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Justice James Jeremiah Shea delivered the Opinion of the Court.
¶1 Appellant Thomas Scott Salsgiver appeals the Order of the Eleventh Judicial District Court, Flathead County, affirming the decision and sentence of the Kalispell Municipal Court finding Salsgiver guilty of partner or family member assault (PFMA), in violation of § 45-5-206, MCA, and criminal mischief, in violation of § 45-6-101, MCA.
¶2 We address the following issues on appeal:
Issue One: Whether the District Court erred by affirming the Municipal Court's Order that Salsgiver waived his right to a jury trial by failing to appear at an omnibus hearing.
Issue Two: Whether certain provisions in Salsgiver's sentencing agreement requiring him to pay fines that were not statutorily authorized are valid and legal.
Issue Three: Whether Salsgiver is entitled to receive four days of credit for jail time served, instead of two days of credit, against his sentence.
¶3 We affirm in part, reverse in part, and remand for further proceedings consistent with this Opinion.
PROCEDURAL AND FACTUAL BACKGROUND
¶4 On March 17, 2015, the City of Kalispell (City) charged Salsgiver in Kalispell Municipal Court with PFMA and criminal mischief. On March 18, 2015, Salsgiver appeared for a video arraignment. Salsgiver pled not guilty to the charged offenses and was released on his own recognizance. As a condition of his release, Salsgiver was ordered to personally appear for all court proceedings and was warned that failing to appear would result in a waiver of jury trial. The Municipal Court also informed Salsgiver that his next scheduled court hearing would be an omnibus hearing to take place on May 5, 2015. Salsgiver signed an acknowledgement of his conditions of release.
¶5 On March 23, 2015, the Municipal Court issued a Notice of Omnibus. The Notice of Omnibus reiterated that Salsgiver's personal presence was required and that failure to appear would result in a waiver of jury trial. On May 5, 2015, Salsgiver did not appear for the omnibus hearing, but Salsgiver's defense counsel did appear. During the omnibus hearing, the Municipal Court found that Salsgiver waived his right to a jury trial due to his failure to personally appear. The Municipal Court set a bench trial for July 9, 2015, and issued a bench warrant for Salsgiver due to his failure to appear.
¶6 On October 15, 2015, Salsgiver was arrested and taken into custody. On October 16, 2015, Salsgiver was arraigned and again released on his own recognizance. The Municipal Court informed Salsgiver his bench trial would take place on November 12, 2015. On October 28, 2015, Salsgiver's defense counsel filed a Motion for a Jury Trial. On November 10, 2015, the Municipal Court denied the Motion, deeming the matter waived due to Salsgiver's failure to appear at the omnibus hearing.
¶7 On November 12, 2015, Salsgiver appeared with his defense counsel at the bench trial. Salsgiver's defense counsel noted Salsgiver's continuing objection to the Municipal Court's finding that Salsgiver waived his right to a jury trial. At the conclusion of trial, Salsgiver was found guilty of PFMA and criminal mischief.
¶8 On the PFMA charge, the Municipal Court sentenced Salsgiver to 364 days of incarceration, with 362 days suspended, and gave him credit against his sentence for two days of time served in jail. The Municipal Court also ordered him to pay $ 300. On the criminal mischief charge, the Municipal Court sentenced Salsgiver to a 180-day suspended jail sentence, and imposed fines, fees, and surcharges in the amount of $ 400, including an additional $ 10 witness fee and $ 20 in court costs.
¶9 After Salsgiver indicated he could not pay the fine amount in full within thirty days, the Municipal Court allowed Salsgiver to pay his fines, costs, and surcharges in installments in a signed written agreement, subject to an additional $ 10 contract fee. The Municipal Court informed Salsgiver he had to make minimum payments of $ 25 per month and explained that Salsgiver would be charged a ten-percent annual interest rate on the unpaid principal balance until paid in full. An additional provision in the written agreement, but missing from the oral pronouncement of sentence, provided that "[a]ll payments are due on a monthly basis and no monthly prepayments are allowed unless authorized ...."
¶10 On November 18, 2015, Salsgiver appealed his conviction to the Flathead County District Court, challenging the denial of his Motion for a Jury Trial. On June 13, 2016, the District Court affirmed the Municipal Court's decision, determining that Salsgiver validly waived his right to a jury trial under Article II, Section 26 of the Montana Constitution and under the Sixth and Fourteenth Amendments of the United States Constitution. Salsgiver appeals the District Court's Order.
STANDARD OF REVIEW
¶11 We review decisions by a district court acting as an appellate court as if originally appealed to this Court. City of Missoula v. Girard , 2013 MT 168, ¶ 9, 370 Mont. 443, 303 P.3d 1283 (citing City of Bozeman v. Cantu , 2013 MT 40, ¶ 10, 369 Mont. 81, 296 P.3d 461 ). We examine the municipal court record independently of the district court's decision, applying the appropriate standard of review to our own examination of the record. Girard , ¶ 9 (citing Cantu , ¶ 10 ). We review de novo a lower court's conclusions of law and interpretations of the Constitution. Girard , ¶ 10 (citing State v. Trier , 2012 MT 99, ¶ 10, 365 Mont. 46, 277 P.3d 1230 ;
City of Missoula v. Cox , 2008 MT 364, ¶ 5, 346 Mont. 422, 196 P.3d 452 ). Constitutional questions are subject to plenary review. Girard , ¶ 10 (citing Cox , ¶ 5 ; Trier , ¶ 10 ). Discretionary trial court rulings are reviewed for an abuse of discretion. Girard , ¶ 10 (citing State v. Price , 2006 MT 79, ¶ 17, 331 Mont. 502, 134 P.3d 45 ).
¶12 When a criminal sentence is not eligible for review by the Sentence Review Division-a sentence of less than one year of incarceration-this Court reviews the sentence for both legality and an abuse of discretion. State v. Himes , 2015 MT 91, ¶ 22, 378 Mont. 419, 345 P.3d 297 (citing State v. Breeding , 2008 MT 162, ¶ 10, 343 Mont. 323, 184 P.3d 313 ; Cantu , ¶ 11 ). This Court's review for legality is confined to determining whether "the sentencing court had statutory authority to impose the sentence, whether the sentence falls within the parameters set by the applicable sentencing statutes, and whether the court adhered to the affirmative mandates of the applicable sentencing statutes." Himes , ¶ 22. "This determination is a question of law and, as such, our review is de novo." Himes , ¶ 22 (citing Breeding , ¶ 10 ). If a sentencing condition is legal, we review the challenged condition for an abuse of discretion. Cantu , ¶ 11. A sentencing court abuses its discretion when it acts arbitrarily without employment of conscientious judgment or exceeds the bounds of reason, resulting in substantial injustice. Himes , ¶ 22 (citing Breeding , ¶ 10 ).
DISCUSSION
¶13 Issue One: Whether the District Court erred by affirming the Municipal Court's Order that Salsgiver waived his right to a jury trial by failing to appear at an omnibus hearing.
¶14 The Sixth Amendment of the United States Constitution provides that "[i]n all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial, by an impartial jury of the State ...." The Fourteenth Amendment guarantees a right to a jury trial in criminal cases, which "were they to be tried in a federal court-would come within the Sixth Amendment's guarantee." Duncan v. Louisiana , 391 U.S. 145, 149, 88 S. Ct. 1444, 1447, 20 L.Ed.2d 491 (1968) (citing U.S. Const. amend. XIV ).
¶15 Article II, Section 26 of the Montana Constitution provides: "The right of trial by jury is secured to all and shall remain inviolate. But upon default of appearance or by consent of the parties expressed in such manner as the law may provide, all cases may be tried without a jury ...." A defendant who is charged with a misdemeanor offense "may appear by counsel only, although the court may require the personal attendance of the defendant at any time." Section 46-16-120, MCA.
¶16 The constitutional right to a trial by jury guaranteed by the Sixth and Fourteenth Amendments to the United States Constitution may be waived by a defendant. Duncan , 391 U.S. at 157-59, 88 S. Ct. at 1452-53 ; Patton v. United States , 281 U.S. 276, 298-99, 50 S. Ct. 253, 258, 74 L.Ed. 854 (1930). To function as an effective waiver, the defendant must waive the right knowingly, intelligently, and voluntarily. See Patton , 281 U.S. at 312, 50 S. Ct. at 263 ; Johnson v. Zerbst , 304 U.S. 458, 464-65, 58 S. Ct. 1019, 1023-25, 82 L.Ed. 1461 (1938) ; see also State v. Walker , 2008 MT 244, ¶ 18, 344 Mont. 477, 188 P.3d 1069 (citing State v. Mann , 2006 MT 33, ¶ 14, 331 Mont. 137, 130 P.3d 164 ("a defendant must waive a known right 'knowingly, intelligently, and voluntarily....' ")). "The question of an effective waiver of a federal constitutional right in a proceeding is ... governed by federal standards." Boykin v. Alabama , 395 U.S. 238, 243, 89 S. Ct. 1709, 1712, 23 L.Ed.2d 274 (1969).
¶17 We examine the " 'particular facts and circumstances surrounding th[e] case' " to determine whether a waiver of a fundamental constitutional right was knowing, intelligent, and voluntary. See State v. Wilson , 2011 MT 277, ¶ 15, 362 Mont. 416, 264 P.3d 1146 (analyzing waiver in the context of the right to counsel) (quoting State v. Plouffe , 198 Mont. 379, 385, 646 P.2d 533, 536 (1982) (citing Edwards v. Arizona , 451 U.S. 477, 482, 101 S. Ct. 1880, 1884, 68 L.Ed.2d 378 (1981) )). The State bears the burden of proving that the waiver of a fundamental constitutional right was knowing, intelligent, and voluntary. See State v. Gittens , 2008 MT 55, ¶ 14, 341 Mont. 450, 178 P.3d 91 (citations omitted). The State must meet this burden by a preponderance of the evidence. See State v. Blakney , 197 Mont. 131, 141, 641 P.2d 1045, 1051 (1982) (citing Lego v. Twomey , 404 U.S. 477, 488-89, 92 S. Ct. 619, 626-27, 30 L.Ed.2d 618 (1972) ).
¶18 This Court indulges in every reasonable presumption against waiver of a fundamental constitutional right. Mann , ¶ 13 (citing State v. Swan , 2000 MT 246, ¶ 17, 301 Mont. 439, 10 P.3d 102 ). Accordingly, we will not presume waiver of one's constitutional rights-such waiver must be made knowingly, intelligently, and voluntarily. State v. Finley , 2003 MT 239, ¶ 32, 317 Mont. 268, 77 P.3d 193 (internal citations omitted); Park v. Sixth Jud. Dist. Ct. , 1998 MT 164, ¶ 36, 289 Mont. 367, 961 P.2d 1267 (citing Zerbst , 304 U.S. at 464, 58 S. Ct. at 1024-25 ).
¶19 The Sixth Amendment requires that a defendant charged with a "serious" crime be afforded the right to a jury trial unless waived by the defendant. Lewis v. United States , 518 U.S. 322, 325, 327, 116 S. Ct. 2163, 2166-67, 135 L.Ed.2d 590 (1996) ; Baldwin v. New York , 399 U.S. 66, 68, 90 S. Ct. 1886, 1887, 26 L.Ed.2d 437 (1970). An offense constitutes a "serious" crime when the charged offense carries a maximum prison term greater than six months. Lewis , 518 U.S. at 326-27, 116 S. Ct. at 2166-67 ; Baldwin , 399 U.S. at 68-69, 90 S. Ct at 1888. "Petty" crimes-criminal offenses where the maximum punishment is incarceration of six months or less-are not subject to the Sixth Amendment jury trial provision. Lewis , 518 U.S. at 325, 116 S. Ct. at 2166 (citing Duncan , 391 U.S. at 159, 88 S. Ct. at 1453 ).
¶20 We have previously established that a misdemeanor defendant may waive his or her Article II, Section 26 right to trial by jury by failing to appear as directed by the trial court. State v. Sherlock , 2018 MT 92, ¶¶ 17-18, 391 Mont. 197, 415 P.3d 997 (affirming a justice court's decision that a defendant's failure to attend a jury confirmation hearing constituted a waiver of his right to a jury trial); Cox , ¶¶ 10, 15 (affirming a municipal court's ruling that a defendant's failure to appear at a jury confirmation hearing waived his right to a jury trial); Trier , ¶ 15 (finding a defendant waived his right to a jury trial by failing to appear for his final pretrial conference). Furthermore, the Montana Constitution's plain language under Article II, Section 26 provides that a defendant's "default of appearance" may result in a nonjury trial. Cox , ¶¶ 9-10.
¶21 We have also previously explained that a defendant's nonappearance does not automatically result in a waiver of the right to a jury trial. Girard , ¶¶ 14, 20 (finding a municipal court abused its discretion by deeming a defendant's failure to appear at a pretrial conference an automatic waiver of his right to a jury trial). Whether a defendant's nonappearance constitutes a waiver of his right to a jury trial depends on the circumstances of the particular case. Girard , ¶ 14. Finding an automatic waiver due to a nonappearance would also run contrary to Article II, Section 26 and "the language of that provision stating that a case 'may' be tried without a jury upon a default of appearance." Girard , ¶ 14. We have yet to address the implications of the Sixth Amendment in such cases because the defendants in Cox , Trier , Girard , and Sherlock were charged with offenses that did not constitute a "serious" crime, as defined in Lewis and Baldwin . See Cox , ¶ 1 (driving while under the influence of alcohol, striking an unattended vehicle, and failing to leave information at the scene); Trier , ¶ 1 (operating a motor vehicle with a blood alcohol concentration of 0.08% or greater); Girard , ¶ 1 (disorderly conduct); Sherlock , ¶ 1 (driving while under the influence of alcohol and obstructing a peace officer).
¶22 In this case, the Municipal Court determined Salsgiver's failure to appear at his omnibus hearing resulted in a waiver of his right to a jury trial under Cox's interpretation of Article II, Section 26 of the Montana Constitution. The District Court affirmed the Municipal Court's decision to deny Salsgiver's Motion for a Jury Trial, finding Salsgiver validly waived his right to a jury trial by failing to appear under the "default of appearance" provision in Article II, Section 26 of the Montana Constitution. The District Court also found that, pursuant to Illinois v. Allen , 397 U.S. 337, 90 S. Ct. 1057, 25 L.Ed.2d 353 (1970), Salsgiver knowingly, intelligently, and voluntarily waived his right to a jury trial under the Sixth Amendment because he understood that he was required to appear for all court proceedings based on the conditions of his release. Finally, the District Court determined Salsgiver was not prejudiced by the Municipal Court's conflicting orders concerning whether his personal presence was required at the omnibus hearing.
¶23 The State argues that although Salsgiver did not enter a formal waiver of his Sixth Amendment right to a jury trial, he waived the right through his conduct. The State argues under Allen that a "waiver by conduct" or "forfeiture with knowledge" occurred because Salsgiver was warned prior to the omnibus hearing, both verbally and in writing, that failing to appear would waive his right to a jury trial.
¶24 Salsgiver argues that the Municipal Court improperly relied on Article II, Section 26 of the Montana Constitution, and our line of cases interpreting it, when it determined that an automatic waiver of jury trial occurred under the "default of appearance" provision on the PFMA charge. Salsgiver argues that he possesses a Sixth Amendment right to a jury trial for the PFMA charge because it was a "serious" offense, and that the Municipal Court incorrectly dismissed his Motion because he did not knowingly, intelligently, and voluntarily waive his Sixth Amendment right. Salsgiver additionally contends that the State's request to extend the "waiver by conduct" standard from loss-of-counsel cases is inappropriate and a constitutionally impermissible means to waive the Sixth Amendment right to a jury trial.
¶25 Salsgiver's PFMA charge carried a maximum sentence of one year in jail, qualifying it as a "serious" offense. Section 45-5-206(3)(a)(1), MCA ; see Baldwin, 399 U.S. at 68-69, 90 S. Ct at 1888. Salsgiver's criminal mischief charge carried a maximum sentence of six months, qualifying it as a "petty" offense. Section 45-6-101(3), MCA ; see Lewis , 518 U.S. at 325, 116 S. Ct. at 2166. Salsgiver had a right to a jury trial under Article II, Section 26 of the Montana Constitution for both charges. In light of the circumstances of this case, Salsgiver's nonappearance at the omnibus hearing waived his state right to a jury trial under the "default of appearance" provision of Article II, Section 26 on both charges. See Cox , ¶ 10 ; Trier , ¶ 15 ; Sherlock , ¶ 18. Salsgiver did not provide any circumstances to counter a finding of waiver or to call into question his ability to comply with the Municipal Court's order. See Girard , ¶¶ 19-20. Salsgiver and his defense counsel never explained why Salsgiver failed to appear at his omnibus hearing.
¶26 Because his criminal mischief conviction was a petty offense, Salsgiver does not challenge the Municipal Court's holding that he waived his right to a jury trial on that charge. Thus, we confine our analysis to the PFMA charge as it pertains to the implication of the Sixth and Fourteenth Amendments.
¶27 Salsgiver retained the right to a jury trial on the PFMA charge under the Sixth and Fourteenth Amendments because this charge constituted a "serious" offense. See Baldwin, 399 U.S. at 68-69, 90 S. Ct at 1888. Consequently, the Municipal Court erred in finding that Salsgiver automatically waived his Sixth Amendment right to a jury trial on the PFMA charge by failing to attend his omnibus hearing. Our previous cases analyzing jury trial waivers under Article II, Section 26 are not applicable to a Sixth Amendment waiver analysis since those cases involved petty offenses that did not address the requirements of waiving the right to a jury trial under the Sixth Amendment. See Cox , ¶¶ 1, 7 ; Trier , ¶ 1 ; Girard , ¶ 1 ; Sherlock , ¶ 1.
¶28 Under the Sixth and Fourteenth Amendments, Salsgiver could only waive his right to a jury trial through a knowing, intelligent, and voluntary waiver. See Patton , 281 U.S. at 312, 50 S. Ct. at 263 ; Zerbst , 304 U.S. at 464-65, 58 S. Ct. at 1023-25 ; see also Walker , ¶ 18 ; Mann , ¶ 14. Moreover, Girard holds that finding an automatic waiver, under any standard, based solely on a defendant's nonappearance is impermissible, as the trial court's determination of waiver must be based on the circumstances of the individual case. See Girard , ¶¶ 14, 20. Consequently, the Municipal Court erred by applying our Article II, Section 26 waiver standard-instead of determining whether Salsgiver made a knowing, intelligent, and voluntary waiver-in determining that Salsgiver automatically waived his right to a jury trial on the PFMA charge under the Sixth Amendment.
¶29 The District Court incorrectly affirmed the Municipal Court when it concluded that Salsgiver's failure to appear at his omnibus hearing constituted a knowing, intelligent, and voluntary waiver. The District Court deemed Salsgiver's knowledge of his release conditions sufficient to meet both the "default of appearance" standard of Article II, Section 26, and the knowing, intelligent, and voluntary standard required by the Sixth Amendment. However, a Sixth Amendment waiver of the right to a jury trial cannot be presumed solely from a defendant's knowledge of his release conditions and subsequent failure to appear. See Finley , ¶ 32 ; Park , ¶ 36 ; Zerbst , 304 U.S. at 464-65, 58 S. Ct. at 1023-25. The record here fails to show that Salsgiver knowingly, intelligently, and voluntarily waived his Sixth Amendment right to a jury trial. See Wilson , ¶ 15 ; Plouffe , 198 Mont. at 385, 646 P.2d at 536. Salsgiver signed a form that he was required to sign as a condition of being released on his own recognizance, informing him of his release conditions. The record also establishes that Salsgiver and his defense counsel never made any representation to the Municipal Court that he wished to waive his right to a jury trial. Prior to Salsgiver's bench trial, Salsgiver's defense counsel filed a motion requesting a jury trial and Salsgiver's defense counsel objected at the beginning of Salsgiver's bench trial to it proceeding without a jury. From our review of the record, the preponderance of the evidence does not establish that Salsgiver knowingly, intelligently, and voluntarily waived his Sixth Amendment right to a jury trial. See Gittens , ¶ 14 ; Blakney , 197 Mont. at 141, 641 P.2d at 1051.
¶30 The District Court's conclusion that "waiver by conduct" or "forfeiture with knowledge" standard from Illinois v. Allen should apply here is misplaced. In Allen , the defendant repeatedly and purposely disrupted proceedings to prevent his trial from going forward. Allen , 397 U.S. at 340-41, 90 S. Ct. at 1059. The Supreme Court in Allen held that a defendant's Sixth Amendment Confrontation Clause right to be present could be lost by a defendant's misconduct where the defendant prevents the trial from going forward. Allen , 397 U.S. at 343, 90 S. Ct. at 1060-61. However, Allen did not concern the issue present in this matter-the waiver of the right of a jury trial under the Sixth Amendment. Different rights that originate from the same constitutional amendment do not necessarily inherit the same waiver rules. Indeed, as Salsgiver's counsel pointed out at oral argument, the trial court in Allen proceeded with a trial before a jury in the defendant's absence, after determining that he had waived his Sixth Amendment right of confrontation. Salsgiver's failure to appear at an omnibus hearing cannot serve as the sole basis for determining a waiver of his Sixth Amendment right to a jury trial when a knowing, intelligent, and voluntary waiver is required. See Finley , ¶ 32 ; Park , ¶ 36.
¶31 Salsgiver did not waive his right to a jury trial under the Sixth and Fourteenth Amendments for his PFMA charge by failing to appear at his omnibus hearing. Salsgiver's PFMA charge is reversed and remanded to the Municipal Court for a jury trial.
¶32 Issue Two: Whether certain provisions in Salsgiver's sentencing agreement requiring him to pay fines that were not statutorily authorized are valid and legal.
¶33 We generally refuse to review issues on appeal where a defendant failed to object in the trial court. State v. Kotwicki , 2007 MT 17, ¶ 8, 335 Mont. 344, 151 P.3d 892 (citing State v. Lenihan , 184 Mont. 338, 341, 602 P.2d 997, 999 (1979) ). However, as an exception to the general rule, we will review a sentence that is alleged to be illegal, or in excess of statutory mandates, even if the defendant raised no objection in the trial court. Kotwicki , ¶ 8 (citing Lenihan , 184 Mont. at 343, 602 P.2d at 1000 ).
¶34 Generally, a defendant need only allege that the trial court imposed an illegal sentence to invoke the Lenihan rule. State v. Garrymore , 2006 MT 245, ¶ 14, 334 Mont. 1, 145 P.3d 946. In Lenihan , we recognized that a defendant "often times must remain silent even in the face of invalid conditions" or risk the chance that a judge may impose a harsher sentence upon raising an objection. Lenihan , 184 Mont. at 343, 602 P.2d at 1000. We determined it is the "better rule to allow an appellate court to review any sentence imposed in a criminal case, if it is alleged that such sentence is illegal or exceeds statutory mandates, even if no objection is made at the time of sentencing." Lenihan , 184 Mont. at 343, 602 P.2d at 1000.
¶35 A trial court's authority to impose sentences in criminal cases is defined and constrained by statute, and we have previously held that "a district court has no power to impose a sentence in the absence of specific statutory authority." State v. Stephenson , 2008 MT 64, ¶ 30, 342 Mont. 60, 179 P.3d 502. A sentence is not illegal if it falls within statutory parameters. Garrymore , ¶ 9. But a sentence not based on statutory authority is illegal. Stephenson , ¶ 32 (citing State v. Krum , 2007 MT 229, ¶ 11, 339 Mont. 154, 168 P.3d 658 );
State v. Ruiz , 2005 MT 117, ¶ 12, 327 Mont. 109, 112 P.3d 1001. We have consistently rejected creative sentencing provisions that are unsupported by express statutory authority. See City of Missoula v. Franklin , 2018 MT 218, ¶¶ 1, 15, 392 Mont. 440, 425 P.3d 1285 (finding a surcharge to fund the city attorney's office exceeded statutory authority); State v. Duong , 2015 MT 70, ¶¶ 19, 23, 378 Mont. 345, 343 P.3d 1218 (finding that imposition of costs for an interpreter and ten percent court administrative fee to collect other fees lacked statutory authority and were illegal); Stephenson , ¶¶ 30-33 (finding that an $ 85 assessment payable to a community service program was illegal); Krum , ¶¶ 1, 3, 21 (finding assessments payable to a county court automation fund, a domestic violence program, and Big Brothers Big Sisters were illegal); State v. Blackwell , 2001 MT 198, ¶¶ 7-9, 306 Mont. 267, 32 P.3d 771 (finding that an assessment based on a local rule for a portion of the court clerk's salary was illegal).
¶36 We have previously declined to apply the Lenihan exception, and determined that a defendant waives appellate review of his sentencing conditions, where the defendant "acquiesced or actively participated" in the imposition of a condition of sentence. State v. Micklon , 2003 MT 45, ¶ 10, 314 Mont. 291, 65 P.3d 559 (internal citations omitted); State v. Holt , 2011 MT 42, ¶ 17, 359 Mont. 308, 249 P.3d 470 ; State v. Walker , 2007 MT 205, ¶¶ 13-16, 338 Mont. 529, 167 P.3d 879. In Micklon , the district court imposed a ten-year suspended sentence and ordered the defendant to pay a $ 55,000 fine. Micklon , ¶ 4. The defendant asked the court to pay the fine in annual installments of $ 11,000. Micklon , ¶ 4. During his sentencing hearing, the district court asked the defendant about having interest accrue on the unpaid balance of the fine as an incentive to pay the fine in a shorter period of time. Micklon , ¶ 10. The defendant agreed to the condition, and the district court ordered that interest accrue on the balance of the fine without statutory authority to do so. Micklon , ¶¶ 4, 10. We held that, in such situations, we generally "will not put a district court in error for an action in which the appealing party acquiesced or actively participated" and concluded that the defendant waived his right to appeal the issue because he "affirmatively agreed to the inclusion of the interest condition in his sentence." Micklon , ¶¶ 10-11 (internal citations omitted); see § 1-3-207, MCA ("[a]cquiescence in error takes away the right of objecting to it. ...").
¶37 We have since narrowed the definition of "active acquiescence" for the purposes of invoking the Lenihan rule. See State v. Eaton , 2004 MT 283, ¶¶ 15-16, 323 Mont. 287, 99 P.3d 661 ;
State v. Erickson , 2005 MT 276, ¶ 32, 329 Mont. 192, 124 P.3d 119. In Eaton , we held that the defendant's willingness to make restitution payments did not rise to the level of "active acquiescence" or "participation" to prevent appellate review under Lenihan because the defendant's statements of remorse lacked any direct request to the trial court for specific sentencing conditions. Eaton , ¶ 15. In Erickson , we held that the defendant's request for clarification about a challenged sentencing condition did not amount to "active acquiescence" or "participation" with the trial court to include the condition because it was the defendant's counsel, and not the defendant himself, who engaged in the dialogue at issue. Erickson , ¶¶ 10, 34.
¶38 Salsgiver argues that the Municipal Court illegally added a $ 10 contract fee and ten-percent annual interest rate on the unpaid principal balance of his fines that it lacked statutory authority to impose. Additionally, Salsgiver argues that the Municipal Court's prohibition on prepayment of his monthly installments without prior judge authorization is similarly unsupported by statutory authority. Salsgiver argues the prepayment prohibition was also illegal because it was not included in the oral pronouncement of his sentence.
¶39 The State counters that Salsgiver waived appellate review of his arguments because he acquiesced when he agreed to pay the contract fee and the interest rate and agreed to the prepayment prohibition. The State argues that under Micklon , Salsgiver's affirmative agreement to the sentencing conditions takes away his right of objection to those conditions.
¶40 Salsgiver failed to raise an objection to the appealed sentencing conditions at the Municipal Court and District Court levels. However, because Salsgiver alleges that provisions in his sentencing agreement fall outside statutory parameters and are illegal, Salsgiver may challenge those provisions on appeal. See Kotwicki , ¶¶ 5,8 (citing Lenihan , 184 Mont. at 343, 602 P.2d at 1000 ); Garrymore , ¶ 14.
¶41 Under these circumstances, we reverse Micklon and hold that the Municipal Court erred in imposing the $ 10 contract fee, the ten-percent annual interest rate on Salsgiver's unpaid principal balance, and the prepayment bar of his monthly installments. Notwithstanding a defendant's active acquiescence, participation, or agreement, an otherwise illegal provision of a sentence cannot allow for the imposition of a sentencing condition bereft of statutory authority. See Stephenson , ¶¶ 30, 32 ; see also Franklin , ¶¶ 1, 15 ; Duong , ¶¶ 19, 23 ; Krum , ¶¶ 1, 3, 21 ; Blackwell , ¶¶ 7-9. The defendant in such circumstances is not "actively acquiescing" or "participating" in a mere trial error, but instead in the imposition of an illegal sentence by the trial court, which inherently lacks the power to impose it. See Stephenson , ¶¶ 30, 32 ; Ruiz , ¶ 12.
¶42 It is fundamentally different for a defendant to acquiesce to an illegal sentence than to a trial error. An acquiescence to a trial error "takes away the right of objecting to it" and deems the issue waived. See § 1-3-207, MCA. A party may acquiesce to a trial court's error, such as the improper admission of testimony, and therefore implicitly accept it. See State v. Buck , 2006 MT 81, ¶ 117, 331 Mont. 517, 134 P.3d 53. However, a party cannot acquiesce and tacitly accept a trial court's exercise of power that it does not have legal authority to impose. See Stephenson , ¶¶ 30, 32, ¶ 41 ; Ruiz , ¶ 12. Our previous acquiescence policy under Micklon incorrectly conflates acquiescence to trial errors with the imposition of illegal sentencing conditions. See Micklon , ¶¶ 10-11 ; Holt , ¶ 17 ; Walker , 2007 MT 205, ¶¶ 13-16, 338 Mont. 529, 167 P.3d 879.
¶43 Though the State correctly notes Salsgiver signed a written agreement allowing for the $ 10 contract fee, the interest rate on the unpaid balance, and the prepayment bar, the Municipal Court lacked statutory authority to impose such conditions at the sentencing agreement's inception. Sections 46-18-234 and 46-18-236(4), MCA, allow a trial court to grant permission for a defendant to pay fines and other costs in specified installments. Therefore, the Municipal Court possessed the statutory authority to allow Salsgiver to pay his fines in an installment plan. See §§ 46-18-234, -236(4), MCA. However, there is no statutory authority for the Municipal Court to impose a $ 10 contract fee, an interest rate on the unpaid balance of a defendant's fines, or to bar prepayment without prior judge authorization. Because the sentencing conditions lacked statutory authority, they were illegal ab initio .
¶44 When the illegal portion of a sentence does not affect the entire sentence, the case should be remanded with instructions to strike the illegal portion. State v. Heafner , 2010 MT 87, ¶ 11, 356 Mont. 128, 231 P.3d 1087 ; Stephenson , ¶ 34 ; Krum , ¶ 23. "Remand to give the district court the opportunity to correct the illegal provision should be ordered unless, under the particular circumstances of the case, the illegal portion of the sentence cannot be corrected." Heafner , ¶ 11. Correcting invalid sentence provisions "protects the integrity of the judicial process and furthers the express correctional and sentencing policy of the state." Heafner, ¶ 12 (citing § 46-18-101, MCA ). The contract fee, interest rate, and prepayment bar are severable conditions of Salsgiver's sentence that do not affect his entire sentence on the criminal mischief charge. Therefore, the appropriate remedy is to reverse this portion of Salsgiver's sentence and to remand with instructions to strike the illegal conditions. See Heafner , ¶ 11 ; Stephenson , ¶ 34.
¶45 The doctrine of stare decisis "does not require us to perpetuate incorrectly-decided precedent ... we are obligated to overrule precedent where it appears the 'construction manifestly is wrong.' " ALPS Prop. & Cas. Ins. Co. v. McLean & McLean, PLLP , 2018 MT 190, ¶ 30, 392 Mont. 236, 425 P.3d 651 (emphasis in original) (quoting State ex rel. Peery v. Dist. Ct. , 145 Mont. 287, 310, 400 P.2d 648, 660 (1965) ). Accordingly, we reverse Micklon and hold that a defendant cannot "actively acquiesce" or "participate" in the imposition of a sentencing condition that is not statutorily authorized. Insofar as our prior case law incorrectly perpetuated this error, those cases are overruled. Salsgiver's sentence on the criminal mischief conviction is remanded to the Municipal Court with instructions to strike the imposition of the $ 10 contract fee, the ten-percent annual interest rate on Salsgiver's unpaid principal balance, and the prepayment bar of his monthly installments without prior judge authorization.
¶46 Issue Three: Whether Salsgiver is entitled to receive four days of credit for jail time served, instead of two days of credit, against his sentence.
¶47 Each day of incarceration prior to or after a conviction must be credited against a defendant's sentence. Section 46-18-403(1), MCA ; State v. McDowell , 2011 MT 75, ¶ 27, 360 Mont. 83, 253 P.3d 812 (citing State v. DeWitt , 2006 MT 302, ¶ 10, 334 Mont. 474, 149 P.3d 549 ). Section 46-18-403(2), MCA provides that "[a] person incarcerated on a bailable offense who does not supply bail and against whom a fine is levied on conviction of the offense may be allowed a credit for each day of incarceration prior to conviction ...."
¶48 Salsgiver argues that he was entitled to four days of credit for jail time served. The Municipal Court gave Salsgiver two days of credit for jail time served, which the District Court affirmed. The City concedes Salsgiver was entitled to four days of credit for jail time served instead of two. Accordingly, Salsgiver is entitled to an additional two days of credit for jail time served against his sentence and fines.
CONCLUSION
¶49 Salsgiver's PFMA conviction is reversed and remanded to the Kalispell Municipal Court for a jury trial. Salsgiver does not challenge his criminal mischief conviction; thus, this conviction is affirmed. Salsgiver's sentence on the criminal mischief conviction is remanded to correct sentencing errors including the illegal provisions of his sentence and to credit his sentence with two additional days of jail time served. The District Court's Order is reversed in part and remanded for further proceedings consistent with this Opinion.
We Concur:
MIKE McGRATH, C.J.
INGRID GUSTAFSON, J.
LAURIE McKINNON, J.
DIRK M. SANDEFUR, J.
The Notice of Omnibus provided, in relevant part:
YOUR PERSONAL PRESENCE IS REQUIRED. FAILURE TO APPEAR WILL RESULT IN A WAIVER OF JURY TRIAL AND MAY RESULT IN A WARRANT FOR YOUR ARREST AND YOUR DRIVER'S LICENSE AND DRIVING PRIVILEGES MAY BE SUSPENDED.
Salsgiver's Agreement to Pay Fines provided in part:
I agree to pay said fine/restitution/cost ordered by the court in the following manner: $ 740.00 in installments of $ 25.00 per month beginning 12/12/2015, until paid in full. I understand that the fine amount includes a $ 10.00 contract fee and that any unpaid balance under this contract shall bear interest at the rate of ten percent (10%) per year.
I fully understand that if I fail to pay the fines in accordance with this agreement I can be prosecuted for contempt of Court and confined in jail until I make such payment. All payments are due on a monthly basis and no monthly prepayments are allowed unless authorized by Judge Adams.
(Emphasis in original.)
The District Court discovered "an inherent conflict" in the various orders concerning whether Salsgiver's personal presence was required at the omnibus hearing, or just his defense counsel's presence. We refuse to examine that issue because Salsgiver failed to raise it in this appeal.
Section 46-18-234, MCA, provides:
Whenever a defendant is sentenced to pay a fine or costs under 46-18-231 or 46-18-232, the court may grant permission for payment to be made within a specified period of time or in specified installments. If no such permission is included in the sentence, the payment is due immediately.
Section 46-18-236(4), MCA, provides:
When the payment of a fine is to be made in installments over a period of time, the charges imposed by this section [for each misdemeanor or felony charge of which a defendant is convicted] must be collected from the first payment made and each subsequent payment as necessary if the first payment is not sufficient to cover the charges. | [
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] |
Justice Ingrid Gustafson delivered the Opinion of the Court.
¶1 KB Enterprises, LLC, d/b/a Snappitz (KB) appeals the Order Affirming Final Agency Decision Issued by the Montana Human Rights Commission issued by the Third Judicial District Court, Anaconda-Deer Lodge County, on September 21, 2018. We affirm.
¶2 We restate the issue on appeal as follows:
Did the District Court err in affirming the Final Agency Decision of the Montana Human Rights Commission?
FACTUAL AND PROCEDURAL BACKGROUND
¶3 KB owns and operates a fabrication business in Anaconda which makes insulated pipe fittings. Appellee Jerry James Bright (Bright) is an African American man who worked as a fabricator at KB from January 2015 until April 2016. Dave Gustafson (Gustafson) was Bright's supervisor during Bright's employment at KB. On four occasions-in March 2015, June 2015, November 2015, and April 2016-Gustafson either directly called or referred to Bright as a "nigger" while the two were at work. Bright quit his job at KB following the April 2016 incident with Gustafson and filed a racial discrimination complaint against KB with the Montana Department of Labor and Industry's Human Rights Bureau (HRB).
¶4 On April 20 and 21, 2017, Office of Administrative Hearings Hearing Officer David A. Scrimm held a contested case hearing on the matter. Bright, Gustafson, Kevin Beck, Josh Blaz, Travis Scholler, and Misty Franklin testified at the hearing. On October 10, 2017, the Hearing Officer issued his Hearing Officer Decision and Notice of Issuance of Administrative Decision, which found that Bright was subjected to racial discrimination in his employment by KB. The Hearing Officer awarded Bright $ 18,357.70 in lost wage damages and $ 20,000.00 in emotional distress damages.
¶5 KB appealed the Hearing Officer's decision to the Montana Human Rights Commission (HRC). After briefing and a hearing, the HRC adopted the Hearing Officer's decision in full as its Final Agency Decision. KB then filed a petition for judicial review in the District Court. After briefing and a hearing, the District Court upheld the HRC's Final Agency Decision and dismissed KB's petition for judicial review. KB appeals.
STANDARD OF REVIEW
¶6 The Montana Administrative Procedures Act (MAPA) governs actions before the HRC. Bollinger v. Billings Clinic , 2019 MT 42, ¶ 26, 394 Mont. 338, 434 P.3d 885. MAPA provides the standard of judicial review of agency decisions:
The court may not substitute its judgment for that of the agency as to the weight of the evidence on questions of fact. The court may affirm the decision of the agency or remand the case for further proceedings. The court may reverse or modify the decision if substantial rights of the appellant have been prejudiced because:
(a) the administrative findings, inferences, conclusions, or decision are:
(i) in violation of constitutional or statutory provisions;
(ii) in excess of the statutory authority of the agency;
(iii) made upon unlawful procedure;
(iv) affected by other error of law;
(v) clearly erroneous in view of the reliable, probative, and substantial evidence on the whole record;
(vi) arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion.
Section 2-4-704(2), MCA. Under this standard of review, which applies to both the district court's review of the agency decision and this Court's review of the district court's decision, a reviewing court may not substitute its judgment for that of the administrative agency, but instead reviews the entire record to determine if the agency's findings of fact are clearly erroneous and its conclusions of law are correct. Bollinger , ¶ 26. A finding is clearly erroneous if it is not supported by substantial evidence, if the agency misapprehended the effect of evidence, or if this Court's review of the record convinces us a mistake has been made. Jones v. All Star Painting Inc. , 2018 MT 70, ¶ 14, 391 Mont. 120, 415 P.3d 986 (citing Arlington v. Miller's Trucking, Inc. , 2015 MT 68, ¶ 10, 378 Mont. 324, 343 P.3d 1222 ).
DISCUSSION
¶7 Did the District Court err in affirming the Final Agency Decision of the Montana Human Rights Commission?
¶8 KB asserts that the Hearing Officer made numerous incorrect findings of fact in this case, and that the HRC and District Court both wrongly upheld the Hearing Officer's decision. In support of this contention, KB essentially asks this Court to believe the testimony of its witnesses over that of Bright's witnesses. The basic facts of this case are that Bright testified that Gustafson called him a "nigger" on four separate occasions during his employment at KB, Gustafson testified that he did not, and the other witnesses generally testified that they did not hear it. The Hearing Officer received this testimony, weighed the credibility of the witnesses, and determined that Gustafson did in fact call Bright a "nigger" on those four occasions.
¶9 "Administrative findings of fact may not be disturbed on judicial review if they are supported by substantial evidence in the record." Peretti v. Dep't of Revenue , 2016 MT 105, ¶ 18, 383 Mont. 340, 372 P.3d 447. Substantial evidence is more than a mere scintilla of evidence but may be less than a preponderance of the evidence. Peretti , ¶ 18 (citing Taylor v. State Comp. Ins. Fund , 275 Mont. 432, 437, 913 P.2d 1242, 1245 (1996) ). "As long as we determine that substantial credible evidence exists to support the findings of the trier of fact, we may not re-weigh the evidence, but must instead defer to the Hearing Examiner." Benjamin v. Anderson , 2005 MT 123, ¶ 37, 327 Mont. 173, 112 P.3d 1039. "A hearing examiner, when one is used, is in the unique position of hearing and observing all testimony entered in the case.... The findings of the hearing examiner, especially as to witness credibility, are therefore entitled to great deference." Benjamin , ¶ 37 (quoting Moran v. Shotgun Willies, Inc. , 270 Mont. 47, 51, 889 P.2d 1185, 1187 (1995) ).
¶10 KB objects to a litany of the Hearing Officer's findings of fact, highlighting conflicting testimony given by the witnesses in this matter. Findings of Fact Nos. 11-17 each concern the four separate incidents where Gustafson called Bright a "nigger" while at work. Finding of Fact No. 23 relatedly concerns Misty Franklin's testimony that she did not remember any incidents of Gustafson using the "N-word." Substantial credible evidence exists to support each of these Findings of Fact as noted by the District Court in its Order. Bright testified to each instance happening and Gustafson denied each instance. The Hearing Officer is in the best position to determine the credibility of witness testimony and his determination that Bright's testimony was true is entitled to great deference. Benjamin , ¶ 37. Findings of Fact Nos. 11-17 and 23 are not clearly erroneous.
¶11 Finding of Fact No. 18 concerns Gustafson admitting to using the "N-word" at work in 2012, when speaking with William Sanders, an African American man who was then employed by KB. Finding of Fact No. 18 further notes that Gustafson had been accused of being a racist by Kevin Beck's father, Dave Beck, when he was the owner of the company. KB claims that this Finding of Fact is clearly erroneous because Dave Beck was no longer an owner of the company when Dave Beck called Gustafson a racist, however Gustafson testified that he was accused by Dave Beck of being a racist "during [his] employment at KB Enterprises" and "after the November 30th incident." While Dave Beck was no longer the owner of KB in 2015, the testimony of Gustafson does not preclude that Dave Beck did call Gustafson a racist during a period when he was the owner of the company. Dave Beck founded KB, was an owner for a period of time, and eventually gave control to Kevin Beck. Dave Beck and Kevin Beck had multiple meetings with Gustafson over the years regarding Gustafson's racist statements. Even after ceding control of KB to Kevin Beck, Dave Beck maintained apparent authority at the company-he could call all-hands employee meetings and was involved in the meetings with Kevin Beck and Gustafson regarding Gustafson's use of the "N-word" at work. Finding of Fact No. 18 is not clearly erroneous, because even though there is not a preponderance of the evidence that Dave Beck called Gustafson a racist while he was the owner of KB, substantial evidence is found in the record to support the Hearing Officer's conclusion that he did. Peretti , ¶ 18.
¶12 Finding of Fact No. 19 concerns Bright's admitted use of the term "nigga" as a term of endearment with other African American employees at work. KB claims that Bright can therefore not claim to be offended when his direct supervisor, who is not an African American, calls him a "nigger." This argument is nonsensical and ignores years of cultural history. See Daniel v. Wayans , 8 Cal. App. 5th 367, 390, 213 Cal.Rptr.3d 865 (2017) ("Nigga is not an unambiguous racial epithet in today's world, especially when used intraracially[.]") Bright testified that he was offended by Gustafson, a non-African American, calling him a "nigger," but used the diminutive "nigga" himself as a non-offensive greeting with fellow African Americans. There is a clear difference between African Americans using the term "nigga" amongst one another and a non-African American calling an African American man a "nigger." See generally Bailey v. Binyon , 583 F. Supp. 923, 927 (N.D. Ill. 1984) ("The use of the word 'nigger' automatically separates the person addressed from every non-black person; this is discrimination per se .") Finding of Fact No. 19 is not clearly erroneous.
¶13 Findings of Fact Nos. 26 and 35 concern Bright's alleged failure to mitigate his damages by twice refusing KB's offers to return to work at KB after Bright quit in response to Gustafson's repeated racial abuse. The Hearing Officer found that at the time of each offer, Gustafson was still employed at KB. Substantial evidence supports this Finding of Fact, as Gustafson testified that he did not leave his job at KB until the end of June, while both of KB's offers to Bright were made in May. Bright obtained employment prior to the second offer, at an admittedly lower wage than he made at KB, but it is reasonable for him to reject KB's offers of reemployment at a company which still employs a supervisor who had repeatedly branded him with racial slurs. KB could toll the accrual of damages by offering Bright his job without conditions attached. Martinell v. Montana Power Co. , 268 Mont. 292, 323, 886 P.2d 421, 440 (1994). It did not do so in this case by offering Bright a job being supervised by Gustafson. KB's offer of reemployment to Bright was therefore conditioned on Bright possibly being subject to even more racial abuse. Findings of Fact Nos. 26 and 35 are not clearly erroneous.
¶14 Finding of Fact No. 32 concerns Bright being hurt by being called a "nigger" by Gustafson. Bright testified to how these experiences hurt him. "The experience of being called 'nigger,' 'spic,' 'Jap,' or 'kike' is like receiving a slap in the face. The injury is instantaneous." State v. Hoshijo , 76 P.3d 550, 565 (Haw. 2003) (quoting Taylor v. Metzger , 152 N.J. 490, 706 A.2d 685, 691 (1998) ). It is abundantly clear that throughout the history of the United States, the term "nigger" has been used as a vicious racial slur to degrade and demean African Americans. The Hearing Officer's Finding of Fact No. 32 that Bright was hurt by this experience is supported by substantial evidence and not clearly erroneous.
¶15 Finding of Fact No. 33 concerns Kevin Beck being aware of Gustafson's racist conduct toward Bright. Bright reported that Gustafson was using "the (N) word" in a written statement to KB. KB admits that it received the statement. Kevin Beck was therefore aware of Bright's allegations and did nothing to protect Bright from Gustafson's racist abuse. Finding of Fact No. 33 is not clearly erroneous.
¶16 KB asserts that Finding of Fact No. 20 regarding Josh Blaz witnessing Gustafson using the "N-word" toward Bright is clearly erroneous because not all of Blaz's testimony at the hearing was truthful. "The jury is to be instructed by the court on all proper occasions that ... a witness false in one part of the witness's testimony is to be distrusted in others[.]" Section 26-1-303(3), MCA. KB claims that the Hearing Officer should have disregarded Blaz's testimony due to this statute. Section 26-1-303, MCA, is, by its plain language, a jury instruction statute and therefore irrelevant to the proceedings before the Hearing Officer in this case. The Hearing Officer is entitled to judge witness credibility and "the findings of the hearing examiner, especially as to witness credibility, are ... entitled to great deference." Benjamin , ¶ 37. Finding of Fact No. 20 is not clearly erroneous.
¶17 Finding of Fact No. 34 concerns the Hearing Officer's conclusion that the racial harassment of Bright was sufficiently severe so as to alter the conditions of Bright's employment. There is no precise test to determine whether instances of discriminatory conduct have created a work environment that it so hostile or abusive that it alters the conditions of an employee's employment-each case must be judged by looking at all the circumstances from the perspective of a reasonable person. Harris v. Forklift Sys. , 510 U.S. 17, 21-22, 114 S. Ct. 367, 370, 126 L.Ed.2d 295 (1993). "Perhaps no single act can more quickly alter the conditions of employment and create an abusive working environment than the use of an unambiguously racial epithet such as 'nigger' by a supervisor in the presence of his subordinates." McGinest v. GTE Serv. Corp. , 360 F.3d 1103, 1116 (9th Cir. 2004) (quoting Rodgers v. Western-Southern Life Ins. Co. , 12 F.3d 668, 675 (7th Cir. 1993) ). There is simply no question that the use of the word "nigger" by a supervisor toward an African American employee objectively creates a hostile and abusive working environment that alters the conditions of that employee's employment. Kevin Beck, the owner of KB, testified to as much during the HRB hearing. Finding of Fact No. 34 is not clearly erroneous and to the extent that it is a conclusion of law, it is correct.
¶18 Finally, KB objects to Findings of Fact Nos. 36 and 41, which concern the Hearing Officer's determination that Bright is entitled to damages. Specifically, Finding of Fact No. 41 awarded Bright $ 20,000.00 for emotional distress. KB claims that this award is excessive and out of line with previous cases, and cites several decisions with lower damages awards in its briefing-though quite notably none where a plaintiff was subjected to the slur used by Gustafson in this case. KB asserts that any emotional distress award should be "directly in line with" Johnson v. Hale , 13 F.3d 1351 (9th Cir. 1994). In Johnson , the plaintiffs were two African American men who were refused an apartment in Billings by a landlord who stated that her husband would not allow her to rent to "Negro men." Johnson , 13 F.3d at 1352. The Ninth Circuit Court of Appeals set aside the district court's de minimis emotional distress award of $ 125.00 to each plaintiff and remanded to the district court to award each plaintiff "not less than $ 3,500 plus costs and attorneys' fees." Johnson , 13 F.3d at 1354. The Ninth Circuit noted "[t]hat sum would appear to be the minimum that finds support in recent cases and takes into account inflation, the purpose of [ 42 U.S.C.] § 1982, and other factors[,]" and stated that the district court "may, of course, award more after reviewing the authorities cited above." Johnson , 13 F.3d at 1354. Taking inflation into account, as the Ninth Circuit did in Johnson , and noting that the plaintiffs in Johnson were subjected to a single instance of racial abuse from a prospective landlord, rather than multiple instances of racial abuse by a direct supervisor, we do not find the Hearing Officer's emotional distress award of $ 20,000.00 to be excessive. Substantial evidence supports the emotional distress award in Findings of Fact Nos. 36 and 41 and those findings are not clearly erroneous.
CONCLUSION
¶19 The Hearing Officer's Findings of Fact were not clearly erroneous, did not misapprehend the effect of evidence, and this Court's review of the entire record does not convince us that a mistake has been made. The District Court correctly affirmed the HRC's Final Agency Decision and dismissed KB's petition for judicial review.
¶20 Affirmed.
We concur:
MIKE McGRATH, C.J.
LAURIE McKINNON, J.
JAMES JEREMIAH SHEA, J.
DIRK M. SANDEFUR, J.
Mr. Gustafson is not related to Justice Gustafson. | [
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Justice Ingrid Gustafson delivered the Opinion of the Court.
¶1 B.J. (Father) appeals from the Findings of Fact, Conclusions of Law and Order Terminating Parental Rights issued by the Nineteenth Judicial District Court, Lincoln County, on December 12, 2018. We affirm.
¶2 We restate the issues on appeal as follows:
1. Whether Father was denied due process when the District Court terminated Father's parental rights.
2. Whether Father's treatment plan was appropriate.
FACTUAL AND PROCEDURAL BACKGROUND
¶3 The Montana Department of Health and Human Services, Child and Family Services Division (Department), became involved with B.J.J., Jr. (Child) when it learned Mother and Father were not actively parenting five-year old Child, but had left him in the care of his maternal grandmother without providing a power of attorney or any financial support. ¶4 On April 6, 2017, the Department filed a petition for emergency protective services (EPS), appointment of a guardian ad litem, adjudication of Child as a youth in need of care (YINC), and for temporary legal custody (TLC). At the time of the petition, Child had been residing in Grandmother's home in Montana for some time, Mother was homeless and allegedly using illegal drugs, and Father was incarcerated in prison in Nevada. Father was appointed counsel to represent him. The show cause hearing was held on May 15, 2017. Although Father was still incarcerated and not present at the hearing and had not yet been personally served with the petition, his counsel represented he had spoken to Father and that Father did not agree with all of the allegations contained in the affidavit, but did not oppose the relief sought by the Department. At the time, as Father was still incarcerated in Nevada, he was not in a position to parent Child. At the conclusion of the hearing, the District Court granted the requested show cause relief, adjudicated Child a YINC, granted the Department TLC for a period of six months, and indicated it would allow Father to move the court to rescind or amend its order and relitigate the petition after Father was served should he so desire. Father was served on May 22, 2017. The court followed its oral order with a written order on June 5, 2017.
¶5 Father was released from prison in July 2017. He contacted Child Protection Specialist (CPS) Weber in mid-August and reported he was living with his father in Nevada and working two jobs at McDonald's and Dairy Queen. CPS Weber provided Father with his contact information as well as that of Father's attorney. CPS Weber also sent Father a copy of the Department's proposed treatment plan. CPS Weber again spoke with Father via telephone in October 2017. Father reported he had not yet begun the tasks of his treatment plan but was in compliance with his probation and in conjunction therewith was working, attending some counseling, and submitting to drug testing. CPS Weber requested Father sign and return the treatment plan which Father indicated he would. CPS Weber also discussed with Father the importance of Father maintaining contact with him and his attorney as well as Father's need to begin to build a relationship with Child by sending him pictures, cards, and letters, after which CPS Weber would then establish telephone contact between Father and Child. Following this conversation, CPS Weber confirmed with Father's probation officer that Father was in compliance with his probation. CPS Weber did not thereafter follow up with Father's probation officer as he believed Father to be discharging from probation in October 2017.
¶6 When Father failed to sign and return his treatment plan as he indicated he would, the Department filed a written motion to approve Father's treatment plan. The District Court held a hearing on this motion on February 12, 2018. Without objection, CPS Weber testified as to the specific goals and tasks in the treatment plan and how they were designed to assist Father to be able to safely parent Child. At the conclusion of the hearing, the District Court approved the Department's proposed treatment plan for Father. Thereafter, Father did not contact CPS Weber further. CPS Weber, however, made repeated attempts to contact Father by telephone without getting an answer. When CPS Weber did get an answer at the telephone number Father had provided, it was a different person's voicemail. At the extension of the TLC hearing on April 16, 2018, Father's counsel indicated he had had no contact from Father, and therefore could not advocate Father's position on the matter.
¶7 The Department filed a motion to approve permanency plan and for termination of Father's parental rights on October 23, 2018. At this time, Father was again incarcerated in Nevada. Father was re-assigned counsel and on October 25, 2018, Brianne Franklin filed her notice of appearance as Father's counsel. On October 28, 2018, while still incarcerated, Father was personally served with the termination petition and notice of the termination hearing set for December 3, 2018. At his counsel's request, the District Court attempted to contact Father by phone at the commencement of the termination hearing on December 3, 2018. Father did not answer, and the court proceeded with the hearing. After CPS Weber testified on direct examination, the court made another attempt to reach Father by phone. Father answered this call and thereafter appeared telephonically through the remainder of the hearing. At the hearing, CPS Weber testified extensively to Father's failure to complete any of his treatment plan tasks, Father's failure to maintain contact with CPS Weber throughout the case, and Father's failure to make even minimal progress in rebuilding a relationship with Child. Upon cross-examination, although he commended Father for appearing telephonically at the hearing, CPS Weber did not believe that if Father was in a new position in his life where he was now prepared to work his treatment plan that such would be in Child's best interest. CPS Weber explained that Father had been provided opportunity over the past two years to work on the issues which precluded him from safely parenting and that he had not shown much interest in his son or any desire to parent him. CPS Weber testified, given Father's complete lack of progress to date, it was not in Child's best interest to wait longer for permanency. Father declined to testify. At the conclusion of the hearing, Father requested the court deny the termination petition and instead extend TLC as Father was in a new position in his life where he was now prepared to work his treatment plan.
¶8 The District Court then determined Father did not successfully complete his treatment plan and the condition rendering him unfit, unable, or unwilling to parent was not likely to change within a reasonable time and terminated his parental rights. Father appeals.
STANDARD OF REVIEW
¶9 This Court reviews a district court's decision to terminate parental rights for an abuse of discretion. In re K.A. , 2016 MT 27, ¶ 19, 382 Mont. 165, 365 P.3d 478. The Department has the burden of proving by clear and convincing evidence that the statutory criteria for termination have been satisfied. In the context of parental rights cases, clear and convincing evidence is the requirement that a preponderance of the evidence be definite, clear, and convincing. In re K.L. , 2014 MT 28, ¶ 14, 373 Mont. 421, 318 P.3d 691. This Court reviews a district court's findings of fact for clear error and its conclusions of law for correctness. In re M.V.R. , 2016 MT 309, ¶ 23, 385 Mont. 448, 384 P.3d 1058. A factual finding is clearly erroneous if it is not supported by substantial evidence, if the court misapprehended the effect of the evidence, or if review of the record convinces this Court a mistake was made. In re J.B. , 2016 MT 68, ¶ 10, 383 Mont. 48, 368 P.3d 715. "To reverse a district court's evidentiary ruling for an abuse of discretion, this Court must determine the district court either acted arbitrarily without employment of conscientious judgment or exceeded the bounds of reason resulting in substantial injustice."
In re I.M. , 2018 MT 61, ¶ 13, 391 Mont. 42, 414 P.3d 797 (citing In re O.A.W. , 2007 MT 13, ¶ 32, 335 Mont. 304, 153 P.3d 6 ).
¶10 Father asserts this Court has "adopted a diminished appellate review standard for reviewing a district court's findings of fact regarding the required statutory criteria." Father contends that the clearly erroneous standard applied by this Court with regard to findings of fact is inconsistent with the United States Supreme Court's holding in Santosky v. Kramer , 455 U.S. 745, 102 S. Ct. 1388, 71 L.Ed.2d 599 (1982), that the constitutionally required burden of proof for establishing criteria for termination is no less than clear and convincing evidence. The Department asserts that Father's argument "conflates evidentiary burdens of proof with appellate standards of review." We agree with the Department. In abuse and neglect cases, the burden of proof generally lies with the Department. Section 41-3-422(5)(a), MCA. Thus, the Department must prove by clear and convincing evidence all required elements for termination of a parent's rights. The district court, as the fact finder, evaluates if the Department has met its burden of presenting clear and convincing evidence regarding all required elements for termination of a parent's rights. The district court's findings of fact and conclusions of law summarize the court's evaluation as to whether the Department has met its burden of proof that a preponderance of the evidence is definite, clear, and convincing. Upon appeal of a district court's findings of fact, conclusions of law, and order terminating a parent's parental rights, this Court does not substitute its judgment as to the strength of the evidence for that of the district court. In re A.N.W. , 2006 MT 42, ¶ 29, 331 Mont. 208, 130 P.3d 619. Rather, this Court reviews factual findings to determine if they are clearly erroneous, conclusions of law for correctness, and that the evidence found by the district court on a whole satisfies that a preponderance of the evidence is definite, clear, and convincing.
DISCUSSION
¶11 1. Whether Father was denied due process when the District Court terminated Father's parental rights.
¶12 Father asserts he was denied due process because he was not properly served and was denied notice and an opportunity to be heard, he received ineffective assistance of counsel, and the Department failed to make reasonable efforts to reunify him with Child.
¶13 Notice and Opportunity to be Heard. As a natural parent's right to care and custody of a child is a fundamental liberty interest which must be protected by fundamentally fair procedures, termination procedures must satisfy the Due Process Clause of the Fourteenth Amendment. In re C.J. , 2010 MT 179, ¶ 26, 357 Mont. 219, 237 P.3d 1282 (citations omitted). For a parent to establish a claim for violation of due process, a parent must demonstrate how the outcome would have been different had the alleged due process violation not occurred. See In re A.N.W. , ¶¶ 38, 47. This Court agrees with Father that "[k]ey components of a fair proceeding are notice and an opportunity to be heard." In re C.J. , ¶ 27 (citing In re T.C. and W.C. , 2001 MT 264, ¶ 22, 307 Mont. 244, 37 P.3d 70 ). In this case, however, Father was afforded fundamentally fair procedures and had equal opportunity to present evidence and test the evidence entered by the Department.
¶14 With regard to his claim of lack of notice and opportunity to be heard, Father primarily takes issue with the adjudication of Child as a YINC prior to Father being personally served with the petition seeking adjudication and TLC. Review of the adjudicatory proceeding leads to the conclusion that Father was provided a full and fair opportunity to contest the petition, but instead stipulated to the relief sought therein. At the hearing on May 15, 2017, Father's counsel represented he had spoken to Father and that Father had "no objection to the relief" sought, although he did not agree with all the allegations contained in the affidavit supporting the petition. Recognizing Father had not yet been personally served, the District Court indicated that although it was adjudicating Child a YINC and granting the Department TLC for a period of six months, it would leave the record open so that Father could, after service, raise objections and request the court amend or rescind the adjudication and TLC order. Thereafter, Father was personally served with the petition seeking adjudication and TLC on May 22, 2017. Father made no further objections or motions to amend or rescind the adjudication and TLC order. Further, Father has never asserted that his counsel's representations at the adjudicatory hearing were false, or disputed the sufficiency of evidence for adjudication and TLC. Finally, Father has not established how the outcome would have been different had the District Court held the adjudicatory hearing after Father was served on May 22, 2017. Father has failed to establish a violation of his right to due process based on his assertion of lack of notice and opportunity to be heard.
¶15 Ineffective Assistance of Counsel (IAC) Claim. Father asserts his appointed counsel, Stephen Dalby (Dalby), rendered ineffective assistance. We evaluate two nonexclusive benchmark factors in assessing the effectiveness of counsel in abuse and neglect proceedings: (1) counsel's training and experience, and (2) the quality of counsel's advocacy during the proceedings. In re A.S ., 2004 MT 62, ¶¶ 26-27, 320 Mont. 268, 87 P.3d 408. To establish an IAC claim, a parent must show he suffered prejudice resulting from counsel's ineffective representation. In re A.S. , ¶ 31. Father does not challenge Dalby's training and experience; instead he claims that the quality of Dalby's advocacy was ineffective. Father asserts Dalby was ineffective by representing Father while simultaneously representing two other natural fathers involved in companion proceedings. Father also asserts Dalby was ineffective for not objecting to adjudication prior to service, failing to object to the appropriateness of the treatment plan, failing to arrange Father's telephonic appearance at any proceedings, and failing to make objections and present witnesses or evidence throughout the case. From our review of the record, we do not find Father's counsel to have provided ineffective assistance.
¶16 While Father asserts Dalby had some type of conflict in representing all three fathers in the companion cases, he fails to identify any actual conflict that existed that would require each father's consent to Dalby's representation. M. R. Pro. Cond. 1.7(a) provides that "a lawyer shall not represent a client if the representation involves a concurrent conflict of interest." If a "concurrent conflict of interest" exists, a lawyer "may represent a client if ... each affected client gives informed consent, confirmed in writing." M. R. Pro. Cond. 1.7(b). Although Father cites M. R. Pro. Cond. 1.7, he does not assert any particular conflict of interest existed in Dalby's representation of all the fathers in the companion cases nor does the record reveal any conflict. The other fathers had no parenting interest or relationship with Child and the three fathers' separate interests in parenting their respective children were not in conflict with one another.
¶17 Father asserts Dalby should have moved to continue the adjudicatory hearing until he was personally served. While Dalby could have made such an objection, Father has not established it was ineffective assistance not to do so. Pursuant to In re K.B. , 2016 MT 73, ¶ 19, 383 Mont. 85, 368 P.3d 722, failure to object to adjudication is not IAC when sufficient evidence supports the adjudication of the child as a YINC. As previously indicated, Father has never asserted the evidence was insufficient to support the District Court's adjudication of Child as a YINC. Father has also never contested his stipulation to the adjudicatory relief.
¶18 Finally, Father asserts IAC based on counsel failing to object to the appropriateness of the treatment plan, failing to arrange Father's telephonic appearance at any proceedings, and failing to make objections and present witnesses or evidence throughout the case. Given Father's lack of engagement with the Department and his lack of contact with counsel throughout the course of this case, his IAC assertions are unavailing. When not incarcerated, Father was basically out of contact and unreachable by his counsel or the Department. Father had contact information for his counsel. Further, Dalby had sent Father the proposed treatment plan and was able to delay the District Court's consideration of it for a period of time as he had not been able to contact Father to discuss it. Father did not answer the telephone at the contact number he provided counsel and did not keep counsel apprised of his contact information when it changed. It is not realistic to expect counsel to make objections or particularly advocate for a client when counsel is unable to locate or contact the client and the client fails to contact the attorney. Without being able to reach Father, Dalby could not make objections, present evidence, or advocate to the court any client progress or position. A parent cannot establish IAC through his own failure to contact and engage with counsel. In this case, Dalby rendered legal services which were as effective as possible given Father's lack of contact and engagement with him.
¶19 Reasonable efforts. Finally, Father asserts his due process rights were violated by the Department's failure to engage in reasonable efforts to reunify him with Child. Specifically, Father argues the Department failed to make reasonable efforts by failing to determine whether his home was safe and appropriate for Child, follow up with his probation officer to confirm compliance with his Nevada conditions of release, definitively determine why Father was incarcerated, and provide Father services, referrals, and information.
¶20 In termination proceedings, § 41-3-609(1)(f), MCA, protects a parent's fundamental right to the care and custody of a child. In re D.B. , 2007 MT 246, ¶ 17, 339 Mont. 240, 168 P.3d 691. A district court may only terminate the parent-child relationship of an adjudicated YINC if it finds "by clear and convincing evidence that: (1) an appropriate court-approved treatment plan was not complied with by the parents or was not successful; and that (2) the conduct or condition of the parents rendering them unfit was unlikely to change within a reasonable time." In re X.M. , 2018 MT 264, ¶ 18, 393 Mont. 210, 429 P.3d 920 (citing § 41-3-609(1)(f)(i), (ii), MCA ).
¶21 Since "a natural parent's right to care and custody of a child is a fundamental liberty interest," a district court "must adequately address each applicable statutory requirement" before terminating an individual's parental rights. In re A.T ., 2003 MT 154, ¶ 10, 316 Mont. 255, 70 P.3d 1247 (citing In re J.N. , 1999 MT 64, ¶ 12, 293 Mont. 524, 977 P.2d 317 ). One such requirement is found in § 41-3-423(1), MCA, which requires the Department to "make reasonable efforts to prevent the necessity of removal of a child from the child's home and to reunify families that have been separated by the state." Although determination of whether the Department made reasonable efforts is not a separate requirement for termination, it is a predicate for finding that the conduct or condition rendering a parent unfit, unwilling, or unable to parent is unlikely to change within a reasonable time-one of the factors required for termination of a parent's rights. See § 41-3-609(1)(f)(ii), MCA ; In re D.B ., ¶ 25.
¶22 To meet its requirements to provide reasonable efforts, the Department must in good faith develop and implement treatment plans designed "to preserve the parent-child relationship and the family unit" and must, in good faith, assist a parent in completing his treatment plan. In re D.B. , ¶ 33 ; see also In re T.D.H. , 2015 MT 244, ¶ 42, 380 Mont. 401, 356 P.3d 457. From our review of the record, we conclude the Department provided reasonable efforts as required by § 41-3-423(1), MCA.
¶23 Pursuant to the Department's policy, when a child is removed from a custodial parent, the non-custodial parent is the first placement option considered by the CPS. See Child and Family Services Policy Manual, § 304-1. Father asserts the Department made no efforts to determine whether his home was safe and appropriate for Child. At the point where the Department became involved with this family, Child was residing with his maternal grandmother with whom he had resided on and off for the majority of his life and with whom he had been residing continuously for approximately 14 months. Moreover, Father was incarcerated so he was not a viable first placement option.
Upon Father's release, there is nothing in the record indicating that Father desired Child be placed with him. From the testimony and affidavit of CPS Weber regarding his interactions with Father, the record indicates Father agreed he needed to address mental health, chemical dependency, housing and stability issues, and build a relationship with Child before he could safely parent Child. Father also claims the Department failed to follow up with his probation officer to confirm compliance with his conditions of release or provide him services, referrals, or information as to where he could obtain services related to his treatment plan tasks. This assertion is also not supported by the record. After Father reported engagement in some therapy and drug testing through his probation, CPS Weber contacted Father's probation officer in October 2017 and confirmed Father was compliant with his conditions of release. CPS Weber did not further follow up with the probation officer as he believed Father was discharging from supervision that month. Again, after this time, Father basically discontinued communicating with the Department. Although CPS Weber repeatedly attempted to contact Father at the number Father provided, Father did not answer. When CPS Weber reached voicemail, it indicated it was the voicemail box of someone other than Father. It was not until a few days before the termination hearing that Father's whereabouts became known again when he was re-incarcerated.
¶24 We have long held that a parent has an obligation to avail himself of services arranged or referred by the Department and engage with the Department to successfully complete his treatment plan. In re R.J.F. , 2019 MT 113, ¶ 38, 395 Mont. 454, 443 P.3d 387 ; In re C.B. , 2014 MT 4, ¶¶ 19, 23, 373 Mont. 204, 316 P.3d 177 ; In re D.F., 2007 MT 147, ¶ 30, 337 Mont. 461, 161 P.3d 825 ; In re T.R. , 2004 MT 388, ¶ 26, 325 Mont. 125, 104 P.3d 439 ; In re L.S. , 2003 MT 12, ¶ 11, 314 Mont. 42, 63 P.3d 497. While "engaging in reasonable efforts requires more than merely suggesting services to a parent and waiting for the parent to then arrange those services for [him]self," they do not require herculean efforts. In re R.J.F. , ¶ 37 ; see also In re A.G. , 2016 MT 203, ¶ 17, 384 Mont. 361, 378 P.3d 1177. In order for the Department to make reasonable efforts, the parent has a corresponding obligation to engage with the Department and maintain sufficient contact with the Department for the Department to be able to assist the parent to obtain the treatment and services necessary for the parent to safely parent. Here, Father cannot establish the Department failed to make reasonable efforts to reunify him with Child through his own failure to remain in contact and engage with the Department.
