author: MR. JUSTICE HARRISON MR. JUSTICE MORRISON, MR. JUSTICE HUNT,

text:
    ROGER DVORAK, Plaintiff/Appellant, v. MATADOR SERVICE, INC., a foreign corporation; and Koch Industries, Inc., a foreign corporation, Defendants/Respondents.
    No. 85-568.
    Submitted July 8, 1986.
    Decided Aug. 28, 1986.
    Rehearing Denied Dec. 9, 1986.
    727 P.2d 1306.

      MR. JUSTICE HUNT filed a dissenting opinion.
    Goetz, Madden and Dunn, P.C., James P. Molloy, Bozeman, Montana, argued, Jeffrey T. Renz, Billings, for plaintiff/appellant.
    Crowley Law Firm, Charles R. Cashmore, Billings, Montana, argued, for defendants/respondents.
   MR. JUSTICE HARRISON

delivered the Opinion of the Court.

The plaintiff-appellant brought this action to recover for injuries which he sustained when he was overcome by hydrogen sulfide gas as he was preparing a vacuum tank for welding repairs. The District Court granted the defendants’ second motion for summary judgment. From that order and judgment the plaintiff appeals. We affirm.

In March of 1981, the plaintiff-appellant, Roger Dvorak (“Dvorak”), was employed as a journeyman welder at Beall, Inc. of Billings, Montana. Beall repairs and fabricates truck tanks used for hauling commodities such as gas and oil.

On March 4, 1981, defendant-respondent Matador Services Company, a subsidiary of defendant-respondent Koch Industries, Inc., delivered a vacuum tank truck to Beall for repairs. The truck at one time or other had hauled oil production water, salt water, and bottom sediment, all contaminated with hydrogen sulfide, a highly toxic substance. Beall officials were aware that all trucks from the Willis-ton Basin, including this truck, could be expected to have hauled hydrogen sulfide contaminated matter. The record is also undisputed that Beall officials were generally aware of the serious dangers associated with hydrogen sulfide.

When Beall received the truck from Matador, it followed its standard procedures for readying tanks for repair. It placed the truck on a steam rack where it was steam cleaned. It was then left outside to cool overnight. The following morning, March 5, Beall’s foreman, Israel Sanchez, tested the tank with an explosimeter to determine whether any explosive gases were present. After determining that the tank was safe, Sanchez assigned Dvorak and an assistant to do the necessary welding repairs.

When Dvorak entered the tank to begin his work, he discovered that it still contained a considerable amount of tar-like material and sediment, and was generally still dirty. Fearing that an explosion would occur if he began welding, Dvorak left the tank and complained about its condition to Sanchez. Sanchez entered the tank himself to inspect it. He noticed no unusual smells or any other indications that the tank was unsafe so he “ordered” Dvorak and his assistant to reenter the tank and scoop the sediment from the bottom before welding. Sanchez told Dvorak and his assistant to either reenter the tank or “go down the road.”

As Dvorak began shoveling the sludge out of the tank, he collapsed. Dvorak’s assistant and several other workers reached into the tank and pulled Dvorak out. It was later learned that Dvorak had been exposed to hydrogen sulfide. Dvorak received serious injuries as a result of his exposure to the hydrogen sulfide.

On March 4, 1983, Dvorak filed suit against Beall, Matador and Koch. Dvorak alleged that Beall was liable under the intentional tort exception to the exclusivity provisions of Montana’s Workers’, Compensation laws. Beall’s motion for summary judgment was granted on January 16, 1984. Dvorak’s subsequent appeal from that judgment was dismissed with prejudice as fully settled on the merits.

Dvorak stated two claims for relief against Matador and Koch (hereinafter defendants or “Matador”). The first claim for relief alleged that the defendants were strictly liable for engaging in an abnormally dangerous activity. Dvorak’s second claim for relief was based on the several theories of negligence. First, Dvorak contended that the defendants’ generally negligent conduct was responsible for his injuries (primarily that the defendants were under a duty to warn or advise Beall that special precautions were necessary when dealing with hydrogen sulfide). Second, Dvorak contended that the peculiar risks associated with hydrogen sulfide make it an inherently or intrinsically dangerous activity, thus making the defendants vicariously liable for Beall’s wrongful conduct.

The defendants moved for summary judgment in February of 1984 based on the argument that the sole proximate cause of Dvorak’s injuries was Beall’s negligence in failing to properly clean the subject tank and in requiring Dvorak to reenter the tank even with actual knowledge of its unclean condition. The District Court found that a material issue of fact existed, relating to whether Beall was aware of the gravity of the danger presented by the presence of hydrogen sulfide in the subject tank. On that basis, the court denied the defendants’ first motion for summary judgment.

Following further discovery, the defendants renewed their motion for summary judgment based on information which showed that Be-all had actual knowledge of the serious dangers associated with hydrogen sulfide. The District Court thereafter granted the defendants’ motion for summary judgment and concluded that Beall’s knowledge of hydrogen sulfide’s potential dangers rendered its conduct the sole proximate cause of Dvorak’s injuries.

It is from the granting of summary judgment in favor of the defendants that Dvorak appeals.

Dvorak now presents the following issues for review by this Court:

I. Did the District Court erroneously impose summary judgment on plaintiffs negligence claims?

A. Did the District Court err in holding as a matter of law that the peculiar risk (inherently dangerous activity) exception to the independent contractor rule does not apply to this case?

1. Does Montana recognize the peculiar risk exception?

2. Are employees of an independent contractor protected under the peculiar risk exception?

B. Did the District Court erroneously impose summary judgment on the plaintiff’s general negligence claim when the record reflected disputed issues of fact regarding foreseeability and causation?

II. Did the District Court erroneously impose summary judgment on plaintiff’s strict liability claim for an abnormally dangerous activity?

I. Dvorak’s negligence claims

Dvorak begins his argument under this issue by noting that at the time he was injured, he was an employee of Beall, Inc. Dvorak further notes that Beall was in turn an independent contractor employed by defendant Matador. The general common law rule, which Montana follows, is that an employer is not liable for the negligence or wrongdoing of an independent contractor. See, Storrusten v. Harrison (1976), 169 Mont. 525, 549 P.2d 464. However, there are some very important exceptions to this general rule. Dvorak argues that Matador falls under two common exceptions to the independent contractor rule: (1) the peculiar risk or inherently dangerous activity doctrine; and (2) the employer’s liability for his own negligence. Dvorak asserts the District Court, in imposing summary judgment, held that Montana does not recognize the “inherently dangerous activity” exception and that, in any event, the exception would not apply to the facts of this case. With regard to the employer’s own negligence exception, the trial court apparently recognized the exception but held that Matador could not be liable on that basis. Dvorak argues the trial court erred in its conclusions.

First, with regard to the inherently dangerous activity exception, Dvorak argues that Montana has long recognized this doctrine. This doctrine basically provides that where the acts to be performed by an independent contractor are of an inherently dangerous nature, the employer will be held vicariously liable for any resultant injury caused by the negligence or wrongdoing of the independent contractor. To establish that Montana has adopted the peculiar risk or inherently dangerous activity exception, Dvorak directs this Court’s attention to the recent cases of Kemp v. Bechtel Construction Co., et al. (Mont. 1986) [221 Mont. 519,] 720 P.2d 270, 43 St.Rep. 1022 and Cash v. Otis Elevator Co. (Mont. 1984), [210 Mont. 319,] 684 P.2d 1041, 41 St.Rep. 1077.

It is also important to note, Dvorak argues, that employees of independent contractors are protected under the inherently dangerous activity exception. In other words, the exception extends not only to third persons, but also to employees of an independent contractor. Therefore, an employer (i.e. Matador) who hires an independent contractor (i.e. Beall) to engage in an inherently dangerous activity, will be liable for negligent acts which injure the contractors own employees (i.e. Dvorak). See, Kemp, supra, and Stepanek v. Kober Construction (Mont. 1981), 625 P.2d 51, 38 St.Rep. 385.

In light of Montana’s clear recognition of the inherently dangerous activity exception, Dvorak argues, the only remaining issue is whether the exception applies to this case. In other words, whether the repairing and fabrication by Beall of tanks which contain hydrogen sulfide contaminated matter is an inherently dangerous activity thereby making Matador vicariously liable for Beall’s negligence or wrongdoing. Dvorak argues this issue is a question of fact which can only be determined by a jury. Consequently, Dvorak asserts, this case must be reversed and remanded for trial.

