author: MR. JUSTICE McDONOUGH MR. JUSTICE HUNT,

text:
    ROWAN OGDEN, Plaintiff and Respondent, v. MONTANA POWER COMPANY, Defendant and Appellant.
    No. 85-426.
    Submitted Nov. 20, 1987.
    Decided Dec. 15, 1987.
    Rehearing Denied Dec. 31, 1987.
    747 P.2d 201.

      Jardine, Stephenson, Blewett & Weaver, Lon Holden argued, Great Falls, for defendant and appellant.
    Erik B. Thueson argued, Great Falls, for plaintiff and respondent.
    Robert F. James argued, Great Falls, for amicus curiae, Montana Assoc, of Defense Counsel.
   MR. JUSTICE McDONOUGH

delivered the Opinion of the Court.

Defendant Montana Power Company (MPC) appeals a jury verdict from the District Court of the Eighth Judicial District in and for the County of Cascade awarding compensatory and punitive damages for negligence and bad faith. MPC also appeals the lower court’s denial of various pretrial motions and jury instructions. Ogden cross-appeals the decision of the jury’s original special verdict and for a determination on Ogden’s motion for sanctions.

A decision was entered by this Court on February 23, 1987. Ogden v. Montana Power Co. (Mont. 1987), 44 St.Rep. 330. MPC petitioned the Court for a reconsideration under Rule 34 M.R.Civ.P. The petition was briefed by the parties and an amicus curiae brief was filed on behalf of the Montana Association of Defense Counsel. We granted oral argument. We now withdraw the original opinion and issue this opinion in its place.

Having considered the arguments and briefs we affirm in part and reverse in part the District Court and remand for further proceedings.

The following issues were raised on appeal and cross-appeal:

1. Did the District Court err in granting partial summary judgment to Ogden on the issue of liability?

2. Does the Unfair Trade Practices Act of the Montana Insurance Code apply to MPC, a self-insured corporation, and was the evidence sufficient to uphold a jury verdict for breach of the implied covenant of good faith and fair dealing against appellant?

3. Did the District Court err in denying MPC’s motion for separate trials on the property damage claim and bad faith claim?

4. Did the District Court err in reducing the Special Verdict award?

5. Did the District Court err in failing to impose economic sanctions upon MPC for alleged dilatory, obstructive, and threatening actions by MPC’s attorney?

On December 19, 1979 a fire occurred at Ogden’s ranch. It burned 40 acmes of vegetation and destroyed the ranch house, barn, sheds and corrals. It is conceded that the only possible cause of the fire was a “floater”, which is a power line owned by MPC that became detached from a supporting pole and came in contact with another power line. Pieces of hot and molten metal heated by the contact dropped to the ground and ignited the vegetation and ultimately the buildings and improvements.

Negotiations between the parties as to the amount of property damage failed and Ogden sued for damages caused by the alleged negligence of MPC. MPC filed an answer, discovery proceeded and Ogden filed a motion for partial summary judgment together with a memorandum and affidavit relative to liability. MPC opposed the motion by briefs, attached affidavits and argument at the hearing. The District Court granted the partial motion raising the first issue.

I

Did the District Court err in granting partial summary judgment to Ogden on the issue of liability?

The only possible question remaining on the motion for partial summary judgment was whether the damage by the floater happened because MPC had negligently inspected and maintained the subject power line. In other words, did MPC breach its duty to inspect and maintain the line? The duty of care owed by an electric utility is presented in a thorough discussion in Bourke v. Butte Electric & Power Co. (1905), 33 Mont. 267, 83 P. 470. In Bourke, this Court held that the owner or operator of an electric plant owes a duty of reasonable care in creating pole lines, selecting appliances, insulating accessible wires and in maintaining a system of inspection. Bourke, 83 P. at 473. In discussing this duty of reasonable care the Bourke court favorably quotes a number of sources:

“ ‘Reasonable care is all that is required. But this must be proportionate to the risks to be apprehended and guarded against.’ ”

Bourke, 83 P. at 474 (quoting Hoye v. Chicago M. & St. P. Ry. Co., 46 Minn. 269, 48 N.W. 1117.)

Later in the opinion, the Bourke court approved a jury instruction which stated in part as follows:

“. . . the care required is measured by and equal to the danger. When anyone handles a force of utmost danger, a very great care is required. What would be care in handling a force of little danger might not be care in handling a force of great danger, and might be negligence in handling such a force. As the danger increases, so the degree of care increases which is required of persons who are handling the force. The degree of care required is proportionate to the danger of the force; . . .”

Bourke, 83 P. at 474.

The standard of care from Bourke applies to this case. The standard is one of reasonable care under the circumstances which is measured by and equal to the danger of those circumstances. Farnum v. Montana-Dakota Power Co. (1935), 99 Mont. 217, 43 P.2d 640.

Section 69-4-201, MCA, adopts the National Electrical Safety Code (NESC) as Montana law. Section 214 A2 of NESC provides: “Lines and equipment should be inspected from time to time at such intervals as experience has shown to be necessary.”

MPC had no policy or procedural manual which provided guidelines for inspections. There had been no maintenance on the line in the fire area. The linecrew chief, Corcoran stated the only time linemen will inspect this type of line is when there is a “problem on them or something goes wrong then you patrol.” MPC admits in its reply brief that the District Court had evidence before it that the subject power line was not in good repair at the time of the fire. The employees involved had no recollection of when they last visited the area and MPC did not come forward with anything in writing indicating when any inspection or maintenance had been done on the Zorce line involved. The power line at the time was not being used but the energy was not cut off.

These facts could very well fail to meet the general standard of care as set out in the Bourke case. However, MPC states that a critical fact was lost in the shuffle. Strong winds had hit the area about two weeks prior to the fire and could have caused the fire. MPC, by affidavit, comes forward with statement and daily time tickets on December 2, 1977, that the Adel line in the same general area to which the Zorce line is attached, was “all out” and the employee conducted a “patrol & rep. floater”. As stated in Bourke, a utility should inspect its property so that:

“. . . any change which has occurred in the physical condition surrounding the plant, poles or lines of wire, which would tend to create or increase the danger to persons lawfully in pursuit of their business or pleasure, may be reasonably discovered.”

Bourke, 83 P. 2d at 473. By their own admission the strong winds are such a change. MPC had knowledge but no inspection was done.

At this point, to raise a question of fact, MPC was obligated to come forward with substantial evidence that it had exercised due care under the circumstances. Harland v. Anderson (1975), 169 Mont. 447, 548 P.2d 613. This it did not do. All it could do was speculate that the high winds caused the floater, it did not come forward with any facts or evidence to raise an issue of fact as to its duty. The evidence appeared overwhelming and the District Court did not err in finding MPC’s liability was essentially uncontradicted by its evidence.

We find partial summary judgment was correctly granted.

II

Does the Unfair Trade Practices Act of the Montana Insurance Code apply to MPC, a self-insured corporation, and was there sufficient evidence to uphold a jury verdict for breach of the implied covenant of good faith and fair dealing by MPC?

Ogden’s amended complaint alleges appellant breached the implied covenant of good faith and fair dealing and violated the Unfair Trade Practices Act Section 33-18-201 et seq., MCA, (Act). MPC moved to dismiss these counts contending that the Act did not apply to self-insurers. The District Court denied this motion and subsequent similar motions. At trial the lower court instructed the jury that certain duties from the Act applied to MPC:

“Instruction No. 21
“The Montana Power Company is subject to the laws of Montana which state that no person may, with such frequency as to indicate a general business practice, do any of the following:
“(1) Fail to acknowledge and act reasonably promptly upon communications with respect to claims; or
“(2) Fail to adopt and implement reasonable standards for the prompt investigation of claims; or
“(3) Refuse to pay claims without conducting a reasonable investigation based upon all available information; or
“(4) Neglect to attempt in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear.
“If you determine that Montana Power Company has violated one or more of the above duties, you should determine that the defendant has not complied with its duties under the laws of the State of Montana.
“A general business practice can be shown by multiple violations occurring in the same claim, or violations of the law in different cases, or from persons having knowledge of the company’s general business practices.
GIVEN:_
District Judge”

The jury found that MPC failed to act reasonably and in good faith with respect to Ogden’s claim.

MPC claims the District Court erred in imposing the duties of the Act upon it and in instructing the jury to that effect. MPC contends the Act does not apply to it as a self-insurer and that it did not violate any duty to Ogden. Ogden contends that the jury was correctly instructed because MPC had both a common law duty to act in good faith and a similar statutory duty under the Act.

The Montana Insurance Code’s Unfair Trade Practices Act does not apply to a self-insured entity like MPC. The legislature enacted the Montana Insurance Code, Title 33, MCA, to govern and regulate the business of insurance. The Unfair Trade Practices Act, Section 33-18-101 et seq., MCA, as a part of the Montana Insurance Code and by virtue of its own stated purpose was enacted to govern and regulate trade practices in the business of insurance. Section 33-18-101, MCA, provides:

“The purpose of this chapter is to regulate trade practices in the business of insurance in accordance with the intent of congress as expressed in P.L. 79-15 . . .”

P.L. 79-15 is codified at 15 U.S.C. Section 1011 and states a declaration of policy by Congress “that the continued regulation and taxation by the several States of the business of insurance is in the public interest, . . .” Hence, Section 33-18-101, MCA, explicitly and by reference to 15 U.S.C. Section 1011 expresses the legislative intent to regulate the business of insurance.

