author: JUSTICE BARZ

text:
    PACIFIC POWER & LIGHT COMPANY, Portland General Electric Company, Washington Water Power Company, Puget Sound Power & Light Company, and The Montana Power Company, Plaintiffs and Appellants, v. MONTANA DEPARTMENT OF REVENUE, et al., Defendants and Respondents.
    No. 90-212.
    Submitted Dec. 6, 1990.
    Decided Jan. 10, 1991.
    Rehearing Denied Feb, 14, 1991.
    246 Mont. 398.
    804 P.2d 397.

      Donald R. Murray, Jr., Murphy, Robinson, Heckathorn & Phillips, P.C., Kalispell, and Thomas H. Nelson, Stoel, Rives, Boley, Jones & Grey, Portland, Or., for plaintiffs and appellants.
    David W. Woodgerd, Chief Legal Counsel, Paul Van Tricht, Tax Counsel, and Larry G. Schuster, all of Dept, of Revenue, Helena, for defendants and respondents.
   JUSTICE BARZ

delivered the Opinion of the Court.

Appellants appeal an order of the First Judicial District Court, Lewis and Clark County, in a consolidated proceeding for declaratory and injunctive relief, upholding the validity of the Montana Department of Revenue’s (DOR) assessment of beneficial use taxes against the appellants pursuant to § 15-24-1203, MCA. Appellants are challenging the beneficial use taxes for tax years 1985, 1986, and 1987, upon certain federally-owned 500 kilovolt (KV) transmission lines located between Townsend, Montana, and the Idaho border. The District Court granted DOR’s motion for partial summary judgment on res judicata grounds and held that this Court’s earlier decisions in Pacific Power and Light Company v. Montana Department of Revenue (1989), 237 Mont. 77, 773 P.2d 1176, and Portland General Electric Company v. Montana Department of Revenue (1989), 237 Mont. 324, 773 P.2d 1189, were dispositive of some of the issues before the District Court. On January 25,1990, following trial on the remaining issues, the District Court entered an order denying the appellants’ claims. The District Court held that the Colstrip Owners had not sustained the burden of proving that the assessment of the beneficial use taxes had violated any statutory or constitutional rights. We affirm.

The factual background leading up to this case has been previously set forth in Pacific Power and Light and Portland General Electric, therefore, we will discuss only the facts necessary to dispose of the relevant issues.

The appellants (Colstrip Owners) are five investor-owned utilities which own undivided interests in coal-fired generating plants at Colstrip, Montana. The Colstrip Owners (Pacific Power & Light Company (PPL), Puget Sound Power & Light Company (Puget) Washington Water Power Company (WWP), Portland General Electric Company (PGE), and Montana Power Company (MPQ), have been assessed beneficial use taxes under § 15-24-1203, MCA, for tax years 1985, 1986, and 1987 with regard to the use of the 500 KV federally-owned transmission line between Townsend and Garrison, Montana, and for tax years 1986 and 1987 with regard to the 500 KV federally-owned transmission lines between Hot Springs, Montana and the Idaho border and between Garrison and the Idaho border.

The Colstrip Owners constructed Colstrip Units 3 and 4 in 1983 and 1985 respectively. Units 3 and 4 each generate 700 megawatts of electricity for transmission west. The energy from the Colstrip units is transmitted over the Colstrip Owners’ two 500 KV transmission lines to its substation at Broadview, Montana, and from the Broadview substation over the Colstrip Owners’ 500 KV lines to a point near Townsend, Montana. At Townsend, the 500 KV lines interconnect with the Bonneville Power Administration’s (BPA) 500 KV transmission lines. BPA constructed a substation on the Hot Springs to Idaho border 500 KV line (referred to as the “Taft substation”) and a Garrison to Taft 500 KV line, to accommodate the increased energy from Colstrip Units 3 and 4. Prior to the completion of the Garrison to Taft 500 KV line, there was no interconnecting 500 KV line west from the Garrison substation. The Garrison to Taft 500 KV line became operational in October, 1985, and was declared available for service in January, 1986. Colstrip power first flowed from the Garrison substation across the Garrison to Taft line during October, 1985. At the Garrison substation, two 230 KV lines run north and interconnect with the Hot Springs substation. These 230 KV lines were known as the “bottleneck” and were the only means of transmitting power west from Garrison prior to BPA’s construction of the Garrison to Taft 500 KV fine.

The transmission of Colstrip energy from the Garrison substation west, is governed by a series of agreements referred to as the “Garrison West” agreements, entered into by each of the Colstrip Owners with BPA. The transmission demands of each Colstrip Owner as set forth in their respective Garrison-West agreements served as the basis for DOR’s allocation of the beneficial use tax. The total cost of the BPA transmission facilities were allocated to the Colstrip Owners as a ratio of each Colstrip Owners’ transmission demand over the total capacity of the lines. This allocated cost was then multiplied by 50% and added to each Owner’s respective allocated Montana value. All the Colstrip Owners were assessed the beneficial use tax on this basis for use of the Townsend to Garrison segment in tax years 1985, 1986, and 1987. Four of the Colstrip Owners (MPC was not assessed beneficial use taxes for the facilities west of the Garrison substation) were assessed the tax on this basis for the use of the Garrison to Taft substation segment of the transmission line system for tax years 1986 and 1987, and for the use of the Taft to Idaho border segment for tax years 1986 and 1987. PPL was also assessed the tax on this basis for its use of the Hot Springs to Taft transmission line system for tax years 1986 and 1987.

Appellants raise six issues on appeal:

1. Whether the District Court erred by assuming jurisdiction to decide the legality of the tax assessments prior to a final determination by the State Tax Appeals Board (STAB).

2. Whether the assessment of beneficial use taxes pursuant to § 15-24-1203, MCA, violates the Supremacy Clause of the United States Constitution by discriminating against the United States or the Colstrip Owners.

3. Whether the Colstrip Owners’ previous constitutional claims are barred by the doctrine of collateral estoppel.

4. Whether the taxes assessed for tax year 1986 on the Garrison-Taft 500 KV line were unlawful or illegal.

5. Whether DOR’s methodology erroneously assumes that all power transmitted west of Garrison passes over the 500 KV federal lines and thereby discriminates against interstate commerce by imposing disproportionate taxes.

6. Whether DOR’s new assessment methodology (50% weighting) is unconstitutional.

The Colstrip Owners contend that the lower court could not properly evaluate the constitutional questions before it, until after STAB had made a final determination concerning the methodology and amount of the assessments. It is the Colstrip Owners’ position that the taxes imposed are excessive and discriminatory and, therefore, since questions of discrimination are often questions of degree, the underlying considerations necessary to properly determine the constitutional issues were not yet decided. We disagree.

This Court has previously held that questions of “constitutional and statutory correctness” are properly decided by the courts. Larson v. State (1975), 166 Mont. 449, 457, 534 P.2d 854, 858. The question of whether the tax itself is unconstitutional bears upon the statutory language of the tax. On the other hand, the question of whether the tax is unconstitutional as applied pertains to the circumstances under which the tax is imposed. The interpretation of either the statutory language or the circumstances surrounding imposition of a tax is not necessarily associated with the amount of that tax. If we determine that a tax is unconstitutional, either on its face or as applied, such determination can certainly be made independent and apart from any analysis of whether the tax is excessive. Therefore the constitutional issues presented by this appeal do not hinge upon the determinations STAB makes concerning the methodology and amount of the assessments.

The second issue raised by appellants is whether the 1987 amendment to § 15-24-1203, MCA, violates the Supremacy Clause of the United States Constitution, Article VI, § 2, as construed by the U.S. Supreme Court in United States v. City of Manassas (4th Cir. 1987), 830 F.2d 530, affirmed (1988), 485 U.S. 1017, 108 S.Ct. 1568, 99 L.Ed.2d 884. The Colstrip Owners argue that because the 1987 amendment results in exempting from beneficial use taxes State-owned property used for railroad transportation, it thereby violates the rule in City of Manassas. The Fourth Circuit stated in City of Manassas that it is unconstitutional for States to tax users of federal property when similarly situated users of State property are exempt from taxation. City of Manassas, 830 F.2d at 534. The test to determine whether a State tax is unconstitutionally discriminatory was first set out by the United States Supreme Court in Phillips Chemical Co. v. Dumas School District (1960), 361 U.S. 376, 80 S.Ct. 474, 4 L.Ed.2d 384. The Court held that where those dealing with federal property are subject to greater use taxation than those dealing with State property, the statutory distinction “must be justified by significant differences between the two classes.” Phillips Chemical Co., 361 U.S. at 383, 80 S.Ct. at 479, 4 L.Ed. 2d at 389. It is true that the 1987 amendment to § 15-24-1203, MCA, exempts users of State-owned rail lines from beneficial use taxes. However, after a thorough examination of the legislative history supporting this amendment, it becomes evident that there are “significant differences” between the railroads and the utilities (Colstrip Owners).

