 1986 settlement amount, before trial, in his motion in limine. Following this refusal, Beil stipulated to an agreed set of facts relative to the amount of settlement. This stipulation was read to the jury during trial. Beil also voluntarily referred to the settlement in his opening argument and through testimony during his case in chief.

Mayer argues that in order to maintain his objection, Beil had to object to the evidence, not only by the motion in limine, but also when the evidence was introduced during the trial. According to this argument, an objection to evidence must be continually renewed, even though a proper objection was registered before trial. Mayer further argues that Beil waived his prior objection by stipulating to agreed facts concerning the 1986 settlement.

Beil, on the other hand, maintains that he properly registered his objection to the evidence. Once that objection was denied, he attempted to deal with its imminent introduction in the best way that he could. As a matter of trial tactics, he brought up the settlement during his case in chief, so that he could attempt to minimize its prejudicial impact. He entered into the stipulation in an effort to prevent needless disagreement over known facts which were part of the settlement. These trial tactics, he maintains, should not constitute a waiver to his original objection.

We agree with Beil’s argument. The following exchange between Beil and the District Court Judge indicates that Beil properly preserved his objection for review. The exchange took place following the denial of Beil’s motion in limine:

“Mr. O’Brien: Your Honor, have I sufficiently preserved the objection to that ruling for purposes of appeal?

“The Court: Well, I understand that you are objecting to everything I did.

“Mr. O’Brien: Okay.”

At trial following Beil’s original objection, the nature of the evidence was not modified. Therefore, Beil’s objection at the time of his motion in limine, covered the same evidence which was presented at trial. We hold that this objection was sufficient, and consequently we can properly review Beil’s objection and hold the evidence improperly admitted.

Ill

As a final point, Mayer argues that even if the settlement evidence was improperly admitted, the erroneous ruling constituted harmless error. According to Mayer, the jury found that he was not negligent. The 1986 settlement evidence only pertained to damages and since it had no relevance to Mayer’s negligence, its admission could not have influenced the jury. It therefore did not affect the outcome of the trial and consequently should be regarded a harmless error, which did not affect the substantial rights of Beil. Based on this assumption, Mayer argues that this Court should not reverse the judgment of the District Court. See Rule 14, M.R.App.P.

We cannot hold as a matter of law that the erroneous admission of this evidence was harmless. In fact, it appears as though the jury may have been substantially influenced by its admission. Following trial, the jury questioned the District Court Judge concerning the damage issue:

“THE COURT: Now ladies and gentlemen of the jury, the bailiff has handed me this note. ‘Judge Green, if the jury decided 50/50 percent negligence on behalf of the plaintiff and defendant, how can we represent this on the verdict and still show no monetary reward?’ Well, as I instructed you, it would take eight or more of your group to find — decide on any question involved in this case, and, apparently, you’re asking if you find the jury — the jury finds that the defendant is 50 percent negligent and the plaintiff is 50 percent negligent; is this correct?

“JURY FOREPERSON: Yes.

“THE COURT: Well, if that is what you find, eight or more of your number on each one of those questions —

“JURY FOREPERSON: Yes.

“THE COURT: — you can answer question one, ‘Was the Defendant negligent?’; question two, ‘Was the Defendant’s negligence a proximate cause of injury or damage to the Plaintiff?’; and question three, ‘Was the Plaintiff negligent?’. That’s where you’d get the two parties. And question four, was the plaintiff’s negligence a proximate cause of the injury? Then you could go to question five, ‘Using one hundred percent (100%) as the total combined negligence of the parties which contributed to the injury or damage to the Plaintiff, what percentage of such negligence is attributable to the Plaintiff?’ There you put in whatever percentage you find is attributable to the Plaintiff. You could then go on, and answer question six, and the Court would take care of the verdict based on what you — how you answer these questions, but there’s no problem with doing that. Do you understand?

“JURY FOREPERSON: Huh-uh? May I speak for the group?

“THE COURT: Surely.

“JURY FOREPERSON: In answering the questions, we did not wish to put all the blame on Mr. Mayer at that particular intersection, nor did we wish to put it all on Mr. Beil, and still our monetary rewards would have been so meager —

“THE COURT: Now you don’t — I don’t want you to explain that to me now.

“JURY FOREPERSON: Okay. We go back down again, and put some figures in there.

