author: JUSTICE McDONOUGH

text:
    ROBERT J. SCHELLIN, ELDON GILMORE, EUGENE MONSON, and LAWRENCE SIEMENS, Petitioners and Respondents, v. NORTH CHINOOK IRRIGATION ASSOCIATION, a corporation registered in Montana, Respondent and Appellant.
    No. 92-153.
    Submitted on Briefs December 10, 1992.
    Decided March 10, 1993.
    50 St.Rep. 260.
    257 Mont. 262.
    848 P.2d 1043.

      For Respondent and Appellant: Thomas J. Sheehy, Big Sandy; Russ McElyea, Moore, O’Connell, Refling & Manos, Bozeman.
    For Petitioners and Respondents: Sarah AmottOzment, Livingston.
   JUSTICE McDONOUGH

delivered the Opinion of the Court.

The North Chinook Irrigation Association appeals from an order of the District Court for the Seventeenth Judicial District, Blaine County, concerning the use of water from Lodge Creek, north of Chinook, Montana. We vacate the District Court’s order and remand for further proceedings consistent with this opinion.

We conclude that the District Judge should have recused himself after participating in negotiations between the parties. Because we vacate the court’s order on that basis, we do not consider the other issues raised on appeal.

North Chinook Irrigation Association is a corporation held by farmers and ranchers who use water from Lodge Creek, in north-central Montana. The Association maintains a dam across the creek approximately twenty-six miles north of Chinook, Montana. Head-gates above the dam direct water down a canal to the Association’s off-stream reservoir about six miles to the east.

Petitioners Robert J. Schellin, Eldon Gilmore, Eugene Monson, and Lawrence Siemens are farmers and ranchers who are not Association members and whose property lies along Lodge Creek at and downstream from the Association’s dam. They brought this action in 1987, seeking an injunction preventing the Association from continuing to operate its dam and canal. They also sought transfer of this controversy to the Water Court pursuant to § 85-2-216, MCA, so that the parties’ water rights could be adjudicated and a water commissioner could be appointed to administer the resulting decree.

The case was transferred from the District Court to the Water Court. In 1990, the Water Court transferred it back to District Court “for interim settlement of the water distribution controversy until such time as the Montana Water Court’s general adjudication is undertaken for the waters of Lodge Creek, a tributary of the Milk River Basin (40J).” The Water Court ruled that under § 85-2-406, MCA, the District Court is the proper forum for this matter because it is a water distribution controversy. This Court denied the petitioners’ request for supervisory control on that ruling.

Just before a scheduled October 10, 1991 District Court hearing on the petitioners’ motion for a preliminary injunction, the parties’ attorneys and the District Judge inspected the Association’s dam and canal. At the court’s suggestion, settlement meetings between the parties were commenced that evening. As the court pointed out, any decision it would reach would only be temporary, until the Water Court determines water rights.

After negotiations continued for most of the next day, the court announced, over objections by the Association, that a settlement had been reached. The court caused a partial record to be made of the settlement discussions. Working from its understanding of the settlement discussions and from the transcript, on March 13, 1992, the court issued a final order together with a memorandum opinion and findings of fact which purported to memorialize the agreement reached by the parties. The Association appeals.

Should the District Judge have recused himself after participating in negotiations between the parties?

In Shields v. Thunem (1986), 220 Mont. 449, 452, 716 P.2d 217, 219, this Court concluded that

where a judge is to be the trier of fact, and he participates in pre-trial settlement negotiations which subsequently fail, he should, upon request, disqualify himself from sitting as the trial judge.

In reaching that conclusion, this Court cited with approval cases from several other jurisdictions. As discussed in the quotations from those cases, the aim is to eliminate any impression of impropriety or bias on the part of the trial judge resulting from participation in pretrial negotiations. Shields, 716 P.2d at 218-19.

The petitioners attempt to minimize the extent of the District Judge’s participation in the settlement negotiations in this case. They state that he was not demanding in his suggestion that the parties attempt settlement, that he did not actively participate in or control the direction of negotiations between the parties, and that he did not order counsel to refrain from advising their clients during the negotiation process.

This Court’s review of the record, however, leaves us with the firm impression that the District Judge was a participant in the settlement negotiations. He “really strongly recommend[ed]” that the parties “get this case settled.” He offered to give advice if impasses were reached in negotiations. He made suggestions concerning use of a headgate, employment of a contractor to do dirt work on a ditch, and sharing of the cost of the transcript. He suggested a clause in the settlement agreement limiting its purpose and dictated settlement terms under which the Association could spray on petitioner Schellin’s land. Finally, he took it upon himself to reduce the claimed settlement agreement to writing.

The settlement discussions between the parties occurred on October 10 and 11, 1991. No written agreement was immediately composed. On October 16, 1991, the Association moved that the District Judge be disqualified for cause. It also moved that the temporary restraining order be continued and that its application for a preliminary injunction be set for hearing. The court issued an order denying the motion for disqualification. Six months later, the court entered its final order and memorandum opinion memorializing the claimed settlement.

The petitioners reason that Shields does not apply because settlement negotiations did not fail in this case. We do not agree. When the Association made its October 16,1991 motions, it was clear there was a serious question about the success of the pre-trial settlement negotiations in which the court had participated. We approve of the judge’s attempts to mediate and to have the parties reach an interim settlement of a complex controversy. We hold, however, that pursuant to our opinion in Shields, the Association’s objections and the October 16, 1991 motions required the District Judge to disqualify himself.

We vacate the District Court’s final order and memorandum opinion and findings of fact, and remand this case for further proceedings before a new district judge to determine whether the agreement obtained between the parties is binding, and for such other proceedings that may come before the court in this cause.

CHIEF JUSTICE TURNAGE, JUSTICES HARRISON, HUNT, TRIEWEILER, WEBER and GRAY concur.


source: Caselaw Access Project

author: JUSTICE McDONOUGH JUSTICE WEBER

license: Public Domain

text:
    JAN M. LOOS for Gary E. Loos, Deceased, Petitioner, Respondent and Cross-Appellant, v. JIM WALDO (f/d/b/a Waldo’s Acton Bar), Defendant, Appellant, and Cross-Respondent, and UNINSURED EMPLOYERS FUND, Defendant, Appellant and Cross-Respondent.
    No. 91-558.
    Submitted on Briefs October 29, 1992.
    Decided March 17, 1993.
    50 St.Rep. 262.
    257 Mont. 266.
    849 P.2d 166.

      For Appellant Waldo: Phillip R. Oliver, Oliver & Graves, Billings.
    For Appellant Loos: Randall G. Nelson, Felt, Martin, Frazier & Lovas, Billings.
    For Respondent: David A. Scott, Dept, of Labor & Industry, Helena.
   JUSTICE McDONOUGH

delivered the Opinion of the Court.

This action arises from a claim for worker’s compensation death benefits filed by Jan M. Loos against Jim Waldo, f7d/b/a Waldo’s Acton Bar, and the Uninsured Employers’ Fund, Department of Labor and Industry (UEF). On appeal is a judgment of the Workers’ Compensation Court, finding that Gary Loos was an employee of Waldo’s Acton Bar and granting death benefits to Jan Loos.

Affirmed.

The issues for our review are:

1. Whether the Workers’ Compensation Court erred in determining that Gary Loos was an employee of Waldo’s Acton Bar, rather than its proprietor.

2. Whether the Workers’Compensation Court erredin denying Jan Loos’ costs and attorney fees.

On September 28,1988, an armed robber shot and killed Gary Loos while Loos was working at Waldo’s Acton Bar in Acton, Montana. His death left Jan Loos a widow.

Two weeks earlier, on September 14th, Waldo and Loos entered an oral lease agreement whereby Loos would purchase the liquor license and inventory of Waldo’s Acton Bar. They also agreed that Loos would lease the realty and the bar’s equipment. Along with the inventory, Waldo gave Loos 790 dollars cash to cover payouts from the poker machines and generally run the bar. Loos had not paid for the inventory or made a lease payment before his death.

Initially, Loos planned to get an advance from his trust fund to pay for the bar. When his plan fell through, he and Waldo agreed that he would pay Waldo for the inventory and liquor license out of the bar’s profits.

Waldo testified that he agreed to sell the liquor license to Loos for one dollar. Apparently, they planned to put the license in escrow and if Loos defaulted on the bar lease, the license and the bar would revert back to Waldo. The testimony indicates that the parties intended to draft a written lease agreement and formally transfer the liquor license in the near future. Yet when Loos died, the license was still in Waldo’s name.

Before September 14th, Loos was a frequent patron of the bar, but did not work there. On that date, Loos and Waldo’s wife took inventory of the bar’s saleable items. Thereafter Loos operated the bar. He hired and paid employees, kept the books, paid the bills, contrived promotions, extended credit, received a share of the poker machine profits, and kept the profits of the bar. Because the business was changing hands, meter readings were taken on the electric meter, propane tank, poker machines and keno machines.

Loos’name was added to the checking account. Waldo relinquished control over the bar keys and check book to Loos. Waldo’s name remained on the account, but Loos wrote all the checks between September 14th and the date of his death. During that time, the creditors sent the bills to Loos rather than Waldo.

After September 14th, Loos represented to friends and business associates that he had leased the bar from Waldo. He told the Coca-Cola distributor that he had leased the bar and would assume responsibility for all future bills. He borrowed shot glasses from another bar for his grand opening. He told the vending machine repair person that he had leased the bar and would be in charge of vending machine matters. In addition, Jan Loos told a bank officer that she and her husband were leasing the bar from Waldo.

On the other hand, Waldo told a State Compensation Insurance Fund field investigator that Loos had attempted to buy the bar, but had been unsuccessful so Loos was managing the bar instead. The field investigator had preconceived that Loos was an employee before the investigation.