Chapter 591,1987 Laws of Montana, was intended to exempt from beneficial use taxation two proposed tourist railroads which were to be run by non-profit corporations. See Senate Comm. on Business and Industry, Minutes on S.B. 272, 50th Leg., 4-5 (Feb. 18, 1987).

The State-owned railroad line in question had been acquired by the State as “abandoned” property under § 60-11-111, MCA, and consisted of a combined distance of thirty miles of track. The two non-profit railroads were designed to promote tourism in the form of an added attraction to parts of historic Montana.

The railroads’ situation is much different than that of the Colstrip Owners. The Colstrip Owners’ primary business pin-pose is to make a profit. The use of the federally-owned transmission lines provide the Colstrip Owners the potential to significantly increase revenues. The United States Supreme Court in City of Detroit v. Murray Corp. (1958), 355 U.S. 489, 78 S.Ct. 458, 2 L.Ed. 2d 441, held it proper for a State to tax government property, used by a private party, in the course of the party’s own business. This is precisely what is being done in this case. The Colstrip Owners are being taxed for their use of federal property. This Court has already determined that “beneficial use” does not necessarily require “physical possession, exclusive use or control of the facilities.” See Portland General Electric Co., 237 Mont. at 329, 773 P.2d at 1192. Therefore, we hold that § 15-24-1203, MCA, and the 1987 amendment does not discriminate against the United States or the Colstrip Owners.

The third issue is whether the Colstrip Owners’ previous constitutional claims raised in Pacific Power and Light, 237 Mont. 77, 773 P.2d 1176, and Portland General Electric, 237 Mont. 324, 773 P.2d 1189, are barred by the doctrine of collateral estoppel. As we recently stated in Smith v. Schweigert (1990), 241 Mont. 54, 785 P.2d 195, collateral estoppel is a form of res judicata, and whereas res judicata bars the same parties from relitigating the same cause of action, collateral estoppel bars the same parties from relitigating identical issues that have already been decided in a different cause of action. There are three elements that must be satisfied in order for collateral estoppel to apply. First, the issue must be identical to an issue that has been decided in a prior adjudication. Second, a final judgment on the merits must have been made in the prior adjudication. Third, the party against whom the plea is made must have been a party, or have privity to the party, in the prior adjudication. Smith at 58, 785 P.2d at 197. In applying each element in turn to the facts of this case it becomes clear that collateral estoppel should be applied. The Colstrip Owners do not dispute the fact that the previous constitutional claims raised in Pacific Power and Light, 237 Mont. 77, 773 P.2d 1176, for the 1984 tax year, and Portland General Electric, 237 Mont. 324, 773 P.2d 1189, for the 1985 tax year, are again being asserted in this litigation. The appellants now assert the identical claims for the 1985,1986 and 1987 tax years. The fact that different tax years are being challenged makes no difference. The constitutional challenges remain the same, and it is the substance of these challenges that have failed. The year in which they were brought has no bearing upon their lack of success. Allowing the Colstrip Owners to raise the same challenges to the same tax each subsequent tax year serves no purpose. If such were the case, each new year would provide a clean slate for any and all previous claims to be readjudicated. The challenges are identical to the issues raised in the previous cases before this Court and thus satisfy the first element.

Likewise, this Court issued a final judgment with respect to those claims in Pacific Power and Light, 237 Mont. 77, 773 P.2d 1176, and Portland General Electric, 237 Mont. 324, 773 P.2d 1189, thereby satisfying the second element. That judgment was made after oral argument and at a time much closer to our thorough consideration of the issues. Reconsideration of those issues as the Colstrip Owners would have us do, at a much later time such as now, would not be correct.

The third element is also satisfied. In both the prior cases and the case at bar, DOR is the party against whom these issues were raised. In fact, all parties in this lawsuit have been parties in the prior adjudication. Consequently, the Colstrip Owners’ previous constitutional claims have been adjudicated and are barred by collateral estoppel from being raised a second time.

The fourth issue is whether the taxes assessed for tax year 1986 on the Garrison to Taft 500 KV line were unlawful or illegal. This issue will be discussed concurrently with the fifth issue, whether DOR’s methodology erroneously assumes that all power transmitted west of Garrison passes over the 500 KV federal lines. Section 15-1-406, MCA, was enacted by the legislature in 1981 to provide an aggrieved taxpayer with an alternative means of challenging the imposition of a tax. Likewise, § 15-2-307, MCA, was enacted to provide an aggrieved taxpayer an alternative means of challenging the method or procedure of assessment. Under both sections a taxpayer may proceed directly to district court in the form of a declaratory judgment action. However, if a challenge is initially brought under Title 15, Chapter 2 of the MCA, pursuant to § 15-1-402, MCA, a taxpayer is required to exhaust the available administrative remedies before proceeding to the courts. See § 15-1-402(2), MCA. The Colstrip Owners chose to bring issues four and five before STAB in accordance with Title 15, Chapter 8, MCA, and Title 15, Chapter 2, MCA, respectively. Had the issues been raised directly to district court in the form of a declaratory judgment action, they would properly be before this Court. But because these issues were initially brought before STAB, they must be first dealt with at that level. Any decision STAB makes may be appealed through district court to this Court.

The final issue deals with a revision of assessment methodology. As the District Court stated in its denial of the Colstrip Owners’ Motion for Leave to File First Amended Complaints, under § 15-8-601(3)(c), MCA, challenges to revisions in assessments must be made by appeal to STAB. The District Court correctly refused to hear this issue and, therefore, we will not hear it either. Once the issue has been brought before STAB a proper judicial review will then be available to the appellants.

The decision of the District Court is affirmed.

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


source: Caselaw Access Project

author: JUSTICE WEBER

license: Public Domain

text:
    SIDNEY P. KURTH, Plaintiff and Appellant, v. GREAT FALLS TRIBUNE COMPANY and COWLES MEDIA COMPANY, its parent company, Defendants and Respondents.
    No. 90-268.
    Submitted on briefs Nov. 15, 1990.
    Decided Jan. 10, 1991.
    Rehearing Denied Peb. 14, 1991.
    246 Mont. 407.
    804 P.2d 393.

      James Graves, Stephens & Graves, Billings, for plaintiff and appellant.
    Peter Michael Meloy, Helena, for defendants and respondents.
   JUSTICE WEBER

delivered the Opinion of the Court.

The plaintiff, Sidney P. Kurth (Kurth) brought this action for defamation in the Eighth Judicial District, Cascade County, seeking damages suffered as a result of an article published by the defendant, Great Falls Tribune (Tribune). The District Court granted summary judgment in favor of the Tribune. We reverse and remand for further proceedings consistent with this opinion.

The issues presented are:

1. Did the District Court err when it determined that Kurth is a public figure as a matter of law?

2. If Kurth is a public figure, did the Tribune act with actual malice?

Kurth brought this action against the Tribune for defamation arising out of a newspaper article which appeared in the Tribune on February 3,1984. The article reported that Kurth was sought for at least nine “criminal” charges. The falsity of the publication was acknowledged by retraction on December 14, 1985.

The article was one of a series of news stories arising out of the activities of Multi-Management Corporation (MMI) and its principles, including an MMI corporate officer, Karl Herrman, and MMI’s legal counsel, Sidney Kurth. In early February of 1984, a local Great Falls television station reported that Herrman and Kurth had been evicted from their London apartment where they were purportedly staying while attempting to negotiate a $350 million loan in behalf of MMI to build a large grain processing plant in Great Falls. A reporter for the Tribune was assigned to watch the television news report and write a story for the next morning’s paper. The reporter watched the television report and wrote the story which is the subject of this lawsuit. The story reported the eviction of Herrman and Kurth. In deposition, the reporter testified he was certain that the television report mentioned other Kurth “charges” but was unable to remember whether the stoiy characterized them as “criminal.”

As background for the story, the reporter read a number of previous stories on the MMI activities and the troubles associated with the principles of MMI. Because the reporter was close to deadline, he failed to verify that Kurth was sought for “criminal” charges.

Kurth seeks special damages for loss of income, impairment of employability, and loss of professional standing as an attorney in a sum to be determined at time of trial. He also seeks general compensatory damages and punitive damages.