“THE COURT: The thing is whatever percentage you determine is due to the plaintiff you will put in — as a — answer to question five. Again, ‘Using one hundred percent (100%) as the total combined negligence of the parties which contributed to the injury or damage to the Plaintiff, what percentage of such negligence is attributable to the Plaintiff?’ And you have placed in there whatever percentage you find is attributable to the plaintiff. You understand that now?

“JURY FOREPERSON: Yes, uh-huh.

“THE COURT: Very well. You will be reconducted to the jury room.”

This exchange indicates that the amount of settlement had an influence on the jury in determining the responsibility of each party for the accident. Here they found no liability on the part of Mayer.

In prior cases we have stated that where controversial evidence was erroneously admitted at time of trial, and on appeal a showing was made that substantial rights might well have been effected, the error was not harmless. State Highway Commission v. Churchwell (1965), 146 Mont. 52, 403 P.2d 751.

It appears as though Beil’s substantial rights have been affected and accordingly the evidence was not harmless. The jury’s verdict is vacated and this case is remanded for proceedings consistent with this opinion.

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


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    LEONARD CHRISTIANSON, Plaintiff and Appellant, v. RICHARD GASVODA, Pat Ryan and Jack Whitaker, acting as the Board of County Commissioners of Cascade County, State of Montana, Defendants and Respondents.
    No. 89-467.
    Submitted on Briefs March 8, 1990.
    Decided April 5, 1990.
    789 P.2d 1234.

      George McCabe, Jardine, Stephenson, Blewett and Weaver, Great Falls, for plaintiff and appellant.
    Patrick Paul, Cascade Co. Atty., and Stephen E. Hagerman, Deputy Cascade Co. Atty., Great Falls, for defendants and respondents.
   JUSTICE McDONOUGH

delivered the Opinion of the Court.

Leonard Christianson appeals from an order of the Eighth Judicial District, Cascade County, granting summary judgment in favor of respondents Richard Gasvoda, Pat Ryan and Jack Whitaker acting as the Board of County Commissioners (Board). The District Court found that the Board acted properly in denying Christianson’s application for approval of a subdivision. The court further found that Christianson had no legal standing to bring this action and that the Board was immune from suit. We affirm.

Because we hold that the Board acted properly in denying Christianson’s application, we need not address every issue submitted. The one issue to be addressed is:

Whether the Board properly rejected Leonard Christianson’s proposed subdivision plat.

Leonard Christianson (Christianson) is a Great Falls developer who has previously developed three subdivisions. These plats were developed in an area south of Great Falls, Montana in Cascade County. Following development of this property by Christianson, and further subdivision by others not named in this lawsuit, residents of an area known as Gibson Flats began to experience increased drainage and flooding problems. Apparently, the subdivisions are located above Gibson Flats. Precipitation in the form of rain or snowfall, has always drained from this area onto Gibson Flats. However, following development the drainage problem and subsequent flooding has intensified.

Despite these problems, Christianson sought to develop another subdivision in the area. He therefore entered into a buy-sell agreement with the owners of undeveloped agricultural property which lies next to his existing subdivisions. According to the agreement Christianson agreed to buy the property on the condition that his subdivision plan was approved. Christianson signed the agreement on August 1, 1987. However the owners did not sign until June 23, 1988.

Christianson then filed an application for approval of the proposed subdivision with the Board of County Commissioners. Following this filing, several residents of Gibson Flats objected upon the assertion that the development would increase surface water drainage onto Gibson Flats. On October 3, 1987, the Board approved the preliminary plat on the condition that Christianson provide adequate drainage. Christianson then submitted a supplemental engineering plan, which provided that two water detention ponds would be built that would hold surface water runoff temporarily. According to' Christianson’s theory, this temporary impoundment would prevent any further flooding of Gibson Flats caused by runoff from his new subdivision.

The residents of Gibson Flats were not satisfied, however, and as a result they continued to object. The Board investigated further and it also began to doubt that the detention ponds would solve the flooding problem. In particular, it found Christianson’s engineering plan and the testimony of his expert witness, who offered different testimony at two separate Board hearings, unconvincing. Consequently, the Board rejected Christianson’s application on November 18, 1987. In rejecting the application, the Board maintained that no further development should occur until the drainage problem, caused by prior development, was solved.

Following this denial, Christianson filed an action in District Court seeking damages for inverse condemnation. Both parties filed motions for summary judgment. The Board’s motion was granted on June 15, 1989. This appeal follows.