Law enforcement officers examined the scene after Loos’ death and found 1,255 dollars cash remaining in the bar. Waldo testified that he kept the money to pay Loos’ bills and that he gave the remaining money to Jan Loos.

The bar closed following Loos’ death. A few days later, Waldo resumed operating the bar and paid Loos’ business creditors.

A claims examiner from the compliance bureau of UEF investigated to determine whether Waldo owed any fines or penalties for not having worker’s compensation insurance on Loos. She concluded that Waldo did not owe anything because there was no evidence that Loos was an employee.

After Loos’ death, Jan Loos submitted a claim for workers’ compensation death benefits. In November 1988, the UEF denied her benefits on the grounds that her husband was not an employee at the time of his death.

Jan Loos then requested administrative review of the UEF’s decision. After a contested hearing, a hearing examiner from the Department of Labor and Industry denied Jan Loos’ claim, holding that Loos was not an employee at the time of his death.

On October 9,1990, the Workers’ Compensation Court reversed and dismissed the hearing examiner’s order. The court stated that the Department did not have jurisdiction over the issue. Jan Loos’ attorneys then filed a request for mediation. After a mediation conference, the workers’ compensation mediator filed a recommendation and report stating that Loos was not an employee at the time of his death.

Jan Loos then filed a petition with the Workers’ Compensation Court. The court held that upon his death Loos was an employee of Waldo’s Acton Bar, thus Jan Loos was entitled to Workers’ Compensation benefits. The court also held that Jan Loos was not entitled to attorney fees because the insurer did not act unreasonably in denying coverage. This appeal followed.

I.

Did the Workers’ Compensation Court err in determining that Loos was an employee of Waldo’s Acton Bar, rather than its proprietor?

This issue presents questions of both law and fact. Where the parties challenge both factual determinations and legal conclusions of the Workers’ Compensation Court, two different standards of review apply. Doig v. Graveley (1991), 248 Mont. 59, 61, 809 P.2d 12, 13. We defer to the fact finder where substantial credible evidence exists to support the court’s factual determinations. However, where we face an issue that raises only a question of law, we are free to determine whether the court was correct in its conclusions. Doig, 809 P.2d at 13.

Waldo and UEF contend that the Workers’ Compensation Court erred by exclusively using the statutory independent contractor test in determining that Loos was an employee rather than a proprietor. This issue presents solely an issue of law, so we draw our own conclusions as to whether the court was correct. See Doig, 809 P.2d at 13.

The Workers’ Compensation Act generally does not cover a person who is a sole proprietor or a working partner. Section 39-71-401(2)(d), (3)(a), MCA. There is no statutory definition of sole proprietor.

In determining that Loos was an employee, the court used the independent contractor test by analogy, because there is no test to determine whether a person is a sole proprietor. Cf. § 39-71-120(1), MCA, (elements necessary for independent contractor status); Sharp v. Hoerner Waldorf Corp. (1978), 178 Mont. 419, 424, 584 P.2d 1298, 1301-02, (four factors used to determine freedom from an employer’s control).

The court did not balance the freedom from control factors, rather it strictly adhered to the statute and case law delineating the independent contractor test. Under the statute, a person who performs services for remuneration is an employee, unless that person meets the elements of an independent contractor. See § 39-71-120(2), MCA. The case law holds that a finding of independent contractor status requires a convincing accumulation of the freedom from control factors and the statutory elements. See, e.g., Sharp, 584 P.2d at 1302. In contrast, employee status “can if necessary often be solidly proved on the strength of one of the four [freedom from control factors].” See, e.g., Sharp, 584 P.2d at 1302.

The court concluded that it was bound by the constraints of the independent contractor test. We hold that the Workers’ Compensation Court did not err by exclusively using the independent contractor test in determining that Loos was an employee rather than a sole proprietor.

In ruling on a related issue, the court found that Waldo did not sell the bar to Loos and did not intend to sell it. Waldo and UEF contend that the court’s finding was erroneous. Because the issue presents a question of fact, we will uphold the Workers’ Compensation Court’s decision if substantial credible evidence supports it. SeeDoig, 809 P.2d at 13.

Waldo originally thought that Loos would purchase the inventory items on a cash basis. They did not enter into any written agreements. Waldo testified that because Loos could not acquire the necessary cash, they agreed Loos would make payments on the inventory along with lease payments on the building and equipment. They did not set a price, however, and Loos did not pay for the inventory.

Waldo owned the liquor license which permitted the sale of alcohol on the premises of Waldo’s Acton Bar. He neither applied with the Department of Revenue to transfer the license, nor assigned the license to Loos. Further, Loos did not apply for temporary authority to sell liquor pending final approval of a transfer of the license. See § 16-4-404(6), MCA; 42.12.208, ARM. Thus Waldo retained any authority the bar had to sell alcoholic beverages.

We note that it is a felony to sell alcoholic beverages without a liquor license. Section 16-6-302, MCA. Loos could not have run the bar without selling alcoholic beverages and he did not have a license to do so. Therefore, if Loos owned the bar he could not have run it without committing a felony.

Waldo gave Loos 790 dollars cash as part of the inventory. After the robbery, 1255 dollars remained in the bar. Although Waldo testified that it belonged to Loos, he kept most of the money for bar operations rather than giving it to Loos’ widow.

Finally, the bar’s checking account continued after the bar’s alleged sale and Waldo remained an owner of the account. Following Loos’ death, Waldo resumed operating the bar and paid Loos’ business bills.

We hold that there is substantial credible evidence to support the Workers’ Compensation Court’s determination that Waldo did not sell the business to Loos.

Moving to another closely related issue, UEF and Waldo contend that Waldo’s ownership of the bar’s liquor license did not constitute a right to control Loos under the independent contractor test. They argue that the control factor is not a mere right to control, but the right to control the details of the person’s work. See Sharp, 584 P.2d at 1301. They urge us to apply the reasoning of a case wherein we said statutes “must not be distorted to allow persons who are truly independent in their operation to be held employees merely for tax purposes and resulting benefits derived from an employer-employee relationship.” St. Regis Paper Co. v. U.C.C. of Mont. etal. (1971), 157 Mont. 548, 552, 487 P.2d 524, 526.

The issue of whether Waldo’s ownership of the liquor license gave him control over Loos’ work presents a question of fact. Consequently, we will defer to the Workers’ Compensation Court if substantial credible evidence supports its determination. Doig, 809 P.2d at 13.

The law governing whether a person is an employee or an independent contractor is well settled. The Workers’ Compensation Code defines independent contractor as follows:

(1) An “independent contractor” is one who renders service in the course of an occupation and:
(a) has been and will continue to be free from control or direction over the performance of the services, both under his contract and in fact; and
(b) is engaged in an independently established trade, occupation, profession, or business.
(2) An individual performing services for remuneration is considered to be an employee under this chapter unless the requirements of subsection (1) are met.

Section 39-71-120, MCA. We have held that this statute creates a two-part test, both parts of which must be met to classify a person as an independent contractor. First, the person must be free from the employer’s control. Second, the person must have an independently established occupation. Sharp, 584 P.2d at 1301.

We use four-factors to determine whether a person is free from an employer’s control:

(1) Direct evidence of right or exercise of control;
(2) Method of payment;
(3) Furnishing of equipment; and
(4) Right to fire.

Sharp, 584 P.2d at 1301-02.

The last three factors tend to indicate that Loos was not Waldo’s employee. First, Loos was not to receive any type of payment directly from Waldo. Rather, Loos’ remuneration would have come from the profits on inventory sales after his payments to Waldo. Second, Waldo was not furnishing the equipment for free. Rather, Loos agreed to purchase the inventory and lease equipment from him. Finally, Waldo testified that he could not fire Loos.

However, the Workers’ Compensation Court concluded that the right to control factor was dispositive. In ruling on the right to control, the court stated: “Although Loos fully operated the bar and made representations regarding his ‘lease,’ Mr. Waldo retained his right of control through his ownership of the liquor license and his status as a signatory on the bar’s checking account.”

Waldo and Loos agreed that Loos would purchase the inventory, but would merely lease equipment and the premises. The court reasoned that a liquor license can be transferred only on the sale of a business, not on a lease. See § 16-4-404(6), MCA. The court determined that because no sale occurred and no sale was intended, the parties could not have transferred the liquor license even if Loos had not died.

We note that a liquor license is personal to the licensee. Section 16-4-404(3), MCA. Before a transfer of a liquor license is effective, the parties must file an application with the Department of Revenue. Section 16-4-404(6), MCA. Waldo and Loos did not file an application. Therefore, the purported sale of the liquor license to Loos was not effective and the liquor license remained in Waldo’s name.

It is a felony to sell alcoholic beverages without a license. Section 16-6-302, MCA. As a result, the bar could not legally sell alcoholic beverages unless Waldo remained in control of the bar.

The Workers’ Compensation Court reasoned that because Waldo owned the liquor license, he had the right to mandate that Loos comply with the State liquor laws. The court further reasoned that Waldo had the right to retake possession of the bar if Loos did not comply. The court concluded that Waldo retained some right to control Loos’ operation of the bar through the liquor license.

In addition, the court reasoned that Waldo had some right to control because he could withdraw funds from the account, as his name was still on the account. After Loos died, Waldo resumed operation of the bar and paid Loos’ business debts. The court concluded that although Waldo did not have access to the bar’s checkbook, he “in effect had access to the purse strings of the bar.”

Although nearly all of the evidence showed that Loos operated the bar, the court held that Loos was not an independent contractor because Waldo retained some right to control the business through the liquor license and the checking account. We hold that there is substantial credible evidence to support the court’s determination that Waldo had the right to control Loos’ work.