Section 33-1-201(6), MCA, provides: “ ‘Insurer’ includes every person engaged as indemnitor, surety, or contractor in the business of entering into contracts of insurance.” MPC is primarily in the business of providing power and utilities to customers, although it insures itself. The legislature did not intend a self-insured entity to be subject to all the technical Montana insurance industry regulations. The Act therefore, does not apply to MPC in this case.

There is also no common law basis for the application of the duties imposed upon MPC as contained in the instruction. Although judicial modification of the common law is sometimes required to prevent great injustice or to ensure that common law is consonant with changing needs of society, see Miller v. Fallon County (Mont. 1986), [222 Mont. 214,] 721 P.2d 342, 43 St.Rep. 1185, it is not warranted here. These are adversarial relationships and a sudden major change of this sort in the law can best be done by legislative enactment as was done with insurance companies. We note that the most recent Montana Legislative Session enacted Section 33-18-242(8), MCA, (effective date July 1, 1987), which applies specific parts of the Unfair Trade Practices Act to actions brought by third party claimants against self-insurers.

We therefore reverse on the issue of MPC’s duty of good faith and fair dealing and Instruction No. 21 and further dismiss the second, third and fourth counts of plaintiffs amended complaint for failure to state a claim. Appellant’s motion below to dismiss these counts should have been granted.

Ill

Did the District Court err in denying MPC’s motion for separate trials on the property damage claim and bad faith claim?

This issue concerns whether it was error to deny MPC’s motion for separate trials on the property damage claim and on the bad faith claims. MPC argues that denial of the motion resulted in confusion and severe prejudice to appellant. We again affirm. MPC contends the reasoning of Fode v. Farmers Insurance Exchange (Mont. 1986), [221 Mont. 282,] 719 P.2d 414, 43 St.Rep. 814, requiring separation should be applied here. Fode does not control in this case. Separation of the bad faith claim in this case would have been appropriate only until the liability issue of the underlying case has been determined. Here the liability of the defendant had already been determined. The property damage issue was not complex and the danger of prejudice was minimal. The District Court correctly exercised its discretion which is authorized by Rule 42(b) M.R.Civ.P. See State v. District Court of Eighth Judicial District (Mont. 1985), [217 Mont. 106,] 703 P.2d 148, 42 St.Rep. 1061. The property damage verdict should stand.

IV

Did the District Court err in reducing the Special Verdict award? In light of this opinion, the question of changing the original jury verdict is moot.

V

Did the District Court err in failing to impose economic sanctions upon MPC for alleged dilatory, obstructive and threatening actions by MPC’s attorney? We remand and request the District Court to enter its decision on the motion for sanctions.

In summary, we affirm the motion for summary judgment on liability for property damages. We will not disturb the jury’s verdict of $62,000 for property damages. We dismiss the second, third and fourth counts in the amended complaint for failure to state a claim and set aside the verdicts based thereon and we remand to the District Court to rule on motion for sanctions.

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

MR. JUSTICE HUNT,

dissenting:

I agree with the majority opinion insofar as affirming the issues of MPC’s liability and upholding the original jury verdict of $62,000 for property damage. I also agree with remanding to the District Court for a ruling on Ogden’s motion for sanctions.

I disagree, however, with the majority’s reversal of the award for punitive damages for a violation of good faith and fair dealing.

The record is replete with instances of MPC’s discovery violations and intentional delays. Although a self-insured company, such as MPC, did not fall under Montana Insurance Code’s Unfair Trade Practices Act at the time of this fire, it should not be thereby freed from a responsibility to act in good faith and fair dealing with persons stating claims against the company. We note that the Montana legislature has just passed a statute which imposes this duty of good faith and fair dealing on self-insurers.

Instruction No. 21, which in the majority opinion requires a reversal of the punitive damages award, does not impose strict or outlandish standards of good faith and fair dealing on MPC. “Reasonable” is the standard of duty enumerated in Instruction No. 21. The jury was entitled to, and did in fact find that MPC failed to “attempt” to act in good faith based on a “reasonable” standard of prompt communication, prompt investigation and payment of valid claims after such “reasonable investigation.” I would affirm the jury’s finding of bad faith and uphold the jury award for all punitive damages.

MR. JUSTICES SHEEHY and HARRISON concur in the foregoing dissent.


source: Caselaw Access Project

author: MR. JUSTICE GULBRANDSON

license: Public Domain

text:
    WILLIAM ALBERS, Plaintiff and Respondent, v. BAR ZF RANCH, INC., Defendant and Appellant.
    No. 87-218.
    Submitted on Briefs Sept. 17, 1987.
    Decided Dec. 17, 1987.
    Rehearing Denied Jan. 14, 1988.
    747 P.2d 1347.

      Jardine, Stephenson, Blewett & Weaver, K. Dale Schwanke, Great Falls, for defendant and appellant.
    Luxan & Murfitt, Jack M. McLean, Helena, for plaintiff and respondent.
   MR. JUSTICE GULBRANDSON

delivered the Opinion of the Court.

The Bar ZF Ranch appeals a Chouteau County District Court judgment awarding William Albers (Albers) damages and costs of suit for breach of an oral contract. The District Court, sitting without a jury, found that the Bar ZF Ranch (Bar ZF) breached its obligation to allow Albers to participate in the 1982 federally sponsored farm subsidy program on farm land owned by Bar ZF and leased by Albers. The District Court awarded Albers $18,671.04 for loss of farm program deficiency payments, storage payments, and loss in sales price of grain. The District Court also awarded Albers prejudgment interest pursuant to Section 27-1-211 and Section 30-1-106, MCA. Defendant Bar ZF Ranch appeals. We affirm in part, reverse in part, and remand with instructions to recalculate prejudgment interest.

The Bar ZF Ranch is a 3,700-acre farm located in Chouteau County, near Carter, Montana. In 1967, the owners of the Bar ZF, Ray and Audie Lohr, entered into an oral lease agreement with William Albers whereby Albers would farm approximately 1,800 acres on the Bar ZF in exchange for two-thirds of each crop. Albers resides near Fort Benton and farms various farmlands with his brother. The 1,800 acres included approximately 640 acres leased by the Bar ZF from the State of Montana. There are also 2,000 acres of grassland on the Bar ZF that were not Albers’ responsibility. Ray Lohr and Albers worked closely together in the operation of the farm, but farm practices were generally left to Albers’ discretion. In addition, Albers was to furnish all necessary seed, fuel, fertilizer, machinery, and weed killer.

Ray Lohr died in 1979 and left Mrs. Lohr as the presiding officer of the Bar ZF Ranch corporation. Albers continued to farm the Bar ZF after Ray Lohr’s death with very little participation from Mrs. Lohr in day-to-day farming operations. Albers decided what crops to plant on what acreage and whether to participate in the federal farm program. On March 24, 1982, Mrs. Lohr applied to participate in the farm subsidy program with the Agricultural Stabilization and Conservation Service (ASCS), United States Department of Agriculture. Mrs. Lohr signed and filed the ASCS papers at Albers’ request, but she later professed ignorance as to the general requirements and procedures of the farm program.

To be eligible for farm subsidy benefits for wheat, the Bar ZF was required to limit wheat planting to 712.5 acres. At the time of the ASCS application, Albers had approximately 705 acres of winter wheat seeded on the Bar ZF. Under the wheat subsidy program as it then existed, the Bar ZF would have qualified for deficiency payments and annual storage payments for 1982 wheat stored in the federal government reserve loan program.

During the winter of 1981, Mrs. Lohr decided to retain a permanent tenant for the Bar ZF so she could move to Fort Benton for health reasons. Thereafter, Mrs. Lohr entered into an oral farm lease with Robert Bronec (Bronec) whereby Bronec would farm and live on the Bar ZF after the 1982 harvest. This agreement was later reduced to writing in the fall of 1982. Mrs. Lohr did not ask Albers to live on the Bar ZF because Albers had his own farm near Fort Benton. Albers was not informed of the Bronec lease until the end of March, 1982. Mrs. Lohr gave Albers written notice of the termination of his lease in a letter dated April 5,1982. The letter required Albers to summerfallow the Bar ZF before quitting the property. Mrs. Lohr’s April 5th letter also expressed her satisfaction with the general working relationship between the Lohrs and Albers since Albers began farming the Bar ZF in 1967.

Upon learning that his lease with the Bar ZF was to end, Albers decided not to participate in the farm subsidy program. Instead, Albers determined that the heavy stubble and reserve moisture on the Bar ZF acreage would provide ideal conditions for burning and recropping. Albers testified at trial that he discussed his intentions with Mrs. Lohr and they agreed that Albers could withdraw from the farm subsidy program and recrop one-half of the Bar ZF stubble acreage. The Bar ZF apparently had never been recropped in this manner and Mrs. Lohr was reluctant to agree to Albers’ request. Mrs. Lohr testified that she was “unclear” as to whether she told Albers he could recrop and that she probably told him to discuss the matter with Bronec.