In determining whether subdivision approval should be given the Board must determine whether the proposed development is in the public interest. Section 76-3-608(1), MCA. The Board, basing their decision upon all of the evidence presented, found that Christianson’s proposal was not in the public interest. This decision was within the scope of their discretion and therefore their denial should be upheld. Pearson Kent Corporation v. Bear (New York 1971), 28 N.Y.2d 396, 322 N.Y.S.2d 235, 271 N.E.2d 218.

The District Court, in its review of the Board’s actions, found that there was substantial evidence that the proposed subdivision would adversely affect public health, safety and welfare. In particular, it found that the flooding problems which were exacerbated by previous development justified rejection of the proposed plat. The Board based its conclusion upon testimony given at Board hearings, numerous letters submitted by the public, and personal observations of the problems at Gibson Flats. Moreover, the Board, as fact finders, were in the best position to weigh conflicting testimony and determine the credibility of the witnesses. They chose not to accept the testimony of Christianson’s expert because he changed his opinion concerning the drainage on at least one occasion and his testimony conflicted with the Board’s experience with the Gibson Flats problem. In short we hold that the Board’s decision to deny further development pending resolution of existing drainage problems and assurances that this development would not further contribute to the problem was not an abuse of discretion.

Moreover we also note that even assuming the Board’s decision was incorrect, Christianson did not suffer any real damages. At the time of denial, he was not the owner of the property in question, nor did he have any interest therein. The sellers of the land did not sign the buy-sell agreement until June 23, 1988. The denial occurred on November 16, 1987 and this lawsuit was filed on January 28, 1988. Therefore, Christianson had no possible legal interest in the land until seven months following the denial of his application and five months following the instigation of this lawsuit. Furthermore, the buy-sell agreement was conditional and Christianson’s obligation to buy did not arise until subdivision approval was granted. Given these facts, Christianson did not have any standing to maintain this litigation.

The judgment of the District Court upholding the Board of County Commissioners is affirmed.

JUSTICES HARRISON, SHEEHY, BARZ and WEBER concur.


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    GERLING GLOBAL REINSURANCE CORPORATION, (U.S. BRANCH), Plaintiff and Respondent, v. FIRST INTERSTATE BANK, f/k/a First National Bank of Missoula, Defendant and Appellant.
    No. 89-481.
    Submitted on Briefs Feb. 22, 1990.
    Decided April 9, 1990.
    Rehearing Denied May 8, 1990.
    789 P.2d 1237.

      James- J. Benn, Boone, Karlberg & Haddon, Missoula, for defendant and appellant.
    Harold V. Dye, Milodragovich, Dale & Dye, Missoula, for plaintiff and respondent.
    Patrick M. Driscoll, Chronister, Driscoll & Moreen, Helena, for amicus curiae.
   JUSTICE McDONOUGH

delivered the Opinion of the Court.

Defendant First Interstate Bank of Missoula (FIB), f/k/a First National Montana Bank Of Missoula appeals the order of the Fourth Judicial District Court, Missoula County, denying its motion for a change of venue to the First Judicial District, Lewis and Clark County. The denial was based on the legal relationship created between the parties when FIB issued the plaintiff, Gerling Global Reinsurance Corp. (Gerling), a letter of credit on behalf of its depositor, Glacier General Assurance Co. (Glacier). The sole issue on appeal is whether the District Court erred in denying the motion. We affirm.

On December 31, 1984, FIB issued an irrevocable letter of credit, on the behalf and at the request of Glacier, to the plaintiff Gerling, in the amount of $746,250.00, The letter of credit was obtained by Gerling to ensure that sight drafts were paid pursuant to a reinsurance agreement it had with Glacier. The letter of credit expired in one year and provided:

“If we receive at our office, on or before the expiry hereof, your sight draft on us mentioning the above reference number, for all or part of this Credit, we will promptly honor the draft. Except as stated herein this undertaking is not subject to any condition or qualification whatsoever.”

Glacier deposited $746,250.00 with FIB and FIB issued Glacier a certificate of deposit, which Glacier pledged as security for the letter of credit. Glacier was experiencing financial problems, apparently unknown to FIB, which surfaced on March 12, 1985, when the Montana Commissioner of Insurance (the Commissioner) was appointed Rehabilitator of Glacier by the District Court of the First Judicial District pursuant to The Insurers Supervision, Rehabilitation and Liquidation Act, §§ 33-2-1301 et seq., MCA. Meanwhile, in August of 1985, Gerling presented FIB with demands against the credit totaling $40,495.28, representing specific listed losses covered by Glacier’s reinsurance. On November 12, 1985, the District Court of the First Judicial District ordered the liquidation of Glacier and appointed the Commissioner as Liquidator, ordering the Liquidator to take possession of all Glacier’s assets for administration under the court’s supervision.

