author: MR. JUSTICE GULBRANDSON

text:
    STATE OF MONTANA, Plaintiff and Respondent, v. TIMOTHY W. BALLENGER, Defendant and Appellant.
    No. 86-291.
    Submitted on Briefs April 19, 1987.
    Decided June 30, 1987.
    738 P.2d 1291.

      James P. O’Brien argued, Missoula, for defendant and appellant.
    Mike Greely, Atty. Gen., Helena, Patrick Driscoll argued, Asst. Atty. Gen., Helena, Robert L. Deschamps, III, Co. Atty., Missoula, Karen Townsend argued, Deputy Co. Atty., for plaintiff and respondent.
   MR. JUSTICE GULBRANDSON

delivered the Opinion of the Court.

Timothy Ballenger appeals his conviction in Missoula County District Court for the deliberate homicide of his three-year old stepson, for which he received a 100 year prison term and a dangerous offender designation. Four issues are presented on appeal:

(1) Whether the District Court erred by refusing to instruct the jury on the lesser included offenses of aggravated assault and felony assault?

(2) . Whether the District Court erred by refusing defendant’s instructions on the necessary mental state for conviction of deliberate homicide?

(3) Whether the State must prove the absence of extreme mental or emotional stress beyond a reasonable doubt in a trial for deliberate homicide, once evidence of the stress has been introduced at trial by the defendant?

(4) Whether the District Court erred by refusing defendant’s instruction for antisocial conduct? We affirm.

On March 1, 1985, Pamela Ballenger brought her three year old son, Beau Mitchell Stanley, to a hospital in Missoula, Montana. The child was comatose, whimpering, exhibited breathing difficulty and had numerous bruises and abrasions on his body. The attending doctor, Dr. Wise, noted that the child appeared to be near death and did not respond to stimuli as expected. Two specialists, Drs. Gary and Snellman, were called in for consultation. Dr. Wise concluded that the child had lost nearly one-fifth of his blood supply through internal bleeding and expressed concern about fresh bruises on the child’s forehead and feet. The child was transferred to the intensive pediatric care unit of another Missoula hospital. As the physicians were attempting to alleviate the pressure in the cranial area, the child died.

An autopsy revealed that the cause of death was shock and hemorrhage due to multiple blunt injuries. The medical examiner found that injuries to the trunk, feet, and legs were consistent with those inflicted by a belt and a bungi cord. The shoulder injuries were attributed to the use of a hairbrush on the child. The autopsy revealed over 140 separate injuries to the child. The hospital notified law enforcement officers subsequent to the child’s admittance. The responding officer spoke with the mother who explained that the child had been at home all day with her husband, the defendant. Upon her return from work, she heard the child experiencing breathing difficulty. She explained that she argued with the defendant, who then left the residence. The officer became suspicious, asked for identification, and followed the mother to her car where the defendant was discovered lying face down in the back seat. The officer arrested both the mother and the defendant. The mother subsequently changed her version of events. She said that when she returned from work, the defendant told her he had spanked the child for misbehaving. The mother found the child gasping for breath and told the defendant that they had to go to the hospital. Defendant replied that the child was faking it and that he, the defendant, would be arrested if they went to the hospital. On the way to the hospital, defendant apparently told the mother to tell those inquiring that they had had a fight and that he had left the residence.

A statement was taken from the defendant who admitted beating the child for not eating his breakfast. The defendant said he hit the child with a belt, bungi cord, and his fists every 5-10 minutes over a four hour period. A search warrant was executed and a belt, bungi cord, and hairbrush were recovered from the residence.

At trial, the jury heard extensive medical testimony about the injuries sustained and defendant’s mental condition, and viewed photographs of the child. Five mental health professionals testified at trial as to defendant’s ability to act purposely or knowingly toward the deceased child. Defendant’s psychologist testified as to his diagnosis of organic brain syndrome but offered no opinion as to defendant’s ability to act purposely or knowingly on the date of the incident. Dr. Hoell, a psychiatrist, testified that the defendant knew he was inflicting punishment on the child but because he was suffering from an organic personality syndrome, he did not realize the severity of the punishment. Dr. Bach, a clinical psychologist, testified that in his opinion defendant’s brain was functioning normally when he saw the defendant in July 1983 and September 1985. The 1985 visit took place approximately six months after the incident. Dr. Bach went on to characterize the defendant’s actions as “remarkably organized, planful, [and] reality laden.” Dr. Stratford, a psychiatrist, and Dr. Walters, a clinical psychologist, generally agreed with Dr. Bach’s assessment and concluded that the defendant was capable of acting purposely or knowingly on the date of the incident. The defendant did not testify at trial, but did raise the defense of mental disease or defect so as to negate the statutory element in deliberate homicide of knowingly or purposely causing the child’s death.

The jury was instructed on deliberate, mitigated deliberate, and negligent homicide. The defendant requested instructions on felony and aggravated assault as well as antisocial conduct but the instructions were refused. The defendant was convicted of deliberate homicide.

The first issue is whether the District Court erred by refusing to instruct the jury on the lesser included offenses of aggravated assault and felony assault. The trial court only has to instruct on lesser offenses to which the evidence is applicable and the jury would be warranted in finding the accused guilty. State v. Koepplin (Mont. 1984), [213 Mont. 55,] 689 P.2d 921, 925, 41 St.Rep. 1942, 1946. The facts in Koepplin were that the defendant admitted striking the deceased victim six to eight times with blunt force but nonetheless the defendant requested an instruction on negligent homicide. We noted that the evidence precluded any notion that the crime involved an ordinary slapping or beating and therefore an instruction on negligent homicide was not warranted. 689 P.2d at 925. Similarly, there is little, if any evidence in this case indicating the commission of aggravated assault or felony assault. To the contrary, the evidence reveals a series of calculated, relentless beatings of a helpless child with a belt, bungi cord, hairbrush, and the defendant’s fists, resulting in the child’s death. As in Koepplin, the defendant admitted that the beatings took place. Since the evidence does not support an instruction on aggravated assault or felony assault, the District Court was correct in refusing defendant’s instructions on those offenses.

The second issue is whether the District Court erred by refusing defendant’s instructions on the necessary mental state for conviction of deliberate homicide. The defendant argues that the State was required to prove that he knew that death would result from his actions. We reject this contention and hold that if an act which causes a death is done purposely or knowingly, deliberate homicide is committed. See State v. Sigler (Mont. 1984), modified, [210 Mont. 248,] 688 P.2d 749, 758. A defendant acts knowingly when there is proof beyond a reasonable doubt that the defendant is aware of the high probability of the result of his conduct. The State is not required to prove that the defendant knowingly and purposely intended the end result. The evidence shows that the defendant knowingly and purposely subjected a defenseless child to immense personal suffering through a series of beatings which culminated in the child’s agonizing death. We hold that the evidence justified the giving of the court’s instruction.

The third issue is whether the State must prove the absence of extreme mental or emotional stress beyond a reasonable doubt in a trial for deliberate homicide, once evidence of the stress has been introduced at trial by the defendant. The defendant offered the following instruction on deliberate homicide:

“To convict the Defendant of Deliberate Homicide, the State must prove the following elements:
“First, that the Defendant performed the acts alleged.
“Second, that when he did so, he acted purposely or knowingly.
“Third, that the Defendant caused the death of Beau Stanley.
“Fourth, that when he did so, he caused the death purposely or knowingly.
“Fifth, the acts leading to death were not committed under the influence of extreme mental or emotional distress for which there is a reasonable explanation or excuse.
“If you find from your consideration of all the evidence that each of these elements has been proved beyond a reasonable doubt, then you should find the defendant guilty.
“If, on the other hand, you find from your consideration of all the evidence that any of these elements has not been proved beyond a reasonable doubt, then you should find the defendant not guilty.”

In essence, the defendant was attempting to place the burden of proof on the State as to the absence of mitigating factors. The trial court rejected the defendant’s instruction. It is true that the State must prove every element of the crime charged beyond a reasonable doubt. State v. Gratzer (Mont. 1984), [209 Mont. 308,] 682 P.2d 141, 41 St.Rep. 727. However, in a prosecution for deliberate homicide in which an instruction for mitigated deliberate homicide is also given, the State does not have to prove absence of mitigation beyond a reasonable doubt. Neither party has the burden of proof as to such mitigating factors. Gratzer, 682 P.2d at 146.

Since an instruction for mitigated deliberate homicide was given, the State, as in Gratzer, was not shouldered with the burden of proof as to the absence of mitigating factors. We therefore reject defendant’s argument on this issue.

The final issue is whether the District Court erred by refusing defendant’s instruction for antisocial conduct. The defendant proposed the following instruction:

“Antisocial conduct is defined as conduct which is marked by behavior deviating from the social norm. Anti-social conduct does not include suicide attempts, masochistic behavior, hallucinations, delusions, disturbed sleeping patterns, emotional lability, or physical complaints.”

The defendant failed to establish an authoritative basis for his instruction, and the court rejected it, favoring the State’s paraphrased version of State v. Watson (Mont. 1984), [211 Mont. 401,] 686 P.2d 879, 41 St.Rep. 1452:

“[A]s used in this instruction, the terms mental disease or defect do not include an abnormality manifested only by repeated criminal or other anti-social conduct. If, however, there is other evidence that the Defendant had a mental disease or defect, you may consider repeated criminal or other anti-social conduct as a manifestation of a mental disease or defect.”

We agree with the lower court that there is no authority for the giving of defendant’s instruction. The court’s instruction conforms to Montana law and was properly given to the jury.

Affirmed.