Albers prepared for the reseeding by burning a 184.6 acre field and by preparing a fire guard around another 94.5 acre field on May 1, 1982. Albers also cleaned seed grain, bought fertilizer, and moved machinery in preparation for the recropping. Mrs. Lohr noticed the smoke from the May 1st burning and personally delivered a note to Albers that afternoon to demand that he quit burning stubble. Mrs. Lohr objected to recropping at that time because she believed that recropping would hurt the subsequent tenant, Bronec, and because she believed there was insufficient reserve moisture in the soil. Albers testified that Mrs. Lohr appeared very upset and that he acquiesced to her demands in concern for her health.

Sometime after May 1, 1982, Mrs. Lohr had Bronec probe the soil on the Bar ZF to determine if there was sufficient moisture to recrop. The probes revealed marginal to sufficient moisture on the fields in question. On May 3, 1982, Mrs. Lohr contacted the Montana State Department of Lands to request permission to recrop the 640 acres of State land leased to the Bar ZF.

Albers returned to the Bar ZF on May 5, 1982, and talked with Mrs. Lohr about what to do with the farm. They agreed that Albers would be excused from leaving summerfallow on the Bar ZF in exchange for his assurance that he would attempt no further recropping. The parties exchanged written agreements to that effect. Albers testified at trial that he also told Mrs. Lohr that he would again be participating in the farm subsidy program for wheat on the Bar ZF if she would not allow him to recrop. Mrs. Lohr testified that she was not told that Albers was back in the farm program.

A few days later, Albers observed Bronec planting on the burned acreage. Mrs. Lohr had given Bronec permission to seed the burned acreage to prevent erosion. Albers did not talk to Bronec and assumed that Bronec was planting barley or some other crop which would not effect the Bar ZF’s compliance with the farm program. Bronec seeded two fields to wheat and one to barley by about May 12, 1982. Albers testified that he returned to the Bar ZF around May 19, 1982, to discover that Bronec had planted wheat in an amount sufficient to disqualify the Bar ZF from the farm subsidy program.

On June 22, 1982, Albers had his attorney write Mrs. Lohr to inform her that “the present operator of the Bar ZF Ranch has exceeded the allowable wheat acreage” for compliance with the farm subsidy program and that noncompliance with the program would cause Albers financial damage. Mrs. Lohr returned to the Bar ZF from an out-of-state trip to find the letter on July 1, 1982. Thereafter, Mrs. Lohr had two weeks to bring the Bar ZF in compliance before the July 15, 1982, ASCS deadline. Mrs. Lohr elected not to destroy the additional wheat so as not to damage Bronec. As a consequence, the Bar ZF was not able to participate in that year’s farm subsidy program.

Albers brought suit against the Bar ZF on November 14, 1984. In his amended complaint, filed on July 29, 1986, Albers alleged breach of contract, estoppel, bad faith, constructive fraud, unjust enrichment, constructive evictment, and breach of the covenant of quiet enjoyment. The Bar ZF counterclaimed with allegations that Albers failed to summerfallow and failed to control weeds on the Bar ZF. The case was tried before the District Court sitting without a jury on November 17 and 18, 1986. On February 6, 1987, the District Court issued its findings, conclusions, and decree awarding Albers contract damages, prejudgment interest and costs. The Bar ZF appeals and raises the following issues:

(1) Did the District Court err in determining that the Bar ZF had a legal duty to William Albers?

(2) Was there sufficient evidence to support the District Court’s award of damages to Albers?

(3) Did the District Court err in awarding Albers prejudgment interest?

(4) Did the District Court err in denying Bar ZF’s counterclaims?

In its first issue, the Bar ZF argues that it owed no obligation, or duty, to assure that Albers was in compliance with the farm subsidy program requirements. The District Court made the following findings and conclusions relevant to this issue.

“6. The court concludes that the oral, year-to-year agreement between the Bar ZF and Albers was a lease.

“7. Lohr and Albers appeared to farm within the customary practices applying to oral leases in the area.

“8. The lessee was obligated to follow the better customary farm practices in the community.

“11. The Bar ZF had the obligation to allow Albers to operate and farm his 1982 winter wheat crop in a way which would bring him (and Bar ZF) the highest return. Mrs. Lohr had an obligation under the oral lease to cooperate with Albers’ staying in the [farm subsidy] program.

“14. When Mrs. Lohr and Albers signed the May 4-5 agreement, the highest return then was for Albers and the Bar ZF to bring their wheat within the [farm subsidy] program. Mrs. Lohr had an obligation under the oral lease to cooperate with Albers in staying in the program, so that the highest return could be achieved.

“Mrs. Lohr’s failure and refusal to achieve compliance and inclusion in the wheat program, when she was able to do so, was a breach of the oral contract.

“15. The Bar ZF, through Mrs. Lohr, prevented Albers from participating in the wheat program, and he suffered damages. [Additions ours.]”

The Bar ZF contends that the District Court erred in finding that it owed an obligation to Albers. We will not reverse the order of the District Court unless we determine that the District Court’s findings were clearly erroneous arid result in an abuse of discretion. Rule 52(a), M.R.Civ.P.; Walker v. Larson (Mont. 1986), [223 Mont. 333,] 727 P.2d 1321, 1322-23, 43 St.Rep. 1765, 1767. We will not disturb those findings that are supported by substantial credible evidence. In.re the Matter of B.T. (Mont. 1986), [223 Mont. 287,] 725 P.2d 230, 232, 43 St.Rep. 1728, 1730. The evidence will be reviewed in a light most favorable to Albers as the prevailing party. Cameron & Jenkins v. Cameron (1978), 179 Mont. 219, 587 P.2d 939.

The Bar ZF incorrectly construes Section 27-1-105, MCA, to characterize its obligation as arising by operation of law rather than by contract. An obligation is defined as “a legal duty by which a person is bound to do or not to do a certain thing.” Section 28-1-101, MCA. An obligation can arise by either contract or operation of law. Sections 27-1-105 and 28-1-102, MCA. We find, as did the District Court, that the oral lease in question served as a contract through which each party acquired their respective obligations.

In the instant case the parties agreed that, under the terms of the oral farm lease, Albers had an obligation to the Bar ZF to utilize the better farming practices in the community. Albers was given wide discretion in choosing those practices during his lease of the Bar ZF. That discretion increased with the death of Ray Lohr. Mrs. Lohr, on the other hand, professed little knowledge of either specific farming practices or the farm subsidy program. She can, however, be charged with knowledge that Albers intended to either participate in the farm subsidy program or recrop. Mrs. Lohr would not allow Albers to recrop so it was reasonable for her to assume that the only other alternative was for the Bar ZF to remain in the farm subsidy program.

The Bar ZF claims that it was Albers’ obligation to assure compliance in the farm program once he discovered that the Bar ZF had been overseeded by Bronec. We disagree. It was Bronec, acting at Mrs. Lohr’s direction, who overseeded and disqualified the Bar ZF from the farm program. Albers, through his attorney, requested that the Bar ZF correct the situation to assure compliance with the farm subsidy program by the July 15, 1982, deadline. It was the Bar ZF’s actions that caused noncompliance and it was the Bar ZF’s obligation then to remedy the situation to assure compliance. Albers’ position in this regard is fully supported by the Restatement (Second) of Property Section 5.4 (1977), which states:

“There is a breach of the landlord’s obligations if, after a tenant’s entry and without fault of the tenant, a change in the condition of the leased property caused by the landlord’s conduct or failure to fulfill an obligation to repair, . . . makes the leased property unsuitable for the use contemplated by the parties and the landlord does not correct the situation within a reasonable time after being requested by the tenant to do so.”

The Bar ZF also calls into question the District Court’s interpretation of numerous other facts. These arguments are not persuasive because there is substantial evidence to support the District Court’s findings.

Though Mrs. Lohr denied that Albers told her that he intended to participate in the farm program, it is the function of the trial court in a nonjury trial to determine the credibility of the witnesses and the weight to be accorded their testimony. In re the Matter of the Estate of Murnion (Mont. 1984), [212 Mont. 107,] 686 P.2d 893, 896, 41 St.Rep. 1627, 1630. The District Court chose to believe Albers and we will not disturb that decision. There is substantial credible evidence to support the District Court’s finding that the Bar ZF owed Albers an obligation to allow him “to operate and farm his 1982 winter wheat crop in a way which would bring him (and the Bar ZF) the highest return” and an “obligation under the oral lease to cooperate with Albers’ staying in the [farm subsidy] program.”

The Bar ZF next questions the sufficiency of the evidence to support an award of damages in this action. The Bar ZF argues that there was no guarantee that Albers would participate in the 1982 regular and reserve loan programs or that he would place all of his grain in the programs. In essence, the Bar ZF’s argument in this regard is that Albers’ damages are too speculative to be recoverable.

Again, we are charged with reviewing the record to determine if there is substantial credible evidence to support the District Court’s findings in this regard. In re the Matter of B.T., supra. Speculative damages not clearly ascertainable are not recoverable. Cremer v. Cremer Rodeo Land and Livestock Co. (Mont. 1981), [_Mont. _,] 627 P.2d 1199, 1202, 38 St.Rep. 574, 578. The terms “speculative damages,” however, refer more to an uncertainty or speculation as to whether the loss of profits is a result of the breach of contract in this case than it does to an uncertainty as to the amount of the damages. Bolz v. Meyers (1982), 200 Mont. 286, 300, 651 P.2d 606, 613.