In conclusion, the court reasoned that Loos must have been an employee because he was not an independent contractor. We note that the dealings between Waldo and Loos were hardly clear-cut business transactions. Consequently, this Court will not attempt to classify them. We merely hold that the Workers’ Compensation Court’s determination that Loos was an employee of Waldo’s Acton Bar was not reversible error.

II.

Did the Workers’ Compensation Court err in denying Jan Loos’ costs and attorney fees?

A workers’ compensation claimant is entitled to reasonable costs and attorney fees if the Workers’ Compensation Court determines that the insurer acted unreasonably in denying liability. Section 39-71-611(l)(c), MCA. The standard of review on the issue is whether the Workers’ Compensation Court abused its discretion. Baeta v. Don Tripp Trucking (1992), 254 Mont. 487, 489-90, 839 P.2d 566, 568-69, 49 St.Rep. 824, 825.

In this case, the Workers’ Compensation Court did not determine that UEF acted unreasonably. In fact, the Worker’s Compensation Court held that Loos was operating the bar in all areas except the right to control.

There is no evidence of unreasonable conduct by the insurer. Workers’ compensation covers employees, but does not automatically cover sole proprietors, working partners, or independent contractors. See § 39-71-401(2)(d), MCA. A workers’ compensation mediator and a hearing examiner separately determined that Loos was not Waldo’s employee. In addition, the UEF’s claims examiner concluded that Waldo did not owe a penalty for noncompliance with workers’ compensation laws, because she could not find any evidence that Loos was an employee.

Because it is not clear that Loos was an employee of Waldo’s Acton Bar at the time of his death, the UEF did not act unreasonably in denying liability. Therefore, the Workers’ Compensation Court did not abuse its discretion in denying Jan Loos’ request for costs and attorney fees. Affirmed.

CHIEF JUSTICE TURNAGE, JUSTICES TRIEWEILER, HUNT and HARRISON concur.

JUSTICE WEBER

dissents as follows:

The majority affirmed the determination by the Workers’ Compensation Court that Loos was an employee rather than a sole proprietor. The majority affirmed the usage of the independent contractor test in reaching that conclusion. I disagree with the usage of the independent contractor test in this case.

The majority further concluded there was substantial credible evidence to support the Workers’ Compensation Court in its determination that Waldo did not sell the bar to Loos and did not intend to sell it. The record does not support that conclusion.

The Workers’ Compensation Court found that Waldo retained his right of control by ownership of the liquor license and his status as a signor on the bar checking account. Applying the control factor from Sharp v. Hoerner Waldorf Corp. (1978), 178 Mont. 419, 584 P.2d 1298, the Workers’ Compensation Court concluded that Loos was an employee because this was direct evidence of the exercise of control by Waldo. The key part of the statute relied upon by the court is the following paragraph of § 16-4-406, MCA (1987):

(6) Upon a bona fide sale of the business operated under any license, the license may be transferred to a qualified purchaser. No transfer of any license ... shall be effective unless and until approved by the department, and any ... proposed transferee who operates ... under any supposedly transferred license prior to the approval of such transfer by the department,... shall be considered as operating without a license and the license affected may be revoked...

The Workers’ Compensation Court concluded that there was no sale of the business under the statute, and the absence of a license transfer provided Waldo with the right of control. The Workers’ Compensation Court stated:

Loos was allegedly leasing the bar from defendant Waldo. However, according to the statute above, it is only upon a sale of the business that a liquor license can be transferred. Therefore, since there was no sale and since none was intended, no transfer of the license could have taken place, even if Loos had not died. This retention of the liquor license provided defendant Waldo the right to control the operation of the bar.

I disagree with the conclusion that no sale occurred and that none was intended. The record does not contain evidence to support that conclusion. Following are portions of significant transcript testimony by Waldo, the previous owner and seller of the bar, which establishes that a sale was intended and in fact was made:

Q Did you operate this bar — Previously you testified that you had owned it since ‘84.
A Yeah.
Q Did you operate the bar from that time until September of ‘88? A Yes.
Q Did you sell the business and lease the building —
A Yes, I did.
Q — and the equipment to anyone in 1988?
A Yes, I did.
Q Who was that?
A Gary Loos.
Q When did you start discussing with him the possibility of leasing the bar?
A During the summer of 1988.
Q What date did the sale and lease take place?
A September 14th, 1988.
Q What were the basic terms, the financial terms of this sale of the lease?
A $1000 a month for the lease on the building and the equipment, $280 a month for the insurance and he would buy the inventory and cash on hand.
Q Did you surrender complete control and convey everything to him on that day?
A Yes, I did. I didn’t even have a key for the building.
Q Was this — I think you’ve testified previously that this was an oral agreement on September 14th?
A Yes.
Q That no formal sale or lease documents had been signed on that date?
A The only thing that had been signed was the inventory we took. Q Did you and Gary intend to memorialize the terms of the lease in writing of the sale?
A Yes, we did.
Q When did you intend to do that?
A As soon as the paperwork got there from a friend of mine who had just leased her bar.
Q Now, where were the papers going to come from?
A From Marty Dreiling who owns the Ryegate Bar who has leased it to the DeBuffs who testified here today.
Q Did you and Gary discuss what the Ryegate deal was about and why you needed those papers?
A Yes, we did.
Q Did you discuss with him the type of agreement that you were going to receive in the mail?
A Yes.
Q And he agreed to go along with that form and to change the names and the dates and the amounts to fit your situation?
A Yes.
Q Mr. Waldo, if you had received the lease agreement from Martha Dreiling on the 14th — You said you had called her on the 11th or 12th. If you had received it on the 14th as you thought you would, would all the paperwork have been completed very promptly?
A Yes, it would have.
Q On the next page it [Ryegate Bar agreement] says “Sale And Assignment of All-Beverage License”. The difference would be your number and how much was going to be paid. How much did you and Gary agree were going to be paid for the liquor license?
A $1.
Q What was the reason for a dollar?
A The reason for the dollar is the guy didn’t have that much money. And we were going to set it up in escrow, and the year-to-year lease would be that if he defaulted on the lease it would revert back to me.
Q Essentially, you were just wanting to get out of the bar business and the amount of the — had you received the rent money, that the amount you were selling the liquor license for wasn’t that important?
A That’s right, it wasn’t that important.
Q And you were talking about an escrow where you would get the liquor license back if he defaulted?
A Yes.
Q Now, did that mean he would pre-sign a transfer form on the liquor license that would go into escrow?
A Yes.
Q You testified earlier that once this was signed and you received it you were going to go down to a lawyer’s office and incorporate this with the transfer forms.
A Yes.
Q And is this something you had done previously —
A Yes.
Q — when you purchased the bar?
A When I purchased the bar, that’s the way it was done.
Q When you bought the bar, was your transfer already approved by the time you began to operate?
A No.
Q On the 14th of September 1988, did Gary Loos own the business?
A Yes, he did.
Q Did he run it — Could he run it in any way he wished?
A Any way that he wanted to.
Q Could you fire him?
A Absolutely not.
Q Could you exercise any control over him?
A None whatsoever.
Q Could he order you off the premises?
A Yes, he could.
Q Did you have a key to the building?
A No. I did not.
Q Did you tell him how to do anything so far as operating the bar?
AI told him how to do nothing. He asked me a couple things and
I explained how I did it.
Q Did you pay him any wages?
A No. I didn’t.

The Workers’ Compensation Court incorrectly concluded that while counsel had briefed the issue of whether or not a contract existed, “dispositive in this case is defendant Waldo’s right of control over Loos.” As quoted above, the court concluded that according to the license transfer statute, it is only upon a sale that a liquor license can be transferred and since there was no sale here and none was intended, no transfer could have taken place. Two questions are raised by that conclusion. The first is whether the facts demonstrate the absence of a sale. The second is whether the failure to comply with the statute is sufficient to invalidate the sale.

With regard to the first point, it is clear that the uncontradicted facts rebut the holding that there was no sale and none was intended. I would reverse the factual determination of the Workers’ Compensation Court that there was no sale and none was intended. I would rely upon the holding of State Comp. Mut. Ins. Fund v. Lee Rost Logging (1992), 252 Mont. 97, 827 P.2d 85, and hold that the finding was not supported by substantial evidence and was, therefore, clearly erroneous.

The next question relates to the Workers’ Compensation Court’s application of § 16-4-404(6), MCA (1987), when it concluded there was a right of control under that statute which met factor one of the Sharp test for an employee rather than an independent contractor. That section does not require such an interpretation. The section establishes that until a transfer of license has been approved by the department, such a transfer is ineffective for licensing purposes and a proceeding may be brought to revoke or suspend the license. I find nothing in the statute which allowed the court to conclude that the statute itself gave Waldo a right to control Loos. The Court apparently concluded that because the license had not yet been transferred, that necessarily gave Waldo the right to control Loos. The statute does not warrant such a conclusion by its wording. In addition, the facts as above set forth clearly indicate that Waldo did not intend to retain such a right of control and, in fact, did not exercise any such right of control. I conclude that the failure to complete the statutory procedure for license transfer did not give any measure of control to Waldo. I therefore conclude that the Workers’ Compensation Court and the majority incorrectly applied factor one of the Sharp test in concluding that Waldo retained control over Loos.