MR. CHIEF JUSTICE TURNAGE and MR. JUSTICES HARRISON, WEBER, SHEEHY and HUNT and HON. C.B. McNEIL, District Judge, sitting for the former MR. JUSTICE MORRISON, concur.


source: Caselaw Access Project

author: MR. JUSTICE HUNT

license: Public Domain

text:
    STATE BANK OF TOWNSEND, a Montana banking corporation, Plaintiff and Respondent, v. MARY JANE WORLINE; Nelson Edward Sayer and Rose Marie Sayer; Tommie H. Thompson and Cathleen K. Thompson; Gary R. Marshall and Romaine L. Marshall, Defendants and Appellants. GARY R. MARSHALL and Romaine L. Marshall, Cross-Claimants, v. MARY JANE WORLINE, Nelson Edward Sayer and Rose Marie Sayer; Tommie H. Thompson and Cathleen K. Thompson, Cross-defendants.
    No. 87-38.
    Submitted on Briefs April 3, 1987.
    Decided June 30, 1987.
    738 P.2d 1295.

      Worden, Thane & Haines; Samuel M. Warren, Missoula, for Thompson.
    McChesney & Grenfell; H. L. McChesney, Missoula, for the Sayers.
    Datsopoulos, MacDonald & Lind; Christopher B. Swartley, Missoula, for Worline.
    John T. Flynn, Townsend, for Marshall.
    Hooks & Budewitz; Patrick F. Hooks, Townsend, for State Bank.
   MR. JUSTICE HUNT

delivered the Opinion of the Court.

This is an appeal from the First Judicial District, Broadwater County, Montana, by cross-defendants, Tommie H. Thompson and Cathleen K. Thompson. The Thompsons appeal from an order denying the motions of all cross-defendants for a change of venue.

We reverse and remand to the District Court.

The issues raised on appeal are as follows:

1. What is the proper venue for an interpleader complaint requesting the resolution of conflicting demands made upon an escrow agent holding documents for a contract for deed?

2. What is the proper venue for an action seeking to effect repossession, foreclosure, or forfeiture of an interest in real property when the escrow documents are held in a county different from that in which the property is located?

3. Does an initial appearance by a defendant waive that defendant’s right to demand a change of venue with respect to a cross-claim which was not before the court at the time of the initial appearance?

4. Did the District Court err in failing to order a separation of trial for an interpleader action and a cross-claim to quiet title?

On April 30, 1986, the State Bank of Townsend (Bank) filed an interpleader action pursuant to Rule 22(a), M.R.Civ.P. against Mary Jane Worline, Nelson E. and Rose Marie Sayer, Tommie and Cathleen Thompson, Gary and Romaine Marshall and Don Torgenrud in Broadwater County, Montana. The defendants had made conflicting demands concerning a contract for deed held in escrow by the Bank. The Bank requested a determination of the respective rights to the property in question and that a final judgment be entered directing the action to be taken by the Bank.

The real estate at issue is located in Missoula County. In 1976, the Marshalls sold the land to Worline and the Sayers under a contract for deed which was deposited in escrow with the State Bank of Townsend, Broadwater County. The Sayers and Worline secured the contract, with two other contracts for deed on property located in Broadwater County.

Sometime prior to this action the Sayers assigned all their interest in the Missoula property to Worline, who subsequently sold the land to Torgenrud. Torgenrud, in turn, sold the property to the Thompsons.

In response to the Bank’s filing of the interpleader complaint, in May, 1986, Worline, the Thompsons and the Marshalls filed motions to dismiss. The Sayers filed a motion to dismiss on June 7, 1986. All motions were summarily denied by the District Court.

On June 12, 1986, defendants Marshall filed a cross-claim against all other defendants alleging that the cross-defendants failed to make an annual payment on the Missoula property and requesting forfeiture and repossession of said property.

The Marshalls also counterclaimed against the Bank but this counterclaim was dismissed with prejudice on August 8, 1986.

In response to the Marshalls’ cross-complaint, cross-defendants Worline, Thompson and Torgenrud filed motions for a change of venue to Missoula County. They argued that all cross-defendants reside in Missoula County, that the property at issue is located there as well, and as such Missoula County is the proper place for trial of this action.

The District Court denied all motions for a change of venue, calling the transaction at issue a contract action, and applying Section 25-2-121, MCA. Under this statute, Broadwater County was considered the place where the contract was to be performed and venue need not be moved to Missoula County. The court held that defendants Worline, Sayer and Thompson waived their right to a change of venue when they failed to move for the change at their initial appearance when filing motions to dismiss the Bank’s interpleader action.

As to defendant Torgenrud, the District Court held that regardless of his timely filing of a motion to change venue, his motion was denied. The reasoning given by the court was that since, as to defendants Marshall, Worline and Sayer, the action was properly filed in Broadwater County, then pursuant to Section 25-2-117, MCA, all defendants can be tried in Broadwater County.

In his memorandum in support of a change of venue, defendant Torgenrud raised the issue of separating the trials pursuant to Rule 42(b), M.R.Civ.P. The District Court refused to decide this issue due to the lack of a properly filed motion requesting separate trials as required by Rule 7(b), M.R.Civ.P.

From this order denying the motions for a change of venue, defendants Thompson appeal.

The first issue which must be resolved when determining the proper county of trial for this action is whether the transaction falls under Section 25-2-121, MCA, or Section 25-2-123, MCA. In other words, is this a contract transaction or a real property transaction?

Upon review of the contract for deed and escrow receipt for the property in question we find that Broadwater County is not delineated as the county in which the contract was to be performed. The contract at issue secures a real property transaction. Section 25-2-123, MCA, unambiguously states that when real property is at issue, proper venue is the county in which the property is located. Broad-water County is merely the county in which the escrow documents were held. Section 25-2-121, MCA, does not apply to this case and Broadwater County is riot a proper county in which to try an action based on the interpleader complaint.

The second issue of what is the proper venue for the cross-claim, supports the finding that Missoula County is the only proper county in which to try this action.

The Marshalls filed a cross-claim against the other co-defendants subsequent to the District Court’s denial of the motions to dismiss the Bank’s interpleader action. The cross-claim alleges that cross-defendants failed to pay an annual payment due on the contract for deed for the Missoula County real property held in escrow at the State Bank of Townsend. Further, the Marshalls requested the court to: (1) declare that the contract for deed on the Missoula property is forfeited; (2) determine that cross-defendants have no further right, title or interest in and to the subject property and to those contracts for deed pledged as security; (3) order cross-defendants to surrender possession of the Missoula property and vacate the same; and, (4) order the escrow agent to deliver the documents to them.

The Marshalls allege that they have all right, title and interest in the property in Missoula County and that the cross-defendants have none. The cross-claim demands further that cross-defendants vacate and return possession of the property to the Marshalls. This type of action is precisely what is described as a real property action in Section 25-2-123(3), MCA:

“The proper place of trial for all actions for the recovery of the possession of, quieting title to, or the enforcement of liens upon real property is the county in which the real property, or any part thereof, affected by such action or actions is situated.”

Although there are two contracts for deed for property located in Broadwater County held in escrow along with the other documents, these contracts are not at issue as to venue. The Broadwater County property contracts for deed are being held as security for the sale of the Missoula County property to Worline and the Sayers from the Marshalls. The dispute and consequential legal action is concerned solely with the Missoula County property.

In Beavers v. Rankin (1963), 142 Mont. 570, 572, 385 P.2d 640, 641 this Court stated that “if [a] complaint contains more than one cause of action, on one of which defendant is entitled to a change of venue, the motion must be granted, though the other cause or causes of action may be properly triable where the action was commenced” citing Heinecke v. Scott (1933), 95 Mont. 200, 26 P.2d 167.

In the present case the causes of action to recover possession of and quiet title to the property in Missoula are properly tried in Missoula County only. The land in question is located in Missoula County and all cross-defendants reside in Missoula County.

We hold that Missoula County is the proper venue for issues raised by the interpleader complaint and for the cross-claim of defendants Marshall. Therefore, Missoula County is the proper county for trial of the entire action.

The third issue of whether cross-defendants Worline, Thompson and Sayer waived their right to demand a change of venue by failing to make a proper motion upon initial appearance is rendered moot because defendant Torgenrud did not waive his right. Torgenrud’s initial appearance was to move for change of venue of the case to Missoula County. “If an action with two or more defendants is brought in a county that is not a proper place of trial for any of the defendants, any defendant may make a motion for change of place of trial to any county which is a proper place of trial.” Section 25-2-117, MCA.

The final request by cross-defendants for an order requiring a separation of the cross-claim from the interpleader complaint for the purpose of trial is also rendered moot by this decision.

The order of the District Court denying cross-defendant’s motions for a change of venue to Missoula County is reversed.

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


text:
    In re the MARRIAGE OF LAVON MEES FEISTHAMEL, Petitioner and Respondent, and GEORGE J. FEISTHAMEL, Respondent and Appellant.
    No. 87-43.
    Submitted on Briefs April 9, 1987.
    Decided June 30, 1987.
    739 P.2d 474.

      Moses Law Firm, Michael Moses, Billings, for respondent and appellant.
    Lucas & Monaghan, Gary L. Day, Miles City, for petitioner and respondent.
   MR. JUSTICE HUNT

delivered the Opinion of the Court.

George Feisthamel appeals a maintenance and property distribution award in a marital dissolution action from the Sixteenth Judicial District Court in Rosebud County, Montana.

We reverse in part, affirm in part and remand for further consideration in accordance with this Opinion.

The issues on appeal are:

1. Did the District Court err in making a determination of a need for a maintenance award without considering certain resources which were the subject of an antenuptial agreement between the parties?

2. Did the District Court abuse its discretion in its order of property disposition?

George and LaVon Feisthamel were married on October 18, 1974. They entered into an antenuptial agreement dated October 5, 1974, prior to the marriage. They separated in July, 1984.