Dvorak argues the second exception to the general rule that an employer is not liable for the tortious acts of an independent contractor is that if the employer is himself negligent in his own dealings with the independent contractor, this can give rise to employer liability. In the instant case, Dvorak primarily argues that Matador’s conduct falls under this exception because Matador negligently failed to advise or warn Beall that special precautions were necessary when dealing with hydrogen sulfide. Dvorak contends that Beall was ignorant of the reasonable particular protections necessary against hydrogen sulfide’s dangers and that Matador knew of Beall’s ignorance. Thus, it was reasonably foreseeable to Matador that a Beall employee (i.e. Dvorak) would be injured. Dvorak based his theory of negligence on Section 413 of the Restatement (Second) of Torts.

In response to Dvorak’s contentions under this issue, Matador argues it is not vicariously liable for Beall’s wrongful conduct. Matador acknowledges there appears to be several exceptions to the general rule that an employer is not vicariously liable for the tortious acts of his agent if the latter is an independent contractor. The exceptions relied on by Dvorak are: (1) the inherently dangerous activity exception; and (2) the employer’s liability for his own negligence exception. Dvorak’s objective, Matador notes, is to establish that Beall was an independent contractor employed by Matador thereby making Matador vicariously liable for Beall’s tortious conduct under the exceptions noted above. However, Matador argues, this whole line of argument by Dvorak simply begs the question and entirely misses the point. We agree.

We agree with Matador that Beall is simply not its agent in the sense in which the proferred doctrines apply and vicarious liability simply does not attach to the instant case. Working through the exceptions to the independent contractor rule is, therefore, to no avail since the underlying agency relationship upon which vicarious liability rests does not exist.

Matador points out the independent contractor rule provides that a principal (employer) will not be liable for the tortious acts of his agent (employee) if the latter is an independent contractor, with certain limited exceptions. In the instant case, however, Matador argues that Beall is not its agent in the first place. Matador did not engage Beall to undertake activities on behalf of Matador in Matador’s relations with third parties or the public generally. Rather, Matador engaged Beall to perform tasks for Matador, not tasks which Matador had undertaken to perform for others and was delegating to Beall. This is simply not an agency case and no principle of vicarious liability can be applied.

We agree with Matador that Dvorak simply attempts to stretch to the point of misapplication the cases which do properly apply exceptions to the independent contractor rule. For example, such doctrines (i.e. the inherently dangerous activity exception) are especially prevalent in construction cases because clearly a subcontractor is an agent of the contractor (principal) for purposes of performing work which the contractor had agreed to perform for the owner (third party). See, Kemp, supra (although the inherently dangerous activity exception was ultimately held not to apply to this fact situation). In such an arrangement, there may very well be a situation in which the contractor is vicariously liable for the acts of the subcontractor, even though an independent contractor relationship exists. In the present case, however, the agency relationships which form the framework of the doctrines are absent. Therefore, Matador can not be vicariously liable for Beall’s wrongful conduct.

It is also important to note, Matador argues, that it is not liable to Dvorak under any general negligence theory, whether associated with an exception to the independent contractor rule or not, because Beall’s conduct was the sole proximate cause of Dvorak’s injuries. Matador asserts that since Beall knew of the presence and dangers of hydrogen sulfide in the subject tank, had the responsibility to clean the tank prior to employee entry, failed to adequately do so, and then ordered Dvorak into the tank despite his protests that the tank was unclean and unsafe, Beall, and not Matador, is liable for Dvorak’s injuries. Matador notes the District Court came to this same conclusion and granted its motion for summary judgment. We agree.

Matador points out that Dvorak under a general negligence theory, is basically arguing that the defendants are liable for his injuries because Matador failed to exercise reasonable care in advising or warning Beall that special precautions were necessary when dealing with hydrogen sulfide. Even assuming Matador owed such a duty to Beall at all (which is highly questionable), and then breached such a duty, the law and facts clearly establish that Beall’s conduct, and not Matador’s conduct, was the proximate cause of Dvorak’s injuries.

Matador strongly relies on the case of Rost v. C.F. & I. Steel Corp. (Mont. 1980), 616 P.2d 383, 37 St.Rep. 1657, to establish that Beall’s conduct was the proximate cause of Dvorak’s injuries. The Rost case was a products liability action against the manufacturer of an elevator cable for injuries sustained when the frayed and torn cable broke and the elevator fell. The plaintiffs in the Rost case settled their dispute against the store owner and proceeded to trial against the cable manufacturer on the theory that the defendant failed to warn the store owner of the dangerous use of the cable. In affirming a jury verdict in favor of the cable manufacturer, this Court found that the proximate cause of the accident was the negligent conduct of the store owner in failing to properly maintain and inspect the cable and not any failure to warn on the part of the manufacturer. The Court characterized the store owner’s conduct, as a matter of law, as the superseding intervening force or “operative conduct” leading to the plaintiff’s injuries.

We find the circumstances of the Rost case are analogous to the circumstances of the instant case. Dvorak’s injuries occurred because Beall did not clean the tank, as it was expected and required to do, and then forced Dvorak to enter the tank even after the unclean conditions had been brought to the attention of Dvorak’s foreman. We find without Beall’s grossly negligent conduct the accident would not have occurred and, therefore, Beall’s conduct was the “operative conduct” or superseding force which intervened as the proximate cause of Dvorak’s injuries. A warning from Matador to Beall as to the risks of hydrogen sulfide (if such a duty existed at all) would have been to no avail, and consequently, a failure to warn could not have been the proximate cause of the accident.

II. Dvorak’s strict liability claim

In addition to the negligence claims mentioned above, Dvorak’s complaint also included a claim against Matador based upon strict liability for engaging in an abnormally dangerous activity. Dvorak points out this Court in Matkovic v. Shell Oil Co. (Mont. 1985), [218 Mont. 156,] 707 P.2d 2, 42 St.Rep. 1482, recently addressed the theory of strict liability in cases involving an abnormally dangerous activity. In Matkovic this Court adopted Section 519 of the Restatement (Second) of Torts which basically holds that “[o]ne who carries on an abnormally dangerous activity is subject to liability for harm to the person ... of another resulting from the activity, although he has exercised the utmost care to prevent the harm.” Matkovic, 707 P.2d at 3-4. In addition, this Court listed numerous factors adopted from Section 520 of the Restatement (Second) of Torts to determine whether a particular activity is abnormally dangerous.

Dvorak now argues, consistent with the law embodied in Matkovic, that the transport and storage of hydrogen sulfide contaminated materials by Matador is an abnormally dangerous activity, thereby making Matador strictly liable for his injuries. Dvorak further asserts this issue of whether the handling and storage of hydrogen sulfide contaminated matter is an abnormally dangerous activity is a question of fact for the jury.

We acknowledge that Dvorak’s allegations under this issue create a superficial factual issue as to whether the handling of hydrogen sulfide contaminated materials is an abnormally dangerous activity. However, we find, as did the District Court, that even if a jury could have found that Matador’s activities were abnormally dangerous, Matador can not be liable in any event because it was not the proximate cause of Dvorak’s injuries.

This Court has previously established that a showing of proximate cause is a necessary element for any plaintiff’s recovery in strict liability. Brown v. North American Manufacturing Co. (1978), 176 Mont. 98, 576 P.2d 711. Therefore, in order for Dvorak to establish a prima facie case for strict liability, it must be proven that Matador’s conduct was the proximate cause of his injuries. Further, contrary to Dvorak’s belief, the showing of proximate cause under strict liability is identical to that required for a prima facie showing of negligence. In other words, a defendant’s liability can be cut off by a superseding intervening force.

As we have already explained under issue I, we find that Beall’s conduct, and not Matador’s conduct, was the proximate cause of Dvorak’s injuries. Therefore, Matador can not be strictly liable for Dvorak’s injuries.