I again emphasize that in reaching this conclusion, the majority failed to rely upon the record but relied only upon the statute itself. Applying the four factors of the Sharp test, we must conclude as follows: (1) the record demonstrates no evidence of retention of a right of control by Waldo, (2) the method of payment did not demonstrate an employee relationship — in fact the record is totally absent of any proof to demonstrate that Waldo was to pay anything to Loos which could be classed as compensation, (3) no furnishing of equipment was present which would demonstrate an employee relationship, and (4) there was no right to fire on the part of Waldo. Because the record, without contradiction, establishes that the four factors stated in Sharp have not been proven, there is no basis to conclude there was an employee relationship rather than an independent contractor relationship.

The Fund was correct when it contended that Loos was a sole proprietor and exempt from the Workers’ Compensation Act under the facts of this case. The Act specifically does not apply to the employment of sole proprietors. Section 39-71-401, MCA (1987), in pertinent part states:

(2) Unless the employer elects coverage under this chapter and an insurer allows such an election, the Workers’ Compensation Act does not apply to any of the following employments:...
(d) employment of sole proprietors or working members of a partnership, except as provided in subsection 3;...
(3)(a) A sole proprietor ... who holds himself out or considers himself an independent contractor ... must elect to be bound personally and individually by the provisions of compensation plan No. 1, 2 or 3 ...

Because the factual record demonstrates that Loos was not intended to be an employee and that the test demonstrating an employee relationship under Sharp had not been met, the issue remaining is whether or not Loos was a sole proprietor. The record demonstrates without contradiction that he was such a sole proprietor. Under the foregoing statute, a sole proprietor may be covered by the Act if he elects to be bound personally. Such election was not made here.

I conclude the Workers’ Compensation Court erroneously found there had been no sale of the business. I further conclude that even where the independent contractor test is applied, under the uncontradicted facts of this case, there was no control present. Last, I conclude that Loos was a sole proprietor and not an independent contractor and was not covered by workers’ compensation. I would hold, therefore, that Loos, in fact, was a sole proprietor and that in the absence of any election under the statute, he could not be classed as covered by the Act.

I would reverse the Workers’ Compensation Court.

JUSTICE GRAY concurs in the foregoing dissent.


author: JUSTICE HUNT

text:
    THE STATE OF MONTANA, Plaintiff and Respondent, v. JAMES MORRISON, Defendant and Appellant.
    No. 91-459.
    Submitted on Briefs December 22, 1992.
    Decided March 18, 1993.
    50 St.Rep. 270.
    257 Mont. 282.
    848 P.2d 514.

      For Defendant and Appellant: William F. Hooks, Appellate Defender Officer, Helena.
    For Plaintiff and Respondent: Marc Racicot, Attorney General, Patricia J. Jordan, Assistant Attorney General, Helena; Dennis Pasónos, Yellowstone County Attorney, Shelley Briney and Brent Brooks, Deputy County Attorneys, Billings.
   JUSTICE HUNT

delivered the Opinion of the Court.

Appellant James Morrison appeals from a judgment of the Thirteenth Judicial District Court, Yellowstone County, convicting him of the offense of sexual intercourse without consent, a felony, and the court’s designation of appellant as a “dangerous offender” for the purposes of parole.

We affirm in part and remand.

Appellant presents two issues for this Court’s consideration:

1. Did the District Court err in failing to hold a hearing regarding appellant’s request for appointment of substitute counsel, thereby denying him effective assistance of counsel?

2. Did the District Court err in failing to articulate its reasons for designating appellant as a “dangerous offender” for purposes of eligibility of parole as required by § 46-18-404, MCA?

Appellant was charged with sexual intercourse without consent on September 14,1990. At the arraignment hearing held on September 18,1990, attorney John Adams was appointed to represent appellant. Appellant pleaded not guilty to the charge and remained incarcerated until trial began on February 26, 1991.

After being incarcerated for approximately six weeks, on October 29, 1990, appellant wrote to the District Court Judge expressing his dissatisfaction with Adams’ legal representation. In his letter, appellant complained that he had not been able to contact his court-appointed counsel to discuss the case and requested the court appoint him new counsel. On November 1, 1990, the District Court Judge directed Adams to see both the court and appellant about the matter and provided Adams with a copy of appellant’s letter. No hearing was held on the matter and Adams continued as appellant’s court-appointed counsel. Adams did not file any motions or a trial brief, and did not subpoena any witnesses on appellant’s behalf.

Following a jury trial, appellant was found guilty of the crime charged. The court ordered a presentence investigation report and set a sentencing date of March 20, 1991.

On the day of sentencing, appellant made a second request for new appointment of counsel to represent him at the sentencing and on appeal. The minute entry reflects that the court denied the request and postponed sentencing until April 3,1991.

On April 3, 1991, the court appointed Art Thompson as co-counsel and postponed sentencing -until April 10, 1991.

Sentencing was held on April 10,1991, at which time Adams asked to be relieved as counsel and that new counsel be appointed, and the request was granted. The court imposed a sentence of 20 years imprisonment, with an additional three years for use of a weapon, to be served consecutively. The court designated appellant as a dangerous offender for purposes of parole eligibility. This Court appointed counsel for the purposes of this appeal.

I.

Did the District Court err in failing to hold a hearing regarding appellant’s request for appointment of substitute counsel thereby denying him effective assistance of counsel?

Appellant argues that the trial court’s failure to hold a hearing upon his requests for appointment of new counsel warrants a reversal of the conviction. We have stated that it is within the sound discretion of the trial court to rule on the substitution of counsel and that we will not overturn a decision absent a showing of an abuse of discretion. State v. Martz (1988), 233 Mont. 136, 139, 760 P.2d 65, 67. A defendant has the right to a “meaningful client-attorney relationship” with his attorney. State v. Enright (1988), 233 Mont. 225, 229, 758 P.2d 779, 782 (quoting State v. Long (1983), 206 Mont. 40, 46, 669 P.2d 1068, 1071-72). Upon a showing of a seemingly substantial complaint about counsel, the district court should conduct a hearing to determine the validity of defendant’s claim. Enright, 758 P.2d at 782. When the district court considers a motion for substitution of counsel, it must adequately inquire into the complaint of the defendant and must discover whether the conflict was so great that it resulted in a total lack of communication. Martz, 760 P.2d at 67.

Appellant contends that the District Court has an affirmative duty to hold an evidentiary hearing upon a defendant’s motion for substitution of counsel pursuant to Enright, 758 P.2d at 782. In Enright, the defendant appeared before the district court 13 days before trial requesting substitution of counsel on the basis that the client-attorney relationship had deteriorated to the point of animosity, that counsel had violated the confidentiality of the relationship, that counsel failed to appear at a meeting in which defendant had assembled all of her witnesses, and had failed to contact a witness defendant had deemed crucial to the case. The court granted the motion and told defendant that she would have to represent herself pro se. Pursuant to a motion by the county attorney’s office, the court subsequently held a hearing to determine defendant’s competency to represent herself. After the hearing, the court determined that she was competent to represent herself. The court failed to question defendant about her complaints concerning counsel, and counsel did not appear to answer the accusations. The court also failed to inform defendant of the hazards of self-representation. We held that it was reversible error because the District Court fáiled to hold a hearing in order to determine the validity of defendant’s claims which in effect deprived her of the opportunity to make a meaningful choice to proceed pro se. This failure infringed upon defendant’s right to effective assistance of counsel and a fair trial. Enright, 758 P.2d at 782.

In this instance, the appellant wrote a letter to the District Court approximately four months prior to trial requesting substitution of counsel because Adams had not yet spoken to him regarding the preparation of defense. The court told counsel to speak with his client and with the court regarding the matter. No hearing or subsequent action was taken until after the trial. Appellant did not make another request for a substitution of counsel until after his conviction during the sentencing hearings. At the April 10, 1991, sentencing hearing, Adams stated to the court:

MR. ADAMS: Mr. Morrison is a man of Indian descent, as the Court notes. He is a man who has always been cooperative with me.
When in the County Jail we visited a number of times and he has always been interested in trying to maintain and prove his innocence. At one time I presented to him and showed him that the County Attorney’s Office was filing notice of persistent felony offender status. He informed me he wasn’t interested in that fact because he was innocent. He has maintained his innocence throughout. It is hard to believe that he would not allow me to plea bargain or do anything because he insisted he was innocent.

This testimony reveals that appellant and Adams did meet on several occasions and discussed the case, which demonstrates that they had a “meaningful relationship” and that there was not a total breakdown of communication. Adams followed appellant’s wishes to not accept a plea bargain. It can be inferred from the facts that after the District Court’s initial inquiry into appellant’s complaint, any communication problems were resolved between appellant and Adams because appellant did not follow through on his complaint until sentencing. Unlike Enright, appellant did not proceed through trial without counsel nor did appellant present seemingly substantial complaints as those contained in Enright. The omnibus hearing indicated that appellant would rely on a general denial defense and would take the stand on his behalf. Other than the witnesses called by the State, appellant has not named a witness whom he could have called on his behalf. Moreover, appellant has not alleged which pretrial motions could have been raised. A careful review of the trial transcript indicates Adams was prepared and conducted an adequate defense and appellant was not denied effective assistance of counsel.

With regard to the court’s denial of substitution of counsel at the sentencing hearing, the court did appoint co-counsel for appellant at the second hearing in which Adams did not appear, and postponed sentencing another week. At the time of sentencing, the court granted Adams’ request to be dismissed as court-appointed counsel. We hold that the District Court’s inquiry was sufficient and that it did not err in failing to substitute appointed counsel.

II.

Did the District Court err in failing to articulate its reasons for designating appellant as a “dangerous offender” for purposes of eligibility of parole as required by § 46-18-404, MCA?