The respondent, LaVon Feisthamel, is a 62 year old woman in fair health. LaVon has had a history of problems relating to high blood pressure, depression, post-menopausal problems, and osteoarthritis. She underwent eye surgery for glaucoma shortly before the trial in this matter and further surgery may be needed.

LaVon has not been in the employment market significantly. While she is a registered nurse, she is not currently licensed since her training occurred many years ago and she has never worked in that capacity. LaVon worked as a housewife and homemaker in a previous marriage and, following her first husband’s death, was employed for a short time as a secretary/receptionist in a Billings Chiropractic Office. Duriug her marriage to the appellant, she worked as a homemaker and housewife. She has made numerous attempts to obtain full employment and obtained a temporary Vista volunteer job for which she receives $357 per month. That job was to end in May, 1987.

The appellant, George Feisthamel, is a 59 year old male in generally good health. Appellant has been employed by Long Construction Company and Western Energy for many years as a heavy equipment mechanic. The appellant is a member of the International Union of Operating Engineers.

He continues to reside in the family home located in Colstrip, Montana. The respondent moved from the family home in July, 1984.

Both of the parties owned certain properties, both real and personal, prior to their marriage. The trial court found that the ante-nuptial agreement dated October 5, 1974, excluded from consideration all real and personal property owned by either party prior to the marriage in determining the issues of maintenance and division of marital assets. This provision was honored in the final decree.

The trial court divided the net marital assets equally between the parties and awarded petitioner maintenance in the amount of $500 per month commencing November 1, 1986, and ending November 31, 1991.

The appellant contests the award of maintenance and the property disposition.

Appellant contends the District Court abused its discretion in awarding respondent this maintenance. He argues that the court erroneously failed to consider the financial resources of the respondent arising out of property subject to the antenuptial agreement. He states both parties knowingly signed the antenuptial agreement. Despite this, he argues the particular provisions disallowing the consideration of properties acquired before the marriage should be dedared void as against public policy as they relate to a determination of the need for maintenance.

The provision involving the maintenance issue in the October 5, 1974 antenuptial agreement states:

“That in the event, after entering into the marriage, said parties find they cannot live together congenially as husband and wife and decide to separate and/or to secure a divorce, and it is necessary to make an equitable division of their property rights and a determination of the rights, if any, of Second Party to separate maintenance or temporary or permanent alimony, all real and personal property now owned by the parties shall not be taken into consideration. Provided, however, in event of such separation and/or divorce, Second Party shall be entitled to an equitable division of the property accumulated and acquired as a result of and in connection with their marriage. Provided, further when said accumulated property has been equitably divided said parties shall execute and deliver to each other, a release of any and all right, title and interest which they may have or claim in and to the property now owned or hereafter accumulated by either party. Provided, further that in the event a divorce is granted by a Court of competent jurisdiction to either party the terms of this contract shall be binding upon said Court, and at the time of granting said divorce this contract shall be incorporated in said decree. (Emphasis added.)”

Appellant claims that the District Court should have considered a certain annuity of $248 as well as other income or benefits she might receive from a trust provided by her deceased first husband.

Respondent LaVon’s position is that the annuity income of $248 per month and any trust benefits are covered by the antenuptial agreement and should not be considered for determining the appropriateness of maintenance. She further argues that maintenance is appropriate even if the annuity was to be considered because she still lacks sufficient property to provide for her reasonable needs and is unable to support herself through appropriate employment.

This issue requires an analysis of several statutes. Montana’s maintenance statute Section 40-4-203, MCA, states:

“Maintenance. (1) In a proceeding for dissolution of marriage or legal separation or a proceeding for maintenance following dissolution of the marriage by a court which lacked personal jurisdiction over the absent spouse, the court may grant a maintenance order for either spouse only if it finds that the spouse seeking maintenance:
“(a) lacks sufficient property to provide for his reasonable needs; and
“(b) is unable to support himself through appropriate employment or is the custodian of a child whose condition or circumstances make it appropriate that the custodian not be required to seek employment outside the home.
“(2) The maintenance order shall be in such amounts and for such periods of time as the court deems just, without regard to marital misconduct, and after considering all relevant facts including:
“(a) the financial resources of the party seeking maintenance, including marital property apportioned to him, and his ability to meet his needs independently, including the extent to which a provision for support of a child living with the party includes a sum for that party as custodian;
“(b) the time necessary to acquire sufficient education or training to enable the party seeking maintenance to find appropriate employment;
“(c) the standard of living established during the marriage;
“(d) the duration of the marriage;
“(e) the age and the physical and emotional condition of the spouse seeking maintenance; and
“(f) the ability of the spouse from whom maintenance is sought to meet his needs while meeting those of the spouse seeking maintenance.”

Section 40-4-203, MCA.

The rights of two parties to contract with one another are elemental and firmly established by the laws of this state and our federal Constitution. Contracts between parties prior to their marriage as well as contracts between married parties, if fair and equitable, are enforceable contracts if they do not conflict with the laws and public policy of this State.

Section 28-2-201, MCA, allows all persons who are capable of contracting except minors, persons of unsound mind, and persons deprived of civil rights to enter into contracts. More specifically Section 40-2-301, MCA, permits either a husband or a wife to enter into any engagement or transaction with the other or with any other person respecting property which either might, if unmarried, be allowed to enter into subject to the general rules on trusts which control the actions of persons occupying confidential relationships with each other.

This Court has also enforced antenuptial agreements as valid in the State of Montana if they meet the requirements of a contract. Stefonick v. Stefonick (1946), 118 Mont. 486, 167 P.2d 848; In Re Herzog’s Estate (1973), 162 Mont. 410, 513 P.2d 9.

In the case before us, the trial court honored the provision in the Feisthamel antenuptial contract which disallowed consideration of each parties’ property owned prior to the marriage for purposes of determining maintenance and property disposition.

We hold that this was error as it relates to. the maintenance provision because such a provision conflicts with the inherent public policy expressed in Section 40-4-203, MCA.

A grant of maintenance under the statute has specific preconditions which must be met. Section 40-4-203(l)(a), MCA, states a spouse must lack sufficient property to provide for his or her reasonable needs to qualify for a maintenance award. This requires the trial court to consider all of the financial resources available to the spouse seeking maintenance, including, but not limited to the resources listed in Section 40-4-203(2)(a), namely, the marital property apportioned to him or her and the ability to meet one’s needs independently.

As a general rule this Court will honor and uphold antenuptial agreements between two consenting parties in accordance with the contract and domestic relations laws of this State. However, a contract provision which disallows full consideration of one party’s financial resources when determining the maintenance rights between the parties to a dissolution is not enforceable as against the public policy of this State.

The trial court is required by Section 40-4-203(2)(f), MCA, to consider the ability of the other spouse, the one from whom maintenance is sought, to meet his or her needs while meeting those of the spouse seeking maintenance. To this end we hold that appellant’s financial resources whether included in the antenuptial contract or otherwise, must also be considered in making a determination of maintenance.

Thus the trial court must consider all of the resources available to the parties before an award of maintenance may be granted.

The trial court also found that respondent testified she was not receiving social security benefits. In keeping with the above holding, we note that social security benefits are a potential financial resource of the parties. The United States Code through the Social Securities Act, provides that a divorced spouse of an individual entitled to social security retirement or disability benefits is entitled to spousal benefits if certain criteria are met. See 42 USCS Sections 402, 416.

According to one treatise, 2 Social Security, Law and Practice Section 15:7 (John A. Glenn ed. 1987), a spouse is entitled to benefits if he or she:

“(1) applies for such benefits;
“(2) is at least 62 years old;
“(3) is not entitled to his or her own primary benefit in an amount equal to or greater than one-half that due his or her spouse; “4) is not married ....
“A divorced spouse who is otherwise eligible for spousal benefits may receive those benefits regardless of whether the insured former mate has begun to receive benefits. In order to be eligible, both the claimant and the insured must be age 62 or older and must have been divorced for at least two years prior to the date the spouse applies for benefits. Prior to 1985, a divorced spouse could not receive benefits unless the insured former mate had applied for and begun to receive benefits.” Id. at 9.

The U.S. Code defines a “divorced wife” in 42 USCS Section 416(c) to mean:

“A woman divorced from an individual, but only if she had been married to such individual for a period of 10 years immediately before the date the divorce became effective.”

Also 42 USCS Section 402(e) provides for an entitlement of widow’s social security insurance benefits if certain criteria are met.

Upon remand the trial court is instructed to consider the issue of respondent’s potential eligibility for social security benefits in determining the need for a grant of maintenance to respondent.

This case is therefore remanded to the trial court with instructions to consider the resources included in the antenuptial contract and other available resources when determining an award of maintenance under these facts.

We find no abuse of discretion in the trial court’s consideration and findings on the remaining statutory preconditions for a maintenance award listed in Section 40-4-203(2)(b) through 2(f), MCA. The above decision, therefore, does not necessarily preclude a maintenance award at the discretion of the trial court upon remand.

With respect to the second issue of property distributions, appellant contends that the trial court erred and abused its discretion by acting arbitrarily, which resulted in substantial injustice to appellant in the following respects:

First, the trial court included the appellant’s retirement plan in the marital estate. Appellant argues the plan was part of the property subject to the antenuptial agreement of the parties. We hold the plan was properly included in the marital estate as a benefit of the employment of appellant similar to wages which are also includable. Further, the plan vested during the duration of the parties’ marriage. It was not error to include the plan.

Second, appellant contends the trial court erred in its valuation of $2,000 for the 1975 pick-up and $2,800 for the 1977 Cadillac. A review of the record indicates the trial court arrived at a value for the 1975 pick-up between the Blue Book value and appellant’s approximation of the value.