As discussed previously, there is substantial evidence that the Bar ZF breached the oral lease by causing noncompliance with the farm program. There is also substantial evidence to support the District Court’s award of damages in this case. Albers will not be denied recovery in this case simply because he had the option to participate in the farm subsidy program. It is evident from the record that participation in the farm subsidy program would have been advantageous to the Bar ZF. Albers also chose to both recrop and participate in the farm program on other operations he farmed. He participated in both the regular and reserve loan programs on two other operations that were so qualified. Albers’ decision on the Bar ZF was to participate in the program due to his inability to recrop as planned and as previously agreed to by Mrs. Lohr.

The District Court made the following findings with regard to Albers’ damages:

“24. Compliance date for the 1982 program was July 15, 1982, meaning that the Bar ZF had until that date to comply with the maximum allowable wheat acreage. Bronec testified that if he had been informed of the problem, he was sure that “something could have been worked out.” He also said he could have seeded barley on all three parcels of land had he known it was necessary, or could have cut and baled young wheat for hay for his cattle. Compliance could have been accomplished by July 15, 1982.
“25. Mrs. Lohr made no effort to achieve compliance and inclusion in the wheat program. Albers lost all the benefits accruing from compliance.
“26. Albers, up to July 15, 1982, was eligible for participation in the farm program, the farm storage grain reserve program, and the Commodity Credit Corporation loan program on the Bar ZF in 1982.
“27. Albers was unable to use spring wheat which he had cleaned at a cost of $116.75, and he had to return fertilizer. He received credit on the fertilizer, but incurred 80 miles of needless driving to return it, at a cost of $40.00 (80 miles times $.50).
“28. Deficiency payment for the 1982 program was $.50 per bushel paid in December, 1982. The total amount of the deficiency payment for a farm is calculated by multiplying the $.50 per bushel by the assigned yield for the Bar ZF and again by the seeded acreage. The assigned yield for the Bar ZF was 24 bushels per acre in 1982. Albers seeded 705.1 acres of wheat on the Bar ZF on May 5, 1982. Total deficiency payment for the wheat program in 1982 would have been $8,461.20. Albers’ share of that deficiency would have been $5,640.80.
“29. Albers had sufficient storage capacity on his own place in 1982 and afterwards, and would have participated in the storage program with his share of the crops from the Bar ZF.
“30. Annual storage payments are calculated by multiplying the per bushel annual storage payments by the assigned wheat yield for the Bar ZF by the seeded acreage.
“31. The annual storage payment for the three-year reserve program in 1982 was $.265 per bushel, the assigned wheat yield for the Bar ZF was 24 bushels per acre. Albers had seeded 705.1 acres of wheat. The total annual storage payment for the Bar ZF would have been $4,484.44. Albers would have received two-thirds of this amount, or $2,989.62. Storage payments are made in advance on an annual basis and participants would be eligible to participate for a three years’ period. Storage payments were made November 4, 1982. Albers’ total loss of storage payments was $8,968.86.
“32. Albers would have also participated in both the regular loan program and reserve loan program. Of 700-800 Chouteau County farmers, 641 used the loan program in 1982. Under the regular loan program, participants could have qualified for a loan immediately in this amount of $3.49 per bushel. After nine months, participants would qualify for the reserve loan of $3.94 per bushel. These loans are based on the assigned wheat yield for a particular farm and the actual seeded wheat acres. Usually participants in the program “turnover” their wheat to the Commodity Credit Corporation after three years, and effectively sell their grain for the loan rate. If grain is turned over to the Commodity Credit Corporation, all interest on the loan is forgiven.
“33. Albers redeemed part of the 1982 grain which he had in the reserve program in 1983. However, he redeemed his maximum amount allowable under the 1983 PIK program and would have left the Bar ZF grain in storage.
“34. The reserve loan V rate [sic] the 1982 farm program was $3.94. The assigned wheat yield for the Bar ZF was 24 bushels per acre. The actual wheat acreage was 705.1.
“35. All wheat stored on the Bar ZF Ranch was sold prior to the 1983 harvest. A recap of the sold wheat, based on EXHIBITS 19-A through 19-P . . . [shows 40,291.39 bushels sold for $144,388.70]. $144,388.70 divided by 40,291.39 bushels = $3.58 bushel average selling price.
“36. The per bushel sales price for wheat for the Bar ZF was $.36 per bushel less than it would have been under the reserve loan V Program ($3.94 — $3.58 = .36). The Bar ZF would have earned $6,092.06 more if it had participated in the reserve loan V Program in 1982 (36 times 24 bushels of yield times 705.1 seeded acres = $6,092.06). Albers’ share of those proceeds would have been $4,061.38.
“37. Mrs. Lohr received two-thirds of the proceeds of the crop which Bronec seeded in May, 1982, or $4,817.66. [Additions ours.]”

From these findings the District Court concluded the following:

“15. The Bar ZF, through Mrs. Lohr, prevented Albers from participating in the farm program, and he suffered damages.
“16. Albers incurred the following losses by being precluded from participating in the farm program:
“(a) Loss of farm program deficiency payments, received 12/83 — $5,640.80.
“(b) Loss of storage payments received, one-third received on 11/4/ 82, 11/4/83, and 11/4/84 — $8,968.86.
“(c) Loss in sales price of grain, received 9/82 — $4,061.38.

Accordingly, the District Court entered judgment in favor of Albers and against the Bar ZF as follows:

“1. For the sum of $5,640.80, with interest of 10% since December 1, 1982.
“2. For the sum of $2,989.62, with interest of 10% from November 4, 1982.
“3. For the sum of $2,989.62 with interest of 10% from November 4, 1983.
“4. For the sum of $2,989.62 with interest of 10% from November 4, 1984.
“5. For the sum of $4,061.38, with interest of 10% from September 1, 1982.
“6. Plaintiff shall have his costs.
“7. The counterclaims are dismissed.”

There is substantial evidence in the record to support the District Court’s assessment of damages in this case and Albers’ damages are subject to calculation with a reasonable degree of certainty. This Court recognizes that “[a]ny award of damages is grounded to a certain degree upon speculation.” Sack v. A.V. Design, Inc. (Mont. 1984), [211 Mont. 147,] 683 P.2d 1311, 1315, 41 St.Rep. 1272, 1276. Damages are not sufficiently speculative in this case to merit reversal.

The Bar ZF argues that the District Court erred in calculating damages by not subtracting the cost of transporting grain to storage. At trial, Albers testified that, before he purchased his own tandem truck, it cost approximately ten cents per bushel to transport his grain the four miles from the Bar ZF to his storage bins in Fort Benton. This Court has long recognized that only the net value of lost crops can be recovered. Agrilease, Inc. v. Gray (1977), 173 Mont. 151, 159, 566 P.2d 1114, 1117. However, any alleged cost of hauling grain was negligible in this case because (1) Albers used his own grain truck to haul the grain at his own expense, and (2) the distance from the Bar ZF farmlands to Albers’ grain storage facilities is nominal.

The Bar ZF also contends that the District Court erred when it failed to differentiate between sales of 1982 wheat and sales of wheat harvested in other years to compute loss of sales price of grain. The District Court calculated the average selling price of Bar ZF wheat from August 19, 1982, to May 9, 1983, and compared that to the reserve loan program price per bushel to determine loss of selling price of grain. We believe that this method of using average selling prices was reasonable under the circumstances. Accordingly, the District Court did not err in its calculation of loss of selling price of grain.

Finally, and again with regard to Albers’ loss of sales price of grain, the Bar ZF asserts that the District Court erred by relying on market prices for grain sold before the date Albers could first qualify for the reserve loan program on June 1, 1983. Albers points out that his inability to participate in the farm program, caused by Mrs. Lohr, forced him to sell his grain to meet expenses before June 1, 1983. He argues that it is only equitable to calculate loss of sales price of his grain based on the average price at which he was forced to sell his grain. We agree with Albers. Albers was in no position to wait until June 1, 1983, to sell his grain. The June 1, 1983 market price is, therefore, immaterial and the District Court did not err in using Albers’ average selling price between August 19, 1982 and May 9, 1983.

The Bar ZF’s third issue relates to the District Court’s alleged errors in the calculation and award of interest. The Bar ZF first argues that Albers’ damages are not “capable of being made certain by calculation.” The Bar ZF relies on Section 27-1-211, MCA, which provides as follows:

“Every person who is entitled to recover damages certain or capable of being made certain by calculation and the right to recover which is vested in him upon a particular day is entitled also to recover interest thereon from that day except during such time as the debtor is prevented by law or by act of the creditor from paying the debt.”

To be entitled to prejudgment interest, Albers must meet three criteria previously recognized by this Court. Agrilease, 566 P.2d at 1118-1119. The criteria are: (1) an underlying monetary obligation; (2) the amount of recovery is capable of being made certain by calculation; and (3) the right to recover the obligation vests on a particular day.

The Bar ZF argues that the recovery in this case was not capable of being made certain by calculation and the right to recover did not vest on a particular day. Albers’ damages, as evidenced by the District Court’s calculations, were clearly calculable given historical average yields on the Bar ZF and per bushel loan rates set under the farm program. Albers’ right to recover these damages vested on the particular ASCS dates for deficiency payments, storage payments, and sale. Accordingly, the District Court did not err in awarding Albers prejudgment interest.