¶25 2. Whether Father's treatment plan was appropriate.
¶26 Father, for the first time on appeal, claims that his court-ordered treatment plan was inappropriate and asserts plain error review is appropriate. Father contends the treatment plan ordered by the court requiring mental health, chemical dependency, housing and stability, and parenting and visitation tasks was inappropriate as "the only problems/conditions related to the abuse/neglect of [Child] by Father were that he left his child in the care of Grandmother without a power of attorney and without providing support."
¶27 Plain error review is discretionary and may be granted where an appellant shows: (1) the asserted error implicates a fundamental right, and (2) not reviewing the asserted error may result in a manifest miscarriage of justice, leave unsettled the question of fundamental fairness of the proceedings, or may compromise the integrity of the judicial process. In re M.K.S. , 2015 MT 146, ¶¶ 13-14, 379 Mont. 293, 350 P.3d 27. We employ plain error review sparingly, on a case-by-case basis. In re J.S.W. , 2013 MT 34, ¶ 16, 369 Mont. 12, 303 P.3d 741.
¶28 Although the asserted error implicates a fundamental right-the right to parent one's child-Father has failed to establish plain error review is warranted. At the outset of this matter, Father was appointed counsel and had full opportunity to contest the adjudication of Child as a YINC. Instead of contesting that his placement of Child in the care of an appropriate relative-maternal grandmother-was insufficient to establish the need for EPS pursuant to §§ 41-3-301, 41-3-427, and 41-3-432, MCA, or to establish Child as a YINC as defined in § 41-3-102(34), MCA, Father stipulated to the relief requested by the Department-EPS and adjudication of Child as a YINC. It is undisputed that Father and his counsel received the proposed treatment plan. Father had contact information for his counsel and the Department. Father also spoke with CPS Weber in August and October 2017. During those conversations CPS Weber discussed the requirements of Father's treatment plan. Father acknowledged to CPS Weber he had received the treatment plan, understood its requirements, and intended to sign it and return it to CPS Weber. Father related to CPS Weber he had not yet had time to work on any of the treatment plan tasks. Father did not express objection to the treatment plan or any of the tasks required therein or request assistance in lining up services. Father did not question the appropriateness of his treatment plan either before or after it was ordered. Father was represented by counsel, had contact information for his counsel, and had full opportunity to seek advice and confer with counsel if he had any questions, concerns, or objections to the treatment plan. Father never requested clarification, modification, or amendment to his treatment plan. Finally, attorney Franklin, who took over Father's representation from Dalby and against whom Father has not made any IAC claims, did not raise any objection to or issue regarding the treatment plan during the termination hearing. Through Father's failure to take advantage of the legal representation appointed to him to contest or object to his treatment plan and through his failure to express anything other than agreement with his treatment plan throughout the entire course of this case, Father has waived his right to appeal the appropriateness of the plan. The District Court's approval of Father's treatment plan did not constitute a manifest miscarriage of justice or compromise the integrity of the proceedings.
CONCLUSION
¶29 Father was not denied due process when the District Court terminated his parental rights, and plain error review regarding the appropriateness of Father's treatment plan is not warranted.
¶30 Affirmed.
We concur:
JAMES JEREMIAH SHEA, J.
DIRK M. SANDEFUR, J.
BETH BAKER, J.
JIM RICE, J.
Child, along with Mother's two other children, had been residing with Grandmother who expressed concern Mother could attempt to take the children from her care. There is nothing in the record suggesting Child was abused or neglected or at risk of such in Grandmother's care. Father did not contest show cause or adjudication of Child as a youth in need of care nor does he appeal this issue.
On December 3, 2018, Father's counsel filed a motion requesting Father be permitted to appear telephonically at the hearing as he was now residing at a sober living home in Nevada.
Three children were involved in related proceedings. Mother was the natural mother of all three children, but each had a different natural father. While each of the children's cases was assigned a separate case number, all cases were heard simultaneously throughout the proceedings.
Father's assertion that his treatment plan was not appropriate will be discussed under Issue 2.
Further, the Department had alleged, and Father did not contest, that Mother and Father had placed Child in the care and custody of Grandmother. | [
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] |
Justice Beth Baker delivered the Opinion of the Court.
¶1 David Kurtz appeals the Thirteenth Judicial District Court's order denying his motion to dismiss for violation of his right to a speedy trial. Kurtz argues that applying this Court's established speedy trial standards, the 422-day delay in resolving his felony driving under the influence charge violated his constitutional rights. We reverse and remand for dismissal of Kurtz's charge.
PROCEDURAL AND FACTUAL BACKGROUND
¶2 A Montana Highway Patrol trooper arrested Kurtz in Yellowstone County on May 3, 2015, and the State charged him with felony driving under the influence of alcohol and misdemeanor driving while license suspended. Kurtz pleaded not guilty. The District Court set bond at $ 20,000, which Kurtz was unable to post. The District Court initially scheduled trial for August 17, 2015. Kurtz filed a motion to suppress on July 22, 2015, contesting the legality of the traffic stop. One week later, the State moved to postpone the trial because the results from the crime lab had not yet been received. Kurtz did not oppose this motion; he agreed the trial should be postponed pending the toxicology results. The court vacated the August trial date and set the trial for September 21, 2015.
¶3 The District Court held a hearing on Kurtz's motion to suppress on August 31, 2015, and denied the motion in late November. On December 14, 2015, the court reset the trial for January 4, 2016, noting that the September trial date had "passed with no resolution." Four days later, Kurtz's counsel e-mailed the District Court's judicial assistant requesting the court "not call a jury for January 4, 2016." The judicial assistant replied that if there is not going to be a trial, Kurtz would have to file a motion to continue with a waiver.
¶4 On December 21, 2015, Kurtz filed a status report requesting that the District Court vacate the January 4 trial and set a change of plea hearing. No hearing was set. The January trial date passed. On April 12, 2016, the State requested the court to reset the trial. The following day, the court set a new trial date for May 23, 2016. Kurtz filed a motion to dismiss on May 11, 2016, alleging that his right to a speedy trial was violated. The May trial date passed. The District Court held a hearing on Kurtz's motion to dismiss on June 1, 2016, and denied it three weeks later. The court found that the length of delay and reasons for the delay weighed in favor of finding a speedy trial violation but concluded that Kurtz's response to the delay and the prejudice to Kurtz did not weigh in Kurtz's favor. The court determined that, on balance and because Kurtz's defense was not impaired, Kurtz was not denied a speedy trial.
¶5 Kurtz entered a change of plea with the District Court four days later. Kurtz pleaded guilty to felony driving under the influence of alcohol and waived his right to a presentence investigation. On the State's motion, the court dismissed the misdemeanor charge. It sentenced Kurtz to the maximum, thirteen-month commitment with the Department of Corrections, followed by a five-year suspended sentence. Because Kurtz's pretrial incarceration was twenty-six days longer than his thirteen-month sentence of imprisonment, Kurtz was released immediately and awarded a $ 2,470 credit against the $ 5,000 fine imposed.
STANDARDS OF REVIEW
¶6 On appeal of a speedy trial ruling, we review a district court's factual findings for clear error. State v. Ariegwe , 2007 MT 204, ¶ 119, 338 Mont. 442, 167 P.3d 815. The trial court's findings are "clearly erroneous if they are not supported by substantial credible evidence, if the court has misapprehended the effect of the evidence, or if a review of the record leaves this Court with a definite and firm conviction that a mistake has been made." Ariegwe , ¶ 119. Whether the factual circumstances establish a speedy trial violation is a question of constitutional law that we review de novo. Ariegwe , ¶ 119.
DISCUSSION
¶7 The Sixth Amendment to the United States Constitution and Article II, Section 24, of the Montana Constitution both guarantee a criminal defendant the right to a speedy trial. If the delay between accusation and trial exceeds 200 days, this Court must examine speedy trial violations under the Ariegwe four-factor test. Ariegwe , ¶ 41. The test balances: (1) the length of delay; (2) the reasons for the delay; (3) the accused's response to the delay; and (4) the prejudice to the accused. Ariegwe , ¶ 34. "No one factor is dispositive by itself; rather, the factors are related and must be considered together with such other circumstances as may be relevant." Ariegwe, ¶ 112.
Factor One: The Length of the Delay
¶8 Kurtz pleaded guilty to felony DUI 422 days after he was arrested and charged, a delay that triggers our four-factor balancing test. Ariegwe , ¶ 107. The presumption of prejudice intensifies, and the State's burden to justify the delay increases, as the delay stretches beyond the 200-day threshold. Ariegwe , ¶ 62.
¶9 The 422-day delay in this case substantially increases the State's burden under Factor Two and Factor Four. The State must provide "particularly compelling justifications" for the delay under Factor Two. Ariegwe , ¶ 123. Further, the State must make a more persuasive showing that Kurtz was not prejudiced by the delay, while the quantum of proof that may be expected of Kurtz to demonstrate prejudice is correspondingly lower. Ariegwe , ¶ 123 ; accord State v. Rose , 2009 MT 4, ¶ 46, 348 Mont. 291, 202 P.3d 749 (holding that a 507-day delay "substantially" increased the State's burden under Factor Two, the presumption that pretrial delay prejudiced Rose is increased, and the quantum of proof expected of Rose under Factor Four is substantially decreased).
Factor Two: The Reasons for the Delay
¶10 Kurtz challenges the weight given to two periods of delay: (1) the sixty-four-day delay between the September trial date and the date the District Court denied Kurtz's suppression motion; and (2) the ninety-nine-day delay between the January 1, 2016 trial date and the date the State asked to reset the trial. The parties do not contest the District Court's analysis of the other periods of delay.
¶11 "[T]he prosecutor and the court have an affirmative constitutional obligation to try the defendant in a timely manner[,] and ... this duty requires a good faith, diligent effort to bring him to trial quickly." Ariegwe , ¶ 65 (internal citations and quotations omitted). The State therefore bears the burden of explaining the pretrial delays. Ariegwe , ¶ 64. Delay is charged to the State unless the accused caused the delay or affirmatively waived his speedy trial right for that period. State v. Billman , 2008 MT 326, ¶ 20, 346 Mont. 118, 194 P.3d 58.
¶12 Under Factor Two, we assign weight to each period of delay based on the specific cause of the delay. State v. Zimmerman , 2014 MT 173, ¶ 19, 375 Mont. 374, 328 P.3d 1132. The weight assigned will depend on the party's culpability in causing the delay. Ariegwe , ¶ 67. The prosecution's negligence or lack of diligence is weighed against the State less heavily than is bad faith, but "still falls on the wrong side of the divide between acceptable and unacceptable reasons for delaying a criminal prosecution once it has begun." Ariegwe , ¶ 69. Institutional delays-"those that are caused by overcrowded court dockets and other similar events"-are attributable to the State but weigh even less heavily. Adams v. State , 2007 MT 35, ¶ 31, 336 Mont. 63, 153 P.3d 601 (citing State v. Small , 279 Mont. 113, 118-19, 926 P.2d 1376, 1379 (1996) ).
Sixty-Four-Day Delay from September 21 to November 24, 2015
¶13 The September 21 trial setting passed without being vacated or continued. On November 24, the court issued findings of fact and conclusions of law denying Kurtz's motion to suppress. The District Court concluded that the period of delay between September 21 and November 24, 2015, was attributable to all parties and deemed institutional. The District Court explained that the delay was due to: (1) the court's consideration of Kurtz's suppression motion; (2) the delay in ruling on the suppression motion pending Kurtz's response to the court's disclosure of a potential conflict of interest; and (3) the presiding judge attending a training seminar. The court reasoned that the delay was attributable in part to Kurtz because he filed the motion to suppress, and a delay caused by defense motions is typically attributable to the defendant. The District Court concluded that the delay also was attributable to the State because the court could have followed up with Kurtz or set a status hearing sooner, and the State could have sought a status hearing.
¶14 Six days before the September trial setting, the District Court contacted counsel for both parties to arrange a conference call. Kurtz's counsel responded the same day and scheduled the call for the next day. The judge revealed a potential conflict of interest arising from his appearance, while a deputy county attorney, in a proceeding involving one of Kurtz's prior DUI charges. Both defense counsel and the court would recall at the suppression hearing that counsel advised the court she did not believe there would be a problem and that the court asked her to discuss it with Kurtz and advise the court "if there's any issues." Because Kurtz had no concerns, counsel did not report back.
¶15 Kurtz argues that the sixty-four-day delay was attributable solely to the State's lack of diligence because the State failed to set Kurtz's case for trial. Kurtz maintains he should not be charged with delay for not following up with the court based on the court's instruction to bring it back only if Kurtz took issue with the possible conflict. The State argues that Kurtz's failure to follow up with the court delayed the court's ruling on the suppression motion.
¶16 A defendant will be charged with delay caused by his or her pretrial motions. See, e.g., Adams , ¶ 32 (holding that delay caused by defense counsel's motion to withdraw as counsel is attributable to the defense); State v. Collier , 277 Mont. 46, 55, 919 P.2d 376, 382 (1996) (holding that delay caused by a motion to vacate and reset the trial date to allow defense counsel additional time to prepare a defense is attributable to the defendant).
¶17 Unlike Adams and Collier , Kurtz's motion to suppress did not seek to continue the trial or cause a resulting delay. Kurtz's motion, filed two months before the September trial date, sought suppression of all evidence collected after the Highway Patrol trooper activated his emergency lights. Kurtz's failure to follow up with the District Court regarding the potential conflict of interest does not support a finding that Kurtz is to blame for the delay; the District Court told Kurtz to follow up only if there was a problem. With the trial just six days later, Kurtz reasonably assumed the court would proceed if he expressed no concern.
¶18 The sixty-four-day delay was at least partly institutional because of the court's training schedule. But the State points to nothing else in the record to support a finding that this delay is "inherent to the criminal justice system and caused by circumstances largely beyond the control of the prosecutor and the accused." Ariegwe , ¶ 68. The presiding judge attended training during the latter half of October and returned on November 2, 2015. By then the trial setting had passed with no resolution. The delay continued twenty-two days after the judge's return with no attempt by the State to timely move the case forward. The sixty-four-day delay therefore weighs more heavily against the State than institutional delay.
Ninety-Nine-Day Delay between January 4 and April 12, 2016
¶19 The District Court concluded that the delay between the January trial date and April 12, when the State asked to reset the trial, was attributable to all parties as institutional delay because: (1) although Kurtz asked the court to set a change of plea hearing, he did not otherwise pursue the change of plea or the setting of the hearing; (2) the District Court did not notice Kurtz's change of plea request in Kurtz's status report; and (3) the State did not actively prosecute Kurtz.
¶20 Kurtz maintains that the ninety-nine-day delay was attributable to the State because, after he requested the District Court to set a change of plea hearing, it was the State's burden to ensure a hearing was set for disposition of the case. The State argues that "Kurtz bears some responsibility for representing to the court that a plea deal had been reached but not entering a plea." The State maintains that this case is factually similar to State v. Stewart , 2017 MT 32, 386 Mont. 315, 389 P.3d 1009, in which this Court concluded that a defendant and the State bore shared responsibility for the delay.
¶21 In Stewart , both Stewart and the State filed status reports asking that the District Court "not assemble a jury." Stewart , ¶ 12. Stewart's report further advised the District Court that "a change of plea has occurred or is scheduled." Stewart , ¶ 12. Stewart was incarcerated in another county on other charges, and both parties were working together to arrange Stewart's appearance by video to change his plea, but those efforts failed. Stewart , ¶ 12. As a result, the trial date passed with no resolution. Stewart , ¶ 12. On appeal, Stewart argued that the State should be apportioned the delay because the State bore the responsibility to bring him to trial. Stewart , ¶ 12. We disagreed and found that Stewart bore "primary responsibility" for the delay, reasoning that Stewart did not enter a plea, as he claimed he intended, but instead moved to substitute the judge and filed complaints against his attorney, which caused delays. Stewart , ¶ 13.
¶22 Here, once Kurtz filed his December 21, 2015 motion to vacate the January trial date and set a change of plea hearing, it was the State's responsibility to schedule that hearing. Unlike Stewart , Kurtz did not engage in any tactics to further the delay. At the speedy trial hearing, he told the judge that he was "just waiting for things to happen." "[O]ngoing negotiations, whether they be for deferred prosecution or a plea bargain," do not relieve the prosecution of its duty to bring defendants to trial in a timely fashion. Small , 279 Mont. at 118, 926 P.2d at 1379. Kurtz did not cause the delay when he asked for a change of plea hearing to be set and the court failed to schedule one. The delay therefore is not attributable to Kurtz.
¶23 The District Court erred in finding that the ninety-nine-day delay was institutional. There is no evidence that the State acted in bad faith or made a deliberate attempt to hamper Kurtz's defense. The State lacked diligence, however, for "inadvertently failing to request the [trial court to] reset this matter for trial." The prosecutor admitted that the State's request for the trial to be reset "basically fell off [his] tickler, [his] radar." The District Court agreed that it was error to fail to set a change of plea hearing. This delay weighs more heavily than institutional delay.
¶24 The sixty-four-day delay and the ninety-nine-day delay were not institutional and not attributable to Kurtz. These 163 days of delay due to the State's lack of diligence weigh against the State. Relying on the District Court's determinations for the rest of the delay, we calculate 35 days of valid delay, 168 days of institutional delay, 183 days of delay based on the State's lack of diligence (including 20 days the District Court attributed that are not at issue on appeal), 32 days attributable to the defendant, and 4 days from the speedy trial ruling to the date Kurtz changed his plea. Without the delays caused by the prosecution's lack of diligence, Kurtz's pretrial delay would barely exceed the 200-day threshold. The State did not meet its burden to show a "particularly compelling justification" for the added pretrial delay. See Ariegwe , ¶ 123. Factor Two therefore weighs in Kurtz's favor.
Factor Three: The Accused's Responses to the Delay
¶25 The District Court concluded that Kurtz did not want a speedy trial: (1) Kurtz stated that he did not want a trial; (2) Kurtz represented to the court that the case would resolve without trial and that the parties reached a plea agreement; (3) Kurtz indicated a willingness to waive speedy trial; and (4) Kurtz waited until twelve days before the fourth set trial date to file his speedy trial motion. The District Court discounted Kurtz's request for a change of plea hearing, reasoning: "Changing one's plea is incompatible with a speedy trial because part of the colloquy that is a prerequisite threshold to the Court accepting a guilty plea involves informing the defendant he is waiving his right to a trial and what the trial involves."
¶26 Kurtz points out that a defendant does not abandon his right to a speedy trial when he engages in plea negotiations. See Small , 279 Mont. at 118, 926 P.2d at 1379. Kurtz argues that he was not required repeatedly to ask that the case proceed. The State maintains that Kurtz's conduct demonstrated his desire to avoid trial when he did not complain about the delay. The State argues that Kurtz's status report requesting that the court "not call a jury for January 4, 2016," and his intention to plead guilty support the finding that Kurtz did not desire a speedy trial.
¶27 Under the third factor, the court evaluates the defendant's acquiescence in or objections to pretrial delays in light of the circumstances. Ariegwe , ¶ 110. The court must evaluate the totality of circumstances to determine whether the defendant actually wanted a speedy trial, "which in turn informs the inquiry into whether there has been a deprivation of the right." Ariegwe , ¶ 110. "The timing and number of instances in which the accused objects to pretrial delay are not talismanic." Ariegwe , ¶ 80. Assertion of the speedy trial right must be viewed in the light of the accused's other conduct. Ariegwe , ¶ 80.
¶28 We rejected the argument in Small that the defendant's continued participation in plea negotiations created "the impression that there would be no trial and thus no speedy trial problem." Small , 279 Mont. at 118, 926 P.2d at 1379. We conclude likewise here that Kurtz's involvement in plea negotiations is not incompatible with his desire for a speedy trial and does not weigh against him in the analysis.
¶29 We also reject the State's argument that Kurtz failed to demonstrate desire for a speedy trial when he made no attempt pursue a change of plea hearing. Kurtz affirmatively sought resolution of the case through a change of plea hearing. It was the State's burden to move forward with either a trial or a change of plea. The District Court should have weighed Factor Three in favor of Kurtz.
Factor Four: Prejudice to the Accused
¶30 The District Court concluded that the delay did not prejudice Kurtz because Kurtz did not show any impact on witness availability or his ability to raise a specific defense. The District Court also reasoned that Kurtz's counsel acknowledged he was not claiming impairment of the defense, "the most serious interest protected by the speedy trial right."
¶31 The court assesses prejudice in the light of the interests that the speedy trial right was designed to protect: "(i) preventing oppressive pretrial incarceration; (ii) minimizing anxiety and concern caused by the presence of unresolved criminal charges, and (iii) limiting the possibility that the accused's ability to present an effective defense will be impaired." Ariegwe , ¶ 111.
¶32 "The first interest-preventing oppressive pretrial incarceration-reflects the 'core concern' of the speedy trial guarantee: 'impairment of liberty.' " Ariegwe , ¶ 89 (quoting United States v. Loud Hawk , 474 U.S. 302, 312, 106 S. Ct. 648, 654, 88 L.Ed.2d 640 (1986) ). The longer the period of pretrial incarceration, the more likely it has been oppressive and the more likely the defendant has been prejudiced by the delay. Ariegwe , ¶ 90. When considering whether pretrial incarceration was oppressive, we consider duration of the incarceration, complexity of the charged offense, any misconduct by the accused directly related to the pretrial incarceration, and conditions of the incarceration. Ariegwe , ¶ 113.
¶33 Kurtz was incarcerated more than three weeks longer than the maximum period of confinement to which he could have been sentenced for felony DUI. In support of its finding that Kurtz's fourteen-month incarceration did not show prejudice, the District Court relied on State v. Hodge , 2014 MT 308, ¶¶ 23, 25, 377 Mont. 123, 339 P.3d 8, stating, "918 days' pretrial incarceration does not by itself show prejudice." The accused in Hodge , however, was incarcerated for almost none of the 918-day delay, much of which was attributed to Hodge's decision to abscond for approximately two years. Hodge , ¶¶ 8, 25. The District Court's reliance on Hodge for the notion that the duration of Kurtz's pretrial incarceration was insufficient to show oppression and commensurate prejudice is therefore misplaced.
¶34 Kurtz's lengthy incarceration-alone an indication of oppressiveness (e.g. , State v. Blair , 2004 MT 356, ¶ 28, 324 Mont. 444, 103 P.3d 538 )-is especially egregious because he was incarcerated for a period that exceeded the maximum sentence of confinement for his charged offense. Further, absent other factors not present here, DUI offenses are relatively simple, ordinary driving offenses for which the tolerable delay is relatively low. See, e.g. , Zimmerman , ¶ 21 ; Billman , ¶ 40.
¶35 We also consider the conditions of confinement. The "seriousness of a deprivation of liberty due to pretrial incarceration will vary with the conditions of the defendant's confinement." Ariegwe , ¶ 93 (internal citation omitted). The question is one of oppressiveness, not merely occasional unpleasantness or disagreeable conditions. Ariegwe , ¶ 93.
¶36 Unable to post the $ 20,000 bond, Kurtz remained incarcerated from the time of his arrest until the day he changed his plea. At the time of hearing on his motion to dismiss, Kurtz was housed with seventy-five other men in a jail unit built to house sixty. The evidence showed that Kurtz did not receive his prescribed sleep aid medication for the first five to six months he was in jail. Kurtz also was denied his mental health medication for approximately the first four months he was incarcerated. When he finally received his anti-depression medication, it was at a dose significantly lower than what he had been prescribed-two milligrams instead of forty milligrams. Kurtz testified that the change in dosage made his medication ineffective, and his mental health condition worsened. Further, prior to his incarceration, Kurtz had issues with his back, including bone spurs, degenerative disc disease, and missing cushion between some vertebrae. Kurtz was going to physical therapy for his back and taking prescribed pain medication three times a day. Kurtz's doctor recommended that Kurtz not lift anything or "pretty much [ ] do anything." Kurtz was not allowed to resume taking his prescribed pain medication in the jail, and he could not afford the over-the-counter medication the jail offered. Kurtz was denied a medical mattress each of the twenty times he requested it either verbally or in writing. Kurtz was required to push a dust mop around his jail unit, which aggravated his pain. As noted, Kurtz's pretrial incarceration surpassed the maximum prison sentence he could receive; that prevented him from participating in or completing a residential alcohol treatment program-the primary purpose of such a sentence. See § 61-8-731(1)(a), MCA. Kurtz's lack of prescribed medical treatment, along with the fact he was incarcerated for longer than the maximum sentence allowed, supports the conclusion that his incarceration was oppressive.
¶37 The second interest requires inquiry whether the delay has unduly prolonged the disruption of the defendant's life or aggravated the anxiety and concern inherent with being accused of a crime.
Ariegwe , ¶ 111. Aggravated mental health problems and the accused's deteriorating financial situation are relevant. See, e.g. , Zimmerman , ¶ 32 (holding that "the critical question is whether the delay in bringing the accused to trial unduly prolonged the disruption in his life or aggravated the anxiety and concern that are inherent in being accused of a crime" (emphasis in original)); Billman , ¶¶ 43-45 (holding that pretrial incarceration unduly prolonged the disruption to Billman's life when he lost his employment, began taking antidepressants and anti-anxiety medication as a result of his incarceration, and was no longer allowed to see his children).
¶38 The State argues that Kurtz's depression existed before his incarceration, and there is no evidence that the pretrial delay unduly prolonged the disruption to Kurtz's life or aggravated Kurtz's anxiety and concern. The State maintains that Kurtz was provided his antidepressants within the 200-day threshold, and therefore the lack of medication should not factor into the analysis. Kurtz testified that after he was incarcerated, his anxiety levels were "through the roof," and continued incarceration made his depression "way worse" and caused him to "feel really worthless." Kurtz's testimony indicates that his aggravated anxiety was from the length of his incarceration and not from the charges brought against him. When asked if he had anything to add about being incarcerated, Kurtz replied, "I wish they could give me more help with my mental issues, which has been denied all the way through." Although Kurtz was allowed to resume taking his prescribed antidepressants within about four months of his incarceration, it was reduced-without an apparent explanation-for the duration of his pretrial incarceration to a level that rendered it ineffective.
¶39 Beyond Kurtz's prolonged mental health problems, Kurtz lost his home while incarcerated. A few months after his arrest, Kurtz's landlord visited him at the jail and told him that his mobile home would be sold for scrap if he was unable to pay rent. Kurtz asked his landlord to wait until he got out or allow him time to arrange something else. His landlord refused, however, and sold his trailer for scrap with no formal eviction proceedings.
¶40 Although the State contends that Kurtz lost his home prior to the 200-day threshold, the State has not made a "highly persuasive showing" that Kurtz's anxiety and concerns were not unduly prolonged, as is required with this length of delay. This factor weighs in favor of finding prejudice.
¶41 Finally, Kurtz does not claim impairment of his defense. We assess prejudice under Factor Four in light of all of the interests the speedy trial right was designed to protect. State v. Velasquez , 2016 MT 216, ¶ 27, 384 Mont. 447, 377 P.3d 1235. Kurtz's interests in preventing oppressive pretrial incarceration and minimizing his anxiety and concern were prejudiced by the delay.
Balancing
¶42 Balancing the four Ariegwe factors, we disagree with the District Court's conclusion that Kurtz's constitutional right to speedy trial was not violated. At bottom, Kurtz fell through the cracks in Montana's overworked Thirteenth Judicial District. With little notice, Kurtz spent every day of the 422-day delay in pretrial incarceration, confined in an overcrowded unit longer than the maximum sentence his charged crime allowed. He did not receive his prescribed medication, his mental and physical health deteriorated, and he lost his home. These consequences ill-serve the objective in a felony DUI case that a repeat offender meaningfully address his substance addiction.
¶43 Our standards requiring the State to provide "particularly compelling justifications" for such a lengthy pretrial delay and a "highly persuasive showing" that the delay did not prejudice the defendant are not theoretical objectives. The State failed to demonstrate either. Balancing the four Ariegwe factors in light of surrounding circumstances, Ariegwe , ¶ 113, we conclude that Kurtz's right to a speedy trial was violated.
CONCLUSION
¶44 We reverse the District Court's denial of Kurtz's motion to dismiss. The case is remanded with instructions to dismiss the charge.
We Concur:
JAMES JEREMIAH SHEA, J.
INGRID GUSTAFSON, J.
DIRK M. SANDEFUR, J.
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] |
Justice James Jeremiah Shea delivered the Opinion of the Court.
¶1 Appellants Than Edward Christman and Tina Marie Christman (collectively "Christmans") appeal the Order of the Thirteenth Judicial District Court, Yellowstone County, denying their Motion for Summary Judgment. We address the following issue:
Whether the District Court erred in denying the Christmans' Motion for Summary Judgment.
¶2 We reverse.
PROCEDURAL AND FACTUAL BACKGROUND
¶3 On October 14, 2009, the Christmans and Roy and Betty Clause (collectively "Clauses") entered into an Installment Sale Contract and Security Agreement (Agreement) to buy a mobile home in Cherry Creek Development. The Christmans were to purchase the mobile home for $ 68,900 from the Clauses. They paid $ 5,512 down and financed the balance of $ 63,388, to be paid in monthly installments of $ 701 for a period of fifteen years.
¶4 The Agreement gave the Clauses a security interest in the mobile home. The Agreement included the following provision regarding potential default by the Christmans:
Default . If [the Christmans] fail[ ] to perform any of the covenants or promises called for hereunder such failure shall, at the election of [the Clauses] constitute a default in the performance of this agreement. If [the Christmans] fail[ ] to cure any such default within [ ] THIRTY (30) days after written notice thereof to [the Christmans], [the Clauses] may, without further notice or period of grace, declare the entire unpaid balance of the purchase price, principal and accrued interest, immediately due and payable. Upon nonpayment thereof, after the same shall become due and payable, [the Clauses] may as an alternative to any other remedy provide [sic] at law or equity, terminate this agreement and retain all payments made as liquidated damages for breach of this agreement and rent for the use of the property. [The Christmans] and [the Clauses] agree that THIRTY (30) days notice is a reasonable time period for notice of termination of this agreement.
¶5 From 2009-2015, the Christmans continually missed payments on their mobile home, only to then make large lump sum payments to bring the loan current. The Clauses made accommodations, including adjusting the loan in November 2014 to put the delinquent amount at the end of the loan, but the Christmans again fell behind on payments.
On August 21, 2015, the Clauses sent the Christmans a Notice of Default. On September 18, 2015, the Christmans paid $ 2,900 in an attempt to become current. Four days later, the Clauses sent a notice that they were invoking the acceleration clause in the default provision of the Agreement and demanded the outstanding balance on the Agreement plus notice fees, a total of $ 57,397.64, within thirty days. In December 2015, after receiving the acceleration notice, the Christmans moved out of the mobile home and voluntarily returned it to the Clauses. At that point, the Christmans owed a balance of $ 54,205.54. The Clauses testified they then spent $ 3,273.83 refurbishing and repairing the mobile home. Two months later, the Clauses sold the mobile home to a new buyer for $ 59,800.
¶6 On January 18, 2017, the Christmans brought suit against the Clauses. On February 14, 2017, the Christmans filed an amended complaint, alleging that the Clauses violated provisions of Article 9A of Montana's adopted version of the Uniform Commercial Code (U.C.C.). The Christmans alleged that the Clauses failed to resell the mobile home in a commercially reasonable manner as required by § 30-9A-625(4), MCA. The Christmans sought $ 69,672 in damages under § 30-9A-625(3)(b), MCA : the time price differential plus ten percent of the cash price. Alternatively, Christmans alleged that they were entitled to any surplus realized for the resale of the mobile home pursuant to § 30-9A-615(4)(a), MCA. The Christmans asserted they owed a balance of $ 17,169.50, and that the Clauses resold the mobile home for $ 59,800, amounting to a surplus of $ 42,630.50. The Christmans also contended that the Clauses were barred from collecting any late fees, finance charges or collection costs on the Agreement because the Agreement violated various provisions of Montana's Retail Installment Sales Act (RISA).
¶7 On June 13, 2017, the Christmans moved for summary judgment. On March 9, 2018, the District Court denied the Christmans' Motion. The District Court held there were material facts in dispute as to both the application of the U.C.C. to the Agreement and whether the Christmans were equitably estopped from asserting their claims against the Clauses.
¶8 On March 26-28, 2018, the District Court presided over a jury trial. On March 28, 2018, the jury returned a verdict in favor of the Clauses. The jury unanimously agreed that the Clauses proved that the Agreement terminated when the Christmans moved out of the mobile home in December 2015. Following the jury verdict, the District Court entered a Final Judgment in which it ordered that the Christmans' action against the Clauses be dismissed on the merits, and that the Christmans pay the Clauses' costs.
¶9 On May 2, 2018, the Christmans moved for a new trial pursuant to M. R. Civ. P. 59(a)(1)(A). The District Court denied the Christmans' Motion.
STANDARDS OF REVIEW
¶10 We review a district court's summary judgment ruling de novo, applying the criteria of M. R. Civ. P. 56. McClue v. Safeco Ins. Co. , 2015 MT 222, ¶ 8, 380 Mont. 204, 354 P.3d 604 ; Yorlum Props., Ltd. v. Lincoln County , 2013 MT 298, ¶ 12, 372 Mont. 159, 311 P.3d 748. Whether a party is entitled to judgment on the facts is a conclusion of law that this Court reviews for correctness. Hutzenbiler v. RJC Inv., Inc. , 2019 MT 80, ¶ 7, 395 Mont. 250, 439 P.3d 378 (citing Yorlum Props., Ltd. , ¶ 12 ). Summary judgment is appropriate only when no genuine issue of material fact exists, and the moving party is entitled to judgment as a matter of law. M. R. Civ. P. 56(c)(3) ; Svaldi v. Anaconda-Deer Lodge County , 2005 MT 17, ¶ 12, 325 Mont. 365, 106 P.3d 548. The evidence, as well as all justifiable inferences drawn from it, must be viewed in a light most favorable to the non-moving party. Svaldi , ¶ 12.
DISCUSSION
¶11 Whether the District Court erred in denying the Christmans' Motion for Summary Judgment.
¶12 Generally, Montana law allows for a "contract in writing [to] be altered by a contract in writing or by an executed oral agreement, and not otherwise." Section 28-2-1602, MCA. However, contracts involving secured transactions are governed by Montana's adopted version of the U.C.C., codified at Title 30, Chapter 9A, and subject both the debtor and creditor parties to additional obligations and rights.
¶13 The Agreement between the Christmans and Clauses involved the sale of a consumer good (the mobile home) in which the Clauses took a security interest. The creation of the security interest in the mobile home triggered the applicability of Title 30, Chapter 9A. E.g. , § 30-9A-102(1)(bbb), MCA.
¶14 Section 30-9A-610, MCA, provides for disposition of collateral after default. "Default" is generally defined by the security agreement. 4 James J. White, Robert S. Summers, & Robert A. Hillman, Uniform Commercial Code: Practitioner Treatise Series § 34:5, at 530 (6th Ed. 2015) (internal citations omitted); Hutzenbiler , ¶ 28 (McKinnon, J., dissenting); 68A Am. Jur. 2d Secured Transactions § 426 (2014). After a debtor defaults, a secured creditor who takes possession of the collateral has the following options: (1) file suit on the obligation and reduce its claim to judgment; (2) " 'sell, lease, license, or otherwise dispose of any or all of the collateral in its present condition or following any commercially reasonable preparation or processing' "; or (3) " 'accept collateral in full or partial satisfaction of the obligation it secures.' " Kapor v. RJC Inv., Inc. , 2019 MT 41, ¶ 16, 394 Mont. 311, 434 P.3d 869 (citing §§ 30-9A-601(1)(a), -610(1), -620(1), MCA ).
¶15 Accordingly, although a creditor's disposition of the collateral terminates the security interest under § 30-9A-617(1)(b), MCA, termination of the security interest does not do away with the obligations of a creditor under Title 30, Chapter 9A. Section 30-9A-602(5), (13), MCA (a debtor may not waive or vary the rules in § 30-9A-608(1), MCA, and § 30-9A-615(4), MCA, to the extent that they require accounting for or payment of surplus proceeds of collateral); Kapor , ¶ 14. The creditor remains obligated to: give the debtor notice of how the creditor intends to dispose of the collateral; conduct a commercially reasonable resale of the collateral, if there is a resale; and the creditor must account to the debtor for any surplus realized from the sale of the collateral. Sections 30-9A-614, -616, -610, -615, -624, -611, MCA.
¶16 Abandonment, voluntary surrender, or voluntary repossession of the collateral does not waive the debtor's right to notice of resale of the collateral. See § 30-9A-602, MCA ; Westmont Tractor Co. v. Cont'l I, Inc. , 224 Mont. 516, 523-24, 731 P.2d 327, 331 (1986) ; see also § 30-9A-619(3), MCA ("transfer of the record or legal title to collateral to a secured party ... does not of itself relieve the secured parties of its duties under this chapter. ..."). Thus, a debtor who voluntarily returns a mobile home to the creditor is still entitled to notice. See Kapor , ¶¶ 13-14, 23, 28 ; Hutzenbiler , ¶¶ 11, 13-14 ; see also W. Nat'l Bank of Casper v. Harrison , 577 P.2d 635, 638 (Wyo. 1978) ; Lindberg v. Williston Indus. Supply Corp. , 411 N.W. 2d 368, 373 (N.D. 1987) ; Vermont Nat. Bank v. Hamilton , 149 Vt. 477, 546 A.2d 1349, 1352 (1988). A debtor may waive notice of disposition of collateral under § 30-9A-611, MCA, only through an authenticated, signed writing after default. Section 30-9A-624(1), MCA.
¶17 Where there are no questions of fact with regards to the adequacy of or failure to give notice, a court may properly determine the adequacy of a particular notice as a matter of law. See Westmont Tractor Co. , 224 Mont. at 520-21, 523, 731 P.2d at 329-31 (citing § 30-9-504, MCA, now § 30-9A-611, MCA ); see also Mack Fin. Corp. v. Tezak , 253 Mont. 492, 495-96, 834 P.2d 396, 397-98 (1992) (citing § 30-9-504, MCA, now § 30-9A-611, MCA ); 68A Am. Jur. 2d Secured Transactions § 605.
¶18 The right of the debtor for any surplus obtained from the sale of collateral is set out in two places in Article 9 of the U.C.C.: § 30-9A-608(1)(d), MCA, and § 30-9A-615(4)(a), MCA. Surplus money is generated by the sale of the debtor's assets "over and above the amount needed to satisfy the debtor's obligations to the secured lender, the secured lender is obligated to make an accounting to the debtor and to pay over to the debtor any such surplus." 68A Am. Jur. 2d Secured Transactions § 554 ; §§ 30-9A-615(6), -626, MCA. "Except as allowed under other U.C.C. provisions, [a party's] discharge or release [of obligations under a secured transaction for the sale of a mobile home] cannot [ ] waive or vary [the creditor's] duty to account for or [the debtor's] right to receive any surplus proceeds from the resale of the mobile home." Kapor , ¶ 13 ; Hutzenbiler , ¶ 10 ; § 30-9A-602, MCA.
¶19 If a secured party fails to comply with the requirements of Title 30, Chapter 9A, and the collateral is a consumer good, the debtor "may recover for that failure in any event an amount not less than the credit service charge plus 10% of the principal amount of the obligation or the time-price differential plus 10% of the cash price." Section 30-9A-625(3)(b), MCA ; see also Bank of Sheridan v. Devers , 217 Mont. 173, 177, 702 P.2d 1388, 1390 (1985) (where a creditor failed to provide a debtor with adequate notice, the creditor was precluded from recovering any deficiency judgment from the debtor).
¶20 Recently, we reversed the district courts' rulings in two cases where the district courts determined that the U.C.C. no longer governed the sales contracts and installment agreements between a creditor and debtors selling and purchasing mobile homes. Kapor , ¶¶ 14, 30 ; Hutzenbiler , ¶¶ 9, 15. The debtors in Kapor and Hutzenbiler signed releases provided by the creditor purporting to terminate the installment agreements. Kapor , ¶¶ 3-5 ; Hutzenbiler , ¶¶ 3-5. The creditor then resold the mobile homes without providing the debtors notice of the resale of the mobile home or an accounting of any potential surplus. Kapor , ¶¶ 3-4 ; Hutzenbiler , ¶ 4. The districts courts concluded that the releases terminated the installment agreements and ended the applicability of the U.C.C. to the parties' relationship. Kapor , ¶ 5 ; Hutzenbiler , ¶¶ 6, 9. We disagreed, holding that the releases "did not, by [their] express terms, lift the parties' relationship from that of debtor and creditor under U.C.C. Article 9 or render obsolete the protections afforded a debtor under §§ 30-9A-608(1)(d) and -615(4)(a), MCA." Kapor , ¶ 14 ; Hutzenbiler , ¶ 12.
¶21 Here, the District Court denied the Christmans' Motion for Summary Judgment after concluding that neither Montana law nor the U.C.C. rendered the Christmans' waiver (orally and by conduct) ineffective, and that there were genuine issues of material fact as to whether the parties terminated the Agreement. The District Court concluded that the Christmans voluntarily abandoned their mobile home in December 2015 and gave every indication they were cancelling the Agreement and walking away from the mobile home and their payment obligations. Thus, the U.C.C. no longer governed the parties' relationship. The District Court further concluded that even if Article 9 of the U.C.C. applied to bar the parties from terminating the Agreement, there was a genuine issue of material fact as to whether equitable estoppel precluded the Christmans' claims. Accordingly, the District Court could not grant summary judgment to the Christmans on the issue of the Clauses' liability.
¶22 The Christmans argue the material facts of this case are not in dispute, and they were entitled to judgment as a matter of law. They contend that Article 9 of the U.C.C. establishes set procedures that must be followed once a secured party takes possession of the collateral that secures a debt, and that the undisputed facts demonstrate that the Clauses failed to follow those procedures. The Christmans contend that the Clauses failed to give proper notice and to account for any surplus as required by the U.C.C. The Christmans contend that they never waived any rights, either orally or in writing, regarding the mobile home. Finally, the Christmans argue that the Clauses may not assert the defense of equitable estoppel, and that the District Court was wrong when it permitted the Clauses to do so.
¶23 The Clauses counter that the District Court properly denied the Christmans' Motion for Summary Judgment in light of the disputed issues of material fact. The Clauses argue that the Christmans agreed to terminate the Agreement, vacated the mobile home, and left it to the Clauses. This series of events served to absolve the Christmans of any further obligation they had to pay under the Agreement and transferred their rights in the mobile home back to the Clauses in exchange for discharging the Clauses' contractual obligations to them. The Clauses argue that once the Christmans terminated the Agreement, the security interest the Clauses had in the mobile home dissolved, and the Agreement was no longer governed by Article 9 of the U.C.C. The Clauses contend that even if Article 9 continued to govern the parties' relationship, the Clauses would be entitled to recover a deficiency from the Christmans, and the Christmans would not be entitled to any surplus or damages.
¶24 Finally, the Clauses argue the District Court properly denied the Christmans' Motion for Summary Judgment on the grounds that disputed issues of material fact existed regarding whether the Christmans were equitably estopped from asserting their claims. The Clauses contend they provided substantial evidence to establish all six elements of equitable estoppel, and the District Court correctly concluded there were disputed material issues not proper for resolution on a motion for summary judgment. We disagree.
¶25 There is no dispute that when the parties entered into the Agreement for the sale of the mobile home, the Agreement was governed by Article 9 of the U.C.C. There is also no dispute that the Clauses did not provide notice of the resale of the collateral or account to the Christmans for any potential surplus. See §§ 30-9A-611, -616, -608(1)(d), -615, MCA. The Christmans were in default and vacated because they were unable to pay the more than $ 50,000 due upon invocation of the acceleration clause. A voluntary repossession indicates a debtor has defaulted, but it does not mean a debtor waived all post-default rights and remedies under the U.C.C. or abandoned interest in any potential surplus. See § 30-9A-602, MCA. Regardless of whether the Clauses voluntary repossessed the mobile home after the Christmans vacated the premises, notice to the Christmans was still required. See Westmont Tractor Co. , 224 Mont. at 523-24, 731 P.2d at 331.
¶26 The Christmans' situation is even more attenuated than that of the debtors in Kapor and Hutzenbiler who signed releases that purportedly waived U.C.C. applicability. The protections and obligations under the U.C.C. still governed the Agreement. See Kapor , ¶ 14 ; Hutzenbiler , ¶¶ 12-13. The Clauses did not provide notice of the resale of the mobile home as required by § 30-9A-611, MCA. The Clauses were obligated to give notice to the Christmans of how they intended to dispose of the mobile home, and they were required to account to the Christmans for any surplus realized from the sale of the collateral. See §§ 30-9A-611, -624, MCA. Although the Christmans theoretically could have waived their right to notice prior to the resale of the collateral, to legitimately do so, any waiver of the notice would have had to take the form of an authenticated writing signed after default. See § 30-9A-624, MCA. In this case, no notice was sent, no authenticated writing was signed, and, consequently, there was no waiver of the right to notice. See § 30-9A-624, MCA.
¶27 There were no genuine issues of material fact as to the Clauses' U.C.C. violations, and the Christmans were entitled to judgment as a matter of law on that issue. See Yorlum Props. Ltd. , ¶ 12 ; M. R. Civ. P. 56. Accordingly, the District Court erred in denying the Christmans' Motion for Summary Judgment as it pertained to the continued application of the U.C.C. to the Christmans' claims. See McClue , ¶ 8 ; Yorlum Props. Ltd. , ¶ 12.
¶28 Finally, the Christmans also argue that the Clauses may not assert the defense of equitable estoppel, and that the District Court was wrong when it concluded the Clauses were permitted to do so. We recently concluded that "the doctrine of equitable estoppel may apply to cases governed by the U.C.C. unless displaced by specific U.C.C. provisions." Kapor , ¶ 32. The Christmans argue that equitable estoppel cannot apply here for four reasons: (1) the Clauses do not have clean hands; (2) public policy dictates that equitable estoppel not apply; (3) estoppel is not available to defeat U.C.C. remedies; and (4) the Clauses' argument of equitable estoppel is disingenuous. The Christmans' argument does not assert any U.C.C. provisions in Article 9 relevant to this case that may displace equitable estoppel. Thus, although the District Court erred by holding that the U.C.C. did not apply to the Christmans' claims, it correctly held that the Clauses may assert equitable estoppel as it may pertain to those claims.
CONCLUSION
¶29 The District Court erred when it denied the Christmans' Motion for Summary Judgment on the grounds that Article 9 no longer applied to the Agreement. We reverse and remand this case to the District Court for further proceedings consistent with this Opinion.
We Concur:
MIKE McGRATH, C.J.
LAURIE McKINNON, J.
BETH BAKER, J.
DIRK M. SANDEFUR, J.
The Clauses own Cherry Creek Development.
The Christmans' first complaint named RJC Investment, Inc. as the defendant in this action. Roy Clause is the President of RJC. Roy and Betty Clause were the named Sellers on the Agreement with the Christmans, and the Christmans named the Clauses as defendants in their amended complaint.
Under the 2009 U.C.C. statutes, which govern the parties' Agreement, "manufactured homes" are defined as "goods" under § 30-9A-102(1)(rr)(i)(E), MCA, and § 30-9A-102(1)(aaa), MCA. Section 30-9A-102(1)(w), MCA, defines a "consumer good" as "goods that are used or bought for use primarily for personal, family, or household purposes." The Christmans testified that they resided in the mobile home and did not use it to conduct any business or rent any portion of it. The mobile home was therefore a "consumer good" within the meaning of § 30-9A-102(1)(w), MCA. | [
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] |
Justice Laurie McKinnon delivered the Opinion of the Court.
¶1 A jury in the Thirteenth Judicial District Court, Yellowstone County, convicted Patrick Neiss of evidence tampering and deliberate homicide for the murder of his neighbor, Frank Greene. Neiss appeals, raising three issues:
1. Did the District Court properly deny Neiss's motion to suppress evidence seized pursuant to a search warrant that did not explicitly authorize a no-knock entry?
2. Did the District Court properly deny Neiss's motion to suppress evidence obtained through a forensic search of his computer?
3. Did the District Court abuse its discretion by instructing the jury to choose the "most reasonable" interpretation of circumstantial evidence when there are two competing interpretations-one that supports innocence and one that supports guilt?
¶2 We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
¶3 What began as a friendship between neighbors founded on a mutual love of cars grew increasingly bitter after Neiss began to suspect Greene had stolen his prized Camaro motor. Neiss's motor went missing in 2007, but beginning around 2011, Neiss became convinced Greene had stolen it. Neiss spoke often about the stolen motor and his suspicions of Greene, and he was "pretty much obsessed with it" as witnesses would later testify. Between 2011 and 2013, the two men had several disagreements and altercations regarding the motor. Neiss became openly hostile toward Greene, even telling his girlfriend at the time that he would like to "shoot" Greene. In September 2012, Neiss told a deputy county sheriff that he considered the sheriff's office to be accomplices of Greene and was angry they had never located the stolen motor. Around the same time, Neiss moved a large water tank to the top of a hill overlooking Greene's property and spray-painted the word "MOTOR" on it in red paint.
¶4 The situation continued to escalate when, during the fall of 2012, Neiss angrily confronted Greene's cousin about the motor. Greene's cousin told Neiss he did not want to become involved with the ongoing dispute, and Neiss responded "you got two weeks." Around February 2013, one of Greene's friends heard Neiss yell expletives at Greene as he drove by Greene's home. On March 7, 2013, another neighbor of Greene's overheard Greene heatedly arguing with an unidentified person. The next day, Greene's girlfriend, Manda Schaible, who lived with Greene at the time, found him in his shop, lying face down in a pool of blood. He had been shot and killed.
¶5 Schaible called 911 immediately. She told the dispatcher Neiss could have been Greene's murderer but she was unsure. About two or three minutes into the call, she saw Neiss's Chevy pickup slowly drive by her home.
¶6 Officers arrived at the scene shortly after. Although they never located a murder weapon, they found five .40 caliber shell casings and what appeared to be fresh shoeprints in the soil near Greene's shop leading to and from the direction of Neiss's property. Officers then located and detained Neiss at a nearby gas station.
¶7 A few days later, Detective Shane Bancroft applied for a search warrant for Neiss's property (March 2013 Warrant). In the warrant application, Detective Bancroft included detailed information connecting Neiss to Greene's death, including evidence from the crime scene investigation, witness statements, prior police reports, and court records. Detective Bancroft stated he had probable cause to believe officers would find evidence on Neiss's property of deliberate homicide and-because officers were unable to locate the murder weapon-evidence tampering. Detective Bancroft believed officers would find evidence including firearms, ammunition, spent shell casings, silencers, biological material, and shoe impressions consistent with those found at the crime scene. Detective Bancroft also described the following items as potential evidence: "[c]ell phones, IPads, computers and/or other electronic devices and the information contained therein"; and "[i]ndicia of Occupancy/Ownership in the form of documents, receipts, statements, mail, billing statements, letters, notes, [and] vehicle registration/titles." Noting the violent nature of the crime, the known prior altercations between Neiss and Greene, Neiss's belief that deputy sheriffs were Greene's accomplices, and a prior federal firearms conviction Neiss received in 2000, Detective Bancroft also requested authorization to execute a no-knock entry-an exception to the knock-and-announce warrant execution requirement. While the ultimate warrant signed by the judge provided for seizure of the evidence Detective Bancroft listed, it left out any authorization for a no-knock entry.
¶8 At 4 a.m. on March 14, 2013, officers executed the search warrant at Neiss's property with SWAT team assistance. Neiss's property was large and had a long gravel road leading to his home, which the officers drove across with their vehicle lights off under the cover of darkness. After parking the vehicles, multiple SWAT team members exited them and stealthily approached Neiss's house. Then, over the course of twelve-to-fifteen seconds, the SWAT team entered Neiss's sunporch, deployed a flashbang device outside his front door, and entered his home, all while sheriff's deputies outside Neiss's residence activated their vehicle lights and announced their presence over their loudspeakers.
¶9 After they gained entry to Neiss's home, the officers executed the search warrant. The officers seized multiple items from Neiss's home and the surrounding area, including three computers and numerous .40 caliber shell casings. The officers did not search the information on the computers at that time.
¶10 On August 12, 2014, officers received a warrant for Neiss's arrest and a warrant for a second search of Neiss's residence. Officers located an item thought to be a silencer for a firearm. The item appeared to be the body of a Maglite flashlight with gunshot residue coating its interior. On May 15, 2015, nearly one year after his arrest and two years following the March 2013 seizure of his computers, Neiss filed a motion to suppress the results of the March 2013 search, arguing the warrant lacked probable cause and officers failed to knock and announce their presence before executing it. On July 22, 2015, the District Court issued an order denying the motion. Following seizure of Neiss's computers in March 2013 and continuing until the District Court's July 2015 order, Neiss's computers were in the possession and control of law enforcement, who did not search or otherwise disturb their contents. Law enforcement kept the computers in a manner that protected them from any physical tampering or environmental degradation. While still lawfully in possession of the computers, officers applied for a third search warrant on August 12, 2015-this time to search the computers themselves. Detective Shane Bancroft applied for the warrant and averred, in pertinent part, as follows:
During the search of the residence on March 14, 2013, Investigators noted computer printouts that would indicate that someone had been actively using the computer. Additionally, Investigators were aware that on at least one occasion the Defendant had written a letter to himself that detailed his history with Greene. While the letter was handwritten; Investigators thought it was possible that Neiss may have kept a journal or log of events on one or more of the computers.
Finally, during a subsequent search of the property at 7200 Central Avenue on August 12, 2014 (pursuant to a Search Warrant signed by Judge Todd earlier in the day), Investigators located an item we thought could possibly have been used as a silencer. The item was what appeared to be the body of a mag light style flashlight. The interior of the item had residue inside it. Later when the suspect's son was interviewed he stated that his father had attached the item to the end of a firearm in the past. Additionally, the Montana Crime lab tested the item and determined that there were substances consistent with gunshot residue. Investigators were interested to know if the computers had been used to obtain information about silencers or other firearms related questions. Investigators noted that at least five rounds had been fired in the Homicide, yet no one in the home or neighborhood reported hearing any gun shots.
Investigators are asking for the search warrant to be granted to attempt to analyze the devices for data that may be related to the homicide, the planning of the homicide, and the investigation of crimes, including but not limited to, the homicide. Again, the computers were seized pursuant to a search warrant signed by Judge Todd on March 13, 2013. Due to the nature of this case and the development of additional information, your affiant is now seeking another search warrant out of an abundance of caution based on information contained herein.
Judge Todd signed the third warrant to search the three computers seized from Neiss's home for evidence connecting Neiss to Greene's death (August 2015 Warrant). Detective Bancroft executed the warrant, and his search revealed that, on one computer, a user had searched the internet for general information and videos about firearm suppressors and, more specifically, how to manufacture homemade suppressors.
¶11 After the August 2015 computer search, Neiss filed a second motion to suppress, this time contending officers lacked probable cause to search the computers and the delay between seizing and searching the computers-well over two years-was unreasonable. The District Court also denied the second motion.
¶12 In January 2016, the District Court held a seven-day jury trial. Throughout the trial, the State presented evidence about Neiss and Greene's history; Neiss's behavior the night of the murder; gunshot residue found on Neiss's hand and face the night of the murder; the shoeprints found on Greene's property; the .40 caliber shell casings found at the crime scene and on Neiss's property; a forensic examination indicating the casings at both locations came from the same weapon; and, because neighbors testified they heard no gunshots or unusual sounds the night of the murder, the computer search history and testimony from Neiss's son that Neiss had used and manufactured firearm suppressors. When settling jury instructions, the State sought to include an instruction regarding the interpretation of circumstantial evidence. Neiss objected to the instruction, but the District Court overruled his objection and gave the instruction to the jury. At the conclusion of trial, the jury convicted Neiss of deliberate homicide and evidence tampering. He appeals.
STANDARD OF REVIEW
¶13 We review a district court's denial of a motion to suppress to determine whether its findings of fact are clearly erroneous and whether its interpretation and application of the law is correct. State v. Kenfield , 2009 MT 242, ¶ 15, 351 Mont. 409, 213 P.3d 461.
¶14 We review a district court's legal conclusion about whether a search warrant is sufficiently particular de novo . State v. Seader , 1999 MT 290, ¶ 4, 297 Mont. 60, 990 P.2d 180.
¶15 A district court has broad discretion when giving jury instructions. We review the court's decision to give an instruction for abuse of discretion. State v. Sanchez , 2017 MT 192, ¶ 7, 388 Mont. 262, 399 P.3d 886. We review the instructions as a whole to determine whether they fully and fairly instruct the jury on the applicable law. Sanchez , ¶ 7. We will not reverse unless a mistake in instructing the jury prejudicially affected the defendant's substantial rights. State v. Kaarma , 2017 MT 24, ¶ 7, 386 Mont. 243, 390 P.3d 609.
DISCUSSION
¶16 1. Did the District Court properly deny Neiss's motion to suppress evidence seized pursuant to a search warrant that did not explicitly authorize a no-knock entry?
¶17 Neiss argues the State violated his rights under the Fourth Amendment of the United States Constitution and Article II, Sections 10 and 11, of the Montana Constitution, when the officers executed the first search warrant because they failed to abide by Montana's knock-and-announce rule. The knock-and-announce rule requires law enforcement officers, when executing a search warrant, to knock and announce their presence and wait a reasonable amount of time before entry. State v. Hill , 2008 MT 260, ¶ 27, 345 Mont. 95, 189 P.3d 1201 ; State v. Anyan , 2004 MT 395, ¶¶ 20, 64, 325 Mont. 245, 104 P.3d 511 ; see United States v. Banks , 540 U.S. 31, 38-40, 124 S. Ct. 521, 526-27, 157 L.Ed.2d 343 (2003). The State responds with the following three arguments: (1) the District Court did not err when it concluded the officers announced their presence and waited a reasonable amount of time before entering Neiss's house; (2) the officers did not need preauthorization from a judge for a no-knock entry; and (3) the proper remedy for a violation of the knock-and-announce rule is not exclusion of the evidenced obtained through the search. We address, first, our precedent from Anyan , ¶ 63, which requires officers to obtain preauthorization from a judge for no-knock entries based on circumstances known to the officers at the time of the application. Next, we address whether the March 2013 Warrant's execution was reasonable.
A. No-knock Entry Preauthorization.
¶18 In Anyan , ¶ 20, we discussed the knock-and-announce rule for the first time. Relying on the United States Supreme Court's decision in Wilson v. Ark. , 514 U.S. 927, 934, 115 S. Ct. 1914, 1918, 131 L.Ed.2d 976 (1995) [hereinafter Arkansas ], we adopted the rule, holding it is an element of the reasonableness inquiry under the Fourth Amendment and-independent of the federal requirement-Article II, Sections 10 and 11, of the Montana Constitution. Anyan , ¶ 61. We also adopted federal precedent creating an exigent-circumstances exception to the knock-and-announce rule. Anyan , ¶¶ 32-33 (citing Arkansas , 514 U.S. at 934, 936, 115 S. Ct. at 1918, 1919 ); see also Anyan ¶¶ 34-60 (reviewing various exigent circumstances that would justify a no-knock entry). However, in Anyan this Court added a requirement nonexistent in federal jurisprudence: "When law enforcement officers contemplate a no-knock entry in executing a search warrant, that intention must be included in the application for the search warrant along with any foreknown exigent circumstances justifying the no-knock entry." Anyan , ¶ 63 (emphasis added). Thus, we created the Anyan rule: officers applying for a warrant must receive preauthorization from a judge for no-knock entries based on exigent circumstances known to the officers at the time of the application. Anyan , ¶ 63 ; see State v. Ochadleus , 2005 MT 88, ¶ 55, 326 Mont. 441, 110 P.3d 448.
¶19 When reviewing the Anyan rule with the aid of federal precedent since our decision and alongside the circumstances of this case, it has become apparent that the rule creates an unworkable standard for investigative officers and judges alike. Here, particularly, the exigent circumstances justifying a no-knock entry were known to the officers when they applied for the warrant. That is, no additional facts or developments occurred after officers obtained the warrant which would support departure from the Anyan rule and allow the officers to enter without first knocking and announcing their presence.
Recognizing a violation of the Anyan rule, the parties were forced to argue extensively whether the officers knocked and announced their presence and whether they waited a reasonable time before entering. Consequently, the District Court avoided addressing the Anyan rule that a warrant "must" include preauthorization for a no-knock entry based on "foreknown exigent circumstances" by finding that the officers did knock and announce prior to their entry into Neiss's residence. See Anyan , ¶ 63. Although, based on our rationale that follows, it is unnecessary to address the District Court's findings that officers actually knocked and announced, we observe it is undisputed officers did not knock on Neiss's door prior to entry and officers employed the flashbang device once they had already entered the sunporch of Neiss's residence. Moreover, the officers' entry into the main residence occurred within a second thereafter.
¶20 The Court will not, however, digress down the same path as the litigants and the District Court. It is clear the District Court's findings and the parties' argument concerning whether the officers actually knocked and announced prior to entry was premised upon their recognition that the Anyan rule had been violated-that exigent circumstances justifying a no-knock entry were foreknown to the officers when they applied for the warrant but the officers did not obtain no-knock preauthorization. Absent no-knock preauthorization, officers were required to knock and announce prior to entry into Neiss's residence. Thus, the violation of the Anyan rule mandated the inquiry on whether officers knocked and announced prior to entry, even though exigent circumstances existed for officers to execute a no-knock warrant. We therefore take this opportunity to reconsider the Anyan rule.
¶21 When we first created the Anyan rule, we believed it fit well within the warrant application process:
This approach is consistent with our prior jurisprudence-i.e., when the right to privacy must reasonably yield to an application to search, that decision should be made by a judicial officer, and not by the police. State ex rel. Townsend v. District Court , 168 Mont. 357, 360, 543 P.2d 193, 195 (1975). And, the review of a search warrant application by an impartial magistrate ensures that a neutral and detached evaluation of the situation is interposed between the investigating officer and the private citizen. State v. Wilson , 266 Mont. 146, 149, 879 P.2d 683, 684 (1994).
Anyan , ¶ 63.
¶22 Our reliance on Wilson and Townsend for this proposition, however, was misplaced. In Wilson , we held "Montana law requires that an impartial magistrate must determine the existence of ... probable cause ...." 266 Mont. at 149, 879 P.2d at 684 (internal quotations and citations omitted; emphasis added). In Townsend , we explained, "The requirement that the magistrate decide the existence of probable cause on the basis of facts sufficient to allow an independent determination, is imposed by Montana law to ensure that some neutral and detached evaluation is interposed between those who investigate crime and the ordinary citizen." 168 Mont. at 360, 543 P.2d at 195 (emphasis added). In both cases, we discussed how the judge's role is to assess the existence of probable cause. Importantly, however, whether probable cause exists to issue a warrant is fundamentally distinct from the issue of whether the manner of the warrant's execution is reasonable. A judge assesses the sufficiency of probable cause to authorize a warrant; law enforcement assesses the circumstances and means by which to execute the warrant in a manner that maximizes public safety, protects property, and secures evidence of a crime. Assessing the circumstances relative to executing a warrant is particularly within the expertise of law enforcement.
¶23 We find federal precedent helpful in understanding the deficiencies of Anyan . The Anyan rule confuses the protections of the warrant clause and reasonableness clause of Article II, Section 11 of the Montana Constitution. Foremost, the knock-and-announce rule is part of the reasonableness clause, not the warrant clause, of Article II, Section 11. Like the Fourth Amendment of the United States Constitution, Article II, Section 11, has both a reasonableness clause and a warrant clause. The reasonableness clause protects against unreasonable searches and seizures, providing, "The people shall be secure in their persons, papers, homes and effects from unreasonable searches and seizures." Mont. Const. art. II, § 11. The warrant clause sets out warrant requirements, providing, "No warrant to search any place, or seize any person or thing shall issue without describing the place to be searched or the person or thing to be seized, or without probable cause, supported by oath or affirmation reduced to writing." Mont. Const. art. II, § 11. The warrant clause is a fundamental part of the reasonableness clause: barring limited exceptions, a warrantless search or seizure is categorically unreasonable. See State v. Ellis , 2009 MT 192, ¶ 24, 351 Mont. 95, 210 P.3d 144 ("[W]arrantless searches conducted inside a home are per se unreasonable, subject only to a few specifically established and well-delineated exceptions." (internal quotations omitted)). Accordingly, a valid warrant is only one consideration of a reasonable search: Article II, Section 11, protects citizens against "unreasonable searches and seizures"-even where officers otherwise possess a valid warrant. Mont. Const. art. II, § 11.
¶24 The knock-and-announce rule, like the warrant clause, is also a fundamental consideration of the reasonableness clause. However, compliance with the knock-and-announce rule is not one of the requirements of the warrant clause-the two are separate and distinct.
Instead, the knock-and-announce rule evinces whether the ultimate search-the execution of the warrant-is reasonable. Regarding the federal constitution, the Supreme Court held in Banks , 540 U.S. at 35-36, 124 S. Ct. at 524-25 (2003) (quoting U.S. Const. amend. IV ) (internal citations omitted):
The Fourth Amendment says nothing specific about formalities in exercising a warrant's authorization, speaking to the manner of searching as well as to the legitimacy of searching at all simply in terms of the right to be "secure ... against unreasonable searches and seizures." Although the notion of reasonable execution must therefore be fleshed out, we have done that case by case, largely avoiding categories and protocols for searches.
¶25 The knock-and-announce rule and the warrant clause are separate and distinct components of a reasonable search or seizure. Importantly, Article II, Section 10, of the Montana Constitution specifically provides Montanans with a right to privacy: "The right of individual privacy is essential to the well-being of a free society and shall not be infringed without the showing of a compelling state interest." We have frequently recognized, " Article II, Sections 10 and 11 of the Montana Constitution provide greater protections against unreasonable searches and seizures and government infringement of individual privacy than does the federal constitution." Anyan , ¶ 61 (emphasis added). The knock-and-announce rule in Montana protects different interests than the warrant clause. In Anyan we explained that underlying the knock-and-announce rule are concerns for reducing the potential for violence and preventing the destruction of private citizens' property. Anyan , ¶¶ 23-25. We also described how the knock-and-announce rule protects interests unique to Montana-our right of privacy and enhanced protections against unreasonable searches and seizures found in Article II, Sections 10 and 11, of the Montana Constitution. Anyan , ¶¶ 20, 61. These interests, however, relate to the reasonableness of a warrant's execution and not to the judicial determination of probable cause.
¶26 Anyan failed to distinguish between the warrant clause and reasonableness clause of Article II, Section 11, and the comparable clauses contained in the Fourth Amendment. Importantly, Anyan improperly attached Montana's heightened right of privacy to the warrant clause of Article II, Section 11, which requires a probable cause determination to be made by an impartial judicial officer upon oath or affirmation. Obviously, the enhanced privacy protections contained in Article II, Section 10, which Anyan recognizes, do not preclude execution of a search warrant which is based upon probable cause, as here. By obtaining a warrant, the state has demonstrated probable cause and a compelling interest in continuing to investigate a crime to which an individual's right to privacy protected by Article II, Section 10, must yield. Article II, Section 10 still, however, provides heightened protections against unreasonable searches, even where officers execute those searches pursuant to a warrant. Searches executed in an unreasonable manner may offend Article II, Section 11's reasonableness clause and the significant privacy interests enshrined in Article II, Section 10.
¶27 Consequently, the Anyan rule confuses the responsibilities of the judge with those of the officer. Although in Ochadleus , we recognized "an investigating officer may make a no-knock entry after a reasonable suspicion of exigency has ripened," Ochadleus , ¶ 56 (citing Banks , 540 U.S. 31, 124 S. Ct. 521 ), we never articulated the role the judge plays in evaluating the "reasonable suspicion of exigency" before the judge issues the search warrant. Nor did we address the situation where exigent circumstances clearly existed when officers applied for the warrant but the judge did not grant a no-knock preauthorization, as here. Surely Anyan should not be construed to require no-knock preauthorization by a judge, who presumably has no expertise in executing warrants, to take priority over the safety of officers and the public. The Anyan rule leaves unclear whether the judge must assess if the officer has a reasonable suspicion of exigency or if the judge has a reasonable suspicion of exigency. Additionally, questions arise where a warrant denies or is silent about a no-knock entry. For example, where officers gain a reasonable suspicion of a new exigency shortly after receiving a warrant but before arriving on-scene to execute it, the new exigency is not an unexpected exigent circumstance arising on-scene that would otherwise justify a no-knock entry under Anyan . See Anyan , ¶ 62. Therefore, it is unclear whether officers must reapply for no-knock authorization before executing the warrant.
¶28 We observe federal jurisprudence has distinguished between the warrant and reasonableness clauses of the Fourth Amendment and, upon such distinction, has not interpreted the Fourth Amendment as requiring officers to obtain advance authorization for a no-knock entry from a neutral and detached magistrate. In Dalia v. United States , 441 U.S. 238, 257 n.19, 99 S. Ct. 1682, 1693 n.19, 60 L.Ed.2d 177 (1979), the Supreme Court stated:
[C]ourts have upheld the use of forceful breaking and entering where necessary to effect a warranted search, even though the warrant gave no indication that force had been contemplated. To be sure, often it is impossible to anticipate when these actions will be necessary. Nothing in the decisions of this Court, however, indicates that officers requesting a warrant would be constitutionally required to set forth the anticipated means for execution even in those cases where they know beforehand that unannounced or forced entry likely will be necessary.
Years later, the Supreme Court considered an argument raised in Richards v. Wis. , 520 U.S. 385, 395-96, 117 S. Ct. 1416, 1422, 137 L.Ed.2d 615 (1997), that an entry was unreasonable where the magistrate signing the warrant explicitly deleted portions of the warrant giving officers permission to execute a no-knock entry. The Court held the magistrate's denial of a no-knock entry "does not alter the reasonableness of the officers' decision, which must be evaluated as of the time they entered the hotel room," and the actual circumstances "justified the officers' ultimate decision to enter without first announcing their presence and authority." Richards , 520 U.S. at 395-96, 117 S. Ct. at 1422.
