author: JUSTICE HUNT JUSTICE LEAPHART,

text:
    INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS, AFL-CIO, LOCAL 1638, Defendant and Appellant, v. THE MONTANA POWER COMPANY, Plaintiff and Respondent.
    No. 96-281.
    Submitted on Briefs September 5, 1996.
    Decided December 9, 1996.
    53 St.Rep. 1296.
    280 Mont. 55.
    929 P.2d 839.
    See C. J.S. Labor Relations § 435.

      For Appellant: Thomas J. Joyce, Hennessey, Joyce & Wing, Butte; Walter C. Brauer, III, Brauer, Buescher, Valentine, Gold-hammer & Kelman, Denver, Colorado.
    For Respondent: W. Wayne Harper, Butte.
   JUSTICE HUNT

delivered the Opinion of the Court.

The Montana Power Company (MPC) filed a complaint in the Second Judicial District Court, Silver Bow County, seeking an alternative writ of prohibition to prevent the conduct of a labor arbitration between itself and the International Brotherhood of Electrical Workers (the Union) arising from a grievance pursued by the Union on behalf of one of its members. The District Court initially granted the alternative writ of prohibition, and in a subsequent order both denied the Union’s motion to dismiss the writ and made the writ permanent. The Union appeals from the District Court’s order.

We reverse.

The dispositive issue in this case is whether the District Court had jurisdiction to issue the writ of prohibition.

FACTS

The relevant facts here are undisputed. Mr. William Morrison was employed by MPC in 1995. MPC is and was in 1995 an employer engaged in interstate commerce as defined by and covered by the Labor Management Relations Act of 1947 (LMRA), 29 U.S.C. § 141 et seq. (1994). The Union is a labor organization that represents MPC employees pursuant to LMRA. MPC and the Union are parties to a collective bargaining agreement concerning grievances, labor disputes, wages, rates of pay, hours of employment, and conditions of work. The collective bargaining agreement provides for a grievance arbitration procedure to resolve disputes regarding the terms of the collective bargaining agreement.

On June 16,1995, Mr. Morrison was transferred from a work crew which worked 12-hour rotating shifts to a crew working 10-hour day shifts. Mr. Morrison brought this transfer to the attention of the Union, which then filed a grievance on his behalf challenging the transfer as a violation of the collective bargaining agreement. The grievance was processed in accord with the collective bargaining agreement.

When it became clear that the Union and MPC could not resolve the grievance, the Union demanded arbitration. The Union and MPC chose Mr. Bill Corbett, a professor at the University of Montana School of Law, as arbitrator and selected March 8,1996 as the hearing date for the arbitration.

Meanwhile, MPC, attempting to reduce its work force at Colstrip, Montana, posted an enhanced severance benefit plan (Plan) at that site. Mr. Morrison read the posting and approached MPC about taking advantage of the Plan. On February 5,1996, Mr. Morrison and MPC reached an agreement concerning the Plan, which included a release by Mr. Morrison of “grievances” against MPC; the “grievances” referred to in the Plan were not specifically identified as grievances under the collective bargaining agreement. The Union was not a party to the Plan.

On March 1,1996, MPC filed a motion for summary judgment with the arbitrator. On March 4,1996, counsel for the Union left a message with MPC’s counsel stating that the Union’s position was that the grievance filed on Mr. Morrison’s behalf “belonged to” the Union as a representative of all MPC employees and that this grievance required an interpretation of the collective bargaining agreement, which affected individuals beyond Mr. Morrison. On March 6, 1996, the attorneys had a telephone conversation in which they explained their clients’ respective positions; MPC’s counsel stated that MPC was considering going to court to enjoin the arbitration.

On March 7, 1996, MPC filed a complaint seeking an alternative writ of prohibition, and went to court the same day to obtain the requested injunctive relief. The District Court granted the writ of prohibition, and set the matter for a show cause hearing on March 18, 1996.

On March 15,1996, the Union filed its answer to MPC’s complaint and moved to dismiss for lack of subject matter jurisdiction and for failure to state a claim upon which relief can be granted. After the hearing, after the filing of post-hearing briefs, the court issued an order which denied the Union’s motion to dismiss and which made permanent the initial writ of prohibition. The Union appeals.

DISCUSSION

Did the District Court lack jurisdiction to issue the writ of prohibition?

The relations between employers and labor unions is a field which is governed by federal law. Avco Corp. v. Aero Lodge No. 735 (1968), 390 U.S. 557, 88 S.Ct. 1235, 20 L.Ed.2d 126 (interpreting LMRA § 301, 29 U.S.C. § 185). This Court stated in Miller v. County of Glacier (1993), 257 Mont. 422, 851 P.2d 401:

Collective bargaining agreements must be interpreted by application of federal law, not state law. Teamsters Union v. Lucas Flour Co. (1962), 369 U.S. 95, 82 S.Ct. 571, 7 L.Ed.2d 593. This is known as federal preemption under § 301 of the Labor Management Relations Act of 1947 (LMRA): Suits for violation of contracts between an employer and a labor organization representing employees in an industry affecting commerce as defined in this chapter, or between any such labor organizations, may be brought in any district court of the United States having jurisdiction of the parties, without respect to the amount in controversy or without regard to the citizenship of the parties. 61 Stat. 156, 29 U.S.C. § 185(a) (1988). See also Foster v. Albertsons, Inc. (1992), 254 Mont. 117, 835 P.2d 720. The United States Supreme Court has interpreted § 301 as a congressional mandate to develop a unified federal common law to address labor contract disputes, [citation omitted.]

Miller, 851 P.2d at 403 (emphasis added). The “unified federal common law” to which we referred in Miller provides that arbitrators, not the courts, should initially attempt to resolve disputes concerning the interpretation of collective bargaining agreements. See United Steelworkers of America v. American Mfg. Co. (1960), 363 U.S. 564, 80 S.Ct. 1343, 4 L.Ed.2d 1403; United Steelworkers of America v. Enterprise Wheel & Car Corp. (1960), 363 U.S. 593, 80 S.Ct. 1358, 4 L.Ed.2d 1424; United Steelworkers of America v. Warrior & Gulf Navigation Co. (1960), 363 U.S. 574, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (collectively known as the “Steelworkers Trilogy”); see also Republic Steel Corp. v. Maddox (1965), 379 U.S. 650,85 S.Ct. 614,13 L.Ed.2d 580.

While MPC recognizes the applicability of the foregoing principles in the appropriate circumstances, it argues that these circumstances are not present here. MPC contends that the issue here is simply whether the District Court properly resolved the contractual matter between MPC and Mr. Morrison. MPC asserts that a Montana district court can appropriately exercise jurisdiction over a private contract issue, a matter of state law wholly distinct from federal labor law.

The Union, on the other hand, argues that interpretation of the Plan is incidental to and a necessary part of a full interpretation of the collective bargaining agreement, and therefore both interpretations are exclusively within the jurisdiction of the arbitrator; the Union contends that the arbitrator must determine whether the collective bargaining agreement permits Mr. Morrison to waive the Union’s grievance through his unilateral action in accepting the Plan. The Union argues that federal common law clearly establishes that the District Court lacked jurisdiction to rule on this matter. We agree.

The Plan and the provisions of the collective bargaining agreement are not facially mutually exclusive. The collective bargaining agreement must be interpreted to determine whether the grievance brought by the Union on Mr. Morrison’s behalf can be waived through a written release to which only Mr. Morrison and MPC were parties. Therefore, the Plan must be interpreted also, to determine whether, as alleged by MPC, it waives the grievance which the Union filed on Mr. Morrison’s behalf. In this respect, any interpretation of the Plan by the arbitrator would not be for the purpose of determining the rights of MPC and Mr. Morrison, the parties to the contract, but would be incidental to the primary inquiry, a determination of the overall meaning and effect of the collective bargaining agreement. In L.O. Koven & Brother, Inc. v. Local 5767, United Steelworkers of America (3rd Cir. 1967), 381 F.2d 196, the court stated:

What remains in this case is the question of whether the effect of the release executed between an employer and a union regarding a claim governed by a collective bargaining agreement is ordinarily a matter for consideration by an arbitrator. There is scant authority on this point, but those cases touching upon this or related questions appear to view the arbitrability of release and settlement questions as obvious. [Citations omitted.] While interpreting the language of the release is not, strictly speaking, a matter of interpreting the collective bargaining contract, the process would also involve an examination of the negotiations and other events regarding the grievance which preceded execution of the release. This is a matter within the arbitrator’s submission and to which he is expertly atuned [sic]. We thus believe that unless a release explicitly discharges the parties from the collective bargaining agreement itself, or from the arbitration provisions thereof, that its effect should be determined by an arbitral forum.

L.O. Koven, 381 F.2d at 204-05 (emphasis added). We believe the principle explained in L.O. Koven is similarly applicable here. The effect of the Plan on the collective bargaining agreement, and of the collective bargaining agreement on the Plan, should be determined by the arbitrator.

MPC does not claim that the grievance filed on Mr. Morrison’s behalf is not arbitrable, according to the terms of the collective bargaining agreement; MPC claims instead that arbitrability of the grievance is precluded by the private contract entered into by MPC and Mr. Morrison. This is a procedural, rather than substantive, challenge to the arbitrability of the grievance. Once it has been determined, either by the parties or the court, that a grievance is arbitrable according to the collective bargaining agreement, subsequent procedural questions are wholly within the jurisdiction of the arbitrator. See, e.g., John Wiley & Sons, Inc. v. Livingston (1964), 376 U.S. 543, 84 S.Ct. 909, 11 L.Ed.2d 898; International Union of Operating Engineers Local 150 v. Flair Builders, Inc. (1972), 406 U.S. 487, 92 S.Ct. 1710, 32 L.Ed.2d 248. While “[a] substantive challenge to arbitrability is one where a grievance is not within the scope of the grievance and arbitration provisions of the collective bargaining agreement between the parties,” Shopmen’s Local 539 of International Assoc, of Bridge, Structural & Ornamental Ironworkers v. Mosher Steel Co. (11th Cir. 1986), 796 F.2d 1361, 1362, a procedural challenge is presented when the arbitrability of an indisputably arbitrable issue is impeded in some way. See Wiley, 376 U.S. at 558-59,84 S.Ct. at 918-19; Flair Builders, 406 U.S. at 491-92, 92 S.Ct. at 1712-13. In Lodge 862, International Association of Machinists and Aerospace Workers v. SafeguardPowertech Systems (D.S.D. 1985), 623 F. Supp. 608, the court stated, with respect to an issue which we deem analogous to the one raised in this case:

Here the center of dispute between the parties is the existence of a settlement itself Since “settlement” is not defined in the Agreement for purposes of determining when arbitration is proper, the dispute resolution procedures of the contract must be interpreted to determine whether the withdrawal of a grievance prior to arbitration is intended to preclude later arbitration of that issue.
An examination of case law suggests that the procedural significance of withdrawal of Grievance # 125 is a question for the arbitrator and not the court to decide. [Citations omitted.]