On December 20, 1985, Gerling wrote FIB and made an additional demand against the remaining balance in the credit. On December 30, 1985, the Liquidator wrote FIB and made a specific demand for the proceeds of the certificate of deposit as an asset of the liquidation estate of Glacier. FIB has not honored the demand of Gerling or the Liquidator.

Gerling commenced the current action against FIB in the Fourth Judicial District Court on January 12, 1989, seeking damages based on FIB’s refusal to honor the letter of credit. The Liquidator sought to intervene in the action, and defendant FIB moved for a change of venue on the grounds that the only proper venue for insurance liquidations is the First Judicial District Court, Lewis and Clark County. See secs. 33-2-1305(2) and 33-2-1308, MCA. FIB’s motion for change of venue, as well as the Liquidator’s motion to intervene, were denied by the District Court. FIB now appeals the denial of its motion for change of venue.

In order to determine where the proper venue lies in this case, it is first necessary for us to examine the nature of and the legal relationships created by a letter of credit.

FIB argues that the proper venue for all authorized actions relating to the liquidation, supervision, and rehabilitation of Glacier should be heard in the First Judicial District, Lewis and Clark County, where the office of the commissioner is located. Sections 33-2-1305(2), 33-2-1308, MCA. Even if we accept this argument, the very nature of a letter of credit makes such an argument inapplicable in this case. A letter of credit is defined as:

“an engagement by a bank or other person made at the request of a customer . . . that the issuer will honor drafts or other demands for payment upon compliance with the conditions specified in the credit. A credit may be either revocable or irrevocable . . . .”

Section 30-5-103, MCA. It is a well settled matter of law that an instrument issued as a letter of credit and containing language that it is substantively a letter of credit creates a primary obligation in the issuer and must be enforced as such, and not as an instrument of guaranty:

“Although every letter of credit appears to function as a guaranty, there are important distinctions. [Citation omitted.] A true guaranty creates a secondary obligation whereby the guarantor promises to answer for the debt of another and may be called upon to perform once the primary obligor has failed to perform. Since a guaranty is ancillary to the underlying contract, a dispute as to the rights and obligations of a guarantor can only be resolved by a factual determination of the rights and obligations of the parties of the underlying contract. A bank that issues a credit however creates a primary obligation as principal, not as an agent of the account party. On the issuance of a credit the bank assumes a primary obligation independent of the underlying contract.”

Sherwood and Roberts, Inc. v. First Security Bank (1984), 209 Mont. 402, 413, 682 P.2d 149, 155. See also, Banks, The Standby Letter of Credit: What It is and How to Use It, 45 Mont.L.Rev. 71 (1984). No consideration is needed for a letter of credit. Section 30-5-105, MCA. A letter of credit is not a third party beneficiary contract, therefore the beneficiary’s claims are not subject to the same defenses (failure of condition and anticipatory breach) as that of a true third party beneficiary’s claim. See Banks, supra, at note 5. Moreover, a bank’s obligation to honor the letter of credit is independent of any underlying contract between the bank and the debtor.

When a bank honors a letter of credit, the payment is made with the bank’s assets, not the assets of the debtor or its bankrupt estate. The letter of credit represents a relationship between the issuer and the beneficiary; generally a bankrupt debtor has no obligations under the letter of credit. Thus, as the trial judge correctly noted, Gerling’s claim against FIB on the letter of credit involves a subject matter separate from Glacier’s liquidation proceeding in Lewis and Clark County. The Liquidator may have an interest in the assets Glacier deposited with FIB, but for purposes of venue such interest has no bearing on FIB’s obligations to Gerling under the irrevocable letter of credit.

With this in mind, it is clear that Gerling’s choice of Missoula County, defendant FIB’s principal place of business and the place of performance under the letter of credit, was proper for purposes of venue. Section 25-2-121, MCA. The District Court did not abuse its discretion in denying FIB’s motion.

AFFIRMED.

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


text:
    ALMEDA MOORE, Adeline Bohlman, Darlene Kilby and Delores Rose, Plaintiffs and Respondents, v. AUGUST WESLEY ADOLPH and Mrs. August Wesley Adolph, Defendants and Appellants.
    No. 89-496.
    Submitted on Briefs March 8, 1990.
    Decided April 9, 1990.
    789 P.2d 1239.
    Ralph L. Herriott, Billings, for defendants and appellants.
    John L. Pratt, Ask & Pratt, Roundup, for plaintiffs and respondents.
   CHIEF JUSTICE TURNAGE

delivered the Opinion of the Court.