The designation of an offender as either nondangerous or dangerous is an important factor in determining parole eligibility. Section 46-18-404, MCA, governs the designation of nondangerous or dangerous offender. In State v. Belmarez (1991), 248 Mont. 378, 381, 812 P.2d 341, 343, we stated:

[A]n individual may be designated a dangerous offender, if, in the discretion of the sentencing court, he is determined to represent a substantial danger to other persons or society; however, more than a mere recital of the statutory language is required. The sentencing court must articulate its reasons underlying its determination. During the sentencing hearing, the District Court stated its reason

for designating appellant a dangerous offender:

And you admit that you have been convicted of a felony and, in my mind, I will have to designate you as a dangerous offender for these purposes. I refuse to even consider the other matter because it wasn’t brought up to me until this time, persistent felony offender. I do nothing and do not consider it. The dangerous offender is a different section.

The Judgment and Commitment order contain the following statements:

Defendant is designated a dangerous offender for purposes of parole, in accordance with Section 46-18-404, Montana Code Annotated, and meets the requirements of that regulation.
Sentence was imposed for the following reasons:
1. The Court has considered the contents of the presentence report.
2. The Court has considered the nature and seriousness of the offense.

The above statements are nothing more than a recitation of the statutory requirement. The reasons stated in this case are even less detailed than those used in Belmarez. In addition, the court made no finding as to whether appellant represented a substantial danger to other persons or society. See Section 46-18-404(l)(b), MCA.

Where there is substantial evidence to support a court’s determination that an offender is dangerous, this Court has remanded the case to the district court for findings to support such a conclusion and without those findings this Court cannot determine whether there is an abuse of discretion. Belmarez, 812 P.2d at 343. We cannot determine whether there was an abuse of discretion unless the District Court articulates its reasons for the designation of dangerous offender status. Therefore, we remand this case to the District Court for further proceedings on designating appellant as a dangerous offender.

We affirm in part and remand for further proceedings consistent with this opinion.

CHIEF JUSTICE TURNAGE, JUSTICES GRAY, TRIEWEILER, HARRISON, McDONOUGH and WEBER concur.


author: JUSTICE GRAY

text:
    TOM GILES, Claimant and Appellant, v. BOZEMAN PUBLIC SCHOOLS, Employer, and EBI/ORION GROUP, Defendant, Cross-Appellant and Respondent.
    No. 91-549.
    Submitted on Briefs June 4, 1992.
    Decided March 18, 1993.
    50 St.Rep. 273.
    257 Mont. 289.
    849 P.2d 180.

      For Claimant and Appellant: Marvin L. Howe, Simonton, Howe & Schneider, Glendive.
    For Defendant, Cross-appellant and Respondent: Joe C. Maynard, Crowley, Haughey, Hanson, Toole & Dietrich, Billings.
   JUSTICE GRAY

delivered the Opinion of the Court.

Tom Giles appeals the findings of fact, conclusions of law, and judgment of the Workers’ Compensation Court refusing to set aside a full and final compromise settlement agreement on the basis of a mutual mistake of material fact. EBI/Orion Group cross-appeals the court’s conclusion that the claim was not barred by the statute of limitations. We affirm.

On June 26, 1987, Tom Giles (Giles) repaired an overhead light ballast in the course of his employment as a custodian with Bozeman Public Schools. While dismounting a ladder, Giles swung his leg over a desk in order to place his foot on the floor. Giles felt a sharp pain shoot through his back and, later, a tingling sensation in his legs. Over the next several days Giles’ feet became completely numb; the numbness extended above his knees.

Giles reported the accident as an industrial injury. Giles’ employer was enrolled under Compensation Plan No. 2 of the Workers’ Compensation Act. Its insurer, EBI/Orion Group (EBI), accepted liability for the injury and paid $220.60 in weekly temporary total disability benefits.

Giles sought medical treatment and diagnosis from a number of physicians during the subsequent seventeen months. They were unable to conclusively diagnose his medical condition. Dr. Curt G. Kurtz, Giles’ family physician, assessed his condition as a nerve irritation secondary to a twisting motion, but noted that Giles should be evaluated for multiple sclerosis (MS) if the symptoms persisted. According to neurologist Herbert E. Prussack, the symptoms suggested a bilateral nerve irritation, possibly caused by a midline disc protrusion. Dr. Donald See, a physiatrist, conducted neurologic, orthopedic, and electrodiagnostic examinations of Giles’ spine and extremities; the results were normal. Dr. James Johnson, a neurologist, had an MRI performed on Giles’ spine. The MRI indicated possible early disc degeneration, but did not reveal disc herniations. Neurologist James Harkness was unable to diagnosis Giles’ medical condition definitively.

In September of 1988, Giles requested a lump sum payment from EBI in the amount of $45,920 as a full and final settlement of permanent partial disability benefits. After subsequent negotiations, the parties settled the claim for a lump sum payment of $40,008.48. The Workers’ Compensation Court approved the full and final compromise settlement agreement on December 20,1988.

After the settlement was reached, Giles’ symptoms became more severe. Dr. Harkness referred Giles to Dr. Dale Peterson, a neurologist. On August 8, 1989, Dr. Peterson diagnosed Giles’ medical condition as MS based on the results of an MRI of the brain. The MS was mild to moderate in severity.

On August 9,1990, Giles requested that EBI reopen the settlement agreement; EBI refused. Giles subsequently filed a petition with the Workers’ Compensation Court requesting that the settlement agreement be set aside due to a mutual mistake of material fact. Giles alleged that at the time of settlement the parties mistakenly believed that Giles had injured his lower back and that he had obtained maximum medical improvement. In addition to the issues related to mutual mistake, the issues presented to the Workers’ Compensation Court for resolution included whether the injury caused the MS or caused it to become symptomatic, whether the MS was a compensable injury, and whether Giles’ petition was barred by the statute of limitations.

The hearing examiner found that there was no mutual mistake of fact regarding Giles’ medical condition. Furthermore, the examiner concluded that even if a mutual mistake existed regarding the MS, the mistake was not material to the settlement agreement because of the complete absence of medical testimony causally linking the multiple sclerosis to the injury. Finally, the examiner concluded that Giles’ petition was not barred by the statute of limitations. On October 25, 1991, the Workers’ Compensation Court adopted the examiner’s findings of fact and conclusions of law and entered judgment accordingly. This appeal follows.

A full and final settlement agreement is a contract which can be set aside, under principles of contract law, if the parties to the agreement were operating under a mutual mistake of fact. Rath v. St. Labre Indian School (1991), 249 Mont. 433, 439, 816 P.2d 1061, 1064. A mistake of fact is statutorily defined:

Mistake of fact is a mistake not caused by the neglect of a legal duty on the part of the person making the mistake and consisting in:
(1) an unconscious ignorance or forgetfulness of a fact, past or present, material to the contract; or
(2) belief in the present existence of a thing material to the contract which does not exist or in the past existence of such a thing which has not existed.

Section 28-2-409, MCA. The statutory definition clearly requires that a mutual mistake concern a material fact before it can serve as a basis for setting aside the settlement agreement. Accordingly, we focus on whether the Workers’ Compensation Court erred in concluding that any mutual mistake regarding the MS would not be material to the settlement agreement because no causation was established between the MS and the injury. Because of our resolution of this issue, we need not address the remaining issues.

The Workers’ Compensation Court determined that even if Giles established a mutual mistake regarding his condition at the time the settlement agreement was entered into, the complete absence of medical testimony establishing a causal link between the MS and the injury precluded the reopening of the settlement agreement. According to the court, Dr. Peterson provided the only medical testimony regarding causation. He testified that it is not medically possible that the injury caused the MS to become symptomatic. Without a showing that the injury caused the MS, the court concluded that a mutual mistake regarding the MS was not material to the agreement and, therefore, would not serve as a basis for reopening the agreement.

Our standard for reviewing a decision of the Workers’ Compensation Court is to determine whether substantial evidence supports its findings and conclusions. When substantial evidence exists to support the Workers’ Compensation Court, this Court cannot overturn the decision. Eastman v. Transport, Ins. (1992), [255 Mont. 262], 843 P.2d 300, 302, 49 St.Rep. 936, 937. Accordingly, we are limited to determining whether substantial evidence exists in the record to support the Workers’ Compensation Court’s conclusion of lack of causation.

Dr. Peterson provided the only medical evidence regarding whether Giles’ injury caused his MS. That testimony is as follows:

Q. [By Giles’ attorney] Is it medically possible that Tom’s accident on June 26, 1987, made his MS symptomatic?
A. No.
Q. Okay. I guess I’m having difficulty with that in that you indicated that he had an MS attack and it started on the date that he stepped down from the ladder. And that’s the day his symptoms started. So I guess I’m — Do you get what I’m getting at?
A. What is your question?
Q. Why wouldn’t, I guess — why wouldn’t it be medically possible that when Tom had his accident, stepped down from the ladder, twisted his back, and then he had numbness in his legs, why wouldn’t that have caused his MS to now be symptomatic when there was nothing before?
A. Because this question has been looked at for 20, 25 years in the neurologic literature. MS has to begin sometime. And in an illness where we’re never sure of the cause, the question of trauma affecting and other medical disorders causing it have been raised for years and years. There’ve been studies done in the neurologic literature to try to answer the question regarding trauma and MS, because it comes up from time to time. According to my reading, the synthesis of the literature currently is that one is on very tenuous grounds scientifically to suggest that trauma either by itself causes an MS attack or exacerbates an MS attack. And that’s our current state of knowledge about it.
Q. [By EBI’s attorney] Is it your opinion that Mr. Giles’ MS was not caused or aggravated by the twisting injury that he suffered during the course and scope of his employment?
A. Yes.
Q. Did I correctly hear you that you earlier indicated that it is not medically possible that the accident caused the MS to become symptomatic?
A. Yes.