The Bar ZF next argues that prejudgment “interest awarded on the reserve loan program rate differential payment can only be awarded from June 1, 1983, which is the date the loan rate would first have been payable, and then only at 6% per annum until October 1, 1985, when Section 31-1-106 was amended to 10% rather than the 10% awarded by the trial court straight through.” We agree. Section 27-1-211, MCA, as previously set forth, only allows an award of interest from the date on which the right to recover vested. In this case, Albers would not have received the reserve loan program rate differential payment until June 1, 1983. Any award of interest must, therefore, be calculated from that date.

Prejudgment interest should be awarded in compliance with Section 31-1-106, MCA. Byrne v. Terry (Mont. 1987), [228 Mont. 387,] 741 P.2d 1341, 1344, 44 St.Rep. 1620, 1624. Prior to October 6, 1985, Section 31-1-106, MCA, only allowed interest at 6% per annum. The statute was amended on that date to allow interest at 10% per annum. We find that Albers is entitled to prejudgment interest at 6% per annum until October 1, 1985, and at 10% per annum thereafter.

In its final issue, the Bar ZF argues that the District court erred when it denied the Bar ZF’s counterclaims. The Bar ZF sought damages for Albers’ alleged failure to have good summerfallow and for his alleged failure to control noxious weeds. The District Court found that the counterclaims failed for lack of evidence. The District Court’s findings in this regard must be clearly erroneous and must constitute an abuse of discretion to merit reversal. Rule 52(a), M.R.Civ.P.; Walker v. Larson, supra. Our review of the record leads us to agree with the District Court.

It is undisputed that Mrs. Lohr, acting for the Bar ZF, released Albers from any obligation to leave summerfallow in a written agreement on May 5,1982. Mrs. Lohr’s summerfallow agreement was in exchange for Albers’ promise not to recrop the Bar ZF. The Bar ZF contends that Albers gave Mrs. Lohr no consideration for the summerfallow agreement because Albers had no right to recrop. We disagree. Under the oral farm lease, Albers was charged with choosing the farming methods to be used on the Bar ZF. He chose to recrop after learning that Mrs. Lohr had retained a new tenant. We find that Albers gave up his right to recrop as consideration for Mrs. Lohr’s summerfallow release.

The Bar ZF also alleges that Albers failed to control noxious weeds during his tenancy on the farm. The District Court heard testimony that tended to show a weed problem on the Bar ZF at all times before, during and after Albers’ tenancy. Albers testified about his efforts to control weeds as did the subsequent tenant, Bronec. Albers produced receipts for costs of weed control and a witness who applied herbicides on the Bar ZF in 1981 at Albers’ direction. Bronec guessed that he spent around $30,000 to control weeds in the three years after Albers left. The Bar ZF did not produce receipts as to exact costs of weed control nor did it attempt to prove how much of Bronec’s approximations could be attributed to normal weed control on the Bar ZF.

The District Court also heard evidence to the effect that Albers was not responsible for controlling those weeds that grow on Bar ZF grasslands, coulees, and reservoirs. These weeds were to be controlled by the Bar ZF during Albers tenancy. In contrast, Bronec was responsible for controlling weeds on these grasslands for at least two of the three years included in his cost approximations. Finally, the District Court heard evidence that the weeds on the 2,000 acres of Bar ZF grasslands were upwind of the Bar ZF farmlands and were a substantial factor in the spread of noxious weeds on the farmland. Given all of the above referenced facts, the District Court did not err in denying the Bar ZF’s counterclaim with respect to noxious weed control.

The Bar ZF also counterclaimed for the alleged damage it contends Albers caused by not assuring compliance in the farm program. Given the disposition of the Bar ZF’s first issue in this appeal, we cannot give this last contention serious consideration. Accordingly, the District Court judgment is affirmed in part, reversed in part, and remanded with instructions to recalculate prejudgment interest.

Affirmed in part, reversed in part.

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


author: MR. JUSTICE HARRISON

text:
    In re the MARRIAGE OF KAYLENE DIANE FORSMAN, Petitioner and Appellant, and MARTIN WILLIAM FORSMAN, Respondent and Respondent.
    No. 87-353.
    Submitted on Briefs Oct. 16, 1987.
    Decided Dec. 18, 1987.
    Rehearing Denied Jan. 7, 1988.
    747 P.2d 861.

      Fred Thomson, Missoula, for petitioner and appellant.
    Geiszler, Taylor, Newcomer & McClain, Kerry N. Newcomer, Missoula, for respondent and respondent.
   MR. JUSTICE HARRISON

delivered the Opinion of the Court.

This is an appeal from the District Court of the Fourth Judicial District, Missoula County, Montana, requesting a reduction of support obligation from a decree of dissolution granted December 6, 1982, by the Honorable Jack L. Green, District Judge. The request for temporary order reducing support was filed on February 27, 1987. The temporary order came before the Honorable James B. Wheelis on April 24, 1987. Judge Wheelis entered his findings of facts and conclusions of law and amended the original decree on June 1, 1987, granting a temporary reduction. Appellant now appeals the District Court’s reduction in child support. We reverse.

Four issues are presented for our review:

(1) Did the District Court commit reversible error when it modified child support payments temporarily for the months of March and April, 1987?

(2) Did the District Court commit reversible error when it modified child support for the months, May, June, July, August and September, 1987?

(3) Did the District Court commit reversible error when it excluded the inflation clause and modified the medical care obligation?

(4) Did the District Court commit reversible error when it refused to award attorney’s fees and costs to the appellant?

At the time of the dissolution in 1982, the parties had been married for twelve years. From that marriage, two children were born: Jillian, now age fifteen and Christian, now age twelve. The original decree of dissolution was issued by Judge Jack L. Green in December of 1982. According to the decree appellant mother (mother) was to receive $250 per month per child for support of the parties’ two children. These payments included a yearly cost of living increase which began in November of 1983. Child support was to be paid prior to and throughout the four years of each child’s college education. Respondent father (father) was also to maintain medical and dental insurance on the children and a life insurance policy on himself with the children as beneficiaries.

Prior to the dissolution, the family owned a home valued at approximately $56,000. For 1981, the last full year prior to the dissolution, the father had an annual adjusted gross income of $23,019, and for 1982 his adjusted gross income was $25,003. At that time father was an employee of a local department store. The mother was employed on an occasional basis, working five hours per week, but with the majority of her time spent in caring for the home and the parties’ two children.

Following the dissolution, father changed jobs and started working as a traveling salesman for a major clothing manufacturer. His sales route covers the states Montana, northern Idaho and eastern Washington and his salary is on commission basis. He has now remarried and currently lives with his new wife in Missoula, Montana, in a home valued at over $50,000.

It is father’s contention that his gross income has declined from 1985 levels by approximately forty percent, blaming the decline on several factors that influence retail clothing sales.

Following the dissolution, mother moved with the children to Butte, Montana, where, in June, 1985, she purchased a home valued at $29,000. She has obtained employment as a medical librarian working twenty hours a week while continuing to care for herself and the two children with additional care required for her youngest child, who is emotionally disturbed. Mother has sought full-time employment, however, the economically depressed condition of the city of Butte has affected her full-time employability.

Mother’s annual adjusted gross income in 1986 was $6,673. In accordance with the decree, mother was entitled in 1986, to $570 per month in child support. Mother’s annual income therefore was $13,513. The record reveals that annual expenses for mother and the two children were approximately $14,196. House payments and living expenses were met with mother’s income, the $570 monthly support payments, money remaining from mother’s share of the sale of the parties’ former home and interest accrued from her savings account. This money has been depleted as mother used that money to meet monthly expenses, especially when father paid only a total of $100 per month in child support during the months of February, March and April of 1987.

For the purpose of our discussion, issues (1) and (2), whether the District Court erred when it modified child support payments temporarily for the months of March and April and modified support payments for the months of May, June, July, August and September, 1987, will be discussed together.

Our statute applicable to modification for child support is Section 40-4-208, MCA. Subsection (2)(b) of Section 40-4-208, MCA, controls in this case and states in part:

“(2)(b) Whenever the decree proposed for modification contains provisions relating to maintenance or support, modification under Subsection (1) may only be made:
“(i) upon a showing of changed circumstances so substantial and continuing as to make the terms unconscionable, . . .” (Emphasis added.)

Our statute provides that the District Court must determine that circumstances since the entering of the original decree have changed so substantially and with such continuity that to continue with the original terms would be unconscionable. Here there is no question that because of the economic situation, there has been a slowdown in clothing sales. However, that slowdown may well be only a temporary situation and it does not suffice to substantially change support for the two children. Additionally, the two children are now into their teenage years. This Court has recognized that children in the age bracket 12-17 generate greater expenditures for the parent than children in the age bracket 0-11. Order Adopting Guidelines For Determining Child Support (Mont. 1987), [227 Mont. 1,] 44 St.Rep. 828, 836.

Section 40-4-208, MCA, is intended to allow modification of the original terms only when the newly modified terms are “substantial and continuing.” The statute by its own terms precludes modification to cure a temporary change in circumstances. The father’s circumstances have not changed sufficiently that he cannot pay child support as ordered by the original decree.