Did the District Court err when it determined that Kurth was a public figure as a matter of law?

A summaiy of the history of defamation law in the United States, and in particular in Montana, is in order.

There are two status categories that have emerged in United States Supreme Court decisions that determine the amount of fault that plaintiff must prove in order to recover in a defamation suit. If the plaintiffwas a public figure at the time of the alleged libel, then he cannot recover unless he can show the statement was made with actual malice. New York Times v. Sullivan (1964), 376 U.S. 254, 279-280, 84 S.Ct. at 710, 725-726, 11 L.Ed.2d 686. Public figures are subdivided into two subcategories, public figure’s for all purposes and public figures for a limited purpose. All purpose public figures have achieved such pervasive fame and notoriety that they become public figures for all purposes and in all contexts. Limited purpose public figures have voluntarily injected themselves or were drawn into a particular public controversy and thereby become public figures for that limited range of issues. Gertz v. Robert Welsh, Inc. (1974), 418 U.S. 323, 94 S.Ct. 2997, 41 L.Ed.2d 789. In either case, public figure plaintiffs must show the statement was made with actual malice which means it was published “with knowledge that it was false or with reckless disregard of whether it was false or not.” New York Times, 376 U.S. at 280, 84 S.Ct. at 726.

The second status category is that of private figures. This category has also been divided into two subcategories by the United States Supreme Court. A private figure is usually not involved in any matter of public concern. However, a private figure may be involved in a matter of public concern and remain a private figure. Milkovich v. Lorain Journal Co., (1990), _U.S._ ,_ ,_ , 110 S.Ct. 2695, 2704, 2707, 111 L.Ed. 2d 1, 15, 19. A private figure must show some degree of fault to recover from a publisher or broadcaster but does not have to prove actual malice except to recover presumed or punitive damages. Gertz v. Welch, 418 U.S. 323, 347, 349, 94 S.Ct. 2997, 3010, 3011.

In the case at bar, the controversy is a matter of public concern as evidenced by the news media coverage of MMI’s activities over a period of several years. The issue is whether Kurth became a public figure through his involvement with MMI or whether he remained a private figure throughout. An attorney does not become a public figure merely because he represents a client who is of concern to the public. Gertz, 418 U.S. 323, 94 S.Ct. 2997,Madison v. Yunker (1978), 180 Mont. 54, 66, 589 P.2d 126, 133. The District Court determined that Kurth was involved with MMI as more than an attorney and had become a public figure as a matter of law. Private figures become public figures when they “thrust themselves to the forefront of particular public controversies in order to influence the resolution of the issues involved.” Gertz, 418 U.S. at 345, 94 S.Ct. at 3009.

In Montana, questions of law, as well as questions of fact, are questions for the jury in libel and slander cases.

“In Gertz v. Robert Welch, Inc., supra, it was held that a lawyer was not a public official, although he had taken on a prominent case and was by virtue of his profession an officer of the court. Likewise, it may be contended in the retrial that Madison is a ‘public figure.’ Whatever his status, it is a question for the jury to determine, because of the constitutional provision that the jury under the instructions of the court is the judge of both law and fact. Article II, Section 7,1972 Montana Constitution. With appropriate instructions, the jury can determine these matters and their status in any trial, unless otherwise stipulated. ” (Emphasis supplied.)

Madison v. Yunker (1978), 180 Mont. 54, 66, 589 P.2d 126, 133. Article II, Section 7 of the 1972 Montana Constitution states:

Section 7. Freedom of speech, expression, and press. No law shall be passed impairing the freedom of speech or expression. Every person shall be free to speak or publish whatever he will on any subject, being responsible for all abuse of that liberty. In all suits and prosecutions for libel or slander the truth thereof may be given in evidence; and the jury, under the direction of the court, shall determine the law and the facts.” (Emphasis supplied.)

For a jury to determine the law is unique to libel and slander cases, and has been a part of Montana constitutional law since the Constitution was first adopted in 1889. In Griffin v. Opinion Publishing Co. (1943), 114 Mont. 502, 512, 138 P.2d 580, 586, this Court interpreted the provision by stating:

“While our Constitution like that of Missouri, Colorado, South Dakota and Wyoming provides that in libel suits ‘the jury, under the direction of the court, shall determine the law and the facts,’ yet the decisions clearly show that the function of the court and jury is not greatly different in the trial of libel from what it is in other cases.
“In other words, it is for the court and not the jury to pass upon demurrers to the complaint; upon the admissibility of the evidence; upon motions for nonsuit; upon motions for a directed verdict; upon motions for a new trial and upon motions to set aside verdicts or vacate judgments.”

In Williams v. Pasma (1982), 202 Mont. 66, 656 P.2d 212, this Court held that it is also appropriate for the court to grant summary judgment in libel and slander cases when there are no material issues of fact and the evidence supports the judgment as a matter of law.

That is not the situation with the case at bar. In its Opinion and Order dated March 30, 1990, the District Court listed the following factors on which it based its finding that Kurth is a public figure as a matter of law:

This Court bases its findings upon the following:

“(1) Mr. Kurth was the registered agent, assistant secretary, director and incorporator in 1979 of International Food and Fuel Manufacturing Co., Inc. This corporation was consolidated with Multi-Management, Inc. (Exhibit 5 to Defendant’s motion for summary judgment and Sidney Kurth Deposition P. 9). Sidney Kurth was representing I.F.F. at a presentation to raise money for a grain processing plant. This process was taken over by Multi-Management when the consolidation with I.F.F. occurred. In the process of consolidation, Sidney Kurth became an attorney for Multi-Management together with Karl Herrman, Sr. Plaintiff Kurth became a shareholder in Multi-Management, Inc. and served on committees for Multi-Management. He was unsure whether he had ever been an officer in MMI. (Kurth Deposition p. 9-10)

(2) The Multi-Management story was a newsworthy item in the Great Falls area from the beginning. (Exhibits 7, 8, 9, 10, 12, 13, 14) (Sweeny Deposition p. 19)

(3) On February 19, 1982, the State Auditor’s office filed suit in district court in Great Falls charging MMI and its various agents and representatives with violations of the State’s securities laws. The violations charged included both registration violations and fraudulent practices. A temporary restraining order was issued on February 19, 1982 prohibiting further sales of securities by Multi-Management, Inc. and its agents and representatives and prohibiting Multi-Management and its agents and representatives from attempting to raise money. On August 25,1982, Judge McCarvel ordered MMI officials to show cause why they should not be held in contempt for violation of the restraining order (CDV82-171).

(4) Among the violations charged by the State Auditor was the issuance, on May 12, 1982, of stock certificates to Sidney Kurth. The State Auditor further alleged that on May 12,1982, Karl Herrman had, in Sidney Kurth’s offices in Billings, Montana, issued stock to various other persons. (CDV-82-171)

(5) On October 13, 1982, Judge Roth entered his Findings of Fact and Conclusions of Law finding Karl Herrman, Jr. in contempt of Court. (CDV-82-171)

(6) Sidney Kurth and Karl Herrman, Jr., were in Europe at this time attempting to secure financing for Multi-Management, Inc. Sidney Kurth and Karl Herrman, Jr. remained in Europe for a period of two (2) years meeting with various European and Arab sources attempting to secure loans. (Kurth Deposition p. 10-40) While there, Sidney Kurth ran up a bill of $66,000.00 on his personal credit card for expenses. (Kurth Deposition, p. 39)

(7) In February of 1983, Sidney Kurth’s law firm in Billings was closed due to Mr. Kurth’s Multi-Management activities. Mr. Kurth was no longer named as a partner or associate.

(8) In June of 1983, Kurth was sued by a client for malpractice. He was also the subject of a number of actions for debt collection.

(9) In 1983, Multi-Management, Inc. and Multi-Management officers Karl Herrman, Jr., Warren HUI, and Robert Montforten were indicted by a federal grand jury. (United States District Court for the District of Montana, Great Falls Division CR-83-42-GF)

In determining whether Kurth became a public figure or remained a private figure, the factfinder must look to the nature and extent of his participation in the particular controversy giving rise to the defamation. Gertz, 418 U.S. at 352, 94 S.Ct. 3013. Factors 1- 6 and 9, as listed by the District Court, maybe evidence that the MMI story was a matter of public concern but the trier of fact must establish if and how Kurth was involved to the degree required to make him a public figure and not merely a private figure who was representing his client Factors 7 and 8 and the last sentence of factor 6 are irrelevant because no facts were presented showing these factors were ever a matter of public knowledge.