Lodge 862, 623 F. Supp. at 610. Here, the impediment to arbitrating the Mr. Morrison grievance is the Plan and Mr. Morrison’s purported waiver of grievances against MPC; “the center of dispute between the parties is the existence of a settlement” or a release under the Plan. The dispute is procedural, not substantive, and should be resolved by the arbitrator, not the court.

We hold that interpretation of the Plan, intertwined as it is with the overall interpretation of the collective bargaining agreement, is subject in the first instance to the jurisdiction of the arbitrator. Reversed.

JUSTICES NELSON and TRIEWEILER concur.

JUSTICE LEAPHART,

specially concurring.

I concur in the result reached by the Court, however I would reach that result by holding that, under state law, a writ of prohibition does not lie against a private party.

The District Court issued a writ of prohibition preventing the Union and the arbitrator, Mr. Corbett, from proceeding with the arbitration. The writ of prohibition is defined by statute in § 27-27-101, MCA, as follows:

Definition and function of writ of prohibition. The writ of prohibition is the counterpart of the writ of mandate. It arrests the proceedings of any tribunal, corporation, board, or person exercising judicial functions when such proceedings are without or in excess of the jurisdiction of such tribunal, corporation, board, or person.

The writ of mandate is designed to compel the performance of an act “that the law specifically enjoins as a duty resulting from an office, trust, or station ....” Section 27-26-102, MCA. Before a writ of mandate will issue, there must be clear legal duty imposed upon a person or official as a consequence of that person’s office, trust or station. As the counterpart of the writ of mandate, the writ of prohibition is designed to stop that same person from exceeding the jurisdiction conferred upon him or her by the applicable law. Although it may be argued that an arbitrator exercises a judicial function, he or she does not do so under the auspices of the state. The arbitrator acts pursuant to agreement between the parties, not pursuant to any statutory grant of jurisdiction attendant to an office, trust or station.

In Kimble Properties v. Department of State Lands (1988), 231 Mont. 54, 56, 750 P.2d 1095, 1096, we stated: “Before a writ of prohibition may be granted the parties seeking the writ must demonstrate that the acts by public officials are clearly unlawful. Section 27-27-101, MCA....” Kimble Properties involved acts by a city and by the Department of State Lands. Although the “public official” component was present in Kimble Properties, the Court concluded that neither the state nor the city acted outside their authority and thus a writ was not appropriate. Kimble Properties, 750 P.2d at 1096.

In International Film Investors v. Arbitration Tribunal of Directors Guild (App. 2nd Dist. 1984), 199 Cal.Rptr. 690, 693, the plaintiff sought, through a writ of prohibition, to prevent the commencement of an arbitration proceeding. The court held that the writ is to enjoin judicial action in excess of jurisdiction, “[i]t does not lie to restrain the acts of an arbitrator.” International Film, 199 Cal.Rptr. at 693. Likewise, in the present case, neither the Union nor the arbitrator are public officials exercising judicial functions. Thus they are not subject to a writ of prohibition.

JUSTICE ERDMANN joins in the foregoing special concurrence.


source: Caselaw Access Project

author: JUSTICE ERDMANN

license: Public Domain

text:
    SHERMAN BARTLETT, Plaintiff and Appellant, v. ALLSTATE INSURANCE COMPANY, Defendant and Respondent.
    No. 95-543.
    Submitted on Briefs September 12, 1996.
    Decided December 10, 1996.
    53 St.Rep. 1300.
    280 Mont. 63.
    929 P.2d 227.

      See C.J.S. Insurance § 188.
    For Appellant: Roderick K. Ermatinger; Attorneys, Inc.; Missoula.
    For Respondent: Steven S. Carey; Carey, Meismer & McKeon; Missoula.
   JUSTICE ERDMANN

delivered the Opinion of the Court.

Sherman Bartlett appeals from opinions and orders issued by the Fourth Judicial District Court, Missoula County, granting summary judgment in favor of Allstate Insurance Company. We affirm in part and reverse in part.

We address the following issues on appeal:

1. Did the District Court err in determining that Bartlett did not have an insurable interest in the property at the time of loss?

2. Did the District Court err in determining that Bartlett did not have colorable claims for unfair trade practices or for fraud, constructive fraud, or punitive damages?

3. Did the District Court err in managing discovery or in awarding costs?

On appeal, the appellant also raised the issue of whether the District Court erred in ruling that material misrepresentations on the application for insurance precluded recovery. However, we affirm the District Court’s grant of summary judgment to Allstate on the basis of our holding in Issue 1, and therefore determine it is not necessary to discuss this issue.

FACTS

In November 1990, Bartlett entered into a buy-sell agreement with the Montana Bank of Mineral County to purchase a residence and one acre of land in Missoula for $31,000. The Bank agreed to close the transaction on November 28, 1990, and instructed Bartlett that he must obtain an insurance binder on the property before closing.

On November 27, 1990, Bartlett met with an agent from Allstate Insurance Company, Surilda Hanks, to obtain the insurance binder. Hanks prepared an application for a landlord’s package policy in which Allstate agreed to insure the property, naming Bartlett as the insured and the Bank as loss payee under the policy as first mortgagee. Hanks completed the application in Bartlett’s presence based upon information Bartlett provided to her. The completed application indicated that the purchase price for the property was $50,000 and that the property had not been vacant for more than thirty days. Allstate insured the dwelling for $68,000 and Bartlett’s personal property for $3,400. Bartlett signed the application and the insurance was to become effective on November 28, 1990.

On November 28, 1990, Bartlett and the Bank president met to transfer the deed and trust indenture. The Bank had discovered a prior lien against Bartlett for a $10,000 child support judgment and was concerned that this lien would attach to the property and therefore declined to proceed with the closing. Bartlett notified Hanks the same day that the transaction had not closed. As a result, Hanks did not submit the binder to Allstate and Allstate never processed the policy. Bartlett never paid a premium for insurance coverage.

On December 23, 1990, a fire completely destroyed the home Bartlett intended to purchase. In January 1991, Bartlett made a demand upon Allstate requesting the full policy limits of $71,400 plus interest. Allstate denied Bartlett’s demand, stating that the binder was intended to become effective at the time of closing, which never occurred. Allstate claimed that Bartlett had cancelled the policy prior to the fire when he called Hanks to inform her that the closing had not taken place, and that, in any event, the Bank had assumed the risk of loss. In October 1992, the Bank assigned any interest it may have had in the insurance policy to Bartlett.

On November 24,1992, Bartlett filed a complaint and demand for jury trial against Allstate seeking to recover for wrongful denial of the insurance proceeds. In April 1994, Bartlett filed an amended complaint alleging that, in addition to the original claims, Allstate violated § 33-18-201, MCA, which is Montana’s prohibition against unfair trade practices. Each party filed motions for summary judgment, and on August 31, 1994, the District Court issued an opinion and order granting summary judgment in Allstate’s favor and dismissed all of Bartlett’s claims. The District Court determined that the policy was void ab initio because of material misrepresentations, that the buy-sell agreement did not provide Bartlett with an insurable interest, and that the Bank’s assignment of its interest in the policy to Bartlett failed. The court dismissed Bartlett’s claims, including those for fraud, constructive fraud, and unfair trade practices, and determined that Bartlett had no claim for punitive damages.

On the same day the court issued its summary judgment ruling, it issued an order in response to motions filed by each party. Allstate had moved the court for a protective order on discovery related to the unfair trade practices claim, alleging that Bartlett was pursuing discovery beyond the limits allowed by the Montana Rules of Civil Procedure. Bartlett had also filed a motion to compel the production of a statement given by Hanks after the insurance binder had been signed. The District Court granted Allstate’s motion and stayed further discovery, and denied Bartlett’s motion. The court also awarded Allstate certain costs for depositions which had been taken.

Bartlett subsequently filed a motion to amend or alter the District Court’s summary judgment order. On November 4, 1994, the court issued an opinion and order reaffirming its decision on summary judgment but vacating its summary judgment ruling on the unfair trade practices claim. The court continued its protective order concerning discovery on that claim. On December 22, 1994, the District Court issued an opinion and order awarding costs to Allstate in the amount of $1,414, and on July 14, 1995, the court granted Allstate’s motion for summary judgment on the unfair trade practices claim. This appeal followed.

STANDARD OF REVIEW

Our standard of review in appeals from summary judgment is de novo. Motarie v. Northern Mont. Joint Refuse Dist. (1995), 274 Mont. 239, 242, 907 P.2d 154, 156; Mead v. M.S.B., Inc. (1994), 264 Mont. 465, 470, 872 P.2d 782, 785. When we review a district court’s grant of summary judgment, we apply the same evaluation as the district court based on Rule 56, M.R.Civ.P Bruner v. Yellowstone County (1995), 272 Mont. 261, 264, 900 P.2d 901, 903. In Bruner we set forth our inquiry:

The movant must demonstrate that no genuine issues of material fact exist. Once this has been accomplished, the burden then shifts to the non-moving party to prove by more than mere denial and speculation that a genuine issue does not exist. Having determined that genuine issues of material fact do not exist, the court must then determine whether the moving party is entitled to judgment as a matter of law. We review the legal determinations made by the district court as to whether the court erred.

Bruner, 900 P.2d at 903.

ISSUE 1

Did the District Court err in determining that Bartlett did not have an insurable interest in the property at the time of loss?

Bartlett argues that he had an insurable interest in the property at the time of the loss. He claims that the buy-sell agreement between him and the Bank was legally binding on both parties. The agreement obligated the Bank to transfer title to the property to Bartlett and in turn Bartlett was obligated to purchase the property. Bartlett argues that at the time of the loss the buy-sell agreement was still legally enforceable since neither party had terminated it.