Mother and the children’s circumstances have severely worsened. As noted, mother has depleted all of her resources that she had and is able to work only twenty hours per week because of the economic condition in Butte and to enable her to spend the necessary time with her emotionally disturbed child. In addition, her failure to receive the full amount of child support provided by the original decree has endangered her ability to continue making payments on their home. Mother purchased the home for herself and the two children in good faith based upon the settlement of the dissolution. Mother fears the loss of the family home would have a devastating effect on the youngest child’s stability.

Father’s adjusted gross income in 1982 was $25,003; in 1985 it was $30,249; and in 1986, it was $27,000. In his argument father contends that he has unavoidable business expenses with his clothing sales job and these expenses should be deducted from his gross income. Father further contends that from his gross income minus business expenses, his “living expenses” should be deducted. We note that several deducted business expenses have also been deducted as living expenses. It appears that father’s changed circumstances are not substantial and continuing and the District Court erred in granting a temporary modification under Section 40-4-208(2) (b), MCA.

Issue three concerns whether the court erred in modifying the terms of the child support excluding the inflation provision and reducing father’s obligation to pay total medical insurance costs. We find clear error here for there was no prayer for relief for the exclusion of the inflation provision nor for a reduction of his obligation to pay for health care. Here the mother had no opportunity to hear arguments in favor of any modification in respect to these matters. The court also erred in taking the father’s proposed findings of fact and conclusions of law, which contain said provisions, over the mother’s objections and adding them to the findings of the court. See, Marriage of Baer (1982), 199 Mont. 21, 647 P.2d 835. We find the District Court abused its discretion when it modified both the inflation and the health provisions of the decree without providing ample opportunity for the mother to argue against such modification.

Lastly we discuss the District Court’s refusal to award attorney’s fees and costs to mother. See Section 40-4-110, MCA. This Court has previously held that this statute generally holds that a showing of necessity is a condition precedent to the award of attorney’s fees. Carr v. Carr (Mont. 1983), 205 Mont. 269, 667 P.2d 425, 40 St.Rep. 1263. In that case we held that due to the husband’s substantially greater salary and other factors, that when considered with the wife’s economic position, the court did not abuse its discretion in awarding attorney’s fees to the wife.

In this case there is no question of the mother’s need. The father has a considerably higher income and mother is charged with the care of their two children. Clearly mother’s standard of living has been lowered considerably since the dissolution. In addition, the father is the one that moved for the modification decree bringing the mother into the court for litigation. The father is in a much better economic situation than the mother, this fact is a compelling reason to award mother attorney’s fees. In addition this Court has also held that when the trial court refuses to award attorney’s fees, the underlying reason must be indicated in the findings of fact . . . Hammeren v. Hammeren (1982), 201 Mont. 443, 663 P.2d 1152. This order of the District Court does not substantiate its reasoning for not awarding costs and attorney’s fees. In fact, attorney’s fees are not mentioned.

Here in the Findings of Fact, Conclusions of Law and Order the District Court modified the payments for a period of eight months. The court further noted that the mother or father may schedule further review for child support after September 1, 1987. In the event no review was scheduled by mother, the order would remain in effect. This is an interesting finding by the District Court because in this action the court denied the mother attorney’s fees and yet in another finding proposes that she can apply in September, 1987, for further “review.” This “review” would again call for attorney’s fees which she cannot afford in the first place. The District Court erred by refusing to award attorney’s fees and costs to the appellant mother.

We reverse and direct the District Court to restore full amount of child support award, $570, with regular increases for inflation and further restore father’s obligation to pay total medical insurance costs as ordered in the original December 6, 1982, decree of dissolution. Furthermore, the District Court is directed to provide reasonable attorney’s fees to the mother.

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


author: MR. JUSTICE HUNT

text:
    AVECO PROPERTIES, INC., a Montana corporation, Plaintiff and Respondent, v. E.J. NICHOLSON, a/k/a Eldon J. Nicholson, Defendant and Appellant.
    No. 86-523.
    Submitted June 3, 1987.
    Decided Dec. 22, 1987.
    747 P.2d 1358.

      Datsopoulos, MacDonald & Lind, Christopher B. Swartley argued, Missoula, for defendant and appellant.
    Worden, Thane & Haines, Ralph B. Kirscher argued, Missoula, for plaintiff and respondent.
   MR. JUSTICE HUNT

delivered the Opinion of the Court.

Nicholson, as defendant and contract buyer, appeals a grant of summary judgment entered by the District Court, Fourth Judicial District, Missoula County, granting specific performance of a contract for deed to plaintiff respondent Aveco Properties, Inc. (Aveco), the successor in interest to the contract seller.

Affirmed in part and reversed in part.

Appellant buyer asks us to consider issues one, two and three on appeal; and respondent Aveco has raised issues four, five and six. These six issues are set forth as follows:

1. Did the District Court err when it refused to determine that contracts for deeds are mortgages under the laws of the State of Montana and that plaintiff-respondent Aveco should be required to proceed through ordinary procedures associated with mortgage foreclosure in this case?

2. If the District Court erred when it refused to determine that a contract for deed is in fact a mortgage, then does it not follow that the plaintiff-respondent as a successor in interest to the vendor under the contract at issue is barred from the recovery of any deficiency judgment on the obligation secured?

3. Did the District Court err in requiring appellant to post a $34,408.83 supersedeas bond?

4. Did the District Court properly determine that Aveco is entitled to specific performance (acceleration of payments) under the contract for deed?

5. Did the District Court properly determine that Aveco is entitled to have the property sold if appellant fails to pay the remaining balance?

6. Did the District Court properly determine that Aveco is entitled to a deficiency judgment if proceeds are insufficient to pay the accelerated balance and other monies owing pursuant to the contract?

On December 1, 1977, E. J. Nicholson purchased certain real property from Hidden Valley Ranches under a contract for deed. On February 28, 1985, respondent Aveco purchased the seller’s interest in the contract for deed from Hidden Valley Ranches and an assignment of seller’s interest was executed. Nicholson was a partner in Hidden Valley Ranches at one time. The original purchase price of the property in question was $26,842.52. The contract requires annual installments of $2,836.72 due on the first day of December of each year after 1977 until the full amount of principal and interest is paid.

Nicholson made annual installments in the years of 1978 through 1984 — seven annual installments. Nicholson failed to make an annual installment on December 1, 1985. On December 9, 1985, Aveco sent Nicholson a notice of default which was received on December 17, 1985. Nicholson failed to make the required payment within the thirty day default period set forth in the contract for deed.

On January 23, 1986, Aveco notified Nicholson of its intention to declare the entire principal balance and accrued interest immediately due and payable. Nicholson did not pay the remaining balance on the contract which amounted to $23,081.08, plus accrued interest at the rate of 8I/2 percent per annum from December 24, 1984.

On January 29, 1986, Aveco, as seller’s assignee, filed its complaint seeking specific performance of the contract for deed compelling Nicholson to pay the full sum due, together with interest and requesting an order directing that the property be sold by the Sheriff of Ravalli County at an auction not later than 90 days after the entry of the decree for specific performance. Aveco took the deposition of Nicholson, and on March 26, 1986, filed its motion for summary judgment.

The matter was heard on April 15, 1986, and thereafter the court entered its order and opinion granting summary judgment specifying the legal reasons for the judgment. The court relied primarily on Glacier Campground v. Wild Rivers, Inc. (1979), 182 Mont. 389, 597 P.2d 689. In discussing Glacier Campground, the court said that it rejected Nicholson’s suggestion that the document be declared a mortgage rather than a contract because:

“In invoking this statute, [Section 71-1-232 (1985) formerly Section 93-6008, R.C.M. 1947] defendants contend that a contract for deed, in effect, is a purchase price mortgage. They further argue that public policy dictates that the statute be read so as to apply to ‘all purchase money situations where a deficiency could be obtained.’ Such contentions ignore the fact that a contract for deed and a purchase money mortgage are not one and the same thing with two different names. They are two distinct legal creatures.”

Glacier Campground, 597 P.2d at 698.

The District Court further noted that Glacier Campground specifically states that because contracts for deed and note mortgage transactions differ from one another

“Therefore ‘[t]he statutory prohibition against deficiency judgments in mortgage foreclosures is not a prohibition against awarding specific performance by granting a money decree and further providing that in the event the decree is not paid, the property shall be sold and the proceeds applied in satisfaction of the money decree.’ Renard v. Allen, 237 Or. [406] at 413, 391 P.2d [777] at 780, and cases subsequently cited.”

Glacier Campground, 597 P.2d at 698.

On May 23, 1986, the District Court issued a final judgment granting Aveco specific performance of the contract for deed and judgment as follows:

1. Granted Aveco judgment for principal, interest, attorney fees, costs advanced and late charges.

2. Granted the appellant Nicholson until June 9, 1986, to pay that judgment including all accrued costs and fees incurred by the respondent.

3. Provided for the docketing of the judgment with authority for the respondent to file his transcript of judgment in any jurisdiction.

4. Provided that if the buyer did not satisfy the judgment then the respondent could sell ‘any interest held by the Defendant in the real property’ at a sheriffs sale with delivery of the deed after the period of redemption pursuant to Title 25, Ch. 13, MCA.

5. Provided that any deficiency from the sale will continue as a judgment to the extent of the deficiency after the sale.

6. Provided the appellant a statutory right of redemption pursuant to Title 25, Ch. 13, MCA and provided that any purchaser would be entitled to immediate possession after the sale and for delivery of the deed from the sheriff to purchaser after the period of redemption.