Rule 52(a), M-RCivP., in relevant part states:

“... Findings of fact and conclusions of law are unnecessary on decisions of motions under Rules 12 or 56 or any other motion except as provided in Rule 41(b). However, any order of the court granting a motion under Rules 12 or 56 which is appealable to an appellate court shall specify the grounds therefor with sufficient particularity as to apprise the parties and the appellate court of the rationale underlying the ruling and this may be done in the body of the order or in an attached opinion The court may require any party to submit proposed findings of fact and conclusions of law for the court’s consideration and the court may adopt any such proposed findings or conclusions so long as they are supported by the evidence and law of the case.” (Emphasis added.)

The District Court’s factors do not specify with sufficient particularity the rationale underlyingits ruling that Kurth is a public figure as amatter of lawto support a summary judgment. In addition, our review of the record convinces this Court that a genuine issue of material fact does exist as to whether Kurth became a public figure for a limited purpose or remained a private figure involved in a matter of public concern. We conclude that under both Rule 52(a) and Article II, Section 7 of the Montana Constitution there remain issues of material tact for determination by ajury

We hold that the District Court erred when it determined that Kurth was a public figure as a matter of law. Since our holding disposes of the appeal there is no need to address whether the Tribune acted with actual malice.

We reverse and remand for further proceedings consistent with this opinion.

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


author: JUSTICE McDONOUGH JUSTICE SHEEHY,

text:
    JOHN L. BINK, Plaintiff and Appellant, v. FIRST BANK WEST, GREAT FALLS, INC. and FIRST BANK SYSTEM, a Minnesota Banking Company, Defendants.
    No. 90-291.
    Submitted on briefs Nov. 1, 1990.
    Decided Jan. 10, 1991.
    246 Mont. 414.
    804 P.2d 384.
    Alexander Blewett, III, Hoyt & Blewett, Great Falls, for plaintiff and appellant.
    Stephen Bell, Dorsey & Whitney, Billings, Gene Daly, Helena, for defendants.
   JUSTICE McDONOUGH

delivered the Opinion of the Court.

This is an appeal from an order of the Montana Eighth Judicial District Court, Cascade County, awarding attorney fees to the plaintiff John Bink’s former attorney Gene Daly. The sole issue on appeal is whether the District Court erred in awarding these fees. We reverse and remand for a full hearing on the subject of attorney fees.

Bink contacted and retained Daly as his attorney for the purpose of litigating Bink’s cause for wrongful discharge in October of 1986. Bink makes several allegations regarding Daly’s performance as bis attorney. He also alleges that he eventually terminated Daly for cause. Bink contacted the law firm of Hoyt & Blewett in October of 1987 and requested that they take over his representation, asking Daly to step down as his attorney. Bink alleges that Daly continually refused to withdraw.

On November 30, 1987, Bink filed a formal motion for change of attorney with the District Court. On May 6,1988 at the hearing on the motion, the District Court agreed to sign an order allowing Hoyt & Blewett to proceed with Bink’s case provided Bink paid Daly $5,127.00 alleged as Daly’s costs attributable to his work on Bink’s case.

In its Order Substituting Counsel For Plaintiff, the court ordered

“that the law firm of Hoyt & Blewett of Great Falls, Montana, is substituted as counsel of record for the plaintiff in place of Attorneys Gene B. Daly, Joseph W. Duffy and Walter M. Hennessey.
“IT IS FURTHER ORDERED that John L. Bink shall immediately pay to Gene B. Daly the sum of $5,127.00.
“FURTHERMORE, IT IS ORDERED that Attorneys Gene B. Daly, Joseph W. Duffy, and Walter M. Hennessey have an attorneys’ hen on the claim of plaintiff, the amount of such lien to be determined in the appropriate manner at a later time.” (Emphasis added.)

Hoyt & Blewett took Bink’s case to trial on a one-third contingency fee basis, and on November 27, 1989 they received a verdict in favor of Bink against the defendants in the sum of $175,000.00. Approximately four months later, on April 3, 1990, without an appropriate motion, notice or hearing, the District Court issued a memorandum and order awarding Daly $19,796.06 in attorney fees from Bink.

We have continually held that a district court’s granting of attorney fees should be based on the introduction of competent evidence:

“[I]n contested cases we are inclined to follow those states requiring the introduction of proof from which a reasonable fee may be determined. To award a fee in such a case without proof would be to disregard the fundamental rules of evidence. An award of fees like any other award, must be based on competent evidence. See Lyle v. Lyle, (Fla.App.1964), 167 So.2d 256, 257. Furthermore, the proper determination of a legal fee is central to the efficient administration of justice and the maintenance of public confidence in the bench and bar.” (Emphasis added.)

Crncevichv. Georgetown Recreation Corp. (1975), 168 Mont. 113, 120, 541 P.2d 56, 59; see also First Security Bank of Bozeman v. Tholkes (1976), 169 Mont. 422, 429-430, 547 P.2d 1328, 1332; Talmage v. Gruss (1983), 202 Mont. 410, 412-413, 658 P.2d 419, 420-421. In its substitution order the District Court noted the amount of Daly’s lien would be determined later in the appropriate manner. The appropriate manner in this case is pursuant to a hearing. Thus, the court erred when it made the award without an evidentiary hearing and without the appropriate motion and notice required by Rule 5(a), M.R.Civ.P. Accordingly, we reverse the District Court’s order and remand the cause to a different judge for a determination of whether Daly was in fact terminated for cause and the total appropriate fees and costs, if any, to be awarded attorney Daly. Such award should be either increased or decreased as necessary by the prior award of $5,127.00 in alleged costs awarded to Daly.

REVERSED and REMANDED for further proceedings consistent with this opinion.

JUSTICES HUNT, BARZ and WEBER, and the HONORABLE TED MIZNER, District Court Judge sitting for JUSTICE HARRISON, and the HONORABLE FRANK M. DAVIS, District Court Judge, sitting for CHIEF JUSTICE TURNAGE, concur.

JUSTICE SHEEHY,

dissenting:

I dissent.

In this cause the district judge awarded Gene Daly a fee of one-third of any attorney fee recovered herein. While the order for Daly’s fee is couched in terms of the attorney fee received by the firm of Hoyt and Blewett, the responsibility for the payment of that fee is on the plaintiff, John L. Bink, unless when Hoyt and Blewett accepted employment by Bink, they agreed with Bink to pay whatever fees Daly had incurred at the time they took over the case. The amount of Daly’s fee, however, as ordered by the court is Vg of the total recovery of Bink, which, in the circumstances of this case, is a proper fee.

John L. Bink was discharged by his employer Banks on October 20, 1983.

Nearly three years later, on August 6, 1986, Bink requested Daly to represent him in his claims against the Banks. Daly was already engaged in suing the same Banks for two other former employees, for which cases he had plenty to do. Nevertheless, in the discussion with Bink in their first meeting, Daly agreed to represent Bink, and noted the impending date of the statute of limitations. Daly contends that he agreed to represent Bink for a contingent fee of 40%. Bink contends that the oral agreement was for 33 1/3%. (Of course, Daly should have obtained a written agreement from Bink.) The District Court apparently resolved this conflict in favor of the client by awarding Daly 1/3 of any attorney fees received.

In time to avoid the statute of limitations, Daly filed on Bink’s behalf a seven-page complaint against the defendants. That complaint contains all of the essentials upon which Bink’s case was eventually tried. The complaint was later amended once through an agreement with the Banks to eliminate John Reichel as a party defendant, after Daly’s services had been terminated. Aside from dividing into two counts the wrongful discharge claim and the negligence claim against the defendants, which causes were combined in Daly’s complaint, the allegations in the amended complaint are essentially the same as those in the complaint filed by Daly. There was never a pre-trial order issued in this case so the issues on which the case was tried were framed by Bink’s complaint, as amended, and the joint response of the Banks to the amended complaint. The joint response again is essentially the same as their original separate responses, except for the addition of some purported affirmative defenses which are in reality only repetitious of their earlier affirmative offenses in their first responses.

Bink moved in District Court to discharge Daly as his attorney on November 30, 1987. First West Side National Bank of Great Falls had filed its answer to the complaint. The answer of Reichel was filed on December 15, 1987, and that of First Banks System on December 23, 1987. The order substituting counsel was not granted until May 9, 1988, and then only after a hearing before Judge McEittrick.