Bartlett also contends that he is entitled to the Bank’s interest under the binder, relying on the fact that the Bank assigned its interest in the binder to him in October 1992. Bartlett argues that even if his interest was voided due to material misrepresentations on the insurance application, a mortgagee’s interest remains protected. He claims he is entitled to receive from Allstate the Bank’s monetary interest in the policy.

Section 33-15-205, MCA, provides that no contract of insurance shall be enforceable except for the benefit of persons having an insurable interest in the property at the time of the loss. Subsection (2) defines “insurable interest” as any actual, lawful, and substantial economic interest in the safety or preservation of the property insured. A purchaser of real estate may have an insurable interest in property to which he or she does not hold title if an enforceable executory contract has been executed which gives the purchaser the right to possess the property. See Musselman v. Mountain West Farm Bureau Mut. Ins. Co. (1992), 251 Mont. 262, 824 P.2d 271.

In the present case, the buy-sell agreement executed by the parties stated that Bartlett would execute a promissory note in favor of the Bank and that the property would be secured with a first position trust indenture. The terms of the buy-sell agreement clearly made the sale contingent upon the Bank holding a first position trust indenture. When the Bank discovered a $10,000 unsatisfied child support judgment against Bartlett, it could not be assured of a first position security interest. Bartlett did not eliminate the judgment lien and the condition precedent to the buy-sell agreement becoming effective was not met. The agreement was therefore terminated and the Bank was the unconditional owner of the property.

Moreover, our examination of the record substantiates the fact that Bartlett did not believe he owned the property at the time of the loss. Hanks testified that Bartlett called her and told her that the deal did not go through and that he did not need the insurance. Hanks testified that following the fire Bartlett called her to ask about the insurance. She said she had done nothing “because you told me not to.” Bartlett responded by stating “[w]ell, that’s a good thing because the house burned down last night.” Scott Waldron, the Fire Chief who responded to the fire, testified that he spoke with Bartlett at the scene of the fire. According to Waldron, Bartlett said he had not been there that night, that he did not own the property, and the Bank was the one with the problem.

Finally, Bartlett’s attempt to bootstrap into the Bank’s rights to recover under the policy is baseless. The record clearly indicates that the Bank took the unequivocal position that it had no interest in the policy because the deal had never gone through. In fact, the record indicates that the Bank looked to its own blanket insurance policy for coverage. The Bank had no interest in the binder which it assigned to Bartlett and therefore neither did Bartlett as the assignee.

We conclude that the District Court did not err when it concluded that Bartlett did not have an insurable interest in the property at the time of loss, and on that basis affirm the court’s summary judgment ruling.

ISSUE 2

Did the District Court err in determining that Bartlett did not have colorable claims for unfair trade practices or for fraud, constructive fraud, or punitive damages?

The District Court granted summary judgment to Allstate on Bartlett’s unfair trade practices claim, stating that no policy coverage existed and Allstate therefore had a reasonable basis in law or fact to deny coverage. Bartlett, however, argues that discovery is essential to determine whether Allstate had a reasonable basis to deny the insurance claim and therefore requests this Court to reverse not only the District Court’s grant of summary judgment to Allstate but also to reverse the court’s order which precluded discovery on the matter.

Bartlett argues that § 33-18-242, MCA, entitles him to maintain a third-party action against Allstate for unfair trade practices. He argues that his claim is based only in part on the existence of the insurance policy and therefore even if the insurance policy is found to be void, his claim survives.

We first note that in the context of bad faith tort actions, a third-party claimant is typically a person who has a claim against the insured party for certain injuries. See O’Fallon v. Farmers Ins. Exchange (1993), 260 Mont. 233, 859 R2d 1008; Klaudt v. Flink (1982), 202 Mont. 247, 658 P.2d 1065. Here, that is not the case since Bartlett alleges he is a third-party claimant even though he also claims to be the insured party. Without addressing the question of whether Bartlett is or is not a third-party claimant, as that term is used in § 33-18-242, MCA, we determine that his claim must fail.

Section 33-18-242(5), MCA, states that án insurer may not be held liable for unfair trade practices if the insurer had a reasonable basis in law or in fact for contesting the claim or the amount of the claim, whichever is at issue. Here, we have affirmed the District Court’s determination that Bartlett did not have an insurable interest in the property and, on that basis, Allstate clearly had a reasonable basis for not paying Bartlett’s claim for insurance proceeds. We therefore conclude that the District Court did not err when it determined that Bartlett did not have a colorable claim against Allstate for unfair trade practices.

With respect to Bartlett’s claim for fraud, Rule 9(b), M.R.Civ.P., requires that the circumstances constituting fraud must be stated with particularity in the pleadings. In order to prove fraud, the plaintiff must establish nine elements: (1) a representation; (2) its falsity; (3) its materiality; (4) the speaker’s knowledge of its falsity or ignorance of its truth; (5) the speaker’s intent that it should be relied on; (6) the hearer’s ignorance of falsity of the representation; (7) the hearer must rely on the representation; (8) the hearer’s right to rely on the representation; and (9) consequent and proximate injury caused by reliance on the representation. Pipinich v. Battershell (1988), 232 Mont. 507, 511, 759 P.2d 148, 151.

This Court has held that if the specific facts constituting the alleged fraud are not stated with particularity, the claim must be dismissed. See Pipinich, 759 P.2d at 150-51; Martin v. Dorn Equip. Co. (1991), 250 Mont. 422, 429, 821 P2d 1025, 1029. Bartlett’s amended complaint simply stated that “Defendant is liable to Plaintiff for fraud for reasons set forth herein.” The amended complaint clearly fails to set forth the allegation of fraud with sufficient specificity. We therefore conclude that the District Court did not err when it dismissed Bartlett’s claim for fraud.

Bartlett also alleges constructive fraud based upon the allegation that Hanks created a false impression that he was insured and that she failed to disclose that information provided by Bartlett concerning the package deal and vacancy would likely cause Allstate to void the policy.

Section 28-2-406, MCA, defines constructive fraud as (1) any breach of duty which, without an actually fraudulent intent, gains an advantage to the person in fault or anyone claiming under him by misleading another to his prejudice or to the prejudice of anyone claiming under him, or (2) any such act or omission as the law especially declares to be fraudulent, without respect to actual fraud. Here, the record does not support Bartlett’s claim for constructive fraud.

Hanks testified that she told Bartlett that Allstate did not insure vacant houses. She also testified that on November 30,1990, two days after Bartlett had initially informed her that the closing had not occurred, Bartlett informed her “I don’t have a deal, the deal is done, there’s nothing going on, I don’t need the insurance.” Furthermore, Bartlett’s own actions indicate he did not believe he needed insurance. He cannot now be allowed to claim that Hanks misrepresented information to him causing him to believe he was insured. We therefore conclude that the District Court did not err when it dismissed Bartlett’s claim for constructive fraud.

Finally, we determine that the District Court did not err in dismissing Bartlett’s claim for punitive damages. Section 27-1-221, MCA, allows for an award of punitive damages if the defendant is found liable for fraud or actual malice. In light of our holdings above, we conclude that the court correctly rejected Bartlett’s claim for punitive damages.

ISSUE 3

Did the District Court err in managing discovery or in awarding costs?

Bartlett argues that the District Court erred by issuing its protective order staying discovery related to the unfair trade practices claim. He also argues that the court erred when it denied his request to compel the production of a recorded statement made by Hanks to Allstate in January 1991.

We have stated that the district court has inherent discretionary power to control discovery under its authority to control trial administration and that the lower court is in a better position than this Court to supervise the day-to-day operations of discovery. State ex rel. Guarantee Ins. Co. v. District Court (1981), 194 Mont. 64, 67-68, 634 R2d 648, 650. We have stated that the objective of the district court in controlling and regulating discovery is to ensure a fair trial to all concerned, neither according one party an unfair advantage nor placing the other at a disadvantage. Hobbs v. Pacific Hide & Fur Depot (1989), 236 Mont. 503, 512, 771 P.2d 125, 131.

Here, in light of our holding above that Allstate had a reasonable basis for denying Bartlett’s claim due to the lack of an insurable interest, we determine that the District Court did not abuse its discretion when it issued the protective order concerning discovery with respect to the unfair trade practices claim.

However, we conclude that the District Court abused its discretion when it denied Bartlett’s motion to compel Hanks’ statement. Rule 612, M.R.Evid., provides that if, before testifying, a witness uses a writing to refresh his or her memory, then the adverse party is entitled to have the writing produced. Here, both Jeffery Mann, Allstate’s underwriter, and Hanks reviewed Hanks’ January 1991 statement prior to testifying in their depositions and the court, therefore, erred in not compelling the production of Hanks’ statement. Nevertheless, in light of our holdings above, we determine that the court’s error in this regard is harmless.

Bartlett also argues that the District Court erred in awarding costs in the amount of $1,414 to Allstate. Specifically, Bartlett claims that he should not be required to pay the transcription costs of the video taped depositions of Hanks and Mann. Bartlett relies on Rule 30(h), M.R.Civ.R, which allows for an audio-visual or tape recorded deposition without a stenographic record.

We have stated that the court is empowered to award costs to the prevailing party on summary judgment and to include the costs of depositions as long as they are reasonable in amount and necessary to the summary judgment. Harrison v. Chance (1990), 244 Mont. 215, 227, 797 P.2d 200, 207. Section 25-10-103, MCA, provides that the court has the discretionary power to apportion costs between the parties, and § 25-10-201(2), MCA, lists expenses of taking depositions as allowable costs.

In this case, the District Court granted summary judgment to Allstate based not only on the fact that Bartlett did not have an insurable interest in the property, but also because the application for insurance contained material misrepresentations. However, since our holding is based only on the fact that Bartlett did not have an insurable interest, we determine that the court’s award of costs should reflect only those costs which were necessary for that purpose. We therefore reverse the District Court’s award of costs and remand the case to the court for a determination of which costs were necessary for summary judgment on the basis of Bartlett’s lack of an insurable interest in the property.

Affirmed in part, reversed in part, and remanded for further proceedings consistent with this opinion.

JUSTICES HUNT, NELSON, TRIEWEILER and GRAY concur.


author: JUSTICE GRAY

text:
    ROCKY MOUNTAIN BANK, f/k/a SECURITY STATE BANK, Plaintiff and Respondent, v. DOUGLAS STUART, Defendant and Appellant.
    No. 96-080.
    Submitted on Briefs September 12, 1996.
    Decided December 10, 1996.
    53 St.Rep. 1305.
    280 Mont. 74.
    928 P.2d 243.