7. Provided for delivery of possession from the appellant at the time of the sale and remedy in the event he failed to do so with writ of assistance.

8. Describes the property authorized to be sold.

9. Authorized the escrow agent to release the papers to complete the chain of title. Delivery authorized to be made to the sheriff, plaintiff or plaintiff’s counsel.

ISSUE 1

DID THE DISTRICT COURT ERR WHEN IT REFUSED TO DETERMINE THAT CONTRACTS FOR DEEDS ARE MORTGAGES UNDER MONTANA LAW AND THAT THE PLAINTIFF RESPONDENT, AVECO, SHOULD BE REQUIRED TO PROCEED THROUGH ORDINARY PROCEDURES ASSOCIATED WITH MORTGAGE FORECLOSURES?

Nicholson first argues the District Court erred by not asserting its equitable powers to declare the contract for deed actually to be a mortgage and by not requiring Aveco to proceed through the ordinary procedures associated with foreclosure.

We cannot agree with Nicholson that a contract for deed should be treated as a mortgage in this situation. A contract for deed is a different legal concept than a purchase money mortgage under the laws of this state. Although certain similarities do exist between the two, it is clear that the Legislature intended to distinguish between a mortgage and a purchaser under a contract for deed. See Glacier Campground, 597 P.2d at 698.

A mortgage is defined in Section 71-1-101, MCA, as a contract “by which specific property is hypothecated for the performance of an act, without the necessity of a change of possession.” Certain foreclosure and redemption rights and proceedings flow from a mortgage transaction under the subsequent sections of the mortgage statutes. See Section 71-1-201, et seq., MCA.

A purchaser under a contract for deed is described in Section 70-20-115, MCA, as

“(a) any person who:
“(i) has entered into a contract with the record owner of real property in which it was agreed that the record owner will deliver the deed to the property to the purchaser when certain conditions have been met, such as completion of payments by the purchaser; and
“(ii) has recorded the contract or an abstract of the contract in accordance with Title 70, chapter 21;
“(b) any assignee or successor of a person included under subsection (a), if such assignee or successor has also recorded the contract or an abstract of the contract in accordance with Title 70, chapter 21 . . . .”

The Legislature is the more appropriate body to decide whether this issue need be changed. It is this Court’s responsibility to construe the statutes as they currently exist. Although appellant expresses valid concerns on this issue, the appropriate forum for this matter is not with this Court. The statutes are clear. A contract for deed is not the same legal concept as a mortgage under Montana law. A contract for deed therefore need not be treated as a mortgage for purpose of foreclosure. No error was made on this issue by the District Court.

ISSUE 2

IF THE DISTRICT COURT ERRED WHEN IT REFUSED TO DETERMINE THAT A CONTRACT FOR DEED IS IN FACT A MORTGAGE, THEN DOES IT NOT FOLLOW THAT THE PLAINTIFF-RESPONDENT AS A SUCCESSOR IN INTEREST TO THE VENDOR UNDER THE CONTRACT AT ISSUE IS BARRED FROM THE RECOVERY OF ANY DEFICIENCY JUDGMENT ON THE OBLIGATION SECURED?

Because of our holding in Issue 1, this issue is moot.

ISSUE 3

DID THE DISTRICT COURT ERR IN REQUIRING APPELLANT TO POST A $34,408.83 SUPERSEDEAS BOND?

Appellant’s final contention is that the District Court erred in requiring that he post a supersedeas bond in the amount of $34,408.83 after he moved that court for a stay of execution on judgment pending appeal. Rule 7(a), M.R.App.P. provides in relevant part:

“When the judgment or order determines the disposition of property in controversy as in real actions, replevin, and actions to foreclose mortgages, or when such property is in the custody of the sheriff or when the proceeds of such property or a bond for its value is in the custody or control of the court, the amount of the supersedeas bond shall be fixed at such sum only as will secure the amount recovered for the use and detention of the property, the costs of the action, costs on appeal, interest, and damages for delay. On application, the supreme court in the interest of justice may suspend, modify, restore, or grant any order made under this subdivision.”

Under the foregoing rule, the real property that is the subject of the contract between the parties is in the control of the District Court. The amount of the judgment is $28,398.67. The supersedeas bond exceeds the judgment by approximately $6,000.00. The amount of the money judgment is at this time unknown, for if Nicholson decides not to complete the contract by paying the balance due, a deficiency judgment cannot be computed until after the sheriff’s sale. In the meantime, the land itself is security for the judgment. It was, moreover, premature to allow Aveco to docket the judgment as it now exists in other jurisdictions. It is our determination that the supersedeas bond in this case should not have exceeded $6,000.00. Therefore, under the power vested in this Court in Rule 7(a), M.R.App.P., we exonerate and discharge the obligation on the supersedeas bond for the amount in excess of $6,000.00.

ISSUE 4

DID THE DISTRICT COURT PROPERLY DETERMINE THAT AVECO IS ENTITLED TO SPECIFIC PERFORMANCE (ACCELERATION OF PAYMENTS) UNDER THE CONTRACT FOR DEED?

Section 27-1-411, MCA, provides that:

“Except as otherwise provided in this part and Title 28, chapter 2, parts 16 and 17, the specific performance of an obligation may he compelled when:
“(4) it has been expressly agreed in writing, between the parties to the contract, that specific performance thereof may be required by either party or that damages shall not be considered adequate relief.”

Section 27-1-414, MCA, provides that the right to specific performance must be mutual

“(1) When either of the parties to an obligation is entitled to a specific performance thereof according to the provisions of 27-1-411, the other party is also entitled to it, though not within those provisions.
“(2) Neither party to any obligation can be compelled specifically to perform it unless the other party thereto has performed or is compellable specifically to perform everything to which the former is entitled under the same obligation, either completely or nearly so, together with full compensation for any want of entire performance.”

While we hold that the trial court properly ordered the sale of the land, in the deficiency judgment and right of redemption it provided that only the “interest held by the defendant” is to be sold. Because Section 27-1-414, MCA requires mutuality of performance, Aveco’s interest must also be sold to give meaning to the statute. Here, specific performance is a requirement to transfer title of the real property. See also Naylor v. Hall (1982), 201 Mont. 59, 651 P.2d 1010; Maxted v. Barrett (1982), 198 Mont. 81, 643 P.2d 1161; and Schultz v. Campbell (1966), 147 Mont. 439, 413 P.2d 879. When the sale is of the interest of both the plaintiff and defendant, equitable and legal title are merged and there is nothing left to be performed. The purchaser at the sale will then receive a title subject to the right of redemption of the defendant. We affirm the District Court’s order of specific performance.

ISSUE 5

DID THE DISTRICT COURT PROPERLY DETERMINE THAT AVECO IS ENTITLED TO HAVE THE PROPERTY SOLD IF APPELLANT FAILS TO PAY THE REMAINING BALANCE?

The contract between the seller and defendant Nicholson provided that the seller could upon default of buyer “. . .at their option declare all sums provided to be paid to them to be immediately due and payable and may take all legal means to collect the same.”

As assignee of the sellers, Aveco elected to ask for specific performance and sale of land in its complaint. This procedure was not contested by the defendant.

We held in SAS Partnership, Etc. v. Schafer (1982), 200 Mont. 478, 653 P.2d 834, and cases therein cited that:

“. . . it is proper for the District Court on remand to enter a decree of specific performance with a provision that if the entire balance is not paid within a specified time period the property should be sold with the net proceeds applied to satisfy the money obligation owed ....

SAS Partnership, 653 P.2d at 838.

The District Court did not err when it ordered the property sold upon defendant’s failure to pay the remaining balance.

ISSUE 6

DID THE DISTRICT COURT PROPERLY DETERMINE THAT AVECO IS ENTITLED TO A DEFICIENCY JUDGMENT IF PROCEEDS ARE INSUFFICIENT TO PAY THE ACCELERATED BALANCE AND OTHER MONIES OWING PURSUANT TO THE CONTRACT?

Again we turn to Glacier Campground. There we held that once specific performance on a contract has been ordered, there is nothing inequitable about awarding a deficiency judgment on any unsatisfied amount after the sale of the land in controversy. Glacier Campground, 597 P.2d at 698.

Nicholson is obligated to Aveco for the amount of the judgment on the contract upon which he defaulted. If, after the property is sold there is a deficiency of the amount owed, Aveco could sue Nicholson for the difference. To award a deficiency judgment in the present proceeding is judicially economical and may ultimately be less expensive for Nicholson with respect to costs and fees. The risk of forfeiting payments already made while still being obligated for the remainder of the contract purchase price is a risk presently taken by anyone entering into a contract for deed such as the one entered into by Nicholson. The deficiency judgment is contingent on the outcome that the sale of the property does not net enough to satisfy Aveco’s judgment against Nicholson.

We hold that the District Court was correct in awarding Aveco a deficiency judgment.

Affirmed in part and reversed in part.

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


author: MR. CHIEF JUSTICE TURNAGE

text:
    WILLIAM H. HUDSON, Plaintiff and Respondent, v. LEE McDONALD and Mary McDonald and Alice E. Flager as County Treasurer of Madison County, Montana, Defendants and Appellants.
    No. 87-67.
    Submitted on Briefs Sept. 25, 1987.
    Decided Dec. 22. 1987.
    747 P.2d 221.