In the hearing before the District Court on the motion to substitute counsel, the following colloquy occurred:

“THE COURT: Well, the main concern that I have right at the moment is Mr. Bink wants to move his case forward and there is a dispute. I think it’s —• it goes without saying that Mr. Daly is owed a certain amount of money, in addition to whatever the costs were.
‘What is your objection to just having a lien placed on the case, accepting the costs now and we can have a hearing on the other monies at a later date to allow the case to go forward?
“MR. DALY: I would go for that. And I’ve already explained to them that — their problem was I accept my cost and leave. I told them I would accept a cost, take a lien on the case and then decide what percentage of that case if settled I am entitled to.
“THE COURT: I think you are entitled — just for starters, from what I know about the case, you are entitled to more than your costs. That goes without saying here, and but I think for the benefit of the client, are you in a position to tender those costs now with the understanding that there are still monies owed, or at least the court is going to consider argument as to monies owed in the future?
“MR. BLEWETT: Your Honor, I guess we really aren’t because we don’t know what the costs are for Mr. Bink. We don’t know what work Mr. Daly has done. Mr. Bink tells us he has filed a complaint and a summons. [The actual state of the pleadings was set out above].
“Now, I am just willing to say he can prove his costs and he can prove his fees that he is entitled to later.
“THE COURT: I thought that tender of the $5,100 or $5,000 + was for cost?
“MR. BLEWETT: We are willing to say this is for everything and you are out of the case, Mr. Daly. And we’ll put this up now. I am not saying that it was — I don’t think Mr. Bink knows what he did for $15,000 had anything to do with Mr. Bink. We were just going to resolve —
“THE COURT: Weren’t depositions taken, pleadings filed?
“MR. BLEWETT: Not in Mr. Bink’s case. There hasn’t even been an appearance by the defense in Mr. Bink’s, to my understanding.
“MR. DALY: Your Honor, that is not true, but go ahead.
“MR. BLEWETT: I don’t know anything about it because we haven’t got the file.
“THE COURT: Here is what the court is focusing on. Mr. Bink is entitled to move his case forward, and this dispute should not hold it up. But I think you ought to get together and tender at least costs, and then the other amounts we ought to talk about at a later date to allow the case to go forward. If that is agreeable with everybody that would be agreeable with me.
“MR. BLEWETT: It is agreeable with us except I don’t and if his costs on John Bink’s case are $5,127 to date, we’ll pay that too, your Honor. I just don’t know that that is the case, and I guess we’re going to have to talk with John and see what he says.
“THE COURT: I think that is what that $5,100 is for. That’s what my understanding was, that was a tender of the costs.
“MR. BLEWETT: We’ll pay them, if he says that the $5,127 was for costs attributable to John Bink’s case, we’ll pay those costs to him on Monday.
“THE COURT: All right.
“MR. BLEWETT: And then —
“THE COURT: Then he has a lien on the case for the rest of it, and we’ll have a hearing to determine what the rest of those monies are at a later date.
“MR. BLEWETT: What the value of his lien is.
“THE COURT: Is that agreeable to everybody?
“MR. DALY: Yes, your Honor, that’s agreeable.
“THE COURT: We’ll be in recess.
“MR. BLEWETT: Would you like an order on that?
“THE COURT: Yes. Would you prepare the order, Mr. Blewett?
“MR. BLEWETT: Okay. Thank you.”

The order, signed by the court on May 6, 1988, provided in part:

“It is further ordered that John L. Bink shall immediately pay to Gene B. Daly the sum of $5,127.
“Furthermore, it is ordered that attorney Gene B. Daly, Joseph W. Duffy, and Walter M. Hennessey have an attorneys’ hen on the claim of plaintiff, the amount of such lien to be determined in the appropriate manner at a later time.”

From the foregoing, there could be no doubt that in the perception of the District Court, the amount of costs was agreed upon, was ordered to be paid, and that there would be further proceedings with respect to the lien on the cause in favor of Gene B. Daly.

While the order of the District Court permitted the substitution of counsel, it made no mention of the papers which had come into the possession of Gene Daly as the result of his representation of Bink. Daly refused to surrender those papers, as he explained in a June 8, 1988 letter to the firm of Hoyt and Blewett:

“To be real honest all of your delays result from your refusal to pay the money, first for costs and now, because my attorneys fees are contingent, a contract to guarantee the fees and percentage. The judge has made this abundantly clear.
“I am willing to give you my work product as soon as I am sure the matter is at rest — NO PROBLEMS.”

As will be demonstrated below, Daly’s legal position on the matter was absolutely correct.

A critical item in all of the pending cases against the Bank employers, but especially in this case for Bink, was a document described as First Bank System’s “New Direction,” a document which eventually led to the liability of First Banks System in this case. Daly had turned up information about the “New Direction” in his other cases, information which the Hoyt and Blewett attempted to get through another attorney in Great Falls. The following appears in a letter from the Hoyt and Blewett dated September 23, 1988 to the other attorney:

“When, in turn, I requested information concerning First Banks System’s New Direction’ and a copy of the deposition that Gene Daly took of Jim Connelly, I was astounded at your refusal to divulge this information to me.
“Now I understand that Mr. Daly is calling the shots for you and will not permit you to provide us with reciprocal information.”

Following that refusal, the firm of Hoyt and Blewett pursued its own discovery, and obtained the “New Direction” document. In the circumstances existing at the time, however, Bink had no legal claim to those papers from Daly. The document had been turned up by Daly’s work, and Hoyt and Blewett attempted to get it without going through Daly.

In Montana, there are two liens that an attorney acquires when he undertakes the representation of a client. The first is a statutory lien, set out in § 37-61-420, MCA, which provides in pertinent part:

“(2) From the commencement of an action or the service of an answer containing a counterclaim, the attorney who appears for a party has a lien upon his client’s cause of action or counterclaim which attaches to a verdict, report, decision or judgment in his client’s favor and the proceeds thereof in whose hands they may come. Such lien cannot be affected by any settlement between the parties before or after judgment.”

Daly’s statutory lien is the legal basis for the order of the District Court in this case awarding him V9 of the total recovery, that being the District Court’s assessment of the value of the services that Daly provided the client in the prosecution of the client’s claim.

There is however, another lien, a common law lien, that an attorney acquires in the retention of the papers that come to him in the course of his representation of a client. The retention hen, however, is lost, if the attorney gives up the client’s papers without first requiring either payment or security for his interest in the case. Required reading on this subject (I especially recommend it to the plaintiff’s bar) is Morse v. Eighth Judicial District Court (1948), 65 Nev. 275, 195 P.2d 199.

In Morse, the clients had entered into a contingent fee agreement with the Morse firm on July 11, 1947. The Morse firm filed a complaint on their behalf on December 1,1947. The defendants appeared by demurrer or motion to strike, and these pleas were pending when on April 12, 1948, the plaintiffs in the action filed a motion to substitute another attorney for the Morse firm. The motions were heard in the court on April 28, 1948, at which time the Morse firm stated there was no objection to the substitution of attorneys. The court thereafter entered an order substituting the attorneys, but requiring the Morse firm to turn over to the substituted firm all of their papers and correspondence pertaining to the suit. When the lower court did not rule on the motion of the Morse firm for rehearing, the firm petitioned the Nevada Supreme Court in an original proceeding, protesting the terms of the lower court order substituting attorneys. In the proceeding before the Supreme Court, Morse did not contest the power of the court to substitute attorneys. He maintained however, that the lower court was without jurisdiction to discharge and destroy the Morse firm’s attorney’s hen upon the papers in their possession and that their lien would be destroyed by delivering the papers in compliance with the order.

In deciding the case, the Nevada Supreme Court first distinguished between the statutory or “charging” lien and the lien on the attorney’s papers, called the “retaining” lien. The Nevada Court said:

“... But the ‘aforesaid lien’ quoted by respondents immediately preceding this assertion is the lien provided by § 89-23, NCL giving the attorney a lien upon his client’s cause of action which attaches to the judgment etc. and the proceeds thereof. This is a special or charging lien and was the kind of lien with which Mr. Justice Ducker was dealing in Berrum v. Georgetta, supra [60 Nev. 1, 93 P.2d 525 (1939)]. It is entirely separate, distinct and remote from a retaining lien. The lien affected by the lower court’s order in the present case is distinctly a retaining lien. This attaches to all papers, books, documents, securities, and money that come to the attorney in the course of his professional employment by the client without any special contract regarding it. The charging lien, such as considered in Berrum v. Georgetta, is a lien on the judgment obtained from the client for the attorney’s services rendered in obtaining it. The former depends upon possession. The latter does not. The former applies to a general balance for all professional services performed whether in the action itself or in prior actions or for general legal services. The latter attaches to the judgment or proceeds for services performed in the particular action only. The former is ‘passive’ and not enforceable by proceedings to foreclose, except as may be accomplished through some incidental proceeding. The latter may be actively enforced as in Berrum v. Georgetta...” 195 P.2d at 202.