      See C.J.S. Mortgages § 579.
    For Appellant: William A. Squires, Randall C. Lester; Matteucci, Falcon, Squires & Lester, Great Falls.

      For Respondent: Greg A. Luinstra; Luinstra & Semansky, Great Falls.
   JUSTICE GRAY

delivered the Opinion of the Court.

Douglas Stuart (Stuart) appeals from the judgment of possession entered by the Seventeenth Judicial District Court, Blaine County, on its order granting the motion for summary judgment filed by Rocky Mountain Bank, f7k/a Security State Bank (Bank), and from orders denying his motion to alter or amend and amending the judgment of possession. We affirm.

We address the following issues on appeal:

1. Did the District Court err in granting summary judgment to the Bank based on its conclusion that the nonjudicial foreclosure sale under the Small Tract Financing Act of Montana was properly conducted?
2. Did the District Court err in granting summary judgment to the Bank based on its conclusion that Stuart was not entitled to notice to vacate the trust property after the nonjudicial foreclosure sale under the Small Tract Financing Act of Montana?

FACTS AND PROCEDURAL BACKGROUND

The following facts are undisputed. On July 28, 1979, Stuart executed a trust indenture covering residential property (trust property) in Blaine County, Montana. The trust indenture, which conveyed the trust property to a trustee and named the Bank as beneficiary, secured Stuart’s obligation to the Bank in the principal amount of $80,000. The trust indenture was modified in 1991 and rerecorded.

Stuart subsequently defaulted on his obligation to the Bank and a successor trustee (trustee) began nonjudicial foreclosure proceedings on the trust property under the Small Tract Financing Act of Montana (STFA). The trustee notified Stuart and his counsel of the foreclosure proceedings and the date of the foreclosure sale. At the time of the sale, Stuart owed the Bank $97,051.63 in principal and interest; he also owed delinquent taxes on the trust property in excess of $15,500.

The Bank was the only bidder at the foreclosure sale held in April of 1995. It made a $69,900 “credit bid,” which the trustee accepted over Stuart’s objection. The trustee then executed and recorded a trustee’s deed conveying the trust property to the Bank.

Stuart remained in possession of the trust property during the foreclosure proceedings. The Bank did not send him a notice to vacate the trust property after the foreclosure sale, and he continues to refuse to relinquish possession of the trust property to the Bank.

On May 18,1995, the Bank filed its complaint for possession of the trust property pursuant to § 71-1-319, MCA, and for attorney fees and costs incurred in the action for possession. In answering the Bank’s complaint, Stuart argued that the foreclosure sale was invalid because it was not a cash sale as required by law; the Bank did not follow statutory procedures to obtain possession of the trust property after the foreclosure sale; and the Bank was not entitled to attorney fees in the action for possession.

The Bank moved for summary judgment, contending that its so-called “credit bid,” under which it applied the amount bid against the outstanding debt owed by Stuart, complied with the statutory requirements for a nonjudicial STFA foreclosure sale and that Stuart was not entitled to notice to vacate after the sale. Stuart filed a cross-motion for summary judgment. He did not dispute that the Bank applied the bid amount against his outstanding debt; he claimed, instead, that the foreclosure sale was improperly conducted because the Bank did not pay the trustee in cash. Alternatively, Stuart argued that the Bank’s complaint for possession was premature because § 70-27-104, MCA, entitled him to post-sale notice to vacate and the Bank did not give such notice; therefore, according to Stuart, the Bank’s complaint should be dismissed.

The District Court granted the Bank’s motion for summary judgment on the basis of the parties’ stipulated facts and briefs. In addition to its conclusions that the foreclosure sale was properly conducted and Stuart was not entitled to notice to vacate thereafter, the court determined that the Bank was entitled to reasonable costs and attorney fees and assistance from the Blaine County Sheriff (Sheriff) in obtaining possession. The Bank subsequently filed its memorandum of costs as directed by the District Court.

Stuart moved to alter or amend the summary judgment order and for a stay of execution pending the District Court’s decision on that motion. The District Court entered a judgment of possession in favor of the Bank and subsequently granted Stuart’s motion for stay of execution. Later, the court denied Stuart’s motion to alter or amend and lifted the stay, and the Bank filed its affidavit of attorney fees incurred in the action.

In response to a motion for clarification filed on behalf of the Sheriff, the District Court amended its judgment of possession by deleting the order of assistance until the Bank made a demand for possession and Stuart had an opportunity to respond. Stuart subsequently refused to relinquish possession to the Bank and the Bank applied for a writ of assistance. Stuart appealed before the District Court could rule on the Bank’s application for a writ of assistance or hold a hearing to determine the amount of attorney fees to which the Bank is entitled.

STANDARD OF REVIEW

Summary judgment is proper when no genuine issues of material fact exist and the moving party is entitled to judgment as a matter of law. Rule 56(c), M.R.Civ.P. We review a district court’s grant of summary judgment de novo, applying the same Rule 56(c), M.R.Civ.R, criteria used by that court. Jarrett v. Valley Park, Inc. (1996), [277 Mont. 333], 922 R2d 485, 487 (citation omitted). Ordinarily, such a review requires that we first determine whether the moving party met its burden of establishing both the absence of genuine issues of material fact and entitlement to judgment as a matter of law. Jarrett, 922 R2d at 487.

In this case, however, the parties agreed on the material facts and, via their cross-motions for summary judgment, each party asserted entitlement to judgment as a matter of law. The District Court having granted the Bank’s motion for summary judgment, we need only determine whether it was correct in concluding that the nonjudicial foreclosure sale was properly conducted and that Stuart was not entitled to notice to vacate the trust property.

DISCUSSION

1. Did the District Court err in granting summary judgment to the Bank based on its conclusion that the nonjudicial foreclosure sale under the STFA was properly conducted?

Nonjudicial STFA foreclosure sale procedures and requirements are governed by statute in Montana. The STFA provides, in relevant part, that “[t]he purchaser at the [foreclosure] sale shall pay the price bid in cash ....” Section 71-1-315(4), MCA. The Bank maintains that the STFA permitted it, as the trust indenture beneficiary, to pay the price bid by applying the amount of its bid to Stuart’s outstanding indebtedness. Stuart, on the other hand, contends that the foreclosure sale was not properly conducted because the Bank did not pay cash for the trust property as required by the STFA. He contends that the plain language of the statute requires that foreclosure sales be conducted only on cash bids.

We have not previously interpreted the phrase “shall pay the price bid in cash” contained in § 71-1-315(4), MCA. In interpreting a statute, we look first to the plain meaning of the words it contains. Werre v. David (1996), 275 Mont. 376, 385, 913 P.2d 625, 631 (citing Clarke v. Massey (1995), 271 Mont. 412, 416, 897 P.2d 1085, 1088); Gulbrandson v. Carey (1995), 272 Mont. 494, 500, 901 P.2d 573, 577. Where the language is clear and unambiguous, the statute speaks for itself and we will not resort to other means of interpretation. Werre, 913 P.2d at 631 (citing Clarke, 897 P.2d at 1088). In this regard, words used by the legislature must be given their usual and ordinary meaning. Werre, 913 P.2d at 631.

The proper interpretation of the word “cash,” undefined by the legislature in enacting the STFA, is determinative of whether the nonjudicial foreclosure sale at issue here complied with § 71-1-315(4), MCA, and we previously have determined the ordinary meaning of that word. In Sidwell v. The New Mine Sapphire Syndicate (1956), 130 Mont. 189,196, 297 P.2d 299, 302, we discussed the definition of “cash” in the context of an agreement for the sale of mining claims. Under the terms of the agreement, the plaintiff had agreed to deposit a sum of money in cash to the defendant’s credit at a local bank immediately upon ratification of the agreement by the defendant’s stockholders. Sidwell, 297 P.2d at 299-300. The plaintiff deposited a substantial sum of money, but not the entire amount required, to the defendant’s credit at the bank after the agreement was ratified and then sued for specific performance. Sidwell, 297 P.2d at 302.

In addressing whether the plaintiff’s deposit of less than the stipulated amount of cash constituted compliance with the agreement, we discussed the concepts of cash and credit. “ With reference to the terms or time of payment, “cash” has been defined as meaning immediate payment; money paid down; money or its equivalent paid immediately or promptly after purchasing.’ ” Sidwell, 297 P.2d at 302 (quoting 14 C.J.S. Cash, p. 16) (citations omitted). Courts generally define cash as the antonym of credit. Sidwell, 297 P.2d at 302 (citation omitted).

Applying this ordinary meaning of the word, “cash” — as used in § 71-1-315(4), MCA — means money or its equivalent paid immediately or promptly after the purchase. Placed in the context of the statutory phrase “shall pay the price bid in cash,” paying the price bid in money or its equivalent immediately or promptly after the foreclosure sale satisfies the requirement set forth in § 71-1-315(4), MCA.

Here, the Bank was the trust indenture beneficiary. It bid $69,900 on the trust property at the foreclosure sale and, after acceptance of its bid by the trustee, credited the bid amount to the outstanding indebtedness owed to it by Stuart. Application of the bid amount to Stuart’s outstanding indebtedness is the equivalent of a money payment of the bid amount because it reduced the amount of Stuart’s outstanding indebtedness to the Bank in precisely the same way that a payment in cash to the trustee — followed by the trustee turning over that amount of cash to the Bank for application to Stuart’s indebtedness — would reduce the amount Stuart owed the Bank. We conclude, therefore, that an accepted “credit bid” by the trust indenture beneficiary at a nonjudicial STFA foreclosure sale, defined as the prompt application of the bid amount to the trust indenture grantor’s outstanding debt, constitutes payment by the purchaser of the price bid in cash as required by § 71-1-315(4), MCA.

Stuart contends that the Bank’s purchase of the trust property was a credit sale prohibited by § 71-1-315(4), MCA. He relies on the definition of a credit sale, contained in Black’s Law Dictionary 333 (5th ed. 1979), as a “sale in which the buyer is permitted to pay for the goods at a later time, as contrasted with a cash sale.” The definition, while valid, is not applicable to the facts before us.

Here, the Bank was not permitted to pay “at a later time” as would be the case if the bid were in the form of a note or other instrument pursuant to which either a lump sum payment or payment by installments over time would be made in the future. Rather, as discussed above, the Bank’s application of the bid amount to Stuart’s outstanding debt constituted payment of the price bid in cash as required by § 71-1-315(4), MCA. In the context of the definition advanced by Stuart, the foreclosure sale at issue here was, indeed, a cash sale rather than a credit sale.