Dr. Peterson’s testimony regarding the lack of causation between Giles’ injury and his MS was unequivocal and undisputed. While acknowledging that experts in the medical field are not sure of the cause of MS, Dr. Peterson testified that Giles’ MS was not caused by the June, 1987, injury, and that current scientific knowledge does not support a link between trauma and MS.

On the basis of this record, we conclude that substantial credible evidence supports the Workers’ Compensation Court’s conclusion that the June, 1987, injury did not cause the MS or cause the MS to become symptomatic. Based on this conclusion, the Workers’ Compensation Court properly determined that any mutual mistake regarding Giles’ condition at the time of the settlement agreement would not be material to the settlement agreement.

Relying on Moffett v. Bozeman Canning Co. (1933), 95 Mont. 347, 26 P.2d 973, and Conway v. Blackfeet Indian Developers, Inc. (1983), 205 Mont. 459, 669 P.2d 225, Giles contends that he need only present evidence relating the date of injury to the onset of the MS symptoms in order to establish that the injury caused the MS. He asserts that Moffett and Conway control here because the medical evidence presented at the hearing indicated that the cause of MS is unknown; he further argues that evidence regarding what may cause MS to become symptomatic is at best extremely tentative and at worst entirely speculative.

We note at the outset that Moffett and Conway do not stand for the proposition that a mere coincidence in time between an injury and the onset of disease symptoms mandates a determination that sufficient causal connection has been established. In both cases, the issue was whether sufficient evidence existed of a link between the injury and the disease — Parkinson’s in Moffett, and MS in Conway — to support a judgment in favor of the claimant. We concluded in both cases that the indirect and circumstantial evidence of record was sufficient to uphold the judgment where direct evidence of causation was impossible to produce because of the state of medical knowledge. Here, the Workers’ Compensation Court was not persuaded by the totality of the evidence produced that a causal link existed between Giles’ injury and the MS, and we have concluded that the record is sufficient to support the court.

Furthermore, Moffett and Conway are distinguishable from the present case on the basis of the record in each. There, the medical witnesses gave conflicting testimony as to any connection between the injury and the disease. Moffett, 26 P.2d at 975; Conway, 669 P.2d at 226-27. In addition, in Moffett the record indicated that while medical science could not definitely establish the cause of the disease in an individual, the medical “authorities” generally agreed that there was a strong link between a trauma and the disease. Moffett, 26 P.2d at 978. In Conway, the question of whether trauma does or does not cause MS to become symptomatic was altogether “medically undemonstrable.” Conway, 669 P.2d at 229-30. No conflicting medical testimony exists on the record in this case. Dr. Peterson testified conclusively that Giles’ injury did not cause or precipitate his MS; he further testified that it was not medically possible that Giles’ accident caused the MS to become symptomatic. Finally, according to the evidence before us, current medical knowledge no longer supports a link between trauma and MS.

We hold that the Workers’ Compensation Court did not err in declining to set aside the settlement agreement on the basis of a mutual mistake of material fact.

Affirmed.

CHIEF JUSTICE TURNAGE, JUSTICES TRIEWEILER, HUNT and HARRISON concur.


author: JUSTICE McDONOUGH JUSTICE HUNT

text:
    JAMES FALCON, individually, as Personal Representative of the Estate of Louise Falcon, Plaintiff and Appellant, v. HUNG CHEUNG, M.D., and FRANCES MAHON DEACONESS HOSPITAL, a Montana corporation, Defendants and Respondents.
    No. 92-210.
    Submitted on Briefs December 3, 1992.
    Rehearing Denied April 1, 1993.
    Decided March 18, 1993.
    50 St.Rep. 276.
    257 Mont. 296.
    848 P.2d 1050.

      For Plaintiff and Appellant: Erik B. Thueson, Thueson Law Office, Helena.
    For Defendant and Respondent: Dennis P. Clarke, Smith, Walsh, Clarke & Gregoire, Great Falls for Hung Cheung, M.D.; Matthew W. Knierim, Glasgow, for Frances Mahon Deaconess Hospital.
   JUSTICE McDONOUGH

delivered the Opinion of the Court.

This is an appeal from an order of the Seventeenth Judicial District Court, Valley County, granting summary judgment in favor of the defendants and dismissing plaintiff’s complaint. We affirm.

The issues on appeal are as follows:

1. Whether the District Court erred by excluding the testimony of plaintiff’s expert witness, Dr. Robin.

2. Whether the District Court erred in determining that no competent expert testimony established that Dr. Cheung deviated from the applicable standard of care in treating Louise Falcon.

This is a medical malpractice action arising out of the death of Louise Falcon (Falcon) on July 25, 1988. She died from internal bleeding when a Swan-Ganz catheter, placed in her pulmonary artery to monitor her heart, migrated and ruptured or pierced a branch of the artery.

Earlier that day, Falcon entered the Frances Mahon Deaconess Hospital in Glasgow, Montana (the Hospital). Her symptoms included acute respiratory distress, pulmonary edema (fluid in the lungs), declining blood pressure, rapid heart beat and arrhythmia among other things. Falcon had suffered at least two prior heart attacks and had been a heavy cigarette smoker. Dr. Stone, plaintiff’s expert witness, testified that she probably suffered from acute congestive heart failure and would have likely died within hours without medical attention.

Dr. Cheung attended Falcon in the emergency room. Dr. Cheung was not board-certified in any specialties at the time. He treated her with drugs that stabilized her condition and then decided to insert a Swan-Ganz catheter to monitor various heart functions.

The Swan-Ganz catheter has a long tube with a balloon tip on the end. The tip contains various electronic sensors that give readings concerning the performance of the heart. An operator inflates the balloon, momentarily blocking the blood flow. The sensors in the tip then transmit readings concerning the various pressures within the vascular system to a video monitor.

The readings obtained from the catheter are known as wedge readings because of the way the balloon wedges against the artery walls. The medical staff uses the information from the wedge readings to further diagnose and treat the patient.

Before Dr. Cheung inserted the catheter, he explained to the family the purpose of a Swan-Ganz catheter and the risks involved in its use. A recognized risk of the Swan-Ganz catheter is that its tip migrates and can perforate the pulmonary artery. If the hole becomes extensive, the patient will die due to massive internal bleeding. Dr. Cheung told the family that the catheter could kill the patient.

To insert the catheter, Dr. Cheung cut a hole in Falcon’s subclavian vein, just below the clavicle. He threaded the device into the hole and through the vein towards the heart. He manipulated the device down the superior vena cava and inflated the balloon tip of the catheter. With the aid of the flowing blood, he moved the catheter into the right atrium, then through the right ventricle of the heart and out into the pulmonary artery.

Once the catheter was in place, Dr. Cheung sutured the catheter’s sheath to Falcon’s chest. He coiled the unused portion of the catheter and taped it down under a sterile bandage. The hospital staff then took an x-ray that showed the catheter properly in place.

The Hospital had a special Swan-Ganz team of nurses that monitored the catheter and periodically obtained wedge readings from it after the doctor inserted the device into Falcon’s body. Dr. Cheung checked on her regularly and gave the nurses written orders to obtain wedge readings every four hours. They actually took readings at 8:00 a.m., 9:00 a.m., 10:00 a.m., 2:00 p.m., 4:00 p.m., and 6:00 p.m.

Falcon’s condition improved throughout the day. That afternoon, when her sons arrived from west of the continental divide, she remarked that she was all right and that they need not have made the trip.

Dr. Cheung left the hospital just before 4:00 p.m. Shortly thereafter Falcon’s respiratory rate increased.

Additionally, a nurse had trouble obtaining a proper wedge during the 4:00 p.m. reading. Instead of wedging, the catheter tip bounced around inside the pulmonary artery. The nurse attempted to correct the problem by withdrawing the catheter approximately one inch, then inflating the balloon and slowly sliding it in, trying to achieve a wedge. However, he was unsuccessful as the balloon did not properly wedge.

The 6:00 p.m. wedge reading showed elevated pressures in the patient’s vascular system. The situation did not constitute an emergency, but the nurse thought Dr. Cheung should know of the change. The nurse unsuccessfully attempted to contact Dr. Cheung several times between 6:00 and 8:00 p.m. Dr. Cheung finally got the message and returned the nurse’s call at 8:00 p.m.

The nurse explained the changes in the catheter wedge readings and in Falcon’s respiration to Dr. Cheung. Dr. Cheung told the nurse to alter the patient’s medication rate and to check her blood pressure every five minutes.

Members of Falcon’s family testified in their depositions that her lungs were congested and she coughed up some blood at about 5:00 p.m. The nurse on duty was present, as was Falcon’s daughter-in-law, who was also a nurse at the Hospital. Neither of them was unduly alarmed and the staff did not note the incident on Falcon’s medical records.

At about 8:30 p.m., Falcon began to have coughing spasms and spit-up substantial amounts of blood. A nurse paged Dr. Cheung who arrived at the Hospital within minutes.

Dr. Cheung noticed that the catheter was farther in than he left it, so he began to withdraw it. He stopped after withdrawing about fifteen centimeters of the catheter because the x-ray technicians had arrived to determine the catheter’s precise location with an x-ray.

The x-ray showed that the catheter’s tip was seven centimeters farther into Falcon’s body than Dr. Cheung had placed it and that it had migrated into a peripheral branch of the pulmonary artery. A portion of the catheter had coiled in a chamber of Falcon’s heart. Dr. Cheung withdrew the catheter from the pulmonary artery to the area of the superior vena cava or the right atrium.

Dr. Cheung then had Falcon transferred by air ambulance to the Montana Deaconess Medical Center in Great Falls. The aircraft picked her up at 1:50 a.m. and she arrived in Great Falls later that morning. There, doctors re-inserted the catheter and otherwise treated her, but she died a few hours later from damage done to her pulmonary artery by the Swan-Ganz catheter.