¶29 More recently, federal circuit courts of appeals have made similar observations. See, e.g. , United States v. Ankeny , 502 F.3d 829, 835 (9th Cir. 2007) ("There is no requirement that the police obtain a no-knock warrant simply because one is available."); United States v. Boulanger , 444 F.3d 76, 83 (1st Cir. 2006) (rejecting an argument that police should have informed the judge issuing the warrant they intended to conduct a no-knock entry because "[t]he [Supreme] Court has ... made clear that the reasonableness of a police officer's decision to conduct a no-knock entry must be evaluated as of the time they conduct the entry." (citing Richards , 520 U.S. at 395, 117 S. Ct. at 1422 ) (original quotations and brackets omitted)). Further, the First Circuit distinguished how the knock-and-announce rule "falls under the Fourth Amendment's reasonableness clause, as opposed to its warrant clause ." Boulanger , 444 F.3d at 83 (citing Arkansas , 514 U.S. at 930, 115 S. Ct. at 1916 ) (emphasis added).
¶30 In Hudson v. Michigan , 547 U.S. 586, 593-94, 126 S. Ct. 2159, 2165, 165 L.Ed.2d 56 (2006), the Supreme Court made a distinction similar to the First Circuit's. It concluded the interests protected by the warrant requirement are different than those protected by the knock-and-announce rule:
Until a valid warrant has issued, citizens are entitled to shield "their persons, houses, papers, and effects," from the government's scrutiny. Exclusion of the evidence obtained by a warrantless search vindicates that entitlement. The interests protected by the knock-and-announce requirement are quite different-and do not include the shielding of potential evidence from the government's eyes.
Hudson , 547 U.S. at 593, 126 S. Ct. at 2165 (quoting U.S. Const. amend. IV ). The Court clarified the interests protected by the knock-and-announce rule: the protection of "human life and limb" where an unannounced entry may provoke violence; the protection of property where, with proper notice, a property owner may avoid "the destruction of property occasioned by a forcible entry"; and the protection of privacy and dignity where the rule "assures the opportunity to collect oneself before answering the door." Hudson , 547 U.S. at 594, 126 S. Ct. at 2165 (internal quotations omitted). In this respect, the Court concluded: "What the knock-and-announce rule has never protected, however, is one's interest in preventing the government from seeing or taking evidence described in a warrant." Hudson , 547 U.S. at 594, 126 S. Ct. at 2165.
¶31 An impartial judge's primary responsibility when issuing a warrant is to determine whether probable cause exists to justify the search itself. Section 46-5-221, MCA ; Wilson , 266 Mont. at 149, 879 P.2d at 684. However, Montana law does not also require judges to determine whether the anticipated means of executing a warrant are reasonable. Moreover, there are no requirements set forth in the Montana Constitution nor the Montana Code Annotated that a judge determines prospectively whether exigent circumstances exist to justify a no-knock entry. See Mont. Const. art. II, §§ 10, 11 ; § 46-5-221, MCA (requiring only facts sufficient to support probable cause and a particular description of the place, object, or person to be searched and who or what is to be seized); see also §§ 46-5-101 to -228, MCA (describing legal authority and procedures for searches and seizures). Only the Anyan rule sets forth such a requirement.
¶32 We conclude Montanans' enhanced privacy protections do not compel judicial preauthorization of no-knock entries because the judge's role is to determine probable cause, not the manner of the warrant's execution. Montana's enhanced privacy protections may, however, compel an examination of the reasonableness of the warrant's execution. Importantly, a defendant may still challenge the reasonableness of a search and argue it violated his right to privacy protected by Article II, Sections 10 and 11, even though officers knocked and announced their presence . As we conclude the officers here had exigent circumstances to execute the March 2013 Warrant without knocking and announcing and the warrant's execution was reasonable, see infra ¶¶ 39-41, we do not address the remedy had the facts and circumstances supported a conclusion that the warrant's execution was unreasonable.
¶33 Lastly, we clarify that whether the March 2013 Warrant's execution was reasonable depends on whether the officers had a reasonable suspicion of exigent circumstances before effectuating the no-knock entry, and not whether exigent circumstances actually existed. Detective Bancroft listed several factors in the March 2013 Warrant application upon which he based his reasonable suspicion that exigent circumstances justified a no-knock entry. The judge, however, ultimately did not authorize a no-knock entry in the warrant. Based on the foregoing analysis, whether a no-knock entry was reasonable depends solely on whether the officers executing the warrant had a reasonable suspicion of exigent circumstances justifying it.
¶34 An investigating officer may effectuate a no-knock entry if the officer has a reasonable suspicion of exigent circumstances. Ochadleus , ¶ 56 (citing Banks , 540 U.S. 31, 124 S. Ct. 521 ). Exigent circumstances are "those circumstances that would cause a reasonable person to believe that entry (or other relevant prompt action) was necessary to prevent physical harm to the officers or other persons, the destruction of relevant evidence, the escape of a suspect, or some other consequence improperly frustrating legitimate law enforcement efforts." Anyan , ¶ 34 (quoting United States v. Zermeno , 66 F.3d 1058, 1063 (9th Cir. 1995) ). The burden of showing a reasonable suspicion "is not high, but the police should be required to make it whenever the reasonableness of a no-knock entry is challenged." Richards , 520 U.S. at 394, 117 S. Ct. at 1422.
¶35 Some of our prior cases differ on whether a reviewing court should review the officers' reasonable suspicion of exigent circumstances or the exigent circumstances themselves. In Anyan , we acknowledged that police must have a reasonable suspicion of exigent circumstances before justifying a no-knock entry, but we later rephrased the same rule as requiring courts to "determine whether an unannounced entry is reasonable under the particular circumstances of each case." Compare Anyan , ¶ 39 (citing Richards , 520 U.S. at 394-95, 117 S. Ct. at 1421-22 ), with Anyan , ¶ 64 (citing Richards , 520 U.S. at 394, 117 S. Ct. at 1421 ). In Cassady v. Yellowstone Cty. Mont. Sheriff Dep't , 2006 MT 217, ¶ 32, 333 Mont. 371, 143 P.3d 148, we evaluated "whether exigent circumstances obviated the knock and announce requirement under the present circumstances," but we made no reference to the officer's reasonable suspicion. In Ochadleus , we held investigating officers did not need to knock and announce their presence where doing so was futile, but we analyzed the actual futility of knocking and announcing under the circumstances-not whether the investigating officers had a reasonable suspicion of futility. Ochadleus , ¶¶ 47-48.
¶36 We clarify that review of the reasonableness of a warrant's execution is directed to whether the officers had a reasonable suspicion of exigent circumstances before effectuating the no-knock entry, and not whether exigent circumstances actually existed. See Hudson , 547 U.S. at 596, 126 S. Ct. at 2166 ("[A] mere 'reasonable suspicion' that knocking and announcing 'under the particular circumstances, would be dangerous or futile, or that it would inhibit the effective investigation of the crime,' will cause the requirement to yield." (quoting Richards , 520 U.S. at 394, 117 S. Ct. at 1421 )). Whether the exigent circumstances actually exist is immaterial-the officers only need a reasonable suspicion of them. Therefore, when reviewing a no-knock entry, courts must confine their review to the reasonableness of the officers' suspicion that exigent circumstances existed when they entered the protected area.
¶37 In conclusion, we have little difficulty holding that officers must have flexibility when evaluating the circumstances surrounding execution of a search warrant, including physical threats posed by knocking and announcing their presence along with any other exigent circumstance. By placing the onus on the judge issuing the warrant to prospectively evaluate exigent circumstances, the Anyan rule severely limits the officer's ability to protect the safety of other persons and property and to secure evidence. The Anyan rule creates confusion and, notwithstanding Anyan , lacks a sufficient foundation in Montana and federal law. We overrule Anyan to the extent it requires prior judicial approval for no-knock entries. Judges no longer have a role in determining whether officers may execute a warrant via a no-knock entry. Instead, officers serving a warrant may perform a no-knock entry if they have a reasonable suspicion of exigent circumstances. They may base their reasonable suspicion on information known both before and after the application for the search warrant. The manner of execution, including whether the officers abided by the knock-and-announce rule, is a factor a court should consider when assessing whether the search was constitutionally reasonable.
¶38 We now address whether exigent circumstances were present which justified a no-knock entry when officers executed the March 2013 Warrant.
B. The Reasonableness of the March 2013 Warrant's Execution.
¶39 In his original warrant application, Detective Bancroft asked the judge to approve a no-knock entry. The judge granted the search warrant, but-the parties debate whether inadvertently or by-design-the warrant itself did not contain a reference to a no-knock entry. Nevertheless, Lieutenant O'Donnell, the officer in charge of the SWAT team executing the warrant, testified he and his team were under the impression the warrant granted them the authority to execute a no-knock entry. After hearing testimony from multiple officers and viewing dashcam footage of the officers' entry into Neiss's home, the District Court concluded that, regardless of whether the warrant permitted a no-knock entry, the officers knocked and announced their presence and waited a reasonable amount of time before entering Neiss's home. On appeal, the parties argue extensively about whether the warrant was executed in a reasonable manner; specifically, whether officers knocked and announced their presence and whether they waited a reasonable time before entering. These factors and the District Court's findings and conclusions are relevant considerations when assessing the reasonableness of how the officers executed the warrant. Ultimately, however, the District Court's conclusion that there was no violation of the knock-and-announce rule is not dispositive of whether the search was reasonable. We therefore consider Neiss's argument that the warrant's execution was unreasonable.
¶40 The officers who executed Niess's search warrant gathered information from the crime scene, witnesses, prior police reports, and Neiss's criminal history to assess how they should approach serving a search warrant on Neiss. Neiss was a homicide suspect, and-unable to find the firearm used to kill Greene-the officers had reason to believe Neiss still possessed it. They knew that, some years before, Neiss was convicted of a federal firearms offense for illegal possession of a machine gun and multiple firearms. They reviewed police reports over the previous year which detailed one incident where Neiss threatened Greene with a baseball bat and another where multiple witnesses heard distant gunshots when Neiss drove away after threatening to kill Greene. The police reports indicated Neiss was often uncooperative with officers and believed them to be Greene's "accomplices." The officers also discovered that the sheriff's department used the SWAT team to serve warrants on Neiss in the past.
¶41 This information gave the investigating officers a suspicion that knocking and announcing under the particular circumstances would have posed a physical threat. Further, based on the quality of the information and the officers' knowledge at the time, their suspicion of exigent circumstances was reasonable. We conclude that the officers' execution of the March 2013 Warrant was reasonable and did not violate Neiss's right to privacy.
¶42 2. Did the District Court properly deny Neiss's motion to suppress evidence obtained through a forensic search of his computer?
¶43 Before searching Neiss's home, officers sought and received the March 2013 Warrant allowing for the seizure of any "[c]ell phones, IPads, computers and/or other electronic devices and the information contained therein." The warrant also allowed the officers to seize "[i]ndicia of Occupancy/Ownership in the form of documents, receipts, statements, mail, billing statements, letters, notes, [and] vehicle registration/titles." While executing the search warrant, the officers found and seized one desktop computer and two laptop computers from Neiss's home. Two years later, while still having custody over the electronic devices, police sought and obtained another warrant, the August 2015 Warrant, to search Neiss's computers. On September 9, 2015, Neiss filed a motion in limine in which he argued, in part, the March 2013 Warrant lacked probable cause and too much time had elapsed between seizure and issuance of the August 2015 Warrant. Neiss also argued the August 2015 Warrant lacked probable cause to search the computers. Regarding the March 2013 Warrant, the District Court held: "Given the ubiquity of electronic communication and on-line social media communication, a reasonable homicide detective could believe that the ongoing dispute between Neiss and Greene could continue through email and social media." The District Court denied the challenge to the March 2013 Warrant. Regarding the August 2015 Warrant, the District Court found that because "investigators ultimately sought to examine the contents of the computers at a later date does not speak to the validity of the original warrant under which the computers were seized." The District Court concluded there were articulable facts which supported probable cause for issuance of the August 2015 Warrant.
¶44 On appeal, Neiss argues both warrants were "overbroad and lacked particularity." Neiss also argues the delay in issuing the August 2015 Warrant rendered the warrant invalid and any subsequent search unreasonable. We will address each of Neiss's contentions and untangle the arguments that have evolved in the context of computer searches and the issuance of two warrants related to the same property. However, as an initial and arguably dispositive matter, it is critical to note law enforcement did not search Neiss's computers pursuant to the March 2013 Warrant. Law enforcement lawfully seized the computers pursuant to the March 2013 Warrant but only searched them pursuant to the August 2015 Warrant when officers sought specific authorization from the District Court to search the computers' contents. While Neiss challenges the August 2015 Warrant based on overbreadth and lack of particularity, which we address infra , Neiss does not clearly argue a probable cause challenge to the August 2015 Warrant. However, because many of Neiss's arguments overlap and tangentially touch on probable cause, we will address the existence of probable cause for the August 2015 Warrant.
¶45 The situation here, where an electronic device is seized pursuant to lawful authority-the March 2013 Warrant-and probable cause subsequently scrutinized pursuant to a warrant for the contents of the computer-the August 2015 Warrant-is analogous to what we addressed in State v. Lacey , 2009 MT 62, 349 Mont. 371, 204 P.3d 1192. In Lacey , police received information from Lacey's girlfriend, Dozier, that she had observed pornographic images of her daughter on Lacey's computer. Lacey , ¶¶ 3-4. Police seized the computer based on Dozier's consent, which we later determined to be invalid. Lacey , ¶ 49. Nevertheless, we noted the police searched Lacey's computer only after receiving a valid federal search warrant. Lacey , ¶ 43. While concluding Dozier did not have the authority to consent to the seizure of Lacey's computer, we held "it is clear under the circumstances presented here that the evidence later discovered on the laptop pursuant to the federal search warrant is admissible under the 'inevitable discovery' exception to the fruit of the poisonous tree doctrine." Lacey , ¶ 52. Because the "officers did not search Lacey's laptop pursuant to Dozier's consent," "the question of whether Dozier could consent to a search of the laptop [was] immaterial to whether she could consent to its seizure." Lacey , ¶ 51.
¶46 In Lacey , it was immaterial whether the computer's initial seizure was lawful because the subsequent search pursuant to a warrant, which was inevitable, rendered the evidence admissible. Here, in contrast to Lacey , officers seized the computers pursuant to the lawful authority of the March 2013 Warrant and then subsequently obtained the August 2015 Warrant to search their contents. Therefore, regardless of whether the March 2013 Warrant would subsequently be determined invalid in a court proceeding, officers possessed Neiss's computers pursuant to the lawful authority of a warrant. Officers searched the computers pursuant to the August 2015 Warrant. We conclude, pursuant to Lacey , that suppression of the evidence is appropriate only if the August 2015 Warrant is constitutionally infirm.
¶47 Neiss challenged the March 2013 Warrant, and the District Court denied his motion to suppress. Thereafter, while still in lawful possession of the computers and without tampering with, altering, or searching their contents, officers secured the August 2015 Warrant, which was directed specifically to the search of Neiss's computers. On appeal, Neiss raises the following challenges: (1) the August 2015 Warrant was invalid on its face because it erroneously referred to New Jersey as the location of the computers and never referenced any crime under investigation, (2) the second warrant lacked particularity and was overbroad, and (3) the delay between the seizure pursuant to the March 2013 Warrant and the ultimate search-which only occurred after the August 2015 Warrant-was unreasonable.
¶48 We have long held, "Appellants may not change their theories on appeal from those that they presented in district court." State v. Kuneff , 1998 MT 287, ¶ 26, 291 Mont. 474, 970 P.2d 556. Generally, "[f]ailure to make a timely objection during trial constitutes a waiver of the objection ...." Section 46-20-104(2), MCA. Neiss raises theories that the August 2015 Warrant was facially invalid and lacked particularity for the first time on appeal. Accordingly, we conclude he waived both arguments.
¶49 To persuade us otherwise, Neiss directs us to multiple motions he made to the district court where he objected to the computer evidence. After reviewing the record, however, we find that while Neiss clearly argued that the March 2013 Warrant lacked particularity, he made no such argument about the August 2015 Warrant; in the District Court, Neiss only claimed the August 2015 Warrant lacked probable cause, which he does not pursue on appeal. Additionally, Neiss never raised the issue of facial validity with the District Court as to either warrant. "The reason for the contemporaneous objection rule ... is to allow the district court an opportunity, where possible, to remedy any error and we will not put a trial court in error where it has not been given such a chance to correct itself, absent an exception to the rule." State v. Clausell , 2001 MT 62, ¶ 25, 305 Mont. 1, 22 P.3d 1111. Neiss never gave the District Court an opportunity to evaluate the facial validity or particularity of the August 2015 Warrant-we will not fault the District Court here.
¶50 Neiss has, however, preserved his claim that the delay between the seizure and ultimate search of the computers was unreasonable.
After first lawfully seizing the computers from Neiss's home, the State did not search them for well over two years. Between their seizure in March 2013 and Neiss's arrest in August 2014, however, Neiss never applied for their return.
¶51 Neiss's unreasonable delay argument rests primarily on United States v. Mitchell , 565 F.3d 1347, 1349 (11th Cir. 2009), where federal agents delayed obtaining a warrant for twenty-one days after an initial warrantless seizure of a hard drive. The Eleventh Circuit Court of Appeals held that while the initial warrantless seizure was permissible, the agents' subsequent delay in obtaining the warrant was unreasonable and infringed upon the defendant's possessory interests protected by the Fourth Amendment. Mitchell , 565 F.3d at 1350-52 ; see also Segura v. United States , 468 U.S. 796, 812, 104 S. Ct. 3380, 3389, 82 L.Ed.2d 599 (1984) ("[A] seizure reasonable at its inception because based upon probable cause may become unreasonable as a result of its duration" if police fail to obtain a search warrant within a reasonable period of time.).
¶52 The difference between Mitchell and the present case, however, is clear: while the agents in Mitchell unreasonably delayed obtaining a warrant after seizing Mitchell's computer, the officers here had already obtained a warrant before seizing Neiss's computers . Mitchell is therefore inapplicable. Furthermore, Neiss did not challenge the March 2013 Warrant until May 2015. The District Court denied Neiss's motion to suppress and officers obtained the August 2015 Warrant specifically addressing a search of the computers. During this entire time, officers were lawfully in possession of the computers by the judicially-authorized March 2013 Warrant. The officers were not obligated to return the computers when they had judicial authorization to possess them.
¶53 We also note Neiss never applied for the computers' return. Therefore, we can hardly fault the State for retaining the computers in evidence pursuant to a valid warrant. Generally, after officers seize items through the authority of a warrant, § 46-5-312, MCA, provides a procedure for the owner of any property seized as evidence to apply for its return. Through that procedure, after the property owner petitions the court, the court holds a hearing to determine whether the property should be returned. Section 46-5-312, MCA. The state held Neiss's computers for over two years, but it did so pursuant to a valid warrant, and Neiss never asked for their return; hence, the length of seizure is irrelevant. In this case, the State's lengthy delay between its seizure and search of Neiss's computers did not render the search unreasonable.
¶54 Finally, although we find it difficult to discern a clear argument by Neiss that the August 2015 Warrant lacked probable cause, we will nonetheless address whether probable cause existed in the August 2015 warrant to search Neiss's computers.
¶55 Pursuant to the Fourth Amendment to the United States Constitution and Article II, Section 11, of the Montana Constitution, "[n]o warrant to search any place, or seize any person or thing shall issue without describing the place to be searched or the person or thing to be seized, or without probable cause, supported by oath or affirmation reduced to writing." Mont. Const. art. II, § 11 ; accord U.S. Const. amend. IV. Section 46-5-221, MCA, delineates basic requirements for a warrant in Montana:
A judge shall issue a search warrant to a person upon application ... made under oath or affirmation, that:
(1) states facts sufficient to support probable cause to believe that an offense has been committed;
(2) states facts sufficient to support probable cause to believe that evidence, contraband, or persons connected with the offense may be found;
(3) particularly describes the place, object, or persons to be searched; and
(4) particularly describes who or what is to be seized.
¶56 Essential to both constitutional provisions and § 46-5-221, MCA, is the particularity requirement. A search warrant must particularly describe which items are to be seized. The specificity required varies "depending on the circumstances of the case and the type of items involved." Seader , ¶ 13. "Generic categories or general descriptions of items are not necessarily invalid if a more precise description of the items to be seized is not possible." State v. Chilinski , 2014 MT 206, ¶ 22, 376 Mont. 122, 330 P.3d 1169 (quoting Seader , ¶ 13 ).
¶57 Nevertheless, "the scope of a lawful search is 'defined by the object of the search and the places in which there is probable cause to believe that it may be found.' " Maryland v. Garrison , 480 U.S. 79, 84, 107 S. Ct. 1013, 1016, 94 L.Ed.2d 72 (1987) (quoting United States v. Ross , 456 U.S. 798, 824, 102 S. Ct. 2157, 2172, 72 L.Ed.2d 572 (1982) ). A search warrant must limit the scope of a search to the specific areas and things for which there is probable cause to search. By so doing, "the requirement ensures that the search will be carefully tailored to its justifications, and will not take on the character of the wide-ranging exploratory searches the Framers intended to prohibit." Garrison , 480 U.S. at 84, 107 S. Ct. at 1016 ; see State v. Quigg , 155 Mont. 119, 132, 467 P.2d 692, 699 (1970)
("There must, of course, be a nexus ... between the item to be seized and criminal behavior." (quoting Warden, Md. Penitentiary v. Hayden , 387 U.S. 294, 307, 87 S. Ct. 1642, 1650, 18 L.Ed.2d 782 (1967) )); United States v. Towne , 997 F.2d 537, 544 (9th Cir. 1993) ("Specificity has two aspects: particularity and breadth. Particularity is the requirement that the warrant must clearly state what is sought. Breadth deals with the requirement that the scope of the warrant be limited by the probable cause on which the warrant is based." (internal quotations and citations omitted)); see also 2 Wayne R. LaFave, Search and Seizure § 4.6(a), 767 (5th ed. 2012) ("[A]n otherwise unobjectionable description of the objects to be seized is defective if it is broader than can be justified by the probable cause upon which the warrant is based."). The Supreme Court illustrated this concept further in Ross , 456 U.S. at 824, 102 S. Ct. at 2172 :
Just as probable cause to believe that a stolen lawnmower may be found in a garage will not support a warrant to search an upstairs bedroom, probable cause to believe that undocumented aliens are being transported in a van will not justify a warrantless search of a suitcase.
¶58 With these principles in mind, we analyze their effect on the August 2015 Warrant and the subsequent search of the computers. We may easily think of a computer as a container-for example, a filing cabinet. A computer, like a filing cabinet, is capable of storing vast amounts of documents, albeit in electronic form. Furthermore, some of the limitations on searching each are similar: for example, while looking for a stolen car, police could not rummage through a filing cabinet; likewise, they could not look through a computer hard drive. See, e.g. , Ross , 456 U.S. at 824, 102 S. Ct. at 2172. However, when lawfully searching for documentary evidence-or other evidence of the kind that may be found in filing cabinets or computers-the scope of the police's search extends to either container if finding the evidence there is reasonably possible. Cf. Ross , 456 U.S. at 821, 102 S. Ct. at 2171 ("[A] warrant that authorizes an officer to search a home for illegal weapons also provides authority to open closets, chests, drawers, and containers in which the weapon might be found."); United States v. Snow , 919 F.2d 1458, 1461 (10th Cir. 1990) (holding a "locked safe was a likely source for the specified documents and could therefore be opened"); United States v. Hunter , 13 F. Supp. 2d 574, 581 (D. Vt. 1998) (holding a warrant authorizing a search for "records" permitted a search of "computers, disks, and similar property"). Likewise, officers may justify seizing both a computer and a filing cabinet for an off-site search where the items described in the warrant are so intermingled with undescribed items that sorting them on-site is impracticable. See United States v. Upham , 168 F.3d 532, 535-36 (1st Cir. 1999) (upholding a seizure and off-site search of computers because "the mechanics of the search for images later performed off site could not readily have been done on the spot."); United States v. Hargus , 128 F.3d 1358, 1363 (10th Cir. 1997) (concluding the seizure of filing cabinets was reasonable where sorting the records on-site was impracticable).
¶59 The August 2015 Warrant recited the lengthy and on-going history of Neiss's dispute with Greene. In particular, when officers searched Neiss's residence in March 2013, they observed computer printouts which indicated someone had been actively using a computer. The officers noted a letter Neiss wrote to himself detailing his history with Greene, and the officers averred they suspected Neiss might keep a journal or log of events on one or more of the computers. Importantly, officers had located the body of a Maglite flashlight during the August 2014 search of Neiss's residence which appeared to have been modified to be a firearm silencer. As the Montana Crime Lab would later confirm, the interior of the silencer had gunshot residue on it. The application also detailed how Neiss's son stated that his father had attached the homemade silencer to the end of a firearm in the past. The application also explained at least five rounds had been fired in the homicide and no one in the home or neighborhood had heard gunshots. The affiant requested a search warrant for Neiss's computers to learn if Neiss had sought information about silencers or firearms over the internet or whether the computers otherwise contained such information.
¶60 We have little difficulty concluding there were sufficient facts, under the totality of the circumstances, there was a fair probability Neiss's computers could contain information about silencers or firearms-related inquiries or journals or logs of Neiss's history with Greene. The District Court did not err in denying Neiss's motion to suppress the August 2015 Warrant.
¶61 3. Did the District Court abuse its discretion by instructing the jury to choose the "most reasonable" interpretation of circumstantial evidence if there were two competing interpretations-one that supported innocence and one that supported guilt?
¶62 The District Court gave the following jury instruction: "When circumstantial evidence is susceptible to two interpretations, one that supports guilt and the other that supports innocence, the jury determines which is most reasonable." On appeal, Neiss argues the District Court abused its discretion by giving the instruction, reasoning the instruction diluted the State's burden of proof and compromised his right to be presumed innocent. The State argues the jury instructions, as a whole, fully and fairly instructed the jury on the State's burden of proof and the concept of reasonable doubt . It points us to our recent decisions in Sanchez and State v. Iverson , 2018 MT 27, 390 Mont. 260, 411 P.3d 1284, where we considered the same circumstantial-evidence instruction.
¶63 In Sanchez , we concluded that, on its face, the disputed circumstantial-evidence instruction did not relieve the State of any of its burden to prove guilt beyond a reasonable doubt. We observed:
Rather, it only provided the jury with some guidance for resolving competing interpretations of circumstantial evidence. If the jury found that an interpretation of circumstantial evidence was reasonable, it could be considered in conjunction with any other evidence to determine whether the State met its burden to prove guilt of each offense beyond a reasonable doubt. It is the overall weight of the evidence, and not any particular inference from the evidence, that determines the jury's ultimate decision on guilt. The existence of alternative interpretations of circumstantial evidence does not mean that both interpretations are equally persuasive or weighty.
Sanchez , ¶ 16. We also cited numerous cases where we held that determining the weight and credibility of conflicting evidence and drawing inferences from circumstantial evidence are exclusively the province of the jury. Sanchez , ¶ 19.
¶64 In Iverson , we once again considered the instruction and concluded the district court fully and fairly instructed the jury regarding the State's burden of proof. Iverson , ¶ 19. We evaluated the jury instructions defining the State's burden of proof and reasonable doubt , and we looked to precedent plainly holding the circumstantial-evidence instruction was acceptable. Iverson , ¶ 19 (citing Sanchez , ¶¶ 16-17 ).
¶65 The District Court here clearly instructed the jury on the State's burden of proof:
The State of Montana has the burden of proving the guilt of the Defendant beyond a reasonable doubt. Proof beyond a reasonable doubt is proof of such a convincing character that a reasonable person would rely and act upon it in the most important of his or her own affairs. Beyond a reasonable doubt does not mean beyond any doubt or beyond a shadow of a doubt.
¶66 The District Court also instructed the jury on the presumption of innocence:
The Defendant is presumed to be innocent of the charge against him. This presumption remains with him throughout every stage of the trial and during your deliberations on the verdict. It is not overcome unless from all the evidence in the case you are convinced beyond a reasonable doubt that the defendant is guilty. The Defendant is not required to prove his innocence or present any evidence.
¶67 Neiss's arguments against the circumstantial-evidence jury instruction are nearly identical to the arguments the defendants in Sanchez and Iverson made. Consequently, just as the Court held in Sanchez and Iverson , we hold Neiss's jury instructions, as a whole, "fully and fairly instruct[ed] the jury on the applicable law." See Iverson , ¶ 10 ; Sanchez , ¶ 7. Our recent decisions from Sanchez and Iverson are controlling.
¶68 Finally, as the Court considered in Sanchez , we address the nature and strength of the state's evidence that was presented for the jury to consider. Here, the State presented evidence of Neiss and Greene's history, Neiss's behavior the night of the murder, gunshot residue found on Neiss's hand and face the night of the murder, shoeprints found on Greene's property leading to and from the direction of Neiss's property, a forensic examination indicating casings around Greene's body and those in Neiss's home came from the same weapon, and testimony from Neiss's son that Neiss had used and manufactured homemade firearm suppressors. Based on our controlling precedent, and in light of this evidence, the District Court did not err in giving the disputed instruction.
CONCLUSION
¶69 The knock-and-announce rule remains a fundamental component of the reasonableness clause of Article II, Section 11, and the right of privacy under Article II, Section 10, of the Montana Constitution. Nevertheless, we overturn the Anyan rule insofar as it requires investigating officers to obtain authorization from a judge to execute a no-knock entry. We also clarify that officers may execute a no-knock entry where they have a reasonable suspicion of exigent circumstances justifying it. Based on the averments presented in the application for the March 2013 Warrant, investigating officers had a reasonable suspicion of exigent circumstances justifying a no-knock entry into Neiss's residence. We conclude they did not violate Neiss's constitutional protections under Article II, Sections 10 and 11, of the Montana Constitution.
¶70 We hold officers may seize an electronic device pursuant to a warrant where the type of evidence the officers are looking for could reasonably be found on the device. Where officers are lawfully in possession of property, do not search the property, and subsequently secure a search warrant for the property, suppression of the evidence is appropriate only if the warrant pursuant to which the search was conducted is constitutionally infirm.
¶71 We also hold the jury instructions, taken as a whole, fully and fairly instructed the jury on the proper burden of proof. The District Court did not abuse its discretion by giving the circumstantial-evidence instruction Neiss takes issue with on appeal.
¶72 We affirm.
We concur:
MIKE McGRATH, C.J.
JAMES JEREMIAH SHEA, J.
BETH BAKER, J.
JIM RICE, J.
Justice Ingrid Gustafson, concurring and dissenting.
¶73 Although I concur in the Majority's holding that the search pursuant to the March 2013 search warrant was lawfully executed, I disagree with its decision to overturn the District Court's findings and conclusions. I would uphold the District Court's finding that law enforcement announced its presence and its conclusion that officers waited a reasonable amount of time before entering Neiss's home.
¶74 I further disagree with the Majority's holding on Issue Two and dissent on that issue. I would conclude the computers were improperly seized under the 2013 search warrant and unlawfully searched under the 2015 search warrant, and that the admission of the computer evidence was reversible error.
Issue One
A. Substantial evidence supports the District Court's finding that officers announced their presence before entering Neiss's home.
¶75 On March 13, 2013, Detective Shane Bancroft of the Yellowstone County Sheriff's Office applied for a search warrant for Neiss's residence. He requested "an exception to the 'Knock and Announce' requirement" due to "Neiss's criminal history and the information regarding his recent involvement with firearms." However, the search warrant the District Court issued was silent about the manner of execution.
¶76 A year and five months later, on August 11, 2014, the State moved for leave to file an information and the District Court issued an arrest warrant for Neiss. On May 15, 2015, Neiss moved to suppress the fruits of the search law enforcement had conducted pursuant to the March 2013 search warrant. He argued the manner of execution was improper because the officers allegedly executed a no-knock entry when the warrant did not authorize such. The District Court denied Neiss's motion because it disagreed that the officers executed a no-knock entry.
¶77 On appeal, Neiss argues the District Court erred in concluding law enforcement executed a knock-and-announce entry. Specifically, he claims officers waited an insufficient amount of time after they announced their presence until they entered his residence for the execution to be considered knock-and-announce. Thus, the issue before the Court is the issue Neiss presents on appeal: Did the District Court err when it determined law enforcement conducted a knock-and-announce execution of the March 2013 search warrant at Neiss's residence?
¶78 Section 46-20-104, MCA, sets forth the scope of appeal available to criminal defendants. It provides:
(1) An appeal may be taken by the defendant only from a final judgment of conviction and orders after judgment which affect the substantial rights of the defendant.
(2) Upon appeal from a judgment, the court may review the verdict or decision and any alleged error objected to which involves the merits or necessarily affects the judgment....
¶79 Section 46-20-103, MCA, sets forth the scope of appeal provided to the State. It provides, in part that, except as otherwise specifically authorized, the State may not appeal in a criminal case. Section 46-20-103(1), MCA. While § 46-20-103(2), MCA, enumerates exceptions to this rule, including "suppressing evidence" in § 46-20-103(2)(e), MCA, it provides no exception for cases such as this, in which the State received a favorable evidentiary ruling at the trial court level.
¶80 Thus, the State has no right of appeal in this case and this Court may only review alleged errors objected to by Neiss, the defendant. The State, however, indicated in its response brief that it preferred this Court consider a different issue on appeal than the issue Neiss presented. Disregarding the District Court's conclusion that officers knocked and announced, it argues, "This Court should abandon Anyan's warrant requirement and instead simply consider whether, at the time of entry, the officers were in possession of sufficient objective facts from which a reasonable officer would suspect that announcing their presence prior to entry would present a risk of physical harm, as the federal courts have done." The State further offers that "[a]lternatively," this Court could uphold the District Court's determination that law enforcement knocked and announced.
¶81 Generally, appellees urge us to uphold the ruling of the lower court rather than argue affirmation of the lower court as a last resort. That is the difference between being an appellee and being a cross-appellant. Although the Majority deems this case an "opportunity to reconsider the Anyan rule," Opinion, ¶ 20, that opportunity does not arise unless and until this Court concludes the District Court erred in determining that officers conducted a knock-and-announce entry. Thus, I would consider the correctness of the District Court's rulings prior to embarking on a mission to overturn established precedent. Rather than deciding the issue squarely presented by Neiss, this Court views the State's brief as a cross-appeal and has neither upheld the decision of the District Court nor ruled upon the issue raised by the defendant on appeal. The Majority's decision to take up the State's cause while sidelining the issue appealed by the defendant is improper.
¶82 This Court reviews a district court's ruling on a motion to suppress evidence to determine whether the court's findings of fact are clearly erroneous and whether the court's interpretation and application of the law are correct. Muir v. Bilderback , 2015 MT 180, ¶ 9, 379 Mont. 459, 353 P.3d 473 (citation omitted). A trial court's findings are clearly erroneous if not supported by substantial evidence, if the court has misapprehended the effect of the evidence, or if this Court's review of the record leaves us with the firm conviction that a mistake has been made. State v. Grmoljez , 2019 MT 82, ¶ 6, 395 Mont. 279, 438 P.3d 802 (citation omitted). "Substantial evidence" is such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. State v. Milhoan , 224 Mont. 505, 509, 730 P.2d 1170, 1172 (1986) (citation omitted).
¶83 On appeal, Neiss argues the District Court erred in finding the officers executed a knock-and-announce warrant because they did not wait a "reasonable period of time" to enter after they announced. The Majority found it "unnecessary to address" whether this finding was clearly erroneous. Opinion, ¶ 19. Although the Majority notes that officers did not knock prior to entry, it does not determine whether the failure to knock in and of itself negates a knock-and-announce execution, and it avoids determining whether, as the officers testified and the District Court found, the officers announced their presence prior to entering.
¶84 Since the District Court ruled that Neiss failed to meet his burden of proving the search was illegal, the question this Court should have addressed is whether substantial evidence supports the District Court's determination that law enforcement executed a knock-and-announce entry. I believe the record provides sufficient evidence to support the District Court's determination. At the suppression hearing, Lieutenant Kent O'Donnell, the SWAT team leader, testified, "Just prior to entry into the residence, lights were activated on ... all of the patrol vehicles, on the [ballistic rescue vehicle] as well; and then myself, Lieutenant Bofto and Captain Michaelis were all on the public address system of the vehicle announcing Sheriff's Office, search warrant, Sheriff's Office, search warrant." After the announcement, a team member deployed a flash-bang concussion device as a signal for the team to enter the residence. The State asked O'Donnell if law enforcement announced its presence prior to entering the residence and he replied, "Absolutely." He later explained, "I believe the warrant ... our detectives obtained was a no knock. On this particular situation we decided to do lights and announce prior to entry, which would be similar with a knock and announce warrant." He further explained that in this instance, law enforcement presence would have included the SWAT team to execute this warrant, regardless of whether the execution was no-knock or knock-and-announce. He explained that in this instance, law enforcement decided to announce for several reasons, including the possible presence of children in the residence, the knowledge that there were dogs in the residence, and the occupants' history of firearms possession. He said, "[W]e decided that we would do a-basically an announce with the lights and the PA at the very last second prior to entry, so it wouldn't ... be confused that we were burglars or robbers...." In other words, in spite of the fact that law enforcement sought a no-knock warrant on the theory that Neiss was dangerous, law enforcement ultimately determined that it would actually be safer to announce its presence.
¶85 The State also entered into evidence video recordings from some of the law enforcement vehicles at the scene. At the hearing, it played the first few minutes of videos from two vehicles which showed the SWAT team's actions up to the moment of entry-including their announcement. In its Order Denying Defendant's Motion to Suppress, the District Court found, "[I]t is clear to this Court that officers announced their presence immediately before entering the premises." Noting that the officers used "several tactics," including flashing lights and two officers announcing their presence over a loudspeaker, the court concluded Neiss's Fourth Amendment rights were not violated "because the Sheriff's Department clearly announced their presence ... before entering the home."
¶86 The weight of the evidence and the credibility of the witnesses are exclusively the province of the trier of fact and, in the event of conflicting evidence, it is within the province of the trier of fact to determine which will prevail. State v. Flack , 260 Mont. 181, 189, 860 P.2d 89, 94 (1993) (citation omitted). Here, the District Court heard live eyewitness testimony and viewed videos of the warrant execution. Under our standard of review, the question before this Court is not whether it would have ruled differently, but whether the District Court's ruling should be upheld. State v. Roper , 2001 MT 96, ¶ 11, 305 Mont. 212, 26 P.3d 741 (citation omitted). A review of the record convinces me that sufficient evidence supports the District Court's finding. I would conclude the District Court did not err in finding that law enforcement announced prior to entering Neiss's home.
B. The District Court's conclusion that Neiss's constitutional rights were not violated is not clearly erroneous.
¶87 In addition to upholding the finding that the officers announced their presence prior to entering Neiss's home, I would also uphold the District Court's conclusion that the search warrant was adequately executed as a knock-and-announce warrant such that Neiss's constitutional rights were not violated.
¶88 In its Opinion, the Majority alludes to the parties' dispute over whether the officers knocked and announced, and whether they then waited a "reasonable time" before entering. Opinion, ¶ 19. However, it characterizes the primary dispute as a mere digression and declines to address it. Opinion, ¶ 20. Instead, it takes the "opportunity" to overrule Anyan -an opportunity which does not exist unless the Court first concludes the District Court erred.
¶89 In Anyan , this Court noted that knock-and-announce is a flexible rule, and the time an officer must wait before using force to enter depends on the facts and circumstances of each case. Anyan , ¶ 64 (citations omitted). Neiss argues that what we call "knock and announce" is really "knock, announce, and wait , for at least a reasonable period of time" before entering. (Emphasis in original.) He relies on Banks , in which the U.S. Supreme Court considered how to determine how long law enforcement must reasonably wait to enter after knocking and announcing. Banks , 540 U.S. at 35, 124 S. Ct. at 524. The Supreme Court declined to set forth criteria for reasonableness, but affirmed its practice of considering reasonableness on a case-by-case basis. Banks , 540 U.S. at 35-36, 124 S. Ct. at 525. In Banks's case, which was a drug case, the Supreme Court concluded law enforcement had reasonably waited 15 to 20 seconds before entering forcibly because if officers had waited longer, Banks would have had ample opportunity to dispose of the evidence. Banks , 540 U.S. at 38, 124 S. Ct. at 526. The Supreme Court found the act of knocking and announcing created the exigent need to enter, and the "crucial fact" in determining a reasonable time to wait was the imminent disposal of the evidence. Banks , 540 U.S. at 40, 124 S. Ct. at 527.
¶90 Here, the State maintains officers waited 12 to 13 seconds before entering "the living space of the home." Law enforcement's primary concern was not destruction of evidence, but the possibility Neiss posed a danger due to a history of illegal firearms possession and a distrust of police. Thus, the question of a reasonable length of time is determined by how long it could take for Neiss to arm himself after the police announced their presence. Here, based on the evidence before it, the District Court determined it could take Neiss mere seconds to do so. From the facts articulated in the search warrant application, it is not unreasonable for officers to fear that Neiss slept with a loaded firearm nearby and was prepared to use it as he saw necessary. Although on these facts, I may have concluded the officers should have waited a longer period of time before entering forcibly, I cannot conclude the District Court erred in its application of facts to law.
¶91 Because I would uphold the District Court, I would end my analysis of this issue here. However, in addition to disagreeing with the Majority's decision to reach an Anyan analysis, I disagree with the grounds upon which the Majority has overruled Anyan , as set forth below.
¶92 First, the Majority declares Anyan must be overruled because it is "unworkable"-although Anyan worked in this case, according to the District Court-and the State offers no evidence of Anyan's alleged lack of workability. The Majority takes issue with the fact that, had the District Court found that law enforcement executed a no-knock warrant, and had the court not found grounds to excuse the error since officers believed they had obtained a no-knock warrant, the March 2013 search would have been suppressed. The Majority explains, "[N]o additional facts or developments occurred after officers obtained the warrant which would support departure from the Anyan rule and allow the officers to enter without first knocking and announcing their presence." Opinion, ¶ 19 (emphasis in original). However, assuming arguendo that the District Court erred in finding the officers knocked and announced, all that would have needed to occur would have been for Detective Bancroft to read the warrant the court signed. It is true that "the parties were forced to argue extensively whether the officers knocked and announced their presence and whether they waited a reasonable time before entering," Opinion, ¶ 19, but this did not occur because Anyan presented an insurmountable hurdle. Rather, it occurred because the officers' knock-and-announce execution was haphazard, thus giving Neiss a colorable challenge to its lawfulness. Expecting officers to have some familiarity with the requirements of the warrant they are executing is not unworkable, nor is it unworkable to expect officers to definitively knock and announce when obligated to do so. Where fundamental constitutional rights are at issue, neither this Court, nor any court, should find it unreasonable to expect officers executing a search warrant to have read the warrant beforehand and acted in accordance with its requirements.
¶93 Next, the Majority argues Anyan was wrongly decided because it places the responsibility for determining the reasonableness of a search on a judge instead of on law enforcement. The Majority maintains the judge's role is only to determine the existence of probable cause. The Majority alleges Anyan incorrectly held that a judge, and not the police, should determine if a person's right to privacy must yield to a search because the yielding of the right to privacy is as to whether officers should be permitted to search at all, and not to how they may execute a search for which probable cause has been established. However, even without an explicit right to privacy in the U.S. Constitution, the U.S. Supreme Court has rejected this reasoning in applying the Fourth Amendment to the execution of no-knock entries pursuant to a valid search warrant. In Richards v. Wisconsin , 520 U.S. 385, 387-88, 117 S. Ct. 1416, 1418, 137 L.Ed.2d 615 (1997), the U.S. Supreme Court considered a challenge to a decision in which the Wisconsin Supreme Court concluded that police officers are not required to knock and announce when executing a search warrant in a felony drug investigation. In that case, the Wisconsin Supreme Court had held that only a minimal violation of privacy occurs when officers, pursuant to a warrant, forcibly enter a residence without announcing their presence because the residents would have been without authority to deny entry in any event. Like the Majority in this case, the Wisconsin court had concluded that the principal intrusion on privacy occurred with the issuance of the warrant, not the manner of execution. Richards , 520 U.S. at 390, 117 S. Ct. at 1419-20. The U.S. Supreme Court disagreed:
The State asserts that the intrusion on individual interests effectuated by a no-knock entry is minimal because the execution of the warrant itself constitutes the primary intrusion on individual privacy .... While it is true that a no-knock entry is less intrusive than, for example, a warrantless search, the individual interests implicated by an unannounced, forcible entry should not be unduly minimized. As we observed in [ Wilson , 514 U.S. at 930-32, 115 S. Ct. at 1916-17 ], the common law recognized that individuals should have an opportunity to themselves comply with the law and to avoid the destruction of property occasioned by a forcible entry. These interests are not inconsequential.
Additionally, when police enter a residence without announcing their presence, the residents are not given any opportunity to prepare themselves for such an entry. The State pointed out at oral argument that, in Wisconsin, most search warrants are executed during the late night and early morning hours. Tr. of Oral Arg. 24. The brief interlude between announcement and entry with a warrant may be the opportunity that an individual has to pull on clothes or get out of bed.
Richards , 520 U.S. at 393, 117 S. Ct. at 1421, n. 5.
¶94 The U.S. Supreme Court rejected a blanket exception to the knock-and-announce rule, stating:
[T]he fact that felony drug investigations may frequently present circumstances warranting a no-knock entry cannot remove from the neutral scrutiny of a reviewing court the reasonableness of the police decision not to knock and announce in a particular case. Instead, in each case, it is the duty of a court confronted with the question to determine whether the facts and circumstances of the particular entry justified dispensing with the knock-and-announce requirement.
Richards , 520 U.S. at 394, 117 S. Ct. at 1421. The U.S. Supreme Court observed that the rule justifying a no-knock entry must strike a balance between legitimate law enforcement concerns and "the individual privacy interests affected by no-knock entries." Richards , 520 U.S. at 394, 117 S. Ct. at 1421-22. Later, relying on Richards , it again confirmed that "the knock-and-announce rule protects those elements of privacy and dignity that can be destroyed by a sudden entrance." Hudson v. Michigan , 547 U.S. 586, 594, 126 S. Ct. 2159, 2165, 165 L.Ed.2d 56 (2006).
¶95 The scheme of the Fourth Amendment becomes meaningful only when it is assured that at some point the conduct of those charged with enforcing the laws can be subjected to the more detached, neutral scrutiny of a judge who must evaluate the reasonableness of a particular search or seizure in the light of the particular circumstances. Terry v. Ohio , 392 U.S. 1, 21, 88 S. Ct. 1868, 1880, 20 L.Ed.2d 889 (1968). Here, the Majority limits the effectiveness of judicial scrutiny, increasing the risk that citizens' constitutional rights will be violated by unreasonable searches rather than seeking to prevent such violations from occurring.
¶96 This begs the question as to why, up to now, we have required law enforcement to seek permission rather than ask for forgiveness when the exigent circumstances justifying a no-knock entry are foreknown? The answer lies in Article II, Section 10, of the Montana Constitution, which affords Montanans greater privacy protections than does the U.S. Constitution. Gryczan v. State , 283 Mont. 433, 448, 942 P.2d 112, 121 (1997) (citation omitted). An unconstitutional invasion of the right to privacy cannot be undone once it has occurred; under Anyan , when the exigent circumstances are foreknown to law enforcement, they present that evidence to the judge issuing the search warrant so that the judge-before privacy is invaded-can determine the reasonableness of the execution. Anyan's preauthorization requirement benefits both suspect and law enforcement: Under this rule, not only are Montanans' rights protected, but officers need not predict whether a judge will ratify their decision to execute a no-knock entry after the fact. ¶97 The Anyan rule in no way prevents officers from executing a no-knock entry should exigent circumstances arise later. It explicitly holds "that the decision to make a no-knock entry should ordinarily be made by a neutral and detached magistrate. ... An investigating officer, may, however, make this decision based on unexpected exigent circumstances that arise on the scene." Anyan , ¶ 62. Although the Majority asserts that Anyan fails to explain what officers should do if exigent circumstances arise after the warrant is issued but before officers arrive on-scene to serve it, and whether it is the judge or the officer who must have a reasonable suspicion of exigency to issue a no-knock warrant, these scenarios were not before the Court in Anyan nor are they present here. Nor does the potential for a novel scenario to arise in a future case render a fatal blow to Anyan's reasoning. The fact that Anyan does not speculate on these scenarios does not preclude this Court from ruling upon them when such come before it.
¶98 Rather than recognizing the role Article II, Section 10, plays in evaluating no-knock entries, and the importance this Court placed upon Montana's right to privacy in determining that Montanans are entitled to a heightened expectation of privacy under our Constitution, the Majority has in this case upended our search and seizure jurisprudence and its application of the Montana Constitution and relied solely on federal case law. The Majority asserts that Anyan "added a requirement nonexistent in federal jurisprudence," Opinion, ¶ 18, without giving proper due to the basis for Anyan's departure from federal jurisprudence: "The right of individual privacy is essential to the well-being of a free society and shall not be infringed without the showing of a compelling state interest." Mont. Const. art. II, § 10. The Majority grounds its decision on a comparison of two clauses of Article II, Section 11, of the Montana Constitution, but it neglects Article II, Section 10, and the paramount significance of our constitutional right to privacy in Anyan's holding. Anyan , ¶ 61, explicitly holds, " Article II, Sections 10 and 11 of the Montana Constitution provide greater protections against unreasonable searches and seizures and government infringement of individual privacy than does the federal constitution." Here, the Majority faults Anyan and finds the federal precedent persuasive even though federal jurisprudence provides no precedents for the interpretation of our State Constitution.
¶99 Until now, this Court has addressed Article II, Section 10, in conjunction with Article II, Section 11, in analyzing and resolving search or seizure issues that specifically implicate the right to privacy. State v. Goetz , 2008 MT 296, ¶ 14, 345 Mont. 421, 191 P.3d 489 (citations omitted). Article II, Section 10, does not have a federal constitutional counterpart. Montana's unique constitutional language affords citizens a greater right to privacy, and therefore, broader protection than the Fourth Amendment in cases involving searches of, or seizures from, private property. State v. Hardaway , 2001 MT 252, ¶ 31, 307 Mont. 139, 36 P.3d 900 (citation omitted).
¶100 In Hardaway , we summarized some of the history of this Court's jurisprudence regarding the application of Article II, Section 10, to search and seizure issues:
Prior to 1972, Article II, Section 10 did not exist and there was no explicit right of privacy in the Montana Constitution.... For several years after the adoption of the 1972 Montana Constitution, cases raising search and seizure issues under Article II, Section 11 generally followed the lead of the U.S. Supreme Court. Similarly, as the 1972 right to privacy developed, our privacy decisions also tended to follow U.S. Supreme Court decisions....
[F]rom the mid-1980s through the early 1990s, the Court provided no greater protection for individual privacy in search and seizure cases than parallel federal law provided. However, since City of Billings v. Whalen (1990), 242 Mont. 293, 790 P.2d 471, this Court has given increased protection to the privacy rights of Montana citizens, limiting the scope of search and seizure cases, and since State v. Bullock [, 272 Mont. 361, 901 P.2d 61 (1995) ], the Court has applied Article II, Section 10, emphasizing privacy as a mechanism to support interpretation of search and seizure cases. In the ensuing years, we consistently analyzed search and seizure cases involving significant privacy issues under both Sections 10 and 11 of Article II of the Montana Constitution.
Hardaway , ¶¶ 50-51 (internal citations and quotations omitted).
¶101 In Goetz , we recognized this Court had made inconsistent rulings regarding the constitutionality of warrantless audio recording where one party had agreed to be recorded but another party was unaware of the recording. Goetz , ¶¶ 11-12 (citing State v. Solis , 214 Mont. 310, 693 P.2d 518 (1984) (holding that videos of defendant's transactions in a pawn shop where defendant was unaware of being filmed were properly suppressed); State v. Brown , 232 Mont. 1, 755 P.2d 1364 (1988) (holding that audio recordings between defendant and an undercover police officer were properly admitted)). We scrutinized the legal analysis of Solis and Brown and concluded that our analysis in Brown fell short because, "notwithstanding our recognition in Brown that Article II, Sections 10 and 11 of the Montana Constitution, taken together, grant rights beyond those contained in the federal constitution, our resolution of that case merely paralleled federal jurisprudence on the subject and failed to properly analyze the greater rights guaranteed by Montana's Constitution." Goetz , ¶ 22. We overruled Brown because we determined it "provides little, if any, guidance in resolving the issue before us in light of the reliance on federal jurisprudence-and limited analysis and application of the provisions of the Montana Constitution." Goetz , ¶ 24.
¶102 Here, the Majority repeats Brown's errors. It bases its rationale for overruling Anyan on federal jurisprudence while at the same time placing greater responsibility for determining reasonableness of a no-knock entry in the hands of law enforcement than federal case law supports. Therefore, I not only take issue with the Majority's decision to reach reconsideration of Anyan in the present case, but I believe the Majority's bases for choosing to overrule Anyan are unfounded.
Issue Two
¶103 As to Issue Two, I agree with Neiss that the District Court erred in denying his motion to suppress the search of the computers. Neiss makes four arguments regarding this search. First, he argues the 2013 search warrant lacked particularity, was overbroad, and offered no probable cause to justify the seizure of the computers. Next, he argues the 2015 search warrant did not validly authorize the search of the computers because it was invalid on its face and lacked particularity. Third, he argues the two-year delay in searching the computers after their seizure is unreasonable. Finally, he argues the State cannot prove the errors made regarding the denial of his motion to suppress were harmless.
¶104 Section 46-5-221(2), MCA, requires a search warrant application to state facts sufficient to support probable cause to believe evidence connected with the offense may be found. This Court assesses the totality of the circumstances to determine whether a search warrant is based upon probable cause. The official issuing the warrant must make a practical, commonsense determination, given all the evidence contained in the search warrant application, whether a fair probability exists that contraband or evidence of a crime will be found in a particular place. Probable cause must be determined from within the four corners of the application for a warrant, and the official's determination that probable cause exists is entitled to great deference, with every reasonable inference possible drawn to support the determination of probable cause. Muir , ¶ 12 (citations and internal quotations omitted).
A. The 2013 search warrant application provided insufficient probable cause to justify seizing the computers.
¶105 I agree with the Majority that the computers were seized pursuant to the March 2013 warrant, but searched pursuant to the August 2015 warrant. However, I disagree with its conclusion that both the seizure and search were lawful. The Fourth Amendment not only guarantees freedom from unreasonable searches, but freedom from unreasonable seizures. United States v. Jacobsen , 466 U.S. 109, 113, 104 S. Ct. 1652, 1656, 80 L.Ed.2d 85 (1984). The Majority provides no justification for its assertion that the 2013 seizure was lawful. The Majority addresses none of Neiss's arguments that the 2013 warrant lacked particularity, was overbroad, and did not validly authorize the seizure of the computers because it set forth no facts from which the District Court could have found probable cause to seize the computers.
¶106 Under the Fourth Amendment to the United States Constitution and Article II, Section 11, of the Montana Constitution, "[n]o warrant to search any place, or seize any person or thing shall issue without describing the place to be searched or the person or thing to be seized, or without probable cause, supported by oath or affirmation reduced to writing." "Specificity has two aspects: particularity and breadth. Particularity is the requirement that the warrant must clearly state what is sought. Breadth deals with the requirement that the scope of the warrant be limited by the probable cause on which the warrant is based." United States v. Towne , 997 F.2d 537, 544 (9th Cir. 1993) (citation omitted). The 2013 warrant is problematic in both aspects: It lacks particularity because it provides no guidance as to the type of evidence sought, and it is overbroad because the warrant is silent as to any connection the computers may have had to the homicide under investigation. Since the question raised by the 2013 warrant is the lawfulness of the seizure of the computers, rather than the lawfulness of the much later search, I focus my attention on Neiss's position that the warrant was overbroad and thus lacking probable cause to support the seizure of the computers in this case.
¶107 A search warrant must limit the scope of a search to the specific areas and things for which there is probable cause to search. By doing so, "the requirement ensures that the search will be carefully tailored to its justifications, and will not take on the character of the wide-ranging exploratory searches the Framers intended to prohibit." However, "the scope of a lawful search is defined by the object of the search and the places in which there is probable cause to believe that it may be found." Maryland v. Garrison , 480 U.S. 79, 84, 107 S. Ct. 1013, 1016, 94 L.Ed.2d 72 (1987) (citation and internal quotation omitted). As the U.S.
Supreme Court stated in United States v. Ross , 456 U.S. 798, 824, 102 S. Ct. 2157, 2172, 72 L.Ed.2d 572 (1982), "Just as probable cause to believe that a stolen lawnmower may be found in a garage will not support a warrant to search an upstairs bedroom, probable cause to believe that undocumented aliens are being transported in a van will not justify a warrantless search of a suitcase."
¶108 Also, there must be a nexus between the item to be seized and criminal behavior. State v. Quigg , 155 Mont. 119, 132, 467 P.2d 692, 699 (1970). The 2013 warrant application set forth a list of items to be seized, including, "Cell phones, IPads, computers and/or other electronic devices and the information contained therein' [sic]." The application described no nexus between the presence of computers within Neiss's home and Greene's homicide. In fact, as set forth more fully below, the only justification for searching the computers that law enforcement ever articulated came about as a result of either the 2013 search in which the computers were seized or in a later 2014 search of Neiss's shop building. None of the allegations recited in the application described the use of a phone or electronic device. All of the confrontations between Neiss and Greene described in the application occurred in person. There is no instance of Neiss calling, texting, or emailing described in the application, nor are there any allegations that Neiss used social media to pursue his dispute with Greene, nor any allegations that Neiss used the computers in any way to further the conflict. Although on appeal the State maintains that the dispute between Neiss and Greene could have spilled over into social media, this is not suggested in the warrant application and there is no evidence that Neiss even maintained any social media or email accounts.
¶109 In this case, the warrant application listed computers among the items to be seized for unknown reasons. Although the District Court concluded that the ubiquity of electronic and social media communication established a reason to seize them, the warrant application only recited facts supporting the seizure of physical objects: A seizure and search of the computers was not going to yield tennis shoes, guns, ammunition or casings, a silencer, nor blood, tissue, or DNA evidence.
¶110 Although the Majority relies upon Lacey to argue that the lawfulness of a seizure is irrelevant so long as any subsequent search of the unlawfully seized items occurs pursuant to a second, lawful search warrant, the Majority's position is inconsistent with the holdings of Quigg , State v. Seader , 1999 MT 290, ¶¶ 14-16, 297 Mont. 60, 990 P.2d 180 (evidence seized pursuant to an overbroad warrant must be suppressed), and Hauge v. Dist. Court , 2001 MT 255, ¶ 19, 307 Mont. 195, 36 P.3d 947 (evidence seized pursuant to an overbroad provision within an otherwise lawful warrant must be suppressed), which require the seizure itself to also be lawful. I disagree that the seizure was lawful and, as explained below, I further disagree with the Majority's position that an unlawful seizure can be cured after the fact by a post-seizure application for a search warrant.
B. The 2015 search warrant application lacked particularity and probable cause.
¶111 Because I would conclude the computers were not lawfully seized under the 2013 warrant, my analysis of the search of the computers under the 2015 search warrant starts from a different place than the Majority's analysis. First, I do not agree with the Majority that Neiss did not properly preserve for appeal his argument that the 2015 search warrant was invalid on its face and lacked particularity. In its appellate brief, the State asserts Neiss did not argue this in the District Court. However, Neiss presented these arguments to the District Court. In fact, he devoted nearly two full pages of his eight-page September 9, 2015 Motion to Suppress Evidence Obtained from Search of Computers and Brief in Support to these arguments, stating in part:
[W]hen applying for the [2015] warrant, the State has failed to allege sufficient facts for this Court to find probable cause for the search.... [T]he State makes a vague reference in the search warrant application to a "consideration" ... as to whether the computers "had been utilized to access the internet, store documents or complete other tasks...." [This] means nothing.
The statement that computer print outs were located during the search ... provides little to establish probable cause, especially in the absence of any information as to what the computer print outs may have revealed.... The search warrant is void of specific facts.... [W]ithout including information as to what documents were printed, this information does nothing to support a finding of probable cause.
The statement that "Investigators were interested to know if the computers had been used to obtain information about silencers or other firearms[-]related questions ..." also does not provide probable cause that evidence will be located on the computer[s]. What investigators were interested to know is irrelevant.... It[']s devoid of facts and fails to support a finding of probable cause.
Finally, the State provides information that investigators "were aware" that ... the Defendant hand wrote a letter detailing his history with Greene. From this, even though the letter was handwritten, the Investigators "thought it was possible that Neiss may have kept a journal or log of events on one or more of the computers." ... [T]he "possibility" of keeping a journal on a computer again does not provide any facts to support a finding of probable cause to search the computer. While an investigator does not need to be certain evidence will be located-a mere "possibility" is insufficient ... to establish probable cause.
¶112 After Neiss filed this motion and brief, on September 14, 2015, the District Court convened an in-chambers pretrial conference. Noting it was aware Neiss had offered several arguments regarding the seizure and search of the computers, the court asked Neiss's counsel to enumerate the issues on the record. Along with other issues, counsel stated, "on the eve of trial deciding to get a second search warrant to have [the computers] searched, and then, again, that search warrant not being specifically particularized as to the reason to search it at all." In post-conference supplemental briefing, Neiss again argued to the District Court that the existence of a handwritten letter, which the 2015 search warrant application used as a basis for probable cause, could not provide probable cause to search computers.
¶113 Because I conclude Neiss properly preserved these arguments for appeal, I would consider their merits.
¶114 The 2015 application for search warrant offers three bases to search the computers: the discovery of a handwritten letter during the March 2013 search, "computer print outs" which investigators "noted" during the March 2013 search "that would indicate that someone had been actively using a computer," and the discovery of a possible homemade silencer during an August 2014 search, which made investigators "interested to know" if anyone had used the computers to search for information about silencers or other firearms-related questions. I find these bases, without more, inadequate to establish probable cause under Hauge . There, we stated:
The Fourth Amendment to the United States Constitution requires that a search warrant "particularly describe the place to be searched, and the persons or things to be seized." While Article II, Section 11 of the Montana Constitution does not use the word "particularly," this Court has held that the Montana Constitution does impose a particularity requirement identical to that under the United States Constitution. See State v. Ballew (1973), 163 Mont. 257, 261, 516 P.2d 1159, 1161-62. In addition, § 46-5-221(4), MCA, requires that a judge issue a search warrant that "particularly describes who or what is to be seized."
The United States Supreme Court has determined that the requirement of particularity serves to prevent a "general, exploratory rummaging in a person's belongings." Coolidge v. New Hampshire (1971), 403 U.S. 443, 467, 91 S. Ct. 2022, 2038, 29 L.Ed.2d 564. And that nothing regarding what is to be taken should be left to the discretion of the officer executing the warrant. Stanford v. Texas (1965), 379 U.S. 476, 485, 85 S. Ct. 506, 512, 13 L.Ed.2d 431.
Hauge , ¶¶ 13-14.
¶115 Under the facts of the present case, law enforcement conducted a "general, exploratory rummaging" of Neiss's computer based on thin justification. First, rather than supporting the theory that Neiss may have kept a journal or other document on the computer regarding his conflict with Greene, the existence of a handwritten letter suggests Neiss did not use a computer for such things. I therefore do not find this statement provides probable cause for a computer search. More compellingly, when the State sent the computers for analysis after obtaining the search warrant, the State asked the expert only to examine the computers for information on Internet searches and web pages visited. It did not ask the expert to search for documents such as a journal that Neiss may have kept on the computers. Either the State did not genuinely believe the handwritten letter indicated similar information might be found on the computers, or the State did not believe such information would prove useful to its investigation. Since the State did not even attempt to locate the information it used as a basis for its search warrant, I would find this to be a pretext unworthy of consideration as a legitimate justification for the search warrant.
¶116 Next, during the hearing on Neiss's motion to suppress the computer evidence on December 7, 2015, Detective Frank Fritz testified that these "print outs," which were not enumerated in the application, consisted of a single "printout on an Internet search for a lathe," but investigators did not seize this document, or any other computer printout, and he could not recall seeing any other printouts during the March 2013 search. Neiss offered a witness whose unrefuted testimony was that in the fall of 2013, he sold Neiss a metal lathe appropriate for use in an automotive shop for such things as making drive shafts and turning brake drums and brake rotors, but that would not be useful for manufacturing a silencer or suppressor. The fact that Neiss, an auto mechanic, apparently searched on the Internet for a tool useful for automotive purposes does not provide probable cause to search the computer for evidence he used the computer to conduct Internet searches about silencers or suppressors. Furthermore, the uncontroverted evidence is that Neiss purchased a lathe in the fall of 2013; even if he had wanted a metal lathe to attempt to manufacture a silencer or suppressor, there is no evidence he owned a metal lathe until several months after Greene's death-long after his purported need for a silencer had passed.
¶117 Finally, a mere "interest[ ] to know" if Neiss may have searched the Internet for information on silencers in no way provides anything beyond baseless speculation. By this point in the investigation, officers had interviewed multiple witnesses, including Neiss's son, who described Neiss attaching something to the barrel of a gun before firing it. None of those witnesses apparently mentioned anything about Neiss conducting Internet research for this purpose. Given Neiss's well-known enthusiasm for guns and for tinkering with projects in his well-stocked workshop, there is no reason to assume Neiss needed to conduct Internet research in order to build a homemade silencer or suppressor.
¶118 Equally as troubling, as Neiss points out, is that the information which officers relied upon to apply to search the computers for Internet research was obtained after a search of Neiss's workshop in 2014. As Neiss argues, the State cannot seize a person's possessions prospectively and wait for probable cause for a search to develop a year or more later. Even assuming a colorable argument could be made that investigators properly seized the computers to preserve the evidence while they applied for a warrant to search them, I would conclude the search warrant was invalid because of the approximate one-year delay in applying for it after uncovering this evidence for reasons more fully set forth below.
¶119 The Majority's reliance on Lacey is misplaced because it misapprehends this Court's basis for upholding the search in Lacey . In Lacey , officers relied on the consent of Lacey's girlfriend to seize Lacey's laptop. Lacey , ¶ 5. Prior to a search of the laptop, Lacey admitted to law enforcement that the laptop contained child pornography. Lacey , ¶ 15. Officers then obtained a warrant to search the laptop. Lacey , ¶ 18. Lacey moved to suppress the evidence recovered, arguing the laptop had been illegally seized because his girlfriend had no authority to consent. Lacey , ¶ 19. The District Court disagreed, ruling that Lacey's girlfriend had the authority to consent to the seizure and search. Lacey , ¶ 20. On appeal, after concluding that Lacey's girlfriend did not have the authority to consent to the seizure, this Court held that the evidence on the laptop was admissible under the "inevitable discovery" doctrine. Lacey , ¶ 52. Under this exception, evidence the State initially obtains illegally may be used against a defendant if the State shows that the evidence would have been inevitably discovered despite a constitutional violation. Lacey , ¶ 55 (citations omitted). The Court based its decision that the laptop evidence was subject to inevitable discovery because it concluded that, had the police not seized the laptop pursuant to Lacey's girlfriend's consent, the evidence they uncovered during a search of Lacey's residence conducted pursuant to a search warrant the following day would have provided probable cause to seize the laptop. Lacey , ¶ 56.
¶120 The Majority glosses over Lacey's reliance on the inevitable discovery doctrine and focuses on the fact that the search warrant obtained after the seizure was a lawful warrant. However, this Court did not decide that the laptop evidence was admissible in Lacey because the warrant was lawful, but rather because the it fell under an exception to the "fruit of the poisonous tree" doctrine because the warrant was not clearly lawful. Lacey , ¶ 52. "Inevitable discovery" is a much harder sell in the present case. Unlike in Lacey , where law enforcement uncovered evidence pursuant to a valid search warrant to provide probable cause for searching the laptop one day after seizing it, in Neiss's case, law enforcement relied on evidence it uncovered over a year after seizing the computers in order to allege probable cause in its application for the 2015 warrant. The inevitable discovery doctrine is stretched beyond recognition if we allow law enforcement to unlawfully seize someone's possessions and then hold onto them for years while waiting to uncover probable cause to search those possessions.
¶121 For these reasons, I would conclude the District Court erred in denying Neiss's motion to suppress the search of the computers because the 2015 warrant lacked probable cause.
C. The two-and-a-half-year delay in applying for a warrant made the search unreasonable.
¶122 As to the delay, because the Majority determined the 2013 seizure was valid, it found Mitchell inapplicable. However, since I would hold the 2013 seizure was not pursuant to a valid search warrant, I would apply Mitchell to this case.
¶123 In Mitchell , federal agents entered the defendant's residence with his consent and spoke with him about a child pornography investigation. The defendant admitted one of the home's computers "probably" contained child pornography. The agents seized a hard drive without a warrant. Mitchell , 565 F.3d at 1349. Twenty-one days later, one of the agents applied for and received a warrant to search the hard drive, and upon searching it, discovered child pornography. Mitchell , 565 F.3d at 1349-50. The defendant's motion to suppress was denied. Mitchell , 565 F.3d at 1350. The Eleventh Circuit Court of Appeals reversed, finding the 21-day delay in obtaining the warrant, which the applying agent explained occurred because he was gone for two weeks and did not see any urgency to apply for the warrant, to be unreasonable. It held unreasonable delay in securing a warrant renders a seizure unconstitutional. Mitchell , 565 F.3d at 1350. Finding no compelling justification for the delay, the court explained:
Computers are relied upon heavily for personal and business use. Individuals may store personal letters, e-mails, financial information, passwords, family photos, and countless other items of a personal nature in electronic form on their computer hard drives. Thus, the detention of the hard drive for over three weeks before a warrant was sought constitutes a significant interference with Mitchell's possessory interest.