Nor is Stuart’s reliance on Greenberg v. Alter Company (Iowa 1963), 124 N.W.2d 438, to any avail. While Stuart correctly cites to Greenberg for the proposition that a cash sale and a credit sale are “completely opposite creatures” (see Greenberg, 124 N.W.2d at 441), Greenberg merely exemplifies our observation in Sidwell that courts generally define cash as the antonym of credit. See Sidwell, 297 P.2d at 302. Moreover, Greenberg addressed whether cash includes cashier’s checks, certified checks or the placement of a bid amount in an escrow account. Greenberg, 124 N.W.2d at 441. Nothing in Greenberg supports Stuart’s argument that the foreclosure sale before us was a credit sale.

As a final matter, we observe that the District Court determined that the Bank was entitled to judgment as a matter of law on the basis of a different legal conclusion than we have reached above. The court concluded that to interpret § 71-1-315(4), MCA, as requiring a trust indenture beneficiary to actually pay cash to the trustee— who, in turn, would return the cash to the beneficiary for application to the borrower’s indebtedness — would be to require an idle act, which the law never requires. See § 1-3-223, MCA. While the “idle acts” maxim of jurisprudence has been statutorily enacted in Montana, we note that such maxims are intended “not to qualify any of the other provisions of [the MCA] but to aid in their just application.” Section 1-3-101, MCA. Under our interpretation of the plain meaning of § 71-1-315(4), MCA, above, it is unnecessary to determine whether — or to what extent — the “idle acts” maxim of jurisprudence might otherwise aid in the just application of § 71-1-315(4), MCA. In any event, we will affirm a district court’s decision which reaches the correct result regardless of the court’s reasoning. Bowen v. McDonald (1996), 276 Mont. 193, 915 P.2d 201, 206 (citations omitted).

We hold that the District Court did not err in granting summary judgment to the Bank based on its conclusion that the nonjudicial foreclosure sale under the STFA was properly conducted.

2. Did the District Court err in granting summary judgment to the Bank based on its conclusion that Stuart was not entitled to notice to vacate the trust property after the nonjudicial foreclosure sale under the STFA?
Section 71-1-319, MCA, provides:
The purchaser at the trustee’s sale shall be entitled to possession of the property on the 10th day following the sale, and any persons remaining in possession after that date under any interest, except one prior to the trust indenture, shall be deemed to be tenants at will.

The Bank contends that, pursuant to § 71-1-319, MCA, it was entitled to possession of the trust property ten days after the STFAnonjudicial foreclosure sale without giving Stuart notice to vacate the trust property. Stuart maintains that his interest in the trust property did not arise prior to his execution of the trust indenture and, therefore, he became a tenant at will by remaining in possession past the tenth day after the sale. Accordingly, he argues that § 70-27-104, MCA, requires the Bank to provide him with a thirty-day notice to vacate the trust property prior to terminating the tenancy and obtaining possession of the property.

The parties’ stipulated facts do not provide a sufficiently clear basis for determining whether Stuart had an interest in the trust property prior to executing the trust indenture. Thus, we cannot resolve the specific question of whether Stuart became a tenant at will under § 71-1-319, MCA. We need not do so, however, in order to determine whether he was entitled to notice to vacate the trust property.

In this case, Stuart executed a trust indenture covering the trust property with the Bank as beneficiary. Except where statutes governing real property mortgages are inconsistent with the laws governing trust indentures, a trust indenture is deemed to be a mortgage on real property and is subject to the laws governing real property mortgages. See § 71-1-305, MCA. Therefore, a trust indenture, like a mortgage, is a contract — an agreement between two or more parties to do, or not to do, something — by which property is pledged, without delivery of title or possession, for the performance of an act. See § 71-1-101, MCA; § 28-2-101, MCA; Weldon v. Montana Bank (1994), 268 Mont. 88, 93, 885 P.2d 511, 514.

By executing the contractual trust indenture in July of 1979, Stuart obligated himself to perform according to its terms. One of those terms, expressly set out in Paragraph 15 of the trust indenture, is that:

Grantor agrees to surrender possession of the hereinabove described trust property to the purchaser at the aforesaid sale on the tenth (10th) day following said sale, in the event such possession has not previously been delivered by Grantor.

Stuart was the grantor named in the trust indenture; the Bank was the purchaser at the foreclosure sale. Pursuant to Paragraph 15, therefore, Stuart specifically contracted to surrender possession of the trust property to the Bank on the tenth day after the sale.

Notwithstanding Paragraph 15, Stuart contends that the Bank was statutorily required to provide a thirty-day notice to him to vacate the trust property. He relies on § 70-27-104, MCA, which requires landlords to give tenants at least one month written notice before terminating a tenancy at will. Section 70-27-104, MCA, clearly was enacted in order to protect a tenant against termination of the tenancy without adequate notice.

Even assuming arguendo the validity of Stuart’s claim that he is a tenant at will, he is not entitled to the benefit of § 70-27-104, MCA. Section 1-3-204, MCA, provides that “[a]nyone may waive the advantage of a law intended solely for his benefit.” By executing the trust indenture and agreeing, via paragraph 15, to vacate the trust property on the tenth day following the foreclosure sale, Stuart waived any benefit under § 70-27-104, MCA, to which he might otherwise have been entitled. We conclude, therefore, that Stuart was not entitled to notice to vacate under § 70-27-104, MCA. On that basis, we hold that the District Court did not err in granting summary judgment to the Bank based on its conclusion that Stuart was not entitled to notice to vacate the trust property after the STFA nonjudicial foreclosure sale.

Finally, the Bank raises several matters which do not relate to the issues raised by Stuart in his appeal. First, the Bank contends that it is entitled to a writ from this Court directing the Sheriff to assist it in obtaining possession of the trust property. The record reflects, however, that the Bank’s application for a writ of assistance is still pending before the District Court. Moreover, the cases cited by the Bank .in support of its request involve our review of trial court decisions relating to writs of possession,. See Fuller v. Gibbs (1948), 122 Mont. 177, 199 R2d 851; Dodd v. Simon (1942), 113 Mont. 536, 129 P.2d 224. They are not authority for the issuance of a writ of assistance by this Court. For these reasons, we reject the Bank’s request that this Court issue a writ of assistance.

The Bank also contends that it is entitled to attorney fees incurred in its efforts to gain possession of the property. Its reason for raising this matter is unclear since the record reflects that the District Court already has determined that the Bank is entitled to reasonable attorney fees incurred in its action for possession. Indeed, the Bank has responded to the court’s directive to submit a memorandum of costs and affidavit of attorney fees. Stuart’s notice of appeal merely short-circuited the District Court’s ability to hold a hearing on the amount of attorney fees to be awarded. Stuart did not, however, appeal the Bank’s entitlement to attorney fees and, therefore, the District Court’s determination of that issue will become final when remittitur issues on this opinion.

Affirmed.

JUSTICES NELSON, HUNT, LEAPHART and ERDMANN concur.


author: JUSTICE TRIEWEILER

text:
    CATHERINE E. SATTERLEE, Petitioner and Appellant, v. LUMBERMEN’S MUTUAL CASUALTY COMPANY, Respondent and Insurer for BUTTREY FOOD AND DRUG, Employer.
    No. 96-102.
    Submitted on Briefs September 12, 1996.
    Decided December 10, 1996.
    53 St.Rep. 1310.
    280 Mont. 85.
    929 P.2d 212.

      See C.J.S. Workmen’s Compensation § 555(15).
    For Appellant: Bernard J. “Ben” Everett; Knight, Dahood, McLean & Everett; Anaconda.
    For Respondent: Thomas A. Marra; Marra, Wenz, Johnson & Hopkins; Great Falls.
   JUSTICE TRIEWEILER

delivered the opinion of the Court.

Catherine E. Satterlee filed a petition in the Workers’ Compensation Court for the State of Montana in which she alleged that she was totally disabled as a result of injuries sustained during the course of her employment at Buttrey Food and Drug at its Anaconda store, but that Buttrey’s insurer, Lumbermen’s Mutual Casualty Company, had wrongfully terminated her disability benefits. Lumbermen’s admitted that Satterlee had been injured while working for Buttrey, but claimed that she had recovered from that injury a short time thereafter, and that any present disability is a result of unrelated mental and physical conditions. After consideration of evidence presented at trial and by deposition, the Workers’ Compensation Court found that her disability was not a result of her work-related injury, and denied disability benefits. Satterlee appeals from that finding. We reverse in part and affirm in part the judgment of the Workers’ Compensation Court.

The claimant raises the following issues on appeal:

1. Are the Workers’ Compensation Court’s findings supported by substantial credible evidence?
2. Did the Workers’ Compensation Court err when it denied Satterlee’s requests for an award of attorney fees and the imposition of a twenty percent penalty in addition to her disability benefits?

FACTUAL BACKGROUND

Catherine Satterlee was born on September 30,1934. On the date that her claim came before the Workers’ Compensation Court for trial, she was sixty years old. She did not graduate from high school, but did receive her graduate equivalency degree. She has no other formal education.

For fifteen years prior to the date of her work-related injury, Satterlee worked as a checker for Buttrey Food and Drug at its store in Anaconda. The evidence was, and the trial court found, that during that time Satterlee had developed degenerative arthritis in her cervical spine, but that she experienced no symptoms or disability from that condition. Until the date of her injury, she performed her duties, which included stocking shelves, dusting and cleaning floors, and checking out customers, without physical limitation. She missed no work due to her underlying cervical condition.

In May 1990, Satterlee’s adult son was killed in an automobile accident. As a result of that loss, she suffered severe depression and missed several months of work. However, following treatment for her condition, which was later diagnosed as post-traumatic stress disorder, she returned to work in 1991 and worked without any further loss of time until the date of her injury which is the subject of this appeal.

On July 25,1992, while waiting on a customer at Buttrey, Satterlee bent over and twisted her body in an attempt to rearrange a forty-five pound bag of dog food so that she could read the price label. As a result of that effort, she experienced a pulling sensation in her left shoulder, followed by pain in that part of her body, as well as in her neck and down her left arm. She had experienced no similar pain at any time prior to that incident. She testified that since that incident she has had continuous pain in her left shoulder and neck. The Workers’ Compensation Court found her to be a credible witness and did not question her testimony in that regard.