The defendants, Dr. Cheung and the Frances Mahon Deaconess Hospital, filed motions for summary judgment in this cause. They based their motions on the grounds that neither the plaintiff’s expert Dr. Stone nor any of the defendants’ experts established that there was malpractice in Falcon’s treatment.

After the motions were briefed, the plaintiff named Dr. Eugene Robin as a new expert witness. After taking his deposition, the defendants filed a motion to exclude his testimony on the grounds that he was incompetent to testify on the standard of care in a rural Montana hospital, such as the one in Glasgow.

Following oral arguments on the motions, the District Court entered an order excluding Dr. Robin’s testimony and granting summary judgment in favor of the defendants. This appeal follows.

I.

Did the District Court err in excluding the testimony of plaintiff’s expert witness, Dr. Robin?

Whether a witness is competent to testify as an expert is a question of law. Tallbull v. Whitney (1977), 172 Mont. 326, 335-36, 564 P.2d 162, 167. Our review of a District Court’s conclusions of law is plenary. We determine whether the court’s conclusions are correct. Steer, Inc. v. Dep’t of Revenue (1990), 245 Mont. 470, 474-75, 803 P.2d 601, 603.

Plaintiff contends that the court should have allowed Dr. Robin’s testimony because the Hospital’s license review process is subject to standards promulgated by the Joint Commission on Accreditation of Hospitals (JCAH). Plaintiff argues that a national standard of care applies to all hospitals accredited by the JCAH. Plaintiff further argues that because Dr. Robin is familiar with other JCAH accredited hospitals, he is competent to testify as to the standard of care applicable to a general practitioner working at the hospital in Glasgow, Montana. We disagree.

A hospital’s election of review by the JCAH for state licensing purposes does not somehow impose a new national legal standard of medical care on the hospital’s general practitioners. We have rejected a national standard to help ensure that the rural communities of this state retain their general practitioners and can continue to provide essential medical services. Chapel v. Allison (1990), 241 Mont. 83, 92, 785 P.2d 204, 209-10; see also Swithin S. McGrath, Note, Standards of Medical Care for General Practitioners in Montana: The Chapel Decision and a Move Toward a National Standard, 53 Mont. L. Rev. 119, 121, 132 (1992).

As further discussed below, the legal standard of medical care for non-board-certified general practitioners in Montana is currently governed by the locality rule or an expanded version of the locality rule, depending on the circumstances. See Chapel, 785 P.2d at 210. We hold that a non-board-certified general practitioner in a rural Montana community is not subject to a national standard of care, merely because the practitioner works at a hospital that has chosen to utilize JCAH standards in its license review process.

Plaintiff further contends that the use of a certain piece of equipment, such as a Swan-Ganz catheter, can subject a non-board-certified general practitioner to a national standard of medical care. Plaintiff argues that Dr. Robin is competent to testify concerning a national standard of care applicable to the use of a Swan-Ganz catheter in Glasgow, Montana. We disagree.

As a factual matter, the standard of care for the use of a particular medical device may be the same in a rural Montana hospital as it is anywhere else in the nation. However, case law governs the legal standard of medical care in Montana. See Tallbull, 564 P.2d at 166-67; Chapel, 785 P.2d at 210. For an expert witness in a medical malpractice case to be competent to testify concerning the standard of care, the expert must qualify under either Tallbull or Chapel, depending on when the defendant treated the patient. See Chapel, 785 P.2d at 210.

The Chapel decision expanded Montana’s legal standard of medical care, but it does not apply in the present case. In Chapel we stated that the new standard of care required of non-board-certified general practitioners applies only if the doctor treated the patient after March 31, 1990. Chapel, 785 P.2d at 210.

The present case accrued on July 25, 1988, which is before the effective date of the new standard set forth in Chapel. Consequently, the old locality rule delineated in Tallbull governs this case. To testify as to the standard of care in this case then, Dr. Robin must be familiar with the standard of practice in Glasgow or a similar locality in Montana, considering geographical location, size, and character of the community in general. See Tallbull, 564 P.2d at 166-67.

The District Court excluded Dr. Robin’s testimony because his deposition showed that he did not know the standard of practice in Glasgow or a similar community in Montana. The court based its decision on the following.

Dr. Robin had never practiced medicine in Montana, nor had he practiced in a rural hospital in another state. He became a faculty member at a university hospital immediately after medical school. His medical practice has consisted solely of practice in university medical hospitals with 400 to 1000 beds and hundreds of specialized physicians on staff.

The evidence showed that Dr. Robin was not familiar with the standard of practice or the medical facilities in Glasgow, in a similar locality in Montana, or even in a similar locality anywhere else in the country.

On this basis, the District Court concluded Dr. Robin was not competent to testify concerning the standard of care applicable to a non-board-certified general practitioner in Glasgow, Montana. The District Court was correct.

II.

Did the District Court err in determining that no competent expert testimony established that Dr. Cheung deviated from the applicable standard of care in treating Louise Falcon?

The District Court granted summary judgment in favor of the defendants because the plaintiff did not provide competent expert testimony showing that a departure from the applicable standard of care by the defendants caused Falcon’s death. We hold that the District Court was correct.

Plaintiff contends that a factual issue exists as to when the catheter first began to injure Falcon. Falcon’s relatives testified that she coughed at 5:00 p.m. and some blood came up with her sputum. Plaintiff argues that this testimony created an issue of fact whether the catheter started to pierce her pulmonary artery at that time, or at 8:30 when she coughed up copious quantities of blood.

Plaintiff further contends that Dr. Cheung violated the standard of care in several ways. First, plaintiff alleges that Falcon’s coughing of small amounts of blood at 5:00 p.m. constituted an emergency and the nurses should have contacted Dr. Cheung immediately. Second, plaintiff alleges that Dr. Cheung violated the standard of care by not responding to calls and pages from the nurses between 6:00 p.m. and 8:00 p.m. Third, plaintiff implies that the catheter migrated because it was improperly secured to Falcon’s chest, although there is no evidence of this. Fourth, plaintiff alleges that Dr. Cheung and the hospital violated the standard of care because of delay in deciding to transfer Falcon to another hospital after she coughed up massive amounts of blood at 8:30 p.m.

These issues are not material issues of fact, however, until the plaintiff produces a medical expert competent to establish the applicable standard of care and a departure from the standard. See Hunter v. Missoula Community Hospital (1988), 230 Mont. 300, 301, 750 P.2d 106,106. In this case, the plaintiff did not provide competent expert testimony establishing that a departure from the applicable standard of care caused Falcon’s death. Therefore, plaintiff’s alleged issues of fact leading to departures from the standard of care are not material issues of fact. See Hunter, 750 P.2d at 106.

In Montana, a defendant doctor is entitled to summary judgment as a matter of law if the plaintiff fails to present competent expert medical testimony that establishes the applicable standard of medical care, that the defendant departed from the standard, and that the departure from the standard proximately caused plaintiff’s injury. Montana Deaconess Hospital v. Gratton (1976), 169 Mont. 185, 190, 545 P.2d 670, 673; Hunter, 750 P.2d at 106.

As discussed above, plaintiff’s expert Dr. Robin, was not competent to testify concerning the applicable standard of care. His testimony, therefore, cannot establish that a departure from the applicable standard of care caused Falcon’s death.

As to plaintiff’s expert Dr. Stone, at one point in his deposition, he agreed that “had it not been for the failure to follow the standard of care for a Swan-Ganz catheter, Louise Falcon would have survived the disease process for which she was originally hospitalized. The medical records do not indicate that she died of the illness for which she was admitted.”

At other places in his deposition, however, Dr. Stone clarified his statement, indicating that although the catheter killed Falcon, negligence in its use did not cause her death. This conforms with the testimony of the defendants’ expert witnesses who agree that the Swan-Ganz catheter killed Falcon, but deny that any departure from the standard of care by the defendants caused Falcon’s death.

Dr. Stone testified directly that Dr. Cheung was not clearly negligent in his prompt decision to use the catheter, rather it was a “question of whether there is some error in judgment that might have contributed to some negligence.” He was unsure whether it was appropriate to use a Swan-Ganz catheter in a rural hospital under the circumstances. But after learning more about the situation, he testified that this might be one of the cases where its use was appropriate and its use was certainly not outside the standard of care. He further testified that Dr. Cheung’s behavior “fell within the range of acceptable medical treatment.”

Dr. Stone opined that perhaps the catheter migrated because it was improperly secured or maybe because someone pushed it in further. But he admitted there was no evidence that anyone manipulated the catheter in a manner that would cause it to migrate. He presented no evidence that the catheter was improperly secured. In addition, Dr. Stone testified that he had lost two patients due to pulmonary hemorrhaging caused by Swan-Ganz catheters.

Dr. Stone did not believe that the problems in locating Dr. Cheung between 6:00 and 8:00 p.m. had anything to do with the cause of Falcon’s death. He testified that there was no evidence that the catheter either migrated or caused problems before 8:30 p.m., and that the record indicated that Falcon’s condition was fine at 8:00 p.m.

Initially in his deposition, Dr. Stone raised the issue of whether the hospital staff should have transferred Falcon to a larger facility more promptly after she coughed massive quantities of blood. Later, however, he went on to testify that it was not inappropriate for the Hospital to retain the patient as long as it did. He testified that, not knowing of the overall hospital situation, he merely raised the question to further explore whether or not a delay in transferring the patient was an issue.