Finally, we agree with Matador that the ultimate reason strict liability does not apply in this case is that Dvorak’s injury did not occur while Matador was conducting any activity at all. Rather, the injury occurred during the conduct of an activity by Beall. Matador was not carrying on an abnormally dangerous activity which resulted in harm to Dvorak. Matador had delivered the tank to Beall and it was Beall, not Matador, who was carrying on the activity involved in Dvorak’s injury. In other words, Matador was carrying on no activity, abnormally dangerous or otherwise, which resulted in Dvorak’s injuries.

In conclusion, we hold the District Court properly granted summary judgment in favor of Matador. This Court has repeatedly stated “that a plaintiff is subject to summary judgment if he fails in establishing certain material elements in a negligence action” (or any cause of action for that matter). Scott v. Robson (1979), 182 Mont. 528, 535, 597 P.2d 1150, 1154; see also Pickett v. Kyger (1968), 151 Mont. 87, 439 P.2d 57. This general rule applies to the instant case.

With regard to his negligence claims under issue I, Dvorak failed to establish the basic principles of agency law necessary to hold Matador vicariously liable for Beall’s wrongful conduct. Further, even under a general negligence theory Matador can not be held liable to Dvorak because Dvorak failed to establish that Matador was the proximate cause of his injuries. (This is even assuming Matador owed a duty to Beall and Dvorak in the first place.)

Finally, with regard to his strict liability claim under issue II, Dvorak failed to establish a prima facie case for this cause of action. As explained in the opinion above, Dvorak failed, once again, to show that there was a proximate causal connection between Matador’s conduct and his injuries.

We hold because Dvorak failed to establish the necessary elements of his stated causes of action, summary judgment was appropriately granted in favor of Matador.

The order of the District Court granting summary judgment is affirmed.

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

MR. JUSTICE MORRISON,

concurring in part and dissenting in part:

I specially concur in part and dissent in part.

Plaintiff presents three theories: 1. Matador and Koch, as owners who employed the services of an independent contractor, should be liable to persons injured by the negligence of the independent contractor on the basis of nondelegable duty because the activity to be performed was inherently dangerous. 2. Matador and Koch were engaged in conducting an ultra hazardous activity, transporting and storing hydrogen sulfide, and should be liable for injury resulting therefrom on the basis of strict liability. 3. Matador and Koch were negligent in failing to warn the independent contractor, Beall and its employees, of the dangerous propensities of hydrogen sulfide and in delivering the truck to Beall in a highly dangerous condition exposing Beall’s employees to unreasonable risk of harm.

I would affirm summary judgment on the first two theories and remand for trial on the third issue involving defendants’ direct negligence.

In the recent case of Kemp v. Bechtel Construction Co. (Mont. 1986), [221 Mont. 519,] 720 P.2d 270, 43 St.Rep. 1022, we recognized that an owner can be liable for the negligence of an independent contractor where the owner employs an independent contractor to engage in an inherently dangerous activity. In Kemp the majority found that trenching was not inherently dangerous under the circumstances of that case.

The rule in Kemp is premised upon the fact that the owner controls the work place in general and cannot delegate safety responsibility to a subcontractor thereby effectively insulating the owner from liability. However, in this case, Matador is not in control of the work place. Matador owns personalty, in the form of a truck, which is taken to an independent contractor for servicing. Matador has no right to enter the work place nor control the way work is performed on the premises. Therefore, it would make no sense to extend the Kemp rationale to the Matador circumstance. I would affirm summary judgment in favor of Matador and Koch on the non-delegable duty theory.

In the recent case of Matkovic v. Shell Oil Co. (Mont. 1985), [218 Mont. 156,] 707 P.2d 2, 42 St.Rep. 1482, we held that strict liability attached for conducting an ultra hazardous activity. I believe that the Matkovic rule is not applicable here. The activity at issue was being conducted by Beall and not by the defendants. Again, I would affirm summary judgment on this count.

Plaintiff alleges direct negligence on behalf of Matador and Koch in failure to warn of the dangerous propensities of hydrogen sulfide and in delivering for cleaning a truck which presented an unreasonable risk of harm to those working inside the truck's tank. This claim should go forward for factual resolution. Apparently the majority feels there is an issue on negligence but finds the action of Beall, plaintiff’s employer, to be a superseding cause. The majority alludes to “proximate case.”

This case involves multiple causes. Therefore, the pertinent inquiry is whether the defendants’ conduct was a substantial factor in producing plaintiff’s injuries. Legal cause, not proximate cause, is the test. Kyriss v. State of Montana (Mont. 1985), [218 Mont. 162,] 707 P.2d 5, 42 St.Rep. 1487.

Beall, acting through its supervisory personnel, may well have been negligent in directing plaintiff to enter the subject tank containing hydrogen sulfide. However, if Matador and Koch were negligent in failing to advise of the extreme danger, given the amount of sediment they knew was in the tank, that negligence may have concurred with the negligence of Beall. The question of causation, under proper legal cause instructions, is for a jury.

This case should be reversed and remanded for trial on the direct negligence claim.

MR. JUSTICE HUNT,

dissenting:

This cause of action should be reversed and remanded for trial in the District Court. Appellant Dvorak has stated a claim for which relief may be granted and questions of fact exist which can only be resolved by trial.

Appellant asserts three legal theories by which respondents Matador and Koch may be held liable for his injuries. All three theories rely on recognized exceptions to the general rule that employers of independent contractors are not liable for injury caused by those independent contractors. Before discussing each theory of liability, it is necessary to examine the relationship between Beall and Matador, the subsidiary of Koch.

I agree with the majority that Beall was not acting as an agent of Matador. An agency relationship “results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other to act. State v. Holdren (1963), 143 Mont. 103, 109, 387 P.2d 446, 449, citing 1 Restatement, Agency, Section 1 (Emphasis in Holdren). No where in the record is it alleged that Matador employed Beall to act on its behalf or subject to Matador’s control. Rather, Matador did not have any right to control the details of Beall’s operation. Therefore Beall must be considered an independent contractor. See Sharp v. Hoerner Waldorf Corporation (1978), 178 Mont. 419, 424, 584 P.2d 1298, 1302; State ex rel. Ferguson v. District Court (1974), 164 Mont. 84, 88, 519 P.2d 151, 153.

I now turn to the three theories of liability asserted by the appellant. First appellant argues that Matador and Koch are liable because Beall’s work in cleaning trucks, which are often contaminated with hydrogen sulfide, is abnormally dangerous. In Matkovic v. Shell Oil Company (Mont. 1985), [218 Mont. 156,] 707 P.2d 2, 4, 42 St.Rep. 1482, 1484, we replied to a certified question from the Federal District Court for Montana. We stated that strict liability principles apply in an abnormally dangerous situation. In so holding, we adopted the standard set forth in Restatement (Second) of Torts Section 519 (1976). The Restatement also treats the issue of abnormally dangerous activities carried on by an independent contractor. Section 427 A. of the Restatement states:

“One who employs an independent contractor to do work which the employer knows or has reason to know to involve an abnormally dangerous activity, is subject to liability to the same extent as the contractor for physical harm to others caused by the activity.”

Comment a to Section 427A refers the reader to Sections 419-524A “to determine the liability of both the employer and the independent contractor.” The rationale for this rule of employer liability is stated in Section 427A comment b. An employer who meets the criteria of Section 427A “cannot be permitted to escape the responsibility for the abnormal danger created by the activity which [the employer] has set in motion, and so cannot delegate the responsibility for harm resulting to others to the contractor.” This language harmonizes well with our longstanding rule that an employer may not “set in operation causes dangerous to the person or property of others . . . [and then] divest himself of the primary duty he owes to other members of the community by contracting with others for the performance of work, the necessary and probable result of which is injury to third persons.” A.M. Holter Co. v. Western Mtge. & Warranty Co. (1915), 51 Mont. 94, 99, 149 P. 489, 490.

I disagree with the majority’s conclusion that “Matador cannot be liable in any event because it has not the proximate cause of Dvorak’s injuries.” Proximate causation is applicable only in a direct negligence action, not in the area of strict liability.

Appellant states a cause of action for which relief may be granted. On this theory, a jury should determine whether Beall’s activities were abnormally dangerous and whether Matador knew or had reason to know about the abnormal danger.