The record further indicates appellant states he was offered $1,700 for the 1977 Cadillac but he did not state its worth. Respondent’s affidavit states it was worth $2,800 according to the Used Car Guide.

We find no abuse of discretion by the trial court in its determination of these values.

The last contention by appellant is that the trial court incorrectly used the appraisal value of the family home of $97,300, dated October 1, 1984. He contends the correct value was the one placed on it by himself of $78,000 at the date of the divorce proceedings in 1986.

Our review of the record indicates no error. This Court has recognized that valuation of the marital assets is preferably done at the time of distribution using fair market values. In re Marriage of Krause (Mont. 1982), 200 Mont. 368, 654 P.2d 963, 39 St.Rep. 1809. However, respondent had the home appraised by an independent appraiser at $97,300 in October of 1984. At trial, in August 1986, appellant speculated the home was worth $78,000 but when questioned by the trial court, he presented no concrete evidence. Without more, the trial court did not exceed the bounds of reason but employed conscientious judgment in adopting the respondent’s valuation of the family home.

We find no error on the property valuation and distribution as argued by appellant. This case is affirmed in part, reversed in part and remanded in accordance with this Opinion.

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


author: MR. JUSTICE WEBER MR. JUSTICE SHEEHY,

text:
    DANIEL NOONAN and Leo Noonan, d/b/a Excelsior Meats, Plaintiffs and Respondents, v. FIRST BANK BUTTE, a Corporation, Defendant and Appellant.
    No. 86-231.
    Submitted April 3, 1987.
    Decided July 1, 1987.
    Rehearing Denied Aug. 26, 1987.
    740 P.2d 631.

      James A. Robischon argued, Butte, for defendant and appellant.
    John Doubek argued, Small, Hatch, Doubek & Pyfer, Helena, for plaintiffs and respondents.
   MR. JUSTICE WEBER

delivered the Opinion of the Court.

This is an appeal from a jury verdict and judgment entered by the District Court of the Second Judicial District, Silver Bow County, in favor of the Noonans and against First Bank Butte (FBB). The jury awarded the Noonans $800,000 for loss of profits, wages, business opportunities, and credit, and $700,000 for emotional distress. We reverse and remand for a new trial.

FBB raises nine issues on appeal. The case requires a new trial based on two of the issues raised. First, the jury was ‘improperly instructed on the tort of bad faith, and second, the jury was improperly instructed on emotional distress. For the guidance of court and counsel on remand, we also discuss the issues of whether the jury should have been instructed on both the implied and statutory duties of good faith, the propriety of excluding certain testimony of an attorney for the Noonans, and whether the jury should have been instructed on negligence. Because we remand the case for new trial, we will not address the issues raised by FBB on sufficiency of the evidence.

Excelsior Meats was a partnership in Butte, Montana, operated by brothers Leo and Dan Noonan. Leo and Dan both have limited educational backgrounds and began working in the family business at a young age. Leo took care of the business aspect of the partnership and Dan worked in the store. Leo also operated a cattle feedlot. The cattle from the feedlot were sold to Excelsior Meats. Dan began his own feedlot operation in May 1981, and also sold cattle to the partnership.

Larry Dwyer was a loan officer at FBB. He had known Leo and Dan Noonan for a long time. There is a conflict in the testimony as to whether Mr. Dwyer first approached Leo Noonan or vice versa, but in 1973, FBB began loaning money to Leo Noonan. The initial loan was for $7,000 to purchase cattle. The Noonans maintained a large checking account balance at FBB and promised to transfer $12,000 in certificates of deposit to FBB. No security was required for the loan.

Leo Noonan continued to borrow from FBB and by April 1975 had over $77,000 on loan. In 1975, FBB also loaned the Noonans $100,000 to expand their meat market building. This loan was secured by a real estate lien on their property.

In November 1980, John Johnson took over the Noonan loans at FBB. At that time, the loans to Leo Noonan and the partnership totaled almost $200,000, excluding the real estate loan. The loans were secured by feedlot cattle, inventory, accounts receivable, furniture, and fixtures of the meat market. When he took over the loans, Mr. Johnson requested financial statements and tax returns. Bob Prigge, a CPA and the Noonans’ accountant, prepared the financial statements.

Mr. Johnson testified that at the time he believed the Excelsior Meats’ financial statements supported FBB’s loans to the Noonans. However, because the statements reflected only the Excelsior Meats’ partnership income, they did not accurately show the profitability or debt of the total Noonan operations. Leo Noonan’s feedlot business, which lost money in every year between 1977 and 1981, was not re-fleeted in the financial statements. Mr. Prigge testified that he offered to provide tax returns for the feedlot operation but that Mr. Johnson refused. Mr. Johnson testified that he was not informed that the financial statements given to him were incomplete.

The financial statements did not disclose that between 1978 and 1981 the Noonans borrowed $125,000 from K.B. Williams, or that they borrowed $45,000 in 1980 from the McLaughlins. Of even greater significance, the Noonans did not disclose to anyone in FBB and the financial statements did not disclose $220,000 owed by Leo Noonan to Miners Bank at the end of 1980, and $93,000 owed by Dan Noonan to Montana Bank in August 1981.

Based on the financial statements, Mr. Johnson renewed a $70,000 loan to Leo Noonan and the partnership in November 1981, and a $250,000 loan in December of the same year. The $70,000 loan was due on demand and was secured by certificates of deposit on account with FBB. The $250,000 loan was due in November 1982 and was secured by 220 head of steers at the feedlot, and by the inventory, accounts receivable, furniture, and fixtures at Excelsior Meats.

In March 1982, Leo Noonan received a letter from Miners Bank requiring payment of one of his delinquent loans. He contacted his attorney, who arranged a meeting with Miners Bank and FBB. At that meeting the Noonans disclosed debts of $980,156.54. Their assets, as of their most recent financial statement, for fiscal year 1980, were $509,800. This information is contained in defendants’ Exhibit 10, introduced at trial.

On learning of the financial position of the Noonans, FBB contacted its attorneys. On their advice, and acting under the default provision of its security agreement, FBB froze the assets in the Noonans’ partnership checking account and cashed in their certificates of deposit. The Noonans’ counsel presented a workout plan to all three banks, but FBB refused to go along with the plan. In April 1982, FBB took control of and liquidated Excelsior Meats pursuant to an authorization for peaceful repossession of collateral signed by Leo and Dan Noonan.

Leo and Dan Noonan filed for bankruptcy individually and on behalf of the partnership in June 1982. They received discharges in bankruptcy in October 1982. After the discharges, they paid $9,432 to bring current their mortgage payments to FBB and $8,100 to bring current other obligations on the market, including repair bills caused by FBB’s repossession of the building. FBB returned the building to them, and Dan Noonan reopened the business.

In March 1984, the Noonans sued FBB. Dan Noonan testified his sales are approximately one-half their 1981 level, he has a hard time getting credit, and because of the bankruptcy he lost his USDA license, which enabled him to sell wholesale. The jury returned a verdict in favor of the Noonans for $800,000 in lost profits and $700,000 in emotional distress. FBB appeals.

I

Was the jury improperly instructed on the implied covenant of good faith and fair dealing?

FBB argues that the implied covenant of good faith and fair dealing cannot apply where a statutory duty of good faith exists. Here, a statutory duty of good faith is present under the Uniform Commercial Code, Section 30-1-203, MCA:

“Every contract or duty within this code imposes an obligation of good faith in its performance or enforcement.”

FBB also contends that, even if an instruction on the common-law duty of good faith is allowed in this case, the one given was inadequate.

This Court has not prohibited application of an implied covenant of good faith and fair dealing where there is a statutory duty of good faith present. In the past, the Court has extended the implied duty of good faith and fair dealing to cases involving banks dealing with their customers. In Tribby v. Northwestern Bank of Great Falls (Mont. 1985), [217 Mont. 196,] 704 P.2d 409, 419, 42 St.Rep. 1133, 1142, we extended the implied covenant of good faith and fair dealing to the commercial area of bank-customer relations. In Nicholson v. United Pacific Ins. Co. (Mont. 1985), [219 Mont. 32,] 710 P.2d 1342, 1347, 42 St.Rep. 1822, 1828, we noted the extension of the tort theory to banks dealing with customers and cited Tribby and First National Bank of Libby v. Twombly (Mont. 1984), [213 Mont. 66,] 689 P.2d 1226, 41 St.Rep. 1948. In Northwestern Nat. Bank v. Weaver-Maxwell (Mont. 1986), [223 Mont. 33,] 729 P.2d 1258, 43 St.Rep. 1995, we allowed a case of a bank-customer dispute to be remanded for retrial on a bad faith theory. In Central Bank of Montana v. Eystad (Mont. 1985), [219 Mont. 69,] 710 P.2d 710, 42 St.Rep. 1850, we declined to determine whether the jury could be instructed on both the implied duty of good faith and fair dealing and the statutory duty of good faith imposed by Section 30-1-203, MCA, as part of the Uniform Commercial Code. Instead, we found that there was sufficient evidence as a matter of law to support the trial court’s denial of the tortious bad faith counterclaim. We hold that both an instruction on the implied covenant and an instruction on the UCC duty of good faith may be proper in this case. Whether such instructions are proper will depend upon the evidence submitted on retrial.

The instruction given on the implied covenant of good faith and fair dealing, instruction No. 24, was:

“You are instructed that First Bank Butte and its agents owed plaintiffs an implied-in-law duty of good faith and fair dealing in the banking relationship, that it should do nothing to unnecessarily deprive the plaintiffs of the benefits associated with the banking relationship between the parties. The duties or obligations arising from the banking relationship between the parties imposed an obligation of good faith in both the performance and enforcement of those duties and obligations. Good faith is defined as honest [sic] in fact in the conduct or relationship concerned. If you find that First Bank or its agents violated this obligation imposed by law, the plaintiffs are entitled to be compensated for all of the detriment or injury proximately caused thereby whether that detriment or injury could be anticipated or not.”