Mitchell , 565 F.3d at 1351. The Court of Appeals found it particularly significant that the seized item was a computer, noting that ordinarily, if a search reveals nothing incriminating, the sooner the warrant issues, the sooner the property owner's possessory rights can be restored, but "this consideration applies with even greater force to the hard drive of a computer, which is the digital equivalent of its owner's home, capable of holding a universe of private information." Mitchell , 565 F.3d at 1352 (citations and internal quotation omitted).
¶124 Relying in part on Mitchell , in United States v. Laist , 702 F.3d 608, 614 (11th Cir. 2012), the Court of Appeals set forth three non-exhaustive factors to consider in determining whether the delay in obtaining a search warrant was unreasonable: the nature and complexity of the investigation and whether overriding circumstances diverted law enforcement personnel to another case; the quality of the warrant application and the amount of time such a warrant would take to prepare; and any other evidence proving or disproving law enforcement's diligence in obtaining the warrant.
¶125 On May 14, 2015, this case was set for trial to begin September 14, 2015. However, on the morning of trial, the District Court convened an in-chambers pretrial conference prior to voir dire to discuss pending issues, including Neiss's motion to suppress the computer evidence. In arguing for suppression, Neiss's counsel argued the State unreasonably held the computers for two and a half years prior to searching them pursuant to a last-minute warrant. Since the State did not provide Neiss with the results of its computer forensic investigation until August 28, 2015, Neiss had had insufficient time to retain an expert to review the evidence. At this conference, the State admitted it had forgotten the computers were seized during the March 2013 search, and it was not until April or May 2015, while reviewing evidence with the defense, that it realized the computers were in its custody. The State further claimed it decided not to act at that point because the District Court had not yet ruled on the validity of the March 2013 search. As to Neiss's allegation that the late disclosure allowed him insufficient time to retain an expert witness, the State argued the remedy should be a continuance and not exclusion. After further discussion, and at the recommendation of the court, the parties stipulated to continuing the trial to provide the court time to rule on the pending motions.
¶126 On December 7, 2015, the District Court held an evidentiary hearing on Neiss's motion to suppress the computer evidence. Detective Fritz also testified at that hearing and offered no explanation for the two-and-a-half-year delay to search the computers.
¶127 Applying the Laist factors here to evaluate the reasonableness of the delay, while this could arguably be construed as a complex investigation, there is no evidence law enforcement was diverted to another case, nor was the complexity a genuine factor in the delay to seek a search warrant for the computers, as the State admitted the delay occurred because it forgot to search the computers sooner and then it decided to wait and see how the District Court ruled on a pending suppression motion. In other words, like the agent in Mitchell , it saw no urgency to seek a warrant. As to the second factor, as set forth more fully above, the warrant contained insufficient information to constitute probable cause and was therefore not of particularly noteworthy quality. Additionally, nothing in the contents of the search warrant application justifies the State's decision to wait from April or May 2015, when it realized it had the computers, until August 2015, when it applied for a warrant to search them. As to the third factor, the evidence presented indicates that law enforcement was not diligent in pursuing this search warrant. They allowed the computers to sit in custody for years prior to filing, and even once they recognized the omission, they failed to act with any urgency to search. Although these factors are non-exhaustive, they all clearly preponderate against the State and therefore support the conclusion that the 2015 search was unreasonable.
¶128 The State's counter-arguments are not persuasive. First, it maintained there was no unreasonable delay in searching because there were "only a few days gap between the issuance of the second warrant and the analysis of the computers." However, the time between the issuance of the 2015 warrant and the search is not the gap at issue. Next, it argues the computers were validly seized. However, even pursuant to a valid seizure, items cannot be held indefinitely. This is particularly remarkable in this case, where the State relied on evidence it obtained after it seized the computers to allege probable cause to search the computers. Next, the State argues the 2015 warrant application was unnecessary, but only pursued out of an abundance of caution. Clearly, the officers believed the additional warrant was necessary-especially since no justification for searching the computers exists in the 2013 search warrant application-or they would not have sought it.
¶129 For these reasons, I would hold that the District Court erred in denying Neiss's motion to suppress the computer searches because the State's two-and-a-half-year delay in searching the computers was unreasonable.
D. Admitting the computer searches into evidence was not harmless error.
¶130 A cause may not be reversed by reason of any error committed by the trial court against the convicted person unless the record shows that the error was prejudicial. Section 46-20-701(1), MCA. Once a convicted person establishes evidence was erroneously admitted and has alleged a reasonable possibility exists that the inadmissible evidence might have contributed to his conviction, the burden is on the State to demonstrate the error was not prejudicial. State v. Van Kirk , 2001 MT 184, ¶ 42, 306 Mont. 215, 32 P.3d 735 (citation omitted). Reversal is not required where there is no reasonable possibility that inadmissible evidence might have contributed to a conviction. Van Kirk , ¶ 47.
¶131 Neiss maintains that in a case built entirely upon circumstantial evidence, the State's reliance on the computer evidence was substantial. In the absence of a murder weapon, eyewitnesses, DNA evidence, fingerprints, definitive gunshot residue test results, or even tying Neiss to the footprints found on Greene's property, the State used the computer's search history to argue that Neiss planned Greene's homicide.
¶132 Conversely, the State argues it presented a strong circumstantial case, and Neiss's counsel skillfully undercut the value of the computer evidence such that it could not possibly have contributed to his conviction.
¶133 When considering tainted evidence, our focus is on the quality of the tainted evidence and its impact upon the fact-finder. State v. Santillan , 2017 MT 314, ¶ 35, 390 Mont. 25, 408 P.3d 130 (citations omitted). This inquiry does not require the Court to definitively state whether the tainted evidence actually influenced the jury's decision to convict, but requires the State to demonstrate there is no reasonable possibility that the tainted evidence might have contributed to the conviction. State v. Reichmand , 2010 MT 228, ¶ 23, 358 Mont. 68, 243 P.3d 423 (citation omitted) (emphasis in original).
¶134 To meet its burden of demonstrating that the error in admitting the computer evidence did not prejudice Neiss, the State points to the following evidence, which it maintains secured Neiss's conviction: Neiss had a motive to kill Greene; Neiss had the opportunity to kill Greene; cartridge cases fired from the murder weapon were located near Neiss's home; shoeprints led to and from Neiss's property; Neiss had gunshot residue on his face and hands when he was detained on the night of Greene's death; evidence indicated the shooter used a suppressor and Neiss's son testified that Neiss had used a homemade suppressor; and, an item alleged to be a homemade suppressor was entered into evidence.
¶135 The evidence the State highlights is not so unequivocal as the State would suggest. Although the State argued Neiss had the opportunity to kill Greene, Neiss's son and mother both provided an alibi, testifying Neiss was at home watching a movie with his son at the time of Greene's death. It is true investigators found cartridge cases near Neiss's home that were likely fired from the murder weapon. However, the evidence demonstrated that many individuals, including Greene before he and Neiss had a falling-out, shot firearms on Neiss's property. Neiss's property had a fence post which he and his guests used for target practice. Travis Spinder, the supervisor of the firearm and toolmark section of the State Crime Lab, testified that investigators found over 120 .40-caliber bullet casings on Neiss's property. Of those, 11 had markings consistent with being ejected from the murder weapon. However, Spinder further testified that these 11 casings were of a different manufacture than the five casings retrieved from the crime scene. These casings were also weathered and Spinder opined they had been exposed to the elements "for a while," requiring multiple cleanings before he could compare them. Aside from the presence of the casings, the State offered no evidence Neiss owned a .40-caliber weapon or that he was the individual who fired the .40-caliber gun on his property.
¶136 Although the State's theory was that Neiss manufactured a homemade suppressor and used it to shoot Greene, the State's theory was based solely on the lack of witnesses who heard gunshots. However, Manda Schaible, Greene's girlfriend who discovered his body, initially informed the 911 dispatcher that she had heard a gunshot, and Detective Bancroft, who interviewed Schaible on the night of the murder, also testified Schaible told him she heard a gunshot. At trial, Schaible insisted she did not hear any gunshots, testifying that shortly after turning off loud music, she heard a "metal-sounding loud noise" that she did not investigate.
¶137 Neiss's son testified Neiss used to own three guns-a shotgun, a .22, and a non-functioning .45-but Neiss got rid of the guns three or four years before Greene's death. On one occasion, Neiss attached a flashlight tube to the barrel of the .22 and it made a "whew" sound when he shot it. Thus, not only was there no direct evidence a suppressor was used in Greene's murder, there is no substantial evidence that Neiss ever owned a .40-caliber gun, and the only evidence outside of the computer searches that connects Neiss to a suppressor of any kind is a single occasion when he fired a .22 through a flashlight tube some three or four years earlier.
¶138 As to the shoeprint evidence, the State proved that footprints found on Greene's property were made by a pair of men's Nike tennis shoes. No tennis shoes were found when Neiss's home was searched. No witness testified that Neiss owned tennis shoes. Even the police who detained Neiss on the night of Greene's death were unable to state that Neiss was wearing tennis shoes. Neiss's mother testified that Neiss did not own tennis shoes in March 2013. Neiss's girlfriend testified he typically wore work boots. Moreover, nothing tied these footprints to the murder. Investigators, who were not trained in footprint analysis, saw footprints on Greene's property going "in the general direction" of Neiss's property. They did not locate any footprints actually leading up to the property boundary, nor did they look for any footprints beyond the boundaries of Greene's property. They further did not definitively rule out the possibility that the footprints could have been left by any of the numerous visitors Greene had had on the day of his murder.
¶139 Next, the evidence of gunshot residue on Neiss's face and hands was anything but conclusive. Bahne Klietz, the gunshot residue expert for the State Crime Lab, testified that gunshot residue typically consists of lead, barium, and antimony in a spherical or melted shape. A particle that is "characteristic of" gunshot residue fits that description. A particle that is "indicative of" gunshot residue only partially fits that description. Klietz found thousands of particles on Neiss which contained various metals, and Klietz conceded that the majority of these particles appeared "environmental or occupational." Of the 3,400 metallic particles Klietz found on Neiss's right hand, one particle was indicative of gunshot residue. Klietz also found three particles characteristic of gunshot residue and six particles indicative of gunshot residue on Neiss's left hand, and three particles characteristic of gunshot residue and one particle indicative of gunshot residue on his face.
¶140 However, Klietz also found four particles indicative of gunshot residue on Schaible's right hand, while Neiss's girlfriend had five particles characteristic of gunshot residue and six particles indicative of gunshot residue on her right hand, and four particles characteristic of gunshot residue and one particle indicative of gunshot residue on her left hand. Moreover, Greene's friend Ronald Mikel testified that Schaible called him hours after Greene's murder and asked if gunshot residue would wash off in the shower.
¶141 Most importantly, none of the evidence the State points to covers the same ground as the computer evidence. The State offered the computer evidence for the purpose of proving that Neiss planned to kill Greene. In its opening statement, it declared:
FBI Agent Matt Salacinski ... will tell you that on one of those computers, he found a number of searches that were done on that computer in the two months immediately prior to [Greene's] death.
Those searches and those websites viewed include websites on the manufacture and use of suppressors and videos showing how to manufacture suppressors and the effectiveness of suppressors. He will also tell you that in those two months there were searches on the Defendant's computer and websites visited on the legal definition of murder, and videos and websites showing scenes and videos that were caught on different cameras of murder, and a Wikipedia page that included a number of murder trials. He also looked up-someone on that computer looked up the legal definition of self-defense.
¶142 On the witness stand, Salacinski, who conducted a forensic examination of the seized computers, testified that he searched for 23 keywords selected by the investigators in web browser use and Internet searches. He produced reports of the keywords he found in the browser history for January and February 2013, including "silencer" and "murder." Salacinski later conducted further examination with some additional keywords, including "suppressor." The jury was shown three exhibits listing the results of Salacinski's investigation. Two exhibits listed visited web pages which contained one or more of the keywords. The web pages were listed by URL, title, date and time visited, and the number of times each page was visited. Most websites listed were for YouTube videos of silencers or suppressors with titles such as "Suppressed beretta" and "10/22 SBR with silencer." The results also listed two Billings Gazette articles about murder trials, as well as searches for the definition of "first degree murder." The third exhibit listed three occasions on which someone had used a search engine to look for "suppressed."
¶143 We developed our modern harmless error analysis in Van Kirk . There, we held, in cases of trial error, we would utilize the "cumulative evidence" test to determine if the State had demonstrated that the error was not prejudicial to the defendant. Van Kirk , ¶¶ 43-44. Under this test, the State must direct us to admissible evidence that proved the same facts as the tainted evidence, and must also demonstrate that the quality of the tainted evidence was such that there was no reasonable possibility that it might have contributed to the defendant's conviction. Van Kirk , ¶ 44. We further stated, "We readily acknowledge that there will be cases in which there was no other admissible evidence proving the same facts that the tainted evidence proved, making the burden of producing cumulative evidence of the fact impossible." Van Kirk , ¶ 45. The present case is such a case. The State used the computer evidence to attempt to prove Neiss had spent time planning Greene's murder. The State points to no other evidence that demonstrates Neiss planned to shoot Greene with a silenced or suppressed firearm.
¶144 Under the harmless error standard of Van Kirk , the State has failed to demonstrate there is no reasonable possibility that inadmissible evidence might have contributed to Neiss's conviction. For this reason, I would reverse and remand for a new trial.
Justice Dirk Sandefur joins the Concurring and Dissenting Opinion of Justice Gustafson.
Neiss does not challenge the validity of the August 12, 2014 warrant.
The dissent contends Neiss devoted nearly two pages in a motion to suppress to an argument that the August 2015 warrant lacked particularity. However, the paragraphs the dissent cites relate instead to Neiss's objection about whether probable cause supported the warrant. Dissent, ¶ 112. Furthermore, defense counsel's cursory remark during the September 14, 2015 hearing that the warrant was not "specifically particularized as to the reason to search" conflates probable cause with particularity because only probable cause relates to the reason for a search. Neiss's supplemental briefing following the conference-by leaving out any argument about the warrant's particularity-confirms this. Whether a warrant lacks particularity and whether probable cause supports it are distinct issues. Neiss may not change theories about the warrant's alleged deficiencies on appeal. See Kuneff , ¶ 26.
This analogy is not unique to Montana. The Colorado Supreme Court, for example, stated that the "container rationale is equally applicable to nontraditional, technological 'containers' that are reasonably likely to hold information in less tangible forms." People v. Gall , 30 P.3d 145, 153 (Colo. 2001) ; see also People v. Swietlicki , 361 P.3d 411, 414 (Colo. 2015) ("We have previously characterized computers as containers for purposes of search and seizure law.").
In 2005, Thomas K. Clancy, then the director of the National Center for Justice and the Rule of Law and a visiting professor at the University of Mississippi School of Law, observed:
Many courts view data in computer storage as a form of a document. Hence, a warrant that authorizes a search for "writings" or "records" permits a search of computer files. This is to say that the government need not know the exact "form that records may take." Indeed, this view asserts that there is "no principled distinction between records kept electronically and those in paper form" and, hence, there is "no justification for favoring those who are capable of storing their records on computer over those who keep hard copies of their records." In both instances, consistent with [Andresen v. Md. , 427 U.S. 463, 96 S. Ct. 2737, 49 L.Ed.2d 627 (1976) ], "innocuous documents may be scanned to ascertain their relevancy" in "recognition of the reality that few people keep documents of their criminal transactions in a folder marked 'crime records.' "
Courts adopting this view have often analogized computers to filing cabinets or to containers ....
Thomas K. Clancy, Symposium: The Search and Seizure of Computers and Electronic Evidence: The Fourth Amendment Aspects of Computer Searches and Seizures: A Perspective and a Primer , 75 Miss. L.J. 193, 197-98 (2005) (internal footnotes omitted).
Section 46-5-112, MCA, which went into effect in 2017, states, "[A] government entity may not obtain the stored data of an electronic device without a search warrant issued by a court upon a finding of probable cause." Although the statute went into effect well after the events in Neiss's case, we note that when officers secured the August 2015 Warrant they complied with the statute's provisions.
Although the warrant also sought "Indicia of Occupancy/Ownership in the form of documents, receipts, statements, mail, billing statements, letters, notes, vehicle registration/titles," neither law enforcement, the parties, nor the District Court have suggested that any of these items could potentially be found on the computers, nor did the State ultimately search the computers for evidence of any of these items.
While the State minimizes the value of this evidence in support of its argument here, in its appellate brief, the State found this evidence valuable enough to point out to this Court, reciting in detail the computer searches and website browsing history its investigation uncovered under the heading "Other evidence of Neiss's guilt ." (Emphasis in original.) | [
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] |
Justice Beth Baker delivered the Opinion of the Court.
¶1 Sharon J. Speck appeals an order of the First Judicial District Court, Lewis and Clark County, affirming the Findings of Fact, Conclusions of Law, Order and Judgment of the Lewis and Clark County Justice Court. The Justice Court's order enjoined Speck from feeding birds within 100 feet of her shared property line in the city of Helena with Hunter Simpkins and Patrick Gustin (collectively "Plaintiffs") and prohibited her from maintaining open water during winter months. We restate the issues Speck raises on appeal as follows:
1. Did the Justice Court abuse its discretion in granting injunctive relief on the ground that Speck's feeding of wild birds constituted a nuisance?
2. Was the Justice Court's injunction overly broad?
We affirm in part and reverse and remand in part.
PROCEDURAL AND FACTUAL BACKGROUND
¶2 Speck, a local member of the Audubon Society, grew up in what she described as a bird-feeding family and has fed birds in her yard for most of her life. Speck now lives in Helena, and her home sits on a 25-by-125-foot lot. In her yard, Speck planted specific varieties of trees and shrubs to promote a bird-friendly habitat. To attract multiple species of wild birds, Speck utilized a variety of feeds and feeding methods, such as different hanging bird feeders and ground feeding. The feeding she provided changed with the seasons: during winter months, she provided additional feed and maintained a heated bird bath to ensure that wild birds would have an unfrozen source of water.
¶3 Plaintiffs moved in next door to Speck about four or five years before the trial in this case. From the time Plaintiffs first moved in, Gustin observed Speck feed birds in her yard on a regular basis. The birds feeding in Speck's yard congregated on a power line running along the property line and landed in the trees in Plaintiffs' yard. Plaintiffs regularly found bird excrement on their property and on vehicles parked in their driveway, endured bird calls from dawn to dusk, and discovered feathers, dismembered birds, and bird carcasses in their yard. Gustin witnessed pigeons, magpies, and crows coming to and from a large patch of ground along their shared property line where Speck spread feed on the ground.
¶4 Gustin confronted Speck twice in January 2017 about her bird feeding. On or around January 11, 2017, Gustin caught Speck while she was on her way to work to complain about bird carcasses and excrement on his property. Their next encounter about the issue occurred three days later while Speck was spreading bird feed on the ground in her yard. Speck told Gustin that she could not ethically stop feeding the birds at that time because the birds had become habituated to her feedings in winter. After their confrontation, however, Speck attempted to mitigate Gustin's concerns by moving her ground feeding area to the center of her back yard and then to her side yard and by reducing the amount of feed she provided in summer.
¶5 Plaintiffs filed a complaint against Speck in Justice Court on February 9, 2017, alleging trespass, negligence, and nuisance and seeking injunctive relief to prohibit Speck from feeding wild birds within 150 feet of their property. The Justice Court held a bench trial on May 31, 2017. Speck and Gustin testified and provided photographic and video evidence. After the bench trial, the Justice Court determined that Speck had not trespassed onto Plaintiffs' property. It found, however, that Speck was negligent in her bird feeding and caused a nuisance. The court ordered Speck to pay the costs of having Plaintiffs' cars professionally cleaned and enjoined her from feeding birds within 100 feet of Plaintiffs' property and from maintaining open water during winter months. Speck appealed to the District Court, which affirmed the Justice Court's judgment.
STANDARDS OF REVIEW
¶6 We review an appeal from a justice court as if the appeal originally had been filed in this Court. Stanley v. Lemire , 2006 MT 304, ¶ 26, 334 Mont. 489, 148 P.3d 643.
¶7 We review a finding of fact for clear error. Stanley , ¶ 26. A finding of fact is clearly erroneous if it is not supported by substantial evidence, if the trial court misapprehended the effect of the evidence, or if our review of the record convinces us that a mistake has been committed. In re Eldorado Coop Canal Co. , 2016 MT 94, ¶ 17, 383 Mont. 205, 369 P.3d 1034.
¶8 We review the granting of a permanent injunction for a manifest abuse of discretion. Shammel v. Canyon Res. Corp. , 2003 MT 372, ¶ 12, 319 Mont. 132, 82 P.3d 912.
DISCUSSION
¶9 1. Did the Justice Court abuse its discretion in granting injunctive relief on the ground that Speck's feeding of wild birds constituted a nuisance?
¶10 Speck first challenges four of the Justice Court's factual findings as clearly erroneous. Specifically, Speck challenges the Justice Court's findings that she "provided food for several birds, including pigeons, crows, and magpies, in her back yard for a significant amount of time," that she "has stated ... she will not stop feeding the birds in her customary manner," that her feeding damaged Plaintiffs' soil, and that her feedings caused an "uncommonly large amount of bird droppings" to accumulate on Plaintiffs' property.
¶11 Our review of a Justice Court's factual findings is limited to determining whether the Justice Court committed clear error. Stanley , ¶ 26. Speck testified that she uses hanging bird feeders and spreads bird feed on the ground to attract multiple species of wild birds. She does not strive to feed pigeons, but does like Eurasian collared doves. She testified that the different feeding methods attract different species of birds. Speck testified that on or around January 11, 2017, was the first time Gustin approached her about dead birds, bird parts, and excessive droppings on his property. Gustin filmed their next interaction three days later, and the Justice Court admitted the video into evidence. In the video, Speck tells Gustin that she cannot stop feeding the birds in winter, because it would be unethical to do so. She testified, however, that after Gustin confronted her she adjusted her bird feedings by moving her ground feeding to the center of her backyard and her side yard, rather than along the back of her property line under the caragana bushes and ash tree. She further testified that she substantially decreased the amount of feed she provides in summer.
¶12 Gustin testified that he sees Speck feed the birds a couple of times a day using bird feeders and spreading feed on the ground. He testified that because of Speck's feedings there are bird droppings on his property, driveway, and vehicles, that there is noise from dawn to dusk, and that there are feathers, dead birds, and dismembered birds in his yard. Gustin provided photographs and videos that the Justice Court admitted into evidence showing the number of birds congregating on the power line along the shared property line after Speck fed birds on the ground in her backyard and showing the bird droppings and feathers on his vehicles and property.
¶13 Based on the testimony and evidence presented to the court, we do not find clear error in the Justice Court's findings that Speck fed birds, causing droppings and feathers to accumulate on Plaintiffs' property. Further, in the videotaped interaction between Speck and Gustin, Speck said she would not stop feeding the birds because it would be unethical to do so in winter, supporting the Justice Court's finding that "Speck has stated ... she will not stop feeding the birds in her customary manner." Her testimony, nonetheless, established that she attempted to adjust her feedings to address the issues Gustin raised with her. Although the Justice Court's finding took Speck's statements out of context, Gustin's testimony and video evidence, including evidence filmed three months after their January confrontations, show that Speck's efforts largely were ineffective at reducing the number of unwanted bird species congregating on and near Plaintiffs' property. We do agree with Speck, however, that substantial evidence did not support the finding that Plaintiffs' soil was damaged.
¶14 Speck argues that the evidence presented to the court did not support its ruling that she acted negligently and created a nuisance. Speck maintains that bird feeding is a lawful activity and that Plaintiffs did not provide evidence that she fed birds negligently. Rather, the evidence showed that she used commercially available bird feeders and feed and engaged in bird feeding practices similar to those employed by other similarly situated persons in the local bird feeding community.
¶15 We review conclusions of law for correctness. Stanley , ¶ 26. Section 27-30-101(1), MCA, defines nuisance as "[a]nything that is injurious to health, indecent or offensive to the senses, or an obstruction to the free use of property, so as to interfere with the comfortable enjoyment of life or property." When considering what constitutes interference with a property owner's comfortable enjoyment of his or her property, "it is the ordinary and reasonable person's complaint that should serve as a basis for what is a nuisance." Kasala v. Kalispell Pee Wee Baseball League , 151 Mont. 109, 114, 439 P.2d 65, 68 (1968). "A nuisance action may be based upon conduct of a defendant that is either intentional, negligent, reckless, or ultrahazardous." Barnes v. City of Thompson Falls , 1999 MT 77, ¶ 16, 294 Mont. 76, 979 P.2d 1275. An action may "become[ ] a nuisance by virtue of circumstances and surroundings." Barnes , ¶ 17. A nuisance based on negligent conduct "consists of anything lawfully but so negligently or carelessly done or permitted as to create a potential and unreasonable risk of harm, which, in due course, results in injury to another." Barnes , ¶ 18. "A negligence action has four elements: (1) duty; (2) breach of duty; (3) causation; and (4) damages." Henricksen v. State , 2004 MT 20, ¶ 20, 319 Mont. 307, 84 P.3d 38. All persons have a general duty of care "to abstain from injuring the person or property of another or infringing upon any of another person's rights." Section 28-1-201, MCA.
¶16 The Justice Court found that Speck created and maintained a nuisance and that she was negligent in the manner in which she fed birds in her yard. Speck protests that bird feeding is legal and that her feeding practices are similar to those used by other members of the local bird feeding community. But an action that is otherwise lawful may create a nuisance depending on the circumstances and surroundings. Barnes , ¶ 17. Evidence showed that a power line runs along the parties' property line upon which birds that ground feed in Speck's yard gather. Further, Gustin testified that the trees on his property are much larger than those in Speck's yard and that the birds land in the trees on his property coming to and from Speck's yard. Although the manner in which Speck feeds birds may not be negligent or a nuisance in different surroundings, the evidence supported the Justice Court's conclusion that the manner of feeding was negligent and created a nuisance under these circumstances. The court did not manifestly abuse its discretion in deciding to issue injunctive relief on this basis.
¶17 2. Was the Justice Court's injunction overly broad?
¶18 Finally, Speck argues that the Justice Court's injunction went too far. She argues that the current injunction is not narrowly tailored to Plaintiffs' complaint and unnecessarily and substantially limits Speck's reasonable use of her own backyard. She suggests that prohibiting ground feeding rather than bird feeding of all types would be more equitable.
¶19 "An injunction is an equitable remedy," and it must be "fashioned according to the circumstances of a particular case." Talley v. Flathead Valley Cmty. Coll. , 259 Mont. 479, 491, 857 P.2d 701, 708 (1993) ; see also City of New York v. Mickalis Pawn Shop, LLC , 645 F.3d 114, 144 (2d Cir. 2011) ("Although a district court has a wide range of discretion in framing an injunction in terms it deems reasonable to prevent wrongful conduct, it is nonetheless the essence of equity jurisdiction that a court is only empowered to grant relief no broader than necessary to cure the effects of the harm caused by the violation." (internal quotations omitted)). "The primary objection to broad injunctive orders is the fear that they will impose unnecessary restraints on individual freedom and prohibit lawful and socially desirable activity." 11A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure , § 2955, 370 (3d ed. 2013); see also 42 Am. Jur. 2d Injunctions § 261 ("An injunction should not ... impose unnecessary burdens on lawful activity."). Thus, because injunctive relief must be "fashioned according to the circumstances of a particular case," an overbroad injunction is an abuse of discretion. See Talley , 259 Mont. at 491, 857 P.2d at 708.
¶20 We have explained that "if a nuisance is private and arises out of the particular manner of the operation of a legitimate enterprise the court should [do] no more than to point to the nuisance and decree methods of adoption calculated to eliminate the injurious features." Kasala , 151 Mont. at 116, 439 P.2d at 69 ; see also 58 Am. Jur. 2d Nuisances § 299 ("[A trial court] should not enjoin more than that which constitutes the nuisance, should not go beyond the necessities and requirements of the particular case, and should go no further than is absolutely necessary to protect the rights of the parties seeking the injunction." (footnotes omitted)). We have recognized that there is an "overriding policy of individual expression in free and reasonable land use." Higdem v. Whitham , 167 Mont. 201, 208-09, 536 P.2d 1185, 1189 (1975). Thus, while "equity may so decree" the complete abatement of an activity, when it is "possible to [ ] eliminate[ ] the objectionable features which were alleged to have infringed upon the ordinary rights of the respondents" without complete abatement, the court must tailor its injunction to do so. Kasala , 151 Mont. at 116, 439 P.2d at 69.
¶21 The evidence presented before the Justice Court showed that the birds creating the nuisance are those congregating on the power line while feeding on the ground in Speck's backyard, such as pigeons, magpies, and crows. Further, Speck testified that an unfrozen water source during the winter attracts the most birds. Given the evidence presented before the Justice Court, the injunction prohibiting all bird feeding within 100 feet of Plaintiffs' property, including hanging feeders that attract non-nuisance varieties like songbirds, was an overly broad prohibition against Speck's use and enjoyment of her own property and constitutes a manifest abuse of discretion. Based on the evidence in the record, an injunction "calculated to eliminate the injurious features" of Speck's bird feeding would have prohibited Speck from engaging in ground feeding and from providing an unfrozen source of water during winter months. See Kasala , 151 Mont. at 116, 439 P.2d at 69. Prohibiting all feeding was unnecessarily burdensome to Speck's reasonable enjoyment of her property and overly broad. Under the Justice Court's order, Speck could not even hang a hummingbird feeder in her own backyard. We reverse the Justice Court's injunction and remand with instructions to fashion appropriate injunctive relief in light of this Opinion.
CONCLUSION
¶22 The Justice Court did not manifestly abuse its discretion in ordering injunctive relief, but the relief it ordered was overly broad and an abuse of discretion. We affirm the District Court in part and reverse in part. The District Court is directed to enter an order remanding the case to the Justice Court to modify the injunction in accordance with this Opinion.
We Concur:
MIKE McGRATH, C.J.
INGRID GUSTAFSON, J.
JAMES JEREMIAH SHEA, J. | [
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Justice Beth Baker delivered the Opinion of the Court.
¶1 Pamela Fossen ("Pam") appeals an order from the Eighth Judicial District Court, Cascade County, awarding Allen Fossen ("Al") prejudgment interest on a $ 20,000 sum Pam was directed to pay in the dissolution. Pursuant to a provision in the dissolution settlement agreement, the District Court also awarded Al's attorney fees incurred in a separate action. We address the following issues on appeal:
1. Whether the District Court erred in awarding Al attorney fees under terms of the parties' dissolution Settlement Agreement for defending Pam's third-party complaint against him in a separate action;
2. Whether the District Court abused its discretion in admitting certain evidence to support the calculation of attorney fees and costs; and
3. Whether the District Court erred in awarding prejudgment interest.
¶2 We affirm issues one and three and reverse and remand issue two for the District Court to determine the amount of attorney fees and costs upon properly admitted evidence.
PROCEDURAL AND FACTUAL BACKGROUND
¶3 Pam and Al entered into a portable toilet business, Great Falls Portables, Inc., with Charles and Mary Lou Dees (the "Deeses") in 1996. Pam and Al separated in 2001, and Pam took control of the management of Great Falls Portables. Pam created a separate LLC, Rocky Mountain Portables, and transferred all Great Falls Portables assets and customers to Rocky Mountain Portables. The Deeses filed suit against Pam, Great Falls Portables, and Rocky Mountain Portables in October 2003, seeking recognition of their interest in Great Falls Portables.
¶4 Pam and Al entered into a Settlement Agreement a month later to divide their marital property between them in the marriage dissolution action. The Agreement called for Pam to receive Great Falls Portables and to pay Al $ 20,000 from the sale or refinance of the real property used by Great Falls Portables. The Agreement provided that Pam would indemnify Al from certain debts, including Pam's agreement to "be responsible to the Dees for any obligation which may be owed them in connection with their interest, if any, in Great Falls Portables." The Agreement's attorney fee provision stated that, "In the event of future litigation between the parties to enforce, modify, or interpret any provision of this agreement, the prevailing party shall be entitled to all his or her court costs, including a reasonable attorney's fee."
¶5 Shortly after entry of the final dissolution decree incorporating Pam and Al's Agreement, Pam filed a third-party complaint against Al in the Deeses' suit against her. Pam alleged that the Deeses' claim arose out of Al's fraudulent actions in his individual capacity and that Al had fraudulently induced Pam to enter the Agreement assigning responsibility for payment of the Deeses' interest. She demanded that Al remedy this fraud by indemnifying her against all liability to the Deeses. The district court in that case granted Al summary judgment on all three counts because Pam failed to plead fraud with sufficient particularity, and no material issue of fact demonstrated Pam's reliance on the alleged fraudulent representations. The court dismissed Pam's indemnity and contribution claim as relating back to the fraud alleged in the other two counts. This Court affirmed the district court's grant of summary judgment to Al on all issues. Fossen I , ¶ 21.
¶6 Following Fossen I , Al moved in the dissolution action to compel enforcement of the Agreement and for an award of attorney fees and costs. The request for attorney fees was based on Al's defense of the third-party complaint in the Dees case. In July 2014, the Standing Master held a hearing on Al's motions, together with Pam's motion to set aside the Agreement for fraud, her motion for attorney fees and costs or for a setoff, and her motion for contempt for failure to pay child support. The Standing Master granted Al's motion and ordered Pam to pay Al the $ 20,000 awarded in the Decree. The Standing Master denied Pam's motions and set a hearing on the amount of fees. The Standing Master awarded Al fees from the third-party action because the Agreement's attorney fee provision did not limit recovery to only future litigation in the dissolution. The Standing Master interpreted the provision to apply to any litigation involving enforcement, modification, or interpretation of the Agreement. The Standing Master concluded that the substance of Pam's third-party complaint against Al was to modify the Agreement: Pam sought to avoid being solely liable for payment to the Deeses for their equity interest in Great Falls Portables. The Standing Master held a hearing on the amount of attorney fees in March 2015. Pam paid Al the $ 20,000 pursuant to the Agreement on the day of the hearing. At the hearing, Al presented attorney Doug Allen as his expert to testify on the reasonableness of the attorney fees.
¶7 The Standing Master failed to rule on the amount of attorney fees, and the District Court withdrew the referral and took up the issue. Considering the testimony and exhibits from the March 2015 hearing, the District Court awarded Al $ 45,894 in attorney fees from his defense to the third-party complaint. The court also awarded Al $ 18,684.93 in prejudgment interest, reasoning that the right to recover the $ 20,000 payment vested when the Agreement was entered in November 2003.
STANDARDS OF REVIEW
¶8 We review for abuse of discretion a decision on a request for an award of attorney fees unless a contract requires an award of fees, in which case a district court lacks discretion to deny the request. In re Marriage of Szafryk , 2010 MT 90, ¶ 19, 356 Mont. 141, 232 P.3d 361. In that case we review the district court's interpretation of the contract to determine whether it is correct. In re Marriage of Szafryk, ¶ 19. We review evidentiary rulings for abuse of discretion. In re Marriage of Lundstrom , 2010 MT 261, ¶ 10, 358 Mont. 318, 245 P.3d 25. A district court, however, is bound by the Montana Rules of Evidence and applicable statutes in exercising its discretion. State v. Polak , 2018 MT 174, ¶ 12, 392 Mont. 90, 422 P.3d 112. Accordingly, we review de novo a district court's ruling based on its interpretation of a Rule of Evidence or a statute. Polak , ¶ 12. We review the decision to award prejudgment interest to determine whether the district court correctly interpreted the law. DeTienne v. Sandrock , 2018 MT 269, ¶ 30, 393 Mont. 249, 431 P.3d 12.
DISCUSSION
¶9 1. Whether the District Court erred in awarding Al attorney fees under terms of the parties' dissolution Settlement Agreement for defending Pam's third-party complaint against him in a separate action.
¶10 The Standing Master held that the relief Pam sought against Al in the third-party complaint appropriately could have been brought as part of an action to modify the portion of the Settlement Agreement that made Pam responsible for any obligation to the Deeses in connection with Great Falls Portables. The court therefore concluded that the third-party complaint constituted an action to modify the Agreement and is thus subject to its attorney fee provision. Pam argues that the Standing Master incorrectly applied the Agreement's attorney fee provision because it was intended to apply only to enforcement of terms governing the marriage dissolution. Pam maintains that there is no wording in the Agreement allowing for the provision's application to litigation separate from the dissolution action.
¶11 Provisions set forth in a marital property settlement agreement are enforceable as contract terms. Section 40-4-201(5), MCA. "District courts are bound by attorney fee provisions within marital settlement agreements if the terms of the agreement are clear." In re Marriage of Simpson , 2018 MT 281, ¶ 34, 393 Mont. 340, 430 P.3d 999 (internal citation omitted). The attorney fee provision in the Agreement provides: "In the event of future litigation between the parties to enforce, modify, or interpret any provision of this agreement, the prevailing party shall be entitled to all his or her court costs, including a reasonable attorney's fee." The language of the provision does not limit recovery of attorney fees to future litigation only in the dissolution case. The Standing Master did not err in concluding that the provision applied to any future litigation, as long as the litigation "involve[ed] enforcement, modification or interpretation" of the Agreement. That is what the plain language provides.
¶12 Pam relies on In re Marriage of Simpson , in which the settlement agreement contained language substantively identical to the attorney fee provision at issue in this case. See In re Marriage of Simpson , ¶ 34. The appellant asserted that she was entitled to attorney fees related to a bankruptcy proceeding that her ex-husband filed. The district court denied her request, reasoning that the bankruptcy proceedings were separate proceedings from the dissolution and the bankruptcy judge did not order the ex-husband to pay attorney fees to any creditors, including the appellant. In re Marriage of Simpson , ¶ 35.
¶13 As the Standing Master observed, Count II of Pam's Third-Party Complaint referenced the Agreement directly. Pam alleged that "[a]s a direct result of the fraudulent acts of [Al], [Pam] was fraudulently induced into entering into the indemnification agreement, all to her detriment and damage." Through the Third-Party Complaint, Pam sought to avoid being solely liable for payment to the Deeses for their alleged interest in Great Falls Portables. See Fossen I , ¶ 20 (finding that "[t]hroughout this litigation, Pam framed her indemnity argument as a remedy to Allan's fraud"). Substantively, Pam sought relief from-or modification of-her agreement to "be responsible to the Dees[es] for any obligation which may be owed them in connection with their interest, if any, in Great Falls Portables." Unlike In re Marriage of Simpson , where the bankruptcy proceeding did not require the court to "enforce, modify, or interpret" the agreement in any way, the parties' indemnity agreement specifically referenced the Deeses' claims, and the fee provision reasonably encompassed attorney fees Al incurred in defending Pam's attempt to avoid responsibility for those claims. Because the Third-Party Complaint sought to modify the Agreement's terms, the Standing Master did not err in awarding Al attorney fees pursuant to its plain language.
¶14 2. Whether the District Court abused its discretion in admitting certain evidence to support the calculation of attorney fees and costs.
¶15 The Standing Master held a hearing in March 2015 regarding attorney fees and costs. Allen testified that the fees Al claimed were reasonable. Allen based his opinions on the Standing Master's summary of the litigation history, the briefs filed with this Court in Fossen I , and the billing statements provided by Al's attorneys. Allen had no personal knowledge of the case or of the work described in the billing statements. Over Pam's objection to lack of foundation, the Standing Master admitted a compilation of billing records from Al's attorneys, Barbara Bell, E. Lee LeVeque, and Jason Holden; copies of checks; hand written notes; and invoice listings ("Exhibit A"). It also admitted a summary of attorney fees and costs compiled from Exhibit A by Jason Holden ("Exhibit B"). The attorneys did not testify. The District Court assumed jurisdiction over the case when the Standing Master did not issue a ruling. After reviewing Exhibits A and B and the transcript of Allen's expert testimony, again over Pam's objection, the District Court awarded Al attorney fees and costs in the amount of $ 45,894. Pam argues that there was no foundation for the exhibits or for the calculation because the attorneys involved in the matter did not file affidavits or testify regarding their billable ledgers, and it was never shown at the hearing that each billable amount was accounted for. Al responds that Exhibit A was authenticated by a "witness with knowledge" and admissible pursuant to M. R. Evid. 901(b)(1), and that Exhibit B was admissible as a summary pursuant to M. R. Evid. 1006.
¶16 Like any other award, an award of attorney fees must be based on competent evidence. Plath v. Schonrock , 2003 MT 21, ¶ 39, 314 Mont. 101, 64 P.3d 984. To be admissible, evidence requires authentication or identification that supports a finding that the matter is what the proponent claims. M. R. Evid. 901(a). Authentication or identification may be accomplished by the testimony of a witness with knowledge that a matter is what it is claimed to be. M. R. Evid. 901(b)(1). Firsthand knowledge that a document is what it is purported to be is sufficient for its introduction and admissibility under M. R. Evid. 901(b)(1). State v. Sullivan , 182 Mont. 66, 72, 595 P.2d 372, 376 (1979) ; see also Smith v. Burlington N. & Santa Fe Ry. , 2008 MT 225, ¶ 52, 344 Mont. 278, 187 P.3d 639 (discussing that none of the affiants could authenticate a document pursuant to Rule 901(b)(1) because none could testify "to the genuineness and authenticity"). To support a claim for attorney fees, there "must be some type of proof of amount and reasonableness introduced into the record by counsel." In re Marriage of Mease , 2004 MT 59, ¶ 58, 320 Mont. 229, 92 P.3d 1148.
¶17 Al's only witness at the hearing on fees was his expert Allen, a lawyer with considerable experience, who testified to the reasonableness of the fees claimed. Allen had no personal knowledge of the truth or accuracy of the written statements of hourly charges for the attorney fees in this case. When asked if he could look through the bills and tell the court what the attorney did, Allen responded, "No, I can tell what the attorney described, and understand what he's describing because ... I'm familiar with those kinds of legal services." Allen could not testify to the number of the hours spent on the matter or that the hours billed were devoted to the issue of modifying the Agreement, because he did not have that knowledge. Without personal knowledge of the case, Allen could not testify that Exhibit A was what it purported to be, an accurate representation of hours Al's attorneys billed him in defending against Pam's Third-Party Complaint. Exhibit A therefore was not admissible pursuant to M. R. Evid. 901(b)(1) because Allen lacked personal knowledge to establish that the exhibit was true and accurate.
¶18 Although an expert may rely on inadmissible evidence in formulating an opinion, the expert may not serve as a conduit for the admission of substantive evidence. See Reese v. Stanton , 2015 MT 293, ¶ 22, 381 Mont. 241, 358 P.3d 208 ; Weber v. BNSF Ry. , 2011 MT 223, ¶ 38, 362 Mont. 53, 261 P.3d 984. Allen could rely on the documents in Exhibits A and B to formulate an opinion on the reasonableness of the fees claimed. Without personal knowledge, however, Allen could not testify to the accuracy of the billing records or be cross-examined on their substance.
¶19 For a summary to be admissible under M. R. Evid. 1006, it must meet two requirements: (1) the underlying material upon which the summary is based must be admissible in evidence; and (2) the underlying materials must be made available to the opposing party for inspection. Mont. Petroleum Tank Release Comp. Bd. v. Crumleys, Inc. , 2008 MT 2, ¶ 77, 341 Mont. 33, 174 P.3d 948. The District Court improperly admitted Exhibit B as a summary pursuant to M. R. Evid. 1006 because the underlying material in Exhibit A was inadmissible as it was presented.
¶20 The District Court abused its discretion when it admitted the billing records without adequate foundation, as required by M. R. Evid. 901. Without that foundation, the court erred in relying on the amounts set forth in Exhibit A and Exhibit B to calculate the attorney fees and costs. We reverse and remand for further proceedings to determine the amount of attorney fees and costs upon properly admitted affidavit or testimonial evidence.
¶21 3. Whether the District Court erred in awarding prejudgment interest.
¶22 In September 2010, the Standing Master stayed all motions in the dissolution case pending resolution of the Dees litigation. The parties stipulated to continue to stay the dissolution proceedings pending this Court's decision on Pam's appeal in Fossen I because many or all of the issues raised in the dissolution case would be affected by this Court's decision. Al moved to lift the stay and for attorney fees and costs in November 2013 after this Court affirmed summary judgment on the Third-Party Complaint. In its final order awarding Al his fees and costs, the District Court also awarded Al prejudgment interest in the amount of $ 18,684.93. The District Court found that interest accrued on the $ 20,000 judgment for nine years and 125 days. Pam argues that she was prevented by law from paying any debt during the stay in this case, and prejudgment interest therefore should not have accrued during the stay periods. Pam maintains further that the District Court did not complete its analysis of the requirements to award prejudgment interest pursuant to § 27-1-211, MCA. She maintains that there was no underlying monetary obligation because no set amount was being litigated; that the amount of recovery was not certain or capable of being calculated because the calculations included dates during this case's stay; and that the court did not find that the right to recover vested on a certain date.
¶23 "The primary objective of the prejudgment interest statute is to fully compensate the injured party for the loss of use of his money during the period in which a valid claim was not paid." DeTienne , ¶ 30 (internal citations and quotations omitted). Prejudgment interest is awarded pursuant to § 27-1-211, MCA, when: (1) there is an underlying monetary obligation; (2) the amount of the recovery is certain or capable of being made certain; and (3) the right to recover vests on a particular day. DeTienne , ¶ 30. The award of prejudgment interest is mandatory if the requesting party satisfies the § 27-1-211, MCA, criteria. Kraft v. High Country Motors , Inc. , 2012 MT 83, ¶ 71, 364 Mont. 465, 276 P.3d 908. Section 27-1-211, MCA, provides that interest accrues "except during the time that the debtor is prevented by law ... from paying the debt." Pam argues that the plain language in § 27-1-211, MCA, means that no interest accrued during the stay. But the $ 20,000 payment was for Al's share of the real property and was not tied to the Deeses' claimed interest in the business. Pam has not developed her argument or provided this Court with any support to suggest that during the stay she was prevented by law from paying the sum she agreed to pay. It is not this Court's obligation to conduct legal research on behalf of a party, to speculate a party's precise position, or to develop legal analysis that may lend support to the position. Johnston v. Palmer , 2007 MT 99, ¶ 30, 337 Mont. 101, 158 P.3d 998 ; see also M. R. App. P. 12(g). We decline to address this argument further.
¶24 The District Court correctly awarded prejudgment interest after finding all § 27-1-211, MCA, elements satisfied. An underlying monetary obligation existed because Pam and Al settled in the Agreement that, "The shop is to be sold as soon as possible and from the net proceeds [Al] shall receive $ 20,000.00, with said amount to be secured in the property until sold by a mortgage on the property.
Alternatively, [Pam] may refinance or otherwise pay [Al] for the $ 20,000 and retain ownership of the property." Pam did not sell the property, and she did not pay Al the $ 20,000 obligation until March 2015. The amount of recovery is certain because the parties agreed to the amount of $ 20,000 in the Agreement regardless if the property was sold or refinanced, or if Pam paid Al by other means. The court correctly found that the right to recover vested on November 4, 2003, when the Agreement was entered into because the Agreement became effective upon its filing with the District Court-November 4, 2003. The District Court found that due to the nature of the property, the latest the property should have been sold was November 4, 2005. Pam was credited for that intervening time, and the District Court did not calculate interest for those two years. The District Court therefore did not err in awarding Al prejudgment interest because all the § 27-1-211, MCA, elements were satisfied.
CONCLUSION
¶25 The District Court did not err in awarding Al attorney fees pursuant to the Agreement when Pam's third-party complaint substantively asked the court to modify the Agreement. But it lacked admissible evidence to properly evaluate the amount of Al's claimed attorney fees and costs. We affirm the decision to award fees, but reverse and remand for further proceedings for the District Court to determine the amount of attorney fees and costs. We affirm the District Court's award of prejudgment interest on Pam's $ 20,000 obligation to Al under the Settlement Agreement.
We Concur:
MIKE McGRATH, C.J.
JIM RICE, J.
DIRK M. SANDEFUR, J.
The Third-Party Complaint is not included in the record for this case; it was included in the record of a separate appeal involving the Dees litigation, Fossen v. Fossen , 2013 MT 299, 372 Mont. 175, 311 P.3d 743 (Fossen I ). We take judicial notice of the Third-Party Complaint and its contents pursuant to M. R. Evid. 201(c).
Pam's counsel preserved her claim on appeal by objecting to the records for lack of foundation. He argued specifically to the Standing Master that the expert could not testify whether the records were "true and accurate" and that Al's counsel "ha[d]n't testified to them [and] ha[d]n't done an affidavit." Counsel again explained later in the hearing, "my objection is that he never called any of the witnesses to lay a foundation for this billing, you know, or present any affidavit to the Court for any of these billing[s]."
The Dissent's citation to Tacke v. Energy West, Inc. , 2010 MT 39, 355 Mont. 243, 254, 227 P.3d 601, for the proposition that billing statements need not be admitted to establish a claim for attorney fees is misplaced. Unlike here, though "short on detail", there was affidavit and testimonial evidence in Tacke from the attorney who actually claimed the hours. Tacke , ¶ 34. The point here is lack of personal knowledge of the hours claimed, not whether the records themselves had to be admitted. This is a fundamental rule of evidence that we are unwilling to overlook simply because the case already has dragged on for years. | [
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¶1 Ford Motor Company (Ford) petitions this Court for a writ of supervisory control following an order of the Eighth Judicial District Court, Cascade County, in Charles Lucero v. Ford Motor Company , ADV-18-247(b), denying its motion to dismiss for lack of personal jurisdiction. We accept supervisory control, conclude Montana has specific personal jurisdiction over Ford in this case, and accordingly affirm the District Court's order. This Opinion and Order addresses the following issue:
Does Montana have specific personal jurisdiction over Ford regarding Lucero's design defect, failure to warn, and negligence claims when the vehicle accident occurred in Montana but the vehicle was not designed, manufactured, or first sold by Ford in Montana?
FACTUAL AND PROCEDURAL BACKGROUND
¶2 Markkaya Jean Gullett, a Montana resident, drove a 1996 Ford Explorer. Ford did not design or manufacture the Explorer in Montana. Ford assembled the Explorer in Kentucky and sold it for the first time to a dealer in Washington. Over ten years later, the Explorer was resold and registered in Montana. In 2015, as Gullett drove the Explorer on the interstate in Montana, one of the Explorer's tires suffered a tread/belt separation. The vehicle lost stability, rolled into a ditch, and came to rest upside down. Gullett died at the scene. Gullett's personal representative, Charles Lucero (Lucero), filed this suit against Ford in Montana state district court on behalf of Gullett and her heirs. The complaint alleges three claims against Ford: strict liability for design defect, strict liability for failure to warn, and negligence. Lucero seeks compensatory and punitive damages.
¶3 Defendant Ford moved to dismiss, arguing Montana does not have specific personal jurisdiction over Ford regarding Lucero's claims and specifically reasoning that there is no link between Ford's Montana contacts and Lucero's claims. The District Court disagreed and ultimately concluded it had specific personal jurisdiction over Ford.
¶4 Ford now asks this Court to exercise supervisory control over the District Court, conclude no specific personal jurisdiction exists, and dismiss the case against Ford. Ford faults the District Court for resting its analysis on Ford's in-state contacts and the fact that Gullett was injured in Montana, arguing the court erred when it failed to identify a link between Ford's contacts with Montana and Lucero's claims. Lucero asserts the court's exercise of specific personal jurisdiction is appropriate in this case.
STANDARD OF REVIEW
¶5 This Court has supervisory control over Montana courts. Mont. Const. art. VII, § 2 (2); see also Great Falls Clinic LLP v. Mont. Eighth Judicial Dist. Court , 2016 MT 245, ¶ 6, 385 Mont. 95, 381 P.3d 550. Supervisory control is an extraordinary remedy and we determine whether to use it on a case-by-case basis. M. R. App. P. 14(3). We may exercise supervisory control when "urgency ... mak[es] the normal appeal process inadequate," "the case involves purely legal questions," and "[c]onstitutional issues of state-wide importance are involved." M. R. App. P. 14(3)(b).
¶6 This Court reviews a personal jurisdiction ruling de novo. Tackett v. Duncan , 2014 MT 253, ¶ 16, 376 Mont. 348, 334 P.3d 920.
DISCUSSION
¶7 We accept Ford's petition for supervisory control to resolve the issue of whether a Montana state court may exercise specific personal jurisdiction over Ford regarding Lucero's design defect, failure to warn, and negligence claims. Urgency makes the normal appeal process inadequate in this case involving personal jurisdiction, because the District Court must have power over the parties in a proceeding to afford adequate relief. The question is purely legal and of state-wide constitutional importance: Ford's due process rights are at issue and this decision will clarify when persons injured in Montana may appropriately file suit in Montana courts. We accordingly accept supervisory control and, for the following reasons, affirm the District Court's decision finding that Montana may exercise specific personal jurisdiction over Ford in this case.
¶8 Personal jurisdiction-a court's power over the parties in a proceeding-may be general (all-purpose) or specific (case-linked). DeLeon v. BNSF Ry. Co. , 2018 MT 219, ¶ 7, 392 Mont. 446, 426 P.3d 1. "General personal jurisdiction is premised upon the defendant's relationship to the forum state, while specific personal jurisdiction is premised upon the defendant's relationship to both the forum state and the particular cause of action." DeLeon , ¶ 7. Ford is undisputedly not subject to general personal jurisdiction in Montana. See BNSF Ry. Co. v. Tyrrell , 581 U.S. ----, ----, 137 S. Ct. 1549, 1559, 198 L.Ed.2d 36 (2017). The question in this case, therefore, is whether Montana may exercise specific personal jurisdiction over Ford regarding Lucero's design defect, failure to warn, and negligence claims.
¶9 Specific personal jurisdiction exists when the suit itself "arises from the specific circumstances set forth in Montana's long-arm statute, M. R. Civ. P. 4(b)(1)." Buckles v. Cont'l Res., Inc. , 2017 MT 235, ¶ 15, 388 Mont. 517, 402 P.3d 1213. A Montana court's exercise of specific personal jurisdiction "depends on whether the defendant's 'suit-related conduct' created a substantial connection with" Montana. Tackett , ¶ 19 (quoting Walden v. Fiore , 571 U.S. 277, 284, 134 S. Ct. 1115, 1121, 188 L.Ed.2d 12 (2014) ). The defendant's relationship with the forum and the litigation must relate to contact the defendant itself created with the forum. Tackett , ¶ 32. Accordingly, exercising specific personal jurisdiction over a defendant is only appropriate when both the defendant and the underlying controversy are appropriately affiliated with Montana. Tackett , ¶ 19 (citing Daimler AG v. Bauman , 571 U.S. 117, 133, 134 S. Ct. 746, 758, 187 L.Ed.2d 624 (2014) (stating that specific personal jurisdiction focuses on the "relationship among the defendant, the forum, and the litigation")).
¶10 We apply a two-step test to determine whether a Montana court may exercise personal jurisdiction over a nonresident defendant. DeLeon , ¶ 10 (citing Milky Whey, Inc. v. Dairy Partners, LLC , 2015 MT 18, ¶ 18, 378 Mont. 75, 342 P.3d 13 ; Tackett , ¶ 22 ). First, we determine whether personal jurisdiction exists under Montana's long-arm statute, M. R. Civ. P. 4(b)(1). Milky Whey , ¶ 18. If the first step is satisfied, we then determine whether exercising personal jurisdiction is constitutional; that is, whether it conforms with "the traditional notions of fair play and substantial justice embodied in the due process clause." Cimmaron Corp. v. Smith , 2003 MT 73, ¶ 10, 315 Mont. 1, 67 P.3d 258.
¶11 First, in considering whether specific personal jurisdiction exists under Montana's long-arm statute, we turn to M. R. Civ. P. 4(b)(1) which provides, in pertinent part: "[A]ny person is subject to the jurisdiction of Montana courts as to any claim for relief arising from ... the commission of any act resulting in accrual within Montana of a tort action." M. R. Civ. P. 4(b)(1)(B). In this case, Lucero's claims for relief arise from Ford's alleged actions of design defect, failing to warn, and negligence. Lucero alleges those actions resulted in the accrual of a tort action in Montana: Gullett was driving the Explorer in Montana when the accident occurred. Accordingly, we conclude Lucero's claims for relief arise from Ford's actions allegedly resulting in a tort action accruing within Montana. See Bunch v. Lancair Int'l, Inc. , 2009 MT 29, ¶ 40, 349 Mont. 144, 202 P.3d 784 (concluding the out-of-state defendant's conduct fell under Montana's long-arm statute because the alleged tort accrued in Montana). Step one is satisfied; Ford's conduct falls under Montana's long-arm statute.
¶12 We next turn to the question of whether exercising personal jurisdiction over Ford is constitutional. A Montana court's exercise of personal jurisdiction over a defendant is limited by the Fourteenth Amendment's Due Process Clause. U.S. Const. amend. XIV. A defendant must have "certain minimum contacts [with Montana] such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.' " Tackett , ¶ 18 (quoting Walden , 571 U.S. at 283, 134 S. Ct. at 1121 (quoting Int'l Shoe Co. v. Washington , 326 U.S. 310, 316, 66 S. Ct. 154, 158, 90 L.Ed. 95 (1945) )). The concept protects a defendant from having to litigate in a distant forum and allows a defendant to reasonably anticipate where he may be haled into court. World-Wide Volkswagen Corp. v. Woodson , 444 U.S. 286, 297, 100 S. Ct. 559, 567, 62 L.Ed.2d 490 (1980). The primary focus "is the defendant's relationship to the forum State." Bristol-Myers Squibb Co. v. Superior Court of Cal., S.F. Cty. , 582 U.S. ----, ----, 137 S. Ct. 1773, 1779, 198 L.Ed.2d 395 (2017). To determine if exercising personal jurisdiction over a defendant comports with due process, we consider whether: (1) the nonresident defendant purposefully availed itself of the privilege of conducting activities in Montana, thereby invoking Montana's laws; (2) the plaintiff's claim arises out of or relates to the defendant's forum-related activities; and (3) the exercise of personal jurisdiction is reasonable. Simmons v. State , 206 Mont. 264, 276, 670 P.2d 1372, 1378 (1983). Once the plaintiff demonstrates that the first element is satisfied-that the defendant purposefully availed itself of the privilege of conducting activities in Montana-a presumption of reasonableness arises, which the defendant can overcome only by presenting a compelling case that jurisdiction would be unreasonable. B.T. Metal Works v. United Die & Mfg. Co. , 2004 MT 286, ¶ 34, 323 Mont. 308, 100 P.3d 127.
¶13 First, we consider whether Ford purposefully availed itself of the privilege of conducting activities in Montana, thereby invoking Montana's laws. "A nonresident defendant purposefully avails itself of the benefits and protections of the laws of the forum state when it takes voluntary action designed to have an effect in the forum." B.T. Metal Works , ¶ 35. On the other hand, "a defendant does not purposefully avail itself of the forum's laws when its only contacts with the forum are random, fortuitous, attenuated, or due to the unilateral activity of a third party." B.T. Metal Works , ¶ 35.
¶14 The stream-of-commerce theory explains that a defendant may purposefully avail itself of the privilege of conducting activities in the forum when it "delivers its products into the stream of commerce with the expectation that they will be purchased by consumers in the forum State." World-Wide Volkswagen , 444 U.S. at 298, 100 S. Ct. at 567. The focus must remain on the defendant: "the foreseeability that is critical to due process analysis is not the mere likelihood that a product will find its way into the forum State. Rather, it is that the defendant's conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there." World-Wide Volkswagen , 444 U.S. at 297, 100 S. Ct. at 567.
¶15 Justice O'Connor, writing for a plurality of four in Asahi Metal Indus. Co. v. Superior Court of Cal., Solano Cty. , 480 U.S. 102, 112, 107 S. Ct. 1026, 1032, 94 L.Ed.2d 92 (1987) (plurality), introduced what is now known as the "stream of commerce plus" theory: placing a product into the stream of commerce, without more, does not demonstrate purposeful availment. Instead, a defendant must engage in some "additional conduct" establishing its "intent or purpose to serve the market in the forum State, [such as] designing the product for the market in the forum State, advertising in the forum State, establishing channels for providing regular advice to customers in the forum State, or marketing the product through a distributor who has agreed to serve as the sales agent in the forum State." Asahi , 480 U.S. at 112, 107 S. Ct. at 1032. A similarly-divided Court revisited the stream of commerce theory in J. McIntyre Mach., Ltd. v. Nicastro , 564 U.S. 873, 882-85, 131 S. Ct. 2780, 2788-90, 180 L.Ed.2d 765 (2011) (plurality), where Justice Kennedy, writing for a plurality, adopted Justice O'Connor's stream of commerce plus approach. According to the stream of commerce plus theory, a defendant's mere awareness that its product may enter the forum state is not enough to demonstrate purposeful availment; the defendant must also engage in some additional conduct establishing its intent or purpose to serve the forum state's market. Asahi , 480 U.S. at 112, 107 S. Ct. at 1032.
¶16 We leaned towards Justice O'Conner's "stream of commerce plus" theory in Bunch v. Lancair Int'l, Inc. , when we reasoned that a defendant must do more than place a product into the stream of commerce in order to purposefully avail itself of the privilege of conducting activities in Montana. Bunch , ¶¶ 24, 28, 30, 55 (quoting Asahi , 480 U.S. at 112, 107 S. Ct. at 1032, for the proposition that "[t]he placement of a product into the stream of commerce, without more, is not an act of the defendant purposefully directed toward the forum State").
¶17 Applying the more stringent "stream of commerce plus" theory, we conclude Ford purposefully availed itself of the privilege of conducting activities in Montana. Ford delivers its vehicles and parts into the stream of commerce with the expectation that Montana consumers will purchase them. Further, Ford engages in additional conduct establishing its intent to serve the market in Montana. Ford advertises in Montana, is registered to do business in Montana, and operates subsidiary companies in Montana. Ford has thirty-six dealerships in Montana. Ford also has employees in Montana. It sells automobiles, specifically Ford Explorers-the kind of vehicle at issue in this case-and parts in Montana. Ford also provides automotive services in Montana, including certified repair, replacement, and recall services. Ford's conduct clearly establishes channels that permit it to provide regular assistance and advice to customers in Montana; Ford serves the market in Montana and expects consumers to drive its automobiles in Montana. Ford's conduct satisfies the more-stringent stream of commerce plus theory, and we accordingly find it purposefully availed itself of the privilege of conducting activities in Montana, thereby invoking Montana's laws.
¶18 Second, we consider whether Lucero's claims arise out of or relate to Ford's forum-related activities. The Supreme Court recently clarified the mandatory nature of this prong. Due process requires a connection between a defendant's in-state actions and a plaintiff's claim: "the suit must arise out of or relate to the defendant's contacts with the forum." Bristol-Myers , 582 U.S. at ----, 137 S. Ct. at 1780 (internal quotations and alterations omitted). Ford argues that, because it did not design or manufacture the Explorer at issue in Montana and because Ford first sold the Explorer outside of Montana, Lucero's claims do not arise out of or relate to any of Ford's Montana activities. Ford's position is supported by courts in other jurisdictions finding no specific personal jurisdiction in similar factual scenarios because of a lack of connection between the plaintiffs' claims and the defendants' in-state contacts. Lucero counters, urging us to find the second due-process consideration satisfied because the claims relate to Ford's in-state activities. Lucero's position is also supported by courts in other jurisdictions finding due process satisfied in similar factual scenarios as long as a defendant has some other connection to the forum state and could have reasonably foreseen its product being used there. For the following reasons, we agree with Lucero and conclude the second prong is satisfied here: Lucero's claims relate to Ford's Montana activities.
¶19 In a products liability action where the defendant purposefully availed itself of the privilege of doing business in Montana based on the stream of commerce plus theory, the question of whether the plaintiff's claims arise out of or relate to the defendant's forum-related activities presents a challenging legal inquiry. The defendant's out-of-state conduct-placing the product into the stream of commerce-technically led to the plaintiff's in-state use of the product and resulting claim. In that sense, the defendant's forum-related activities did not directly result in the plaintiff's use of the product in that forum. However, due process does not require a direct connection; it only requires that the plaintiff's claims "arise out of" or "relate to" the defendant's forum-related activities. Therefore, we must determine when the plaintiff's claims "arise out of" or "relate to" the defendant's Montana-related activities when the defendant purposefully availed itself of the privilege of conducting activities in Montana based on the stream of commerce plus theory.
¶20 "[I]f the sale of a product of a manufacturer or distributor ... is not simply an isolated occurrence, but arises from the efforts of the manufacturer or distributor to serve directly or indirectly, the market for its product in other States, it is not unreasonable to subject it to suit in one of those States if its allegedly defective merchandise has there been the source of injury ...." World-Wide Volkswagen , 444 U.S. at 298, 100 S. Ct. at 567 (emphasis added); see also Walden , 571 U.S. at 290, 134 S. Ct. at 1125 ("[A]n injury is jurisdictionally relevant only insofar as it shows that the defendant has formed a contact with the forum State."). Where a plaintiff alleges a nonresident defendant, acting outside of the forum, placed a product into the stream of commerce that ultimately caused harm in the forum, the "[f]low of a manufacturer's products into the forum ... may bolster an affiliation germane to specific jurisdiction." See Goodyear Dunlop Tires Operations, S.A. v. Brown , 564 U.S. 915, 927, 131 S. Ct. 2846, 2855, 180 L.Ed.2d 796 (2011). Therefore, when the defendant purposefully avails itself of the privilege of conducting activities in a specific forum by placing a product into the stream of commerce, the plaintiff's claims will relate to the defendant's forum-related activities as long as the connection between the defendant's in-state conduct and the plaintiff's claim is sufficient enough to not offend due process.
¶21 At its core, due process is concerned with fairness and reasonableness: Is it fair and reasonable to ask an out-of-state defendant to defend a specific lawsuit in Montana? Companies build vehicles specifically for interstate travel. Irrespective of where a company initially designed, manufactured, or first sold a vehicle, it is fair to say that a company designing, manufacturing, and selling vehicles can reasonably foresee (even expect) its vehicles to cross state lines. When a company engages in the design, manufacture, and distribution of products specifically designed for interstate travel, it is both fair and reasonable to require the company to defend a lawsuit in a state where the product caused injury as long as the company has otherwise purposefully availed itself of the privilege of doing business in that state and if a nexus exists between the product and the defendant's in-state activity. Where a company first designed, manufactured, or sold a vehicle is immaterial to the personal jurisdiction inquiry, and focusing on those limited factors would unduly restrict courts of this state from exercising specific personal jurisdiction that comports with due process over nonresident defendants in cases such as this one.
¶22 Accordingly, we now hold that if a defendant's actions resulted in the accrual of a tort action in Montana (that is, if M. R. Civ. P. 4(b)(1)(B) is satisfied), and if the defendant purposefully availed itself of the privilege of conducting activities in Montana under the stream of commerce plus theory, the plaintiff's claims "relate to" the defendant's forum-related activities if a nexus exists between the product and the defendant's in-state activity and if the defendant could have reasonably foreseen its product being used in Montana. In this case, M. R. Civ. P. 4(b)(1)(B) is satisfied and Ford purposefully availed itself of the privilege of conducing activities in Montana under the stream of commerce plus theory. Therefore, Lucero's claims "relate to" Ford's Montana activities if a nexus exists between the Explorer and Ford's Montana activities and if Ford could have reasonably foreseen the Explorer being used in Montana.
¶23 A nexus exists between Gullett's use of the Explorer and Ford's in-state activity. Ford advertises, sells, and services vehicles in Montana. Ford makes it convenient for Montana residents to drive Ford vehicles by offering maintenance, repair, and recall services in Montana. Gullett's use of the Explorer in Montana is tied to Ford's activities of selling, maintaining, and repairing vehicles in Montana. Further, Ford could have reasonably foreseen the Explorer-a product specifically built to travel-being used in Montana. We accordingly conclude that Lucero's claims "relate to" Ford's Montana activities.
¶24 Ford cites recent Supreme Court opinions Bristol-Myers and Walden , reasoning they support its argument that Lucero's claims do not arise out of or relate to its forum-related activities because it did not design, manufacture, or first sell the Explorer in Montana. Those cases, however, do not limit the specific personal jurisdiction analysis in the way Ford argues.
¶25 In Bristol-Myers , plaintiffs filed a products liability action against Bristol-Myers in California state court, alleging they were injured by the pharmaceutical company's drug Plavix.
Bristol-Myers , 582 U.S. at ----, 137 S. Ct. at 1778. Over 600 plaintiffs participated in the action: 86 plaintiffs alleged Plavix injured them in California, while 592 plaintiffs alleged Plavix injured them in other states. Bristol-Myers , 582 U.S. at ----, 137 S. Ct. at 1778. Bristol-Myers challenged the California court's jurisdiction over the claims arising from the out-of-state injuries. Notably, the court's jurisdiction over the claims arising from the in-state injuries was not at issue. The Supreme Court ultimately held the California state court could not exercise specific personal jurisdiction over the claims arising from out-of-state injuries because the plaintiffs bringing those claims "were not prescribed Plavix in California, did not purchase Plavix in California, did not ingest Plavix in California, and were not injured by Plavix in California." Bristol-Myers , 582 U.S. at ---, 137 S. Ct. at 1781. This case is distinguishable. Gullett was injured while driving the Explorer in Montana. Therefore, while Bristol-Myers did not have sufficient California contacts regarding the claims arising from out-of-state injuries, the Court's holding from Bristol-Myers does not impact our analysis regarding whether Lucero's claims relate to Ford's Montana contacts because Gullett was injured while driving the Explorer in Montana.
¶26 In Walden , a police officer seized a large sum of cash from airline passengers at an airport in Georgia, believing the cash was connected to drug-related activity. Walden , 571 U.S. at 279, 134 S. Ct. at 1119. The passengers filed suit in Nevada. The Supreme Court ultimately held the officer was not subject to personal jurisdiction in Nevada because he lacked any connection to the state. The Court recognized that in order for personal jurisdiction to comport with due process, the "defendant's suit-related conduct must create a substantial connection with the forum State" and the "relationship must arise out of contacts that the 'defendant himself' creates with the forum State." Walden , 571 U.S. at 284, 134 S. Ct. at 1121-22 (quoting Burger King Corp. v. Rudzewicz , 471 U.S. 462, 475, 105 S. Ct. 2174, 2184, 85 L.Ed.2d 528 (1985) ). "[T]he plaintiff cannot be the only link between the defendant and the forum. Rather, it is the defendant's conduct that must form the necessary connection with the forum State that is the basis for its jurisdiction over him." Walden , 571 U.S. at 285, 134 S. Ct. at 1122. The Court reiterated that the specific personal jurisdiction analysis must focus on the "relationship among the defendant, the forum, and the litigation." Walden , 571 U.S. at 291, 134 S. Ct. at 1126.