The Nevada Supreme Court went on to point out that the adoption of a charging lien by statute does not abrogate the common law lien for retention of papers, pointing out that many federal and state courts have so held. In discussing the various authorities, and after a thorough review of other cases, the Nevada Court decided:

“... The record indicates that the court’s reasoning was simply that the right of substitution existed and that the substitution would have been a more or less vain act without providing the substituted attorney with the necessary data to enable her to continue the litigation, but, as has been seen, this is the very strength and purpose of an attorney’s retaining lien. The court was without jurisdiction to discharge and destroy such lien without providing for the payment or security for the payment of the attorney fees secured thereby.
“The clients complained bitterly that the tactics of the attorneys have greatly prejudiced the formers’ rights, have impeded and retarded litigation;...
“... Accordingly, it would seem that the extent of the recovery of the main action, although presently contingent and possibly problematical, should not make it difficult for the clients to provide such bond or security as may be fixed by the court. The litigation involving the attorney’s claim for fees and the client’s cross complaint for damages could then be tried and determined in an orderly manner.” 195 P.2d at 206-207.

The Nevada Supreme Court then entered an order requiring that the attorneys turn over the papers to the substituted attorneys, upon the clients providing a bond or other security in the amount of extent to be determined by the lower court.

The Morse case fits exactly the situation that Daly faced when he was substituted as counsel for the plaintiff Bink. He had framed a complaint upon which Bink’s case depended, he had received the answers from the defendants, and he had in his file the key to eventual liability, the “New Discovery” document. He informed the substituted counsel that he was holding these papers until a contract or other agreement was reached respecting his fee. He was absolutely legally correct to do so. Events have proved his foresight was correct. Not only does Bink refuse to pay him any fee, but even now he contests the cost bill to which his substituted attorneys agreed before the District Court.

It is sharper than a serpent’s tooth for a lawyer to have a thankless client. Bink, nearing the end of his time under the statute of limitations, found a lawyer with some expertise in the matter willing to take on his case on a contingent fee basis, and to advance costs of his behalf because Bink claimed that he had “no funds.” The District Court in this case was considerate in his award of a fee to Daly. One-ninth of a total recovery is little enough for the lawyer who saved Bink’s cause of action and whose efforts outlined its form, and through whom the clinching document was obtained.

When a client enters into a contingent fee contract with an attorney to pursue for the client a legal right, one would think that the basic principles of contract law should apply as with any other contract. An intervening problem when a breach of a contingent fee occurs is that even though the client is bound by the contract, as well as the attorney, the courts nevertheless are reluctant, through the application of ordinary contract law, to override the client’s freedom to retain counsel whom he trusts and in whom he has confidence, and to discharge an attorney with whom he is dissatisfied. The California experience is illustrative. Formerly, California held that an attorney employed under a contingent fee contract and subsequently discharged without cause was entitled to recover the full amount of the contingent fee agreed upon regardless of the amount of work he had put in the case and even though the success contemplated under the contingency was brought about by another attorney whom the client has substituted. Denio v. City of Huntington Beach, 22 Cal.2d 580, 140 P.2d 392 (1943); Zurich General Accident and Insurance Company v. Kinsler, 12 Cal.2d 98, 81 P.2d 913 (1938). In those cases, the breach of contract law was strictly applied. Later, however, in Fracasse v. Brent, 6 Cal.2d 784, 100 Cal.Rptr. 385, 494 P.2d (Cal. 1972), it was held that the remedy of a wrongfully discharged attorney was limited to recovery in quantum, meruit of the value of the services rendered up to the time of the discharge and that the attorney was not entitled to sue for full damages for the client’s breach of the contingent fee contract.

The State of Idaho, when faced with this problem, refused to follow either the former California cases or the Fracasse case, and said in Anderson v. Gailey, 100 Idaho 796, 606 P.2d 90, 96 (1986):

“Although the client is only liable for the attorney’s actual losses and not necessarily the full contract fee, a client who discharges one attorney and hires another will nevertheless pay more in attorney’s fees than if he had only retained the services of one attorney. The services performed by the second attorney will generally be somewhat duplicative of services already performed by the first attorney, and those duplicated services ordinarily would be reflected both in the first attorneys recovery and in the fees recovered by the second attorney. In- this sense, the client’s freedom to discharge an attorney is burdened. However, it is not inappropriate for the client to bear this burden where he has discharged his first attorney without cause. In sum, an application of general principles of contract law in this type of case will not generally result in the imposition of a significantly greater burden on the client than that which results from a recovery in quantum merit under the California courts rule in Fracasse.
“We conclude that a proper application of the general principles of contract law best remedies the evils pointed out by the California court in Fricasse, and yet does so without engaging in the dubious practice of finding ‘implied in law1 terms in the contingent fee contract and without stripping the attorney entirely of his right to rely on the contingent fee contract and to sue for its breach. The California court’s decision in Fracasse, as the dissent in that case noted, reduced ‘an attorney-client contract to a hollow and meaningless act’ and to an agreement that ‘may be dissolved into thin air at the mere whim of a client’ (citing authority). In our view, the attorney-client contract is still a contract, and either the attorney or the client is entitled to sue for damages for its breach.”

Based on the foregoing, the Idaho court remanded the cause to District Court with these instructions: The court was to consider the expenses saved by the first attorney because he was not required to complete the performance of the contract, and to consider the value to the first attorney of being relieved of his obligation to continue to perform those services and expend further time; in making those determinations on remand, the court was also to look to the services performed by the second attorney, the substituted counsel, as an indication of the services which remained to be performed and which the first attorney was no longer obligated to perform. It would also be recognized by the district court on remand that some of the services performed by the substituted counsel would be duplicative of those already performed by the first attorney and the first attorney's recovery on contract was not to be reduced by the value of those services. 606 P.2d at 96-97.

When push comes to shove on the remand of this case, the first duty of the trial court would be to find whether Daly was discharged for cause under the facts of the case. If he was discharged without cause, merely because the client was dissatisfied with the progress of the client’s case but was not otherwise prejudiced, then the rule adopted by the Idaho court in Anderson v. Gailey should apply as a proper rule in Montana. When the cause comes back to this Court, if it does, we will have a proper record on which to make a decision.

In the meantime, on the record before us now, I would affirm the District Court.


author: JUSTICE McDONOUGH

text:
    GEORGE DAVID LIX, Leonard Perkins, Richard Len Pitsch, and all other persons known and unknown, but similarly situated, Plaintiffs and Respondents, v. STEPHEN J. KENNEY, and CORY KENNEY, jointly, individually, and d/b/a STEPHEN J. KENNEY CONTRACTORS, Defendants and Appellants. DAVID L. HUNTER and THE DEPARTMENT OF LABOR AND INDUSTRY, Plaintiff and Respondent, v. STEPHEN J. KENNEY d/b/a STEPHEN J. KENNEY CONTRACTORS, Defendant and Appellant.
    No. 90-316.
    Submitted on briefs Nov. 29, 1990.
    Decided Jan. 10, 1991.
    246 Mont. 426.
    804 P.2d 391.

      Randall G. Nelson and Laurence R. Martin, Felt, Martin, Frazier & Lovas, Billings, for defendants and appellants.
    William Richardson, Butte, David Scott, Dept, of Labor and Industry, Helena, for plaintiffs and respondents.
   JUSTICE McDONOUGH

delivered the Opinion of the Court.

Stephen J. Kenney d/b/a Stephen J. Kenney Contractors appeals from an order of the Thirteenth Judicial District, Big Horn County, granting summary judgment in favor of the Department of Labor and Industry (Department) and George Lix, Leonard Perkins and Richard Pitsch, employees of Kenney Contractors. In its order, the District Court held that Kenney Contractors was liable for back wages, costs, penalties as required by § 39-3-206, MCA, and attorneys’ fees. We affirm.

The sole issue on appeal is:

Whether the District Court erred when it ruled that Kenney Contractors was bound by a contractual provision requiring it to pay its employees certain hourly wages.

In 1982, the City of Hardin solicited bids to build a pumphouse and river intake structure. The project qualified as a public works project subject to Montana’s Little Davis-Bacon Act. See §§ 18-2-401 through 432, MCA.