This instruction is virtually identical to an instruction given in McGregor v. Mommer (Mont. 1986), [220 Mont. 98] 714 P.2d 536, 546, 43 St.Rep. 206, 218. It defines good faith as “honesty in fact”, which is the definition given in the Uniform Commercial Code, Section 30-1-201(19), MCA. We held in McGregor that breach of the UCC standard of honesty in fact is not enough to constitute a tort. The minimal requirement for the tortious breach of the covenant of good faith and fair dealing is action by the defendant which was arbitrary, capricious or unreasonable, and exceeded plaintiffs’ justifiable expectation. McGregor, 714 P.2d at 543. The instruction given in this case inadequately defined the tort. We hold, as in McGregor, that giving of this instruction is reversible error.

II

Did the lower court erroneously instruct the jury on damages for emotional distress and mental anguish?

Instruction No. 20 on emotional distress read:

“You are instructed that the law does not prescribe any definite standard by which to compensate an injured person for emotional distress or mental anguish. This case does not require that any witness should have expressed an opinion as to the amount of damages that would compensate for such injury. The law does require, however, that when making an award for emotional distress or mental anguish, the jury shall exercise calm and reasonable judgment. If you find for plaintiffs, you must award them damages for all emotional distress and mental anguish suffered as a result of the defendant’s conduct. The damages must be just and reasonable.”

Notwithstanding the substantial amount of damages awarded for emotional distress, the record is devoid of significant evidence on this point. There was no medical testimony indicating emotional distress. The only testimony on this issue was the testimony of the Noonans themselves, and they made only general statements of mental strain and stress, inability to sleep, and stiffness. As a result, the statement in the above jury instruction that damages “must” be awarded may have misled the jury, especially in view of their $700,000 damage award for emotional distress.

The instruction given is, in relevant part, identical to an instruction given in McGregor. There, we held the jury instruction in effect directed a verdict on emotional distress because it stated the jury must award damages for all emotional distress suffered. We cited Johnson v. Supersave Markets, Inc. (Mont. 1984), [211 Mont. 465,] 686 P.2d 209, 41 St.Rep. 1495, as authority for the proposition that we do not yet live in an eggshell society where every harm to a property interest gives rise to a right of action for mental distress. We said that mental distress is compensable absent a showing of physical or mental injury only if the tortious conduct results in a substantial invasion of a legally protected interest and causes a significant impact on the person of the plaintiff. McGregor, 714 P.2d at 544-45. Another instruction given in this case improperly required the jury to award damages for emotional distress without a finding of a substantial invasion of a legally protected interest and a significant impact on the person of the plaintiffs. We hold that the trial court erred in giving this instruction.

Ill

Did the trial court err in excluding testimony of William Kebe, the Noonans’ attorney during some of the time at issue in this action?

Attorney William Kebe represented the Noonans prior to and during the foreclosure of Excelsior Meats. At trial, FBB attempted to elicit testimony from Mr. Kebe about his impressions and observations as to whether FBB’s conduct constituted bad faith, and about certain discussions he had with attorneys for FBB and Miners Bank. The District Court applied the attorney-client privilege and ruled the testimony inadmissible.

In Kuiper v. Dist. Court of Eighth Judicial Dist. (Mont. 1981), [_Mont__,] 632 P.2d 694, 38 St.Rep. 1288, we held that the attorney-client privilege applies to communications made by a client to his attorney and legal advice given in response in the course of professional employment. Section 26-1-803, MCA. The District Court correctly excluded testimony by Mr. Kebe on his evaluation of the Noonans’ legal position because it was covered by the attorney-client privilege. Conversations occurring in the presence of third parties are not privileged. Jones v. Jones (Mont. 1980), [190 Mont. 221,] 620 P.2d 850, 852, 37 St. Rep. 1973, 1976. In this case, the District Court correctly allowed FBB to elicit testimony from Mr. Kebe as to the conversations that took place at the meeting between bank officials, attorneys, and the Noonans. However, the District Court excluded Mr. Kebe’s testimony about his conversations with third parties when the Noonans were not present. These conversations are not protected by the attorney-client privilege. On retrial, the District Court shall allow Mr. Kebe to testify about his conversations with third parties, whether or not the Noonans were present.

IV

Did the trial court err in submitting the negligence theory to the jury?

FBB asserts that the jury should not have been separately instructed on negligence. We discuss the instruction because the case is returned for retrial. We have approved an instruction on a separate negligence theory in the employer-employee context of an action alleging breach of the implied covenant of good faith and fair dealing. Flanigan v. Prudential Federal Sav. & Loan (Mont. 1986), [221 Mont. 419,] 720 P.2d 257, 263, 43 St.Rep. 941, 948; Crenshaw v. Bozeman Deaconess Hosp. (Mont. 1984), [213 Mont. 488,] 693 P.2d 487, 493, 41 St.Rep. 2251, 2259. However, such an instruction must be supported by the pleadings and the evidence. We'conclude that, on retrial, a negligence instruction may properly be given if the court concludes that the allegation of negligence is established in the pleadings and if the proof establishes a claim for the elements of negligence, including unreasonable conduct on the part of the bank.

Reversed and remanded for new trial.

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

MR. JUSTICE SHEEHY,

dissenting:

I dissent. The majority opinion leaves the Noonans bereft and gelded of their just verdict which arose from the unjust actions of the Bank.

The evidence heard by the jury was not cast in the form reported by the majority opinion. Instead the jury heard of business perfidy which the Bank could not deny and on which the jury based a necessarily substantial verdict.

The Noonan’s were a respected business family in Butte. They had limited education, they were not country club folk, but they were hard working and industrious. The Bank’s representative, Dwyer, saw their potential, and sought to obtain all of their banking business. It was through the Bank’s agent that loans were originally made, without the requirement of financial statements or other financial data, and against the Bank’s own protocol. Expansions of buildings and operations were counseled by the Bank and the promise was both expressed and implied that the money needed for their expanding operations would be supplied by the Bank.

When the Noonan’s obtained loans, they signed whatever security agreements were required by the Bank and it is undisputed in this case that for the loans given, the Bank had a first position with respect to the assets and collateral which the Bank had required in making the loans.

The president of the Bank became furious when he learned that the Noonans had been borrowing money from other banks. On March 31, 1982, the Bank gave notice of default to the Noonans, based on the opinion of the Bank that the financial conditions and affairs of the borrower impaired the Bank’s security, increased its risk, and that the Bank deemed itself insecure. When the notice was given, the Noonans had faithfully made the payments which were due to Bank. They were not in default as to any payment and the Bank had a first position with respect to the collateral which it had demanded. Nonetheless the Bank after March 31, 1982, stopped all payments out of Noonans’ checking account with the Bank, seized $70,000 in certificates of deposit which the Noonans had put up for collateral, and obdurately refused to cooperate to keep the Noonans in business. The Noonans were forced into bankruptcy. Thus did the Noonans lose the business which had been operated by their family for over 40 years.

That in brief was the factual background which led this jury, acting responsibly, to award the Noonans $800,000 for loss of profits, wages, business opportunities, and credit, and $700,000 for emotional distress.

The reversal of the judgment in this case on the ground of Instruction No. 24 is terribly unfair. The majority have disregarded the fact that this case was tried under the standards of good faith enunciated in the Uniform Commercial Code. Here the majority strikes Instruction No. 24 because “the minimum requirement for the tortious breach of the covenant of good faith and fair dealing is actions by the defendant which are arbitrarily, capricious, or unreasonable, and exceeded plaintiffs justifiable expectation.” That statement finds its origin in Nicholson v. United Pacific Insurance Company (Mont. 1985), [219 Mont. 32,] 710 P.2d 1342, 42 St.Rep. 1822.

Instructions based on Nicholson would be out of place in a trial of this case. The Noonans’ transactions with the Bank were evidenced by commercial paper. As such, the instruments were covered by the Uniform Commercial Code. Section 30-3-101, et. seq. MCA. Under the Uniform Commercial Code, there is a statutory, as distinguished from a common law obligation of good faith. Section 30-1-203, MCA, provides that:

“Every contract or duty within this code imposes an obligation of good faith in its performance or enforcement.”

Furthermore, under the Uniform Commercial Code, good faith is defined as “honesty in fact in the conduct or transaction concerned.” Section 30-1-201(19), MCA.

The District Court in this case regarded the provisions of the Uniform Commercial Code, and instructed the jury accordingly.

This theory of recovery was acceded to by the Bank, because the instructions offered by the Bank and given by the court parallel Instruction No. 24. Those instructions offered by the Bank were court instructions No. 19 and 26. We set them out as follows:

“INSTRUCTION NO. 19
“You are instructed that both parties in a commercial relationship, such as existed between plaintiffs and defendant in this case, have the duty to deal fairly and in good faith with each other. Good faith is defined as meaning honesty in fact and observance of reasonable standards of fair dealing in the trade.
“Therefore in. this case, if you find that defendant did some dishonest act that harmed the plaintiffs; or that Defendant failed to observe reasonable standards of fair dealing in the transactions with plaintiff, then defendant acted in bad faith and is liable to the plaintiffs for any damages proximately caused thereby.
“Conversely, if you find that defendant did not act in a dishonest manner or fail to observe reasonable standards of fair dealing in its transactions with plaintiffs, then defendant did not act in bad faith and is not liable to the plaintiffs for any losses or damages claimed.”
“INSTRUCTION NO. 26
“You are instructed that a term in a promissory note or security agreement providing that the lender may accelerate payment or performance ‘at will’ or ‘when he deems himself insecure’, or in words of similar import, mean that he shall have power to do so only if he in good faith believes that the prospect of payment or performance is impaired.
“The burden of establishing lack of good faith is on the party against whom the power has been exercised, the plaintiffs, in this case.”