¶27 This case presents a much different factual scenario. Unlike in Walden , where the plaintiffs were the only connection between the defendant and the forum state, here, Gullett is by no means the only connection between Ford and Montana. Rather, Ford's own actions link its Montana contacts to Lucero's claims. Ford markets, sells, and services vehicles in Montana, demonstrating a willingness to sell to and serve Montana customers like Gullett, who was injured while driving an Explorer in Montana. Focusing on the relationship between the defendant (Ford), the forum (Montana), and the litigation (Lucero's design defect, failure to warn, and negligence claims arising from a vehicle accident that occurred in Montana), we conclude Lucero's claims relate to Ford's in-state activities.
¶28 Third in our due process analysis, we consider whether the exercise of personal jurisdiction is reasonable. After finding that a defendant purposefully availed itself of the privilege of conducting activities, we presume that the exercise of personal jurisdiction is reasonable. A defendant can only overcome that presumption by presenting a compelling case that exercising jurisdiction would be unreasonable. B.T. Metal Works , ¶ 34. Because we found that Ford purposefully availed itself of conducting activities in Montana under the stream of commerce plus theory, we presume that exercising personal jurisdiction is reasonable unless Ford can overcome that presumption by presenting a compelling case that jurisdiction would be unreasonable.
¶29 The reasonableness analysis generally depends on an examination of factors that illustrate the concept of fundamental fairness, such as: (1) the extent of the defendant's purposeful interjection into Montana; (2) the burden on the defendant of defending in Montana; (3) the extent of conflict with the sovereignty of the defendant's state; (4) Montana's interest in adjudicating the dispute; (5) the most efficient resolution of the controversy; (6) the importance of Montana to the plaintiff's interest in convenient and effective relief; and (7) the existence of an alternative forum. Simmons Oil Corp. v. Holly Corp. , 244 Mont. 75, 87-88, 796 P.2d 189, 196-97 (1990) ; see also World-Wide Volkswagen , 444 U.S. at 292, 100 S. Ct. at 564-65.
¶30 Applying those factors to this case, we conclude Ford has failed to present a compelling case that exercising jurisdiction over it would be unreasonable: (1) Ford's purposeful interjections into Montana are extensive; (2) Ford did not represent that it is burdened by defending in Montana; (3) Ford did not point out any conflicts between Montana and its home states; (4) Montana has a strong interest in adjudicating the dispute, considering the fact that the accident involved a Montana resident and occurred on Montana roadways; (5) the controversy may be efficiently resolved in Montana, as it was the place of the accident; (6) Montana's court system is important to Lucero's interest in convenient and effective relief; and (7) while alternative forums exist where Ford would be subject to general personal jurisdiction, those forums are less convenient considering the fact that the accident occurred in Montana. Ford has failed to overcome our presumption that exercising jurisdiction is reasonable. The third due process factor is satisfied.
CONCLUSION
¶31 We accept Ford's petition for supervisory control. This case regarding personal jurisdiction presents urgent factors making the normal appeal process inadequate. The issue presented is purely legal and of state-wide constitutional importance. We agree with the District Court's determination that a Montana court may exercise specific personal jurisdiction over Ford regarding Lucero's design defect, failure to warn, and negligence claims.
IT IS THEREFORE ORDERED Ford's Petition for a Writ of Supervisory Control is GRANTED and the District Court's order denying Ford's motion to dismiss for lack of personal jurisdiction is AFFIRMED.
The Clerk is directed to forward a copy of this Opinion and Order to all counsel of record in the Eighth Judicial District Court Cause No. ADV-18-247(b), and to the Honorable Elizabeth Best, presiding District Judge.
We concur:
MIKE McGRATH, C.J.
BETH BAKER, J.
INGRID GUSTAFSON, J.
JAMES JEREMIAH SHEA, J.
DIRK M. SANDEFUR, J.
JIM RICE, J.
Ford selectively quotes from our prior case law in Tackett and Milky Whey to support its contention that its conduct here does not satisfy subsection (b)(1)(B) of Montana's long-arm statute. See Tackett , ¶ 31 (accrual turns "on where the events giving rise to the tort claims occurred, rather than where the plaintiffs allegedly experienced ... their injuries"), ¶ 34 ("[N]o part of [the defendant's] course of conduct forming the basis of [the plaintiff's] claims occurred in Montana."), ¶ 35 ("Mere injury to a forum resident is not a sufficient connection to the forum, however."); Milky Whey , ¶ 24 ("[A] tort does not accrue in Montana when all acts giving rise to the claims occur in another state.").
Those cases, however, are factually distinguishable-Tackett involved a monetary dispute where the only connection to Montana was a party's transfer of funds from his Montana bank account, and Milky Whey involved a dispute over the delivery of a product where the product never physically entered Montana. See Tackett , ¶ 24 ; Milky Whey , ¶¶ 22-24. In this case, the tort undoubtedly accrued in Montana: the accident occurred while Gullett was driving on a Montana roadway. Lucero's claims of design defect, failing to warn, and negligence against Ford, if proven, resulted in the accrual of a tort in Montana and, accordingly, M. R. Civ. P. 4(b)(1)(B) is satisfied in this case.
Justice Brennan, also writing for four justices in Asahi , rejected the stream of commerce plus approach, instead supporting a less-demanding test: a defendant participating in "the regular and anticipated flow of products from manufacture to distribution to retail sale" is properly subject to jurisdiction so long as the defendant is "aware that the final product is being marketed in the forum State." Asahi , 480 U.S. at 117, 107 S. Ct. at 1034 (Brennan, J., concurring in part and concurring in judgment). Justice Stevens, joined by two justices, stated that, instead of considering the defendant's awareness that a component could find its way into the forum state, the court should evaluate "the volume, the value, and the hazardous character" of the defendant's product to determine purposeful availment. Asahi , 480 U.S. at 122, 107 S. Ct. at 1037 (Stevens, J., concurring in part and concurring in judgment).
See, e.g. , Sullivan v. Ford Motor Co. , No. 16-cv-03505-JST, 2016 WL 6520174, at *3 (N.D. Cal. 2016) (finding no specific personal jurisdiction over Ford in California where the plaintiff was injured in California but Ford manufactured and first sold the vehicle outside of the state because there was "every reason to think that [plaintiff's] injury would have occurred regardless of Ford's contacts with California"); Erwin v. Ford Motor Co. , No. 8:16-cv-01322-T-24 AEP, 2016 WL 7655398, at *7 (M.D. Fla. 2016) (finding no specific personal jurisdiction over Ford in Florida where the accident occurred in Florida but where Ford first sold the vehicle outside of the state because the plaintiff's injuries would have occurred regardless of whether or not Ford had contacts with Florida); Pitts v. Ford Motor Co. , 127 F. Supp. 3d 676, 686 (S.D. Miss. 2015) (finding no specific personal jurisdiction over Ford in Mississippi where the plaintiffs purchased their vehicle in Texas and crashed in Mississippi because there was no "meaningful connection" between the claims and Ford's Mississippi contacts).
See, e.g. , Bandemer v. Ford Motor Co. , 913 N.W.2d 710, 716-17 (Minn. Ct. App. 2018) (concluding plaintiff's injury was connected to Ford's Minnesota contacts because Ford initiated contacts with Minnesota and actively sought out business through marketing in the state-Ford "should have reasonably anticipated being haled into court in Minnesota"); Semperit Technische Produkte Gesellschaft M.B.H. v. Hennessy , 508 S.W.3d 569, 583-84 (Tex. Ct. App. 2016) (concluding there was a sufficient nexus between the plaintiff's claims and Texas because the defendant was engaged in the business of selling the product in Texas-the fact that the particular product at issue went through a distributor in another state was immaterial to the analysis); Thomas v. Ford Motor Co. , 289 F. Supp. 3d 941, 948 (E.D. Wis. 2017) (finding a connection between the plaintiffs' claims because Ford could have reasonably foreseen that it would be subject to suit in Wisconsin based on its willingness to serve and sell to Wisconsin consumers, its pervasive marketing platforms, and its accrual of benefits from Wisconsin consumers buying its products); Antonini v. Ford Motor Co. , 2017 WL 3633287, *3-4, 2017 U.S. Dist. LEXIS 135247, *8-9 (M.D. Penn. 2017) (holding that, because plaintiff testified that she would not have purchased the vehicle had she not seen Ford's advertisements touting the safety of Ford's vehicles, Ford established a reasonably foreseeable connection with Pennsylvania by enticing Pennsylvanians to buy and drive Ford vehicles); Tarver v. Ford Motor Co. , 2016 WL 7077045, *5-6, 2016 U.S. Dist. LEXIS 167363, *15-16 (W.D. Okla. 2016) (finding a nexus between plaintiffs' claims and Oklahoma because Ford's contacts with Oklahoma-advertising, maintaining dealerships, and providing regular service and product information to Oklahoma consumers through its dealerships-combined with the fact that Ford manufacturers products specifically meant for interstate travel, established a sufficient connection). | [
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Justice Jim Rice delivered the Opinion of the Court.
¶1 Randall Questo appeals the Order entered by the Tenth Judicial District Court, Fergus County, denying his motions to suppress. We affirm.
Did the District Court err by denying Questo's Motions to Suppress?
FACTUAL AND PROCEDURAL BACKGROUND
¶2 At approximately 6:00 p.m. on April 24, 2017, the Lewistown Police Department received a call from two employees at the local Boys and Girls Club reporting that an adult male, who "smelled of [an] alcoholic beverage," had just picked up his minor children from the Club and was leaving with them in a muddy blue truck. The callers identified themselves, provided dispatch a description of the vehicle, and identified the driver as Randall Questo. Lewistown Police Officer William Routzahn, who received this information from dispatch while on patrol, was familiar with Questo. Routzahn proceeded to the area near the Boys and Girls Club, attempting to locate Questo and the vehicle described by the callers.
¶3 Officer Routzahn located a truck matching the description provided by the Club employees parked at a gas station fuel pump, and observed an adult male, who he recognized as Questo, standing beside the truck and filling it with fuel. Routzahn had not observed Questo driving. Routzahn drove his patrol car into the gas station's parking lot and parked next to the curb, away from the fuel pumps. He did not activate his vehicle's overhead lights. Routzahn's vehicle was facing the front of Questo's truck, but was parked on the opposite side of the parking lot's driveway. Routzahn estimated that he parked thirty or more feet away from Questo's truck, which provided space enough for Questo to exit and a "right of way so that people in the parking lot could get in and out as well."
¶4 Officer Routzahn approached Questo on foot and advised him a call had been received from the Club, reporting that Questo had smelled of alcohol when he picked up his children. Questo admitted driving the truck from the Club to the gas station, and indicated his girlfriend and two children were inside the vehicle, but denied that he smelled of alcohol. Routzahn said that he detected an odor of alcohol coming from Questo or his truck. Questo replied that he had empty beer cans in the back of his truck and suggested those might be causing the smell. Routzahn expressed doubt that the empty cans could be causing such a smell, given the windy conditions. He then asked if Questo had been drinking. Questo answered no, stating he had drunk alcohol the night before but not that day.
¶5 Routzahn asked if Questo would perform some field sobriety tests, and Questo agreed. To conduct the test out of the wind, Routzahn and Questo moved across the parking lot to a location near the gas station building. Routzahn testified that, removed from the truck, he could "still detect an odor of alcoholic beverage" emanating from Questo. Routzahn conducted the horizontal gaze nystagmus test and noted that Questo scored a three out of six, which he testified indicates "a certain level of impairment." Routzahn advised Questo of the test results and again asked whether he had been drinking. This time, Questo stated that "he'd had a couple beers a few hours prior" and had recently consumed Dayquil. Routzahn asked Questo if he would perform a preliminary breath test (PBT), and Questo agreed. Questo provided a breath sample, which registered an illegal blood-alcohol content for purposes of driving. Officer Honeycutt, who had arrived as backup, did not formally arrest Questo at the time, but transported him to the Sheriff's office for additional testing. A breath test conducted at the Sheriff's office indicated Questo had a blood-alcohol content of 0.121.
¶6 Questo was arrested and charged by Information in Count I with Criminal Endangerment, a felony in violation of § 45-5-207, MCA, and in Count II with Driving Under the Influence of Alcohol (DUI), a misdemeanor in violation of § 61-8-401(1)(a), MCA. Questo filed a motion to suppress the evidence, arguing Officer Routzahn "lacked particularized suspicion for the investigatory stop based on a citizen's report." After an evidentiary hearing, at which Questo was represented by counsel, the District Court denied the motion.
¶7 Questo then discharged his attorney and obtained new legal counsel. After the State filed an Amended Information, adding Count III, DUI per se, in violation of § 61-8-406, MCA, Questo's new counsel filed a second motion to suppress, requesting the District Court reconsider his initial motion and also consider additional arguments. The District Court granted the request. In his second motion, Questo again argued that, "prior to the 'stop' of his vehicle," the officer lacked particularized suspicion to investigate him for DUI, and also argued "there is zero evidence of observable impairment prior to his arrest and therefore no probable cause for his arrest." The District Court conducted another evidentiary hearing and entered an order again denying Questo's motion, reasoning the citizen tip satisfied the reliability factors in State v. Pratt , 286 Mont. 156, 951 P.2d 37 (1997), and reiterated its earlier conclusion that Officer Routzahn "did have particularized suspicion to perform a DUI investigation." The State filed a Second Amended Information, amending Count I to Criminal Child Endangerment, a felony in violation of § 45-5-628, MCA. Pursuant to a plea bargain agreement, Questo pled guilty to Count III, misdemeanor DUI per se, in violation of § 61-8-406, MCA, reserving his right to appeal the District Court's denial of his motion to suppress, and the State dismissed Counts I and II.
¶8 Questo appeals.
STANDARD OF REVIEW
¶9 We review a district court's ruling on a motion to suppress evidence to determine whether the court's factual findings are clearly erroneous and whether the court's interpretation and application of the law are correct. State v. Demontiney , 2014 MT 66, ¶ 9, 374 Mont. 211, 324 P.3d 344. A court's findings are clearly erroneous if they are unsupported by substantial evidence, if we believe the court has misapprehended the effect of the evidence, or if our review of the record leaves us with the definite or firm conviction that a mistake has been made. State v. Morrisey , 2009 MT 201, ¶ 14, 351 Mont. 144, 214 P.3d 708.
DISCUSSION
¶10 Did the District Court err by denying Questo's Motions to Suppress ?
¶11 Questo argues that, "prior to the 'stop' of his vehicle, there was no particularized suspicion to investigate [him] for any potential driving offense." While he concedes the phone call from the Boys and Girls Club employees was reliable, he notes it only reported the smell of alcohol, which was "not enough to establish particularized suspicion sufficient for law enforcement to seek out and seize [him] as he was gassing up at the Fort Lewis convenience store," but was merely a "generalized suspicion" and an "unconfirmed hunch." He thus argues the District Court erred in finding there was particularized suspicion for the stop under the Pratt test.
¶12 The Fourth Amendment of the United States Constitution and Article II, Section 11 of the Montana Constitution protect citizens from unreasonable searches and seizures. Montanans are afforded even greater protection from government intrusion than what the U.S. Constitution provides. State v. Graham , 2007 MT 358, ¶ 12, 340 Mont. 366, 175 P.3d 885 (citing the Right to Privacy enumerated in Article II, Section 10 of the Montana Constitution ). The Fourth Amendment and Article II, Section 11 both require law enforcement officers to obtain a warrant before seizing an individual. Graham , ¶ 13. An exception to the warrant requirement is the "investigatory or 'Terry stop,' which allows 'a brief seizure of the individual that must be supported by a reasonable [or particularized] suspicion of criminal activity.' " State v. Ballinger , 2016 MT 30, ¶ 16, 382 Mont. 193, 366 P.3d 668 (quoting State v. Lovegren , 2002 MT 153, ¶ 15, 310 Mont. 358, 51 P.3d 471 (citing Terry v. Ohio , 392 U.S. 1, 88 S. Ct. 1868, 20 L.Ed.2d 889 (1968) )).
¶13 Police did not initiate a stop of Questo's vehicle, and thus, as Questo correctly notes, we must first determine whether a seizure occurred that required particularized suspicion. State v. Strom , 2014 MT 234, ¶ 10, 376 Mont. 277, 333 P.3d 218 ("we must first determine whether a seizure has occurred," requiring particularized suspicion). "Not all interactions between peace officers and citizens rise to the level of an investigative stop or seizure." State v. Dupree , 2015 MT 103, ¶ 14, 378 Mont. 499, 346 P.3d 1114. A seizure has occurred only when the officer, "by means of physical force or show of authority, has in some way restrained the liberty of a citizen." State v. Wilkins , 2009 MT 99, ¶ 8, 350 Mont. 96, 205 P.3d 795 (quoting Terry , 392 U.S. at 19 n.16, 88 S. Ct. at 1879 ). We have generally stated that a person has been "seized" if a reasonable person "would have believed that he was not free to leave," Ballinger , ¶ 18 (citations omitted), but the "central inquiry under the Fourth Amendment is the reasonableness under all the circumstances of a particular governmental invasion of a citizen's personal security." Wilkins , ¶ 8 (quoting State v. Clayton , 2002 MT 67, ¶ 12, 309 Mont. 215, 45 P.3d 30 ) (citing Terry , 392 U.S. at 19, 88 S. Ct. at 1879 ). We have relied upon circumstances cited by the United States Supreme Court in United States v. Mendenhall , 446 U.S. 544, 100 S. Ct. 1870, 64 L.Ed.2d 497 (1980), which may indicate a person was seized: "the threatening presence of several officers, the display of a weapon by an officer, some physical touching of the person of the citizen, or the use of language or tone of voice indicating that compliance with the officer's request might be compelled." Wilkins , ¶ 9 (quoting Mendenhall , 446 U.S. at 554, 100 S. Ct. at 1877 ). We have recognized that these are not an exhaustive list and that applying them "is necessarily imprecise and will vary depending on the setting in which the conduct occurs." Strom , ¶ 10 (quoting Clayton , ¶ 23 ).
¶14 In State v. Wagner , 2003 MT 120, ¶¶ 3, 31, 315 Mont. 498, 68 P.3d 840, we held no investigative stop occurred when a defendant exited the highway, parked his vehicle, and entered a gas station "on his own volition" before being approached by a police officer investigating a citizen tip that a lone male, who appeared to be driving while intoxicated, had recently "staggered into the building." We noted that the officer "did not summon Wagner to his presence," but instead initiated the encounter in a "public venue of the defendant's choosing." Wagner was standing inside a public gas station when the officer approached and "requested that Wagner accompany him outside for further questioning." We concluded this was not an investigative stop because the officers did not "restrain[ ] Wagner's liberty, by means of physical force or a show of authority," and he was "free to disregard" the officer's request. Wagner , ¶ 31. See also Clayton , ¶ 27 (holding officers stopping behind the defendant's vehicle, which was parked on a public street, and shining a spotlight inside the vehicle did not constitute seizure because the officers did not initiate the stop, did not activate their emergency lights or sirens, and the encounter occurred in a public place); Wilkins , ¶ 12 (finding no investigative stop when an officer approached a parked car to "find out why [the defendant] was parked on a dark remote street late at night in cold weather" without "activat[ing] his emergency light, display[ing] a weapon or employ[ing] threatening tones").
¶15 Questo was parked in a public location of his choosing at the time of the encounter. Routzahn did not activate his vehicle's lights or siren and, as he testified and the video evidence clearly indicates, parked his patrol car a significant distance from the front of Questo's truck. The vehicles were far enough apart that other cars could enter and exit the gas station through the driveway between Questo's truck and the patrol car. Routzahn approached Questo alone and on foot, did not draw his weapon, and did not use harsh language or speak in a harsh tone, but rather used a neutral tone to inform Questo about the citizen report. Routzahn proceeded to ask Questo questions and requested his voluntary participation in field sobriety testing, to which Questo consented.
¶16 Citing Wilkins , Questo argues, "[t]his is not the kind of random, fortuitous, voluntary encounter that does not qualify as a seizure under Montana law." Questo posits that Routzahn "went looking for Questo's vehicle following the report from dispatch ... intend[ing] to conduct a DUI investigation, no matter what." The implication of Questo's argument is that a police encounter must be random, fortuitous, and voluntary to not constitute a seizure, and that Routzahn's motivation to investigate for DUI required particularized suspicion.
¶17 However, Questo seems to ignore the longstanding requirement to consider "all the circumstances" surrounding a police encounter when determining whether a seizure occurred. Strom , ¶ 10. Montana law does not require police encounters to be either random, fortuitous, and voluntary, or supported by particularized suspicion. Further, we have recognized that police encounters may not constitute "seizures" or investigative stops, despite an officer's inclination to investigate. In Wilkins , upon which Questo relies, we held no seizure occurred when a police officer "stopped to investigate" a parked vehicle that was left running at an unusual time of night in an area known for recent burglaries. Wilkins , ¶¶ 3, 14. In Ballinger , an officer was investigating a suspicious report of a vacated house with its door open. The officer observed two individuals walking on a public street toward the vacant house and "intercepted" them by shining a flashlight and informing them he was "investigating a suspicious call," and then asked where they were going. Ballinger , ¶¶ 19-20. We held that this was not a seizure because the officer did not ask them to do anything and "made no show of force or authority" at the time of his initial encounter. Ballinger , ¶ 20. Likewise, in Dupree , after receiving a tip that the defendant would be in possession of illegal drugs when she arrived at a train station later that day, two police officers "proceeded to the station to investigate." Dupree , ¶ 4. The officers located the defendant standing "in a public place of her choosing," approached her, identified themselves, and told her about the tip. They proceeded to ask, "in permissive terms," if the defendant was willing to be searched and she agreed. We held a seizure had not occurred because the officers "did not utilize threats or use a show of force to compel compliance" or in any way restrain the defendant's liberty "by means of physical force of show of authority." Dupree , ¶ 15 (internal quotations omitted).
¶18 Here, Officer Routzahn's actions are similar to those of the officers in Wilkins , Ballinger , and Dupree . Although Routzahn was responding to a tip and had an investigative motive when he approached Questo, he did nothing, as explained above, to restrain Questo's liberty. The facts found by the District Court do not support a conclusion that Questo was seized when Routzahn approached and engaged him.
CONCLUSION
¶19 While the District Court found that Officer Routzahn had particularized suspicion to investigate Questo pursuant to a Pratt analysis, and denied Questo's motions to suppress on that basis, we conclude Officer Routzahn's approach to Questo at the fuel pump was a routine police encounter that did not require particularized suspicion. He thereafter acquired particularized suspicion for further investigation upon Questo's voluntary participation in his questioning and testing. We will affirm a district court when it reaches the right result, even if it reaches that result for the wrong reason. State v. Ellison , 2012 MT 50, ¶ 8, 364 Mont. 276, 272 P.3d 646.
¶20 Affirmed.
We concur:
LAURIE McKINNON, J.
JAMES JEREMIAH SHEA, J.
DIRK M. SANDEFUR, J.
INGRID GUSTAFSON, J. | [
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] |
For Appellant: Shannon Hathaway, Montana Legal Justice, PLLC, Missoula, Montana
For Appellee: Timothy C. Fox, Montana Attorney General, Micheal S. Wellenstein, Assistant Attorney General, Helena, Montana, Scott D. Twito, Yellowstone County Attorney, Corbit Harrington, Deputy County Attorney, Billings, Montana
Justice Ingrid Gustafson delivered the Opinion of the Court.
¶1 R.U. (Mother) appeals from the termination of her parental rights issued July 27, 2018, by the Thirteenth Judicial District Court, Yellowstone County. We reverse and remand for the Department to engage in reasonable efforts to reunify Mother with R.J.F. (Child).
¶2 We restate the issues on appeal as follows:
1. Whether the Department engaged in reasonable efforts to prevent removal of Child and to reunite Mother with Child.
2. Whether the District Court erred in determining the conduct or condition rendering Mother unfit, unable, or unwilling to parent was unlikely to change within a reasonable time.
FACTUAL AND PROCEDURAL BACKGROUND
¶3 The Montana Department of Health and Human Services, Child and Family Services Division (Department), became involved with Mother and Child when Mother tested positive for methamphetamine and marijuana at Child's birth in October 2016. At that time, Mother was temporarily in Billings, Montana, but lived in North Dakota. The Department removed Child from Mother's care on October 8, 2016. Ten days later, the Department filed its Petition for Emergency Protective Services (EPS), Adjudication as Youth in Need of Care (YINC) and Temporary Legal Custody (TLC) on October 18, 2016. Mother returned to Williston, North Dakota-300 miles from Billings-where she resided, owned a residence, and had employment. The Department arranged visits for Mother "whenever she was in town or whenever she could make it to town." At the time, Mother did not have her own car and did not have a driver's license.
¶4 The court initially set the show cause hearing for November 1, 2016, but reset the hearing at the request of the Department to December 20, 2016, the time set for the adjudication and disposition hearing. On December 15, 2016, the Department again requested continuance of the hearings set for December 20, 2016, as it had not yet served putative fathers and needed time to serve them by publication. Despite Mother visiting Child in October and November 2016, and the Department knowing her whereabouts, the Department did not serve Mother with the Petition until December 16, 2016. The court reset the show cause, adjudication, and disposition hearings to February 21, 2017, over four months after Child's removal from Mother.
¶5 Notwithstanding Mother did not own a car or have a valid driver's license, Mother visited Child on October 20, 24, and 27, 2016, and attended his initial well-baby check-up. Mother further visited Child on November 18 and 30, 2017, December 15 and 16, 2017, and January 27, 2017. On January 11, 2017, Mother filed a petition to transfer venue pursuant to § 25-2-201(3), MCA, to Williams County, North Dakota where she resided. Hearing on this petition was held February 21, 2017, at the same time as the show cause, adjudication, and disposition hearings. Child protection specialist (CPS) Bertoncelj, then assigned to the case, expressed concern at transferring the case to North Dakota. CPS Bertoncelj noted Mother had been inconsistent with visits, was somewhat disengaged in the last two months, and that she would hate for Child to be removed from the foster parents. Child was residing in a non-kinship, foster placement with no ties to any family members, nearly 300 miles away from Mother. Mother's counsel noted the considerable distance between Billings and Williston, Mother's transportation problems, and winter weather as factors interfering with Mother's ability to engage and be present in Billings. He logically pointed out that the Department should be working to increase the bond between Mother and Child, not the bond between the foster parents and Child. The guardian ad litem did not object to Mother's request to transfer the case to North Dakota, advocating only for an orderly transition. The District Court denied the request to transfer venue, indicating she did not have information regarding the social worker in North Dakota and that she would want to talk to a North Dakota judge. The District Court did not direct anyone to obtain more information for her or make any arrangement for her to talk to a North Dakota judge, nor did the parties provide the court with additional information. At the completion of the hearing, the District Court adjudicated Child as a YINC and granted the Department TLC for a period of six months. Two and a half months later, the District Court issued its written order denying the transfer.
¶6 CPS Reinhart was the assigned worker from Child's removal until December 2016. CPS Reinhart testified that during this time she worked with Mother on a voluntary service list that included a chemical dependency (CD) evaluation, random drug testing, meeting with her, and visits in Billings. Mother completed the CD evaluation with Kimberly McNamara in October 2016, which recommended Mother engage in outpatient treatment. CPS Reinhart testified to the reasonable efforts she made while assigned this case, "We did visits when we could ... She had prior been living in Williston, North Dakota, she had a house there so she wanted to go back there, and in the end, that's what she did. We set up visits whenever she was in town or whenever she could make it to town." CPS Reinhart also testified she wanted to set up drug testing, but she did not arrange for any such testing in North Dakota, instead relying on Mother to get this set up on her own. Mother was unable to arrange for drug testing, or consistently meet with CPS Reinhart or visit Billings.
¶7 In late December 2016, CPS Bertoncelj took over Mother's case. Recognizing Mother's transportation problems, CPS Bertoncelj determined Mother should fly to Billings every couple of weeks for a visit with Child. She also determined since Mother would be coming to Billings every couple of weeks, it would be appropriate for her to obtain services in Billings rather than in North Dakota. As such, CPS Bertoncelj arranged for intermittent flights to Billings and introduced Mother to the Center for Children and Families.
¶8 In March 2017, Mother was re-assigned new counsel and the Department filed a motion to approve a treatment plan for her. The proposed treatment plan was approved on April 6, 2017, six months after Child was removed from Mother's care. Despite the Department paying for intermittent plane tickets for Mother to visit Child, Mother had difficulties with transportation, work, and her active addiction. These difficulties significantly interfered with Mother's ability to make her scheduled visits. Consequently, she made less than half of them between December 2016 and July 2017. Although Mother struggled to address her issues, during this time she was in regular contact with CPS Bertoncelj. CPS Bertoncelj did not re-evaluate the viability of her plan that Mother obtain services in Billings and did not arrange for or refer Mother for services in North Dakota.
¶9 A Family Engagement Meeting (FEM) was held on August 17, 2017. At this meeting, Mother identified two potential family members she desired the Department to consider as placements for Child: her mother, S.S., who also appeared telephonically at this FEM, and her maternal cousin, D.B.
¶10 On August 28, 2017, CPS Bertoncelj signed an affidavit in support of the Department's request to extend TLC and thereafter went on maternity leave. Mother was then assigned to work with CPS Herbst. Although CPS Herbst was aware of the Department's policy that whenever a child is placed in out-of-home care and the non-custodial parent is not an option, the Department must consider a child's extended family as placement, she did not seriously investigate whether either identified family member was a suitable placement for Child. Instead, CPS Herbst indicated she tried calling S.S. but never made contact, and did not consider S.S. as a placement as she thought Mother and S.S. did not have a good relationship. CPS Herbst made no inquiry whatsoever regarding Mother's cousin D.B. Upon taking over the case, CPS Herbst discontinued visitation assistance and did not reach out to establish any services in North Dakota for Mother. Less than a month after being assigned to the case and only eleven months since Child's removal, CPS Herbst executed an affidavit seeking termination of Mother's parental rights for failure to complete her treatment plan.
¶11 Mother recognized she had a drug problem and was unable to quit using drugs on her own. She felt she was not getting the help and support she needed to address this problem or to reunify with Child. Mother testified CPS Herbst told her that her only option was to leave her home in Williston and move to Billings. Mother advised CPS Herbst that she would have to sell her home to afford to move to Billings. Mother felt CPS Herbst was working against her and requested she be assigned a different CPS worker. Mother sold her trailer home and moved to Billings "[t]o fight [her] case and get clean." Upon her arrival in Billings, Mother contacted CPS Herbst, advised her where she was staying, and requested visitation. CPS Herbst advised Mother that she had a large caseload, did not have time to schedule visits, and had already filed for termination of Mother's parental rights.
¶12 The Department filed its Petition for Permanent Legal Custody and Termination of Parental Rights on September 18, 2017, only eleven months after its initial petition for EPS and only five months after Mother's treatment plan was put in place. The Department asserted Mother had abandoned Child, failed to complete her treatment plan, and the conduct or condition rendering her unfit, unable, or unwilling to parent was unlikely to change within a reasonable time. Hearing on the termination petition was set for December 11, 2017. On October 4, 2017, the District Court granted the Department's petition to extend TLC. In this order, the District Court stated that the permanency plan was in the best interest of the child. However, no permanency plan had yet been presented to the District Court. On October 12, 2017, one year after Child's removal, CPS Herbst executed an affidavit requesting a permanency hearing in which she indicated adoption as the only permanency option. A permanency hearing was then scheduled at the same time as the termination hearing. On November 15, 2017, Mother filed a motion to vacate the termination hearing on the basis that the court had just granted a six-month extension of TLC. The Department objected and the court did not rule on this motion. On December 4, 2017, the Department sought continuance of the termination hearing and it was re-scheduled to February 12, 2018, at 4:00 p.m.
¶13 After moving to Billings, Mother obtained an updated CD evaluation from Lisa Hjelmstad in October 2017, which again recommended outpatient treatment, and began attending treatment and self-help meetings. Thereafter, Mother underwent a psychological evaluation with Dr. Veraldi. CPS Herbst did not meet with Mother to go over Hjelmstad's or Veraldi's evaluation recommendations, assuming the evaluators would follow up with Mother. CPS Herbst ultimately did refer Mother to visits at Family Works and Mother arranged for the drug patch through Posse Partners. Mother also enrolled in and completed all but the final session of her parenting course. Notwithstanding the gains Mother made from October through November 2017-once she was actually receiving some services-the Department continued its pursuit to terminate Mother's parental rights. Mother felt CPS Herbst was not trying to help her and no matter what efforts she made, the Department intended to terminate her parental rights. Near the time set for the termination hearing in December 2017, Mother took a trip to North Dakota. While there, she relapsed, resulting in her hospitalization. Shortly after being released from the hospital, in early January 2018, Mother moved to California, where her mother and step-father live. Upon doing so, she contacted Child's father who assured her he would step-up, work with the Department, and obtain custody of Child.
¶14 On February 5, 2017, the Department moved the court to take judicial notice of Mother's non-compliance with her treatment plan pursuant to In re M.C. , 2017 MT 252, 389 Mont. 78, 403 P.3d 1266. Therein, the Department requested the court take judicial notice of written reports of experts and service providers-the psychological evaluation of Dr. Veraldi, CD assessments of Hjelmstad and McNamara, drug test results and other documents of Posse Partners, LLC., and visitation summaries and documents of Family Works-as the court had ordered such evaluations and services through Mother's treatment plan. The Department asserted these reports and services were admissible, over hearsay and foundational objection, pursuant to In re M.C . Mother sought continuance of the termination hearing as she needed additional time to respond to the Department's motion, the Department did not object, and the hearing was reset for March 19, 2019. Mother objected to the court taking judicial notice of the written reports of experts and service providers and admission of these reports to establish Mother's non-compliance with her treatment plan without testimony of the actual evaluators and service providers and without them being subject to cross-examination. Mother argued the Department's reliance on In re M.C. was misplaced, that this Court did not address basic foundational requirements resulting in Mother's inability to cross-examine the actual evaluators and providers, and that there was a difference between treatment plan tasks and evaluations and services. The District Court interpreted In re M.C. to require admission of documents and written reports of experts and service providers ordered as part of the treatment plan, over otherwise valid hearsay and foundation objections and took judicial notice of Mother's non-compliance with her treatment plan.
¶15 At the time of the March 19, 2018 termination hearing, attorney Scott Pederson, prior guardian ad litem in this case, appeared on behalf of the Department. Recognizing he had previously served as the guardian ad litem, he asked the court to continue the matter. The court reset the hearing to April 23, 2018.
¶16 After moving to California, Mother made significant gains in addressing her substance abuse and overall stability. By the close of the termination hearing on June 8, 2017, Mother had been substance-free five months, was residing in a sober living home, was participating in intensive outpatient treatment and one-on-one counseling through a CARF-certified treatment facility, was attending AA/NA meetings five to six times per week, had started a Friday evening self-help meeting group, was maintaining full-time employment, had obtained a valid driver's license, was undergoing drug testing at both her sober living home and treatment facility, and had completed an online parenting course. Additionally, she had a sponsor and was working the 12-steps (currently at step four) and volunteering at Stanton Detox. She had completed anger management and felt she had much better ability to cope with anger and frustration. She felt she had a real support system with her mother, step-father, sisters, grandmother, great aunt, and cousins in the area.
¶17 Shortly after relocating to California, Mother contacted CPS Herbst and learned Child's father had not been in contact with the Department. Mother told CPS Herbst she wanted to continue to work with the Department. She requested assistance with transportation costs for visits, but CPS Herbst denied the request. She requested Skype visitation, but CPS Herbst denied this indicating it was not age-appropriate. CPS Herbst did not refer Mother for any treatment or services in California, did not pursue any potential family placements, did not pursue an ICPC, or provide any additional assistance to Mother. Mother testified she repeatedly tried to contact CPS Herbst, but CPS Herbst generally did not answer Mother's calls. As such, Mother primarily contacted CPS Herbst through email. Mother testified she emailed CPS Herbst that she had enrolled in an online parenting course. Mother provided CPS Herbst with the course details and completed lessons from the course. CPS Herbst did not respond and did not advise Mother she would not accept the online parenting course in satisfaction of the parenting class task required by Mother's treatment plan.
¶18 At the termination hearing held on April 23, 2018, and June 8, 2018, CPS Herbst contended the conduct or condition making Mother unfit, unwilling, or unable to safely parent was continued drug use and lack of movement forward on her treatment plan. She faulted Mother for only living in Billings for three months, and that she did so after the petition for termination had already been filed. CPS Herbst admitted she knew Mother was living in a sober house in California, attending NA/AA meetings, had a sponsor, was employed, had written Child, had requested visitation, and had identified potential family placements. CPS Herbst asserted she had not seen results of Mother's drug testing, but then admitted she had not requested them from Mother or any provider.
¶19 The court determined Mother did not successfully complete her treatment plan and the condition rendering her unfit, unable, or unwilling to parent was not likely to change within a reasonable time and terminated her parental rights. Mother appeals.
STANDARD OF REVIEW
¶20 This Court reviews a district court's decision to terminate parental rights for an abuse of discretion. In re A.S. , 2016 MT 156, ¶ 11, 384 Mont. 41, 373 P.3d 848 ; In re K.A. , 2016 MT 27, ¶ 19, 382 Mont. 165, 365 P.3d 478. The Department has the burden of proving by clear and convincing evidence that the statutory criteria for termination have been satisfied. In the context of parental rights cases, clear and convincing evidence is the requirement that a preponderance of the evidence be definite, clear, and convincing. In re K.L. , 2014 MT 28, ¶ 14, 373 Mont. 421, 318 P.3d 691. This Court reviews a district court's findings of fact for clear error and conclusions of law for correctness. In re M.V.R. , 2016 MT 309, ¶ 23, 385 Mont. 448, 384 P.3d 1058. "A factual finding is clearly erroneous if it is not supported by substantial evidence, if the court misapprehended the effect of the evidence, or if review of the record convinces the Court a mistake was made." In re J.B. , 2016 MT 68, ¶ 10, 383 Mont. 48, 368 P.3d 715. "To reverse a district court's evidentiary ruling for an abuse of discretion, this Court must determine the district court either acted arbitrarily without employment of conscientious judgment or exceeded the bounds of reason resulting in substantial injustice." In re I.M. , 2018 MT 61, ¶ 13, 391 Mont. 42, 414 P.3d 797.
DISCUSSION
¶21 1. Whether the Department engaged in reasonable efforts to prevent removal of Child and to reunite Mother with Child.
¶22 Mother asserts the Department violated her fundamental constitutional right to parent and abused its discretion by failing to provide Mother with the required reasonable efforts to reunify her with Child. Mother asserts the District Court abused its discretion and the Department violated its own policies when it did not transfer venue of the case to Williams County, North Dakota, where Mother resided. Although couched as a transfer of venue, this argument in essence asserts the Department did not provide reasonable efforts to reunify Mother and Child: by failing to place Child as close as possible to Mother's home; by failing to develop voluntary services and a treatment plan realistically designed to allow true bonding to occur between Mother and Child; and by failing to implement a service provision plan that could successfully address Mother's substance abuse problem-the conduct or condition rendering her unable to safely parent. Mother further asserts the Department failed to provide reasonable efforts by failing to provide Mother a courtesy worker both in North Dakota and California to assist her in accessing services to help her meet the goals of her treatment plan.
¶23 The Department contends it made reasonable efforts to reunify Mother and Child and technically did not violate its policy by failing to provide Mother a courtesy out-of-state CPS as the Department's policy only provides that if a parent moves to another county , the Department will assign a CPS in the new county where the parent is residing.
¶24 In termination proceedings, § 41-3-609(1)(f), MCA, protects a parent's fundamental right to the care and custody of a child. In re D.B. , 2007 MT 246, ¶ 17, 339 Mont. 240, 168 P.3d 691. A district court may only terminate the parent-child relationship of an adjudicated YINC if it finds "by clear and convincing evidence that: (1) an appropriate court-approved treatment plan was not complied with by the parents or was not successful; and that (2) the conduct or condition of the parents rendering them unfit was unlikely to change within a reasonable time." In re X.M. , 2018 MT 264, ¶ 18, 393 Mont. 210, 429 P.3d 920 (citing § 41-3-609(1)(f)(i), (ii), MCA ).
¶25 Since "a natural parent's right to care and custody of a child is a fundamental liberty interest," a district court "must adequately address each applicable statutory requirement" before terminating an individual's parental rights. In re Matter of A.T ., 2003 MT 154, ¶ 10, 316 Mont. 255, 70 P.3d 1247. One such requirement is found in § 41-3-423(1), MCA, which provides in pertinent part:
The department shall make reasonable efforts to prevent the necessity of removal of a child from the child's home and to reunify families that have been separated by the state. Reasonable efforts include but are not limited to voluntary protective services agreements, development of individual written case plans specifying state efforts to reunify families, placement in the least disruptive setting possible, provision of services pursuant to a case plan, and periodic review of each case to ensure timely progress toward reunification or permanent placement. In determining preservation or reunification services to be provided and in making reasonable efforts at providing preservation or reunification services, the child's health and safety are of paramount concern.
(Emphasis added.)
¶26 Although determination of whether the Department made reasonable efforts is not a separate requirement for termination, it is a predicate for finding that the conduct or condition rendering a parent unfit, unwilling, or unable to parent is unlikely to change within a reasonable time-one of the factors required for termination of a parent's rights. See § 41-3-609(1)(f)(ii), MCA ; In re D.B ., ¶ 25.
¶27 The Department's policy provides:
When agency intervention into the family becomes necessary in order to protect the child, placement of the child as close as possible to the home of the birth parents provides the child maximum opportunity for visits with his/her birth parents while services are provided to the family. The goal should be to reunify the family, or if that is not possible, to promptly implement a permanent placement plan. The Division is committed to the expedited permanent placement of children who are placed in substitute care.... When the decision has been made to place the child, consideration should first be given to a placement with the non-custodial parent, extended family or kinship care home .... Factors to be considered in selecting a placement are ... the location of the child's family and the need to maintain contact with family members.
Child and Family Services Policy Manual, § 401-1 (DPHHS 2014), https://perma.cc/7J9J-FQF7 (emphasis added). Analysis of reasonable efforts is highly fact dependent. In re J.H. , 2016 MT 35, ¶ 17, 382 Mont. 214, 367 P.3d 339.
¶28 To meet its requirements to provide reasonable efforts, the Department must in good faith develop and implement voluntary services plans and treatment plans designed "to preserve the parent-child relationship and the family unit" and to meet the Department's policy to provide "the child maximum opportunity for visits with his/her birth parents while services are provided to the family." In re D.B. , ¶ 33 ; In re T.D.H. , 2015 MT 244, ¶ 42, 380 Mont. 401, 356 P.3d 457 ; Child and Family Services Policy Manual, § 401-1. Additionally, the Department must, in good faith, assist a parent in completing his or her voluntary services and treatment plan. In re D.B. , ¶ 33 ; In re T.D.H. , ¶ 42 ; Child and Family Services Policy Manual, § 401-1.
¶29 From our review of the record, we conclude the District Court erred in determining the Department provided reasonable efforts as required by § 41-3-423(1), MCA. Child was removed from Mother's care at birth because Mother tested positive for methamphetamine and marijuana. ¶30 Removal of an infant implicates different services than removal of an older child. The parent-child relationship plays a critical role in early childhood development. Wendy L. Haight, Jill Doner Kagle, James E. Black, Understanding and Supporting Parent-Child Relationships During Foster Care Visits: Attachment Theory and Research , 48 Soc. Work 195 (2003); Lucy Hudson, Eva Klain, Margaret Smariga, Victoria Youcha, Healing the Youngest Children: Model Court-Community Partnerships , American Bar Association (2007), https://perma.cc/5EJE-JJX3. Consistent and frequent family time visitation is a best practice for families in dependency cases. Peg Hess, Visiting Between Children in Care and their Families , The National Resource Center for Foster Care & Permanency Planning (2003), https://perma.cc/NJD3-KP4F; Child Welfare for the 21st Century: A Handbook of Practices, Policies, and Programs (Gerald P. Mallon, Peg McCartt Hess, eds., 2005). Contact between a child and the child's biological family is the single most important factor related to whether the child remains in out-of-home care. Visitation is strongly associated with shorter placement time and faster family reunification. During visitation, the parent-child attachment is strengthened. This helps prepare families for the transition from out-of-home care to returning home, and increases the likelihood of lasting reunification. The first visit should occur within forty-eight hours of removal. Child and Family Visitation Best Practice Guide (Tex. DPFS 2015), https://perma.cc/Q79J-X87J. There is a positive correlation between parent-child visitation and children's well-being while in placement care. Peg Hess, Visiting Between Children in Care and their Families , The National Resource Center for Foster Care & Permanency Planning (2003), https://perma.cc/NJD3-KP4F; Child Welfare for the 21st Century: A Handbook of Practices, Policies, and Programs (Gerald P. Mallon, Peg McCartt Hess, eds., 2005).
¶31 There are many best practices established for parent-child visitation. "[F]requent, meaningful parent-child visits are critical for infants and toddlers in foster care." Lucy Hudson, Eva Klain, Margaret Smariga, Victoria Youcha, Healing the Youngest Children: Model Court-Community Partnerships , American Bar Association (2007), https://perma.cc/5EJE-JJX3; Margaret Smariga, Visitation with Infants and Toddlers in Foster Care , American Bar Association (2007), https://perma.cc/QYZ4-C5B9. According to research-based best practice guides, frequency and duration of visitation goals vary for different age groups. For children birth to three years of age, best practice guides prescribe daily visitation and, if not daily, at the least, every two to three days. Margaret Smariga, Visitation with Infants and Toddlers in Foster Care , American Bar Association (2007), https://perma.cc/QYZ4-C5B9; Child and Family Visitation Best Practice Guide (Tex. DPFS 2015), https://perma.cc/Q79J-X87J.
Timely access to [chemical dependency] treatment, or the time it takes between a client's initial evaluation or assessment, and the engagement in treatment services, is a critical component for treatment success. Clients coming into treatment with substance use disorders often struggle with feelings of ambivalence towards treatment ... the window of opportunity for engagement will often be short.
What Works: Collaborative Practice Between Substance Abuse, Child Welfare, and the Courts , 8 (National Center on Substance Abuse and Child Welfare, 2014), https://perma.cc/PJ77-DVSV. "Clients also need quick access ... for substance use disorder assessments, the first step on the journey towards recovery." What Works: Collaborative Practice Between Substance Abuse, Child Welfare, and the Courts , 8 (National Center on Substance Abuse and Child Welfare, 2014), https://perma.cc/PJ77-DVSV. While we do not require the exercise of reasonable efforts to necessarily include these or other particular best practices, this information is consistent with and supports the underpinnings of the Department's policy requiring "placement of the child as close as possible to the home of the birth parents" and providing "the child maximum opportunity for visits with his/her birth parents while services are provided to the family." Child and Family Services Policy Manual, § 401-1; In re D.B. , ¶ 33 ; In re T.D.H. , ¶ 42. ¶32 Child was removed from Mother's care on October 8, 2016. Mother had her first visit nearly two weeks later on October 20, 2016. For the first three months of Child's life, the Department knew Mother lived 300 miles away in another state, did not own a vehicle, and did not have a valid driver's license, yet developed voluntary services and provided visitation "whenever [Mother] was in town or whenever she could make it to town." Although Mother completed a CD evaluation that recommended outpatient treatment, no referral for treatment was made for Mother in North Dakota. While CPS Reinhart wanted to set up drug testing, she did not arrange for any such testing in North Dakota, but instead expected Mother to set this up on her own. In contradiction to Department policy, the Department placed Child 300 miles away from Mother's home in a non-kinship foster placement and did not engage in any efforts to identify or locate a potential kinship placement. After Mother identified two potential kinship placements, the Department failed to meaningfully investigate or pursue these placements. Further, no extended family resided in Billings or the surrounding area.
¶33 The Department's policy also requires the Department to document the reasons why the placement is in the best interests of the child "[i]f the child is not placed in close proximity (the same county) as the parent(s)' home." Child and Family Services Policy Manual, § 402-5 (Mont. DPHHS 2015), https://perma.cc/T3Y5-UD75. In selecting a placement, the Department considers: the services the child will need; the child's race and the role racial identity plays in the child's life; the availability and appropriate placement with siblings; the child's religion; and "the location of the child's family and the need to maintain contact with family members." Child and Family Services Policy Manual, § 401-1. Child was not determined to have any specialized needs and the record is void of any racial or religious considerations. The Department did not identify or document any reason why it was in the child's best interest to be placed in a non-kinship placement nearly 300 miles away from Mother's home. Instead, contrary to its own policies, the Department maintained a placement for Child which precluded Mother and Child from having sufficient contact to bond and failed to provide Mother with the services she reasonably needed to address her substance use disorder. In this regard, during the time CPS Reinhart was assigned to the case, the Department did not provide reasonable efforts to reunify Mother and Child.
¶34 Likewise, while CPS Bertoncelj was assigned to the case, the Department continued to fail to provide reasonable efforts designed to reunify Mother and Child. During this time, Mother was in active drug addiction and continued to have transportation problems. Until the court approved a treatment plan for Mother on April 6, 2017, the Department implemented voluntary services whereby the Department would arrange air travel for Mother to visit Child and receive services approximately every two weeks. Due to Mother's ongoing transportation problems and active addiction, she was not able to organize herself enough to consistently make her visitations. Despite Mother's demonstrated difficulties in travelling to Billings for visitation and services, the Department continued the very same child placement and visitation/service arrangement. Even if Mother had consistently made her visits, this minimal level of visitation was insufficient to build a bond between Mother and Child and permit her to demonstrate her ability to safely parent. Further, receiving services-presumably outpatient substance abuse treatment followed by a parenting course-for a few hours every couple of weeks would not realistically address Mother's substance abuse disorder, let alone address it in a timely manner. When Mother did not exhibit progress, the Department did nothing more to assist Mother in meeting the goals of her treatment plan. By the time CPS Bertoncelj went on maternity leave at the end of August 2017, nearly eleven months had elapsed since Child's removal and the Department had not yet provided reasonable efforts to reunify Mother and Child. For the first eleven months of this case, the Department primarily engaged in efforts to strengthen the bond between Child and the foster parents and faulted and penalized Mother for living in another state. ¶35 When CPS Herbst took over for CPS Bertoncelj, CPS Herbst discontinued any transportation assistance to Mother to come to Billings and advised Mother her only option was to move to Billings. When Mother ultimately moved to Billings in late September 2017, the Department filed for termination of Mother's parental rights.
¶36 Upon moving to Billings, Mother made significant progress in meeting the goals of her treatment plan. She completed an updated CD evaluation and began treatment, and enrolled in a parenting course and completed all but the final class. She arranged for drug testing through Posse Partners, completed a psychological evaluation, maintained regular contact with the Department, obtained a residence, remained free from criminal activity, attended visits, and signed all releases required by the Department. Despite this progress, the Department proceeded toward termination of Mother's parental rights. Not surprisingly, Mother felt that no matter what she did, the Department intended to terminate her parental rights. Also, not surprisingly, near the time set for the termination hearing, Mother relapsed and required hospitalization. Shortly thereafter, Mother moved to California, re-engaged in treatment, and continued to build on the progress she began in October 2017.
¶37 While reasonable efforts do not require herculean efforts, they do require the Department to adhere to its policies and use its best efforts to place a child in close enough proximity to a parent to arrange visitation in sufficient frequency and duration to make it possible for a parent to establish a bond between herself and her child. Further, engaging in reasonable efforts requires more than merely suggesting services to a parent and waiting for the parent to then arrange those services for herself. Engaging in reasonable efforts requires the development and implementation of voluntary services and/or a treatment plan reasonably designed to address the parent's treatment and other needs precluding the parent from safely parenting. The means by which the Department prescribed Mother was going to accomplish visitation-whenever she could make it to Billings and later through flight every couple of weeks-would not realistically foster or develop a bond between Mother and Child. The means by which the Department prescribed Mother was going to accomplish chemical dependency treatment, drug testing, and a parenting course-arrange such herself and later refer Mother to arrange, obtain, and complete such when she was in Billings every other week-would not realistically address Mother's treatment needs. The Department's failure to provide reasonable efforts contributed to Mother's lack of progress over the first eleven months of this case. The District Court erred in determining the Department met its obligation to provide reasonable efforts throughout this case.
¶38 We have long held that a parent has an obligation to avail herself of services arranged or referred by the Department and engage with the Department to successfully complete her treatment plan. In re C.B. , 2014 MT 4, ¶¶ 19, 23, 373 Mont. 204, 316 P.3d 177 ; In re D.F., 2007 MT 147, ¶ 29, 337 Mont. 461, 161 P.3d 825 ; In re T.R. , 2004 MT 388, ¶ 26, 325 Mont. 125, 104 P.3d 439 ; In re L.S. , 2003 MT 12, ¶ 11, 314 Mont. 42, 63 P.3d 497. This Court has consistently held that Montana law requires the Department to make reasonable efforts to reunite parents with their children, not herculean efforts. In re A.G. , 2016 MT 203, ¶ 17, 384 Mont. 361, 378 P.3d 1177. Our holding herein does not diminish a parent's obligation to engage with the Department or to avail herself of services arranged or referred by the Department in working toward successful completion of a treatment plan.
¶39 2. Whether the District Court erred in determining the conduct or condition rendering Mother unfit, unable, or unwilling to parent was unlikely to change within a reasonable time.
¶40 Mother asserts the District Court erred when it found the Department presented clear and convincing evidence that the condition or conduct rendering her unfit to parent was unlikely to change in a reasonable time. Mother argues the evidence clearly shows she had already made substantial progress in achieving sobriety, the primary condition that made her unfit to parent. Contrarily, the Department argues that although Mother did begin to address her drug use, her being in treatment for a short time did not show her condition had changed or would likely change within a reasonable time. The Department asserts, pursuant to § 41-3-604(1), MCA, termination of Mother's parental rights is presumed to be in Child's best interest. Section 41-3-604(1), MCA, provides:
(1) If a child has been in foster care under the physical custody of the state for 15 months of the most recent 22 months, the best interests of the child must be presumed to be served by termination of parental rights. If a child has been in foster care for 15 months of the most recent 22 months or if the court has found that reasonable efforts to preserve or reunify a child with the child's parent or guardian are not required pursuant to 41-3-423, a petition to terminate parental rights must be filed unless:
(a) the child is being cared for by a relative;
(b) the department has not provided the services considered necessary for the safe return of the child to the child's home; or
(c) the department has documented a compelling reason, available for court review, for determining that filing a petition to terminate parental rights would not be in the best interests of the child.
¶41 In consideration of § 41-3-604(1)(b), MCA, and our conclusion that the Department failed to provide reasonable efforts to reunify Mother and Child throughout this case, the Department's reliance on the presumption in favor of termination is misplaced.
¶42 Section 41-3-609(2), MCA, provides:
In determining whether the conduct or condition of the parents is unlikely to change within a reasonable time, the court shall enter a finding that continuation of the parent-child legal relationship will likely result in continued abuse or neglect or that the conduct or the condition of the parents renders the parents unfit, unable, or unwilling to give the child adequate parental care.
¶43 "[C]onduct or condition of the parent" means the condition or reason causing the treatment plan to be unsuccessful. In re J.B. , ¶ 22. In making its determination, a district court considers the "excessive use of intoxicating liquor or of a narcotic or dangerous drug that affects the parent's ability to care and provide for the child." Section 41-3-609(2)(c), MCA.
¶44 Given the lack of reasonable efforts combined with Mother's considerable progress, the District Court erred when it found the Department presented clear and convincing evidence that the condition or conduct rendering Mother unfit to parent was unlikely to change in a reasonable time. Admittedly, it took Mother some time to fully recognize her substance-use disorder and engage in treatment, but this was compounded by the unique circumstances of her case. Mother had an active substance-use disorder, had just given birth to a newborn child, and resided in another state 300 miles away from Child. The delays in court proceedings and in providing Mother with a treatment plan additionally disadvantaged Mother. Although Mother experienced relapse, such is typical and expected with the disease of addiction and does not necessarily evidence change to be unlikely. Mother presented clear and convincing evidence that she had already made substantial progress, was fully engaged in treatment and her sobriety, and was on a path reasonably expected to lead to long-term sobriety and stability. The District Court erred in concluding the conduct rendering Mother unfit to parent was unlikely to change within a reasonable period of time.
¶45 In reviewing the procedural history of this case, it has come to our attention that the District Court misunderstood our holding in In re M.C . As other courts may do the same, we take this opportunity to clarify our In re M.C. holding. The District Court interpreted In re M.C. to require admission of documents and written reports of experts and service providers ordered as part of the treatment plan, over otherwise valid hearsay or foundational objections. The District Court thus admitted the psychological evaluation, CD assessments, drug testing results and documents, and visitation summaries and documents and took judicial notice of their contents and Mother's treatment non-compliance without any testimony from the experts or providers. Such a result was not intended to result from our holding in In re M.C.
¶46 In In re M.C. , as part of her treatment plan, Mother agreed to undergo a psychological evaluation and to follow the evaluation's recommendations in working towards reunification with M.C. In re M.C. , ¶ 3. Although the Department worked with Mother for over a year to reunify her with M.C., the reunification efforts were unsuccessful and the Department petitioned to terminate her parental rights. In re M.C. , ¶ 5. At the hearing on the petition, during the direct examination of the CPS worker, the Department moved for admission of Mother's psychological evaluation. Mother objected on grounds that it was inadmissible hearsay. The court admitted the psychological evaluation as a business record, but limited its use to the recommendations made therein. In re M.C. , ¶ 6. We upheld the district court's admission of the evaluation, which limited its use to the recommendations made therein, not as a business record exception to the hearsay rule, but pursuant to unique statutes permitting the court to order various examinations and evaluations and Mother's agreement to follow the evaluator's recommendations. In re M.C. , ¶ 13. Mother agreed as part of her treatment plan to undergo a psychological evaluation and follow its recommendations. After receiving the evaluation and its recommendations, Mother did not object to or contest the recommendations or otherwise request amendment or modification to her treatment plan. At the termination hearing, Mother's compliance with the recommendations of her psychological evaluation was one of the salient issues to be assessed by the district court. In re M.C. , ¶ 13. For the district court to determine whether Mother complied with the recommendations contained in her psychological evaluation, the district court determined it had to be able to access the recommendations contained in the report and as such admitted the report but limited its use to the recommendations contained therein. We upheld that determination and determined under the particular circumstances of the case, admission of the psychological evaluation for the purpose of determining whether Mother complied with the evaluation's recommendations was appropriate. In re M.C. , ¶¶ 13, 15. As Mother had not previously objected to or contested the recommendations contained in her psychological evaluation or sought modification or amendment of her treatment plan following her receipt of the recommendations, Mother was not permitted to contest the recommendations at the termination hearing or preclude their admission. In re M.C. , ¶ 14. We did not intend our holding to be interpreted to permit courts to admit any and all written expert reports or evaluations or service-related documents over otherwise valid hearsay or foundation objections.
¶47 We recognize there are no easy decisions in child dependency cases. Courts struggle with balancing the child's interest in permanency and stability against the parent's fundamental rights to parent. Substance use disorders are complicated brain-based diseases, the treatment of which involves the ongoing management of a lifelong disease similar to diabetes, asthma, or high blood pressure. What Works: Collaborative Practice Between Substance Abuse, Child Welfare, and the Courts , 5-6 (National Center on Substance Abuse and Child Welfare, 2014), https://perma.cc/PJ77-DVSV. All too often substance use disorders are the primary cause of a parent's inability to safely parent and we recognize the challenges the Department faces to make limited services available to a growing number of parents facing these and similar obstacles as well as the challenges presented when a parent relapses, including delays in reunification or changes in permanency planning. We understand Child has been in the foster placement for over two years and is apparently thriving and there is no guarantee Mother's substance use disorder will remain in remission. There are times, however, when the Court must recognize the parent has not received what the law guarantees before her rights may be terminated. This is such a case.
CONCLUSION
¶48 The Department failed to provide reasonable efforts to reunify Mother and Child. As such, Mother was not provided the services considered necessary for the safe return of Child to her care. Primarily, the Department refused to place child as close as possible to Mother's home, failed to obtain a courtesy CPS in North Dakota or California, and failed to develop and employ voluntary services and a treatment plan realistically designed to build a bond between Mother and Child and timely assist Mother in addressing her substance use disorder. Given the substantial change Mother had already accomplished by the time of the termination hearing combined with the Department's failure to provide reasonable efforts to reunite Mother and Child, the District Court erred in its determination that the Department established by clear and convincing evidence that the condition rendering Mother unfit to safely parent, namely her substance use disorder, was not likely to change within a reasonable time. It is appropriate to remand this matter to the District Court for the Department to provide Mother with reasonable efforts to reunify her with Child and for the District Court to conduct further proceedings consistent with this opinion.
¶49 Reversed and remanded.
We concur:
MIKE McGRATH, C.J.
JAMES JEREMIAH SHEA, J.
LAURIE McKINNON, J.
DIRK M. SANDEFUR, J.
BETH BAKER, J.
JIM RICE, J.
Pursuant to § 41-3-301(6), MCA, an abuse and neglect petition must be filed within five working days of the emergency removal of a child.
Pursuant to § 41-3-432(1)(a), (c), MCA, a show cause hearing "must be conducted within 20 days" of filing the initial petition unless otherwise stipulated by the parties or an extension of time is granted by the court upon a showing of "substantial injustice." While the court granted extension, the court did not analyze any substantial injustice requiring extension. Section 41-3-432, MCA, emphasizes the importance in expeditiously addressing child dependency cases. We encourage courts not to delay holding critical hearings for a present parent to serve unknown putative fathers by publication.
Section 25-2-201(3), MCA, requires, under general civil procedure rules, that the court change the place of trial "when the convenience of witnesses and the ends of justice would be promoted by the change." In a dependency and neglect action, however, jurisdiction and venue are provided for in § 41-3-103, MCA.
Mother testified she did well for the first few months following Child's birth but then relapsed back into drug use. She also testified she was arrested for not having a valid driver's license on October 31, 2016, while driving to Billings. These problems, known to the Department, impeded her ability to travel to Billings for visits.
Section 41-3-103(1)(a), MCA, provides that a district court has jurisdiction over "a youth who is within the state of Montana for any purpose." Section 40-3-103(2), MCA, provides that venue is proper in the county where the youth is located or a county where the youth's parent resides or has resided within 180 days before the petition was filed. Although pursuant to § 41-3-103, MCA, jurisdiction and venue were proper in Yellowstone County, Montana, they were also proper in Williams County, North Dakota. While there was no legal requirement to transfer the case under Montana's jurisdiction statutes, transferring a case to another venue or jurisdiction is not difficult and is routinely accomplished by courts and the Department through use of the Uniform Child Custody Jurisdiction and Enforcement Act. Section 40-7-101, et seq. , MCA. The District Court could easily have directed the Department to contact its sister organization in Williston to assign a courtesy worker and make arrangements to transfer the case.
Mother continued to have transportation problems as she had to travel approximately an hour to the airport and did not have a car or a valid driver's license.
This was the only FEM held in this case.
The Department faulted Mother for leaving some visits early. Mother explained she did so as many of the visits were scheduled and held during times when Child was napping and she could not actively engage with Child. Mother had to specifically request visits not be made for times when Child was known to be napping.
Were Child to be placed in her care, Mother would be able to move to a sober living home for women and children.
The National Center on Substance Abuse and Child Welfare asserts that, given no other safety concerns, "a positive drug test or a series of positive drug tests should not be used as the sole determining factor in the removal of a child from the home or to determine parental visitation." Drug Testing in Child Welfare , National Center on Substance Abuse and Child Welfare (2010), https://perma.cc/TCA2-4GWY.
The most effective way to identify a substance use disorder or determine if a child is at risk for maltreatment or neglect is to use a combination of screening and assessment tools inclusive of safety and risk assessments, clinical instruments, random drug testing, self-reports, and observations of behavioral indicators.
Drug Testing in Child Welfare , National Center on Substance Abuse and Child Welfare (2010), https://perma.cc/TCA2-4GWY. Other than Mother's testing positive at Child's birth, no Family Functioning Assessment or other screening or assessment results were entered to determine risk. Further, no other evidence was presented to establish there were no reasonable efforts the Department could undertake with Mother to avoid removal of Child from her care. As Mother does not assert in her appeal that the Department failed to provide reasonable efforts to avoid removal, we do not discuss this further.
Mother's treatment plan required her to remain in good standing with her assigned probation officer. It is noted that Mother has at no time during this case been on probation.
Mother suffers from addiction. According to the American Society of Addiction Medicine (ASAM), "[l]ike other chronic diseases, addiction often involves cycles of relapse and remission." Public Policy Statement: Definition of Addiction , ASAM (2011), https://perma.cc/XN2W-PW6A.
It is noted that at the time the Department filed its petition for termination, Child had not been out of the home for fifteen months, thus the Department is not entitled to the best-interest presumption it asserts.
Although addiction often involves cycles of relapse and remission, it does not excuse behaviors of relapse or one's obligation to seek and participate in treatment, but instead better informs the treatment and services a person with a substance use disorder needs to address the problem. Unfortunately, even in circumstances where a parent is provided timely services and opportunity to engage, there will be times where a parent is ultimately unable to attain sufficient remission to parent safely within the time frame needed to meet the child's best interests for permanency.
"The treatment of chronic diseases involves lifestyle changes to accommodate medical and behavioral recommendations. Behavioral changes rarely progress in a straight line, but instead involve periods in which people return to their old behaviors despite negative consequences. Diabetes, asthma, and hypertension patients struggle with relapse at nearly the same rate as people with substance use disorders." What Works: Collaborative Practice Between Substance Abuse, Child Welfare, and the Courts , 6 (National Center on Substance Abuse and Child Welfare, 2014), https://perma.cc/PJ77-DVSV. | [
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] |
Justice Jim Rice delivered the Opinion of the Court.
¶1 Lisa Warrington (Warrington) appeals an order granting partial summary judgment to Great Falls Clinic, LLP (the Clinic), and challenges jury instructions given by the District Court at trial. The Clinic cross-appeals the District Court's denial of its trial motion for judgment as a matter of law, the $ 220,000 in damages awarded by the jury on Warrington's breach of contract claims, and asserted trial evidentiary errors. We affirm the appeal and cross appeal, and restate the parties' issues as follows:
1. Did the District Court err by granting partial summary judgment to the Clinic on Warrington's tort claim for breach of the covenant of good faith and fair dealing, and by denying Warrington's proposed instructions on her other tort claims?
2. Did the District Court err by admitting evidence of the Clinic's liability and Warrington's emotional distress?
3. Did the District Court err by denying the Clinic's motion for judgment as a matter of law regarding Warrington's damages?
4. Did the District Court err by failing to rule and instruct the jury that the contract was for a one-year term pursuant to § 39-2-602(1), MCA ?
FACTUAL AND PROCEDURAL BACKGROUND
¶2 In 2014, after working at Benefis Hospital in Great Falls for approximately 22 years, Warrington applied for a job with the Clinic as a clinical manager. This position paid a higher annual salary than her job at Benefis, in addition to benefits. The Clinic offered the job to Warrington on October 7, and she accepted the next day. Warrington then notified Benefis that her last day of work would be Friday, October 24. On October 10, Warrington signed a written employment contract for an indefinite term with the Clinic, and the parties agreed that Warrington would begin work there on October 27.
¶3 On October 24, Warrington's last day at Benefis, the Clinic called Warrington and advised it would not be employing her after all. The Clinic would not provide a reason for withdrawing its offer of employment. Later, the Clinic indicated that Benefis officials had informed the Clinic that Warrington would not be a good fit for the Clinic. In actuality, a Clinic employee who formerly worked at Benefis had opined to the Clinic that Warrington would not be a good fit there. Warrington tried to return to her former job at Benefis, but Benefis would not re-hire her. Ultimately, Warrington moved to Helena to take fulltime employment there.
¶4 Warrington brought this action against the Clinic for breach of contract, breach of the covenant of good faith and fair dealing, and promissory estoppel. After discovery, the District Court entered partial summary judgment against the Clinic, holding it had breached the employment contract with Warrington and that the Wrongful Discharge from Employment Act (WDEA) did not apply, because the case involved an executory contract. The Clinic petitioned this Court for supervisory control, arguing the District Court was proceeding under a mistake of law. This Court affirmed the District Court's summary rulings that the WDEA did not apply and the Clinic had breached the contract, and remanded the matter "for further proceedings consistent with" our order. Great Falls Clinic LLP v. Mont. Eighth Judicial Dist. Ct. , 2016 MT 245, ¶¶ 4, 13-15, 17, 385 Mont. 95, 381 P.3d 550.
¶5 On remand, Warrington moved for partial summary judgment on her tort claim for breach of the covenant of good faith and fair dealing to establish as a matter of law that the requisite "special relationship" existed to support the claim, see Story v. Bozeman , 242 Mont. 436, 791 P.2d 767 (1990) ( Story I ), for which she sought damages for emotional distress, loss of enjoyment of life, embarrassment, anxiety, and punitive damages. The District Court concluded Warrington could not satisfy the elements of a special relationship, and granted summary judgment in favor of the Clinic on the issue, ruling that "if the jury does conclude that the Clinic breached the implied covenant, Ms. Warrington can recover her contract expectancy damages but not tort damages." The District Court denied Warrington's request to amend her complaint to add additional tort claims, including negligence, negligent and intentional infliction of emotional distress, and wrongful failure to employ, and, accordingly, did not instruct the jury on any of Warrington's tort claims or on punitive damages.