Our opinion in Matkovic sets forth the factors to be considered by the jury in determining whether an activity is abnormally dangerous. Matkovic, 707 P.2d at 4, 42 St.Rep. at 148, citing Restatement (Second) of Torts Section 520 (1976). Next, appellant asserts that another exception to the general rule of non-liability of employers of independent contractors applies to the facts of this case. Again, appellant relies on Montana cases which reflect the exception found in Sections 416 and 427, Restatement (Second) of Torts (1976). Montana has long recognized that those who employ independent contractors to undertake “inherently dangerous” activity, or activity involving “peculiar risks” are primarily liable for harm growing out of the inherent dangers. See Kemp v. Bechtel (Mont. 1986), [221 Mont. 519,] 720 P.2d 270, 43 St.Rep. 1022, 1029-1034 (Morrison, Hunt, JJ. dissenting) Ulmen v. Schweiger (1932), 92 Mont. 331, 247, 12 P.2d 856, 857; Shope v. City of Billings (1929), 85 Mont. 302, 278 P. 826; AM. Holter Co. v. Western Mtge. & Warranty Co. (1915), 51 Mont. 94, 99, 149 P. 489, 490.

This rule imposes liability upon employers for “the failure of the contractor to exercise reasonable care.” Restatement (Second) of Torts Section 416 at 395. Therefore, the contractor’s negligence cannot be held to cut off the employer’s liability simply because that negligence is the sole proximate cause of the injury. It is the very negligence of the contractor which makes the employer liable. Again this vicarious liability exists because Montana’s policy is not to let those who set in motion dangerous activities escape liability. And again, this theory calls for jury determination of the factual issue of whether shoveling sediment from trucks used in the Williston Basin is inherently dangerous or involves particular risks.

Finally appellant also relies upon a direct negligence theory to hold Matador and Koch liable for his injuries. The first two theories would hold Matador and Koch liable despite the absence of any negligence upon their part. In this third argument, appellant contends that Matador was directly negligent in not exercising reasonable care to provide that Beall take precautions necessary to avoid peculiar and unreasonable risks inherent in the work. Again this theory reflects the Restatement (Second) of Torts, this time Section 413. That section recognizes that employers of independent contractors do not have the right to control the details of the contractor’s work. However, where the employers, by knowledge and experience, realize that the work is inherently dangerous, the employers have a duty of due care in setting that work in motion. The simplest way to exercise that care is to provide for preventative precautions in the contract with the independent contractor. Section 413(a) Restatement (Second) of Torts (1976). The employer who realizes, after forming the contract, that dangers have arisen should act to prevent those dangers from causing injury. See Section 413 comment d. Again, a jury should determine the extent of Matador’s experience, knowledge, and awareness of unreasonable danger and evaluate the acts of Matador against that standard of due care. For appellant to prevail on this third theory, a negligence action, the jury must, of course, find Matador’s actions, or failure to act, proximately caused appellant’s injury.

Finally, I must disagree with the majority position that the Restatement exceptions to the general rule of employer non-liability apply only in the construction context. I simply cite a sampling of cases where these sections have been applied outside the construction area. Sun Pipeline Co. v. Kirkpatrick (Tex.App. 1974), 514 S.W.2d 789 (spraying defoliant along an easement); Trexler v. Tug Raven (E.D.Va. 1968) 290 F.Supp. 429, 444 (gasoline being discharged into storage tanks from a barge); McDonald v. Oakland (1967) 255 Cal.App.2d 816, 63 Cal.Rptr. 593 (painting a water tank with volatile paint).

As long as the policy behind the Sections 413, 416, 427, 427A is remembered, employers will not be suddenly liable for every negligent act of independent contractors employed by them. These theories apply only where employers set in motion activities which are inherently dangerous and where Montana’s long-standing policy is to hold the initiator of dangerous activities liable for any resulting injury. I would reverse and remand for trial.


source: Caselaw Access Project

author: MR. CHIEF JUSTICE TURNAGE

license: Public Domain

text:
    EL-CE STORMS TRUST, Cecil H. Storms and Elsie S. Storms, Plaintiffs and Respondents, v. PAUL ALLEN SVETAHOR and Ann Gail Svetahor, Defendants and Appellants.
    No. 85-591.
    Submitted on Briefs April 10, 1986.
    Decided Aug. 28, 1986.
    724 P.2d 704.

      Sverdrup & Spencer, Scott Spencer, Libby, for defendants and appellants.
    Hedman, Hileman & Lacosta, Donald E. Hedman, Whitefish, for plaintiffs and respondents.
   MR. CHIEF JUSTICE TURNAGE

delivered the Opinion of the Court.

This is an appeal from a judgment entered in the Nineteenth Judicial District, in and for the County of Lincoln. Cecil Storms, as trustee of El-Ce Storms Trust, brought suit on a contract and promissory note executed by Paul and Ann Svetahor in favor of El-Ce Storms Trust. Paul was unable to be served; however, Ann answered the complaint and set up the affirmative defense of discharge for failure to adequately protect the collateral. After a bench trial, the trial court entered judgment in favor of Storms for the full balance due on the note. Ann Svetahor has appealed from that judgment. We reverse in part and remand for findings consistent with this opinion.

During October 1982 respondent and Paul Svetahor began negotiations concerning a loan. Paul wanted to borrow $10,000 from respondent so that he could increase his stock in Shaklee Products. At that time, Paul was married to appellant, although at the time of trial the two were divorced. At no time during the negotiations for the loan did respondent have any discussion with appellant as to her role on the note or in her husband’s business. At some point, respondent drafted the note and contract at issue here; however, he told Paul that he would not loan him the money without appellant’s signature on the note. Appellant had no knowledge of the note until Paul brought it home for her to sign. Paul told her that respondent insisted she sign the note; otherwise, he would not loan Paul the money. Appellant signed the note along with her husband. Within sixty days of their signing, respondent paid $10,000 to Paul and appellant in three separate checks. They endorsed the checks, and the money was used to buy Shaklee products for Paul’s business.

The agreement between respondent and the Svetahors granted the former a security interest in the Shaklee inventory used in Paul’s business. However, respondent did not record the security agreement at that time. In January 1983, Paul obtained a loan from the First National Bank of Eureka. The bank took a security interest in the Shaklee products used in Paul’s business and immediately filed a financing statement.

Only seven payments were made on the loan from respondent, and Paul also defaulted on the loan from First National Bank. Respondent took possession of the Shaklee inventory after the loan became delinquent. However, when the bank learned of this, it demanded that the inventory be delivered to it. Respondent complied, and the bank sold the inventory. Respondent subsequently brought suit on the note.

Three issues are presented for our consideration:

1. Whether the appeal is timely.

2. Whether appellant is discharged from liability on the note due to respondent’s impairment of the collateral.

3. Whether the District Court erred in computing the amount due on the note.

Timeliness of the Appeal

Respondent contends that appellant did not perfect her appeal within the time restraints imposed by law. He bases this contention solely on the fact that judgment was entered on August 13, 1985, and notice of appeal was not filed until November 4, 1985. Rule 5 of the Montana Rules of Appellate Civil Procedure states the applicable time limit for filing notice of appeal:

“The time within which an appeal from a judgment or an order must be taken shall be 30 days from the entry thereof, except that in cases where service of notice of entry of judgment is required by Rule 77(d) of the Montana Rules of Civil Procedure the time shall be 30 days from the service of notice of entry of judgment . . .” [Emphasis added.]

This is a case where service of notice of entry of judgment is required by Rule 77(d) because appellant made an appearance in the action. Therefore, under Rule 5, M.R.App.Civ.P., the time within which the appeal must have been taken by appellant was thirty days from the “service” of notice of entry of judgment.

In determining what constitutes proper service under Rule 5 sufficient to start the thirty-day time limit running, reference must again be made to Rule 77(d), M.R.Civ.P. The prevailing party in an action has the duty of serving notice of entry of judgment, together with a copy of the judgment or a description of the nature and amount of relief and damages granted, upon all parties who have made an appearance. Since respondent was the prevailing party in this action, he had the burden of serving proper notice of the judgment on appellant. Nothing in the record indicates that respondent ever served any notice on appellant nor does respondent contend that he did so. It does appear that the District Court mailed a notice of entry of judgment to counsel for both parties; however, that notice was totally insufficient since it did not state what the judgment was nor provide a description of the nature of the relief granted. The thirty-day period for filing a notice of appeal does not begin to run until proper notice, as required by Rule 77(d), is served on the losing party who has made an appearance. Haywood v. Sedillo (1975), 167 Mont. 101, 535 P.2d 1014; Pierce Packing Co. v. District Court, Etc. (1978), 177 Mont. 50, 579 P.2d 760. Since proper notice of entry of judgment was never served on appellant, the time for filing her notice of appeal never began to run. Consequently, this appeal was timely filed.