There is not a dime’s worth of difference between the instructions offered in this case by the Bank and Instruction No. 24 which this Court uses to reverse the plaintiffs’ verdict.

The majority has failed to distinguish that McGregor v. Mommer (Mont. 1986), [220 Mont. 98 ] 714 P.2d 536, 43 St.Rep. 206 was a common law implied covenant of good faith action to which the Nicholson definition applied from this action based on commercial paper, to which the Uniform Commercial Code applies. The instructions in this case were proper.

Finally, the majority have misinterpreted McGregor v. Mommer, supra, as to the impact of Instruction No. 20 on emotional distress.

In McGregor, the use of the word “must” in the instruction was held improper because damages for emotional distress are a tort remedy, and the jury in McGregor may have misinterpreted the instruction as applying to recovery on a contract claim. 714 P.2d at 544.. The language of Instruction No. 24 is not improper in this tort claim, because the language is conditioned first, on finding for the plaintiff on tort and secondly, that the emotional distress is a result of the defendant’s conduct. The decision of the majority to reverse the emotional distress award seems to be based on insufficiency of the evidence to support the award which of course we should leave to the jury. It can be charitably said that the majority see no adverse emotional impact on the Noonans who saw their family business that had been 40 years abuilding crumble and disappear through the unfair conduct of the Bank.

MR. JUSTICE HUNT, joins in the foregoing dissent of MR. JUSTICE SHEEHY.


author: MR. JUSTICE GULBRANDSON MR. JUSTICE HUNT, MR. JUSTICE SHEEHY,

text:
    JOSEPH M. BELTH, as an individual and as Editor of Insurance Forum, Plaintiff/Petitioner and Respondent, v. ANDREA BENNETT, State Auditor and Commissioner of Insurance of the State of Montana, Defendant/Respondent and Appellant.
    No. 86-429.
    Submitted Feb. 19, 1987.
    Decided July 2, 1987.
    Rehearing Denied Aug. 26, 1987.
    740 P.2d 638.

      Robert Throssell argued, Helena, for defendant/respondent and appellant.
    Jonathan Motl argued, Helena, for plaintiff/petitioner and respondent.
    Paul Van Tricht, Legal Affairs, Dept, of Revenue, Charles E. Erdmann, Nat. Ass’n of Ins. Com’rs, Helena, and Sandra L. Gilfillan, Kansas City, Mo., for amicus curiae.
   MR. JUSTICE GULBRANDSON

delivered the Opinion of the Court.

Andrea Bennett, the State Auditor and Commissioner of Insurance for the State of Montana, appeals a Lewis and Clark County District Court order directing her to provide respondent Joseph Belth with access to data and analyses in appellant’s possession which relate to insurance companies. The issues on appeal are:

(1) whether a corporation, as well as a natural person, can assert the right to privacy exception in Section 9, Article II of the Montana Constitution (the “Right to Know”);

(2) whether a governmental agency can assert another’s Section 9, Article II privacy interest;

(3) whether public disclosure of the information would deny due process to insurance companies;

(4) whether the District Court erred in declaring Section 33-1-412(5), MCA, unconstitutional. Reversed and remanded.

Appellant is a member of the National Association of Insurance Commissioners (NAIC). The NAIC developed the Insurance Regulatory Information System (IRIS) to assist in the regulation of insurance companies throughout the nation. The NAIC issues IRIS reports to its members to assist them in reviewing the financial affairs of insurance companies. The reports cover two “phases”; (1) a statistical phase of calculations derived from data supplied by the insurance companies’ annual financial statements, and (2) an analytical phase which analyzes the information in the statistical phase. Appellant receives these reports on a regular basis. Appellant and amicus NAIC argue that Montana will not be allowed to participate in the IRIS system if appellant has to divulge the IRIS reports. The record shows that the NAIC publishes explanatory material stating that IRIS reports produced under the two phases are confidential and are furnished to the state insurance departments for regulatory use only.

Respondent Belth is an Indiana resident and the editor of a monthly publication entitled Insurance Forum. In March 1985, he sought access to the IRIS reports in appellant’s possession. Appellant initially indicated that respondent would be allowed access to the information. Subsequently, appellant refused to allow access to respondent.

In August 1985, respondent filed a complaint in the Lewis and Clark County District Court seeking a declaratory judgment that would direct appellant to provide him with access to the IRIS information. Respondent relied principally upon Article II, Section 9 of the Montana Constitution (vulgarly called the “Right to Know”) as the basis for his complaint. That section provides:

“No person shall be deprived of the right to examine documents or to observe the deliberations of all public bodies or agencies of state government and its subdivisions, except in cases in which the demand of individual privacy clearly exceeds the merits of public disclosure.”

In August 1985, the appellant filed her answer asserting, (1) that Section 33-1-412(5), MCA, gave her the right to withhold the information; (2) that release of the information could cause unwarranted injury to the insurance companies which were the subjects of the IRIS reports; (3) that the IRIS reports contain matters of individual privacy and are protected from access; and (4) that the IRIS reports contain investigative information which is not a matter of public record. Section 33-1-412(5), MCA, provides:

“The commissioner may withhold from public inspection any examination or investigation report for so long as he deems such withholding to be necessary for the protection of the person examined against unwarranted injury or to be in the public interest.”

In February 1986, the respondent Belth moved for summary judgment. In August 1986, the District Court entered judgment for respondent and ordered appellant to provide respondent with access to all IRIS documents in the possession of appellant. The court issued a memorandum explaining its decision and finding that, (1) a corporation (such as the insurance companies analyzed in the IRIS reports) could not assert the right to privacy exception to Article II, Section 9; (2) that no public official, by reason of his or her office or employment, could claim a right of privacy on behalf of an individual; (3) that “[t]here is a constitutional presumption that all documents of every kind in the hands of public officials are amenable to inspection, regardless of legislation, special exceptions being made to accommodate the exercise of constitutional police power and other competing constitutional interests, such as due process;” (4) Section 33-1-412(5), MCA, (the statute which appellant relied upon in denying access to respondent) is clearly in conflict with the constitutional “Right to Know” (Section 9 of Article II) because it establishes an area of secrecy without any showing that there is a privacy interest involved, much less a privacy interest clearly exceeding the merits of public disclosure; (5) Section 33-1-412(5), MCA, is therefore unconstitutional on its face and unquestionably unconstitutional as applied. This appeal followed.

The first issue is whether a corporation, as well as a natural person, can assert the right to privacy exception to the constitutional “Right to Know.” This Court has already ruled on that question. In Mt. States, Etc. v. Dept. of Pub. Serv. Reg. (Mont. 1981), 634 P.2d 181, 38 St.Rep. 1479, we held that a corporation could assert the right to privacy exception.

“[T]he demands of individual privacy of a corporation as well as of a person might clearly exceed the merits of public disclosure, and thus come within the exception of the right to know provision.” Mt. States, Etc., 634 P.2d at 188. Therefore, the District Court incorrectly held that a corporation could not assert the privacy exception to the “Right to Know.”

The next issue is whether a governmental agency can assert the privacy interest of another. In Montana Human Rights Div. v. City of Billings (Mont. 1982), 199 Mont. 434, 649 P.2d 1283, 30 St.Rep. 1504, we allowed the City of Billings to assert the privacy interests of its employees. The City had argued that if it disclosed personal information about employees without their consent or a court order directing it to do so, it could be sued for revealing the information. We agreed that “potential economic injury is sufficient to establish standing.” Montana Human Rights Division, 649 P.2d at 1288. We hold that that same rule allows the appellant to assert the privacy rights of the insurance companies which are the subjects of the IRIS information. There is a possibility that the insurance companies could sue the State for appellant’s release of injurious information.

The next issue we address is whether the District Court erred in declaring Section 33-1-412(5), MCA, unconstitutional on its face and as applied in this case. We disagree that the statute is unconstitutional on its face. Section 33-1-412(5), MCA, allows appellant to withhold certain reports from public inspection where such withholding is “necessary for the protection of the person examined against unwarranted injury or [is] in the public interest.” We note that,

“[i]t is the duty of the courts to uphold the constitutionality of legislative enactments if such can be accomplished by reasonable construction.”

North Central Services, Inc. v. Hafdahl (Mont. 1981), [_Mont. -,] 625 P.2d 56, 58, 38 St.Rep. 372, 374. Moreover, “[t]he general rule is that whenever there are differing possible interpretations of statute, a constitutional interpretation is favored over one that is not.” Department of State Lands v. Pettibone (Mont. 1985), [216 Mont. 361,] 702 P.2d 948, 956, 42 St.Rep. 869, 878.

To effect a constitutional interpretation, we hold that the Section 33-1-412(51, MCA, exception to public inspection is identical to, and coextensive with, the right to privacy exception to the “Right to Know.” In other words, appellant can only invoke the statutory exception when, in the words of Article II, Section 9, “the demand of individual privacy clearly exceeds the merits of public disclosure.” We find that the statutory language is simply an alternative expression of the constitutional privacy exception. We believe that this is a reasonable construction of the statute and it fulfills our duty to uphold the constitutionality of legislative enactments. The District Court stated that Section 33-1-412(5), MCA, was unconstitutional “as establishing an area of secrecy without any showing, legislatively or otherwise, that there is a privacy interest involved at all, much less a privacy interest that clearly exceeds the merits of public disclosure.” We disagree. The statute does not establish an area of secrecy. The statute does authorize appellant to make the initial decision, in line with the constitutional language, whether the privacy rights outweigh the need for public disclosure.