¶6 During trial, the District Court admitted evidence offered by Warrington to which the Clinic objected as beyond the issues to be tried under the court's rulings. The court also denied the Clinic's motion for judgment as a matter of law on Warrington's damages and rejected the Clinic's proposed jury instruction regarding the term of employment contract. The jury awarded Warrington $ 220,000 in contract damages.
¶7 Warrington appeals the District Court's grant of summary judgment in favor of the Clinic on her claim for breach of the covenant of good faith and fair dealing, and the denial of her instructions regarding her other tort claims. The Clinic cross-appeals the evidentiary rulings made by the District Court, including admission of evidence that went beyond the court's pre-trial rulings, the court's denial of its motion for judgment as a matter of law, and the court's denial of its proposed instruction regarding the contract term.
STANDARD OF REVIEW
¶8 "We review a district court's ruling on summary judgment de novo, to determine whether it is correct, using the same standards as the district court under M. R. Civ. P. 56." Great Falls Clinic LLP , ¶ 7. "Summary judgment is appropriate if the pleadings, depositions, answers to interrogatories, and admissions on file, together with any affidavits demonstrate that no genuine issue exists as to any material fact and that the party moving for summary judgment is entitled to judgment as a matter of law. We view the evidence in the light most favorable to the party opposing summary judgment, and we draw all reasonable inferences in favor of the party opposing summary judgment." Modroo v. Nationwide Mut. Fire Ins. Co. , 2008 MT 275, ¶ 19, 345 Mont. 262, 191 P.3d 389 (internal citations and quotations omitted).
¶9 We review a district court's grant or denial of a motion for judgment as a matter of law de novo. Patch v. Hillerich & Bradsby Co. , 2011 MT 175, ¶ 11, 361 Mont. 241, 257 P.3d 383. "Judgment as a matter of law is appropriate only when, considering all evidence and any legitimate inferences that might be drawn from the evidence in a light most favorable to the non-moving party, there is a complete lack of evidence that would justify submitting an issue to the jury." Patch , ¶ 24.
¶10 We review jury instructions for an abuse of discretion. Cechovic v. Hardin & Assocs. , 273 Mont. 104, 116, 902 P.2d 520, 527 (1995). When reviewing a trial court's decision regarding jury instructions, we consider the "instructions in their entirety and in connection with other instructions given and the evidence introduced at trial." Story v. City of Bozeman , 259 Mont. 207, 222, 856 P.2d 202, 211 (1993) ( Story II ) (overruled in part by Arrowhead Sch. Dist. No. 75 v. Klyap , 2003 MT 294, ¶ 54, 318 Mont. 103, 79 P.3d 250 ). A trial court's refusal to give an offered instruction only constitutes reversible error when "such refusal affects the substantial rights of the party proposing the instruction, thereby prejudicing him." Busta v. Columbus Hosp. , 276 Mont. 342, 360, 916 P.2d 122, 132 (1996). The party assigning error must show prejudice. Tarlton v. Kaufman , 2008 MT 462, ¶ 19, 348 Mont. 178, 199 P.3d 263. If "the jury instructions in their entirety state the applicable law of the case," we will not find prejudice. Peterson v. St. Paul Fire & Marine Ins. Co. , 2010 MT 187, ¶ 22, 357 Mont. 293, 239 P.3d 904.
¶11 "We review evidentiary rulings for abuse of discretion." State v. Bonamarte , 2009 MT 243, ¶ 13, 351 Mont. 419, 213 P.3d 457 (citations omitted).
DISCUSSION
¶12 1. Did the District Court err by granting partial summary judgment to the Clinic on Warrington's tort claim for breach of the covenant of good faith and fair dealing, and denying Warrington's proposed instructions on her other tort claims?
¶13 Warrington argues the District Court erred by concluding she did not establish a requisite "special relationship," Story I , 242 Mont. at 451, 791 P.2d at 776, to support a tort claim for breach of the covenant of good faith and fair dealing.
¶14 Generally, a breach of contract claim gives rise only to expectancy damages. Section 27-1-311, MCA; see also Arrowhead Sch. Dist. No. 75 , ¶ 20 ; Riverview Homes II, Ltd. v. Canton , 2001 MT 309, ¶ 24, 307 Mont. 517, 38 P.3d 848 ; Conagra, Inc. v. Nierenberg , 2000 MT 213, ¶ 69, 301 Mont. 55, 7 P.3d 369 ; Textana, Inc. v. Klabzuba Oil & Gas , 2009 MT 401, ¶ 52, 353 Mont. 442, 222 P.3d 580 ; McEwen v. MCR, LLC , 2012 MT 319, ¶ 65, 368 Mont. 38, 291 P.3d 1253 ; Story I , 242 Mont. at 450, 791 P.2d at 776. Although "every contract, regardless of type, contains an implied covenant of good faith and fair dealing," a breach of that covenant is generally only "a breach of the contract." Story I , 242 Mont. at 450, 791 P.2d at 775. Accordingly, in ordinary contract cases, only contract damages are recoverable. Story I , 242 Mont. at 450, 791 P.2d at 775. However, we have previously recognized an "exceptional circumstance[ ]" when tort damages can be recovered "in contracts involving special relationships which are not otherwise controlled by specific statutory provisions." Story I , 242 Mont. at 451, 791 P.2d at 776.
¶15 To demonstrate the existence of a contract involving a "special relationship," a party must prove five elements: first, that the parties are in "inherently unequal bargaining positions"; second, "the motivation for entering the contract must be a non-profit motivation, i.e., to secure peace of mind, security, future protection"; third, "ordinary contract damages" would not allow adequate recovery, because "they do not require the party in the superior position to account for its actions, and [ ] they do not make the inferior party whole"; fourth, "one party is especially vulnerable because of the type of harm it may suffer and of necessity places trust in the other party to perform"; and last, "the other party is aware of this vulnerability." Story I , 242 Mont. at 451, 791 P.2d at 776 (quoting Wallis v. Superior Ct. , 160 Cal. App. 3d 1109, 1118, 207 Cal.Rptr. 123 (Cal. 1984) ) (internal quotation marks omitted). The five elements are conjunctive, and thus the failure to prove one defeats the entire claim. Story I , 242 Mont. at 451, 791 P.2d at 776.
¶16 Wallis , on which this Court relied in Story I , 242 Mont. at 451, 791 P.2d at 776, involved a contract that required the employer to pay a monthly annuity payment to former employees laid off during a factory closing, but which the employer unilaterally rescinded after paying for two years. The California Court of Appeals considered the following asserted facts to be relevant to its determination that an employer breached the covenant of good faith and fair dealing in a contract that involved a special relationship:
(1) the contract entered into between plaintiff and defendant contained an implied covenant of good faith and fair dealing; (2) plaintiff and defendant entered into the contract shortly after plaintiff learned his employment was to be terminated; (3) plaintiff had worked for defendant over 30 years, was 55 years of age, did not have any work skills outside furniture manufacture, and was not eligible for his accrued pension benefits for approximately 10 more years, when he would turn 65; (4) the parties were not in equal bargaining positions, defendant dictated the terms of the contract, plaintiff had no option but to sign the contract as defendant dictated; (5) because of his financial insecurity, his age, and his lack of work skills, plaintiff was in a position where he had to trust defendant; (6) defendant knew of plaintiff's precarious financial position, his age, and his lack of other work skills and knew that he relied on them for financial security ...
Wallis , 160 Cal. App. 3d at 1115-16, 207 Cal.Rptr. 123.
¶17 Under the element of unequal bargaining power, courts will consider factors such as the plaintiff's income, expenses, and skills that might make her employable in a different job or profession. See Wallis , 160 Cal. App. 3d at 1119, 207 Cal.Rptr. 123 ; see also Silberg v. Cal. Life Ins. Co. , 11 Cal.3d 452, 113 Cal.Rptr. 711, 521 P.2d 1103, 1109 (1974). In this regard, Warrington's circumstances were quite different than the employee at issue in Wallis . At the time Warrington applied with the Clinic, she had been employed at Benefis for 22 years, working in a variety of positions with increasing responsibilities, including management. Her education and experience in the healthcare industry made her employable elsewhere: she was qualified and hired for the Clinic position, found temporary employment within 10 days after the Clinic breached her employment contract, and then transitioned to a permanent position with the Montana State Fund in Helena. Warrington left her longstanding employment with Benefis for a higher paying job at the Clinic. Thus, Warrington was not in the kind of "precarious financial position" as the employee in Wallis , who was 10 years from retirement when laid off, did not have work skills outside furniture manufacture, relied upon the monthly check from his former employer as his only income, had not been offered further employment with the company, and signed a covenant not to compete with his former employer. Wallis , 160 Cal. App. 3d at 1113, 1115-16, 207 Cal.Rptr. 123. Further, Warrington's contract was not for what was essentially unemployment compensation in Wallis , but for a higher paying job, one that she voluntarily sought. As the District Court reasoned, this weighed against a finding of unequal bargaining power because, "when she negotiated this contract, she was safely employed at an existing job." She wanted the Clinic job because it "paid more," had "more challenging responsibilities," and "carried more prestige." Warrington had not signed a non-compete agreement like the employee signed in Wallis , and, as cited by the District Court, on the basis of the market economy, was able to demand and obtain "a very high price" for providing her services to the Clinic. Warrington was not faced with "no option but to sign the contract as defendant dictated," because she had the choice to accept or decline the new employment position and keep her current employment, in contrast to the employee in Wallis . Wallis , 160 Cal. App. 3d at 1113, 1116, 207 Cal.Rptr. 123.
¶18 Regarding the element of a non-profit motivation and peace of mind, the District Court noted the reasoning in Wallis that the contract must fulfill noncommercial purposes, such as the security provided by a life insurance policy despite the consumer's knowledge that she may "never see[ ] a monetary payback on the premiums paid." The Wallis court considered whether the contract's purpose was to "obtain a commercial advantage," as opposed to protecting the party "against the risks of accidental losses, including the mental distress which might follow from the losses" and to obtain "peace of mind and security." Wallis , 160 Cal. App. 3d at 1117, 207 Cal.Rptr. 123 (citations omitted). The District Court noted that Warrington testified by affidavit that "the reason I signed and entered into that contract with the Great Falls Clinic was to advance my career in the healthcare field. I also entered into that contract because the Clinic promised to pay me more money than I was making at the time at Benefis Hospital." The District Court concluded these statements demonstrated Warrington's primary purpose for entering the contract was to "obtain a commercial advantage." See Wallis , 160 Cal. App. 3d at 1117, 207 Cal.Rptr. 123.
¶19 "If substantial evidence is not presented in support of each and all of the essential elements, the court shall direct there is no special relationship." Story I , 242 Mont. at 451, 791 P.2d at 776 ; see also Monroe v. Cogswell Agency , 2010 MT 134, ¶ 34, 356 Mont. 417, 234 P.3d 79 (a failure of proof concerning an essential element of a claim "makes judgment appropriate as a matter of law."). Given this record, we cannot conclude the District Court erred in holding that the "special relationship" factors of unequal bargaining power and non-profit motivation were not established. Absent a showing on those two elements, the Clinic was entitled to judgment as a matter of law, and the entry of summary judgment on the claim was not error.
¶20 In a brief, related argument, Warrington contends the District Court erred when it failed to instruct the jury on her tort claims arising out of the breach of the covenant of good faith and fair dealing, and those she sought to add to her complaint, including intentional and negligent infliction of emotional distress, negligence, wrongful failure to employ, and punitive damages. This argument is related to the long procedural history of the case.
¶21 The District Court determined in its December 22, 2017 order on summary judgment that the only issue to be tried was the damages owed to Warrington for the Clinic's breach of contract (and any contract-based breach of the implied covenant), and that Warrington's then-pled tort claims would not be considered. The court reiterated this ruling in a telephone conference with the parties on January 18, 2018, explaining Warrington's special relationship claim had been dismissed by summary judgment. Six months later, shortly before trial, Warrington sought leave to amend her complaint to plead additional tort claims, which the District Court denied.
¶22 Warrington frames her argument as instructional error, which we typically review for abuse of discretion, Cechovic , 273 Mont. at 116, 902 P.2d at 527, and to determine if "the jury instructions in their entirety state the applicable law of the case." Peterson , ¶ 22. However, the issue is more accurately about the District Court's rulings on the motion to amend and on Warrington's tort claim for breach of the implied covenant, the denial of which is affirmed above. Montana statute expressly prohibits recovery of emotional distress damages in a contract action. Section 27-1-310, MCA. The District Court properly determined that the only claim to be tried was the damages for breach of contract and, therefore, there was no instructional error for failing to instruct the jury on further tort claims.
¶23 2. Did the District Court err by admitting evidence of the Clinic's liability and Warrington's emotional distress?
¶24 On cross appeal, the Clinic argues the District Court abused its discretion and committed reversible error when it allowed Warrington to present evidence regarding the Clinic's contract liability and her emotional distress. The Clinic argues that, despite a pre-trial ruling, upheld by this Court by Writ of Supervisory Control, that the Clinic had breached the contract, the District Court nonetheless permitted Warrington to introduce liability evidence about the breach that served only to prejudice the Clinic in the eyes of the jury, as did evidence the District Court permitted Warrington to introduce regarding her emotional distress, when distress claims were not before the jury.
¶25 Montana Rule of Evidence 104(a) provides that "the admissibility of evidence shall be determined by the court." Moreover, "[a] district court has broad discretion when determining the relevance and admissibility of evidence," thus this determination is reviewed for an abuse of discretion. State v. Given , 2015 MT 273, ¶ 23, 381 Mont. 115, 359 P.3d 90.
¶26 This case did not involve a simple transaction, and the District Court faced challenges in managing the case in a manner that would permit damages for the Clinic's breach of its executory employment contract to be properly evaluated. Significant issues of fact remained about the harm suffered by Warrington, which the District Court believed necessitated evidence and explanation about context. Noting that the parties' contract referenced a future "successful career" Warrington would have with the Clinic, but also subjected her to six-month probationary period, the District Court reasoned:
The parties dispute what full performance by the Clinic would have looked like.... Genuine fact disputes remain about how the situation would have unfolded if the Clinic had not breached the contract on October 24.... Jurors who hear all of this need not necessarily believe ... that Ms. Warrington would not have lasted through her first day.... This will require deciding whether the Clinic would have fired Ms. Warrington at all, when it would have done so, and how much she would have earned before it happened.
The court further ruled that, although the Clinic was entitled to summary judgment on the special relationship issue that precluded tort damages, the jury would determine whether the Clinic "breached the implied covenant of good faith and fair dealing.... Therefore, if the jury does conclude that the Clinic breached the implied covenant, Ms. Warrington can recover her contract expectancy damages but not tort damages."
¶27 Consequently, evidence of Warrington's expectations, had the Clinic not breached the contract, and the fallout from the breach, including Warrington's concerns over the impact of the loss upon her reputation and employability at her age, and the steps she took to find comparable work, involving relocating to another city, was potentially relevant to the determination of expectancy damages, which is the amount reasonably expected to put the non-breaching party in the position it would have been absent the breach. Section 27-1-311, MCA; see also Arrowhead Sch. Dist. No. 75 , ¶ 20 ; Riverview Homes II, Ltd. , ¶ 24 ; Conagra, Inc. , ¶ 69 ; Textana, Inc., ¶ 52 ; McEwen , ¶ 65. Thus, the District Court was tasked with assessing the evidence offered in these regards, and applying the rules of evidence in the exercise of its discretion.
¶28 The District Court also gave some latitude for Plaintiff's counsel to, in the District Court's words, "personalize" Warrington. Unfortunately, Plaintiff's counsel, given an inch, attempted to take a mile, and, in response to the Clinic's continuing objections, the District Court admonished: "You can't get emotional distress damages ... Over and over and over again, this is what she did in the Army. She was a nurse for babies.... She's saved people's lives. She's saved [her husband's] life many times. It's not what this case is about. It's not a tort case. It's a contract case...."
¶29 The District Court may have permitted Plaintiff's counsel to go too far, but our review of the record leads us to the conclusion that any error did not ultimately result in prejudice to the Clinic requiring reversal. The court admonished Plaintiff's counsel to stop overreaching, and instructed the jury that Warrington could only recover contract expectancy damages, that she could not be awarded damages for emotional distress, and that the Clinic could not be assessed punitive damages. The District Court had broad discretion to admit evidence, and in a case involving significant personal expectancy damages for which evidence about the consequences of the breach upon Warrington was potentially relevant, as discussed above, we cannot conclude the District Court's evidentiary rulings constituted reversible error.
¶30 3. Did the District Court err by denying the Clinic's motion for judgment as a matter of law regarding Warrington's damages?
¶31 The Clinic moved for a directed verdict on the issue of Warrington's damage computation, which included claims for mortgage interest and for travel and mileage expenses. The District Court denied the motion. The Clinic argues there was insufficient evidence to prove the Clinic caused damages relating to Warrington's mortgage costs and travel expenses, nor were these costs reasonably expected to arise out of the breach of an employment contract.
¶32 We have explained that there are two types of contract damages-natural damages and contemplated damages. McEwen , ¶ 59. "Natural damages represent the direct and natural result of the contract breach. Contemplated damages fall within the contemplation of the parties when they entered into the contract." McEwen , ¶ 59 (internal citations and quotations omitted). A non-breaching party injured by another's breach of contract has a duty to mitigate her damages. Arrowhead , ¶ 20 n.3 ; Bitterroot Int'l Sys. v. Western Star Trucks, Inc. , 2007 MT 48, ¶ 62, 336 Mont. 145, 153 P.3d 627. We have held that the expenses incurred by a non-breaching party in an effort to secure other employment after a breach of contract are recoverable, and that procuring other employment is part of damage mitigation. Wyatt v. Sch. Dist. , 148 Mont. 83, 90-91, 417 P.2d 221, 225 (1966).
¶33 Warrington found part-time employment within ten days of the Clinic's breach, but to find full-time work in her healthcare career field, comparable to her previous position with Benefis, she relocated from Great Falls, taking a position in Helena. Warrington argued the Clinic should have reasonably contemplated this employment dilemma at the time of contracting, knowing that Warrington had worked exclusively in the healthcare industry for many years; that its facility was one of two hospital-based healthcare providers in Great Falls; and that Warrington would have to leave Great Falls to pursue her career track if her employment with the Clinic fell through and she was ineligible for re-hire at Benefis. Warrington's move to Helena could have been determined by the jury to be proper mitigation of her damages, in which she also incurred costs she otherwise would not have incurred had the Clinic not breached the employment contract, including a mortgage payment on her house in Helena, and commuting expenses between Great Falls and Helena. They were thus potentially recoverable consequential damages necessary to put Warrington in the position she would have been had the Clinic not breached the employment contract.
¶34 Judgment as a matter of law is appropriate only when "there is a complete lack of evidence that would justify submitting an issue to the jury." Patch , ¶ 24. Because Warrington presented sufficient evidence that her damages were appropriate and reasonably incurred, the District Court properly denied the motion.
¶35 4. Did the District Court err by failing to rule and instruct the jury that the contract was for a one-year term pursuant to § 39-2-602(1), MCA ?
¶36 Citing § 39-2-602(1), MCA, and Warrington's contractually-agreed annual salary of $ 78,500, the Clinic argues the District Court "should have ordered the employment contract was a contract for one year and instructed the jury as such." That statute states, in pertinent part:
A servant is presumed to have been hired for such length of time as the parties adopt for the estimation of wages. A hiring at a yearly rate is presumed to be for 1 year; a hiring at a daily rate, for 1 day; a hiring by piecework, for no specified term.
Section 39-2-602(1), MCA. The Clinic asserts this provision "required the jury to be instructed Warrington's written employment contract was a one-year contract," as a matter of law.
¶37 The Clinic over-applies the statute. The provision is a rebuttable evidentiary presumption that can guide resolution of a dispute over the term or length of employment. Here, larger issues were in play, including genuine issues of material fact about the potential length of Warrington's employment, and it would have been inappropriate for the District Court to have instructed the jury that the term of the contract between the Clinic and Warrington was one year, and essentially determined all of these issues as a matter of law. We find no error.
¶38 Affirmed.
We concur:
LAURIE McKINNON, J.
DIRK M. SANDEFUR, J.
INGRID GUSTAFSON, J.
BETH BAKER, J.
The District Court ruled that Warrington failed to prove at least two of the five elements-unequal bargaining power and nonprofit motivation-and thus did not consider the other Story I elements. We likewise limit our review to those two elements. | [
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Justice Dirk Sandefur delivered the Opinion of the Court.
¶1 Plaintiff Big Sky Civil & Environmental, Inc. (BSCE) appeals from judgments of the Montana Eighth Judicial District Court denying summary judgment to BSCE, and granting summary judgment to Wertzberger Architects, P.C. (WAPC) on BSCE's claim that Thomas Wertzberger is personally liable for certain professional services rendered by BSCE under a contract negotiated with WAPC, an agent of Allen Dunlavy, d/b/a Dunlavy Corp. We affirm.
¶2 The restated issues presented are:
1. Whether the District Court erroneously granted summary judgment that WAPC was not personally liable to BSCE pursuant to § 28-10-702(1), MCA ?
2. Whether the District Court erroneously disregarded an unqualified common-law agency rule that an agent who contracts on behalf of a non-existent principal is personally liable on the contract?
3. Whether the District Court erroneously interjected and applied judicial estoppel as an alternative basis for its grant of summary judgment to WAPC?
BACKGROUND
¶3 BSCE is a civil engineering firm based in Great Falls, Montana, engaged in the business of providing professional civil engineering services, primarily through its principal shareholder, Joseph Murphy, P.E. WAPC is an Iowa-based professional corporation engaged in providing professional architectural and design services, primarily through its principal shareholder, Thomas Wertzberger, AIA. In January 2013, Allen Dunlavy, d/b/a Dunlavy Corp., retained WAPC to perform professional architectural and design services on a building construction project in Shelby, Montana (Shelby Project). Unknown to WAPC, and for reasons not of record on appeal, Dunlavy Corp. did not actually exist as a separate corporate entity.
¶4 Incident to providing architectural and design services to Dunlavy, WAPC commissioned BSCE to provide onsite engineering services for the Shelby Project. By email dated Monday, January 14, 2014, WAPC authorized BSCE to proceed with a previously discussed scope of work, to wit:
Please accept this email as your authorization to begin work on the Shelby [project] site.
You can proceed on an hourly basis per the schedule you sent me.
For now , you can invoice your time to [WAPC] as listed below. This may change as things proceed on the project.
(Emphasis added.) WAPC addressed and sent the email jointly to BSCE, Allen Dunlavy, and Dunlavy's construction contractor (Warren Barse). BSCE immediately replied "Thanks. We'll plan to meet Warren [Barse] onsite on Wednesday...." BSCE emailed its response directly to Wertzberger, Barse, and Allen Dunlavy, with copies to various others. In a subsequent affidavit, WAPC, through Wertzberger, attested that WAPC clearly communicated to BSCE that WAPC was at all times acting on behalf and to the benefit of Dunlavy Corp . Wertzberger further attested that "BSCE met with [Dunlavy Corp. ] personnel in Shelby in the early stages of the engagement to come up with the work plan." By email dated Friday, January 18th, BSCE notified Wertzberger, Barse, and Allen Dunlavy of BSCE's preliminary communications with a contemplated geotechnical engineering subcontractor. The email advised that BSCE would forward the subcontractor's proposal later that day and requested that the recipients notify BSCE if they desired a sooner start date.
¶5 Several weeks later, on February 7, 2013, at 5:06 p.m., BSCE emailed an invoice to WAPC in the amount of $19,610.86 for payment on BSCE's completed Shelby Project work. At 11:33 a.m. the next morning, WAPC replied by email, stating:
The owner would like you to bill him directly for your services. If you could modify the invoice so it is to him and send it there that would be great.
(Emphasis added.) The WAPC email further instructed BSCE to send the invoice to the referenced owner, "[Dunlavy Corp. ] ... Atten. Allen Dunlavy." Without objection or question, BSCE re-addressed the invoice as directed and sent it to the address specified in the WAPC email. In a subsequent affidavit, Murphy attested that BSCE re-invoiced Dunlavy Corp. based on BSCE's belief that WAPC and Wertzberger "were agents of [Dunlavy Corp. ]" By correspondence on April 26, 2013, Allen Dunlavy instructed BSCE that "if [BSCE] [is] not paid by May 1st ..." to "direct all collections towards [Dunlavy]" and that "the other parties have no part in this invoice."
¶6 On May 20, 2013, after receiving no payment on the Dunlavy invoice, BSCE filed a complaint in the Montana Eighth Judicial District Court against Dunlavy Corp. , Wertzberger, WAPC, and Barse for payment on the invoiced work. Four days later, BSCE amended its complaint to included named defendants Allen Dunlavy d/b/a Dunlavy Corp. , WAPC, and Wertzberger. Following Dunlavy's failure to appear and answer, BSCE ultimately obtained a default judgment against "Allen Dunlavy d/b/a [Dunlavy Corp. ]" for the principal amount of the contract debt ($19,610.86), plus costs and interest. On August 12, 2014, BSCE moved for summary judgment against WAPC for the same principal amount on asserted claims of account stated and breach of contract. In opposition to the motion, WAPC asserted that WAPC never assented to the BSCE invoice as a debt owed by WAPC and that WAPC was not liable in contract because BSCE was aware that WAPC was acting as an agent for Dunlavy d/b/a Dunlavy Corp . Finding that genuine issues of material fact remained as to whether WAPC assented to the BSCE invoice as an account stated and whether WAPC disclosed to BSCE that it was acting as an agent of an identified principal rather than in its own individual capacity, the District Court denied BSCE's motion.
¶7 On November 4, 2015, WAPC and Wertzberger filed their own motion for summary judgment on BSCE's claims on the asserted grounds that: (1) neither of them assented to the BSCE invoice as a debt owed to BSCE by either; (2) WAPC was not liable to BSCE because it entered into the BSCE contract merely as an agent for a disclosed principal (Dunlavy d/b/a Dunlavy Corp. ); and (3) Wertzberger was not liable for any debt attributed to WAPC because he in turn was merely acting as a known agent for an identified principal (WAPC) and that grounds did not exist to pierce WAPC's corporate veil. BSCE opposed the motion on the asserted grounds that genuine issues of material fact remained as to whether WAPC assented to the BSCE invoice as an account stated and whether WAPC/Wertzberger contracted with BSCE in their individual capacities rather than in their asserted agency capacities. BSCE alternatively asserted that, even if acting as an agent of Dunlavy Corp. , WAPC remained liable to BSCE under agency principles either due to non-disclosure of the agency or principal or because the purported principal in fact did not exist. Finding no genuine issue of material fact on the supplemented Rule 56 record, the District Court granted summary judgment to WAPC and Wertzberger on BSCE's claims. The court essentially concluded that WAPC and Wertzberger were entitled to summary judgment that: (1) WAPC's overnight delay in responding to BSCE's afterhours email invoice did not constitute assent to be personally bound by the stated debt; (2) BSCE had reason to know that WAPC engaged BSCE as an agent of Dunlavy d/b/a Dunlavy Corp. ; (3) the common-law principle that an agent is liable for obligations entered into on behalf of a non-existent principal does not apply if the agent was not acting for the agent's own benefit; (4) Wertzberger made an unrebutted threshold showing that he engaged BSCE on behalf of his immediate principal (WAPC); and (5) BSCE neither pled nor made a supported factual showing for a claim for piercing WAPC's corporate veil.
STANDARD OF REVIEW
¶8 We review summary judgment rulings de novo under the standards of M. R. Civ. P. 56. Dick Anderson Constr., Inc. v. Monroe Prop. Co. , 2011 MT 138, ¶ 16, 361 Mont. 30, 255 P.3d 1257. Summary judgment is proper only when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. M. R. Civ. P. 56(c)(3). Whether a genuine issue of material fact exists or whether a party is entitled to judgment as a matter of law are conclusions of law subject to de novo review for correctness. Ereth v. Cascade Cty. , 2003 MT 328, ¶ 11, 318 Mont. 355, 81 P.3d 463.
DISCUSSION
¶9 1. Whether the District Court erroneously granted summary judgment that WAPC was not personally liable to BSCE under § 28-10-702(1), MCA ?
¶10 In support of its motion for summary judgment, BSCE asserts that it was entitled to judgment pursuant to § 28-10-702(1), MCA, because there was no genuine issue of material fact that the parties mutually assented that WAPC would be personally liable to BSCE for the agreed scope of work performed by BSCE on the Shelby Project.
BSCE asserts that it is beyond genuine material dispute that, regardless of WAPC's agency capacity, WAPC consented to personally receive credit from BSCE in the transaction within the meaning of § 28-10-702(1), MCA.
¶11 Section 28-10-702(1), MCA, provides that:
A person who assumes to act as an agent is responsible to third persons as a principal for acts in the course of the agency ... when, with the agent's consent, credit is given to the agent personally in a transaction.
Adopted by Montana from the California Civil Code, § 28 - 10 - 702(1) is a Field Code formulation of a common-law agency principle which, in the absence of clear legislative intent to deviate from the common law, we must construe in accordance with the common-law principles from which it derives. See §§ 1-1-108 to -109, 1-2-103, MCA ; Estate of Duke , 61 Cal.4th 871, 190 Cal.Rptr.3d 295, 352 P.3d 863, 868-69 (2015) ; Siminoff v. Jas. H. Goodman & Co. Bank , 18 Cal.App. 5, 121 P. 939, 941 (1912).
¶12 Consistent with the language of § 28-10-702(1), MCA, the common law generally recognizes four scenarios generally determining when an agent of another is personally liable when contracting with a third party. First, an actual or apparent agent may contract with a third party on the agent's behalf without liability to the principal if the contract expressly excludes the principal as a party. See Restatement (Third) of Agency §§ 6.01 and 6.02 (2006). Accord § 28-10-702(1), MCA.
¶13 Second, except as otherwise agreed by the agent and third party, an agent with actual authority who enters into a contract with a third party on behalf of a disclosed principal is not personally liable on the contract. Empire Office Machs., Inc. v. Aspen Trails Assocs. LLC , 2014 MT 94, ¶ 14, 374 Mont. 421, 322 P.3d 424 ; Como v. Rhines , 198 Mont. 279, 287, 645 P.2d 948, 952 (1982) (citing Budget Ins. & Fin. v. Leighty , 186 Mont. 368, 372, 607 P.2d 1125, 1127 (1980) ); Heringer v. Schumacher , 88 Cal.App. 349, 263 P. 550, 552 (1928) ; Restatement (Third) of Agency § 6.01(2). See also § 28-10-702(1), MCA. When an agent's principal is disclosed, the law presumes that the agent intended to bind the principal without personal liability "except upon clear and explicit evidence" of the agent's intent to be personally liable with or exclusive of the principal. Heringer , 263 P. at 552. A principal is disclosed if the third party knows or had reason to know that an agent is acting for a principal and also knows or had reason to know of the identity of the principal. Empire Office Machs. , ¶¶ 17-18 ; Restatement (Third) of Agency §§ 1.04(2)(a), 1.04(4), and 6.01 cmt c. Accord Marks v. Jos. H. Rucker & Co. , 53 Cal.App. 568, 200 P. 655, 656 (1921) (actual knowledge of the principal's identity sufficient to relieve agent of liability however knowledge acquired). "Unless the contract explicitly excludes the principal as a party, parol evidence is admissible" to prove a third party's awareness of the identity of an agent's principal. Restatement (Third) of Agency § 6.01 cmt. c.
¶14 Third, except as otherwise agreed by the agent and third party, an agent with actual or apparent authority who enters into a contract with a third party on behalf of an unidentified principal is personally liable to the third party with the principal. Restatement (Third) of Agency § 6.02(2). See also § 28-10-702(1), MCA. A principal is unidentified if the third party knows or has reason to know that the agent is acting for a principal but does not know or have reason to know of the principal's identity. Restatement (Third) of Agency §§ 1.04(2)(c) and 1.04(4). Accord Empire Office Machs. , ¶¶ 14-18.
¶15 Fourth, an agent with actual authority who enters into a contract with a third party on behalf of an undisclosed principal is also personally liable to the third party with the principal. Restatement (Third) of Agency § 6.03(2). See also § 28-10-702(1), MCA. A principal is undisclosed if the third party does not know or have reason to know that the agent is acting for a principal. Restatement (Third) of Agency §§ 1.04(2)(b) and 1.04(4). Accord Empire Office Machs. , ¶¶ 14-18.
¶16 Here, BSCE asserts that it was entitled to summary judgment based on WAPC's email directive for BSCE to proceed and invoice WAPC, and Murphy's subsequent affidavit assertion that WAPC "consented and agreed" that "credit would be given to [WAPC] personally in said transaction." However, the pertinent record email communication between WAPC and BSCE included Allen Dunlavy as a co-addressee. WAPC's directive to invoice WAPC was qualified (i.e. "for now ... you can invoice" WAPC but "[t]his may change as things proceed ..."). WAPC made an affidavit showing that Wertzberger at all times clearly communicated to BSCE that WAPC was acting on behalf of Dunlavy Corp . WAPC further made an affidavit showing the BSCE did not object to WAPC's February 7th directive to invoice Dunlavy Corp . directly. Though it did not dispute the amount of the initial BSCE invoice, WAPC directed BSCE to resubmit it directly to "the owner" the next day, which BSCE did without objection. We hold that the District Court correctly determined BSCE failed to show the absence of genuine issues of material fact entitling it to judgment as a matter of law on its contract and account stated claims.
¶17 On WAPC's subsequently filed motion, the District Court conversely granted summary judgment that WAPC was not personally liable on the contract pursuant to § 28-10-702(1), MCA. BSCE asserts that genuine issues of material fact precluded summary judgment to WAPC based on the Murphy affidavit assertions that WAPC "agreed ... that the credit would be given to [WAPC] personally in said transaction" and that "BSCE performed the services on credit given to [WAPC] ... as previously agreed to and instructed by" WAPC. However, "[a] contract may be explained by reference to the circumstances under which it was made and the matter to which it relates." Section 28-3-402, MCA. Accord Restatement (Second) of Contracts § 202(1) (1981). In the absence of an integrated written agreement, the "parties to an agreement know best what they meant" and "their [contemporaneous] action under" the agreement "is often the strongest evidence of" their agreement. Restatement (Second) of Contracts § 202 cmt. g.
¶18 A product of a patchwork of prior communications and subsequent performance on the record presented, the WAPC-BSCE contract was an informal, unintegrated agreement based on a previously discussed scope of work, previously exchanged rate schedule, WAPC's January 14th email notice to proceed, BSCE's performance, and the parties' pertinent communications along the way. It is beyond genuine material dispute that WAPC was acting at all times as the project architect. BSCE made no assertion, much less a supported responsive showing, that WAPC had any other interest in the project or of any cost distribution agreement between WAPC and BSCE. WAPC co-addressed its January 14th notice to proceed jointly to BSCE, Allen Dunlavy, and construction contractor Barse. WAPC's included directive for BSCE to email WAPC was expressly subject to subsequent change.
¶19 BSCE's own contemporaneous conduct eliminates any ambiguity in WAPC's initial email statement. In response to WAPC's January 14th notice to proceed and initial invoicing instruction, BSCE responded by email directly to WAPC, contractor Barse, and Allen Dunlavy. Four days later, BSCE similarly emailed WAPC, Barse, and Allen Dunlavy (addressing them collectively as "Gentlemen"). The email advised them that the Shelby Project geotechnical work would commence on a specified start date "assuming" that they found the subcontractor's "proposal acceptable," and requested that they notify BSCE if they desired a sooner start date.
¶20 Following its receipt of BSCE's initial email invoice after 5:00 p.m. on February 7th, and consistent with its prior notice to BSCE that the invoice recipient was subject to change, WAPC advised BSCE the next morning that:
[t]he owner would like you to bill him directly for your services. If you could modify the invoice so it is to him and send it there that would be great. The owner is [Dunlavy Corp. ] [address omitted] Attn: Allen Dunlavy.... Let me know if you have any questions.
(Emphasis added.) BSCE promptly redirected the invoice to Dunlavy Corp . as directed without question, objection, or statement evincing any prior understanding or manifestation of mutual intent that WAPC would be personally bound. Consistent with WAPC's affidavit assertion that BSCE was aware at all times that WAPC was merely acting as the project architect to the benefit of Dunlavy Corp ., BSCE later admitted that it resubmitted its invoice to Dunlavy Corp. as directed by WAPC based on its belief that WAPC and Wertzberger "were agents of [Dunlavy Corp .]" In yet another indicia of the parties' contemporaneous understanding, Allen Dunlavy corresponded with BSCE on April 26, 2013, and instructed BSCE that "if [BSCE] [is] not paid by May 1st ..." to "direct all collections towards [Dunlavy]" and that "the other parties have no part in this invoice." WAPC also presented unrebutted affidavit testimony that BSCE made no contemporaneous statement asserting or indicating a belief that it had contracted with WAPC in a personal capacity. The first assertion or indication of any such belief came in BSCE's District Court complaint.
¶21 Further supporting WAPC's position are two after-the-fact email statements on August 13, 2013, made by Allen Dunlavy to BSCE's counsel, WAPC, and Dunlavy's general contractor wherein Dunlavy consistently admits that he "personally gave" WAPC "the go ahead to request the [sitework] survey" and that he, not WAPC, was "responsible for [the] debt." Though double hearsay is otherwise generally inadmissible pursuant to M. R. Evid. 801(c), 802, and 805, Dunlavy's statements were nonetheless admissible as definitional non-hearsay pursuant to M. R. Evid. 801(d)(2)(A) and (B) (admissions by a party-opponent). In the first instance, Dunlavy's statements were admissible against Dunlavy pursuant to M. R. Evid. R. 801(d)(2)(A) as admissions offered against him in the affidavit of BSCE counsel Mark Dunn in support of BSCE's motion for entry of default judgment. In the second instance, Dunlavy's statements were admissible against BSCE pursuant to M. R. Evid. R. 801(d)(2)(B) as statements in which BSCE previously manifested an adoption or belief in their truth for the purpose of obtaining default judgment against Dunlavy. If unrebutted, the totality of these facts and circumstances clearly manifest that WAPC was at all times acting as an agent of a principal whose identity BSCE had reason to know, Allen Dunlavy d/b/a Dunlavy Corp. These facts similarly contradict BSCE's assertion that WAPC expressly or implicitly agreed to be personally liable on the contract independent of Dunlavy.
¶22 On satisfaction of the moving party's threshold burden of establishing the absence of genuine issues of material fact, the evidentiary burden shifts to the opposing party to respond with an affirmative showing of specific, substantial, and material evidence creating a genuine issue of material fact. State Farm Mut. Auto. Ins. Co. v. Gibson , 2007 MT 153, ¶ 9, 337 Mont. 509, 163 P.3d 387 ; Stanley v. Holms , 1999 MT 41, ¶ 31, 293 Mont. 343, 975 P.2d 1242. "Conclusory statements, speculative assertions, and mere denials are insufficient to defeat" summary judgment. Moe v. Butte-Silver Bow Cty. , 2016 MT 103, ¶ 14, 383 Mont. 297, 371 P.3d 415 ; State Farm , ¶ 9 ; Stanley ¶ 32 ; Sprunk v. First Bank Sys. , 252 Mont. 463, 466-67, 830 P.2d 103, 105 (1992). Mere disagreement over the correct interpretation or conclusion to be drawn from facts not otherwise subject to genuine material dispute is similarly insufficient to create a genuine issue of material fact. Stanley ¶ 32 ; Sprunk , 252 Mont. at 466, 830 P.2d at 105. Here, BSCE has made no non-conclusory showing of contemporaneous fact indicating any affirmative expression or manifestation by WAPC to be personally bound to pay BSCE for the Shelby Project work. As a threshold matter, BSCE's conveniently parsed reliance on WAPC's initial email directive to invoice WAPC and its subsequent affidavit assertions that WAPC agreed that BSCE would extend credit to WAPC personally are inconsistent with: (1) the complete email statement in context; (2) BSCE's contemporaneous pre-dispute conduct; (3) BSCE's subsequent affidavit admission that BSCE believed that WAPC was Dunlavy's agent; and (4) BSCE's subsequent adoption and assertion of Dunlavy's admission that he, not WAPC, was responsible for the debt. BSCE has made no affirmative factual showing of any particular statement, circumstance, or conduct supporting its general conclusory assertion that WAPC affirmatively assented to be personally bound either in lieu of, or jointly with, Dunlavy on a contract debt negotiated by an admitted agent of a principal whose identity BSCE had reason to know. Under these circumstances, BSCE's conclusory affidavit assertions, tantamount to mere denials, were insufficient to defeat summary judgment on the Rule 56 showing made by WAPC. Regardless of the non-existence of Dunlavy Corp. as a separate legal entity, it is beyond genuine material dispute on the Rule 56 record presented that WAPC was a disclosed agent for a disclosed principal, Allen Dunlavy d/b/a/ Dunlavy Corp. It is similarly beyond genuine material dispute that WAPC did not expressly or implicitly assent to be personally liable for the preliminary Shelby Project work performed by BSCE to the benefit of the project owner. We hold that the District Court correctly granted summary judgment that WAPC was not personally liable to BSCE pursuant to § 28-10-702(1), MCA.
¶23 2. Whether the District Court erroneously disregarded an unqualified common-law agency rule that an agent who contracts on behalf of a non-existent principal is personally liable on the contract?
¶24 Citing 3 Am. Jur. 2d Agency § 277, BSCE asserts that the District Court erroneously disregarded the unqualified common-law rule that an agent who contracts on behalf of a non-existent principal is personally liable on the contract regardless of the agent's good-faith belief in the principal's existence. 3 Am. Jur. 2d Agency § 277 certainly recognizes the common-law rule cited by BSCE but the rule is hardly unqualified.
¶25 As narrowly applicable to the promoter/non-existent corporate entity scenario, a purported agent who contracts with a third party "on behalf of an entity that does not exist" is "personally liable on the contract." Restatement (Third) of Agency § 6.04 cmt. c. Consistent with this promoter/non-existent entity rule, 3 Am. Jur. 2d Agency § 277 similarly recognizes that a person who contracts on behalf of a purported but non-existent principal "becomes a party to the contract if the purported agent knows or has reason to know that the purported principal does not exist." 3 Am. Jur. 2d Agency § 277 (citing Restatement (Third) of Agency § 6.04 ). However, it is beyond genuine material dispute on the Rule 56 record presented here that WAPC was not a promoter of Dunlavy Corp . and had no reason to believe that it did not exist. Thus, the promoter/non-existent entity principles recognized in 3 Am. Jur. 2d Agency § 277 and Restatement (Third) of Agency § 6.04 have no application here.
¶26 3 Am. Jur. 2d Agency § 277 further recognizes that the general rule cited by BSCE does not apply where the parties agreed, "by express agreement or from the circumstances" not to hold the agent personally liable. The Restatement similarly recognizes that "[a] person who acts as agent on behalf of a disclosed principal does not become a party to a contract made with a third party unless the agent and the third party so agree." Restatement (Third) of Agency § 6.04 cmt. b. Here, while Dunlavy Corp . did not exist, it is beyond genuine material dispute that Allen Dunlavy did exist and that BSCE had reason to know of his existence at the time of contracting. Not only was WAPC an authorized and apparent agent for a disclosed principal (Dunlavy) for the purposes of Restatement (Third) of Agency §§ 1.04 and 6.01 -03, BSCE made no non-conclusory showing rebutting WAPC's assertion that WAPC did not expressly or implicitly agree to be personally bound on the Shelby Project contract. Thus, BSCE has not demonstrated that the District Court disregarded an unqualified common-law rule of agency.
¶27 BSCE similarly relies on Metro Kitchenworks Sales, LLC v. Cont'l Cabinets, LLC , 31 A.D.3d 722, 723, 820 N.Y.S.2d 79 (2006), for the similar proposition that, "on the theory of a breach of an implied warranty of authority[,]" an agent who contracts on behalf of a non-existent principal is personally liable except as otherwise agreed. At common law, an agent who purports to contract on behalf of another implicitly warrants to the third party that the principal authorized the agent to act on the principal's behalf. Restatement (Third) of Agency § 6.10. An agent is thus subject to liability to a third party for damages or loss caused by a breach of the warranty, including loss of the expectancy that the principal would perform as agreed by the agent. Restatement (Third) of Agency § 6.10. However, the implied warranty does not render an agent the guarantor of the principal's performance; it merely warrants that the principal authorized the agent to contract on the principal's behalf. See Restatement (Third) of Agency § 6.10.
¶28 Here, it is beyond genuine material dispute that WAPC contracted with BSCE as an agent of Allen Dunlavy d/b/a/ Dunlavy Corp . and that Dunlavy was the only apparent principal or corporate officer involved or apparent in the subject transaction. There is no record evidence that WAPC represented or otherwise warranted that it was acting as an agent of Dunlavy Corp. separate and apart from Allen Dunlavy. The record at most reflects that WAPC expressly or implicitly represented that it was an agent of Dunlavy d/b/a Dunlavy Corp. Regardless of the non-existence of Dunlavy Corp., WAPC was authorized by Dunlavy to act as Dunlavy's project architect and to contract in that capacity for the subject third-party engineering services. BSCE has failed to show that WAPC breached the implied warranty of authority as to Dunlavy personally. As to Dunlavy Corp ., in addition to failing to plead a breach of warranty claim, BSCE has made no showing that the non-existence of Dunlavy Corp . caused any damage to BSCE separate and apart from Dunlavy's breach of the contract. Thus, the implied warranty of authority principle recognized in Metro Kitchenworks and Restatement (Third) of Agency § 6.10 is not applicable here. We hold that the District Court did not erroneously disregard an unqualified common-law agency rule that an agent who contracts on behalf of a non-existent principal is personally liable on the contract.
¶29 3. Whether the District Court erroneously interjected and applied judicial estoppel as an alternative basis for its grant of summary judgment to WAPC?
¶30 Judicial estoppel is an equitable principle that bars a party from taking inconsistent positions of fact and law at different points in the same litigation if: (1) the party had knowledge of the pertinent facts at the time of the initial assertion; (2) the party accomplished or prevailed on the litigation purpose for which the party initially made the assertion; (3) the subsequent assertion of fact and law is contrary or inconsistent with the party's prior position; and (4) the original assertion induced or misled the adverse party such that allowing that party to change positions would prejudice the adverse party. Watkins Tr. v. Lacosta , 2004 MT 144, ¶ 33, 321 Mont. 432, 92 P.3d 620. See also New Hampshire v. Maine , 532 U.S. 742, 749, 121 S.Ct. 1808, 1814, 149 L.Ed.2d 968 (2001) (judicial estoppel "generally prevents a party from prevailing in one phase of a case on an argument and then relying on a contradictory argument to prevail in another phase"). Here, based on two email admissions made by Allen Dunlavy on August 13, 2013 (i.e., that he "personally gave" WAPC "the go ahead to request the [sitework] survey" and that he, not WAPC, was "responsible for [the] debt"), BSCE previously asserted, in support of its motion for default judgment against Dunlavy, that Dunlavy was solely liable to BSCE on the Shelby Project contract. Thus, as an alternative basis for granting summary judgment that WAPC was not personally liable on the BSCE contract, the District Court concluded sua sponte that judicial estoppel barred BSCE from subsequently asserting that WAPC was personally liable on the contract, whether solely or jointly with Dunlavy.
¶31 Citing M. R. Civ. P. 8(c)(1) and Love v. Tyson Foods, Inc. , 677 F.3d 258 (5th Cir. 2012), BSCE asserts that judicial estoppel is an affirmative defense, waived if not affirmatively pled in a response pleading. Based on the fact that WAPC did not plead judicial estoppel as an affirmative defense or otherwise assert it in opposition to BSCE in this litigation, BSCE asserts that the District Court erroneously interjected a waived affirmative defense to the benefit of WAPC and prejudice of BSCE. BSCE further asserts that, even if not waived, judicial estoppel would not apply on its elements in any event upon consideration of BSCE's prior litigation position viewed in context.
¶32 We need not address BSCE's assertions of error under this issue because the District Court interjected judicial estoppel only as an alternative basis for granting summary judgment that WAPC was not personally liable to BSCE and we are not affirming any of the court's summary judgment rulings on that basis. Therefore, without comment on the merits of the issue, we decline to address whether the District Court erroneously interjected and applied judicial estoppel under the facts and circumstances of this case.
CONCLUSION
¶33 In summary, we hold that that the District Court correctly denied BSCE's motion for summary judgment that WAPC was personally liable to BSCE pursuant to § 28-10-702(1), MCA. We further hold that the District Court correctly granted summary judgment on WAPC's subsequent motion that WAPC was not personally liable to BSCE pursuant to § 28-10-702(1), MCA. Finally, we hold that the District Court did not erroneously disregard an unqualified common-law agency rule that an agent who contracts on behalf of a non-existent principal is personally liable on the contract.
¶34 Affirmed.
We concur:
MIKE McGRATH, C.J.
JAMES JEREMIAH SHEA, J.
BETH BAKER, J.
JIM RICE, J.
Our analysis of this issue encompasses the related issue of whether the District Court erroneously denied BSCE's motion for summary judgment that WAPC was personally liable to BSCE under § 28-10-702(1), MCA.
Based on prior communication not of record, BSCE had transmitted its standard rates and fees schedule to WAPC earlier in the day. In a subsequent affidavit, Murphy attested that Wertzberger first contacted BSCE "in early January 2013, requesting that BSCE provide services, including surveying and developing an autocad drawing" for the Shelby Project site.
The specific identity of the "[Dunlavy Corp. ] personnel" referenced in the Wertzberger affidavit is unclear from the record, whether Allen Dunlavy, contractor Barse, or other. The only record indication is BSCE's January 14th email response to WAPC's earlier notice to proceed, stating BSCE's acknowledgment and plan to meet Warren Barse onsite on Wednesday, January 16th.
See Pl.'s Am. Compl. ¶ 7, May 24, 2013.
BSCE effected service of process on Allen Dunlavy in South Dakota on July 27, 2013.
See David Dudley Field's proposed but never-enacted New York Civil Code (1865).
See also Scott J. Burnham, Let's Repeal the Field Code! , 67 Mont. L. Rev. 31, 40-47 (2006) ; Andrew P. Morriss, " This State Will Soon Have Plenty of Laws"-Lessons Learned from One Hundred Years of Codification in Montana , 56 Mont. L. Rev. 359, 363-98 (1995) ; Robert G. Natelson, Running with the Land in Montana , 51 Mont. L. Rev. 17, 35-44, 86-90 (1990) ; Rodolfo Batiza, Sources of the Field Civil Code: The Civil Law Influences on a Common Law Code , 60 Tul. L. Rev. 799, 813-15 (1986).
See Aff. Joseph Murphy ¶ 14, December 23, 2015.
See Pl.'s Am. Compl. ¶ 7, May 24, 2013.
The recipients of WAPC's January 14, 2013 email notice to proceed included Joseph Murphy, Warren Barse (Dunlavy's general contractor), and Allen Dunlavy.
The Rule 56 record merely reflects that: (1) Dunlavy apparently held himself out as the principal of Dunlavy Corp. ; (2) WAPC and BSCE assumed that Dunlavy Corp. existed; and (3) Dunlavy was the only corporate representative of Dunlavy Corp . known to WAPC and BSCE.
Metro Kitchenworks is further distinguishable on its facts and to the narrow corporate promoter/non-existent corporation scenario. In that case, a corporate promoter and a third party knowingly entered into a ten-year contract purporting to bind an anticipated but then non-existing corporation. Metro Kitchenworks , 31 A.D.3d at 722, 820 N.Y.S.2d 79. In the face of an apparent breach of the contract by the third party six years into the contract, the promoter finally chartered the corporation and then sued the third party on the contract. Metro Kitchenworks , 31 A.D.3d at 723, 820 N.Y.S.2d 79. In response to the third party's assertion that the contract was unenforceable because the corporation did not exist at the time of contract formation, the New York Supreme Court Appellate Division held that the contract was enforceable by the subsequently chartered corporation because the initial contract was binding between the promoter/agent and the third party regardless of the non-existence of the corporation and upon the corporation's post-charter assumption or ratification of the contract. Metro Kitchenworks , 31 A.D.3d at 723, 820 N.Y.S.2d 79. | [
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Justice Dirk Sandefur delivered the Opinion of the Court.
¶1 Jennifer Ruth Bessette (Mother) appeals pro se the judgment of the Montana Eleventh Judicial District Court, Flathead County temporarily suspending a previously imposed parenting plan for the minor child, L.G.B. We affirm.
¶2 We restate the dispositive issues as:
1. Whether the District Court erroneously granted and maintained a temporary emergency order pursuant to § 40-4-220(2)(a)(ii), MCA, without an adequate showing and finding of changed circumstances under §§ 40-4-219(1) and -220(1), MCA ?
2. Whether the District Court abused its discretion when it limited Mother to supervised visitation?
3. Whether the District Court abused its discretion in denying Mother's request to refer the matter to Family Court Services in lieu of further involvement of the court-appointed guardian ad litem?
4. Whether the District Court abused its discretion in precluding admission of a psychological evaluation report authored by a non-testifying mental health professional?
FACTUAL AND PROCEDURAL BACKGROUND
¶3 On November 4, 2015, Chad Bessette (Father) filed a petition for dissolution of his marriage to Mother and for imposition of a court-ordered parenting plan for their minor child, L.G.B., then six years old. After Mother timely responded and litigation ensued for over a year, the parties eventually stipulated to a final parenting plan. On December 6, 2016, the District Court approved and imposed the stipulated plan as a final parenting plan. The plan provided that, from March through November of each year, the child would reside in Father's custody and care from Thursday evening to Friday evening, and alternating weekends. From November through March, the child would reside in Father's custody and care from Wednesday evening to Friday afternoon, and on alternating weekends. The child would be in Mother's custody and care at all other times.
¶4 On June 12, 2017, Mother filed a motion to amend the final parenting plan supported by affidavit and a proposed amended parenting plan. Based on an incident of domestic violence at Father's home in the presence of the child, Father subsequently applied for and obtained a temporary order of protection against Mother. On August 8th, the District Court denied Mother's motion for an amended final parenting plan and set all remaining issues for bench trial. On September 8th, 2017, Mother filed a motion for appointment of a limited-scope guardian ad litem (GAL) to assess the parenting dispute and make recommendations to the court regarding what contact Mother should ultimately have with the child in light of recent developments. On September 15th, the court granted Mother's motion and appointed Christina Larsen, Esq., as a limited-scope GAL for L.G.B.
¶5 On November 29, 2017, the parties participated in a twelve-hour settlement conference encompassing a wide-range of parenting plan, temporary protective order, and marital estate distribution issues still outstanding. As a result, the parties entered into stipulated parenting plan and marital estate distribution agreements. On December 1, 2017, the District Court adopted and imposed the parties' now-second stipulated parenting plan as their amended final parenting plan. The plan essentially placed L.G.B. in the primary custody and care of Father subject to a three-phase graduated transition schedule designed to incrementally increase Mother's parenting time upon demonstration of stable and appropriate parenting conduct. Under Phase 1, for two weeks, Mother would have specified day visitation on Saturdays or Sundays and after-school visits on Wednesdays. Under Phase 2, for three weeks, Mother would have the child overnight from Saturday at 8:00 AM to Sunday at 6:00 PM. Under Phase 3, for four weeks, Mother would have specified parenting time on alternating weekends. Upon the completion of the phased transitional schedule, the parties would have equal parenting time on a specified alternating schedule. The stipulated plan provided that the previously appointed GAL (Larsen) would oversee the transitional phases of the plan and monitor the child's adjustment to Mother through the first month of the plan. The parenting plan further superseded the prior temporary protective order as to the child and provided that parenting exchanges would be an exception to the continuing protective order between Father and Mother.
¶6 On December 13, 2017, only two weeks into the phased transition schedule, an incident occurred at the parking lot of Pick's Bowling Alley in Bigfork, Montana, where Mother and Father had arranged to meet to exchange the child. According to Father, he drove to the Bowling Alley, accompanied by his girlfriend, and waited for Mother to arrive with the child. Upon arriving with the child and seeing Father's girlfriend, Mother rapidly accelerated toward Father's car, stopping abruptly approximately two feet short of where Father was standing next to the car. Mother then angrily got out and repeatedly screamed "you shouldn't bring that bitch here." The child then became upset, yelling at Mother to "stop fighting." According to Mother's version of the events, she merely "parked very close" to Father's car "because it was icy and snowy and [she] didn't want [the child] to have to walk across the lot and slip on the ice." Mother acknowledged that her "reaction could have been better."
¶7 On December 15, 2017, Father filed a motion "for ex parte interim relief" and a subsequent show cause hearing. The motion requested immediate suspension of the parties' then-governing amended parenting plan to bar Mother from having unsupervised contact with the child. The motion further requested that the court reauthorize the court-appointed GAL to investigate and make further recommendation as to what contact Mother should have with the child. Father characterized the relief sought as "ex parte interim relief" but did not expressly seek modification of the parties' then-governing final parenting plan. The District Court issued Father's proposed ex parte order and set a show cause hearing for January 3, 2018.
¶8 At the show cause hearing, the court heard testimony from various witnesses regarding the circumstances of the bowling alley incident and the damaging effect on the child of Mother's continued belligerent behavior toward Father. Testifying on behalf of the child and based on consultation with the child's therapist, Mother's therapist, and interviews of the child and Father, the GAL testified that the child continued to be traumatized and scared by Mother's uncontrolled anger and rage toward Father. The GAL testified that Mother's behavior had not improved under the amended parenting plan to date and thus recommended that the court order her to complete anger management counseling to help control her emotions. The GAL further recommended that, in the interim, the court should limit Mother's contact with the child to supervised visitation.
¶9 Mother acknowledged that her behavior could have been better but asserted that there had been no change of circumstances sufficient to warrant modification of the parties' prior parenting plan. On the purported basis of eliminating the continuing cost of the GAL, Mother further requested that the court relieve the GAL and refer the matter to the Eleventh Judicial District Family Court Services program for further monitoring.
¶10 Finding it necessary in the best interests of the child, the District Court orally ordered: (1) continued suspension of the prior parenting plan; (2) that Mother complete 40 hours of anger management counseling; (3) that Mother have only supervised visitation pending reinstatement of the parenting plan; and (4) that, upon approval from the GAL, the child's counselor, and the anger management counselor, the prior parenting plan would be reinstated and restarted under its phased transition schedule. Inter alia , the District Court explained that, "rather than a change in circumstances," the bowling alley incident "was just a continuation of what had been going on before ... it's the same old stuff ... so I'm going to suspend the parenting plan" with the "hop[e] that within ... a year from now it will be going full tilt 50/50."
¶11 On the stated ground that any such referral "probably should have been done a year or two ago [a]nd I ... hate to reinvent the wheel at this stage," the court orally denied Mother's motion to refer the matter to Family Court Services in lieu of further involvement of the GAL.
¶12 The Court subsequently issued written findings of fact, conclusions of law, and judgment formalizing its oral ruling at hearing. With reference to the parties' previously imposed parenting plan, the District Court's written judgment stated, inter alia :
[1] Pursuant to M.C.A. § 40-4-220(2)(ii), the [c]ourt has the authority to grant a temporary order providing for living arrangements for the child ex parte as an emergency situation has arisen in the child's present environment that endangers the child's physical, mental, and emotional health and an immediate change is necessary to protect the child.
[2] The [prior amended parenting plan] was [previously] approved as an Order of the Court.... However, it is in the child's best interest under ... M.C.A. § 40-4-212 that the [prior parenting plan] is suspended until such time as....
The written judgment ultimately ordered that the parties' prior amended parenting plan "is hereby SUSPENDED" pending satisfaction of the specified conditions of reinstatement. Mother timely appeals.
STANDARD OF REVIEW
¶13 District courts have broad discretion to make and modify parenting plan determinations under the applicable standards of §§ 40-4-212, -219, and -220, MCA. In re C.J ., 2016 MT 93, ¶ 13, 383 Mont. 197, 369 P.3d 1028. We review parenting plan determinations and modifications for a clear abuse of discretion. C.J ., ¶ 13 ; Jacobsen v. Thomas , 2006 MT 212, ¶ 13, 333 Mont. 323, 142 P.3d 859. We review evidentiary rulings for an abuse of discretion but subject to de novo review of related questions or applications of law. State v. Frey , 2018 MT 238, ¶ 12, 393 Mont. 59, 427 P.3d 86 ; Puccinelli v. Puccinelli , 2012 MT 46, ¶ 12, 364 Mont. 235, 272 P.3d 117. An abuse of discretion occurs if a court exercises granted discretion based on a clearly erroneous finding of fact, an erroneous conclusion or application of law, or otherwise "acts arbitrarily, without employment of conscientious judgment, or exceeds the bounds of reason resulting in substantial injustice."
In re D.E. , 2018 MT 196, ¶ 21, 392 Mont. 297, 423 P.3d 586. A finding of fact is clearly erroneous only if not supported by substantial evidence, the court misapprehended the effect of the evidence, or, based on our review of the record, we have a definite and firm conviction that the lower court was mistaken. D.E. , ¶ 21. We review conclusions of law de novo for correctness. D.E. , ¶ 21.
DISCUSSION
¶14 1. Whether the District Court erroneously granted and maintained a temporary emergency order pursuant to § 40-4-220(2)(a)(ii), MCA, without an adequate showing and finding of changed circumstances under §§ 40-4-219(1) and -220(1), MCA ?
¶15 Regardless of the District Court's characterization of it as a mere temporary "suspension" of the prior parenting plan, Mother characterizes the relief granted as a modification or amendment of a prior parenting plan subject to the requirements of § 40-4-219(1), MCA. Based on the court's characterization of her conduct as "a continuation of" the "same old stuff" that "had been going on before" rather than "a change in circumstances," Mother essentially asserts that the court either erroneously modified the prior parenting plain without a sufficient finding of changed circumstances or, alternatively, erroneously suspended the parenting plan pursuant to § 40-4-220(2)(a)(ii), MCA, independent of § 40-4-219(1), MCA. In response, Father essentially asserts that the relief granted was not a modification of a prior parenting plan but merely a temporary suspension of the existing parenting plan independently authorized under § 40-4-220(2)(a)(ii), MCA, without regard for the requirements of § 40-4-219(1), MCA.
¶16 In its discretion, a district court may amend or modify a previously imposed parenting plan only upon finding that (1) a change in the circumstances of the child exists based on "facts that have arisen since the prior plan or that were unknown to the court at the time of entry of the prior plan"; and (2) amendment or modification is "necessary to serve the best interest of the child" based on consideration of the relevant criteria specified in §§ 40-4-212 and - 219(1), MCA. Section 40-4-219(1), MCA. For purposes of § 40-4-219(1), MCA, a prior parenting plan is a court-ordered parenting plan constituting a final judgment of the court in a parenting proceeding. See § 40-4-219(7), MCA ; In re Marriage of Hedges , 2002 MT 204, ¶ 18, 311 Mont. 230, 53 P.3d 1273 (distinguishing final parenting plans from "interim" or "temporary" parenting plans); In re Marriage of Allen , 237 Mont. 64, 68, 771 P.2d 578, 580 (1989) (limited purpose of interim or temporary parenting plans authorized by § 40-4-213, MCA (interim parenting plans) is to provide for "temporary custody pending [final] resolution of the action" (original emphasis)). See also §§ 40-4-219(1), -233(1), -234(1), -213(4), MCA (distinguishing "amended parenting plan" from "prior plan," mandating incorporation of "final parenting plan" into "any final decree or amended decree" in "every dissolution proceeding" or "parenting plan proceeding," and providing that "[a]doption of a final parenting plan under 40-4-234 vacates any interim parenting plan adopted under" § 40-4-213, MCA ).
¶17 At present, Title 40, chapter 4, part 1, MCA, provides for only three types of parenting plans-initial parenting plans, amended parenting plans, and temporary interim parenting plans incident to a previously or concurrently filed request for an initial or amended parenting plan. See §§ 40-4-211(1), -212, -213, -219, -220, MCA ; In re Marriage of Kovash , 260 Mont. 44, 50, 858 P.2d 351, 355 (1993) ("[t]emporary child custody" order under § 40-4-213, MCA, "is merely an initial determination made" for temporary custody "until such time as full hearing ... may be" had-showing of changed circumstances under § 40-4-219, MCA, not required for final parenting plan superseding interim parenting plan imposed incident to initial parenting plan determination).
¶18 A party seeking amendment or modification of a prior parenting plan must file a motion for amendment supported by an affidavit showing of the alleged change in circumstances and necessity for modification specified in § 40-4-219(1), MCA.
Sections 40-4-219(1), -220(1), MCA. If the motion and supporting affidavits are "adequate" to establish cause for modification under both requirements of § 40-4-219(1), MCA, the court must then set a duly noticed show cause hearing on the merits. Section 40-4-220(1), MCA. If not, the court "shall deny the motion." Section 40-4-220(1), MCA.
¶19 Within this framework, the party seeking amendment may also seek an ex parte interim order for "temporary living arrangements for the child." Section 40-4-220(2)(a)(i), MCA. In addition to the affidavit showing required by §§ 40-4-219(1) and -220(1), MCA, the motion must be further supported by an additional affidavit showing that "an emergency situation has arisen ... endanger[ing] the child's physical, mental, or emotional health" and that "an immediate" parenting plan change "is necessary to protect the child" pending further proceedings. Section 40-4-220(2)(a)(ii), MCA. If the ex parte affidavit showing is sufficient to establish a prima facie showing of an emergency situation endangering the child and a resulting need for immediate protection as required by § 40-4-220(2)(a)(ii), MCA, then the court "shall" issue an order granting the requested temporary parenting plan and then "require all parties to appear" before the court "within 21 days from the execution of the interim parenting plan" and "show cause ... why the interim parenting plan should not remain in effect until further order of court." Section 40-4-220(2)(b), MCA. The moving party has a "heavy burden" of proving entitlement to relief under §§ 40-4-219(1), -220(1), and -220(2)(a)(ii), MCA. In re R.J.N. , 2017 MT 249, ¶ 9, 389 Mont. 68, 403 P.3d 675. The exacting procedural and substantive requirements of those statutes "promote[ ] stability" for children and discourage "unnecessary litigation over parenting plans." R.J.N. , ¶ 12. In contrast to interim parenting plans issued pending an initial parenting plan determination, §§ 40-4-213(1) and -220(1)-(2), MCA, do not provide for an interim parenting plan incident to a requested amendment of a prior parenting plan except upon an affidavit showing of changed circumstances and an "emergency situation" endangering the child. See §§ 40-4-213(1), -220(1), (2)(a), MCA (interim parenting plan incident to request for initial parenting plan determination); compare §§ 40-4-213(1), -219(1), -220(1), (2)(b), MCA (interim parenting plan incident to request for amendment of prior parenting plan).
¶20 Citing In re Arneson-Nelson , 2001 MT 242, ¶¶ 33-34, 307 Mont. 60, 36 P.3d 874, Father asserts that § 40-4-220(2)(a)(ii), MCA, provides district courts authority to grant emergency relief temporarily overriding a prior parenting plan independent of and without an associated request for amendment under § 40-4-219(1), MCA. In Arneson , against the backdrop of a previously imposed final parenting plan, a mother filed a motion for a temporary ex parte order suspending the father's visitation rights under the prior parenting plan based on the alleged negative impact on the child of the father's belligerent behavior toward the mother. Arneson , ¶¶ 12-13. Finding good cause thereon, the district court issued an interim order temporarily suspending the father's parenting plan rights pending a hearing. Arneson , ¶ 13. Upon hearing, based on express findings that the father's hostile behavior was harmful to the child and that the best interests of the child required continued suspension of father's contact with the child, the court issued an order "supend[ing] all physical contact between" the father and child and limited the father's contact with the child "to phone calls, e-mail, and mail." Arneson , ¶¶ 14, 20. On appeal, father asserted that the district court erroneously modified his prior parenting plan rights without finding the change in circumstances required by § 40-4-219(1), MCA. Arneson , ¶ 30. Though the district court did not make an express finding of a "change in circumstances," we reviewed the court's judgment under § 40-4-219(1), MCA, and ultimately held that the findings made by the court were sufficient to support and clearly imply the requisite finding of a change in circumstances. Arneson , ¶ 30. Arneson thus does not support the proposition that § 40-4-220(2)(a)(ii), MCA, authorizes district courts to temporarily suspend or deviate from a prior parenting plan absent the change of circumstances required by § 40-4-220(2)(a)(ii), MCA. By its terms in context of §§ 40-4-213, -219(1), and -220(1), MCA, § 40-4-220(2)(a)(ii), MCA, does not provide district courts authority to grant emergency relief temporarily overriding a prior parenting plan independent of and without an associated request for amendment under § 40-4-219(1), MCA.
¶21 Here, Mother correctly points out that the District Court characterized its order on hearing as a mere temporary "suspension" of the prior parenting plan subject to specified conditions for reinstatement. This characterization notwithstanding, the relief granted upon hearing, within the limited application of §§ 40-4-220(1) - (2), MCA, in regard to a previously imposed parenting plan, was in substantive effect an amendment or modification of a prior parenting plan subject to § 40-4-219(1), MCA. In that context, we agree with Mother that, in addition to not making a specific finding of a change in circumstances under § 40-4-219(1), MCA, the District Court further made a seemingly contrary statement from the bench-rather than "a change in circumstances," Mother's conduct was "a continuation of" the "same old stuff" that "had been going on before." However, we must view the court's oral statement in context of the hearing record and in light of the actual findings of fact and conclusions of law entered pursuant to M. R. Civ. P. 52(a).
¶22 The court's written findings of fact did not similarly state or manifestly imply that it found that no change in circumstances that had arisen since imposition of the prior parenting plan. Moreover, as in Arneson , the court's written findings clearly manifest a change in circumstances that would have supported an express finding under § 40-4-219(1), MCA. Under the terms of the prior parenting plan, Mother would either have had limited visitation as provided by the transition schedule or, upon satisfaction of the specified conditions precedent, shared custody with Father on a specified 50/50 basis. In either event, the prior parenting plan clearly contemplated that its structure and provisions would be sufficient to adequately protect the child under the then-contemplated circumstances. The terms of the parenting plan did not contemplate or provide for the nature and occurrence of Mother's subsequent behavior and the resulting need for additional protection of the child not provided under the prior parenting plan .