Impairment of the Collateral

Appellant contends that she is completely discharged from liability on the note because the respondent failed to perfect his security interest in the inventory causing an impairment of the collateral. Respondent answers by saying that appellant signed as a comaker and, as such, she is primarily liable on the note without the benefit of any defenses. Under what circumstances, and to what extent, a party to a note is discharged from liability because the holder has impaired the collateral appears to be a case of first impression in this Court.

Under Section 30-3-606, MCA, a “holder discharges any party to the instrument to the extent that without such party’s consent the holder unjustifiably impairs any collateral for the instrument given by or on behalf of the party or any person against whom he has a right of recourse.” The first problem encountered under the statute is determining what is meant by “any party to the instrument.” From a plain reading of the statute, it would appear that any person on the instrument could be discharged, which would include makers, endorsers, guarantors — in short, any person who appears on the instrument. Under this interpretation, appellant would be entitled to the defense offered by the statute since she is clearly a party to the instrument. However, statutes cannot be interpreted in a vacuum. “The goal of statutory interpretations is to give effect to the purpose of the statute. [Citation omitted.] To give effect to the purpose of the statute as intended by the legislature, the context in which the words are used is more important than precise grammatical rules or dictionary definition.” Burritt v. City of Butte (1973), 161 Mont. 530, 535, 508 P.2d 563, 566.

Montana adopted Section 3-606 of the Uniform Commercial Code verbatim; therefore, the official code comment and the law applied in other jurisdictions is helpful in determining what is meant by the words “any party.” Official Comment 1 provides that the purpose of the section is to make it clear:

“The words ‘any party to the instrument’ remove an uncertainty arising under the original section. The suretyship defenses here provided are not limited to parties who are ‘secondarily liable,’ but are available to any party who is in the position of a surety, having a right of recourse either on the instrument or dehors it, including an accommodation maker or acceptor known to the holder to be so.” [Emphasis added.]

Thus, the drafters of the Code appear to limit the defense of discharge solely to those “parties” who occupy the position of a surety. Under this view, accommodation makers, endorsers, and guarantors would be included, but makers and comakers would not.

There is some disagreement among the states over whether Section 3-606 should apply to all parties to an instrument or whether it should extend only to accommodation parties and others who occupy the position of sureties. Some jurisdictions hold that ordinary makers and comakers are discharged along with parties in the position of sureties. See e.g. Crimmins v. Lowry (Tex. 1985), 691 S.W.2d 582; Southwest Florida Production v. Schirow (Fla. 1980), 388 So.2d 338; Rushton v. U.M.&M. Credit Corporation (1968), 245 Ark. 703, 434 S.W.2d 81. However, the majority of jurisdictions take the view that only parties who occupy the position of sureties are entitled to discharge. See e.g. Wohlhuter v. St. Charles Lumber & Fuel Co. (1975), 62 Ill.2d 16, 338 N.E.2d 179; Peoples Bank, Etc. v. Pied Piper Retreat, Inc. (1974), 158 W.Va. 170, 209 S.E.2d 573; Smiley v. Wheeler (Okla.1979), 602 P.2d 209; Bank of New Jersey v. Pulini (1984), 194 N.J. Supper. 163, 476 A.2d 797; United States v. Unum, Inc. (5th Cir. 1981), 658 F.2d 300.

We find that the majority rule is the better approach. The comments to Section 30-3-606 make it clear that the statute discharges “any party who is in the position of a surety, having a right of recourse . . .” Makers and comakers are not sureties and do not have a right of recourse on the instrument. A maker is primarily liable on the instrument and cannot look to anyone else for payment. Similarly, comakers are primarily liable on an instrument. As between comakers, each is ultimately liable for the obligation. Although one comaker may have a right of contribution from the other comaker if the former pays more than his share, he does not have a right of recourse for the entire payment made. However, a party who occupies the position of a surety does have a right of recourse on the instrument for the full amount owing if he is made to pay.

The Restatement of Security defines suretyship as “the relation which exists where one person has undertaken an obligation and another person is also under an obligation or other duty to the obligee, who is entitled to but one performance, and as between the two who are bound, one rather than the other should perform.” (Emphasis added.) Restatement of Security, Section 82. Thus, as between a maker and a party who signs for accommodation, the maker is ultimately liable on the note and is the one who is expected to pay. If the surety or accommodation party pays the instrument, he is subrogated to the rights of a creditor and has full right of recourse against the maker. Section 30-3-415, MCA. This principle applies equally well whether the party signs as an accommodation maker, an accommodation endorser or a surety. See Comment 1 to Section 30-3-415. Therefore, we hold that Section 30-3-606 applies to all parties who occupy the position of a surety, including accommodation makers, endorsers and acceptors, but it does not apply to principles and comakers.

Having decided that accommodation makers are entitled to the defense of discharge under Section 30-3-606, we must now determine whether appellant signed as a comaker or an accommodation maker. The District Court found as a fact that appellant “signed the Promissory Note. There is no language in the Note or Contract limiting her signatory capacity. Plaintiff had no notice that she claimed to be anything other than a maker.” The court then concluded that appellant was liable for the full amount due on the note. In its findings and conclusions, it appears that the court failed to fully analyze the individual rights and obligations of the parties to the note in question in light of the statutory definition of an accommodation party.

Section 30-3-415, MCA, provides:

“(1) An accommodation party is one who signs the instrument in any capacity for the purpose of lending his name to another party to it.
“(2) When the instrument has been taken for value before it is due the accommodation party is liable in the capacity in which he has signed even though the taker knows of the accommodation.
“(3) As against a holder in due course and without notice of the accommodation oral proof of the accommodation is not admissible to give the accommodation party the benefit of discharges dependent on his character as such. In other cases the accommodation character may be shown by oral proof.” [Emphasis added.]

Thus, it is obvious that a person can sign an instrument as a comaker for the purpose of lending his name to the other maker and still be considered an accommodation party. Although the accommodation maker will be liable on the instrument as a maker, he will be entitled to the defenses of a surety — in this case, discharge under Section 30-3-606.

The instrument at issue shows that appellant signed as a comaker. The note states that “the undersigned promise to pay,” and the appellant’s signature appears under her husband’s at the lower right-hand corner of the note without any limitation on her liability thereon. However, this fact is not the sole consideration in determining whether appellant is an accommodation party. Several factors are important in this determination; namely, her purpose in signing the instrument, the intent of the parties to the instrument, whether she took part in any negotiations leading up to the loan, whether she received any benefit from the transaction, and whether her signature was necessary in enabling the other party to get the loan. See Lyons v. Citizens Commercial Bank (Fla.1983), 443 So.2d 229. We find, on the basis of these factors and in light of the undisputed evidence, that appellant was an accommodation maker on the instrument and that respondent had notice of her status as such.

One of the most important indications that appellant signed as an accommodation to her husband is the fact that she signed solely for the purpose of enabling her husband to get the loan. In respondent’s own testimony, he stated that he would not make the loan without appellant’s signature. Likewise, Paul Svetahor told appellant before she signed the note that Storms insisted that she sign. This fact alone indicates that respondent had knowledge that appellant signed the note as an accommodation to her husband. Furthermore, appellant took no part in the negotiations between respondent and Paul leading up to the loan. Additionally, appellant did not receive any direct benefit from the loan to her husband. She testified, without contradiction, that the entire proceeds of the loan went to buy inventory for Paul’s business. Respondent had knowledge of this fact since the contract itself provided that the proceeds of the loan would go to buy inventory. Appellant did not take any part in Paul’s business; she did not even have a key to his office. Thus, it appears that appellant signed the note solely to enable her husband to get the loan, and she did not receive any direct benefit from it.