We also disagree with the lower court’s ruling that the statute was unconstitutional as applied in this case. The court gave no reasoning behind this assertion nor did the court perform the balancing test between the merits of privacy and disclosure. Apparently, the court found the statute unconstitutional as applied because the application allowed corporations a privacy exception to the “Right to Know” and the court had ruled that corporations could have no such exception. As we ruled above, corporations can assert the privacy exception. Therefore, the court’s ruling is in error, as we will develop further in this opinion.

Given the state of the record in this case, we find that this Court is in a proper position to balance the demands of the insurance companies’ privacy rights against the merits of public disclosure under the “Right to Know” provision. We believe that this is an instance when this Court “should exercise its undoubted authority to take the initiative in disposing of litigation as expeditiously as possible . . .” Sun River Cattle Co. v. Miner’s Bank of Montana (1974), 164 Mont. 479, 481, 525 P.2d 19, 20; quoting State ex rel. La France Copper Co. v. District Court (1909), 40 Mont. 206, 211, 105 P. 721, 723. As a preliminary step, we apply the two-part test this Court has established for determining whether there exists a constitutionally protected privacy interest. That test is “whether the person involved had a subjective or actual expectation of privacy and whether society is willing to recognize that expectation as reasonable.” Missoulian v. Board of Regents of Higher Educ. (Mont. 1984), [207 Mont. 513,] 675 P.2d 962, 967, 41 St.Rep. 110, 116. We find that the insurance companies did have a subjective or actual expectation of privacy in the IRIS reports. As noted previously, NAIC explanatory material states that IRIS reports are confidential and are furnished to the states for regulatory use only. We also find that those expectations of privacy are reasonable. This Court has agreed that,

“[t]ime, place and status are factors in the reasonableness determination. But the determination should include consideration of all relevant circumstances, including the nature of the information sought. (Emphasis in original.)”

Missoulian, 675 P.2d at 968. Here, the NAIC warns of the possibility of inaccuracy in the IRIS reports. In this regard, NAIC explanatory material provides the following caveats:

“Two limitations of IRIS are the nonparticipation of some companies, and the keying of the analytical phase to a mechanical process that has some uncontrollable elements. The mechanical process is dependent on the accuracy and standardization of the annual statements filed by the insurers. The ratios cannot identify a misstatement of financial condition or, in certain situations, a statement not prepared in the proper format. Also, there exists the possibility of data processing errors.
“IRIS has been reasonably effective in distinguishing between troubled and sound companies. As previously stated, however, the statistical ratios are not in themselves determinative. They are subject to individual company circumstances. From previous sections of this chapter, the following caveats emerge:
“1. No state can rely on IRIS as its only form of surveillance.
“2. Important decisions — such as licensing — are not based on IRIS without further analysis or examination of the company concerned.
“3. Valid interpretation of ratio data depends to a considerable extent on the judgment of financial examiners. A company may be outside the usual range because of unusual accounting methods, or matters that have been corrected, or other circumstances.
“5. The criteria for determining usual range values, and the usefulness of such ratios, . . . may not be valid for future experience in different economic periods. For this reason, the components of the ratios are reviewed annually and updated as necessary.”

The nature of this information increases the insurance companies’ expectations of privacy. Given the NAIC assurance of confidentiality and the admitted possibility of inaccurate information, we hold that the insurance companies’ expectations of privacy are reasonable. Therefore, there is a constitutionally protected privacy interest in the IRIS reports.

Finally, we reach the dispositive issue, the balancing test between privacy and disclosure. The demands of individual privacy are established by the affidavit of James Borchardt, the chief examiner of the State Insurance Department. His affidavit states, in part,

“3. That the information contained in the IRIS reports constitute a preliminary evaluation of the financial condition of the insurance company being reported on . . .
“4. That prior to taking any type of regulatory action against an insurance company a full and complete financial examination is necessary. That the IRIS documents in and of themselves do not adequately provide an accurate picture of the company’s financial condition. That to afford a company an opportunity to fully explain its financial condition it is necessary for a qualified examiner or examiners to review the books and records of the company in total.
“5. That the IRIS tests while initially pointing out potential problem companies are not dispositive of the issue of financial condition. That there exists a real possibility that a company identified by the IRIS tests as being outside the statistical limits is financially sound. To release the IRIS information without an adequate examination potentially jeopardizes the company’s business reputation. (Emphasis added.)”

We find that the privacy interest at stake is a substantial one. Parenthetically, we note that Borchardt’s affidavit supports our conclusion that the insurance companies’ expectations of privacy are reasonable.

Respondent argues that there is a substantial benefit in disclosing the IRIS reports. Respondent’s affidavit indicates the reports are useful in identifying companies experiencing financial difficulties or with imminent problems. We agree that there would be some public benefit to disclosure. We do not find that that benefit would outweigh the demands of individual privacy. The benefits of disclosure are diminished by the availability of similar final, relatively non-subjective examinations made by the State. Montana’s regulatory scheme for insurance companies includes the following provisions. Section 33-1-401, MCA, provides that the insurance commissioner “shall examine the affairs, transactions, accounts, records, and assets of each authorized” domestic insurer at least once every three years and of other authorized insurers as he deems advisable. The commissioner may accept another state’s examination in lieu of making her own. Section 33-1-412, MCA, provides that the commissioner shall make a report of each examination and that such reports “shall comprise only facts appearing from the books, papers, records, or documents” or ascertained from sworn testimony. That section also states (1) that the entity examined shall receive a copy of the report, (2) for the possibility of a hearing on the report, and (3) for modifying the report as the commissioner deems proper. Section 33-1-412(5), MCA, also provides that the commissioner can withhold such reports, as we held above, in accordance with the constitutional “Right to Know” provision. Under Section 33-2-701, MCA, every authorized insurer must file an annual financial statement with the commissioner. Section 33-1-312, MCA, provides in part:

“(1) The commissioner shall enter in permanent form records of his official transactions, examinations, investigations, and proceedings and keep such records in his office. Such records and insurance filings in his office shall be open to the public inspection except as otherwise provided in this code with respect to particular records or filings.”

Finally, Section 33-2-721, MCA, requires each product liability insurer to file an annual, detailed business report, including information on premiums collected, earned premiums, incurred losses, loss reserves, etc. Those reports are available to the public for a reasonable fee. Section 33-2-722, MCA. The IRIS reports differ from the above described State examinations in their preliminary, subjective nature. It is this preliminary, subjective quality which particularly intrudes upon the privacy interest at stake.

Given the availability of other comparable information and the preliminary, subjective nature of the IRIS reports, we hold that the demands of individual privacy outweigh the merits of public disclosure. Thus, the appellant may properly deny respondent Belth access to the IRIS reports. A further result is that, contrary to the District Court order, Section 33-1-412(5), MCA, is constitutional as applied in this case to deny access to respondent.

Reversed and remanded for entry of judgment in accordance with this opinion.

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

MR. JUSTICE HUNT,

dissenting:

I agree with the dissent of Justice Sheehy. Judge Bennett should be affirmed and the citizen’s right to know should be upheld.

The majority finds many devils lurking in the future that will take advantage of our foolishness if our balancing act comes down on the side of the insurance buyer and our right to know. For example the majority is concerned that the state might be sued if the commissioner releases injurious information about an insurance company. There is another side to that coin. As long as we are going to speculate, then in my view, to allow a company flying distress signals observable only to the commissioner but hidden from potential customers presents far more interesting possibilities for future litigation than the release of information furnished by the industry.

As Justice Sheehy says in his dissent, “It approaches inanity to hold that Montana insureds shall not be allowed to know which troubled companies are doing business in Montana or that they are troubled companies.”

A company in trouble or showing signs of trouble would certainly want privacy, but the realistic expectation is something else. In balancing the right to privacy of a relatively sophisticated insurance company doing business in Montana with the rights of generally less informed consumer-citizens who seek to purchase insurance, I would hold that the expectation of the citizen to know about the company clearly outweighs the need of a state agency to warehouse information in secrecy and deny citizens the right

The District Court should be affirmed.

MR. JUSTICE SHEEHY,

dissenting:

I dissent. The majority opinion goes far beyond the right of Joseph M. Belth from Indiana to gain access to IRIS reports. The majority in effect have told Montana citizens that they have no right to examine certain information in IRIS reports on hand in the office of the State Auditor and Insurance Commissioner about insurance companies with which Montanans do business. For that reason alone the majority opinion is inexcusable and indefensible.

The majority opinion defies Article II, Section 9, Montana State Constitution (1972) which states:

“Right to know. No person shall be deprived of the right to examine documents or to observe the deliberations of all public bodies or agencies of state government and its subdivisions, except in cases in which the demand of individual privacy clearly exceeds the merits of public disclosure.”

The question which we should be deciding in this case, and which is decided adversely by the foregoing majority opinion, is whether Montanans have a right to know that an insurance company doing business in this state has been identified as a “troubled company” by IRIS, and that such “troubled company” is being licensed or continues to be licensed by the state auditor. If the “right to know” provision of the state Constitution means anything, it means that this specific information should be available to Montana insureds and to any organization or entities that would funnel such information to Montana insureds.

In discussing this issue, I take as given that a corporation as well as a natural person can assert the right to privacy under the exception to the constitutional right to know because we said so in Mountain States Telephone and Telegraph Co. v. Department of Public Service Regulation (Mont. 1981), [_Mont._,] 634 P.2d 181, 38 St.Rep. 1479. I also accept as given what the District Court found, that Section 33-1-412(5), MCA, if otherwise valid, applies as well to investigation reports as to examination reports which are specifically covered under that section.

Unexplained and undiscussed by the majority is how public domain information, open to anyone, becomes private when it is run through a computer. Also unexplained and undiscussed by the majority is why or how Montanans should be precluded from information which would tell them how insurance companies licensed in this state stack up when compared with other insurance companies in the same business.