The defendants appeal from an action in the Fourteenth Judicial District Court, Musselshell County, partitioning the parties’ undivided interests in 173 acres of real property and 150 acre feet of irrigation water. We affirm.

In 1953 August Adolph and Arnold Johnson purchased a 173-acre tract of land on the Musselshell River. To irrigate the land, they contracted with the Deadman’s Basin Water User’s Association to provide 150 acre feet of water annually. Arnold Johnson eventually sold his undivided one-half interest in the real property to August’s son and daughter-in-law, the current appellants Wesley and Lois Adolph. In 1965, Arnold executed a Request for Release and Transfer of Water Purchase Contract No. 176 to assign the water contract to Wesley and Lois.

August, however, never signed the water contract release. The record indicates that Ronald Belcher, secretary of the Water User’s Association, prepared the Request for Release and Transfer at Arnold Johnson’s request. After Johnson signed the request, Belcher took the document to the home of August and his son Wesley. August was absent so Wesley signed for his father as he often had on business checks-“August Adolph by Wesley Adolph.” Although August never saw the release, Belcher testified that during a discussion of the transfer, August gave his oral consent. Belcher believed that Wesley was authorized to sign the release because August and Wesley had an oral agreement that Wesley would receive the water. The Water User’s Association subsequently approved the transfer and provided Wesley with the 150 acre feet under Contract No. 176A. Wesley thereafter used the water and made all payments to the Association.

August Adolph died in 1983. Under his will’s residuary clause, his interest in the 173-acre tract passed in equal portions to his surviving heirs. The respondents each took an undivided ten percent. Wesley took ten percent from his father’s estate in addition to the fifty percent purchased from Arnold Johnson.

The respondents petitioned the District Court to partition the property, to invalidate the water contract transfer from August to Wesley, and to distribute August’s interest in the water contract under the residuary clause. After a hearing on the issue, the District Court found that the transfer violated the statute of frauds and was, therefore, void. The court distributed August’s one-half interest in the 150 acre feet of irrigation water under the residuary clause. The respondents each took a right to fifteen acre feet of water. Wesley took fifteen acre feet under the residuary clause and seventy-five acre feet under Arnold Johnson’s release. Because the real property could not be partitioned without prejudice to the parties, the District Court ordered it sold and the proceeds distributed according to ownership interests.

The appellants raise the single issue of whether the District Court erred in concluding that the assignment of August Adolph’s one-half interest in the water contract to Wesley Adolph was void. They argue that Wesley acted as August’s agent in executing the transfer and that August ratified the transfer.

“Ratification exists upon the concurrence of three elements:

“(1) acceptance by the principal of the benefits of the agent’s acts,

“(2) with full knowledge of the facts and,

“(3) circumstances or an affirmative election indicating an intention to adopt the unauthorized arrangement.”

Safeco Ins. Co. v. Lovely Agency (1982), 200 Mont. 447, 453, 652 P.2d 1160, 1163 (quoting 2A C.J.S., Agency § 71). The appellants point to the testimony of Ronald Belcher as undisputed evidence that August knew about and fully approved the transfer.

Whether August approved is not relevant in the absence of a writing. See Palin v. Gebert Logging, Inc. (1986), 220 Mont. 405, 407-08, 716 P.2d 200, 202. Under Montana law, “an agreement that by its terms is not to be performed within a year from the making thereof” is invalid unless it is written. Section 28-2-903(1)(a), MCA. The present contracts cannot be performed within one year; they require yearly payments for thirty-two years. “[A]n authority to enter into a contract required by law to be in writing can only be given by an instrument in writing.” Section 28-10-203, MCA. Any authority August gave Wesley assigning the water contract was invalid because August did not give it in writing. Finally, the alleged ratification was not effective because it too was not in writing. “A ratification can be made only in the manner that would have been necessary to confer an original authority . . . .” Section 28-10-211, MCA.

The statute of frauds’ writing requirement for contracts which cannot be performed within one year is intended to avoid disputes, such as this one, when the passage of time has made evidence unreliable and witnesses unavailable. E. Farnsworth, Contracts, § 6.4 at 391 (1982). Its requirements are mandatory.

Affirmed.

JUSTICES HUNT, SHEEHY, WEBER and McDONOUGH concur.