Cases in other jurisdictions considering a similar situation have found the wife to be an accommodation party on less evidence than was presented in this case. In Fithian v. Jamar (1979), 286 Md. 161, 410 A. 2d 569, two partners sought a loan from a bank in order to enable them to purchase some new equipment for their business. The bank agreed to loan the men the money only if each man’s wife would co-sign the note. The note was signed on its face at the bottom right-hand corner by the two men and their wives. Since the court found that the wives’ signatures were required before the bank would make the loan, it held that the wives signed as accommodation makers.

In Godfrey State Bank v. Mundy (1980), 90 Ill.App.3d 142, 45 Ill.Dec. 549, 412 N.E.2d 1131, the wife executed a note along with her husband signing in the lower right-hand corner without any limitation on her capacity as a maker. She took no part in the negotiations prior to the execution of the note nor did she derive any direct benefit from the proceeds of the loan. On a finding that the wife signed the note only to lend her name to her husband, the court held that she was an accommodation maker. A similar result was also reached in Savings Bank of Manchester v. Kane (1978), 4 Conn.Sup. 82, 396 A.2d 952, and Seaboard Finance Co. of Connecticut, Inc. v. Dorman (1966), 4 Conn.Cir. 154, 227 A.2d 441.

Although there may have been no express understanding between appellant and her husband as to which one would be ultimately liable on the note, such an understanding is implied in the circumstances of the transaction. This implication is found primarily in the fact that appellant signed the note solely to lend her name to her husband to enable him to obtain the loan, appellant received no direct benefit from the loan, and appellant took no part in the negotiations prior to the loan. “[T]he failure of a party to receive a benefit is strong evidence of the party’s accommodation status.. . . [W]here B co-makes a note with A to obtain a loan to be used solely by A, B will be presumed to be an accommodation party especially if the loan was negotiated by A with C, the lender, who requested that A obtain a comaker.” Hawkland and Lawrence UCC Series, Section 3-415:03 (Art. 3). We hold that appellant was an accommodation party, and the District Court erred in finding her to be otherwise.

Having found that appellant is an accommodation party who is entitled to the benefit of the defense provided by Section 30-3-606, we now decide whether respondent’s failure to perfect his security interest in the inventory constituted an unjustifiable impairment of collateral. It is undisputed that respondent could have filed a financing statement perfecting his security interest in the collateral at least as early as November 3, 1982. However, respondent did not perfect his security interest in the inventory at that time. Instead, he waited until after the First National Bank of Eureka perfected its security interest in the same inventory. Had respondent perfected his security interest prior to the date that the bank did so, respondent would have had priority over the bank in the collateral, and it would have been available to him to apply to the debt. See Sections 30-9-302, 30-9-312, MCA. Had appellant paid the debt immediately upon demand by respondent, she would have been subrogated to respondent’s rights against Paul Svetahor, and she would have been entitled to apply the collateral to the debt. But, because respondent failed to take the necessary steps to secure his priority in the collateral which resulted in its loss to another creditor, the collateral was unavailable to appellant. Thus, the collateral was unjustifiably impaired.

The great majority of courts in other jurisdictions considering the issue have held that the failure to perfect a security interest is an unjustifiable impairment of collateral. In Farmers State Bank of Oakley v. Cooper (1980), 227 Kan. 547, 608 P.2d 929, the holder of a note secured by a security agreement in office equipment brought suit against the accommodation maker for payment on the note. The security agreement was never perfected, and the collateral was lost. The court held that the “failure of the holder of a security agreement to perfect it, which failure results in a loss of available collateral to an accommodation party, is an impairment of the collateral.” Farmers State Bank of Oakley, 608 P.2d at 936. In Huey v. Port Gibson Bank (Miss. 1980), 390 So.2d 1005, the bank filed suit on two promissory notes endorsed by Huey. As collateral, a security agreement was imposed on all inventory, furniture, and appliances owned by the maker. However, the bank failed to properly file a financing statement evidencing its interest which allowed the trustee in bankruptcy to gain priority. The court held that “the bank’s failure to file the financing statement with the Secretary of State, thereby permitting other creditors to gain priority, was an unjustifiable impairment.” Huey, 390 So.2d at 1009. Similarly, in Bank of New Jersey v. Pulini (1984), 194 N.J. Super. 163, 476 A.2d 797, 799, the court held:

“Since defendant [i.e., the accommodation maker] had the right to have this collateral assigned to him if he paid off the loan balance, the bank’s failure to perfect its security interest impaired the value of that collateral to defendant.”

Anderson, in his treatise on the Uniform Commercial Code, supports the majority view. In considering what constitutes an impairment of collateral, he states:

“The failure to perfect a security interest under Article 9 is an ‘impairing’ of collateral within the discharge provision of Article 3. Consequently, where a creditor is given a chattel mortgage on an automobile to secure payment of a note, the chattel mortgage constitutes ‘collateral’ and if the creditor fails to file the mortgage with the result that it has no effect as against a subsequent purchaser of the automobile, there is a failure to preserve collateral within the meaning of Code Section 9-207, and an accommodation maker on the note is discharged under Code Section 3-606.”

Anderson, Uniform Commercial Code, Section 3-606:8. See also, Beneficial Finance Co. of Norman v. Marshall (Okla.1976), 551 P.2d 315; Shaffer v. Davidson (Wyo.1968), 445 P.2d 13.

We hold that respondent’s failure to perfect his security interest in the inventory which resulted in its loss to another secured party constituted an unjustifiable impairment of the collateral and entitled appellant to a discharge. However, appellant is discharged only to the extent of the impairment. Since the entire collateral was lost, she is entitled to a discharge to the extent of the value of the collateral. The earliest date that appellant would have been allowed to look to the collateral was the date demand was made on her by the respondent. At that point, appellant could have paid the entire debt due and then taken the collateral for sale under her right of subrogation, if it had been available. Therefore, on remand, the District Court shall determine the value of the collateral as of the date of respondent’s initial demand against appellant. Since appellant is still liable as a maker on the note, she is still obligated to pay the amount of the judgment less the value of the collateral.

Computation of the Amount Due on the Note

Appellant contends that the District Court erred in computing the amount due on the note. Her contention on this point is without merit. The computation was made within the general terms of the note and contract.

Reversed in part and remanded.

MR. JUSTICES MORRISON, WEBER, GULBRANDSON and HUNT concur.


author: MR. JUSTICE MORRISON

text:
    LOIS A. CAMPBELL, Plaintiff and Appellant, v. MYRON CAMPBELL, Carol Campbell, and Stanley J. Campbell, Defendants and Respondents.
    No. 86-156.
    Submitted on Briefs July 10, 1986.
    Decided Sept. 4, 1986.
    Rehearing Denied Oct. 9, 1986.
    725 P.2d 207.

      Cate Law Firm, Jerome J. Cate, Billings, for plaintiff and appellant.
    Jon A. Oldenburg, Lewistown, H. Elwood English, Billings, for defendants and respondents.
   MR. JUSTICE MORRISON

delivered the Opinion of the Court.

Plaintiff Lois Campbell appeals the January 30, 1986, order of the Thirteenth Judicial District Court granting summary judgment in favor of defendants. We affirm.

At all times relevant to this case, Stanley and Lois Campbell were husband and wife. In 1972, Stanley and Lois had a home built on property located at 1716 Westwood Drive in Billings, Montana. The purchase price of the home was $34,000. To finance the purchase, $14,000 was borrowed from Hazel Rustuen, Lois’s grandmother, who took a mortgage against the property in that amount.

Stanley and Lois experienced financial difficulties in the ensuing years. The Internal Revenue Service (IRS) filed a lien against the property for $18,098.88 for non-payment of taxes. The Montana Department of Revenue filed a lien against the property of $919.17, as did the Montana Employment Security Division in the amount of $1,494.05. In addition, Stanley and Lois owed property taxes in the amount of $5,739.06, and $673.74 for Special District Improvement assessments.

The bills went unpaid, and on November 6, 1978, the IRS filed a notice of seizure and noticed the Campbells’ property for sale. A few days prior to the sale date, Myron Campbell, Stanley’s brother, and other members of Stanley’s family loaned $20,000 to Stanley and Lois for the purpose of satisfying the IRS lien. On the same date, Stanley and Lois signed a second mortgage and note payable to Myron in the amount of $20,000. These documents were never delivered nor recorded.