Following her injury, Satterlee attempted to return to work on two consecutive days, but could not perform her duties, and has not worked in any capacity since July 28, 1992.

Since her injury, Satterlee has been seen and treated or evaluated by numerous physicians. Her injury has been variously diagnosed as “left trapezius strain,” “neck strain,” and “degenerative disc disease and degenerative arthritis of the cervical spine.”

Satterlee was treated with medication and therapy for her cervical and shoulder pain. However, that treatment has been unsuccessful.

Satterlee’s pain is constant, it causes headaches, which are present most of the time, and her symptoms are worsened by activity.

Due to her pain and discomfort, she is no longer capable of performing most of her household responsibilities. The majority of her waking hours are spent sitting in a recliner.

During 1993, while visiting her daughter in the state of Washington, Satterlee was examined by a physician who advised Lumbermen’s that whatever soft tissue injury she had sustained at work should have healed within a six week period, and that any continuing disability was a result of her preexisting spinal disease. Following receipt of that correspondence, on February 23, 1993, Lumbermen’s terminated Satterlee’s total disability benefits.

During 1993, Satterlee’s adult daughter died at the age of 33 from cystic fibrosis after she was unable to obtain necessary organ transplants. During that same year, a foster daughter and her children died from a fire in their home, and Satterlee’s sister was diagnosed with a terminal brain tumor. Satterlee’s preexisting emotional condition worsened. After further psychiatric evaluation, she was again diagnosed with major depression and post-traumatic stress disorder.

Satterlee applied for social security disability benefits, and was found vocationally disabled by the Social Security Administration on December 14, 1993. The SSA attributed her disability to both back pain and severe emotional trauma.

It is, and has been, Lumbermen’s position that any physical disability which resulted from Satterlee’s work-related injury was temporary. Lumbermen’s contends that she has fully recovered from any soft tissue injury and that, even though she experienced no symptoms from her underlying degenerative condition prior to that injury, any current pain or physical impairment that she currently experiences is strictly a result of her preexisting degenerative condition. There was medical testimony to support that contention.

Lumbermen’s also contends that, to the extent Satterlee is disabled from gainful employment, the primary factor is not her physical impairment, but her emotional disorder which developed subsequent to her work-related injury, and that therefore, it is not responsible for any disability caused by that disorder.

Satterlee has contended, and continues to assert on appeal, that she was free of pain prior to her injury, has been unable to function due to pain since her injury, and that the evidence does not support any finding other than that she is totally disabled due to her work-related injury.

The Workers’ Compensation Court did not completely accept either party’s argument. Its findings, some of which are designated as “findings,” some of which are included under “conclusions,” and some of which are set forth in its order that denied Satterlee’s post-trial motions, are summarized as follows:

1. Satterlee was a credible witness. (Finding No. 7.)
2. Satterlee was able to perform all of her job duties during the fifteen years prior to her injury, and testified that she suffered no neck or left shoulder pain prior to that date. Medical exams conducted after her injury showed that she suffered from preexisting cervical disc disease. However, that condition was asymptomatic prior to her injury. (Finding No. 8.)
3. Although Satterlee’s daughter died in the spring of 1993 (Finding No. 21), the internal medicine specialist from whom she sought treatment for depression beginning on May 10,1993, noted that that loss was only the latest in a series of personal losses, and that her son was killed in an automobile accident two years prior to her industrial injury. That loss also led to treatment for depression and insomnia. (Finding No. 22.)
4. On December 14, 1993, the Social Security Administration concluded that Satterlee was totally disabled because of back pain and severe emotional trauma. (Findings No. 29 and 30.)
5. When Satterlee testified that she had pain in her left shoulder, neck, and arm ever since 1992, the Court found her testimony credible. (Finding No. 33.)
6. Based on the medical testimony, the court was persuaded that Satterlee’s 1992 industrial injury aggravated a preexisting cervical disease and made her condition symptomatic, triggering pain and associated muscle spasm. (Finding No. 44.)
7. Even though Satterlee suffers from shoulder and neck pain, her psychological condition amplifies her pain. (Finding No. 46.)
8. If motivated, Satterlee could tolerate her pain and work on a regular basis in either of two positions identified by the insurer’s vocational consultant. (Finding No. 49.)
9. However, the court attributed Satterlee’s lack of motivation to her depression and general mental condition, and found that, based on the combination of her circumstances, she would be unable to cope with her pain while working on a regular basis. (Finding No. 49.) The court was unpersuaded, however, that absent her personal losses, Satterlee would be unable to cope with her pain and work. (Finding No. 50.)
10. The court agreed that at the time of trial Satterlee could not cope with her pain, and therefore return to work. However, the court was not persuaded that absent the psychological trauma associated with the death of her daughter and other close relatives, Satterlee’s pain would preclude her from physically performing either of the two jobs which were medically approved by Dana Headapohl, M.D. The court did conclude that Satterlee had valid medical and psychological reasons for her inability to cope with pain, however, it further concluded that those reasons were attributable to subsequent unrelated events, and not to her industrial injury. (Conclusion of Law No. 12.)
11. When the Workers’ Compensation Court denied Satterlee’s post-trial motions, it clarified that it did not find Satterlee’s pain to be anything other than as she claimed, but believed that she truthfully reported her disabling pain. However, it stated that her underlying psychological condition is amplifying her pain, and that the losses which have led to her underlying psychological condition have occurred since her injury. The court recognized that pain which is amplified by a preexisting psychological condition is compensable, but in this case, concluded that the principle events which caused Satterlee’s post-traumatic stress disorder occurred subsequent to her work-related injury.

ISSUE 1

Are the Workers’ Compensation Court’s findings supported by substantial credible evidence?

We will uphold the Workers’ Compensation Court’s findings if they are supported by substantial credible evidence. Wunderlich v. Lumbermen’s Mutual Cas. Co. (1995), 270 Mont. 404, 408, 892 P.2d 563,566.

Following the entry of judgment for the defendant, Satterlee moved the Workers’ Compensation Court to amend its findings based on her contention that they were not supported by substantial evidence. That motion was denied, and her appeal is from the denial of that motion. Lumbermen’s has not cross-appealed, and therefore, we accept as true those findings which were favorable to Satterlee. Those findings were that, while Satterlee suffered from an underlying condition of degenerative disc disease prior to her work-related injury, she experienced no symptoms from that condition and was able to perform all of her job duties for fifteen years. Due to that injury, however, she aggravated the underlying degenerative disease in her neck, and has experienced continuous pain and muscle spasm since the date other injury. The combination other pain and her inability to deal with that pain due to her emotional condition, render her unable to work on a regular basis. However, absent her underlying emotional disorder, there are two jobs that Satterlee could perform.

The Workers’ Compensation Court correctly concluded that an employer takes its employee as it finds her, and that if her disability is aggravated by an underlying physical or emotional condition, that the employer is liable for disability which results from that aggravation. Shumacher v. Empire Mfg. (1977), 175 Mont. 411, 413-14, 574 P.2d 987, 988. However, the critical finding, and the one on which the denial of Satterlee’s benefits is based, was the court’s finding that her emotional condition resulted from events which occurred subsequent to her work-related injury, and that that condition did not preexist her injury. We must, therefore, determine whether that finding is supported by substantial evidence.

In the record, there are only three sources of information which relate to the onset of Satterlee’s post-traumatic stress disorder. They include the claimant’s own testimony at the time of trial, the medical records of Martin D. Cheatle, Ph.D., and the medical records of Kenneth C. Olson, M.D.

When asked during trial, Satterlee stated that she believed her post-traumatic stress symptoms developed in May 1990 when her son was killed. She stated that she was out of work and involved in treatment for that condition for eight months after her son’s death, but had been able to return to work following that period of treatment until this injury occurred.

Dr. Cheatle was the psychologist who evaluated Satterlee for the St. Patrick Hospital Medical Panel to which she was referred for evaluation. His records indicate that, although her psychological condition declined after the death of her daughter, the diagnosis of post-traumatic stress disorder was first made following the death of her son in 1990, and that her treatment by psychotherapy first began following that incident.

It was Dr. Cheatle’s opinion that Satterlee’s persistent cervical and left shoulder pain, and her ability to deal with that pain, were complicated by post-traumatic stress disorder and depression. However, he does not, at any point in his report, distinguish between the post-traumatic stress disorder that resulted from the death of her son and any worsening of that condition which occurred following the death of her daughter.

Dr. Kenneth C. Olson is a psychiatrist to whom Satterlee was referred for evaluation in August 1993 by Dr. Michael Sadaj, her attending physician. His report to Dr. Sadaj indicates that the onset of Satterlee’s emotional problems began following the death of her son in 1990, and that the emotional trauma was so severe that she lost her memory for a period of eight months. His report indicates that during his interview of her she cried and expressed anger when discussing the loss of her son. Similar emotional reactions are not related to any other event. He diagnosed major depression with unresolved pathological grief and post-traumatic stress disorder. Nowhere in his report does he relate those emotional conditions to events that occurred after Satterlee’s work-related injury. Any inference that can be drawn from his report suggests that the primary factor related to those mental disorders is the death of her son, which occurred prior to her work-related injury.

There is no other evidence which suggests a cause for Satterlee’s emotional disorder, other than the evidence set forth above. Therefore, we conclude that there was not substantial evidence to support the Workers’ Compensation Court’s finding that Satterlee’s depression or post-traumatic stress disorder was caused by events which occurred subsequent to her work-related injury.

We have previously held that:

[I]t is well established that an employer takes his employee subject to the employee’s physical and, logically, emotional condition at the time of his employment. Birnie v. U.S. Gypsum Co., 134 Mont. 39, 328 P.2d 133 (1958); Peitz v. Industrial Accident Board, 127 Mont. 316, 264 P.2d 709 (1953). An employee who suffers from a pre-existing condition is entitled to compensation if the condition was aggravated by an industrial injury. Rumsey v. Cardinal Petroleum, 166 Mont. 17, 530 P.2d 433 (1975); Weakley v. Cook, 126 Mont. 332, 249 P.2d 926 (1952).

Shumacher, 175 Mont, at 413-14, 574 P.2d at 988.

The Workers’ Compensation Court correctly recognized this rule of law when, during trial, it stated:

Sounds like we’ve got the principle that you take the worker as you find them, so if they are suffering from an underlying psychological condition and they’ve got pain that’s triggered, even though that pain continues to be — they continue to feel more severe pain than they would without the psychological condition, this sounds like a multi-factorial thing. You’ve got some of the psychological condition arising before, some after, with the psychological condition probably amplifying the pain.