In March of 1982, Kenney Contractors successfully bid on the project and on May 21, 1982 signed a construction contract with the City. The contract, which was agreed to by all parties, contained a schedule of specific-prevailing wage rates such as $15.90 per hour, for a journeyman electrician. These rates were minimum wage determinations based on job classifications common in the construction industry. They were established by the Department pursuant to § 18-2-402(1), MCA. It is undisputed that Kenney Contractors failed to pay its employees according to the prescribed rates in the contract. On August 22, 1983, the Department filed a complaint against Kenney Contractors alleging that it failed to pay the wage rates as required by the contract. The Department sought damages in the form of unpaid wages, on behalf of the employees, and penalties for its failure to comply with the express terms of the contract.

Later, several employees of Kenney Contractors filed their own complaint, in which they sought damages for unpaid wages. The individual plaintiffs also sought permission to intervene in the Department’s action against Kenney Contractors and to join their claims to the Departments’ claim. On February 9, 1988, the District Court consolidated the two cases.

All parties moved for summary judgment. Following the submission of written briefs and hearing oral argument, the District Court granted partial summary judgment in favor of the Department and the employees. This appeal followed.

As stated above, the pumphouse and river intake structure qualified as a public works project under the Montana “Little Davis-Bacon Act.” Sections 18-2-401 - 432, MCA. This act requires contractors on public projects to pay their employees “the standard prevailing rate of wages ... applicable to the district in which the work is being performed.” Section 18-2-403(2), MCA.

In compliance with this mandate, the Department required a provision to be included in the contract, which directed Kenney Contractors to pay its workers according to the standard prevailing wages determined by the Department. A full and complete list in dollar amounts of these specific wages was appended to the contract.

Kenney Contractors maintains that it is not bound to pay these wages because the wage rates were not adopted in compliance with the Montana Administrative Procedure Act. See §§ 2-4-101 through 711, MCA. Therefore, because the rates were not determined in compliance with the law, Kenney Contractors argues that their inclusion constitutes an illegal provision in the contract. Because the provision is illegal, Kenney Contractors argues, it was not required to comply with its mandate and this Court is precluded from enforcing its language. See. e.g. MPH Company and Tropic Industries v. Imagineering, Inc. and Bill R. Williams (1990), [243 Mont. 342,] 47 St.Rep. 947, 792 P.2d 1081.

We disagree with this argument. Kenney Contractors relies heavily upon a district court case which held the Department of Labor did not have express rule making authority to determine standard prevailing wage rates. Therefore its determinations of these standards lacked the force of law. See Townsend Electric Inc. v. Dept. of Labor and Industry, First Judicial District No. 47160 (1983).

The decision in that case is not, however, applicable to the facts here. In the case now before us, Kenney Contractors expressly agreed to pay wage rates contained in the contract that it voluntarily executed with the City of Hardin. Therefore the issue presented for our review is one of contract law. It has nothing to do with administrative rule making authority. Furthermore, it is uncontested that Kenney Contractors failed to pay the contractually set wages. We disagree with its assumption that the wage provisions were illegal. These provisions were not contrary to law, public policy or good morals. See § 28-2-701, MCA.

We therefore hold that the District Court properly granted summary judgment. There are no genuine issues of fact and because Kenney Contractors is contractually bound to pay the wage rates, the Department as well as the individual employees are entitled to judgment as a matter of law. The order of the District Court is affirmed.

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


author: JUSTICE SHEEHY

text:
    SHIRLEY SPENCER, Plaintiff and Appellant, v. B.J. UKRA, individually and B. J. UKRA AND ASSOCIATES, Business Management and Tax Consultants, Defendants and Respondents.
    No. 90-333.
    Submitted Oct. 19, 1990.
    Decided Jan. 10, 1991.
    Rehearing Denied Feb. 14, 1991.
    246 Mont. 430.
    804 P.2d 380.

      George T. Radovich, Billings, for plaintiff and appellant.
    Scott G. Gratton, Anderson Brown Law Firm, Billings, for defendants and respondents.
   JUSTICE SHEEHY

delivered the Opinion of the Court.

Plaintiff Shirley Spencer appeals from an order of the Thirteenth Judicial District Court, Yellowstone County, dismissing her complaint against defendants B. J. Ukra, individually, and B. J. Ukra and Associates, and Business Management and Tax Consultants, for lack of personal jurisdiction. We reverse.

The sole issue raised by the parties on appeal is whether the District Court erred in granting Ukra’s motion to dismiss for lack of personal jurisdiction. The District Court had concluded that service of the Ukra defendants in California pursuant to Montana’s Long Arm Rule, 4B(1), M.R.Civ.P., was deficient because the District Court found that the exercise of jurisdiction over the Ukra defendants in the case at bar through service of summons under the Long Arm Rule would not be reasonable.

We have no need to determine those grounds on appeal however, because the District Court record shows that the Ukra defendants, before they raised the question of personal jurisdiction, had made a general appearance in the District Court action and subjected themselves to the jurisdiction of the District Court.

The complaint and the summons issued out of the Yellowstone County District Court in this case were served upon the defendants in California on January 6, 1989.

On February 9, 1989, there having been no appearance made by the Ukra defendants, on motion of counsel for the plaintiff, the District Court clerk entered the default of the Ukra defendants.

On March 7, 1989, the Ukra defendants, through their counsel, filed a written motion to set aside the default pursuant to Rules 55(c) and 60(b) M.R.Civ.P. The written motion recited that the summons and complaint were served on January 6,1989; that the Ukra defendants retained Montana counsel on March 4, 1989; that plaintiff’s counsel had stipulated to setting aside the default and that the defendants’ motion to set aside the default was made solely upon the grounds that through inadvertence and excusable neglect the defendants had failed to make an appearance within the time allowed by law. The concluding paragraph of the written motion stated:

“Therefore, Defendants hereby request an order setting aside the default issued by this Court and appear herewith and ask leave of Court allowing Defendants (20) days to file a response to the complaint.” (Emphasis added.)

On March 20, 1989, counsel for the Ukra defendants filed in the District Court two stipulations between counsel. One stipulation was to the effect that the default entered against the defendants could be set aside and that the defendants have 20 days thereafter within which to file “a response to the Complaint in this action.” The second stipulation provided that the Ukra defendants would have to and including April 11, 1989, to answer and respond to the plaintiff’s combined discovery requests propounded “upon” them on January 6, 1989.

On March 22, 1989, the District Court entered its order setting aside the default, based upon the motion of the Ukra defendants, and pursuant to the stipulation between counsel and granted the defendants 20 additional days within which to file “a response to the complaint in this action.”

On April 10, 1989, the defendants filed a motion in the District Court to dismiss the action for lack of personal jurisdiction and failure to state a claim pursuant to Rule 12(b), M.R.Civ.P.

Thereafter, after a series of briefs, motions for discovery and to compel discovery, and orders for the same, the District Court, on June 8,1990, dismissed plaintiff’s action for lack of jurisdiction over the defendants. It is from this order that plaintiff appeals.

The first appearance of the Ukra defendants in this case was a motion to set aside the judgment, based solely upon inadvertence and excusable neglect. No issue was raised at that time or in that motion of the lack of personal jurisdiction over the defendants. Motions to vacate a judgment on the ground of mistake, inadvertence, accident, surprise, or excusable neglect, and not on jurisdictional grounds, have been held to constitute a general appearance. 5 Am. Jur. 2d Appearance § 32, at 505-06.

The general rule is stated thusly:

“Personal jurisdiction may be acquired over a nonresident by his voluntary general appearance. If he makes such an appearance in person or by attorney, he submits himself to the jurisdiction of the court and the court may make a personal adjudication against him; he cannot, if -unsuccessful, avoid the effect of the judgment or other decision by urging that he was a nonresident and that the court pronouncing judgment against him had no jurisdiction over him.”

5 Am. Jur. 2d Appearance § 11, at 488.

This rule of general appearance is also estabhshed in Montana. In Haggerty v. Sherburne Mercantile Co. (1947), 120 Mont. 386, 395, 186 P.2d 884, 891, this Court said:

“In Gravelin v. Porier, 77 Mont. 260, 274, 250 P. 823, 826, this Court said: Tn fact, any act which recognizes the case as in corut constitutes a general appearance, and even in the face of a declared contrary intention, a general appearance “may arise by implication from the defendant seeking, taking, or agreeing to some step or proceeding in the cause beneficial to himself and detrimental to the plaintiff,” other than one contesting only the jurisdiction of the court.’ ” (Citing authority.)

The voluntary general appearance by the defendant is a waiver of the issuance or service of the summons and consequently of any defects or irregularities therein. Haggerty, 186 P.2d at 890.