¶23 Moreover, despite its seemingly contrary comment from the bench, the District Court's written conclusions of law clearly manifest the court's awareness and understanding that, as a matter of law, emergency relief under § 40-4-220(2)(a)(ii), MCA, is available only in conjunction with a request for modification of a prior parenting plan pursuant to §§ 40-4-219(1) and -220(1), MCA. Even in the isolated context of the hearing record, the court's comment cannot be fairly viewed as an oral finding of fact. It occurred in the narrow context of the court compassionately explaining to Mother the necessity of the temporary modification and the built-in pathway for reinstatement of the prior plan. Thus, as in Arneson , the court's written findings of fact and conclusions of law manifestly imply a sufficient finding of a requisite change in circumstances under § 40-4-219(1), MCA. We hold that the District Court did not erroneously modify the parties' prior parenting plan without a sufficient finding of changed circumstances as required by § 40-4-219(1), MCA.
¶24 2. Whether the District Court abused its discretion when it limited Mother to supervised visitation? ?
¶25 Mother asserts that the District Court erroneously limited her custodial rights to supervised visitation without making the requisite finding of fact under § 40-4-218(2), MCA. Subject to § 40-4-219(1), MCA, as applicable, a district court "shall determine [a] parenting plan in accordance with the best interest of the child." Section 40-4-212(1), MCA. In determining the best interest of the child, the court must "consider all relevant parenting factors" including, inter alia , "the interaction and interrelationship of the child with the child's parent or parents," "mental and physical health of all individuals involved," and "physical abuse or threat of physical abuse by one parent against the other parent or the child." Section 40-4-212(1)(c), (e)-(f), (2), MCA. Absent an agreement of the parties, a court "may order supervised visitation by the noncustodial parent," upon a finding that failure to do so would endanger the child's physical health or significantly impair the child's emotional development. Section 40-4-218(2), MCA. ¶26 We strongly recommend and caution that district courts should make specific findings on all relevant statutory criteria in making parenting plan determinations under Title 40, chapter 4, part 2, MCA. See In re Marriage of Woerner , 2014 MT 134, ¶ 15, 375 Mont. 153, 325 P.3d 1244. Nonetheless, under the doctrine of implied findings, we will not reverse a parenting plan determination for failure to make a specific finding if the express findings made were not clearly erroneous and were themselves sufficient, alone or in conjunction with other record evidence, to support and manifestly imply a more specific finding on the requisite statutory criteria. In re D.L.B. , 2017 MT 106, ¶¶ 13-14, 387 Mont. 323, 394 P.3d 169. Here, the District Court did not make a specific finding of fact on the criteria specified in § 40-4-218(2), MCA. However, regardless of other conflicting evidence, substantial record evidence supports the findings of fact made by the court. In context of its conclusions of law, the written findings made by the court were further manifestly sufficient to support and imply a finding that the failure to temporarily limit Mother to supervised visitation would likely significantly impair the child's emotional development under the circumstances-a circumstance and need not contemplated or provided for in the prior parenting plan. Apart from the court's failure to make a specific finding of fact under § 40-4-218(2), MCA, Mother has failed to demonstrate either that the findings made were clearly erroneous or that the court otherwise abused its discretion. We hold that the District Court did not erroneously limit Mother to supervised visitation without making a sufficient finding under § 40-4-218(2), MCA.
¶27 3. Whether the District Court abused its discretion in denying Mother's request to refer the matter to Family Court Services in lieu of further involvement of the court-appointed guardian ad litem?
¶28 The Eleventh Judicial District Court has long utilized a local Family Court Services (FCS) program to assist the court in determining and monitoring parenting plans. See Eleventh Jud. Dist. Local Rule 8(B) (June 2018); In re Marriage of Wilson , 2009 MT 203, ¶ 16, 351 Mont. 204, 210 P.3d 170 ; In re Marriage of Hickey , 213 Mont. 38, 43-44, 689 P.2d 1222, 1225 (1984). Since superseded by a discretionary rule, the prior local rule, as applicable here without exception, unequivocally mandated that, "[u]pon request of either party, the [c]ourt shall " refer a subject child custody or visitation matter to FCS "for investigation, report and recommendation." Local Rule 22(D)(2) (superseded June 28, 2018) (emphasis added). Mother thus asserts that, regardless of its rationale, the District Court erroneously denied her motion for referral to FCS as then-required by local rule.
¶29 To the extent not in conflict with the Montana Constitution, statutes, or rules of this Court, district courts have power and discretion to adopt local rules of administration, practice, and procedure. Sections 3-1-112(1), 3-2-704, MCA ; M. R. Civ. P. 83. Duly-adopted local rules are generally "binding upon" the adopting court.
McLaughlin v. Hart , 213 Mont. 216, 219, 690 P.2d 431, 433 (1984). However, contrary to Mother's characterization, this is not a case where a court simply disregarded its own local rule.
¶30 In September 2017, in the ongoing course of pre-judgment litigation prior to the initial parenting plan determination, the District Court granted Mother's uncontested motion for appointment of a limited-scope GAL to assess the parenting dispute and make recommendations regarding what contact Mother should ultimately have with the child. At that time, the parties stipulated to splitting the costs of the GAL's services. As an integral component, the stipulated and ultimately imposed parenting plan mandated that the previously appointed GAL would monitor Mother's progress and the child's welfare throughout the specified transition schedule. Mother did not object.
¶31 This chapter of the ongoing custody dispute arose after imposition of the parties' "final" parenting plan and prior to expiration of the stipulated period of court-ordered monitoring by the GAL. Under these unique circumstances, Mother waived her option of compelling referral to FCS pursuant to the since-superseded Local Rule 22(D)(2). We hold that the District Court did not erroneously fail to refer this matter to FCS in violation of the then-governing local rule.
¶32 4. Whether the District Court abused its discretion in precluding admission of a psychological evaluation report authored by a non-testifying mental health professional?
¶33 At the show cause hearing, Mother moved for admission of a presumably favorable written psychological evaluation report prepared by an examining mental health professional not called to testify. On Father's objection, the District Court denied admission of the report as inadmissible hearsay. Mother proceeded to examine the court-appointed GAL about her knowledge of the substance of the report. The record manifests that the testimony elicited by Mother from the GAL was largely rank hearsay as defined and generally inadmissible under M. R. Evid. 801 - 02. Mother essentially asserts that Father's failure to object to the hearsay testimony subsequently elicited by Mother was a tacit, after-the-fact waiver of his prior successful objection. Mother thus puts the District Court in error for failing to retroactively admit the previously precluded evidence sua sponte .
¶34 No sale. Mother acknowledges on appeal that the evaluation report was inadmissible hearsay as defined by M. R. Evid. 801 - 02. However inconsistent or counterproductive, Father's failure to object to the subsequent admission of the subject hearsay through other means does not render the District Court in error for failing to retroactively admit the previously precluded evidence sua sponte . We hold that the District Court did not abuse its discretion in precluding admission of the subject psychological evaluation report.
CONCLUSION
¶35 We hold that the District Court did not erroneously grant and maintain a temporary emergency order pursuant to § 40-4-220(2)(a)(ii), MCA, without an adequate showing and finding of changed circumstances under §§ 40-4-219(1) and -220(1), MCA. We further hold that the District Court did not abuse its discretion in limiting Mother to supervised visitation, failing to refer this matter to a Family Court Services program pursuant to local rule, or precluding admission of a psychological evaluation report authored by a non-testifying mental health professional.
¶36 Affirmed.
We concur:
LAURIE McKINNON, J.
INGRID GUSTAFSON, J.
JAMES JEREMIAH SHEA, J.
JIM RICE, J.
The District Court apparently imposed the "final" parenting plan prior to entry of a final judgment dissolving the parties' marriage and adjudicating all other incidents of the marriage. See Order Approving Stipulated Final Parenting Plan , filed December 6, 2016.
As extended following hearing on August 23, 2017, the protective order referenced, inter alia , a then-pending Justice Court partner/family member assault prosecution against Mother and further barred Mother from having any contact with the child except as approved by the child's counselor.
In contrast, independent of § 40-4-219, MCA, parents may periodically seek review and modification of a prior parenting plan without proof of a "change in circumstances" if the prior plan expressly provides for such review. See § 40-4-234(2)(f), MCA (periodic review of parenting plan in re contemplated future need for review if provided for in prior parenting plan); In re S.W.B.S. , 2019 MT 1, ¶¶ 12-17, 394 Mont. 52, 432 P.3d 709.
If the ex parte affidavit showing is facially insufficient to constitute a prima facie showing under § 40-4-220(2)(a)(ii), MCA, nothing in § 40-4-220(2)(b), MCA, prevents a court, in its discretion, from conducting a hearing to determine whether, upon additional evidence, sufficient cause may yet exist to grant the relief under the standards of § 40-4-220(2)(a)(ii), MCA.
"In appropriate circumstances" in a domestic relations matter, "the [c]ourt may refer the matter to Family Court Services for investigation, report and recommendation regarding custody ... and visitation rights of each child and parent." Montana Eleventh Jud. Dist. Local Rule 8(B).
The court did not specifically sustain the objection but implicitly did so by not admitting it and, instead, specifically authorizing Mother to question the court-appointed GAL about her knowledge of the subject matter. | [
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Justice James Jeremiah Shea delivered the Opinion of the Court.
¶1 Farmers State Financial Corporation (Farmers) appeals the Order of the Twenty-First Judicial District Court, Ravalli County, awarding punitive damages against Farmers for fraudulent stock conversion.
¶2 We restate the issues as follows:
Issue One: Whether the District Court Order restoring John Cote, Jr.'s converted Stock constituted an award of compensatory damages for purposes of determining an award of punitive damages.
Issue Two: Whether the District Court erred by finding that Farmers was subject to punitive damages because it acted with actual malice.
Issue Three: Whether the award of punitive damages was excessive.
¶3 We affirm.
PROCEDURAL AND FACTUAL BACKGROUND
¶4 This appeal arises from an estate contest between Janice Smith-Cote, wife of John P. Cote, Sr. (John Sr.), John P. Cote, Jr. (John Jr.), and other members of the Cote family. This Court affirmed an earlier appeal in which the District Court replaced Smith-Cote as personal representative of John Sr.'s estate. See In re Estate of Cote , No. DA 16-0295, 387 Mont. 535, 2017 WL 203681, 2017 MT 11N, ¶¶ 2, 16, 2017 Mont. LEXIS 13. The current appeal involves shares of Farmers' Stock that John Jr. owned with his father, John Sr., and Farmers' disposition of shares of that stock relative to John Jr.
¶5 On November 27, 1995, Farmers (then called Alpha-Omega Holding Company) issued stock to John Sr. and John Jr. as joint tenants with right of survivorship (JTWROS). On March 26, 1997, John Sr. and John Jr. jointly owned 181.619 shares pursuant to Farmers' Stock Certificate No. 20, which identified the owners as "John P. Cote, Sr., or John P. Cote, Jr., JTWROS."
¶6 In January 2011, John Sr. and Smith-Cote were living in Renton, Washington. Farmers communicated with Smith-Cote about transferring Stock ownership from John Sr. and John Jr. to John Sr. only. On January 19, 2011, Farmers' Executive Secretary sent Smith-Cote an e-mail with an attached "Stock Power Form" recognizing John Sr. and John Jr. as owning the Stock as JTWROS. The same day, Farmers' President sent an e-mail to the Executive Secretary regarding the proposed transfer of Stock ownership:
[W]ill you find out ihow [sic] [Smith-Cote] wants the [S]tock titled? Will it be just in her name or if John Jr. will be on it also as he is now?? He doesn't need to be, I just want to make sure it is how [John Sr.] wants it. [I]f so whether it is joint with survivorshilp [sic] or as tennats [sic] in common....
¶7 John Sr. purportedly signed two stock power forms, one dated January 21, 2011, and the other dated February 3, 2011. Farmers' policies and procedures require each stock owner's signature on a stock power form to be accompanied by a medallion signature guarantee to effectuate transfer of Farmers' stock. A medallion signature guarantee is an endorsement affixed to a request to transfer a security by the transferring financial institution that guarantees the genuineness of the signature and the legal capacity of the signatory. John Jr. and John. Sr.'s Stock required an Edward Jones' medallion signature guarantee. The January 21, 2011 Stock Power Form (January Form) was sent to Edward Jones' offices in St. Louis, Missouri. No Edward Jones' employee authorized to affix the medallion signature guarantee witnessed the execution of the January Form. However, several days after John Sr. allegedly signed the January Form, an Edward Jones employee affixed a medallion signature guarantee to the Form. Farmers claimed it never received the January Form, and the January Form was not found in Farmers' records. On February 2, 2011, Farmers contacted Smith-Cote to notify her no signed form had been received.
¶8 On February 3, 2011, John Sr. purportedly received and signed a second Stock Power Form (February Form) in an attempt to transfer all 181.619 shares of the Stock to Smith-Cote. Edward Jones has no records of any employee being present to witness the execution of the February Form. On February 5, 2011, John Sr. passed away. On February 7, 2011, the local branch of Edward Jones transmitted the February Form to the Edward Jones' St. Louis office. At an uncertain point in time, the February Form was also stamped with a medallion signature guarantee issued by Norman Eaker, CEO of Edwards Jones, although Eaker was not present to witness John Sr. sign the Form. Edward Jones transmitted the February Form to Farmers. Farmers then canceled the Stock held by John Sr. and John Jr. and transferred all 181.619 shares to Smith-Cote. The Stock Certificate cancellation and reissue date was February 3, 2011. The February Form Farmers accepted had been altered from the form Farmers originally provided to Smith-Cote.
¶9 In November 2012, John Jr. requested records from Farmers related to the Stock. John Jr. learned of the Stock transfer to Smith-Cote when Farmers responded in December 2012. Farmers determined that it had erred in transferring all 181.619 shares to Smith-Cote, declaring that it should have only transferred half the Stock. On December 21, 2012, Farmers requested that Smith-Cote return the Stock Certificate, which she did on June 24, 2014.
¶10 On February 28, 2013, John Jr. and the Cote family initiated litigation against Smith-Cote. See In re Estate of Cote , ¶ 4. On June 30, 2014, John Jr. and the Cotes filed an Amended Petition, alleging claims of undue influence and lack of capacity, conversion, fraud, and unjust enrichment against Smith-Cote regarding the Stock transfer. In re Estate of Cote , ¶ 4. The Amended Petition also stated claims against Farmers for negligent violation of fiduciary duties and conversion. On March 28, 2014, Farmers wrote to John Jr. and advised him that in exchange for a release of liability, Farmers would issue John Jr. a certificate for half of the Stock, or 90.8095 shares. John Jr. declined to sign a release, and Farmers did not issue a stock certificate. Farmers answered with a counterclaim and cross-claim for interpleader against John Jr. John Jr. responded and reiterated his claims against Farmers, alleging breach of the duty of care owed to a stockholder, breach of the fiduciary duty owed to a stockholder, breach of the duty of good faith and fair dealing, and requesting punitive damages. Around August 14, 2015, Farmers filed a motion for summary judgment, arguing that Smith-Cote and John Jr. each owned equal shares of the 181.619 shares of Farmers' Stock as tenants in common.
¶11 The District Court conducted two bench trials: on August 31-September 1, 2015, and on April 19-20, 2016. On April 11, 2016, the District Court granted John Jr.'s motion for partial summary judgment against Smith-Cote and Farmers. The District Court held that John Jr. is the sole owner of all 181.619 shares of Stock because Farmers did not transfer the Stock to Smith-Cote until after John, Sr.'s death. The District Court found there was no genuine dispute as to the following material facts: (1) John Jr. did not provide his consent to transfer all shares of the jointly held Farmers' Stock at issue to Smith-Cote; (2) the medallion signature guarantee, which was a requirement on Farmers' own form, was not provided until sometime after February 7, 2011, regardless of when the stamp was affixed; (3) the February Form was not transmitted to Farmers in order to effectuate the transfer until sometime after John Sr.'s death; and (4) Farmers' admission that it erred is an additional ground showing that the attempted transfer is invalid in its entirety. On March 2, 2017, Farmers represented to the District Court that it paid the remaining 2012-2016 dividends on the Stock and has now paid all the dividends on the 181.619 shares of Stock to John Jr., together with interest.
¶12 On March 16, 2017, the District Court issued an order requiring Farmers to pay John Jr. (1) any and all outstanding dividends with ten percent interest that has not already been paid on the 181.619 shares of Stock, including any dividends distributed to stockholders between February 3, 2011 and the order date; (2) $1.1 million in punitive damages to John Jr.; and (3) John Jr.'s costs in pursuing recovery of the Stock. Farmers filed a motion to vacate or reduce the award of punitive damages. The District Court denied Farmers' motion. Farmers appeals.
STANDARDS OF REVIEW
¶13 This Court reviews a district court's conclusions of law de novo for correctness.
Folsom v. Mont. Pub. Emps. Ass'n , 2017 MT 204, ¶ 18, 388 Mont. 307, 400 P.3d 706 ; Giambra v. Kelsey , 2007 MT 158, ¶ 28, 338 Mont. 19, 162 P.3d 134. A district court's interpretation and application of statutes presents a question of law. See Kulstad v. Maniaci , 2009 MT 326, ¶ 50, 352 Mont. 513, 220 P.3d 595. We review a district court's decision to award punitive damages for an abuse of discretion. Osman v. Cavalier , 2011 MT 60, ¶ 7, 360 Mont. 17, 251 P.3d 686. We review a district court's findings under the statute setting out requirements for awards of punitive damages, § 27-1-221, MCA, to determine whether the findings are clearly erroneous. Marie Deonier & Assocs. v. Paul Revere Life Ins. Co. , 2004 MT 297, ¶ 39, 323 Mont. 387, 101 P.3d 742. "A district court's findings are clearly erroneous if they are not supported by substantial credible evidence, if the [district] court misapprehended the effect of the evidence, or if a review of the record leaves this Court with the definite and firm conviction that a mistake has been committed." Beaver v. Mont. Dep't of Nat. Res. & Conserv. , 2003 MT 287, ¶ 79, 318 Mont. 35, 78 P.3d 857 ; Marie Deonier & Assocs. , ¶ 39. This Court's review of a district court's application of §§ 27-1-220, -221, MCA, is plenary. Osman , ¶ 7. This Court reviews de novo the constitutionality of punitive damages awards. McCulley v. U.S. Bank of Mont. , 2015 MT 100, ¶ 20, 378 Mont. 462, 347 P.3d 247 (citing Seltzer v. Morton , 2007 MT 62, ¶ 152, 336 Mont. 225, 154 P.3d 561 ).
DISCUSSION
¶14 Issue One: Whether the District Court Order restoring John Cote, Jr.'s converted Stock constituted an award of compensatory damages for purposes of determining an award of punitive damages.
¶15 Compensatory damages are designed to compensate the injured party for an actual loss or injury. Sunburst Sch. Dist. No. 2 v. Texaco, Inc. , 2007 MT 183, ¶ 40, 338 Mont. 259, 165 P.3d 1079 ; Seltzer , ¶ 148 ; State Farm Mut. Auto Ins. Co. v. Campbell , 538 U.S. 408, 416, 123 S.Ct. 1513, 1519, 155 L.Ed.2d 585 (2003) ("[c]ompensatory damages are intended to redress the concrete loss that the plaintiff has suffered by reason of the defendant's wrongful conduct....") (internal citations omitted); Semenza v. Bowman, 268 Mont. 118, 126, 885 P.2d 451, 456 (1994) ; § 27-1-317, MCA ; Restatement (Second) of Torts, § 903 cmt. a (Am. Law Inst. 1979) ("[w]hen there has been harm only to the pecuniary interests of a person, compensatory damages are designed to place him in a position substantially equivalent in a pecuniary way to that which he would have occupied had no tort been committed...."). The "proper measure of compensatory damages must be determined solely based on the facts of each case." Seltzer , ¶ 96. By contrast, "punitive damages serve a broader function; they are aimed at deterrence and retribution." Campbell , 538 U.S. at 416, 123 S.Ct. at 1519.
¶16 A party may recover lost profits if the profits can be established with some certainty and proof of source. DeTienne v. Sandrock , 2018 MT 269, ¶¶ 14, 18, 393 Mont. 249, 431 P.3d 12 (citing § 27-1-317, MCA ); Delaney & Co. v. City of Bozeman , 2009 MT 441, ¶¶ 41-42, 354 Mont. 181, 222 P.3d 618. Dividends are a portion of a company's profits distributed to shareholders in the form of money or additional shares. Dividends , Black's Law Dictionary (10th Ed. 2014). Here, the withheld dividends amount to lost profits and can be established with complete certainty of amount and source.
¶17 Interest as damages is includable in a judgment. Section 27-1-211, MCA ("[e]ach person who is entitled to recover damages certain or capable of being made certain by calculation and the right to recover which is vested in the person upon a particular day is entitled also to recover interest on the damages from that day...."). Securities have an immediate "use" value, like money. Including interest in the calculation of damages reflects a defendant's use of a plaintiff's money (or securities) that must be included in a judgment to ensure a plaintiff is fully compensated. Byrne v. Terry , 228 Mont. 387, 391, 741 P.2d 1341, 1343 (1987) (citing § 27-1-211, MCA ). As the Dissent correctly points out, the interest on the Stock was compensatory damages designed to compensate John Jr. for Farmers' wrongful detention of John Jr.'s money. Dissent, ¶ 62.
¶18 Under Montana's adopted version of the Uniform Commercial Code, "[a]n issuer that is liable for wrongful registration of transfer ... on demand shall provide the person entitled to the security with a like certificated or uncertificated security, and any payments or distributions that the person did not receive as a result of the wrongful registration." Section 30-8-414(2), MCA.
¶19 The District Court found that Farmers is an issuer and is liable for wrongful registration of t he transfers of Stock to Smith-Cote. The District Court relied on a Delaware case applying a statute identical to Montana's adopted provisions, § 30-8-414(2), MCA, and interpreting official comments that are consistent with Montana's official comments. The Delaware Court held that the "right to elect damages instead of the return of duplicate securities does not exist under ordinary circumstances ... where the issuer acts with reasonable promptness." Tuggle v. Am. Fin. Sys. , 1978 WL 21995, at *3, 1978 Del. Ch. LEXIS 659, at *7 (Del. Ch. June 22, 1978). However, "[t]he draftsmen's official comments to [§ 8-404] note that the case law has also recognized the right to elect between an equitable action to compel issue of a new security and an action for damages." Tuggle , 1978 WL 21995, at *2, 1978 Del. Ch. LEXIS at *6. Applying the Delaware Court's rationale, the District Court determined that Farmers did not act with "reasonable promptness." Despite Farmers' representations to the District Court and John Jr.'s repeated demands, it took Farmers nearly five years from the time Farmers admitted to John Jr. that it improperly transferred the Stock until it finally returned the Stock to John Jr. Thus, the District Court concluded Farmers was not entitled to the statutory protections or limitations on damages under § 30-8-414, MCA, and was obligated to make John Jr. whole. The District Court concluded John Jr. was entitled to compensatory damages in the form of the Farmers stock, interest, and dividends, and that Farmers was not entitled to the statutory limitation of remedies.
¶20Farmers argues the remedy for wrongful registration of a security is not compensatory damages, and the District Court erred in awarding punitive damages to John Jr. Farmers contends that the proper remedy under § 30-8-414(2), MCA, is requiring the financial institution to reissue the security, along with any payments or distributions the aggrieved party did not receive as a result of the wrongful registration. Farmers argues it complied with the statute when it returned the Stock. John Jr. counters the District Court correctly identified the Stock, dividends, and interest as "compensatory damages" in the amount of at least $477,846.85. We agree.
¶21 In pleadings and in the District Court's order regarding partial summary judgment, Farmers conceded it is an issuer and is liable for "wrongful registration of transfer" of the Stock to Smith-Cote. See § 30-8-414, MCA
¶22 When Farmers wrongfully transferred the Stock, John Jr. clearly suffered damages. Farmers refused John Jr.'s repeated demands for the return of all 181.619 shares of Stock. Nearly five years passed between when Farmers admitted to John Jr. that it improperly transferred John Jr.'s Stock to Smith-Cote and when Farmers represented to the District Court that it had paid all shares of Stock, plus interest and dividends, to John Jr. Farmers forced John Jr. to seek a judicial remedy to compel Farmers to return the other half of the Stock, plus interest and dividends. Throughout this period, John. Jr. was deprived of the use and value of his Stock.
¶23 Compensatory damages are designed to make a party whole, and a court should determine compensatory damages based on the facts of each case. Seltzer , ¶¶ 96, 148. Here, the Stock is equivalent to compensatory damages. See Campbell , 538 U.S. at 416, 123 S.Ct. at 1519. The Stock is fungible, transferrable, and with a redeemable, immediately liquid ascertainable cash value that serves as compensation for a pecuniary loss. See Seltzer , ¶ 148 ; Campbell , 538 U.S. at 416, 123 S.Ct. at 1519.
¶24 Unlike a court-ordered return of a unique piece of property, wrongful registration of a security under § 30-8-414(2), MCA, requires that the party who wrongfully registered the security provide the wronged party "with a like certificated or uncertificated security, and any payments or distributions that the person did not receive as a result of the wrongful registration." (Emphasis added.) The issuance of the Stock constituted an immediate restoration of monetary value to John Jr.: the value of the certificated Stock, plus accrued interest and dividends. The interest and dividends were necessary to fully restore John Jr. for his detriment suffered at the hands of Farmers. See §§ 27-1-201, -202, MCA. The Dissent contends that the issuance of the Stock is an equitable remedy and one not equivalent to, or interchangeable with, compensatory damages. Dissent, ¶¶ 47-49. However, we have consistently held that "the purpose of compensatory damages ... is to redress the concrete loss that a plaintiff has suffered by reason of a defendant's wrongful conduct." Seltzer , ¶ 148 (citing Campbell , 538 U.S. at 416, 123 S.Ct. at 1519 ). That is precisely what occurred in this case. John Jr. suffered a concrete loss by reason of Farmers' wrongful conduct. The District Court redressed Farmers' wrongful conduct by requiring Farmers to issue a like security, along with payment for the ancillary pecuniary loss John Jr. suffered as a result. Based on the contemporaneous value of the Stock, the parties and the District Court were able to calculate to the penny John. Jr.'s concrete losses. Further, on the day John Jr. received the Stock certificates, he could have immediately converted the Stock to cash, no different than he could have deposited a check for the damages he suffered. If something "looks like a duck, walks like a duck and quacks like a duck, it must be a duck." Wild v. Fregein Constr ., 2003 MT 115, ¶ 31, 315 Mont. 425, 68 P.3d 855. In both form and substance, the District Court's award in this case was a duck.
¶25 The Dissent points to a comment to § 30-8-414, MCA, that, historically, when an issuer wrongfully registered a security transfer, some courts allowed the registered owner to elect between the issuance of new stock and a claim for monetary damages, which § 30-8-414, MCA, does not provide. Dissent, ¶ 49. The Dissent then makes the unsupported leap that the elimination of an election of remedies means that the statutorily prescribed remedy is necessarily an equitable one. Dissent, ¶ 49. Since both remedies were designed to redress the concrete loss suffered by the wronged party, however, the elimination of one remedy is less proof of an intent to constrain the redress obtained, and more a recognition that the remedies are just two ducks of a different color.
¶26 Finally, during the April 19-20, 2016 bench trial and in its September 2016 proposed Supplemental Findings of Fact and Conclusions of Law, Farmers framed the dispute over the return of Stock as "damages" and called its March 2014 offer to return half the Stock a way for John Jr. to "mitigate [his] damages." Farmers points out that its mitigation argument was in reference to the financial pressure John Jr. felt relating to litigation costs, the fact that potential acceptance of half the Stock at an earlier stage in the proceeding could have been used to solve John Jr.'s financial concerns goes to Farmers' treatment of the Stock as monetary damages.
¶27 The District Court did not err when it concluded John Jr. was entitled to the compensatory damages in the form of all the shares of Farmers' Stock, plus appropriate dividends and interest. See Kulstad , ¶ 50 ; Giambra , ¶ 28. This award of compensatory damages thus enabled the District Court to consider punitive damages against Farmers. See Folsom , ¶ 51 ("punitive damages are not available as a matter of law absent an award of compensatory damages on a predicate cause of action from which the actual malice or actual fraud arose....").
¶28 Issue Two: Whether the District Court erred by finding that Farmers was subject to punitive damages because it acted with actual malice.
¶29 It should be presumed that a plaintiff "has been made whole for his injuries by compensatory damages, so punitive damages should only be awarded if the defendant's culpability ... is so reprehensible as to warrant the imposition of further sanctions to achieve punishment or deterrence." Campbell , 538 U.S. at 419, 123 S.Ct. at 1521 ; Seltzer , ¶ 134 (the purpose of punitive damages "is to have an impact on the defendant in the form of punishment and deterrence....").
¶30 "[R]easonable punitive damages may be awarded when the defendant has been found guilty of actual fraud or actual malice." Section 27-1-221(1), MCA. Actual malice exists where a defendant
has knowledge of facts or intentionally disregards facts that create a high probability of injury to the plaintiff and:
(a) deliberately proceeds to act in conscious or intentional disregard of the high probability of injury to the plaintiff; or
(b) deliberately proceeds to act with indifference to the high probability of injury to the plaintiff.
Section 27-1-221(2), MCA. When assessing an award for punitive damages, the district court "shall clearly state the reasons for making the award in findings of fact and conclusions of law, demonstrating consideration of each of the following matters":
(i) the nature and reprehensibility of the defendant's wrongdoing;
(ii) the extent of the defendant's wrongdoing;
(iii) the intent of the defendant in committing the wrong;
(iv) the profitability of the defendant's wrongdoing, if applicable;
(v) the amount of actual damages awarded by the jury;
(vi) the defendant's net worth;
(vii) previous awards of punitive or exemplary damages against the defendant based upon the same wrongful act;
(viii) potential or prior criminal sanctions against the defendant based upon the same wrongful act; and
(ix) any other circumstances that may operate to increase or reduce, without wholly defeating, punitive damages.
Section 27-1-221(7)(b), MCA. All elements of the claim for punitive damages must be proven by clear and convincing evidence, which "is more than a preponderance of evidence but less than beyond a reasonable doubt." Section 27-1-221(5), MCA.
¶31 It is well established that a "joint tenant with the right of survivorship automatically gains the other tenant's interest in the property upon the other tenant's death, as a matter of law." In re Estate of Afrank , 2012 MT 289, ¶ 9, 367 Mont. 334, 291 P.3d 576 (citations omitted); § 70-1-307, MCA (a "joint interest is one owned by several persons in equal shares by a title created by a single will or transfer, when expressly declared in the will or transfer to be a joint tenancy or when granted or devised to executors or trustees as joint tenants...."). A joint tenant's interest ceases upon his death, and the joint property immediately passes to the surviving joint tenant. Vogele v. Estate of Schock , 229 Mont. 259, 263, 745 P.2d 1138, 1140 (1987) (citing § 70-1-307, MCA ).
¶32 The District Court concluded that Farmers acted with actual fraud and actual malice, and that John Jr. was entitled to punitive damages. In its initial order awarding punitive damages and in its order denying Farmers' motion to vacate or reduce the award of punitive damages, the District Court justified its award and analyzed relevant statutory considerations under § 27-1-221(7)(b), MCA. The District Court reasoned that Farmers blatantly disregarded its own policies and procedures regarding stock transfer and the rights associated with JTWROS. Especially egregious was Farmers' backdating of the Stock Power Form. Further, even after Farmers discovered its error, it initially refused to return the Stock to John Jr. ¶33 Farmers argues that it made a good-faith mistake and promptly and repeatedly attempted to fix it. Farmers argues it had no possible motive to harm John Jr., benefit Smith-Cote, or benefit itself. Farmers further contends that, ultimately, John Jr. was not harmed and incurred no compensatory damages, rendering him ineligible for punitive damages. Farmers argues the District Court's findings of actual fraud and actual malice were based solely on the erroneous conclusion that Farmers misrepresented the stock transfer date during litigation. John Jr. counters Farmers acted with actual fraud and actual malice and proceeded with deliberate indifference toward John Jr. John Jr. argues Farmers conduct was not an isolated incident but was the result of a series of repeated, intentional, and deliberate acts designed to deprive John Jr. of his Stock.
¶34 The record supports the District Court's determination that Farmers had knowledge of, or intentionally disregarded, facts that created a high probability of injury and deliberately proceeded to act in conscious or intentional disregard to the high probability of injury to John Jr. See § 27-1-221(2), MCA. The District Court found that Farmers made multiple misrepresentations regarding the ineffective Stock transfer and concealed the fact that it backdated the Stock transfer. Farmers knew John Jr. owned the Stock and knew, or should have known, based on the advice of its own counsel and its own policy requirements that a stock power form must be affixed with a valid medallion signature guarantee before stock can be transferred. Farmers knew before John Sr. died that the Stock Power Form had not been delivered to any Edward Jones office, and that the medallion signature guarantee was not affixed until after John Sr.'s death. John Jr. did not sign any stock power form, and Farmers admitted John Jr. did not consent to transferring the shares to Smith-Cote. Nevertheless, Farmers representatives still told Smith-Cote it could transfer the Stock to her and, ultimately, Farmers did transfer the Stock. It was only after Edward Jones produced records proving the transfer did not occur on February 3, 2011, that Farmers admitted it did not actually transfer the Stock before John Sr.'s death. Farmers also admitted the Stock Power Form it accepted to make the improper transfer had been altered. The sheer implausibility of John Sr. receiving and signing the Stock Power Form in Washington, obtaining a medallion signature guarantee in Missouri, and transmitting the Form to Montana all on February 3, 2011, casts a further pall over Farmers' conduct that certainly supports the conclusion that Farmers intentionally disregarded the facts because it knew, or should have known, such a transfer was illegitimate, and the transfer led to John Jr.'s injury. See § 27-1-221(2), MCA.
¶35 Farmers further disregarded John Jr.'s rights as a shareholder when it failed to take any real steps to recover the Stock for several years. Farmers ignored John Jr.'s repeated demand for the return of the Stock, it initially requested that Smith-Cote retain the Stock Certificate, and it ignored its statutory obligation to reissue all 181.619 shares of Stock in John Jr.'s name. Farmers admitted it never notified John Jr. that it was in the process of transferring his interest in the 181.619 shares of Stock. John Jr. testified that it was not until he contacted Farmers in November 2012 that he learned of the improper conversion and Stock transfer. Although Farmers admitted to improperly transferring the Stock in December 2012, Farmers repeatedly claimed Smith-Cote was entitled to at least half of the shares. Farmers failed to fulfill its good faith obligation to John Jr. and deprived John Jr. of the benefit and use of the Stock. See § 27-1-221(2), MCA.
¶36 In direct contravention of its own policies and Montana law, Farmers allowed one stock owner who is a joint tenant with a right of survivorship to unilaterally terminate the other joint tenant's interest. See In re Estate of Afrank , ¶ 9 ; Cote Family Ex. List, Ex. 137 J, Farmers' Combined Disc. Requests, Farmers' Stock Transfer Policy ("[s]tock held by joint tenants cannot be transferred without the consent of all the joint tenants named on the certificate....") (emphasis added). Thus, the termination of the JTWROS and transfer of all shares to John Sr., and then to Smith-Cote, was never accomplished. Instead, upon John Sr.'s death on February 5, 2011, all 181.619 shares of Stock transferred to John Jr. automatically. See Vogele , 229 Mont. at 262, 745 P.2d at 1140. Although Farmers backdated the February Form, Stock Certificate cancellation, and Stock transfer to Smith-Cote to February 3, 2011, the earliest date any transfer could have been completed was February 7, 2011. There is no excuse for Farmers' willful disregard of its own policies and procedures, Montana law, and the rights associated with such stock.
¶37 We are satisfied that the District Court considered the relevant and applicable factors of § 27-1-221(7)(b), MCA, prior to awarding John Jr. punitive damages. Based on the record before it, the District Court thoroughly analyzed the nature and reprehensibility of Farmers' wrongdoing; the extent of Farmers' wrongdoing; the intent of Farmers in committing the wrong; the amount of the actual damages to John Jr.; Farmers' net worth; previous awards of punitive or exemplary damages against Farmers based upon the same wrongful act; potential or prior criminal sanctions against Farmers based upon the same wrongful act; and any other circumstances that operated to increase or reduce punitive damages. See § 27-1-221(7)(b), MCA. The District Court's findings are not clearly erroneous. See Marie Deonier & Assocs. , ¶ 39. Instead, the record clearly and convincingly shows Farmers acted with actual malice, see § 27-1-221(2), MCA, and Farmers' conduct warranted punitive damages, see Campbell , 538 U.S. at 419, 123 S.Ct. at 1521. The District Court did not abuse its discretion when it determined John Jr. was entitled to punitive damages. See Osman , ¶ 7.
¶38 Issue Three: Whether the award of punitive damages was excessive.
¶39 Punitive damages may be imposed " 'to further a State's legitimate interests in punishing unlawful conduct and deterring its repetition.' " McCulley , ¶ 43 (quoting BMW of N. Am. v. Gore , 517 U.S. 559, 568, 116 S.Ct. 1589, 1595, 134 L.Ed.2d 809 (1996) ). However, a grossly excessive award may violate the Due Process Clause of the Fourteenth Amendment. McCulley , ¶¶ 43-44 (citing Gore , 517 U.S. at 562, 568, 116 S.Ct. at 1592, 1595 ). Courts should not employ a strict mathematical formula in determining whether an award is excessive under the Due Process Clause. McCulley , ¶¶ 43-44, 53-54 (quoting Gore , 517 U.S. at 582, 116 S.Ct. at 1602 ). Instead, a district court must consider first and foremost the degree of reprehensibility of the defendant's conduct. McCulley , ¶¶ 44-45. Second, a district court must weigh the disparity, or ratio, between the actual or potential harms suffered by the plaintiff and the punitive damages award; "few awards exceeding a single-digit ratio between punitive and compensatory damages ... will satisfy due process...." McCulley , ¶¶ 44, 53 (quoting Campbell , 538 U.S. at 425, 123 S.Ct. at 1524 ). Finally, a district court should consider the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases. McCulley , ¶¶ 18, 43-44, 54-55 (upholding a punitive damages award of $5 million where compensatory damages were $1 million) (citing Campbell , 538 U.S. at 418, 123 S.Ct. at 1520 ); Seltzer , ¶¶ 1, 190, 199 (upholding a punitive damages award of $9.9 million). In Montana, punitive damages awards are also subject to statutory limitations: such awards "may not exceed $10 million or [three percent] of a defendant's net worth, whichever is less." Section 27-1-220(3), MCA.
¶40 After determining Farmers acted with actual fraud and actual malice, the District Court awarded John Jr. $1.1 million in punitive damages. Farmers argues the punitive damages award was excessive and unconstitutional and must therefore be reversed. John Jr. counters Farmers' conduct was malicious, fraudulent, and especially reprehensible given its statutory obligations, and that the District Court's punitive damages award was not unconstitutional or excessive and well within the statutory boundaries. We agree.
¶41 As previously discussed, the record contains ample evidence demonstrating Farmers acted with actual malice. See McCulley , ¶¶ 45, 51. Farmers knew or should have known about its own policy requirements regarding stock power forms, medallion signature guarantees, and valid stock transfers. Farmers even received advice from its own counsel in this regard. Despite this, Farmers proceeded with deliberate indifference to the harm caused to John Jr. The ineffective transfer was deliberately made in violation of Farmers' policies, procedures, and requirements, and Montana law. Once confronted with its fraudulent activity, Farmers failed to retrieve the Stock from Smith-Cote for years. Further, the Stock records were in Farmers' control, and yet Farmers has no records to document or support the transaction. See McCulley , ¶¶ 45, 51. The award is also not excessive when compared to awards imposed in comparable cases. See McCulley , ¶¶ 43-44, 55.
¶42 The award did not violate due process and fell within a single-digit ratio between the punitive and compensatory damages awarded. See McCulley , ¶¶ 45, 53-54, 56. Farmers converted the Stock valued at $477,846.85 for the full 181.619 shares. Although Farmers offered to refund half the Stock to John Jr. in fairly short order, it continued to withhold the other half based on fraudulently transferred stock certificates. Even to the extent that it withheld half, the value of that Stock is approximately $238,923.43. Punitive damages were $1.1 million. Regardless of whether the compensatory damages are calculated at $477,846.85 or $238,923.43, both values are well within the single-digit factor guidepost of Gore and Campbell and well below the $10 million statutory cap pursuant to § 27-1-220(3), MCA. Further, Farmers admits a 2015 net worth of $38,130,000. Thus the $1.1 million in punitive damages is also less than three percent of Farmers' net worth. See § 27-1-220(3), MCA. By either measure-Montana statute or under a due process analysis-the punitive damage award was not excessive. The District Court correctly determined the amount of the award. See Marie Deonier & Assocs. , ¶ 39 ; Osman , ¶ 7. The award of punitive damages was not excessive and fell within acceptable constitutional and statutory parameters. See McCulley , ¶¶ 43-44, 54-55.
CONCLUSION
¶43 The District Court correctly held that the Stock return amounted to compensatory damages. This enabled the District Court to consider punitive damages against Farmers. The District Court did not err in awarding punitive damages to John Jr. against Farmers and did not abuse its discretion in determining the amount of the award. Finally, the award of punitive damages was not excessive and fell within acceptable constitutional and statutory parameters. We affirm.
We Concur:
MIKE McGRATH, C.J.
DIRK M. SANDEFUR, J.
INGRID GUSTAFSON, J.
This Court affirmed the District Court's determination that Smith-Cote breached her fiduciary duty, warranting her removal as personal representative of John Sr.'s Estate, and upheld the attorney fees award against Smith-Cote. In re Estate of Cote , ¶¶ 14-16.
John Jr. acquired the Stock when his grandmother, Ruth Cote, distributed it to John Jr. and John Sr. through the Ruth Cote Trust.
The record shows Farmers contacted its counsel about the requirements for transferring the Stock. On January 20, 2011, Farmers' counsel advised that John Sr. was required to sign a stock power form "in the presence of a person authorized to give a Medallion guarantee...."
An issuer that is liable for wrongful registration of transfer ... on demand shall
provide the person entitled to the security with a like certificated or uncertificated security, and any payments or distributions that the person did not receive as a result of the wrongful registration.
Del. Code Ann. tit. 6, § 8-404.
John Jr. testified he declined to sign the initial Stock Power Form that would have transferred half the Stock, plus dividends and interest, into his possession because he feared such action would result in the other half of his shares being withheld or forfeited.
Because the statute is written in the disjunctive, we need not analyze whether Farmers committed actual fraud. See § 27-1-221(1), MCA.
Three percent of Farmers' net worth would be $1,143,900. See § 27-1-220(3), MCA. | [
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Justice Ingrid Gustafson delivered the Opinion of the Court.
¶1 Defendant Kristi Anne O'Connell appeals from a First Judicial District Court order upholding the denial of her motion to dismiss her driving under the influence charge. We affirm.
¶2 We restate the issue on appeal as follows:
Whether the District Court correctly upheld the Municipal Court's denial of O'Connell's motion to dismiss her driving under the influence charge as violative of her statutory protection against multiple prosecutions and her constitutional protection against double jeopardy.
FACTUAL AND PROCEDURAL BACKGROUND
¶3 The parties stipulated to the following facts in the proceeding before the Municipal Court.
Helena Police Officer Kaleczyc's report states that on or about June 3, 2016, at approximately 8:49 a.m., he arrived at a multiple vehicle crash on the intersection of Lyndale and Last Chance Gulch, Helena, Montana. After investigation, he determined that O'Connell had failed to drive in a safe and prudent manner and had rear-ended another vehicle. In total, five vehicles were damaged in the accident.
During his investigation, Officer Kaleczyc learned O'Connell had missed a turn and was looking for an opportunity to turn around. O'Connell explained she was in the process of looping back around when the accident happened. Based on his review of O'Connell's phone log and text messages, Officer Kaleczyc determined that O'Connell was not using her cell phone while driving. O'Connell informed Officer Kaleczyc that she took prescription medication for Lupus, depression, and sleeping. Officer Kaleczyc reported that he observed no behaviors indicating O'Connell was under the influence of alcohol or drugs. On June 3, 2016, Officer Kaleczyc charged O'Connell with careless driving for failure to operate her truck in a safe and prudent manner in violation of § 61-8-302, MCA.
¶4 On June 9, 2016, O'Connell pleaded guilty to careless driving in violation of § 61-8-302, MCA, and Helena Municipal Court sentenced her with a $90 fine.
¶5 On October 9, 2016, after reviewing O'Connell's toxicology report, the Helena Attorney's Office (City) additionally charged O'Connell with driving under the influence (DUI). O'Connell pleaded not guilty and moved the Municipal Court to dismiss her DUI charge as a subsequent prosecution barred by § 46-11-504(1), MCA. On December 22, 2016, the Municipal Court denied O'Connell's motion to dismiss the DUI charge. Pursuant to a plea agreement, O'Connell pleaded guilty to negligent endangerment, preserved her right to appeal, and timely appealed the denial of her motion to dismiss to the District Court.
¶6 On appeal, the parties stipulated to the following facts.
On June 3, 2016, O'Connell caused a multiple-car accident at the intersection of Lyndale and Last Chance Gulch. O'Connell told the dispatched officer she didn't have a clear memory of how she caused the accident. She was cited for careless driving.
When O'Connell reported she took medication for depression, difficulty sleeping, and Lupus, the citing officer asked for a blood sample. O'Connell agreed to provide one.
On June 9, 2016, O'Connell pleaded guilty to the careless driving charge. On August 22, 2016, the City received the toxicology report on O'Connell's blood sample, revealing the presence of four medications in O'Connell's blood. On October 9, 2016, the City cited O'Connell with DUI.
O'Connell filed a motion to dismiss the DUI charge on statutory and constitutional grounds. O'Connell's opening brief, the City's response, and O'Connell's reply were filed, but no hearing was held. On December 22, 2016, the Helena Municipal Court issued an order denying O'Connell's motion to dismiss her DUI charge.
O'Connell's counsel informed the City that O'Connell's driving was impaired by a sudden onset of dizziness. O'Connell acknowledged she chose to continue driving when she became impaired, resulting in the multiple-vehicle accident. The City offered O'Connell the opportunity to plead guilty to an amended charge, negligent endangerment. O'Connell accepted, pleaded guilty to negligent endangerment, and preserved her right to appeal.
¶7 O'Connell appealed to the District Court, which issued a June 1, 2017 order affirming the Municipal Court's denial of her motion. O'Connell presently appeals from the District Court's order.
STANDARD OF REVIEW
¶8 A district court's review of a municipal court order is limited to the record and questions of law. This Court reviews a district court's conclusions of law for correctness. City of Missoula v. Duane , 2015 MT 232, ¶ 10, 380 Mont. 290, 355 P.3d 729. Denial of a motion to dismiss based on statutory double jeopardy is a question of law reviewed by this Court for correctness. State v. Glass , 2017 MT 128, ¶ 9, 387 Mont. 471, 395 P.3d 469.
DISCUSSION
¶9 Whether the District Court correctly upheld the Municipal Court's denial of O'Connell's motion to dismiss her driving under the influence charge as violative of her statutory protection against multiple prosecutions and her constitutional protection against double jeopardy.
¶10 O'Connell argues that § 46-11-504, MCA, statutorily bars the City from charging her with DUI, because the DUI charge occurred nearly four months after the accident and O'Connell's guilty plea to careless driving. O'Connell argues if a prosecution results in a conviction, § 46-11-504, MCA, bars a subsequent prosecution based on an offense arising out of the same transaction. O'Connell argues that her DUI charge arose from the same transaction, the accident, as her careless driving conviction. The City argues that § 46-11-504, MCA, does not bar her subsequent DUI charge, because the DUI charge did not arise from the same transaction as the careless driving conviction. Pursuant to § 46-1-202(23), MCA :
"Same transaction" means conduct consisting of a series of acts or omissions that are motivated by:
(a) a purpose to accomplish a criminal objective and that are necessary or incidental to the accomplishment of that objective.
¶11 Specifically, O'Connell argues her conduct fell within the meaning of "same transaction" because the conduct that led up to both the careless driving and DUI charge was the same conduct-continuing to drive after she became dizzy. O'Connell asserts that State v. James , 2010 MT 175, 357 Mont. 193, 237 P.3d 672, and State v. Cech , 2007 MT 184, 338 Mont. 330, 167 P.3d 389, support her position. Contrarily, the City argues that absolute liability offenses, including DUI, require no proof of mental state and do not carry a criminal objective. Therefore, absolute liability offenses cannot be part of a "same transaction," even if they arose from the same incident. The City asserts State ex. rel Booth v. Montana Twenty-First Judicial Dist. , 1998 MT 344, 292 Mont. 371, 972 P.2d 325, and State v. Condo , 2008 MT 114, 342 Mont. 468, 182 P.3d 57, support its position.
¶12 Montana's statutes provide defendants with greater protections against double jeopardy than the United States Constitution. Cech , ¶ 13. Based on the particular jurisdictional circumstances of a case, either § 46-11-503, MCA, or § 46-11-504, MCA, provides a party with statutory protection against double jeopardy. Both statutes protect against subsequent prosecutions based on the same transaction.
¶13 Although the parties relied on § 46-11-504, MCA, as the basis for their arguments in briefing, at oral argument both parties indicated that § 46-11-503, MCA, was the more applicable statute in this case. We agree. Section 46-11-503, MCA, provides:
46-11-503 Prosecution based on same transaction barred by former prosecution.
(1) When two or more offenses are known to the prosecutor, are supported by probable cause, and are consummated prior to the original charge and jurisdiction and venue of the offenses lie in a single court, a prosecution is barred if:
(a) the former prosecution resulted in an acquittal. There is an acquittal whenever the prosecution results in a finding of not guilty by the trier of fact or in a determination that there is insufficient evidence to warrant a conviction. A finding of guilty of a lesser included offense that is subsequently set aside is an acquittal of the greater offense that was charged.
(b) the former prosecution resulted in a conviction that has not been set aside, reversed, or vacated;
(c) after a charge had been filed, the prosecution was terminated by a final order or judgment for the defendant that has not been set aside, reversed, or vacated; or
(d) the former prosecution was terminated for reasons not amounting to an acquittal and takes place:
(i) in a jury trial, when the jury is impaneled and sworn; or
(ii) in a nonjury trial, after the first witness is sworn but before a judgment as to guilt or innocence is reached.
(2) A prosecution based upon the same transaction as a former prosecution is not barred under subsection (1)(d) when:
(a) the defendant consents to the termination or waives the right to object to the termination; or
(b) the trial court finds that the termination is necessary because:
(i) it is physically impossible to proceed with the trial in conformity with law;
(ii) there is a legal defect in the proceedings that would make any judgment entered upon a verdict reversible as a matter of law;
(iii) prejudicial conduct makes it impossible to proceed with the trial without manifest injustice to either the defendant or the state;
(iv) the jury is unable to agree upon a verdict; or
(v) false statements of a juror on voir dire prevent a fair trial.
¶14 Section 46-11-503, MCA, applies where jurisdiction and venue of the offenses lie in a single court, whereas § 46-11-504, MCA, bars a subsequent prosecution where the conduct constituting the offense is charged and resolved in any state or federal jurisdiction. Here, the jurisdiction and venue of O'Connell's offenses lie in a single court. Section 46-11-503, MCA, is therefore the more appropriate and specific statute to this case. O'Connell has consistently claimed that the City's subsequent prosecution for DUI violated her statutory protections against double jeopardy under Montana law. The City understood O'Connell's claim and responded to the merits of her argument accordingly. The District Court had full opportunity to address O'Connell's claims. Thus, the parties' failure to specifically refer to § 46-11-503, MCA, does not waive its consideration in this instance.
¶15 Although the parties devote considerable argument to whether the DUI and careless driving charges arose out of the "same transaction," that issue is not dispositive in this case. For purposes of this appeal, we assume the DUI and careless driving charges arose out of the same transaction. Section 46-11-503(1), MCA, requires this Court to preliminarily consider whether both offenses, careless driving and DUI, were supported by probable cause when the initial offense was resolved. O'Connell's careless driving charge was resolved when she pleaded guilty to the charge on June 9, 2016. If probable cause did not exist to charge the DUI offense by June 9, 2016, § 46-1-503, MCA, did not bar its subsequent prosecution, regardless of whether it arose out of the same transaction.
¶16 "Probable cause" is defined as "[a] reasonable ground to suspect that a person has committed or is committing a crime."
Probable cause , Black's Law Dictionary (10th ed. 2009). Probable cause exists:
if the facts and circumstances within an officer's personal knowledge, or related to the officer by a reliable source, are sufficient to warrant a reasonable person to believe that another person is committing or has committed an offense." The probable cause determination must be based on an assessment of all relevant circumstances, evaluated in light of the knowledge of a trained law enforcement officer. Mere suspicion is not enough to establish probable cause.
City of Missoula v. Iosefo , 2014 MT 209, ¶ 10, 376 Mont. 161, 330 P.3d 1180 (internal citations omitted).
¶17 The stipulated facts regarding the accident on June 3, 2016, support that probable cause existed to charge O'Connell with careless driving, but do not support that probable cause existed to charge O'Connell with DUI. O'Connell agreed she caused a multiple-vehicle accident. She told Officer Kaleczyc her memory was unclear as to how she caused the accident. Upon investigation, Officer Kaleczyc determined that an accident occurred and that he had reasonable grounds to believe O'Connell caused the accident. He reasonably concluded that O'Connell failed to operate her truck in a safe and prudent manner and issued her a citation for careless driving in violation of § 61-8-302, MCA.
¶18 O'Connell advised Officer Kaleczyc she was prescribed medication for Lupus, depression, and difficulty sleeping. Officer Kaleczyc reported he observed no behaviors indicating O'Connell was under the influence of alcohol or drugs. Therefore, Officer Kaleczyc had no more than an unconfirmed suspicion that O'Connell potentially was under the influence of medication. Accordingly, he requested that O'Connell provide a blood sample.
¶19 On August 22, 2016, the City received the toxicology report on O'Connell's blood sample, revealing the presence of four medications in O'Connell's blood at the time of the accident. After examination of the toxicology report, the City established probable cause to charge O'Connell with DUI. Probable cause did not yet exist for the City to charge O'Connell with DUI on June 9, 2016, the day O'Connell's initial offense, careless driving, was resolved through her guilty plea and imposition of sentence. Therefore, § 46-11-503, MCA, did not bar the subsequent DUI charge from prosecution.
¶20 Although the District Court's determination upholding the Municipal Court's denial of O'Connell's motion to dismiss was not based on lack of probable cause to charge the DUI offense, we "will affirm the district court when it reaches the right result, even if it reaches the right result for the wrong reason." State v. Daffin , 2017 MT 76, ¶ 34, 387 Mont. 154, 392 P.3d 150.
CONCLUSION
¶21 Section 46-11-503, MCA, applies to this proceeding. As no probable cause existed to charge O'Connell with DUI before resolution of her careless driving charge, Montana's statutory protections against double jeopardy did not bar O'Connell's subsequent DUI charge.
¶22 Affirmed.
We concur:
MIKE McGRATH, C.J.
LAURIE McKINNON, J.
BETH BAKER, J.
JAMES JEREMIAH SHEA, J.
DIRK M. SANDEFUR, J.
DAN WILSON, J.
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Justice James Jeremiah Shea delivered the Opinion of the Court.
¶ 1 Pursuant to Section I, Paragraph 3(c), Montana Supreme Court Internal Operating Rules, this case is decided by memorandum opinion and shall not be cited and does not serve as precedent. Its case title, cause number, and disposition shall be included in this Court's quarterly list of noncitable cases published in the Pacific Reporter and Montana Reports.
¶ 2 Lyndsey Lalicker (Mother) appeals the Order of the Eighteenth Judicial District Court, Gallatin County, denying Mother's Notice of Objections and granting Nelson Luke Oyler (Father) visitation rights to L.G.L., their minor child. We affirm.
¶ 3 On November 1, 2013, Mother and Father were married. On July 9, 2014, the marriage was declared invalid on the grounds that Father lacked the ability to consent to marry due to mental health issues. At the time of the Declaration of Invalidity, Mother was pregnant with L.G.L.
¶ 4 On September 5, 2014, Father filed a Petition for Voluntary Relinquishment of his Parental Rights to L.G.L. in the First Judicial District Court, Broadwater County. On October 9, 2014, the Broadwater County District Court denied Father's Petition. In November 2014, Mother initiated an administrative action with the Montana Child Support Enforcement Division (CSED) to determine Father's child support obligations.
¶ 5 On September 1, 2015, Father filed a Petition to Establish a Parenting Plan in the Eighteenth Judicial District Court, Gallatin County. On February 15, 2017, the Standing Master held a hearing on the Petition, during which Mother and Father both presented evidence and testified. Father called Dr. Thomas Heriza, his medical provider, and Gallatin County Father Engagement Specialist Patrick Duganz to provide testimony as to Father's ability to safely parent L.G.L. On June 30, 2017, the Standing Master issued its Findings of Fact, Conclusions of Law, and Final Parenting Plan granting Father supervised parenting of L.G.L.
¶ 6 On August 29, 2017, Mother, acting pro se after her attorney withdrew following the hearing, filed a Motion for the Court to Grant Relief from Judgment. On October 30, 2017, the Standing Master denied the Motion, determining that Mother failed to establish grounds for relief and that no specific objections to the Final Parenting Plan were filed within the time provided by statute.
¶ 7 On November 8, 2017, Mother filed her Notice of Objections. On January 11, 2018, the Gallatin County District Court, despite the untimeliness of the Notice of Objections, held a hearing. On February 1, 2018, the Gallatin County District Court denied the Notice of Objections and amended the Standing Master's Findings of Facts, Conclusions of Law, and Final Parenting Plan to provide a modified legal analysis. Mother appeals.
¶ 8 We review de novo a district court's decision to adopt a standing master's report to determine whether it applied the correct standards of review to the standing master's findings of fact and conclusions of law. Patton v. Patton , 2015 MT 7, ¶ 17, 378 Mont. 22, 340 P.3d 1242 (citing In re G.J.A. , 2014 MT 215, ¶ 11, 376 Mont. 212, 331 P.3d 835 ). In a case tried before a standing master, "we apply the same standard of review to an adopted [standing] master's report that we do to any other district court order." Maloney v. Home & Inv. Ctr., Inc. , 2000 MT 34, ¶ 28, 298 Mont. 213, 994 P.2d 1124.
¶ 9 We review a district court's findings of fact in parenting plan orders to determine whether they are clearly erroneous. Healy v. Healy , 2016 MT 154, ¶ 18, 384 Mont. 31, 376 P.3d 99. A finding of fact is clearly erroneous if "it is not supported by substantial evidence, if the district court misapprehended the effect of the evidence, or if our review of the record convinces us that the district court made a mistake." Healy , ¶ 18 (citation omitted). "We review a district court's conclusions of law to determine if they are correct." Healy , ¶ 18 (citation omitted). Absent clearly erroneous findings, we will not disturb a district court's decision regarding parenting plans unless there is a clear abuse of discretion. In re C.J. , 2016 MT 93, ¶ 13, 383 Mont. 197, 369 P.3d 1028 (citation omitted). A district court abuses its discretion when it acts "arbitrarily without employment of conscientious judgment or exceed[s] the bounds of reason resulting in substantial injustice." Guffin v. Plaisted-Harman , 2010 MT 100, ¶ 20, 356 Mont. 218, 232 P.3d 888 (citation omitted).
¶ 10 We normally do not consider issues raised for the first time on appeal. Siebken v. Voderberg , 2015 MT 296, ¶ 11, 381 Mont. 256, 359 P.3d 1073 ; Wheelsmith Fabrication v. Mont. Dep't of Labor & Indus. , 2000 MT 27, ¶ 11, 298 Mont. 187, 993 P.2d 713. "This rule applies to both substantive and procedural matters, as well as to a change in a party's theory of the case." Hansen Trust v. Ward , 2015 MT 131, ¶ 19, 379 Mont. 161, 349 P.3d 500 (citation omitted). This includes consideration of arguments raised for the first time on appeal "based on the doctrine of judicial estoppel." Wheelsmith , ¶ 15.
¶ 11 In determining a parenting plan, the district court must act "in accordance with the best interests of the child." Section 40-4-212(1), MCA ; Woerner v. Woerner , 2014 MT 134, ¶ 12, 375 Mont. 153, 325 P.3d 1244. The district court should consider "all relevant parenting factors." Woerner , ¶ 13. "A district court has broad discretion when considering the parenting of a child, and we must presume the district court carefully considered the evidence and made the correct decision." In re C.J. , ¶ 13.
¶ 12 A parenting plan action brought within six months of a child support action is vexatious. Section 40-4-212(4)(a), MCA. However, a rebuttable presumption exists as to the vexatious nature of the action, and the presumption applies unless contrary to the best interest of the child. Section 40-4-212(4)(a), MCA ; see In re Z.D.L.-B v. Batey , 2016 MT 164, ¶ 30, 384 Mont. 65, 375 P.3d 378.
¶ 13 Mother generally argues that the Standing Master misapprehended the evidence regarding Father's fitness to parent. Mother raises, for the first time on appeal, that the doctrines of judicial estoppel, judicial admissions, and conclusive presumption preclude the grant of Father's Petition. Mother argues the Standing Master erred when it granted Father's Petition because Father waived his parental rights by previously filing for a voluntary relinquishment. Finally, Mother argues the Standing Master erred by granting Father's Petition because the action was vexatious pursuant to § 40-4-212(4)(a), MCA, because Father filed the Petition five days after the parties' CSED hearing.
¶ 14 Mother's objections concerning judicial estoppel, judicial admissions, and conclusive presumption were not argued before the District Court and are being raised for the first time on appeal. This Court will not address issues that were not raised before the District Court. See Siebken , ¶ 11; Wheelsmith , ¶¶ 11, 15. Also, Mother's arguments concerning judicial estoppel, judicial admissions, and conclusive presumption are all generally based on Mother's changed theory of the case. See Ward , ¶ 19. Consequently, the Court will only address the issues regarding whether the District Court erred in approving the Standing Master's Findings of Fact, Conclusions of Law, and Order.
¶ 15 The District Court correctly determined Mother failed to demonstrate clear error in the Standing Master's findings, and correctly concluded it would be in the best interests of L.G.L. to have Father be a part of her life. See Healy , ¶ 18. Father presented evidence of significant progress on his mental health issues with Dr. Heriza, and his willingness to engage and work with a parenting specialist. Additionally, the District Court correctly concluded Father did not waive his parental rights by previously filing an action to terminate his parental rights. Father remained the natural parent of L.G.L., both for purposes of child support and determining a final parenting plan, because his request to terminate his parental rights was denied by the Broadwater County District Court. The District Court did not err in concluding it is in L.G.L.'s best interest to continue to reside primarily with Mother while also having a relationship with Father as set forth in the Final Parenting Plan. See § 40-4-212(1), MCA ; In re C.J. , ¶ 14; Woerner , ¶ 13.
¶ 16 The District Court correctly concluded Father rebutted the presumption that the parenting plan filing was vexatious, and no attorney fees should be awarded to Mother, because a parenting plan was not in place at the time of Father's Petition. See § 40-4-212(4)(a), MCA ; In re Z.D.L.-B , ¶ 30.
¶ 17 Based on the Standing Master's application of the § 40-4-212(1), MCA factors, and the substantial evidence presented at the hearing, the Standing Master's Findings of Fact were not clearly erroneous, its Conclusions of Law were correct, and the Standing Master did not abuse its discretion in granting Father visitation rights to L.G.L. See In re C.J. , ¶ 13; Guffin , ¶ 20. The District Court applied the correct standard of review in approving and modifying the Standing Master's Findings of Fact, Conclusions of Law, and Final Parenting Plan. See Patton , ¶ 17; In re G.J.A. , ¶ 11.
¶ 18 We have determined to decide this case pursuant to Section I, Paragraph 3(c) of our Internal Operating Rules, which provides for memorandum opinions. In the opinion of the Court, the case presents a question controlled by settled law or by the clear application of applicable standards of review. The District Court's Conclusions of Law were correct, its Findings of Fact were not clearly erroneous, and its ruling was not an abuse of discretion. We affirm.
We concur:
MIKE McGRATH, C.J.
LAURIE McKINNON, J.
INGRID GUSTAFSON, J.
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Chief Justice Mike McGrath delivered the Opinion of the Court.
¶ 1 This is an appeal from a Thirteenth Judicial District Court order modifying Dennis Simpson's (Dennis) and Larissa Simpson's (Larissa) Property Settlement Agreement and subsequent order awarding attorney fees. We affirm.
¶ 2 We restate the issues on appeal as follows:
1. Whether the District Court abused its discretion when it modified the Agreement, terminating monthly payments to Larissa.
2. Whether the District Court abused its discretion when it limited the amount of Larissa's attorney fees to those incurred during the contempt proceedings.
PROCEDURAL AND FACTUAL BACKGROUND
¶ 3 Dennis and Larissa were married in 1988 and divorced in 2006. In early November 2006, the District Court entered a Final Decree of Dissolution of Marriage which incorporated both a Property Settlement Agreement (Agreement) and a Stipulated Final Parenting Plan. Between 2006 and 2009, the parties were engaged in ongoing disputes and litigation, mainly involving the parenting plan. In 2013, this Court affirmed the District Court's decision to deny Dennis's motion to modify child support and Larissa's motion to invalidate a stipulation concerning delayed child support payments.
Simpson v. Simpson , 2013 MT 22, 368 Mont. 315, 294 P.3d 1212 ( Simpson I ).
¶ 4 Pursuant to the Agreement, Dennis retained the bulk of the marital assets and assumed responsibility for the marital debts. Larissa was to receive a $10,000 monthly payment from Dennis each month for life, secured by a life insurance policy on Dennis's life with Larissa as the sole beneficiary. The Agreement also required Dennis to pay Larissa a lump sum of $500,000 and provide her with a lifetime gym membership. The Agreement included a non-modification clause, which stated that "Both parties agree that this Agreement and any Decree of Dissolution of their marriage incorporating this Agreement shall not be modified in any future legal proceeding under the authority of § 40-4-201(6), MCA." The parties also included a provision that the prevailing party in any future dispute will be entitled to attorney fees.
¶ 5 At or near the time of dissolution, the parties prepared financial statements, which indicated their net worth to be approximately $13,000,000. However, the District Court found the "assets were not worth anywhere near $13,000,000," noting that these "statements exaggerated the parties' net worth and, in further complication, much of the value of these assets was completely lost with the economic disaster occurring in 2008-09." These assets included (1) a note receivable for $500,000; (2) a certificate of deposit with Mountain West Bank for $385,000; (3) Arrow Construction Inc. valued at $600,000; (4) Rainbow Subdivision valued at $4,000,000; (5) lots in Northstar Subdivision valued at $750,000; (6) eighty acres of property at Triple Creek Meadows valued at $1,900,000; (7) two lots at the Bozeman Hot Springs valued at $1,200,000; (8) the Bozeman Hot Springs valued at $5,000,000; (9) personal belongings valued at $600,000; and (10) $62,000 in cash. Dennis also noted multiple debts in his financial statement, including loans with Mountain West Bank and Yellowstone Bank and various tax obligations.
¶ 6 In May 2015, Dennis continued to fall behind on the monthly $10,000 payments to Larissa. On May 7, 2015, Larissa filed a motion to hold Dennis in contempt for failure to make payments. Larissa also moved the District Court to find Dennis in breach of the Agreement for his failure to maintain life insurance. After a hearing, the District Court issued an order for an accounting and held the contempt in abeyance after Dennis advised that he was filing for bankruptcy in Arizona. Following bankruptcy proceedings in Arizona and several continuances, Dennis filed his accounting on May 4, 2017. The District Court held another hearing on July 25, 2017. Following that hearing, Dennis filed a motion to modify the Agreement, arguing that changed circumstances made the Agreement unconscionable.
¶ 7 On October 31, 2017, the District Court found Dennis in contempt, ordered him to pay Larissa $253,475, and awarded Larissa court costs and reasonable attorney fees associated with her contempt motions. The District Court also modified the Agreement by terminating Dennis's obligation to pay Larissa $10,000 a month. The District Court concluded that the Agreement was unconscionable under the current circumstances because the valuation of the marital assets was "grossly inflated," a fire damaged the Bozeman Hot Springs, and an economic collapse in 2008 virtually halted development projects in Gallatin County. The modification order stated that Dennis could purge his contempt if he made monthly installments of $2,000 on or before the tenth day of each month until Larissa was paid in full. The District Court denied Larissa's claim for loss of investment benefit and ruled that Dennis's second wife, Michelle Simpson, was not required to divert payments she owed Dennis to Larissa.
¶ 8 On January 10, 2018, pursuant to the provision within the Agreement that awarded reasonable attorney fees and costs to the prevailing party, the District Court awarded Larissa $26,953 associated with her contempt action. The District Court awarded 75% of the $35,937.50 that Larissa originally requested because 25% of the proceedings involved issues where Dennis was the prevailing party. These included modification issues and issues related to Dennis assigning his interest in a note payable to Larissa. The District Court declined to award Larissa attorney fees related to the bankruptcy proceedings in Arizona. Larissa's request for an award of costs was denied because she failed to file a bill of costs pursuant to § 25-10-501, MCA.
¶ 9 Larissa appeals the District Court's decision to modify the Agreement and the District Court's limitation of attorney fees related to her contempt motions.