Stanley and Lois continued to have financial problems. They failed to clear the liens against their property, and did not make any mortgage payments to Lois’s grandmother, who filed suit to foreclose on her mortgage. Stanley and Lois were unable to refinance, so they decided to sell their property to Myron and Carol Campbell. The buy-sell agreement was executed June 26, 1979, in the amount of $34,500. The parties agreed that Stanley and Lois would remain in the home but would be required to pay $475 monthly rental. The parties further agreed that Stanley arid Lois would be permitted to buy back the home for $34,500 if they were ever in a financial position to do so.

Stanley and Lois never made any rental payments, and began to have marital difficulties. Lois filed a dissolution action, and Stanley was removed from the home by court order in May of 1983. Thereafter, Lois filed suit against Stanley, Myron and Carol on February 8, 1984. Lois’s complaint alleged that the sale of the home was made by the parties with the understanding that it would be immediately reconveyed to Stanley and Lois subject to the amount of financing obtained by Myron and Carol. Lois claimed that Myron and Carol had received the property for far less than its actual value and prayed that the conveyance be set aside as fraudulent.

Myron and Carol also filed suit on February 8, 1984, to have Lois evicted from the home for failure to pay rent, to quiet title, and to collect damages. The two actions were consolidated. On February 6, 1985, the district judge granted summary judgment in favor of Myron and Carol on the issue of title and right to possession. Lois’s complaint was dismissed with prejudice. Lois appeals and raises the following issue: Whether the District Court erred in granting summary judgment?

Lois contends the District Court overlooked material issues of fact in granting summary judgment, including the following: that the sale of the home was made for the purpose of paying off the $20,000 loan to the Campbell family and the balance due on the mortgage held by Lois’s grandmother; that the conveyance of the home to Myron and Carol was a method to protect it from creditors and that the agreement provided for reconveyance of the home to Stanley and Lois; that there was an agreement between Stanley and Myron whereby Myron would make the house payments in exchange for Stanley’s interest in the family farm.

The depositions of the parties show Stanley and Lois sold their home because they were unable to refinance and wanted to avoid foreclosure. The buyer’s closing statement reveals that Stanley and Lois had unpaid obligations of $28,881.02 on the date of sale, irrespective of the $20,000 owed to the Campbell family. Lois’s claim that the home was transferred in exchange for Stanley’s interest in the family farm has no support in the record.

Lois contends the transaction was a mortgage and not a sale under the case law of Montana. In Murray v. Butte Monitor Tunnel Mining Company (1910), 41 Mont. 449, 110 P. 497, this Court listed the four factors to be considered in determining whether a transaction was a mortgage and not a sale:

“1. The transaction in its inception had for its purpose a loan, not a sale.
“2. The grantor was in financial distress at the time of the transaction.
“3. The price which the grantee claims he paid for the property appears to be grossly inadequate.
“4. According to grantee’s own theory, the transaction did not amount to an absolute sale, but to a conditional sale; that is, a sale with an option to grantor to repurchase.”

Contrary to Lois’s assertions, the value of the home was estimated by Lomas and Nettleton Company to be $58,900 on the date of closing. Although the purchase price was $34,500, Stanley and Lois had already received a $20,000 loan from Myron and other family members. Further, Myron testified that $34,500 was the maximum amount that an agency would lend for the purchase of the property. Thus, the price paid for the home was not grossly inadequate. Clearly, Myron and Carol were trying to protect their investment by purchasing the home rather than allow foreclosure.

Myron and Carol admit that Stanley and Lois had an option to repurchase under their agreement. The evidence shows Stanley and Lois were not financially able to do so. No rent was ever paid to Myron and Carol, who have been making payments on the house since 1979. Whether the option to repurchase still exists was not determined by the District Court. There is substantial evidence in the record that the June 26, 1979, transaction was a sale and not a mortgage.

Lois contends she was fraudulently induced to participate in the transaction with the false promise that the home would be deeded back to her. This contention is not supported by the facts. Stanley and Lois were in deep financial trouble. Myron and Carol were not willing to lend them any more money. Under such circumstances, Myron and Carol certainly would not assume the responsibility of making the payments on the home while surrendering the title to Stanley and Lois. Section 28-2-404, MCA, states: “Fraud is either actual or constructive. Actual fraud is always a question of fact.” This statute does not preclude summary judgment where there is no evidence supporting a claim of fraud. Van Ettinger u. Pappin (1978), 180 Mont. 1, 588 P.2d 988. Under Rule 56(c), MontR.Civ.P. summary judgment was appropriate in this case.

The District Court is affirmed.

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


text:
    STATE OF MONTANA, Plaintiff and Respondent, v. KENNETH C. STRANDBERG, Defendant and Appellant.
    No. 85-105.
    Submitted on Briefs July 24, 1986.
    Decided Sept. 8, 1986.
    724 P.2d 710.

      Julie A. Macek, Public Defender, Great Falls, for defendant and appellant.
    Mike Greely, Atty. Gen., Helena, Kimberly A. Kradolfer, Asst. Atty. Gen., Helena, Patrick L. Paul, Co. Atty., Great Falls, Barbara Bell, Deputy Co. Atty., Great Falls, for plaintiff and respondent.
   MR. JUSTICE MORRISON

delivered the Opinion of the Court.

Defendant Kenneth Strandberg appeals his August 28, 1984, jury conviction in the Eighth Judicial District Court, County of Cascade, on one count of felony escape. We affirm.

On February 13, 1984, defendant was confined in the Cascade County Jail following his arrest on the charge of felony theft. Defendant was placed in the position of trustee which allowed him greater freedom in the facilities and required the performance of certain duties. On February 24, 1984, defendant struck another trustee in response to a racial slur directed at defendant. Defendant did not report the incident. However, one of the jailers questioned him about it and defendant replied that his problems with the other trustee were not serious.

On February 25, 1984, defendant walked away from the Cascade County Jail. An arrest warrant was issued and an information filed charging defendant with felony escape.

On May 25, 1984, the Cascade County Sheriffs Department received an anonymous tip that defendant was hiding at 1712 Colorado Avenue in Black Eagle. That same day officers searched the residence and found defendant hiding in a bedroom closet. The record does not indicate who was in legal possession of the residence, nor whether the officers had obtained a search warrant. Defendant was arrested and charged with escape pursuant to Sections 45-7-306, MCA.

Defendant was represented by Art Tadewaldt, a Cascade County public defender, until July 3, 1984. On that date, defendant’s case was transferred to another public defender, Joe Engel. Engel appeared with defendant at the omnibus hearing on August 2, 1984, at which time defendant indicated he did not wish to be represented by anyone from the public defender’s office. Trial was scheduled for August 25, 1984.

Engel attempted to meet with defendant several times prior to trial but defendant refused to see him. The County Attorney offered a plea bargain agreement which Engel forwarded to defendant. The matter came on for trial August 28, 1984. Engel informed the district judge that he was not familiar with the case due to defendant’s failure to cooperate. The district judge questioned defendant whether he desired to represent himself, to which defendant responded, “I might as well, because I’m not satisfied with the public defender’s services.”

Trial was commenced with defendant acting pro se, and Engel present to assist if necessary. Engel conducted voir dire of the potential jurors, raised objections throughout the trial, assisted defendant in admitting evidence, participated in the selection of jury instructions, and delivered the summation. Defendant waived his opening statement, but conducted cross-examination of each prosecution witness, and called two witnesses to testify on his behalf. Additionally, defendant took the stand to testify.

Defendant presented the defense of justification, claiming that he had been threatened by the other trustees and escaped to procure his own safety. However, the jail supervisor, and one of the jailers, each testified that defendant did not report concern for his own safety prior to his escape, nor did defendant contact anyone at the jail subsequent to his escape. The jury found defendant guilty of felony escape. Defendant appeals and raises the following issues:

1) Whether defendant was afforded effective assistance of counsel?

2) Whether the District Court’s refusal to grant a continuance was an abuse of discretion?

Prior to commencement of the trial, defendant informed the district judge that he was not satisfied with the services of the public defender’s office, yet he was indigent and could not afford an attorney. Defendant further stated that he would represent himself. The district judge permitted the trial to go on as scheduled, with Engel present to assist defendant if necessary.