Haggerty was decided before the adoption by this Court of our Rules of Civil Procedure modeled on the federal Rules. It is true that ordinarily, a defendant pleading under Rule 12(b), M.R.Civ.R, may raise the issue of lack of jurisdiction over the person, by motion, which shall be made before pleading further if a further pleading is permitted, or the objection to personal jurisdiction may be combined with other general defenses. However even under our Rules of Civil Procedure, such objection to lack of personal jurisdiction must be made at the time of the initial appearance in the District Court.

The point is illustrated in the Colorado case of Weaver Construction Co. v. District Court for El Paso City, (Colo. 1976), 545 P.2d 1042. In that case, involving two defendants, one had been served properly with summons and complaint, and the other had not. They filed a joint motion to set aside a default judgment under Colorado’s Rule 60(b) on the grounds (1) that there was a meritorious defense, and (2), that the judgment was void for lack of proper service. The Court stated the effect of those grounds:

“On or about October 15, 1975, defendants Robert and Joy Grinnell, through counsel, filed several documents with the District Court: an entry of special appearance, a motion to quash service of process, and a statement of meritorious defense. The filing of these documents was an attempt to appear solely for the purpose of contesting personal jurisdiction. Had the district cotut found that personal jurisdiction existed, then in the alternative the Grinnells would have entered a general appearance for the purpose of setting aside the default judgment and receiving a trial on the merits. Their statement of meritorious defense specified several grounds of defense to the merits of the allegations in the complaint.
“Ahearing on the motions was conducted on October 27,1975. The trial judge set aside the default judgment as to Robert Grinnell because of the lack of proper service and process, and as to Joy Grinnell because of ‘excusable neglect,’ and the presence of the statement of meritorious defense.”

Weaver, 545 P.2d at 1044.

The Colorado Supreme Court held that as to the person not served, the default judgment was vacated, but as to the other, the one moving for excusable neglect, the default was merely vacated. The Court explained as follows:

. “The general appearance subjected Robert Grinnell only to the jurisdiction of the court from the date of the appearance, and is not retroactive as to validate the void judgment. (Citing authority.) The subsequent filing of an entry of special appearance as an alternative pleading would have constituted a special appearance, avoiding the continuing jurisdiction of the court, had it been his initial appearance. However, once a person subjects himself to the jurisdiction of the court by entering a general appearance, he cannot withdraw the earlier appearance and escape the jurisdiction of the court.” (Emphasis supplied.)

Weaver, 545 P.2d at 1046.

In the case at bar, the Ukra defendants, having moved the court to set aside the default in their initial appearance, without at the same time preserving the question of lack of personal jurisdiction, consented to the general jurisdiction of the court and their appearance was general. This conclusion is also fortified by a written “Notice of Appearance” also filed by defendants on March 7, 1989, in the District Court which stated as follows:

“PLEASE TAKE NOTICE that the firm of Anderson, Brown, Gerbase, Cebull, Fulton, Harman, and Ross, P.C., by Scott G. Gratton, appears herein for the defendants B. J. Ukra, individually, and B. J. Ukra and Associates, Business Management and Tax Consultants and requests that you make service of all pleadings at the firm address.”

The foregoing notice of appearance also, under our statutes, is an appearance. The pertinent statute provides:

“25-3-401. Notice Requirements After Appearance of Defendant. A defendant appears in an action when he answers, files a motion, or gives the plaintiff written notice of his appearance or when an attorney gives notice of appearance for him or has such appearance entered in open court. After appearance, a defendant or his attorney is entitled to notice of all subsequent proceedings in which notice is required to be given.” (Emphasis supplied.)

The rule is that a party defendant may not first make the general appearance or file a motion submitting to the general jurisdiction of the court, which motion in effect recognizes the validity of the action taken by the court against him, and then later disputes the personal jurisdiction of the court over the defendant. Collings v. Phillips (1972), 54 Wis.2d 204, 194 N.W.2d 677. Because the Ukra defendants made an initial appearance to vacate the default without reserving the question of personal jurisdiction, their appearance was general, and waived all irregularities with respect to the service of process. Accordingly, the decision of the District Court is reversed.

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


text:
    JOHN HOLLAS and SHEILA HOLLAS, Plaintiffs and Appellants, v. JACK L. McLEOD, Jack McLeod and Associates, Inc., and Glenn Pryor and Lois Pryor, Defendants and Respondents.
    No. 90-429.
    Submitted on briefs Nov. 29, 1990.
    Decided Jan. 15, 1991.
    246 Mont. 436.
    804 P.2d 1038.
    David N. Hull, Helena, for plaintiffs and appellants.
    James E. Purcell, Butte, for defendants and respondents.
   JUSTICE WEBER

delivered the Opinion of the Court.

Plaintiffs John Hollas and Sheila Hollas sought specific performance of a contract for deed, naming Jack L. McLeod, Jack McLeod and Associates, Inc., (McLeods) realtors in the transaction, and Glenn Pryor and Lois Pryor, sellers in the transaction, as defendants. The District Court for the Second Judicial District, Silver Bow County, granted summary judgment to the McLeods. Plaintiffs appeal. We affirm.

The sole issue for our review is whether the District Court erred in granting summary judgment in favor of the McLeods.

On January 20, 1986, the Pryors listed their real property for sale with the McLeods. The plaintiffs made several offers to purchase the property, which resulted in the execution of a Contract for Deed on February 14, 1986 between the plaintiffs and the Pryors. Note that the Pryors were never served and are not parties to this appeal.

The Contract for Deed was executed on February 14, 1986 and provided that the purchase price of $30,000 was payable $20,000 upon execution of the agreement, with the balance of $10,000 payable in monthly installments of $192.65 at 9% over 5 Vi years. The contract also obligated the Pryors to provide the plaintiffs with an owner’s title insurance policy within 90 days after the execution of this agreement, guaranteeing that the Pryors owned the real property in fee simple absolute, free and clear of liens and encumbrances. In its review of the uncontested facts, the District Court summarized the same by pointing out that the plaintiffs went into possession of the property on March 7,1986; and the McLeods did not set up the escrow because the Pryors went into bankruptcy. The District Court referred to the various steps in the bankruptcy court which culminated in the 1989 petition to reopen the Pryor bankruptcy on the part of McLeods and resulted in a bankruptcy court order authorizing the sale of the property in question free and clear of any hens. At that point the McLeods had a title insurance policy issued which did show clear title as of that time in the Pryors.

In December, 1986, the McLeods dispersed the $20,000 retained in its trust account since February 20, 1986. Plaintiffs’ complaint against the McLeods alleges that they orally advised McLeod not to disburse the $20,000 down payment until there was a clear title. The plaintiffs also claim a breach of fiduciary duty to them by disbursing without clear title. The defendants moved for summary judgment, maintaining that the plaintiffs have not been damaged as they now have a policy showing clear title so that the Pryors had fulfilled their obligation to give clear title; and also contending that the McLeods had no contractual relationship with the plaintiffs.

Relying on Scheitlin v. R.D. Minerals (1985), 217 Mont. 8, 701 P.2d 1388, the District Court held that plaintiffs waived the 90-day clear title provision of the Contract for Deed. It pointed out that McLeod was employed by the Pryors, not the plaintiffs and thus McLeod did not owe a fiduciary duty to the plaintiffs. It further pointed out that any agreement regarding the disbursal of the down payment funds should have been memorialized in the buy-sell agreement or the Contract for Deed. The District Court concluded that there were no genuine issues of fact. It stated:

“This case is governed by the provisions of the Contract for Deed between Sellers and Buyers concerning the subject real estate and in this case the Buyers did absolutely nothing from February 14, 1986, until after the Escrow was set up in late December, 1986, following the original bankruptcy order. Other than said Contract for Deed, there was nothing in writing evidencing any agreement between the Plaintiffs and the Defendants McLeod regarding dispersal of funds.” Pursuant to Rule 56(c), M.R.Civ.R, the District Court granted summary judgment in favor of defendants. From that judgment, plaintiffs appeal.

We affirm the holding of the District Court that the plaintiffs waived the provision by their failure to object until after the McLeods disbursed the $20,000 down payment. We emphasize that as a result of the issuance of the title insurance policies, the Pryors as sellers have fulfilled their obligation to provide clear and marketable title to the plaintiffs. As a result, the question of the waiver of the 90-day marketable provision is moot for practical purposes.

We affirm the District Court.

CHIEF JUSTICE TURNAGE and JUSTICES HARRISON, McDONOUGH and BARZ concur.