It logically follows that if Satterlee’s work-related injury in 1992 aggravated an underlying condition of degenerative arthritis or disc disease, and she experiences pain from that aggravation, which is made worse by physical activity, and which she cannot cope with due to a preexisting emotional condition, such as depression or post-traumatic stress disorder, her employer is liable for the disability which results from that combination of physical and emotional conditions. In this case, the Workers’ Compensation Court found and concluded that Satterlee was not a candidate for regular employment due to the combination of her physical and emotional impairment.

Therefore, we reverse the judgment of the Workers’ Compensation Court to the extent that it denied Satterlee’s claim for total disability benefits, and remand this case to that court for entry of judgment in favor of the claimant, Catherine Satterlee.

ISSUE 2

Did the Workers’ Compensation Court err when it denied Satterlee’s requests for an award of attorney fees and the imposition of a twenty percent penalty in addition to her disability benefits?

Satterlee also contends that Lumbermen’s termination of her total disability benefits was unreasonable and, therefore, that she is entitled to an award of attorney fees pursuant to § 39-71-611, MCA (1991), and the imposition of a twenty percent penalty pursuant to § 39-71-2907(1), MCA (1991). Based on its conclusion that Lumbermen’s was correct when it terminated her disability benefits, the Workers’ Compensation Court held that the insurer had not acted unreasonably.

Although we reverse that part of the Workers’ Compensation Court’s judgment which denied disability benefits to Satterlee, we conclude that there was substantial evidence upon which the court could have found that the insurer did not act unreasonably when it terminated her benefits. Specifically, correspondence from Alvin J. Harris, M.D., dated February 1, 1993, created an issue with regard to the cause of her continuing physical complaints. We conclude that it was not unreasonable as a matter of law for the insurer to rely on that information as the basis for its termination of benefits. Therefore, the Workers’ Compensation Court’s denial of attorney fees and a twenty percent penalty is affirmed.

This case is remanded to the Workers’ Compensation Court for entry of judgment consistent with this opinion.

CHIEF JUSTICE TURNAGE, JUSTICES GRAY, NELSON, HUNT, LEAPHART and ERDMANN concur.


author: JUSTICE LEAPHART JUSTICE HUNT

text:
    GREGG A. HAFNER, Plaintiff and Appellant, v. MONTANA DEPARTMENT OF LABOR AND INDUSTRY and DUBRAY LAND SERVICES, INC., Defendants and Respondents.
    No. 96-105.
    Submitted on Briefs August 9, 1996.
    Decided December 10, 1996.
    53 St.Rep. 1315.
    280 Mont. 95.
    929 P.2d 233.

      See C.J.S. Social Security and Public Welfare § 222.
    For Appellant: Michael G. Eiselein; Lynaugh, Fitzgerald, Eiselein & Eakin, Billings.
    For Respondents: Melanie A. Symons, Department of Labor & Industry,. Helena; Calvin J. Stacey; Stacey & Walen, Billings.
   JUSTICE LEAPHART

delivered the Opinion of the Court.

Appellant, Gregg Hafner (Hafner), appeals from the decision of the Thirteenth Judicial District Court, Yellowstone County, affirming a Board of Labor Appeals’ denial of unemployment insurance benefits. We affirm the District Court.

We restate the issue raised by Hafiier as follows:

Did Hafner’s failure to notify his employer of a conflict of interest constitute misconduct for purposes of unemployment compensation benefits?

BACKGROUND

This case arises out of the Department of Labor’s (the Department) denial of unemployment benefits to Hafner. Hafner appeals from the District Court’s decision affirming the Board of Labor Appeals’ (the Board) denial of unemployment benefits on the basis of misconduct.

Hafher was hired by respondent, DuBray Land Services, Inc. (DuBray) as a Right-of-Way agent in March of 1990. As a Right-of-Way agent for DuBray, Hafher’s duties included purchasing easement rights for various companies. In preparation of Hafher’s position as a Right-of-Way agent, DuBray sent Hafner to a training program. As part of the training program, Hafher took courses in “Ethics and the Right of Way Profession” and “Rules of Professional Conduct.” Additionally, Hafher was a member of the International Right of Way Association. The Association adheres to a Code of Ethics, Ethical Rules and Standards of Conduct. Ethical Rule No. 6 of the Code of Ethics provides in part: “Members pledge to maintain a high professional relationship with his/her client or employer.” Standard Two of the “Standards of Practice for the Right of Way Professional” provides in part:

FULL DISCLOSURE

Full disclosure of all pertinent information requires, without reservation, disclosure to the client, employer or public, all relevant information a member possess [sic] with regard to the member’s employment.
Interpretation:
1. Full disclosure to the client/employer means disclosure of:
(a) conflicts of interest (including, but not limited to such items as personal, financial, emotional, employment; prior or current, or others).

While employed by DuBray, Hafher applied for and was, on a probationary basis, given a job with Conoco, Inc. (Conoco). As a pre-requisite to employment with Conoco, Hafher underwent a physical examination. After receiving the results of Hafher’s physical examination, Conoco decided to terminate Hafher’s employment before he began working. Hafner contended that Conoco’s decision to terminate him was discriminatory and he filed a claim against Conoco with the Montana Human Rights Commission. Hafher’s civil suit against Conoco continued for several years while he continued to work for DuBray.

In 1992, while the Human Rights Commission complaint was still pending, DuBray assigned Hafher to work on the Conoco account. Hafner did not advise DuBray that he had a Human Rights Complaint pending against Conoco. In handling the Conoco account, Hafner had access to Conoco’s files and a Conoco checking account. Despite his pending civil suit, Hafher continued to work on the Conoco account without informing DuBray of this conflict of interest. DuBray only became aware of the suit in December of 1994, when a Billings newspaper reported that this Court had reversed the trial court’s granting of summary judgment for Conoco and remanded Hafner’s claim for trial. Hafner v. Conoco (1994), 268 Mont. 396, 886 P.2d 947. When it became aware of the suit, DuBray decided to terminate Hafner by letter dated December 28, 1994, stating as follows:

Gregg Hafner
This letter is your notice that you are terminated for cause from your employment with DuBray Land Services, Inc. effective today, December 28,1994. You will be given today two checks for your net pay for salary through today and vacation pay accumulated through today.
The reason for your termination for cause is that you are the Plaintiff in a lawsuit entitled Hafner v. Conoco, Cause No. 93-552 in Yellowstone County District Court, which lawsuit has only become known to this company through a newspaper article published in The Billings Gazette on Saturday, December 17, 1994, a copy of which is attached. This newspaper article was first delivered to me yesterday, December 27, 1994. In the meantime, for approximately two years you have been working on Conoco projects for DuBray Land Services, Inc. without informing the company of your lawsuit against Conoco. This is an untenable disregard for the interest of your employer and cannot be tolerated.
By the end of work today you must have all of your personal belongings removed from the premises of DuBray Land Services, Inc. In addition, you must turn in the company automobile and all sets of company car keys, all company credit cards and telephone cards, all company files in your possession (those for Conoco and otherwise), the Conoco checkbook, all company equipment and supplies, and your set of keys to the company office building. When you have turned over this property and cleaned out your personal property you will be given your checks for salary and vacation pay.
Thank you.

Following his termination from DuBray, Hafner filed a claim for unemployment benefits with the Department. Hafner’s request was denied on the basis that he was terminated for misconduct. Hafner then filed an appeal with the Board. After determining that Hafner had been discharged for “misconduct,” the Board denied Hafner’s request for unemployment benefits pursuant to § 39-51-2303, MCA, and § 24.11.460, ARM. Next, Hafner filed a request for judicial review with the Thirteenth Judicial District Court, Yellowstone County. The District Court affirmed the Board’s decision. Hafner has filed the instant appeal challenging the decision of the District Court’s decision to affirm the Board’s denial of unemployment benefits.

DISCUSSION

Did Hafner’s failure to notify his employer of a conflict of interest constitute misconduct for purposes of unemployment compensation benefits?

A District Court’s review of a decision of the Board is limited by § 39-51-2410(5), MCA, which provides:

In any judicial proceeding under 39-51-2406 through 39-51-2410, the findings of the board as to the facts, if supported by evidence and in the absence of fraud, shall be conclusive and the jurisdiction of said court shall be confined to questions of law. ...

In both Connolly v. Montana Bd. of Labor Appeals (1987), 226 Mont. 201,734 P.2d 1211, and Stine v. Western Federal Savings Bank (1994), 266 Mont. 83, 87, 879 P.2d 53, 56, this Court held that the determination of “misconduct” in the context of an application for unemployment benefits “was a factual question, properly left to the appeal’s referee and the Board of Labor Appeals.” Connolly, 734 P.2d at 1215. Having reviewed this issue in the present case, we reverse Connolly and Stine to the extent that they hold that “misconduct” is a question of fact and, for the reasons stated below, hold that the question of whether conduct rises to the level of “misconduct” is a question of law which this Court reviews for correctness.

Misconduct is defined by § 24.11.460(1), ARM, and includes:

(a) willful or wanton disregard of the rights, title, and interests of a fellow employee or the employer;
(b) deliberate violations or disregard of standards of behavior which the employer has the right to expect of an employee',
(c) carelessness or negligence that causes or would likely cause serious bodily harm to the employer or fellow employee; or
(d) carelessness or negligence of such degree or recurrence to show an intentional or substantial disregard of the employer’s interest.

(Emphasis added.) In addition, § 24.11.461(l)(f), ARM, explains:

(1) The followings acts are considered misconduct because the acts signify a willful and wanton disregard of the rights, title, and interests of the employer or a fellow employee. These acts include:
• (f) violation of a company rule if the rule is reasonable and if the claimant knew or should have known of the existence of the rule [.]

The question of whether an employee has disregarded standards of behavior, been careless or negligent, or violated company rules is a question of fact. Whether those “facts” then constitute “misconduct” involves interpretation and application of the Administrative Rules of Montana and is a legal conclusion reviewable by this Court.