In summary, Dr. Stone did not specify any departure from the standard of care that caused Falcon’s death, therefore the defendants are entitled to summary judgment as a matter of law. See Montana Deaconess Hospital, 545 P.2d at 673; Hunter, 750 P.2d at 106. The District Court was correct in granting summary judgment because the plaintiff failed to present competent expert testimony showing that a departure from the applicable standard of care by the defendants caused Falcon’s death. Affirmed.

CHIEF JUSTICE TURNAGE, JUSTICES GRAY, HARRISON and WEBER concur.

JUSTICE TRIEWEILER did not participate in this opinion.

JUSTICE HUNT

dissenting.

I dissent. The majority states the second issue to be whether the District Court erred in determining that there was no competent expert testimony establishing that Dr. Cheung deviated from the applicable standard of care in treating Louise Falcon.

A material issue of fact is raised when a plaintiff produces a medical expert competent to establish the applicable standard of care and that the defendant departed from that standard which proximately caused plaintiff’s injury. Gratton, 545 P.2d at 673. In his deposition, Dr. Stone agreed that:

[H]ad it not been for the failure to follow the standard of care for a Swan-Ganz catheter, Louise Falcon would have survived the disease process for which she was originally hospitalized. The medical records do not indicate that she died of the illness for which she was admitted.

In my opinion, this statement alone creates a material issue of fact that Dr. Cheung departed from the applicable standard of care which proximately caused Falcon’s death. Based upon this statement, the court should have denied summary judgment and allowed the case to proceed to trial.

With the advent of the technological and information revolutions, there is no reason why a patient living in Glasgow does not deserve the same standard of care as a patient living anywhere else in the nation. The need for rural doctors in Montana does not excuse a physician’s negligence. I would reverse the summary judgment and allow this case to proceed to trial.


text:
    ROSEBUD COUNTY, MONTANA and PHILLIPS COUNTY, MONTANA, Plaintiff/Intervenor and Respondent, v. THE DEPARTMENT OF REVENUE OF THE STATE OF MONTANA, Defendant and Appellant.
    No. 92-227.
    Submitted on Briefs October 8, 1992.
    Decided March 18, 1993.
    50 St.Rep. 281.
    257 Mont. 306.
    849 P.2d 177.

      For Defendant and Appellant: Paul Van Tricht, Tax Counsel, Office of Legal Affairs, Department of Revenue, Helena.
    For Plaintiff/intervenor and Respondent: Larry Schuster, Great Falls; John C. McKeon, Phillips County Attorney, Malta.
    For Amici Curiae: John Alke and Chris D. Tweeten, Hughes, Kellner, Sullivan & Alke, Helena.
   JUSTICE HUNT

delivered the Opinion of the Court.

Appellant Montana Department of Revenue (DOR) appeals from a judgment of the Sixteenth Judicial District Court, Rosebud County, invalidating the “Acquired Cost” method and reinstating the “Green Guide” as the method of determining market value of heavy equipment for property tax assessment. We affirm.

The plaintiff and appellant have set forth several issues which we consolidate and restate as follows:

1. Did the District Court err in denying DOR’s motion to dismiss on the grounds that plaintiff suffered no actual harm?

2. Did the District Court err in denying DOR’s motion to dismiss on the grounds that plaintiff, as a political subdivision of the State of Montana, does not have standing to sue the State itself?

3. Did the District Court err in declaring that DOR’s attempt to amend 42.21.131, ARM, did not comply with the requirements set out in the Montana Administrative Procedure Act (MAPA)?

4. Did the District Court err in concluding that DOR is required to assess all heavy equipment at 100 percent of its market value according to § 15-8-111, MCA, and that market value is not adequately determined by employing the “Acquired Cost Method”?

The green guide method of establishing the market value of heavy equipment for property tax assessments has been the primary method used from 1975 through December 31, 1990, by DOR. However, if a particular item could not be located in the green guide, various back-up methods, such as the acquired cost method, were employed.

The green guide method involves using the national green guides which represent a nationwide average of sale prices of equipment in average working order. The market values in the guides are by region and include the trends of depreciation tables.

In April 1990, Denis Adams, Director of DOR, began discussing the possibility of having the acquired cost method replace the green guide as the primary method of assessment. Although the green guide method would still be employed, it would only be used if the acquired cost of a particular item could not be ascertained.

On January 4, 1991, DOR sent out a letter to all of the county tax assessors directing them to use the acquired cost method, rather than the green guide method, as the primary method. The county assessors complied with this directive. The result was a substantial loss of market value, taxable value, and revenue for plaintiffs Rosebud County and Phillips County.

In order to address the objections to the implementation of the amended rule, DOR initiated a formal rule-making process under MAPA and held a public hearing on May 8,1991. At the hearing, there was much opposition to the new valuation method due to concerns regarding fiscal impact, the State’s inability to audit the method appropriately, and the lack of appointed auditors. Support for the amendment came in the form of letters from contractors and mining companies.

On May 31, 1991, the Revenue Oversight Committee of the Montana Legislature presided over an additional hearing. There was no action taken as a result of this hearing. On June 3,1991, notice of the adoption of the amendment to 42.21.131, ARM, adopting the acquired cost method, was published.

Plaintiffs Rosebud County and Phillips County filed an Amended Complaint for Injunctive and Declaratory Relief from the administrative rule at issue. On December 16, 1991, the District Court issued its Findings of Fact and Conclusions of Law and Order invalidating the administrative rule and amendment to 42.21.131, ARM, as adopted June 13, 1991. The DOR appeals from that order.

I.

Did the District Court err in denying DOR’s motion to dismiss on the grounds that plaintiff suffered no actual harm?

The DOR claims that Rosebud County does not have standing to sue because it has not suffered any actual harm. In order to establish standing to sue, one need only show potential economic harm. Montana Human Rights Division v. City of Billings (1982), 199 Mont. 434, 443, 649 P.2d 1283, 1288. That court concluded the respondents did in fact have standing to assert the constitutional rights of their employees in refusing to disclose personal information about them without their consent or court order because doing so might place the respondents in jeopardy of being sued. City of Billings, 649 P.2d at 1288. In the case at bar, Rosebud County has a potential for harm caused by change in valuation of heavy equipment in the county. Rosebud County has a substantial interest in the protection of its tax base. The District Court found that Rosebud County had standing to sue, and we agree.

II.

Did the District Court err in denying DOR’s motion to dismiss on the grounds that plaintiff, as a political subdivision of the State of Montana, does not have standing to sue the State itself?

Although DOR has cited School District No. 55 v. Musselshell County (1990), 245 Mont. 525, 802 P.2d 1252, for the proposition that Rosebud County lacks standing in the case at bar, the two cases can be distinguished by the type of relief sought. Rosebud County is suing for injunctive and declaratory relief, rather than damages. Since counties are considered to be persons under § 2-4-102(8), MCA, they possess all the rights of persons during administrative rule-making. Sections 2-4-302 and -305, MCA. Because of DOR’s failure to satisfy the procedural and substantive requirements of MAPA by not holding hearings prior to making its rule to change the method of determining the value of property, Rosebud is entitled to bring an action against the State to protect its statutory and constitutional interests. The District Court did not err in denying DOR’s motion to dismiss.

III.

Did the District Court err in declaring that DOR’s attempt to amend 42.21.131, ARM, did not comply with the requirements set out in the Montana Administrative Procedure Act (MAPA)?

The Montana Administrative Procedure Act states in part as follows:

2-4-302. Notice, hearing, and submission of views. (1) Prior to the adoption, amendment, or repeal of any rule, the agency shall give written notice of its intended action. The notice shall include a statement of either the terms or substance of the intended action or a description of the subjects and issues involved, the rationale for the intended action, and the time when, place where, and manner in which interested persons may present their views thereon.
(3) If any statute provides for a different method of publication, the affected agency shall comply with the statute in addition to the requirements contained herein. However, in no case may the notice period be less than 30 days or more than 6 months.
(4) Prior to the adoption, amendment, or repeal of any rule, the agency shall afford interested persons at least 20 days’ notice of a hearing and 28 days from the day of notice to submit data, views, or arguments, orally or in writing.

The DOR did none of these things prior to its attempt in January 1991 to adopt the acquired cost method.

The District Court found that after receiving objections regarding the implementation of an amended “rule” by administrative fiat in 1991, the DOR initiated the formal rule-making process. This process culminated in a public hearing on May 8, 1991.

During the administrative rule hearing on May 8,1991, Adams met with a large contingent of county and state officials who appeared in opposition to the proposed rule change. There were no proponents of the proposed amendment in attendance at the meeting, although they did return form letters that had previously been distributed by Adams.

The rule-making process in this case was, in essence, a sham. The result was that the public, the Legislature, and certain affected agencies were denied their right to participate effectively in the governmental process. The District Court did not err in finding that DOR’s attempt to amend 42.21.131, ARM, was invalid.

IV.

Did the District Court err in concluding that DOR is required to assess all heavy equipment at 100 percent of its market value according to § 15-8-111, MCA, and that market value is not adequately determined by employing the “Acquired Cost Method”?

According to § 15-8-111(3), MCA, DOR is prohibited from assessing heavy equipment lower than 100 percent of market value. It should be noted that both Director Adams and Property Supervisor Noble agreed that the acquired cost method yields an assessment 22 percent less than market value. Therefore, the amendment is in conflict with § 15-8-111(3), MCA. Even if the amendment had been “reasonably necessary,” this necessity was not demonstrated in DOR’s notice of proposed rule making. Section 2-4-305(6)(b), MCA.

The substance and procedure of the rule making in this case is deficient, and the new rule in question is invalid.

We affirm the District Court.

CHIEF JUSTICE TURNAGE, JUSTICES TRIEWEILER, HARRISON, McDONOUGH and WEBER concur.

JUSTICE GRAY did not participate in this decision.