      Thomas I. Sabo, Bozeman, for defendants and appellants.
    Chester Lloyd Jones, Virginia City, for plaintiff and respondent.
   MR. CHIEF JUSTICE TURNAGE

delivered the Opinion of the Court.

Defendant McDonald appeals the July 11, 1986, summary judgment of the Fifth Judicial District Court, Madison County. The judgment voided McDonald’s tax deed, validated Hudson’s redemption of his property, and quieted title in Hudson against McDonald and the Madison County Treasurer. We affirm.

The parties raise three issues for our review.

1. Under the tax deed application procedures of Section 15-18-202(1), MCA (1985), must notice be served on the occupant of the subject property?

2. Does a published “Notice of Application for Tax Deed” serve proper notice if it fails to comply with the publication requirements of Section 15-18-202(3), MCA (1985)?

3. Is a delinquent taxpayer, who pays the redemption amount to the County Treasurer after publication of a “Notice of Claim of a Tax Title”, entitled to redemption under Section 15-18-403, MCA (1985)?

The code sections cited in this opinion were repealed by the 50th Legislature in 1987. However, the sections cited are the law applicable to this case.

Plaintiff Hudson purchased an eighty-acre parcel in Madison County, Montana, in 1968. From 1968 to 1980, Hudson received his property tax notices at his office in the Mercantile Securities Building in Dallas, Texas. He paid those taxes. In June of 1980, Hudson moved his office to the Plaza of the Americas in Dallas.

In November of 1980, the tax notice for 1980 was mailed to the Mercantile address and duly forwarded to the Plaza address. Hudson paid the taxes in November of 1980. However, the post office only forwarded mail for one year and no further tax notice was ever received at the Plaza address.

On July 20, 1982, Hudson’s property was sold to Madison County for delinquent taxes. Two years later, McDonald paid the taxes and penalties due under assignment to the Madison County Treasurer. On July 26,1984, McDonald became the assignee of a duplicate certificate of tax sale issued to Madison County.

Throughout this period, Hudson’s property had been occupied, on a seasonal basis by Hudson, his relatives and friends. Household furnishings as well as vehicles and maintenance equipment were stored on the premises year-round. The property was also surrounded by a perimeter fence. During 1984, a person physically occupied the premises with Hudson’s permission from July through October 20 and then from November 15 through 30. The premises were also occupied from July 10 through September 30, 1985.

On April 17, 1985, McDonald sent Hudson notice by certified mail of McDonald’s intention to apply for a tax deed. The notice was sent to Hudson’s Mercantile address. McDonald also published, once a week for two successive weeks, a “Notice of Application for Tax Deed” in the Madisonian, a weekly newspaper in Virginia City. The publication commenced on April 25, 1985.

Prior to mailing and publishing the notice, McDonald went physically upon the property to determine if it was occupied. He knocked on the door and searched the premises but found no one. He later telephoned the neighboring ranch and was advised by an employee that Hudson’s property was occupied during the summer and fall.

However, McDonald never served notice on any occupant of Hudson’s property. No notice of delinquent taxes was ever found posted on the property. Hudson did not receive the notice by certified mail and did not know that notice had been published in the Madisonian.

On September 3, 1985, McDonald paid the Madison County Treasurer $2,154.68 and received a tax deed for the property. He promptly recorded the deed in the office of the Madison County Clerk and Recorder. On September 12 and 19, 1985, McDonald published in the Madisonian a “Notice of Claim of a Tax Title” pursuant to Section 15-18-403, MCA.

Hudson first learned about the tax sale when a neighbor of Hudson’s property advised Hudson that the “Notice of Claim of a Tax Title” had been published. In response, Hudson sent the Madison County Treasurer a check for $2,334.31 on September 23, 1985, to redeem the property.

On September 30, 1985, the Madison County Treasurer issued Hudson a certificate showing redemption of the property from tax sale. However, a month later the Treasurer sent a letter to Hudson stating that she had “voided out” Hudson’s redemption because McDonald’s tax deed had been issued on September 3, 1985.

Hudson then filed to quiet title. McDonald counter-claimed for title. Both parties agreed to the facts recited above and moved for summary judgment.

On July 11, 1986, the District Court entered judgment ratifying Hudson’s redemption of the property. The court found that “there was a failure to comply with the scope, intent and purpose of applicable tax sale proceedings.” The court strictly construed the tax statutes against McDonald, stating: “To do otherwise would be to put judicial imprimatur on acts which in effect forfeit $200,000 worth of property for $2,000.” It concluded that McDonald’s tax deed was void and quieted title in Hudson against McDonald and the Madison County Treasurer. McDonald appealed on August 7, 1986.

On appellate review of a summary judgment, this Court is free to examine the entire record and make appropriate findings. Shimsky v. Valley Credit Union (Mont. 1984), [208 Mont. 186,] 676 P.2d 1308, 1310, 41 St.Rep. 258, 260. We will uphold the summary judgment if there is no genuine issue of material fact and the evidence shows the moving party is entitled to judgment as a matter of law. Vogele v. Estate of Schock (Mont. 1987), [229 Mont. 259,] 745 P.2d 1138, 44 St.Rep. 1950, 1953.

Issue 1. Notice

McDonald contends that his tax deed was valid and the notice was proper. We analyze this issue under the guidelines of Section 15-18-202(1), MCA. When property is occupied, the statute requires service upon the occupant:

“The purchaser of property sold for delinquent taxes or his assignee must. . . serve upon the owner of the property purchased, if known . . . and upon the person occupying the property, if the said property is occupied ... a written notice . . . [Emphasis added.]”

We note that the word “and” maximizes the probability that the delinquent taxpayer will receive notice.

McDonald was required by statute to serve the occupant with notice. McDonald failed to do so. McDonald admits in his affidavit for tax deed that he knew the property was occupied. He stated: “That upon inquiry, Affiant has determined the property to be unoccupied, except from time to time during the summer and fall months, or as the weather permits, property is occupied by owner and guests.” [Emphasis added.] McDonald’s efforts to personally serve Hudson were in the early spring, when Hudson’s property was customarily unoccupied. McDonald later agreed that the property was occupied for the two months prior to McDonald’s receipt of tax deed on September 3, 1985. Yet the record reveals no subsequent efforts by McDonald to serve the occupant. McDonald’s admission in his affidavit, coupled with his lack of diligence in serving the occupant, was fatal to proper notice under Section 15-18-202(1), MCA.

As we held in Long v. Dillon (Mont. 1984), [208 Mont. 490,] 679 P.2d 772, 774, 41 St.Rep. 486, 489, if proper notice of application for tax deed is not given to the owner of real property, then the time for redemption continues indefinitely. Accordingly, we hold that McDonald’s tax deed was void because the notice requirements of Section 15-18-202(1), MCA, were not followed.

Issue 2. Publication

McDonald asserts that he published a proper “Notice of Application for Tax Deed.” Our analysis of this issue is governed by Section 15-18-202(3), MCA. The statute prescribes the form of publication for a “Notice of Application for Tax Deed.” The form reads:

“Notice is hereby given that the undersigned will on the-day of _ 19_, apply to the county treasurer of ___county for a tax deed to the following described property, to wit:

The “Notice of Application for Tax Deed,” as published by McDonald, contained two discrepancies. The first discrepancy is that McDonald’s notice read “Notice is hereby given that the undersigned will on or after the 21st day of August, 1985 . . .” (Emphasis added.) The words “or after” add an element of ambiguity that is not in the statute. Such an ambiguity could work against the delinquent taxpayer.

The second discrepancy is that McDonald described the property as “E2NE4 of Section 35, Township 8 South, Range 1 East, Madison County, Montana,” in his affidavit for tax deed. However, in his published notice, the property is merely described as “E2NE4, 35, 8S, IE.” The published description omits the words section, township and range. More importantly, it also omits the county where the property is situated. In the case of a tax sale, such notice must be strictly construed. We find that this truncated description does not adequately identify the location of the subject property. By failing to comply with the requirements of Section 15-18-202(3), MCA, the published description was fatally defective. Yetter v. Gallatin County (1982), 198 Mont. 243, 245, 645 P.2d 941, 942.

As the District Court stated: “Let the tax deed applicant be aware of these statutes, and let him adhere to the letter thereof, particularly as to description of the property, the content of the affidavits and notices, and the need for the determination of occupancy.”

In conclusion, the defective notice and publication precluded the Madison County Treasurer from issuing a valid tax deed. Edwards v. Walters (1983), 204 Mont. 374, 385, 664 P.2d 932, 937. We hold that the District Court’s findings and memorandum adequately support its conclusion that the tax deed was void.

Issue 3. Redemption under Section 15-18-403, MCA

The title of Section 15-18-403, MCA, states: “Title conveyed by deed — procedure to cure defects.” McDonald contends that Section 15-18-403, MCA, merely gave Hudson standing to bring a quiet title action to challenge the validity of McDonald’s tax deed. In this issue, McDonald attempts to divert attention from the defective notice and publication.

McDonald’s argument is misdirected. The focus of this appeal is the propriety of the procedures before the issuance of the tax deed, not after. A curative statute cannot validate a void tax deed. Therefore, this issue is moot.

We affirm the summary judgment of the District Court.

MR. JUSTICES HARRISON, HUNT, McDONOUGH and GULBRANDSON concur.