Hafner argues that he has a constitutional right to pursue his discrimination claim against Conoco and that it is illegal for DuBray or anyone else to interfere with this claim or retaliate against him for exercising his right to sue. Section 49-2-301, MCA. His characterization of the issue presented assumes that he was terminated for having sued Conoco. He relies on the statement in the letter of termination which states: “The reason for your termination for cause is that you are the Plaintiff in a lawsuit entitled Hafner v. Conoco ...” When that statement, however, is put in the context of the whole letter, it is apparent that he was terminated not for suing Conoco, but for failing to advise DuBray that he was suing Conoco while at the same time continuing to work on Conoco files on behalf of DuBray. Hafner also emphasizes that while the appeals referee labeled his conduct as a conflict of interest, DuBray did not. Rather, DuBray’s letter states that Hafher’s conduct was an “untenable disregard for the interest of your employer and cannot be tolerated.” This is not a distinction of significance. Failing to advise an employer of a conflict of interest can certainly constitute a disregard for the interests of the employer.

As restated, the question presented by this appeal is whether Hafner’s failure to disclose his pending litigation against Conoco, while working on Conoco files for DuBray, constituted “misconduct.” The ethical rules of a Right-of-Way agent require full disclosure of all conflicts of interest. Hafher’s failure to advise his employer regarding his suit against DuBray’s client, Conoco, was a violation of company policy as well as a violation of his ethical duty as a Right-of-Way agent.

The ethical rule imposed upon Hafner was reasonable. Hafher’s employer, DuBray, was justified in expecting to be informed of conflicts of interest that arise between its employees and its clients. In addition, Hafner’s training in 1990 made him fully aware of his obligation to reveal conflicts of interest. In failing to inform DuBray of his pending litigation against Conoco while continuing to work on the Conoco account on behalf of DuBray, Hafher willfully disregarded the interests of DuBray. This disregard of reasonable standards constitutes misconduct under § 24.11.460(1), ARM.

Hafner argues that there is no logic to holding that he could be fired for failing to advise DuBray of the suit against Conoco since:

Like it or not, DuBray is prohibited from doing anything about Gregg’s suit against his customer. He may not tell Gregg to drop the suit. He may not “suggest” that Gregg choose between his job and his lawsuit. We submit that in the complete absence of even the suggestion of any wrongdoing on the part of Gregg, DuBray could not even take Gregg off the Conoco projects, because to do so would seriously limit Gregg’s usefulness as a DuBray employee and could for that reason subject him to an increased risk of layoff or termination. Such treatment would “otherwise discriminate” against Gregg and would amount to retaliation under the plain language of MCA 49-2-301.

We agree that, if Hafner had advised DuBray of his claim against Conoco in a timely fashion, DuBray would not have been justified in firing Hafher or in having him choose between his job and his claim against Conoco. We do not, however, agree that DuBray could not have chosen to assign Hafner to non-Conoco accounts or, if he were already working on the Conoco account, reassign him to other accounts as DuBray had done with other employees.

Hafher points out that Conoco was aware of the situation from the start and had no objection to his continuing to work the Conoco file while pursuing his claim. That fact does not, however, change the fact that DuBray, as the employer, had a reasonable expectation that it would be advised if its employee had a conflict of interest so that DuBray could decide how to handle the situation. Conflict of interest rules are designed to work prospectively; to prevent conflicts from causing harm to employer or client. As the District Court stated, Hafner’s argument misses the point. The fact that, in retrospect, the client was not damaged or offended, does not justify having kept the employer in the dark. Hafher should have advised DuBray of this situation when it arose so that DuBray would have been in a position to take appropriate in-house action to defuse any conflict.

Hafner argues that denying him unemployment benefits amounts to a denial of his constitutional right to pursue a discrimination claim. Specifically, Hafner maintains that his termination for violating an “ethical rule” infringed upon his inalienable right to pursue and maintain employment; a right which this Court has held to be necessary to enjoy one of “life’s basic necessities” under Article II, section 3 of the Montana Constitution. In support of his argument, Hafner cites to Wadsworth v. State (1996), 275 Mont. 287, 911 P.2d 1165. In Wadsworth, the plaintiff claimed that a Department of Revenue conflict of interest rule precluding outside employment violated his right to pursue life’s basic necessities contained in the Montana Constitution. Wadsworth, 911 P.2d at 1173. This Court agreed with Wadsworth and held that the State did not demonstrate a compelling interest for applying the conflict of interest rule, thus his termination violated his constitutional right to pursue life’s basic necessities under Article II, section 3 of the Montana Constitution. Wadsworth, 911 P.2d at 1175.

In contrast to Wadsworth, Hafner was not terminated for pursuing life’s basic necessities nor is it accurate to say he was terminated for pursuing a discrimination claim against Conoco. Rather, Hafner was terminated because, without DuBray’s knowledge, he continued to work on the Conoco account while he pursued a civil suit against Conoco. Hafner’s access to a Conoco checking account and other confidential information created a conflict of interest of which DuBray had a right to be aware. Hafner’s failure to disclose this conflict created a legitimate reason for DuBray to terminate him. We hold that DuBray had a legitimate expectation to be informed of the conflict of interest. Hafner’s failure to inform DuBray of this conflict of interest constituted willful disregard of the interests of his employer and of reasonable standards of behavior which the employer had the right to expect of an employee. Section 24.11.460(1), ARM, and § 24.11.461(l)(f), ARM. The District Court’s determination that Hafner’s conduct amounted to misconduct under § 39-51-2303(1), MCA, was correct. Stine, 879 P.2d at 56.

Accordingly, we affirm.

CHIEF JUSTICE TURNAGE, JUSTICES ERDMANN, NELSON and GRAY concur.

JUSTICE HUNT

dissenting.

I dissent. The majority opinion ignores the obvious and clearly stated reason for Hafner’s dismissal and, further, countenances a result which the Department’s own regulations would not allow, if they were correctly followed.

1. The reason for Hafher’s termination was his status as a plaintiff in a case against Conoco.

This Court usually adheres to the general legal principle that, in the absence of an ambiguity, a document should be presumed to mean precisely what it says. We have repeatedly acknowledged this principle when construing contracts and statutes. See, for example, Carbon County v. Dain Bosworth, Inc. (1994), 265 Mont. 75, 874 P.2d 718; Farmers Alliance Mutual Insurance Co. v. Holeman (Mont. 1996), 924 P.2d 1315, 53 St.Rep. 904. Yet, for some reason, the majority ignores this very sensible legal rule in this case.

The dismissal letter from DuBray to Hafher states, unequivocally and in plain English, “[t]he reason for [Hafner’s] termination for cause is that [he is] the Plaintiff in a lawsuit entitled Hafner v. Conoco.” Nothing could be clearer. The majority, however, goes to great lengths to attempt to show that, while that may be what the letter says, that is not what the letter means. The majority contends that “[w]hen that statement is put in the context of the whole letter, it is apparent that [Hafher] was terminated not for suing Conoco, but for failing to advise DuBray that he was suing Conoco ...” Such a conclusion is not apparent to me. The termination letter means no more, and no less, than exactly what it says: Hafner was fired because he was the plaintiff in a lawsuit against Conoco. Such a firing is plainly illegal under § 49-2-301, MCA.

2. There is a significant difference between an actual conflict of interest and a potential conflict of interest.

The majority opinion fails to distinguish between a potential conflict of interest and an actual conflict of interest when the recognition and application of this distinction is crucial to the fair disposition of this case. Instead, the majority presumes the existence of an actual conflict of interest throughout its opinion, and this presumption dictates the opinion’s obvious result.

In making such a presumption, the majority perpetuates an error originally made by the hearings examiner, whose findings and conclusions were accepted without question at every level. Like the majority of this Court, the hearings examiner failed to distinguish between an actual and a potential conflict of interest, but instead proceeded under the erroneous assumption that the there is no difference between the two.

In contrast, Hafner himself distinguished between an actual and a potential conflict of interest and has tried without success to make those involved in the appeals process understand what he was talking about. At the hearing, Hafner testified as follows:

Q: In any event you see and would agree with me that at a minimum your claim against Conoco, Inc., could be potentially a conflict of interest, is that correct?
Hafner: Potentially?
Q: Yes.
Hafner: Yes, I’ll agree with potentially.
Q: Okay. And you don’t think that it ever turned into a conflict of interest because you governed yourself so that you did the best work possible, you put to the side your lawsuit against Conoco, Inc., and you did the job well and satisfactory [sic], is that a fair characterization?
Hafner: That’s fair.

Hafner did not feel that his actions constituted misconduct because the potential conflict of interest (which he freely acknowledged existed) never ripened into an actual conflict of interest. As noted above, this is a distinction that the hearings examiner never addressed. Instead, the examiner found that Hafner was “discharged from employment for failing to disclose a potential conflict of interest to [his] employer.” (Emphasis added). The examiner further concluded that this failure to disclose a potential conflict, of interest constituted misconduct and that DuBray’s firing of Hafner was justified because of this misconduct.

But on its “claimant separation information” form, the Department itself states that “ [t] o justify a finding of misconduct it must be shown that the matter was within the individual’s control and the behavior must have had a direct adverse effect on the employer’s business interests.” (Emphasis added.) By this definition, the Department implicitly recognizes the difference between a potential conflict of interest, which does not directly adversely impact the employer’s interests, and an actual conflict of interest, which does. In order for an employee’s actions to constitute misconduct, the employer must show the existence of an actual conflict of interest which has a direct adverse effect on his business.

DuBray was asked during the hearing to explain how his business had been impacted by Hafner’s actions. He replied that “we haven’t done a billable hour for Conoco since [Hafner] left our employ.” Yet there is no explanation for how or why Hafner was responsible for this. Asked again what business interests Hafner’s actions affected, DuBray responded,

It affects my, the, my agent/client relationship that I have, and the fact that Mr. Hafner was carrying a checkbook that was Conoco’s checkbook, and my checkbook and that he had an obligation to me to notify me of any potential conflicts of interest that he had. To notify Dubray Land Services. He did not.

(Emphasis added.) DuBray’s response does not reveal any direct adverse effect on his business; rather, it reveals his belief that his firing of Hafner for a potential conflict of interest was justified. The fact is, however, that neither DuBray’s testimony nor any other evidence presented demonstrated the direct adverse effect on the employer’s business which is a prerequisite for a finding of misconduct.

Hafher’s potential conflict of interest did not rise to the level of an actual conflict of interest. It did not have a direct adverse impact on DuBray’s business and therefore did not constitute misconduct. Without a finding of misconduct, DuBray’s firing of Hafiier was not justified, and the hearings examiner’s findings to the contrary are clearly erroneous. For these reasons, I dissent from the majority opinion.

JUSTICE TRIEWEILER concurs in the foregoing dissent.