Defendant contends he did not assert his right to self-representation, nor did he knowingly waive his constitutional right to effective assistance of counsel. We do not agree. Defendant's statements to the district judge prior to trial amount to an assertion of his right to self-representation. Defendant admitted that his indigency precluded his having a private attorney, and yet he was not satisfied with anyone in the public defender’s office. The district judge, although not required to do so, permitted defendant to act pro se with Engel’s assistance. Nothing more could be done.

A review of the trial transcript reveals that defendant raised the only possible defense available to him, which was justification. In State v. Stuit (1978), 176 Mont. 84, 576 P.2d 264, this Court held that four conditions must exist at the time of escape for justification to be an available defense:

1) The defendant was faced with a specific threat of death, or substantial bodily injury in the immediate future.

2) There is no time for a complaint to the authorities or there exists a history of futile complaints which make any result from such complaints illusory.

3) There is not time or opportunity to resort to the courts.

4) The prisoner immediately reports to the proper authorities when he has attained a position of safety from the immediate threat.

In Stuit, we adopted an objective standard which requires defendant to establish by a preponderance of the evidence that escape is objectively the only viable and reasonable choice available under the circumstance. 176 Mont. 90, 576 P.2d 267.

Defendant testified that another trustee had threatened him the day prior to his escape. Defendant did not complain nor voice concerns about his safety to anyone. In fact he denied having serious problems with the other trustees when questioned by one of the jailers. Defendant testified he had done some amateur boxing and had won other fights he’d been in while incarcerated. Viewed objectively defendant was not facing a specific threat of death, or substantial bodily injury. Additionally, the evidence was weak that conditions (2) and (3) were met, and it is undisputed that condition (4) was not met.

Defendant contends that his public defender should have filed a motion to suppress evidence on grounds that the arresting officers had no search warrant at the time of his arrest. The circumstances surrounding defendant’s arrest at the residence are not in the record, and a claim that a search warrant was necessary is mere speculation.

Defendant’s claim of ineffective assistance of counsel has absolutely no merit. First, a defendant who refuses to cooperate in his own defense cannot argue he was afforded ineffective assistance of counsel. State v. Long (Mont. 1983), [206 Mont. 40,] 669 P.2d 1068, 1072, 40 St.Rep. 1493, 1498. Secondly, this method in which defendant’s defense was conducted was not so deficient as to show any prejudice to defendant. There is substantial evidence in the record supporting the jury verdict. To show prejudice, a defendant must show that, but for counsel’s unprofessional errors, there was a reasonable probability that the result of the proceeding would have been different. State v. Robbins (Mont. 1985), [218 Mont. 107,] 708 P.2d 227, 232, 42 St.Rep. 1440, 1444.

Next, defendant asserts the district judge erred in refusing to grant a continuance. We do not agree. Pursuant to Section 46-13-202, MCA, the trial court has discretion whether to grant a continuance. Section 46-13-202(3), MCA, specifically provides that the trial court shall consider the diligence shown on the part of the movant. In this case, an order setting the trial date for August 28, 1984, was sent to defendant on July 2, 1984. Defendant appeared at his omnibus hearing approximately four weeks prior to trial.

Defendant moved for a continuance on the morning of trial. This Court has previously ruled that moving for a continuance on the morning of trial does not show diligence on the part of the movant. State v. Klemann (Mont. 1981), 634 P.2d 632, 634, 38 St.Rep. 1627, 1629. We find no abuse of discretion by the trial court in refusing to grant a continuance in this instance.

The District Court is affirmed.

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


text:
    EDGAR NEIL WEIGAND, and Tommy Eileen Weigand, Plaintiffs and Appellants, v. MONTANA LAND AND REAL ESTATE INVESTMENTS, INC., Defendants and Respondents.
    No. 86-183.
    Submitted on Briefs July 17, 1986.
    Decided Sept. 8, 1986.
    724 P.2d 194.

      Patrick F. Flaherty, Great Falls, for plaintiffs and appellants.
    K. Dale Schwanke, Jardine, Stephenson, Blewett & Weaver, Great Falls, for defendants and respondents.
   MR. JUSTICE MORRISON

delivered the Opinion of the Court.

Edgar Neil Weigand and Tommy Eileen Weigand (Weigands) appeal the February 6, 1986, order of the Seventeenth Judicial District Court dismissing the complaint they had filed against Montana Land and Real Estate Investments, Inc. (Montana Land). We affirm the dismissal of the complaint.

Weigands, with the help of a real estate agent employed by Montana Land, offered to purchase the David Jenkins home in Chinook, Montana. Weigands signed an Earnest Money Receipt and Agreement to Sell and Purchase. The earnest money provided was $1.00. The Agreement stated that “(i)f the Seller does not approve this sale within five days of (June 7, 1985) . . . the unexpended earnest money shall be returned to the Purchaser on demand and all rights of Purchaser terminated . . . .” The sellers never signed the Agreement. The earnest money was returned on July 11, 1985, after sellers had acquired another prospective buyer.

Weigands filed a complaint against Montana Land alleging breach of contract, bad faith and negligent misrepresentation. Montana Land sought to have the complaint dismissed for failure to state a claim upon which relief could be granted. Thereafter, Weigands filed a motion to amend the complaint. The amended complaint would have named as additional defendants, David and Eileen Jenkins, owners of the David Jenkins home. The allegations in the amended complaint remained the same as those in the original.

Following the filing of numerous briefs and the hearing of oral argument via a telephone conference call, the trial judge found that the sellers (Jenkins) had never accepted Weigands’ offer to purchase. Therefore, no contract existed. Weigands’ motion to amend was denied. Montana Land’s motion to dismiss was granted.

On appeal, Weigands raise the following issues:

1. Is the Earnest Money Receipt and Agreement to Sell and Purchase a legally enforceable contract?

2. Do Weigands have a cause of action against Montana Land for breach of the implied covenant of good faith and fair dealing?

3. Do Weigands have a cause of action against Montana Land for the tort of negligent misrepresentation?

The Earnest Money Receipt and Agreement to Sell and Purchase is not a legally enforceable contract because sellers failed to sign it. Sections 28-2-102, MCA, states:

Essential elements of a contract. It is essential to the existence of a contract that there be:

“(1) identifiable parties capable of contracting;
“(2) their consent;
“(3) a lawful object; and
“(4) a sufficient cause of consideration.”

Consent of all the parties is lacking. Had sellers consented to the Agreement, they needed only to sign it. They did not. There is nothing in the record to show they consented to the Agreement.

The record is devoid of any evidence that Weigands’ offer reflected the price at which sellers had listed their property. There is no evidence that Weigands’ offer was in fact an acceptance of an offer to sell the property for a certain price. The Agreement was merely an offer by Weigands to purchase the David Jenkins home for $45,000. The offer was never accepted by the sellers. There was no contract.

Weigands contend Montana Land breached a covenant to act fairly and in good faith. There is no evidence that Montana Land engaged in conduct which could give rise to the action. The duty owed Weigands by Montana Land was to present Weigands’ offer to sellers. The complaint contains no allegation that the duty was not performed. There simply is no factual basis in this record to support appellants’ claim.

Finally, negligent misrepresentation requires the supplying of false information for the guidance of others in their business transactions. State Bank of Townsend v. Maryann’s, Inc. (Mont. 1983), [204 Mont. 21,] 664 P.2d 295, 40 St.Rep. 637. Again, the complaint contains no specific allegation that Montana Land provided Weigands false information with respect to their offer. The complaint merely alleges, in very broad terms, that negligent misrepresentation occurred. This is insufficient. Rule 8(a), M.R.Civ.P. Rambur v. Diehl Lumber Co. (1963), 142 Mont. 175, 382 P.2d 552.

The Earnest Money Receipt and Agreement to Sell and Purchase is an offer to purchase certain property. The offer was not accepted. To find the offer to be a contract would be contrary to black-letter contract law and would wreck havoc on the real estate business. The complaint contains no specific factual allegations of breach of the covenant to act fairly and in good faith or of negligent misrepresentation by Montana Land’s employee. The order dismissing the complaint is affirmed.

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