We are informed how the IRIS system works by the brief of amicus NAIC [National Association of Insurance Commissioners]. Its brief states:

“Once a year the NAIC disseminates statistical reports to each state insurance department. The reports set forth a usual range of ratio results based on previous studies. IRIS ratios are run on certain items taken from the annual statements such as surplus or premium and are compared to the usual range. If the results of the testing produce values outside of the normal range, this indicates a need for further examination. The NAIC then prepares a list which highlights those companies reflecting values outside the normal range. At this point, insurance regulators take this information and combine it with their own internal methods of analyzing solvency. Internally, a department’s examiner will conduct a detailed analysis of all of the information which has been submitted. “The ratios discussed above are published and are available to the Respondent. The ratio results are actually compiled from annual statements, which statements are also available to the Respondent. The results are not produced from any secret source of material which state open records acts are designed to reveal. The ratio results, however, are confidential work product of the NAIC and are shared with its member regulators solely on the basis that the results are not to be divulged to the public.
“The analytical phase of the IRIS employs a team of examiners and financial analysts to review the ratio results. Companies selected for review are those which were designated with four or more ratios outside of the normal range, in addition to the companies targeted as requiring attention in the previous year. The overall objective of IRIS is to identify companies which appear to require immediate regulatory attention. (Emphasis supplied.)”

The majority opinion has erected a wall between Montanans and the information that regulators have determined some companies “appear to require immediate regulatory attention.” Such companies have been given an unwarranted right to privacy by the majority.

No types of corporations are so affected with the public interest as are financial institutions, which include insurance companies. It is because of this public interest that such corporations are so highly regulated by both state and federal authorities. Insurance companies, however, are not subject to federal regulation. Even though insurance companies are part of interstate commerce, United States v. South-Eastern Underwriters Association (1944), 322 U.S. 533, 64 S.Ct. 1162, 88 L.Ed. 1440, the Congress delegated to the states the duty of regulating insurance companies under the McCarran-Ferguson Act. 15 U.S.C. Sections 1011 through 1015. The principal regulators in each state have formed the National Association of Insurance Commissioners, with two ends in mind, one, to provide effective regulation of insurance companies, and at the same time to make the regulation as little onerous as possible. We are told that IRIS was established in 1971 for the property and casualty industry as an aid to state regulators of companies engaged in such industry..

Because insurance companies are affected with the public interest, and because their activities are broadly regulated, the expectation of privacy of an insurance company does not begin to rise to the level of a mining company or retail store chain.

From the viewpoint of regulation, three kinds of insurance companies may be authorized to do business in this state: (1) domestic insurers, that is those domiciled or having their home office in this state; (2) foreign insurers, that is companies domiciled or having their home office outside of Montana but in one of the United States or its territories; and (3) alien insurers, that is insurance companies domiciled in a foreign country and represented in the United States by a manager (or in the case of Canada, an officer of the Canadian corporation). See Sections 33-2-111 and 33-2-215, MCA.

An insurance company, whether domestic, foreign, or alien, desiring to do insurance business in this state must obtain a certificate of authority from the commissioner who in this state is the state auditor. Section 33-2-101, MCA. Each authorized insurer may be examined as to its affairs, transactions, accounts, records and assets as often as the state auditor deems advisable but domestic insurers must be examined not less frequently than every three years. Section 33-1-401, MCA. All the other states have like provisions requiring examinations. Obviously if the separate examiners from the 50 states descended willy-nilly on insurance companies authorized to transact business in the respective states, the company business would be disrupted and the cost would be burdensome. To avoid this problem, the NAIC supervises examinations in an orderly manner in which the states participate on a regional basis and the examination results are made available to all the states in which the insurer is authorized. The examinations, as far as Montana is concerned, are at the expense of the insurer. Section 33-1-413, MCA.

The IRIS system conducted by the NAIC applies, as we have said, to the property and casualty business. The ratios which are used in IRIS are published, and are open to the public.

Each authorized insurer is required to file with the state auditor annually a statement of its financial condition, transactions and affairs as of the December 31 preceding. Section 33-2-701, MCA. Those statutory provisions which make the investigation and examination reports confidential do not apply to annual statements. Section 33-1-412(5), MCA. The material contained in the annual statement is open to the public.

Thus the basic information used by IRIS is public information. IRIS utilizes published ratios and applies those ratios to filed annual statements, to achieve results which IRIS now considers confidential. It is nonsense to hold that there is an expectation of privacy in the results so derived from public information. It approaches inanity to hold that Montana insureds shall not be allowed to know which troubled companies are doing business in Montana or that they are troubled companies. Such companies should have the least possible expectation of privacy.

The problem presented in this case has two phases which should be closely examined, 1), whether NAIC, by itself, can impose confidentiality so as to overrule our constitutional right to know and 2), whether the state auditor, under Section 33-1-412(5), MCA, may withhold from public inspection an investigation report obtained with tax monies, which report she uses in the regulation of insurers.

It should be clear that our constitutional provision for right-to-know does not depend on a classification of confidentiality by the NAIC. In San Gabriel Tribune v. Superior Court (1983), 143 Cal.App.3d 762, 192 Cal. Rptr. 415, it was held that assurances of confidentiality by the city to a disposal company that the data would remain private was not sufficient to convert what was a public record into a private record. If we countenance such assertion of confidentiality, the right to know provision will soon become worthless.

As to the second phase, District Judge Gordon Bennett concentrated on whether Section 33-1-412(5), MCA, was constitutional so as to empower the state auditor to withhold the information. The District Judge found that Section 33-1-412(5), was unconstitutional facially and as applied. His determination ought to be sustained by us.

The opening paragraph of District Judge Bennett’s discussion on right-to-know is worth repeating:

“An extraordinary theme ran through the proposal and consideration of three entirely novel sections of the 1972 Constitution. They were the ‘right of participation’ Section (8), sometimes called the ‘open meeting’ section; the ‘right to know’ Section (9), and the ‘right to privacy’ Section (10) all found in the ‘declaration of rights’ Article II. The theme was that except as it may be limited by the right of the individual to personal privacy, there is to be in Montana a broad-based, pervasive and absolute right of citizens to know what is going on in their government and a right to participate in government untrammeled by the government itself.”

As District Judge Bennett indicated, in determining right to know, the three sections of Article II, Sections 8, 9, and 10 must be read together. Section 10 provides for a right of individual privacy (which we have determined applies to corporations) which shall not be infringed without the showing of a compelling state interest. Section 9 gives all persons a right to examine documents and to observe the deliberations of all public bodies or agencies of state government except where the demands of individual privacy clearly exceed the merits of public disclosure. Section 8 requires governmental agencies to afford a reasonable opportunity for citizens’ participation in the operation of agencies prior to the final decision “as may be provided by law.” It should be clear because the insurers are so affected with a public interest, because the affairs of their insureds are so dependent on insurers, and because property and casualty losses may affect third parties that there is a compelling state interest which overrides any right of individual privacy of an insurer to open up information that an insurance company doing business in this state is “troubled.” The state auditor and the NAIC contend that divulging such information may result in “a run on the company” but it may be more important to the insured to make that run before the company is found insolvent or its certificate of authority is jerked. Section 8 obviously intends that governmental agencies open up such information prior to the final decision of the regulators.

In the light of the three sections of Article II, District Judge Bennett determined that Section 33-1-412(5) was facially unconstitutional and invalid as applied. That particular statute was adopted in 1959, before the adoption of the state constitutional provisions in the convention of 1972. This is the first case in which the provisions of Section 33-1-412(5) have been examined in the light of those constitutional provisions. District Judge Bennett made an extensive review of the proceedings of the constitutional convention, and from it determined that an act of the legislature which in effect performs the balancing function between the right to know and the right of individual privacy was not within the grant of the, convention. He found it to be the prerogative of the courts, and not the legislature to define “parameters and incidents of the rights guaranteed by Sections 9 and 10.” He therefore held that while government agencies may be authorized by appropriate legislation to perform initially the balancing act between the right to know and the right to privacy “it is the exclusive function of the state’s courts to make final determination as to which right is dominant in any given case.”

With a proper regard therefore to what the constitutional convention intended in adopting Sections 8, 9, and 10 of Article II, we should examine the reasons postulated by the NAIC and the state auditor for confidentiality in this case. What are those reasons?

First it is contended that insolvency of the insurer could result in a “run on the company” instigated by misinterpretation of IRIS data by those not trained to interpret the test results. That claim is pretty far-fetched. If insureds cancel their property and casualty policies, their premium refunds would be calculated on the short rate basis which would be adequately covered by the companies unearned premium reserves. Section 33-2-512, MCA.

Secondly we are told that those responsible for IRIS data collection fear they may be potentially liable for errors in reporting. If the IRIS data is that unreliable, perhaps the state auditor ought not to use the information in any event.

Third, we are told that if the Montana Insurance Department is required to disclose IRIS results, it will not be able thereafter to participate in the IRIS system which, it is contended, would have a devastating effect on the Department’s ability to monitor the solvency of its domestic as well as foreign companies. Montana has few if any domestic property and casualty insurers, and we doubt if the state auditor would be long in finding out, if it should occur, that a domestic insurer was in fact a “troubled company” under IRIS determinations. Other states would be monitoring foreign companies.

Finally, we are told that IRIS information is important to the state auditor in determining whether to authorize a foreign insurance company to do business in Montana. Again, astute questioning by the state auditor of an applicant for a certificate of authority would quickly determine its IRIS standing.

None of these contended reasons for withholding information contained in IRIS by the state auditor overweigh the right of our citizens to participate in the debate before their governmental bodies before the final decision, and to have access to information which is in the hands of public officials. Therefore I would sustain the District Court.