STANDARD OF REVIEW
¶ 10 The construction and interpretation of a written agreement are questions of law. Orr v. Orr , 2017 MT 291, ¶ 8, 389 Mont. 400, 410 P.3d 181. We review a district court's conclusions of law for correctness. In re Marriage of Pospisil , 2000 MT 132, ¶ 20, 299 Mont. 527, 1 P.3d 364. This Court reviews a district court's findings of fact for clear error. In re S.T. , 2008 MT 19, ¶ 8, 341 Mont. 176, 176 P.3d 1054. We review a district court's determinations of unconscionability under § 40-4-208(2)(b)(i), MCA, for abuse of discretion. Toenjes v. Toenjes , 2018 MT 189, ¶ 9, 392 Mont. 230, 422 P.3d 1215. An award of attorney fees is also reviewed under the abuse of discretion standard. In re Marriage of Cameron , 2009 MT 302, ¶ 10, 352 Mont. 375, 217 P.3d 78. In a dissolution proceeding, a district court abuses its discretion if it "acted arbitrarily without employment of conscientious judgment" or "exceeded the bounds of reason resulting in substantial injustice." In re Pospisil , ¶ 19.
DISCUSSION
¶ 11 1. Whether the District Court abused its discretion when it modified the Agreement, terminating monthly payments to Larissa.
¶ 12 As a general rule, terms of a separation agreement, except those providing for the support, parenting, and parental contact with children, are binding on a court unless, after considering the economic circumstances of the parties and any other relevant evidence, the separation agreement is "unconscionable." Section 40-4-201(2), MCA Property disposition provisions may not be revoked or modified unless the court finds "conditions that justify the reopening of a judgment under the laws of this state." Section 40-4-208(3)(b), MCA. Determinations of unconscionability are made "subject to the underlying facts on a case-by-case basis." Jackson v. Jackson , 2008 MT 25, ¶ 29, 341 Mont. 227, 177 P.3d 474. However, Montana law also provides that a "decree may expressly preclude or limit modification of terms set forth in the decree if provided for in the separation agreement." Section 40-4-201(6), MCA. We have held that if a decree limits modification, a district court "must adhere to the non-modification clause and cannot later modify the agreement." Tanascu v. Tanascu , 2014 MT 293, ¶ 14, 377 Mont. 1, 338 P.3d 47 (quoting In re Marriage of Cortese , 2008 MT 28, ¶ 9, 341 Mont. 287, 176 P.3d 1064 ).
¶ 13 In Tanascu , Linda Tanascu had petitioned the district court to modify her property settlement agreement for unconscionability because the district court "wrongfully failed to make findings as to the net value of the marital estate and consequently awarded [her ex-husband] $1,721,641 while awarding her only $96,112," and because she had trouble selling her house for as much as she had anticipated. Tanascu , ¶ 7. This Court held that pursuant to § 40-4-201, MCA, and the non-modification provision included in the agreement, the district court's decision not to reopen and modify the agreement was not an abuse of discretion. Further, this Court held that M. R. Civ. P. 60(b)(6) did not provide any relief to Linda because the district court was not required to determine the value of any assets covered by the settlement agreement when it entered the decree of dissolution, and there was no indication that the agreement was unconscionable.
¶ 14 In Orr , this Court affirmed the district court's denial of Daniel Orr's motion to modify maintenance. Daniel and Melinda Orr's marriage dissolution provided that Daniel would pay Melinda $3,000 every month in maintenance for a period of three and one-half years. This payment was, "in effect, a structured purchase of Melinda's share of [their] business." Orr , ¶ 13. The marital and property settlement agreement also contained a non-modification provision, saying that their agreement "may not be amended or modified except by an agreement in writing...." Orr , ¶ 3. Daniel petitioned the district court to modify his maintenance payments because his business in the Bakken oil fields was severely affected when the oil market declined, forcing him to take a lower-wage position. This Court held that "the maintenance provision [was] an inseverable part of the property distribution provided in the [a]greement, and [could not] be separately modified by a court upon Daniel's motion," in part because "where a separation agreement expressly precludes modification or limitation of maintenance, a [d]istrict [c]ourt is barred from later modifying the terms of the agreement." Orr , ¶¶ 11, 13 (citations omitted).
¶ 15 We note that, subject to limited exceptions not applicable here, maintenance agreements may only be modified "upon a showing of changed circumstances so substantial and continuing as to make the terms unconscionable." Section 40-4-208(2)(b), MCA.
¶ 16 Larissa argues that the District Court erred when it modified the Agreement, because it has a non-modification provision. Conversely, Dennis argues that because he was surprised by unforeseeable events that prevented him from paying Larissa $10,000 every month, the District Court was correct to modify the Agreement pursuant to M. R. Civ. P. 60(b). Further, Dennis asserts that these events and substantially changed circumstances made the $10,000 monthly payments unconscionable, and thus subject to modification.
¶ 17 The statutory provisions addressing modification of maintenance payments in § 40-4-208(2)(b)(i), MCA, modification of property disposition provisions in § 40-4-208(3)(b), MCA, enforcement of separation agreements in § 40-4-201(2) and (3), MCA, and non-modification clauses in § 40-4-201(6), MCA, appear to conflict. Read separately, § 40-4-201(6), MCA, could prevent a court from modifying even an unconscionable decree or settlement agreement if that agreement included a non-modification clause. However, it has long been a fundamental rule that statutes should be interpreted as a whole, giving meaning to all, if possible. Section 1-2-101, MCA ; Mont. Fish, Wildlife & Parks v. Trap Free Mont. Pub. Lands , 2018 MT 120, ¶ 14, 391 Mont. 328, 417 P.3d 1100 ; Hiland Crude, LLC v. Dep't of Revenue , 2018 MT 159, ¶ 12, 392 Mont. 44, 421 P.3d 275 ; City of Great Falls v. Morris , 2006 MT 93, ¶ 19, 332 Mont. 85, 134 P.3d 692 ; State v. Martel , 273 Mont. 143, 148, 902 P.2d 14, 17 (1995) ; Aleksich v. Industrial Accident Fund , 116 Mont. 127, 137, 151 P.2d 1016, 1020 (1944). This Court interprets a statute "as a whole, without isolating specific terms from the context in which they are used by the Legislature." Mont. Fish, Wildlife & Parks , ¶ 14 (citations omitted). It is especially important to interpret each provision in conjunction with the whole when considering a broad statutory scheme that addresses the same subject matter. Reading the provisions within Title 40, chapter 4, MCA, together, it is apparent that the Legislature considered unconscionability as an appropriate reason to modify property settlement agreements in all cases.
¶ 18 Section 40-4-201(2), MCA, specifically provides that except for parenting and support issues, separation agreements are binding on a court unless the court finds the agreement unconscionable after considering the parties' economic circumstances and other relevant evidence. And § 40-4-208(3)(b), MCA, allows modification of a property disposition if the court finds conditions that justify reopening the judgment. We hold that courts may modify decrees with settlement agreements in dissolution cases despite a non-modification clause if the agreement is unconscionable. Read together it appears that the non-modification provisions of § 40-4-201(2), MCA, were not enacted to trump a district court's findings of unconscionability.
¶ 19 Although Dennis and Larissa's Agreement included a non-modification provision, clearly the parties anticipated potential future modification efforts by including the attorney fee provision. Several unique and unforeseeable events occurred between the parties' marriage dissolution in 2006 and Dennis's motion to modify the Agreement in 2017, substantially changing the circumstances and making the Agreement unconscionable.
¶ 20 The following summarizes the assets identified in the parties' financial statements and how they have either decreased in value or are no longer in Dennis's possession.
¶ 21 The note receivable from Dave MacDonald was for a property transaction, which created an unsecured $500,000 debt to Dennis. However, MacDonald subsequently filed for bankruptcy and his obligation to Dennis was discharged in the bankruptcy.
¶ 22 In his financial statement, Dennis asserted he had a certificate of deposit with Mountain West Bank in the amount of $385,000. After a fire at the Bozeman Hot Springs, Dennis received $1,500,000 in insurance proceedings. Dennis then made payments on loans from the bank and repairs to the hot springs, leaving $385,000 as the remaining balance.
¶ 23 Dennis and Larissa acquired property referred to as Rainbow Subdivision in 2001, which Dennis estimated to be worth $4,000,000 in his financial statement. He had plans to develop the subdivision and sell the individual lots. Although Dennis received a Letter of Intent to purchase the hot springs for $6,000,000 and an option to purchase the Rainbow Subdivision for $4,500,000 in 2008, the economy deteriorated and the sale did not occur. Mountain West Bank informed Dennis that he needed to pay off two loans or assign the Rainbow Subdivision to the bank, as the property had been pledged as security. Consequently, Dennis sold the Rainbow Subdivision and another subdivision referred to as Northstar Subdivision for a total of $1,670,000. From these proceeds $988,922 was paid to the bank to satisfy the loans secured by the property. Dennis used the remaining money to acquire another property, which was then later sold for approximately $214,000 less than the original exchange value.
¶ 24 Also in his financial statement Dennis identified the fair market value of his construction business, Arrow Construction Inc., at $600,000. However, the topsoil he included in this estimate was no longer available. The remaining estimated value of Arrow Construction was comprised of construction tools which may have some re-sale value, but continue to deteriorate in value.
¶ 25 Dennis owned eighty acres of property at Triple Creek Meadows, which had a fair market value of $1,900,000. Dennis had intended to put the eighty acres into the Triple Creek Meadows LLC when a final subdivision was platted. However, Triple Creek Meadows LLC declared bankruptcy and Dennis sold his acres at a net loss of $83.
¶ 26 Dennis's financial statement indicated that two lots at the Bozeman Hot Springs were valued at $1,200,000. They were sold in 2011 for $886,476. However, because Dennis owed more money on the properties than what he sold them for, he ended up with a net loss of $17,107.42 on the sale. The hot springs was valued at $5,000,000 in 2009, and sold for $5,500,000. Proceeds from this sale were distributed to satisfy outstanding tax obligations, to Larissa to satisfy obligations Dennis owed her through September 2011, to Larissa's attorney for attorney fees and costs, and the remainder to Dennis.
¶ 27 In 2009, Dennis valued his personal belongings at $600,000. However, much of these belongings were either sold with his home or benefitted the children of the parties and were not realized by Dennis in any meaningful way. Dennis also noted having $62,000 in cash in 2009.
¶ 28 Dennis used the remaining funds from the sale of the Bozeman Hot Springs to purchase the Sleeping Buffalo Hot Springs in Malta, Montana. He invested $580,370 in the Sleeping Buffalo Hot Springs, including the purchase and cost of improvements. However, Dennis could not finish the property for lack of funds so he sold it to his second wife, Michelle, for $545,524 in 2015. Pursuant to the Agreement Regarding Property and accompanying Promissory Note, Michelle was to pay Dennis monthly payments of $3,306, representing principal and interest at the rate of 4% per annum. The monthly payments together with Dennis's salary or funds available to him to operate Sleeping Buffalo appear to be Dennis's only remaining assets. However, he testified that he entered into an agreement with Michelle to forego the monthly payments until she finished developing lodging on the property.
¶ 29 Lastly, Dennis's life insurance premium increased from $320 a month to $1,412 a month in October 2014. Dennis could not afford these new payments and let the policy lapse, leaving him without life insurance.
¶ 30 Larissa relies heavily upon this Court's application of § 40-4-201(6), MCA, in Tanascu and Orr . However, the cases are factually distinguishable. Here, both parties' estimated net worth of $13,000,000 was greatly exaggerated, and most assets were completely lost with the 2008 economic decline. As noted by the District Court in its 2017 order, unlike the oil market decline in Orr , the financial crisis was felt globally, impacting many areas of the American economy and was considered to have been the worst economic crisis since the Great Depression in the 1930s. As a developer, Dennis was directly impacted. Further, although their accounting reflected a number of assets, Dennis and Larissa did not actually possess some of those assets when the parties entered into the Agreement.
¶ 31 The Bozeman Hot Springs, which was the only real income-producing asset, was sold, in part, to satisfy payment obligations to Larissa under the Agreement. Without this income, Dennis could no longer afford monthly payments of $10,000 for the remainder of Larissa's life- payments he had made for many years. Coupled with the extreme and unanticipated events that occurred following the District Court's approval of the Agreement, it is clear that in effect the changed circumstances made the Agreement unconscionable.
¶ 32 The District Court thoroughly considered the very unique facts of this case and the findings are not clearly erroneous. The District Court did not abuse its discretion when it held the Agreement was unconscionable and modified it. The decision did not exceed the bounds of reason or create a substantial injustice.
¶ 33 2. Whether the District Court abused its discretion when it limited the amount of Larissa's attorney fees to those incurred during the contempt proceedings.
¶ 34 District courts are bound by attorney fee provisions within marital settlement agreements if the terms of the agreement are clear. In re Marriage of Cini , 2011 MT 295, ¶ 27, 363 Mont. 1, 266 P.3d 1257. Here, the Agreement states "In the event of future litigation between the parties to enforce, modify, or interpret any provision of this Agreement, the prevailing party shall be entitled to all of his or her court costs, including a reasonable attorney's fee." On appeal, Larissa argues that the District Court failed to abide by the Agreement and abused its discretion when it limited the award of attorney fees to those incurred during the contempt proceedings. Specifically, Larissa asserts she is entitled to attorney fees related to the bankruptcy proceedings in Arizona, and disputes the District Court's conclusion that the July 25, 2017 hearing addressed issues other than contempt.
¶ 35 The District Court did not abuse its discretion when it determined the amount of attorney fees awarded to Larissa. Larissa was the prevailing party in the contempt proceedings. However, Dennis was the prevailing party in proceedings involving modification issues and issues related to Dennis assigning his interest in a note payable to Larissa. Although Larissa quibbles about the timing of modification proceedings, the District Court looked at the proceedings of the case as a whole. The District Court awarded Larissa 75% of her proposed attorney fee amount because Dennis was the prevailing party in 25% of the proceedings. Further, the bankruptcy proceedings were separate proceedings. The Arizona bankruptcy judge did not order Dennis to pay attorney fees to any creditors, including Larissa. A review of the record does not reflect an abuse of discretion.
CONCLUSION
¶ 36 The District Court did not abuse its discretion in concluding continued imposition and enforcement of the parties' Agreement was unconscionable and its modification of the Agreement based on the parties' unique circumstances was appropriate. The District Court did not abuse its discretion in limiting Larissa's attorney fees.
¶ 37 Affirmed.
We Concur:
LAURIE McKINNON, J.
JAMES JEREMIAH SHEA, J.
BETH BAKER, J.
JIM RICE, J.
ORDER
On September 21, 2018, counsel for Appellant filed with this Court a petition for rehearing in the above-entitled matter. Appellee's objection to the rehearing request was filed on October 9, 2018. The Appellant's Petition for Rehearing has pointed out provisions in our original Opinion that are incorrect. Accordingly, the Court having considered the petition and objection,
IT IS ORDERED that Appellant's Petition for Rehearing is GRANTED.
IT IS FURTHER ORDERED that this Court's September 18, 2018 Opinion in DA 18-0067, In re the Marriage of: Larissa L. Simpson v. Dennis D. Simpson , 2018 MT 230, 2018 WL 4443188, is hereby WITHDRAWN and is replaced by the superseding Opinion issued herein.
/S/ MIKE McGRATH, C.J.
/S/ LAURIE McKINNON, J.
/S/ JAMES JEREMIAH SHEA, J.
/S/ BETH BAKER, J.
/S/ JIM RICE, J.
In Simpson I , this Court affirmed the District Court's conclusion that the $10,000 per month obligation in the Agreement was to be considered a portion of the property settlement. | [
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] |
Justice Laurie McKinnon delivered the Opinion of the Court.
¶1 Michala Berube (Mother) appeals from an order of the Eleventh Judicial District Court, Flathead County, amending her parenting plan with Bryan Sinram (Father). While Mother presents nine issues on appeal, we summarize her arguments and restate the dispositive issue as:
Did the District Court err in amending the parties' parenting plan?
¶2 We conclude the District Court did not err and therefore affirm its order amending the parties' parenting plan.
FACTUAL AND PROCEDURAL BACKGROUND
¶3 S.W.B.S. was born to Mother and Father in December 2012. Mother and Father never married and, in 2015, when S.W.B.S. was two years old, the District Court approved the parties' stipulated parenting plan (Initial Parenting Plan). Both parents lived in Kalispell and the plan's residential schedule provided that Mother would parent four days a week while Father would parent three days a week. The residential schedule contained a holiday schedule that contemplated S.W.B.S. entering school; it provided specific arrangements for spring and winter breaks "applicable when kindergarten begins" and clarified that "school attendance takes priority over the holiday" schedule. The residential schedule also contained a subsection entitled "School (when applicable)" and delineated instances in which the parties could remove S.W.B.S. from school.
¶4 The plan further provided that Mother and Father would make certain parenting decisions-specifically those regarding S.W.B.S.'s schooling and healthcare-together. If the parties were unable to agree upon those parenting decisions, the plan provided that they were to make a good-faith effort to resolve the issues through dispute resolution processes before bringing their disagreements to the court. The plan also contained a provision entitled "Modification" (Modification Provision), which provided:
The parties agree that the above schedule shall be reviewed and modified as necessary if there are significant change in circumstances or when the minor child begins kindergarten to consider the developmental changes, needs, and best interest of the child at that time. They shall begin discussions of a schedule at least 6 months prior to the start of kindergarten. Both parties agree that the above schedule must be modified to some extent so that both parents may enjoy a full weekend parenting time with the child.
¶5 After the District Court approved the Initial Parenting Plan, Mother had two more children and moved to Columbia Falls. As S.W.B.S. aged, Mother and Father continuously disagreed on notable parenting decisions, such as whether S.W.B.S. should attend preschool and whether S.W.B.S. should be vaccinated. The parties tried to mediate the issues but could not agree. Therefore, in May 2017, Father filed a motion to permit school enrollment, amend the parenting plan, and modify child support. Specifically, Father wished to enroll S.W.B.S. in preschool and vaccinate him. Father also sought an amended residential schedule, as contemplated by the Initial Parenting Plan's Modification Provision, in anticipation of S.W.B.S. beginning kindergarten the next fall. Mother objected to Father's motion. The District Court held a hearing regarding Father's motion in August 2017.
¶6 Ultimately, the District Court denied Father's request to enroll S.W.B.S. in preschool and granted his request to vaccinate S.W.B.S. The District Court further determined that, in light of its Modification Provision, the Initial Parenting Plan's residential schedule should change as soon as S.W.B.S. entered kindergarten. The District Court memorialized those decisions in an order modifying the parenting plan. That document contained a few clerical errors, and in October 2017, the District Court issued a corrected order (October 2017 Order).
¶7 In its October 2017 Order, the court cited § 40-4-219(1), MCA, the statute governing amendments to parenting plans, which requires the court to find that a change occurred in the child's circumstances and that an amendment is in the child's best interest. Instead of finding a change in circumstances, the District Court relied on the Initial Parenting Plan's Modification Provision to justify its amendment. The court further concluded it was in S.W.B.S.'s best interest to amend the Initial Parenting Plan's residential schedule as soon as he started kindergarten. The new residential schedule provided that beginning in the fall of 2018, S.W.B.S. would reside primarily with Father during the school year, spending time with Mother on alternating weekends from Thursday after school until Sunday evening, with a mid-week visit on opposite weeks. During summer break, Mother would parent from Tuesday afternoon until Friday afternoon, and Father would parent from Friday afternoon until Tuesday afternoon.
¶8 The District Court instructed Father's counsel to prepare a proposed amended parenting plan reflecting the court's determinations, submit the proposal to Mother's counsel, and then submit the proposal to the court for final review and approval. Father's counsel submitted multiple proposals to Mother's counsel, but Mother did not believe any of the proposals accurately reflected the court's October 2017 Order. Father filed a proposed amended parenting plan in early-January 2018 embodying what he considered to reflect the court's rulings. Mother subsequently filed a notice of objection to Father's proposed amended parenting plan.
¶9 In response, the District Court issued a supplemental order in January 2018 regarding miscellaneous parenting plan issues. In the supplemental order, the court found that Mother should parent for most of S.W.B.S.'s summer vacation and, accordingly, ordered the school-year schedule to reverse from June 12 until August 31 each year with Mother parenting the majority of the time. In February 2018, the District Court approved an amended parenting plan that took into account its October 2017 Order and January 2018 supplemental order (Amended Parenting Plan). Mother appeals the District Court's decision to amend the Initial Parenting Plan.
STANDARD OF REVIEW
¶10 When reviewing a district court's decision to modify a parenting plan, we review its findings of fact for clear error. Jacobsen v. Thomas , 2006 MT 212, ¶ 13, 333 Mont. 323, 142 P.3d 859. Findings are clearly erroneous if they are not supported by substantial evidence, the court misapprehended the effect of the evidence, or our review of the record convinces us that a mistake was made. In re Marriage of Oehlke , 2002 MT 79, ¶ 17, 309 Mont. 254, 46 P.3d 49. When the findings upon which the court based its decision are not clearly erroneous, we will reverse a district court's decision only where the district court clearly abused its discretion. Oehlke , ¶ 9 ; In re Marriage of Whyte , 2012 MT 45, ¶ 23, 364 Mont. 219, 272 P.3d 102 (explaining that child custody cases present the court with difficult decisions and, accordingly, we presume the court carefully considered the evidence and made the correct decision).
DISCUSSION
¶11 On appeal, Mother contends the District Court made numerous errors when it amended the Initial Parenting Plan, the essence of her arguments being that the District Court erred in its application of § 40-4-219(1), MCA, the statute controlling parenting plan amendments. Section 40-4-219(1), MCA, permits a court to amend a prior parenting plan after finding a change in the child's circumstances and determining the amendment is in the child's best interest. The District Court did not cite a change in S.W.B.S.'s circumstances when it amended the Initial Parenting Plan. Instead, the court cited the plan's Modification Provision, in which the parties agreed to review the plan in contemplation of S.W.B.S. beginning kindergarten. Mother argues the District Court erred by failing to find S.W.B.S.'s circumstances substantially changed before amending the Initial Parenting Plan. Father contends the District Court appropriately amended the Initial Parenting Plan based on its Modification Provision. For the reasons set forth below, we conclude the District Court did not err in amending the parties' parenting plan based on the Modification Provision.
¶12 Parents possess a fundamental right to "make decisions concerning the care, custody, and control" of their child-they are in the best position to determine what parenting arrangement is in their child's best interest. See Polasek v. Omura , 2006 MT 103, ¶ 12, 332 Mont. 157, 136 P.3d 519 (quoting Troxel v. Granville , 530 U.S. 57, 66, 120 S.Ct. 2054, 2060, 147 L.Ed.2d 49 (2000) (plurality)). Parents develop their parenting plans with the intent to accomplish various objectives, such as protecting their child's best interest, providing for their child's physical care, and maintaining their child's emotional stability. Section 40-4-233(1) - (3), MCA. As parents make decisions regarding their child's care, they should consider their child's developmental level. Section 40-4-234(1)(e), MCA. Therefore, a parenting plan should "provide for the child's changing needs as the child grows and matures, in a way that minimizes the need for future amendment to the final parenting plan." Section 40-4-233(4), MCA.
¶13 To aid in accomplishing these objectives, a parenting plan may include a periodic-review provision-a provision providing for the "periodic review of the parenting plan when requested by either parent or the child or when circumstances arise that are foreseen by the parents as triggering a need for review, such as attainment by the child of a certain age or if a change in the child's residence is necessitated." Section 40-4-234(2)(f), MCA. Periodic-review provisions give parents the option to request a review or to foresee certain circumstances triggering a need for review, allowing them to account for their child's changing needs as he or she ages. See §§ 40-4-233(4), -234(2)(f), MCA. Recognizing that parents are in the best position to determine what parenting arrangement is in their child's best interest and giving effect to § 40-4-234(2)(f), MCA, we conclude that a parenting plan may be reviewed and amended pursuant to the plan's periodic-review provision.
¶14 Utilizing a parenting plan's periodic-review provision to review and amend a parenting plan exists as an alternative to amending a parenting plan pursuant to § 40-4-219(1), MCA. Under § 40-4-219(1), MCA, a court may only amend a parenting plan after finding "upon the basis of facts that have arisen since the prior plan or that were unknown to the court at the time of entry of the prior plan, that a change has occurred in the circumstances of the child...." Section 40-4-219(1), MCA ; In re Parenting of R.J.N. & H.E.N. , 2017 MT 249, ¶ 9, 389 Mont. 68, 403 P.3d 675 ; In re Marriage of D'Alton , 2009 MT 184, ¶ 9, 351 Mont. 51, 209 P.3d 251. Amendment pursuant to a periodic-review provision, on the other hand, is based on parents, who are familiar with their child's development, needs, education, and familial circumstances, deciding that a review of the parenting plan is in their child's best interest. In doing so, parents exercise their constitutional rights to make decisions they believe to be in their child's best interest.
¶15 Under § 40-4-219(1), MCA, a change in circumstances must be of a substantial nature. In D'Alton , we held that a child's mere aging is not a sufficient change in circumstances because aging, by itself, is not an unknown event. D'Alton , ¶ 11. However, a child may undergo significant developmental changes as he grows and matures, and those developmental changes may result in a substantial change in the child's circumstances. When parents have not previously decided that periodic review is in their child's best interest, a court must consider whether those developmental changes resulted in a change in the child's circumstances under § 40-4-219(1), MCA. On the other hand, when parents decide they want to periodically review their child's needs as he ages, they may utilize a periodic-review provision and review the parenting plan pursuant to that provision.
¶16 Section 40-4-219(1), MCA's change-in-circumstances requirement only applies when a parent seeks to amend a parenting plan based on a change in circumstances; it does not apply when parents seek to amend a parenting plan pursuant to the plan's periodic-review provision. Parents are in the best position to determine what parenting arrangement is in their child's best interest, and when they include a periodic-review provision in their parenting plan, courts must give effect to that provision and permit amendments based on that provision. Requiring parents to demonstrate a change in their child's circumstances-after they agreed that periodic review is in the child's best interest-would interfere with parents' constitutional rights to make decisions concerning the best interest of their children.
¶17 While a court may amend a parenting plan based on either a periodic-review provision, § 40-4-234(2)(f), MCA, or a change in the child's circumstances, § 40-4-219(1), MCA, any amendment must be in the child's best interest. In determining whether the amendment is in the child's best interest, the court may consider the criteria listed in § 40-4-212(1)(a)-(m), MCA, as well as the factors enumerated in § 40-4-219(1)(a)-(e), MCA.
¶18 In this case, the Initial Parenting Plan contained a periodic-review provision: the Modification Provision. Mother and Father foresaw that developmental changes would occur and determined it was in S.W.B.S.'s best interest to review the Initial Parenting Plan's residential schedule in contemplation of S.W.B.S. beginning kindergarten. Therefore, they included the Modification Provision in their Initial Parenting Plan, as permitted by § 40-4-234(2)(f), MCA. We conclude the District Court appropriately relied on the Modification Provision to amend the Initial Parenting Plan.
¶19 The District Court further determined the amendment was in S.W.B.S.'s best interest. The court found S.W.B.S. should spend the majority of his school week living with Father because Father could provide more child-centered parenting and greater continuity and stability than Mother. Further, the District Court found S.W.B.S. would have better academic success in Father's more structured environment. The court also determined the new residential schedule would still ensure S.W.B.S. had frequent and continuing contact with both parents. We conclude the District Court based its decision on findings that were not clearly erroneous and did not abuse its discretion by determining an amended parenting plan was in S.W.B.S.'s best interest. See Oehlke , ¶ 9.
¶20 As a final note, we address Mother's argument on appeal that Father failed to engage in mediation prior to filing an action to amend the parenting plan in District Court. Mother's contention is unsupported by the facts, which demonstrate that Father attempted to mediate the dispute before filing a motion in District Court. Mother's argument is, therefore, unpersuasive.
CONCLUSION
¶21 Parents may agree to periodically review their parenting plan pursuant to § 40-4-234(2)(f), MCA. Amending a parenting plan pursuant to a periodic-review provision exists as an alternative to amending a parenting plan pursuant to § 40-4-219(1), MCA. In this case, the District Court appropriately relied on the Modification Provision when it amended the Initial Parenting Plan and did not abuse its discretion when it determined an amendment was in S.W.B.S.'s best interest. We accordingly affirm the District Court's October 2017 Order and the Amended Parenting Plan.
We concur:
MIKE McGRATH, C.J.
BETH BAKER, J.
INGRID GUSTAFSON, J.
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Ingrid Gustafson, J., delivered the Opinion of the Court.
¶ 1 Appellant Dennis Cromwell, the natural father of A.J.C. (Father), appeals the July 20, 2016 Findings, Conclusions and Parenting Plan ordered by the Twentieth Judicial District Court, Sanders County. In a separate but related matter, Father has also appealed the District Court's September 26, 2017 Order Denying Department's Motion to Amend the Permanency Plan and Order of Dismissal.
¶ 2 We restate the issue on appeal as follows:
Did the District Court err by allowing a child's grandmother to pursue a parental interest under Title 40 while a dependent neglect case was pending under Title 41?
FACTUAL AND PROCEDURAL BACKGROUND
¶ 3 On September 22, 2014, the Department of Health and Human Services, Child and Family Services Division (Department) filed a Petition for Emergency Protective Services (EPS) and Temporary Investigative Authority (TIA) in a dependent neglect (DN) matter, designated as DN 14-06 in the District Court. At the time, A.J.C. was eleven years old and was in the legal custody of his mother (Mother), who frequently left him in the care of his grandmother, Appellee Laura Schaefer (Grandmother). Up to that time, Father, who resided in Oregon, had not participated in parenting A.J.C. to any significant degree, nor had he provided consistent and substantial financial support.
¶ 4 After the Department became formally involved with Mother, Father acted to gain custody of A.J.C. On October 14, 2014, at the Department's direction, Father, naming Mother as Respondent, petitioned the District Court for a parenting plan designating him as A.J.C.'s primary residential parent. This petition, DR 14-71, is the cause underlying this appeal.
¶ 5 On November 3, 2014, the District Court granted EPS and TIA in DN 14-06. On November 17, 2014, the District Court entered default against Mother in DR 14-71 because she had failed to appear. On February 20, 2015, Mother appeared in DR 14-71 via counsel and moved to set aside default. Ultimately, Father and Mother stipulated to an interim parenting plan which had A.J.C. residing with Grandmother during the school year and visiting Father for six weeks during the summer of 2015. The District Court set aside Mother's default and approved the stipulated parenting plan on March 24, 2015, subject to any occurrences in DN 14-06.
¶ 6 On August 13, 2015, Father moved to amend the interim parenting plan, alleging that Mother had not complied with the treatment plan approved by the District Court in DN 14-06. Father asserted that he had agreed to the parenting plan because Mother was in a residential chemical dependency treatment program and he believed placement with Grandmother was appropriate at the time. Father alleged that in the intervening months, Mother had left the residential program and events had occurred which caused him to conclude Grandmother was not an appropriate placement for A.J.C., including Mother being arrested at Grandmother's home, Grandmother allowing a convicted felon to stay at the home while A.J.C. was present, and A.J.C. arriving for his summer visit with Father lacking appropriate clothing and in need of eyeglasses and dental care. Father also alleged that A.J.C. had done well in Oregon and had made friends. Father proposed that A.J.C. reside with him during the school year and visit Mother at Grandmother's home for six weeks each summer.
¶ 7 On September 2, 2015, Grandmother filed a Petition to Establish a Parental Interest as a separate action, which the District Court designated DR 15-37. Grandmother alleged that Mother was not complying with her treatment plan and that Father had abandoned A.J.C. Grandmother argued that she met the criteria for a third-party interest in A.J.C. under § 40-4-228, MCA. On January 4, 2016, the District Court consolidated DR 15-37 into DR 14-71.
¶ 8 On April 12, 2016, the District Court held a hearing regarding Grandmother's petition to establish a parental interest and the proposed parenting plans Father and Grandmother had filed. The hearing encompassed not only the matters pending in this consolidated case, but also included hearing on the Department's pending Motion for Approval of Permanency Plan in DN 14-06.
¶ 9 On April 18, 2016, Father filed a Motion to Adopt Parenting Plan, and Incorporated Brief in Support, in which he asked the District Court to place A.J.C. in his custody during the school year while allowing continued summer visitation with Grandmother. Father argued that Grandmother was not legally entitled to a parental interest or placement of A.J.C. Father further argued that such placement would not be in A.J.C.'s best interests, as he alleged A.J.C. had been exposed to Mother's drug use, domestic violence, other illegal activity, and association with felons while in Grandmother's care, and alleged that Grandmother had demonstrated an inability to keep Mother away from A.J.C. Grandmother objected to Father's proposed parenting plan.
¶ 10 On July 18, 2016, prior to the District Court issuing rulings on the issues pending at the April hearing, Father filed a motion for an emergency status hearing in DN 14-06. Father indicated the Department had advised him that it intended to place A.J.C. with him for a trial home placement, and Father asked the District Court to hold a status hearing prior to issuing its rulings on the issues argued at the April hearing.
¶ 11 However, prior to responding to Father's motion for emergency status hearing, on July 20, 2016, the District Court issued findings of fact, conclusions of law, and a parenting plan in this case. It awarded Grandmother primary residential custody of A.J.C. and provided Father six weeks of parenting time during the summer. Father appeals from this determination, arguing that the District Court should not have entertained Grandmother's petition for a parental interest and proposed parenting plan because she did not have standing to pursue a parental interest action under Title 40 while a DN action under Title 41 was pending.
STANDARD OF REVIEW
¶ 12 The same standard of review applies to both termination of parental rights and custodial determinations. In both instances, the District Court's decision is afforded all reasonable presumptions as to the correctness of the determination and therefore such decision will not be disturbed on appeal unless there is a mistake of law or a finding of fact not supported by substantial credible evidence that would amount to a clear abuse of discretion. Our review for abuse of discretion is whether the trial court acted arbitrarily, without employment of conscientious judgment, or exceeded the bounds of reason resulting in substantial injustice. In re M.B. , 2009 MT 97, ¶ 11, 350 Mont. 76, 204 P.3d 1242 (citations and internal quotations omitted).
¶ 13 Questions of justiciability, such as standing, are questions of law which we review de novo. We determine whether a party has standing as of the time the action is brought. In re C.B.D. , 2017 MT 108, ¶ 5, 387 Mont. 347, 394 P.3d 202 (citation and internal quotation omitted).
DISCUSSION
¶ 14 Did the District Court err by allowing a child's grandmother to pursue a parental interest under Title 40 while a dependent neglect case was pending under Title 41?
¶ 15 The District Court adjudicated A.J.C. as a youth in need of care in DN 14-06 under the authority of Title 41, ch. 3, Mont. Code Ann. While the Title 41 action was pending, Grandmother filed a petition to establish a parental interest and a parenting plan pursuant to § 40-4-228, MCA. Father moved to dismiss Grandmother's petition, asserting lack of standing and jurisdiction. The District Court ultimately ordered a parenting plan that provided for A.J.C. to reside primarily with Grandmother and to spend six weeks each summer with Father.
¶ 16 Father argues that pursuant to § 40-4-228(1), MCA, Grandmother, a nonparent, did not have standing to pursue a parental interest while the Title 41 action was pending and thus the District Court erred in issuing a parenting plan which awarded custody to Grandmother because it lacked jurisdiction to do so. Father further argues the District Court deprived him of his fundamental right to parent by inappropriately using a best interest test to award custody to Grandmother, a nonparent.
¶ 17 Grandmother asserts A.J.C. desires to live with her. She asserts Father abandoned A.J.C. and she faults Father for being an absent parent until the DN case was commenced. She characterizes Father as only a "sperm donor" and argues Father should not be rewarded with standing because of a "technicality in the law." She invites us to "clarify and/or correct" the DR and DN statutes.
¶ 18 A threshold question in every case is whether a party has standing to bring an action. In re C.B.D. , ¶ 7 (citation omitted). Here, the question is whether Grandmother has standing to pursue a parental interest under Title 40 during the pendency of a separate dependent abuse and neglect case under Title 41, in light of § 40-4-228(1), MCA. Section 40-4-228(1), MCA, states in relevant part: "In cases when a nonparent seeks a parental interest in a child under 40-4-211 ... the provisions of this chapter apply unless a separate action is pending under Title 41, chapter 3 ." (Emphasis added.)
¶ 19 Grandmother points to § 40-4-211(4)(b), MCA, which provides that a parenting plan proceeding may be commenced in a district court by a nonparent if that person has established a child-parent relationship with the child. She asserts § 40-4-211, MCA, "seems" to give her standing, but acknowledges that her interpretation of the applicability of § 40-4-211, MCA, places it in conflict with § 40-4-228(1), MCA. Grandmother appears to recognize that the application of § 40-4-228, MCA, limits her ability to pursue her action under § 40-4-211, MCA ; she argues this Court should "revise[ ] or modif[y]" § 40-4-228(1), MCA, to permit her to pursue a parental interest action even though a DN action is pending.
¶ 20 Revision or modification of a statute is the province of the Legislature, not this Court. This Court will not intrude in areas properly the province of the Legislature. Anesthesiology, P.C. v. Blue Cross & Blue Shield , 246 Mont. 277, 280, 806 P.2d 16, 18 (1990). Our role is to interpret and apply statutes consistent with their plain language and where the language is ambiguous, consistent with the legislative intent. Sweeney v. Mont. Third Jud. Dist. Ct. , 2018 MT 95, ¶ 12, 391 Mont. 224, 416 P.3d 187 ;
Gulbrandson v. Carey , 272 Mont. 494, 500, 901 P.2d 573, 577 (1995) (citations omitted); Pinnow v. Mont. State Fund , 2007 MT 332, ¶ 37, 340 Mont. 217, 172 P.3d 1273 (even where Court notes "gaping holes in the statutory scheme," it is the province of the Legislature, not this Court, to remedy).
¶ 21 Section 40-4-211(4)(b), MCA, gives standing to a nonparent to seek a parenting interest of a minor child if that person has established a child-parent relationship. Kulstad v. Maniaci , 2009 MT 326, ¶ 57, 352 Mont. 513, 220 P.3d 595. However, this statute must be read in conjunction with § 40-4-228(1), MCA, which precludes the application of Title 40, ch. 4 while a separate action is pending under Title 41, ch. 3. By the clear, unambiguous language of § 40-4-228(1), MCA, Grandmother lacked the ability to pursue an action to establish a parental interest while the Title 41 child dependency action was pending and the District Court erred in awarding Grandmother custody or visitation while the Title 41 child dependency action was pending.
¶ 22 Recognizing Montana law does not provide her the ability to pursue a parental interest during pendency of a Title 41 child dependency proceeding, Grandmother asserts we should instead adopt a best interest test, because she alleges it is in A.J.C.'s best interest to reside with her. We have already determined such an approach to be unconstitutional and contrary to a parent's fundamental right to parent. In re Parenting of J.N.P. v. Knopp , 2001 MT 120, 305 Mont. 351, 27 P.3d 953. In In re Parenting of J.N.P. , the grandparents filed a petition for a parenting plan asserting it was in their grandchild's best interest to reside with them. The District Court dismissed the petition, concluding that, absent termination of mother's parental rights, it had no authority to grant a parenting plan to grandparents. In re Parenting of J.N.P. , ¶ 12. This Court affirmed and expounded on the pitfalls of elevating a best interest test over a parent's fundamental right to parent:
[A] natural parent cannot be denied custody of his or her child absent termination of that person's parental rights for abuse or neglect pursuant to Title 41, Chapter 3 of the Montana Code.
Our case law does not permit destruction of a natural parent's fundamental right to the custody of his or her child based simply on the subjective determination of that child's best interest. Were we to allow such a result, the implications are obvious. Is it in a child's best interest that he or she be raised in an affluent family as opposed to an impoverished family? Would it be better that a child be raised by extremely intelligent parents rather than people of average intelligence? Is a child better off if that child is raised in a conventional life style rather than an unconventional life style? All of these factors could arguably be considered in determining the child's best interests. However, none even remotely justify denying a parent's constitutional and fundamental right to the custody of his or her child.
In re Parenting of J.N.P. , ¶¶ 25-26.
¶ 23 Here, the District Court should have stayed the DR action until the Title 41 action was resolved, at which time the District Court could lift the stay, issue an interim parenting plan if it deemed necessary, hear Father's and Grandmother's petitions, and then issue detailed written findings of fact and conclusions of law and a parenting plan, if appropriate. Thus, we remand to the District Court for further action consistent with this Court's Opinions here and in DA 17-0600.
CONCLUSION
¶ 24 Because Grandmother could not pursue a parental interest and parenting plan during the pendency of a Title 41 child dependency proceeding, the District Court erred in ordering a parenting plan which awarded Grandmother primary residential custody during the course of an ongoing child dependency proceeding.
¶ 25 Reversed and remanded for action consistent with this Opinion.
We concur:
MIKE McGRATH, C.J.
JAMES JEREMIAH SHEA, J.
BETH BAKER, J.
LAURIE McKINNON, J.
DIRK M. SANDEFUR, J.
JIM RICE, J.
As the parties to each of these appeals are not identical, this Court has issued separate Opinions. See In re A.J.C. , DA 17-0600. However, these appeals are interrelated and based on the same underlying facts. The District Court consolidated Father's parenting plan action (DR 14-71) with Grandmother's parental interest/parenting plan action (DR 15-37), and then held joint hearing on April 12, 2016 on these matters as well as on the Department's motion to approve its permanency plan (DN 14-06).
The parties do not dispute that Grandmother has established a "child-parent relationship" with A.J.C. as that term is defined in § 40-4-211(6), MCA. | [
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Justice Ingrid Gustafson delivered the Opinion of the Court.
¶ 1 Pursuant to Section I, Paragraph 3(c), Montana Supreme Court Internal Operating Rules, this case is decided by memorandum opinion and shall not be cited and does not serve as precedent. Its case title, cause number, and disposition shall be included in this Court's quarterly list of noncitable cases published in the Pacific Reporter and Montana Reports.
¶ 2 Sarah Jess Hurt (Sarah) appeals from the Findings of Fact, Conclusions of Law and Order issued January 26, 2018, by the Sixth Judicial District Court, Park County, which establish a parenting plan which provides for each parent to parent their child, V.M.D., on a 50/50 basis with exchanges occurring Sundays at 5:30 p.m. We affirm.
¶ 3 Sarah and Adam Dunlap (Adam) are the parents of V.M.D., currently 6 years old. In 2015, Sarah's and Adam's relationship deteriorated. After they separated, the situation became more contentious and Adam brought an action to establish a parenting plan. Following interim proceedings and hearing on the petition to establish a parenting plan, the District Court entered its order establishing a parenting plan which provides for the parties to parent on a 50/50 basis. Sarah contends the District Court erred when it determined such a plan to be in the best interests of V.M.D. Adam asserts the District Court thoroughly considered the evidence presented and appropriately established a parenting plan which is in V.M.D.'s best interests.
¶ 4 We review a district court's findings establishing a parenting plan under the clearly erroneous standard. In re Marriage of Williams , 2018 MT 221, ¶ 5, 392 Mont. 484, 425 P.3d 1277 (citation omitted). We review a district court's conclusions of law to determine if they are correct. In re the Parenting of C.J. , 2016 MT 93, ¶ 12, 383 Mont. 197, 369 P.3d 1028 (citation omitted). A district court has broad discretion when considering the parenting of a child, and we must presume the court carefully considered the evidence and made the correct decision. Accordingly, absent clearly erroneous findings, we will not disturb a district court's decision regarding parenting plans unless there is a clear abuse of discretion. Parenting of C.J. , ¶ 13 (citations omitted).
¶ 5 Upon review of the record, we find no error by the District Court. The District Court appropriately set forth the purpose and objectives of a final parenting plan as provided by § 40-4-233, MCA. The court then thoroughly and conscientiously considered the best interest factors set forth in § 40-4-212, MCA, to determine V.M.D.'s best interests. The testimony presented together with the report of the guardian ad litem, Douglas B. Fry, support the detailed findings made by the District Court. The District Court appropriately followed Montana's statutes and well-settled precedent in its findings and conclusions. See §§ 40-4-211 through -213, -215, and -233, MCA, and Marriage of Williams , ¶ 5. Thus, we conclude the District Court's findings of fact are not clearly erroneous and its conclusions of law are correct.
¶ 6 We have determined to decide this case pursuant to Section I, Paragraph 3(c) of our Internal Operating Rules, which provides for memorandum opinions. In the opinion of the Court, the case presents a question controlled by settled law or by the clear application of applicable standards of review.
¶ 7 Affirmed.
We concur:
MIKE McGRATH, C.J.
LAURIE McKINNON, J.
BETH BAKER, J.
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Justice Jim Rice delivered the Opinion of the Court.
¶ 1 Pursuant to Section I, Paragraph 3(c), Montana Supreme Court Internal Operating Rules, this case is decided by memorandum opinion and shall not be cited and does not serve as precedent. Its case title, cause number, and disposition shall be included in this Court's quarterly list of noncitable cases published in the Pacific Reporter and Montana Reports.
¶ 2 Roger and Carrie Peters (Peters) appeal the order of the Water Court that adopted the Water Master's Report dismissing Peters' claim to 120 miner's inches from Medicine Lodge Creek in the Red Rock River Basin (41A).
¶ 3 This case involves two competing irrigation claims, Peters' Claim 41A 95026-00 and Claim 41A 117659-00, held by William and Helen Wellborn (Wellborn). In 1895, the Beaverhead County District Court decreed rights totaling 270 miner's inches from Medicine Lodge Creek, conveyed through the Nesbitt Ranch Ditch, with an August 1, 1886, priority date, split among three appropriators, including James Nesbitt, who was granted 120 miner's inches (3 cfs) (Nesbitt Right). The Nesbitt Property, consisting of nearly 160 acres, was located in Sections 7 and 18 of Township 10 South, Range 11 West, Beaverhead County. Nesbitt sold the property in 1892, and it was eventually sold to C.L. Livestock Company (C.L. Livestock) in 1920.
¶ 4 In 1925, the District Court issued another decree for Medicine Lodge Creek. This decree listed C.L. Livestock as owner of the former Nesbitt Property in Sections 7 and 18, as well as a larger parcel of land in Sections 4, 5, 9, and 10, and granted C.L. Livestock three rights totaling 475 miner's inches, including a right for 120 miner's inches, with a priority date of August 1, 1886, conveyed by the Nesbitt Ranch Ditch. The 1925 decree established that the rights conveyed by the Nesbitt Ditch were historically used on C.L. Livestock's lands in Sections 7 and 18, as well as the lands owned by a Mary Craver (Craver) in Sections 13 and 24 of Township 10 South, Range 12 West. Peters and Wellborn are successors to the lands owned by C.L. Livestock, and both claim a 120 miner's inches right based upon the Nesbitt Right. Because the combined flow rates of their claims exceeded the decreed flow rate, both claims appeared in the Preliminary Decree for Basin 41A with an issue remark denoting a "decree exceeded" status.
¶ 5 The Water Master held a hearing on the Peters-Wellborn "decree exceeded" issue on November 28, 2016. The parties offered several chain-of-title documents as evidence. Wellborn also called three witnesses, but Peters called none, relying on the "prima facie status of claim 41A 95026-00." The Master found that Wellborn was the successor to the Nesbitt Right, and that, while both parties were successors in interest to land owned by C.L. Livestock, "the Medicine Lodge Right is appurtenant" to the land now owned by Wellborn. Moreover, the Master found the water right as conveyed by the Nesbitt Ranch Ditch was historically and continuously put to use on the Wellborn land, and there was no evidence suggesting that the Medicine Lodge Right was severed from the land. The Master determined "the Right remained appurtenant to the land and was conveyed to the Wellborns when they purchased the property." The Master also noted that, other than chain-of-title evidence, Peters did not offer any evidence relating to their historical use of water claimed under 41A 95026-00. Thus, the Master concluded that Wellborn was entitled to all 120 miner's inches, and recommended dismissal of Peters' claim.
¶ 6 Peters filed objections to the Water Master's Report, raising new assertions regarding Wellborn's historical use and the number of acres Wellborn irrigated with the Nesbitt Right. Peters requested the Water Court take judicial notice of another claim, Claim 41A 118190-00, asserting that both Peters and Wellborn are successors to the Nesbitt Right and that the 120 miner's inches flow rate should be apportioned between both parties based on acres irrigated. The Water Court denied Peters' request, reasoning that Peters sought to use the claim "as evidence supporting arguments they first raised in their objection to the Master's Report." The court thus reasoned the assertions were not timely and, further, Peters' new arguments were "not relevant to the decree exceeded issue." The court determined that the Master's recommendations were supported by substantial evidence. Tracing the chain of title, the court found that Peters' and Wellborn's land had a common predecessor after the Nesbitt land was sold and split, who "acquired the Nesbitt property and appurtenant water right in 1920." This land was again sold and split in 1950, with the Nesbitt Right remaining appurtenant to that land. Wellborns became the successor to this right when they purchased the land. As such, the court concluded that "Wellborn acquired the entire Nesbitt [R]ight when [they] purchased the property in 1973," and thus, "Wellborn claim 41A 117659-00 is the successor to the Nesbitt [R]ight."
¶ 7 Peters appeal. In water cases, we employ two standards of review: "the standard the water judge applies to the Water Master's report and the standard we apply to the Water Court's opinion." Marks v. 71 Ranch, LP , 2014 MT 250, ¶ 12, 376 Mont. 340, 334 P.3d 373 (citation omitted). "[T]he Water Court reviews the Water Master's findings of fact for clear error and the Water Master's conclusions of law for correctness." Marks , ¶ 12 (citations omitted). "We apply the same standards of review to the Water Court as we do to an appeal from a district court. Whether the standard of review was applied correctly is a question of law." Marks , ¶ 13 (citation omitted). Thus, we review a Water Court's decision "under a de novo standard to determine whether it correctly applied the clear error standard of review to the Water Master's findings of fact, and whether its conclusions of law are correct." Marks , ¶ 13 (citation omitted).
¶ 8 On appeal, Peters raise three issues: whether the Water Court erred by adopting the Water Master's finding that Wellborn's right as conveyed by the Nesbitt Ditch had continuously been put to use on the Wellborn property; whether the Water Court erred by ruling that any alleged nonuse by Wellborn was not relevant to the validation of Peters' claim to a portion of the right; and third, whether the Water Court erred by denying Peters' request for judicial notice to support their argument that the Wellborn property is incapable of supporting 120 miner's inches, as untimely and irrelevant. We consider the primary issue on appeal to be whether the Water Master's findings that Wellborn was entitled to all 120 miner's inches from the Nesbitt Right were clearly erroneous, and whether the Water Court erred in adopting those findings.
¶ 9 The question presented and to be resolved by the Water Court was the conflict between the competing claims of Peters and Wellborn to the Nesbitt Right. Key to the resolution of that issue was a determination of which party's land the Nesbitt Right was appurtenant, requiring assessment of the chain of title from the original Nesbitt Ranch property, and a determination of whether the water right had been severed from the original place of use. Here, the Water Master considered chain-of-title documents and the district court decrees, tracing the Nesbitt Right from the 1895 decree, which allotted 270 miner's inches from Medicine Lodge Creek through the Nesbitt Ranch Ditch to Wilson Wadams (30 miner's inches), James Nesbitt (120 miner's inches), and Frank Andrews (120 miner's inches) with a priority date of August 1, 1886. The Master found that, "based on the information provided in the Decree and patent information, it is apparent that the Nesbitt Ranch Ditch was historically used to provide water for the irrigation of the lands owned by the appropriators in Sections 7 and 18...." As noted above, the original Nesbitt property was located in Sections 7 and 18.
¶ 10 Water rights on Medicine Lodge Creek were again decreed by the District Court in 1925. At that time, C.L. Livestock owned the Nesbitt property in Sections 7 and 18 and a larger parcel of land in Sections 4, 5, 9, and 10. Craver owned Sections 13 and 24. The decree stated that the Nesbitt Ranch Ditch and the water rights conveyed by the ditch were historically used on C.L. Livestock's lands in Sections 7 and 18 and Craver's lands in Sections 13 and 24. Peters and Wellborn are successors to the land owned by C.L. Livestock. Their water claims, 41A 95026-00 and 41A 117659-00, respectively, include the following lands formerly owned by C.L. Livestock:
SENW of Section 5- (Peters claim 41A 95026-00)
SW of Section 4- (Peters claim 41A 95026-00)
N2N2, S2NE and NESE of Section 9- (Peters claim 41A 95026-00)
SEWS of Section 7- (Wellborn claim 41A 117659-00)
E2NW of Section 18- (Wellborn claim 41A 117659-00)
¶ 11 Notably, Sections 7 and 18 are owned by Wellborn, and the Master found that Wellborn owned the lands formerly owned by C.L. Livestock that are capable of irrigation from the Nesbitt Ranch Ditch. No evidence was introduced showing any severance of the Medicine Lodge Creek right from the land it was originally appurtenant to, or a reservation of the right in the chain of title for either Peters' or Wellborn's property. Additionally, Helen Wellborn testified that the Nesbitt Ditch terminates on Wellborn property, and that no other water users take water from the ditch. Helen's daughter, Virginia Hill, likewise testified that the Nesbitt Ranch Ditch both begins and ends on the Wellborn property, and that all the water from the ditch is consumed on the Wellborn property. In contrast, Peters did not demonstrate historical use of the Nesbitt Ranch Ditch to serve their property, or that they had ever placed a call for this water. As the Water Master stated, "Peters elected to rely almost entirely on the prima facie status of claim 41A 95026-00." Peters did not demonstrate appurtenance of the Medicine Lodge Right to their land because there was no evidence to support historical use in Sections 4, 5, and 9, which they own; rather, the only evidence of historical use was for Sections 7 and 18, which belong to Wellborn.
¶ 12 Our review of the record convinces us that substantial evidence supports the Water Master's findings and does not leave us with a definite and firm conviction that a mistake was committed. The Water Court did not err by adopting the Water Master's recommendation that Wellborn's claim to the 120 miner's inches, as the successor to the Nesbitt Right, was proven. The other issues raised on appeal by Peters, challenging evidentiary rulings by the Water Court denying Peters' offers of evidence, are not error, because the proffered evidence was untimely submitted and did not serve to prove Peters' claim, and therefore was not relevant to the dispute before the Water Court regarding which competing claim was the successor to the Nesbitt right.
¶ 13 We have determined to decide this case pursuant to Section I, Paragraph 3(c) of our Internal Operating Rules, which provides for memorandum opinions. In the opinion of the Court, the case presents a question controlled by settled law or by the clear application of applicable standards of review.
¶ 14 Affirmed.
We concur:
LAURIE McKINNON, J.
JAMES JEREMIAH SHEA, J.
DIRK M. SANDEFUR, J.
INGRID GUSTAFSON, J.
William Wellborn is now deceased.
C.L. Livestock's other decreed rights were conveyed by other ditches.
Hildreth Livestock Co. filed objections to the claims of both Peters and Wellborn, which were incorporated into the Water Master's recommendations and adopted by the Water Court. Denhan Ranches, Inc., appeared by stipulation on Claim 41A 95026-00. These parties raise no issues in this appeal.
The Master rejected a theory offered by Peters, as unsupported by evidence, that at a point prior to 1973, a change of diversion point had occurred, the claimed water was used on Peters' property, and the Nesbitt Right had been severed from the land owned by Wellborns.
Neither party had filed objections to the other's claim, and thus the legal question was which party's claim had succeeded to the Nesbitt Right. | [
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Justice Laurie McKinnon delivered the Opinion of the Court.
¶ 1 Pursuant to Section I, Paragraph 3(c), Montana Supreme Court Internal Operating Rules, this case is decided by memorandum opinion and shall not be cited and does not serve as precedent. Its case title, cause number, and disposition shall be included in this Court's quarterly list of noncitable cases published in the Pacific Reporter and Montana Reports.
¶ 2 Nikki Zelenka, formerly known as Nikki Rorabaugh (Nikki), appeals an order from the Eighteenth Judicial District Court, Gallatin County, adopting the Standing Master's findings of fact, conclusions of law, and a final decree of dissolution (Final Decree) of her marriage with Jason Rorabaugh (Jason). We affirm.
¶ 3 Nikki and Jason married in 1994. They had four children while married. During their marriage, Jason had a bachelor's degree and worked as a Petroleum Division Manager at Rocky Mountain Supply, earning approximately $80,000 per year. Nikki also had a bachelor's degree, but she primarily worked as a stay-at-home mother, homemaker, and homeschool teacher for the parties' children. Around 2009, Nikki began attending graduate school full-time to obtain her Master's Degree in Health and Human Development.
¶ 4 Nikki and Jason separated in March 2010. Jason moved out of the marital home and into a condominium the parties purchased. Both parties agreed their marriage was irretrievably broken, so in September 2011, Jason filed a petition for dissolution of their marriage. At that time, the parties' major assets were the marital home, the condominium, and Jason's 401(k) retirement account. After the parties' separation, Jason continued to support Nikki and the children by depositing his paychecks into the parties' joint bank account, and Nikki paid the marital home mortgage and other expenses using funds from the account. In October 2011, Jason discontinued depositing his paychecks into the joint account, began paying the marital home mortgage and a few other expenses himself, and elected to directly pay Nikki $1,000 per month.
¶ 5 From there, the matter quickly became contentious. In December 2011, Nikki filed a motion for temporary family support requesting that Jason pay her $3,200 per month. The Standing Master held a hearing in August 2012 to address Nikki's motion. During the hearing, the Standing Master asked each party to later follow up and submit proposed financial distribution plans. She also encouraged the parties to sell the marital home and take other measures to reduce their monthly expenses, stating: "The reality is the parties are split, they're separate, they have four children, their lifestyle is not going to be the same. And the sooner everybody accepts that, then the more likely it is that we can move forward in this case."
¶ 6 After the parties submitted their proposed financial distribution plans, the Standing Master did not rule on Nikki's motion for temporary family support. Nikki subsequently asked Child Support Enforcement Division (CSED) to calculate child support. In August 2013, CSED entered a final agency decision requiring Jason to pay monthly child support of $1,892. CSED's decision also provided that after Nikki graduated with her master's degree, in January 2014 Jason's support requirement would decrease to $1,555 per month.
¶ 7 In December 2013, the Standing Master held a three-day trial regarding the dissolution of the parties' marriage. After trial, the matter lingered, unresolved, for well over three years until the Standing Master issued the Final Decree in June 2017. The Final Decree evenly divided the marital home, the condominium, and Jason's 401(k) retirement account between the parties according to the assets' values at the time of the parties' dissolution; held each party liable for liens against the parties' real property filed under their individual names; held each party liable for one half of Nikki's student loan debt; generally held each party solely liable for his or her own individual debts incurred after March 2010; declined to award maintenance to either party; held each party liable for their own attorney fees; required each party to begin maintaining his or her own health insurance coverage; declined to require either party to pay back their children for amounts taken from the children's funds to cover family expenses; and was "dispositive of all other pending motions."
¶ 8 Nikki filed several objections to the Standing Master's Final Decree of Dissolution, and the District Court held a hearing on Nikki's objections in October 2017. The District Court subsequently overruled Nikki's objections and adopted the Standing Master's Final Decree in its entirety. Nikki then filed a motion to reopen the case to admit additional evidence regarding the parties' finances. The District Court denied Nikki's motion. Nikki appeals.
¶ 9 Jason argues Nikki's appeal is untimely. M. R. App. P. 4(5)(a)(i) provides that in civil cases, the notice of appeal is timely only when a party files it within thirty days of the entry date of the order from which the appeal is taken. Nevertheless, if either party timely files a motion to amend or make additional findings of fact under M. R. Civ. P. 52(b) or to alter or amend judgment under M. R. Civ. P. 59, the time for appeal runs instead from the entry date of the order granting or denying the motion. M. R. App. P. 4(5)(a)(iv). To identify which motion a party intended to present, we "look to the substance of a motion, not just its title...." In re Marriage of Holloway , 2000 MT 104, ¶ 13, 299 Mont. 291, 999 P.2d 980 (quoting Miller v. Herbert , 272 Mont. 132, 136, 900 P.2d 273, 275 (1995) ).
¶ 10 The District Court issued its order adopting the Standing Master's Final Decree on October 23, 2017. On November 6, 2017, Nikki filed a motion titled "Respondent's Motion and Brief to Reopen Case for Taking of Further Financial Evidence and Testimony, and Request for Hearing on the Financial Matters Noted Herein, Prior to Entering Final Judgement [sic] (and Accompanying Affidavit and Exhibits)." The title of Nikki's motion neither asked the District Court to amend or make additional findings of fact nor to alter or amend the judgment. Quite evident through the substance of her motion, however, is Nikki's intent for the District Court to make additional findings of fact in order to amend the final judgment. See M. R. Civ. P. 52(b), 59. Therefore, Nikki's motion extended her allotted time for filing a notice of appeal. After the District Court denied her motion on December 4, 2017, she had thirty days to file a notice of appeal. See M. R. App. P. 4(5)(a)(i). She met this requirement, filing her notice on January 3, 2018.
¶ 11 Nikki claims the Standing Master abused her discretion by failing to issue a written order granting or denying Nikki's motion for temporary family support. She also claims the Standing Master abused her discretion by denying Nikki's requests that Jason pay for spousal maintenance, Nikki's attorney fees, and Nikki's continued health insurance coverage. We review "a district court's decisions de novo to determine whether it applied the correct standard of review to a master's findings of fact and conclusions of law." Patton v. Patton , 2015 MT 7, ¶ 17, 378 Mont. 22, 340 P.3d 1242. We apply the same standard of review to an adopted standing master's report that we do to any other district court order. Patton , ¶ 17. Section 40-4-202, MCA, which governs the distribution of a marital estate, vests a district court with broad discretion to apportion the marital estate in a manner equitable to each party under the circumstances. Section 40-4-110, MCA, allows the district court, after considering the parties' financial resources, to order a party to pay a reasonable amount of the opposing party's attorney fees. We initially review a district court's division of marital property and maintenance award to determine whether the findings of fact upon which the division and maintenance award are based are clearly erroneous. Jackson v. Jackson , 2008 MT 25, ¶ 9, 341 Mont. 227, 177 P.3d 474. "A finding is clearly erroneous if it is not supported by substantial evidence, if the district court misapprehended the effect of the evidence, or if our review of the record convinces us that the district court made a mistake." Jackson , ¶ 9 (quoting In re Marriage of Gerhart , 2003 MT 292, ¶ 15, 318 Mont. 94, 78 P.3d 1219 ). Absent clearly erroneous findings, we review marital property divisions and maintenance awards for abuse of discretion, determining "whether the district court acted arbitrarily without employment of conscientious judgment or exceeded the bounds of reason resulting in a substantial injustice." Jackson , ¶ 9.
¶ 12 The Standing Master failed to rule on Nikki's December 2011 motion for temporary family support for well over five years-only in June 2017 did the Final Decree dispose of it along with "all other pending motions." Nevertheless, the Standing Master found that between December 2011 and July 2013, although Jason quit depositing his paychecks into his and Nikki's joint bank account, Jason continued paying the $1,081 mortgage on the marital residence and began paying Nikki $1,000 per month directly. In July 2013, CSED issued a temporary order for Jason to begin paying Nikki $1,892 per month in child support, which it reduced to $1,555 per month in January 2014 after Nikki completed graduate school and could begin earning full-time income. The Standing Master's Final Decree ordered CSED to issue a final child support and medical support order in the case, and the Standing Master ultimately did not order Jason to pay Nikki retroactive child support and maintenance.
¶ 13 Nikki graduated with her master's degree in December 2013, and the Standing Master found she was capable of meeting her reasonable needs through employment. Nikki incurred student loan debt while pursuing her degree, and the Standing Master found Nikki had incurred the debt to increase her earning potential, which ultimately benefited the family. Nikki claimed she had suffered several physical and mental injuries over the course of the proceedings that would require continuous medical treatment and affected her ability to work. Nevertheless, in December 2015, Nikki informed the Standing Master that while she was permanently partially disabled, with some accommodations, she was capable of working full-time. Therefore, the Standing Master concluded each party would assume one half of Nikki's student loan debt, Nikki would not receive spousal maintenance, each party would pay his or her own attorney fees, and each party would pay for his or her own future health insurance coverage.
¶ 14 In October 2017, after Nikki objected to the Standing Master's Final Decree, the District Court held a hearing to allow Nikki to present oral argument supporting her objections. Nikki raised the same concerns to the District Court that she had raised to the Standing Master and provided no additional reasoning supporting her requests for retroactive child support, maintenance, attorney fees, and health insurance coverage.
¶ 15 The record supports the Standing Master's factual findings, and they are not clearly erroneous. Likewise, the Standing Master did not abuse her discretion when she decided not to award Nikki retroactive child support. The record shows that Jason continued supporting Nikki and the children from December 2011 through July 2013 by making mortgage payments on the marital residence, by paying for some other basic expenses, and by paying $1,000 per month directly to Nikki. The record does not indicate Jason failed to make payments required by CSED's support orders from July 2013 onward. Nikki argues the value of payments she received was inadequate, but we agree with the Standing Master's observation regarding the parties' post-separation finances: "The reality is the parties are split ... their lifestyle is not going to be the same." Accordingly, although the Standing Master's Final Decree was profoundly delayed, her decision not to award retroactive child support was not an abuse of discretion based on Jason's mortgage payments, direct payments to Nikki, and later CSED-ordered child support payments.
¶ 16 Furthermore, the Standing Master evenly divided the parties' major assets-the marital residence, the condominium, and Jason's 401(k) retirement account-and required each party to pay for one half of Nikki's student loan debt. Nikki graduated with her master's degree and is capable of full-time employment. Accordingly, based on the parties' post-dissolution financial resources and Nikki's employment potential, the Standing Master did not abuse her discretion by declining to award Nikki spousal maintenance, attorney fees, and health insurance coverage.
¶ 17 Nikki also claims the District Court abused its discretion when it denied her post-dissolution motion to reopen the case to admit further financial evidence. Nikki argues the District Court should have reopened the case to receive information regarding her post-trial debt and the liens Jason's parents and his attorney placed on the parties' marital home and condominium. "Whether to reopen a case for the introduction of further evidence after the case has been submitted to the court is within the discretion of the trial court. Its ruling, upon the request to reopen, will not be disturbed by this Court unless there has been a clear abuse of discretion." Stavenjord v. Mont. State Fund , 2003 MT 67, ¶ 15, 314 Mont. 466, 67 P.3d 229.
¶ 18 Although well over three years elapsed between trial in December 2013 and the Standing Master's Final Decree in October 2017, the Standing Master did reopen the case for disclosure of updated financial information in May 2015. The parties supplied the updated information, and the Standing Master considered it alongside the additional information both parties filed between December 2013 and October 2017 before issuing the Final Decree. The Final Decree divided the marital home, condominium, and 401(k) retirement account according to their values as of the Final Decree date (October 2017), not the trial date (December 2013). The Final Decree also evenly divided Nikki's student loan debt, generally held each party responsible for their own debts, and held that any individual party's debt secured by a lien against the parties' real property "should be satisfied from the individual's marital portion of the equity in the real property awarded to each." Therefore, the liens Jason's parents and attorney placed on the parties' real property had no effect on Nikki's equity in the properties. Before adopting the Standing Master's Final Decree, the District Court heard argument from Nikki regarding the liens and her post-trial debt. The District Court did not abuse its discretion by denying her motion to reopen the case.
¶ 19 Finally, Nikki argues the District Court abused its discretion by failing to require the parties to reimburse their children for amounts the parties borrowed from the children's funds. A district court may only modify a standing master's finding of fact or conclusion of law if one of the parties files a "specific objection." Section 3-5-126(2), MCA ; In re Marriage of McMichael , 2006 MT 237, ¶ 15, 333 Mont. 517, 143 P.3d 439 ; Beals v. Beals , 2013 MT 120, ¶ 12, 370 Mont. 88, 300 P.3d 1158. The Standing Master held neither party responsible for repaying the children for any amounts borrowed from the children's funds. However, Nikki failed to specifically object to that decision when she filed her objections to the Final Decree with the District Court. Therefore, we will not decide the issue for the first time on appeal.
¶ 20 We have determined to decide this case pursuant to Section I, Paragraph 3(c) of our Internal Operating Rules, which provides for memorandum opinions. This appeal presents no constitutional issues, no issues of first impression, and does not establish new precedent or modify existing precedent.
¶ 21 Affirmed.
We concur:
MIKE McGRATH, C.J.
INGRID GUSTAFSON, J.
BETH BAKER, J.
JIM RICE, J. | [
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Justice Beth Baker delivered the Opinion of the Court.
¶ 1 Pursuant to Section I, Paragraph 3(c), Montana Supreme Court Internal Operating Rules, this case is decided by memorandum opinion and shall not be cited and does not serve as precedent. Its case title, cause number, and disposition shall be included in this Court's quarterly list of noncitable cases published in the Pacific Reporter and Montana Reports.
¶ 2 Kelley M. Anderson appeals the findings of fact, conclusions of law, and second amended parenting plan ordered by the First Judicial District Court, Lewis and Clark County. Under the new parenting plan, Brandon Herrera is the primary residential parent, and Kelley has parenting time every other weekend. Kelley alleges that the District Court abused its discretion by relying at trial on evidence it previously deemed "irrelevant," that its findings are clearly erroneous, and that it failed to consider the statutory best-interest factors under § 40-4-212(1), MCA. We affirm.
¶ 3 Kelley and Brandon are the parents of two children, A.H., born in 2006, and J.H., born in 2009. In October 2014, the District Court dissolved the parties' marriage. The final decree adopted a Stipulated Final Parenting Plan under which the parties, who both resided in Boulder at the time, shared parenting on a 50/50 basis. Two months after the dissolution, Kelley and the children moved to Butte without notice to Brandon. Brandon moved to Butte soon after. In April 2015, the parties entered into, and the court adopted, a Stipulated Amended Parenting Plan; under that plan, Kelley was the primary residential parent and caregiver, and Brandon had parenting time every other weekend.
¶ 4 In July 2015, Kelley moved to Helena without notice to Brandon and took the children with her. Kelley then moved to amend the parenting plan, proposing that Brandon have only supervised visits with the children. While the motion was pending, the parties entered into a stipulated co-parenting agreement. In August 2016, Kelley attempted to obtain an order of protection against Brandon, but it was denied twice. In September 2016, Brandon moved for an order to show cause to hold Kelley in contempt for her failure to follow the parenting plan. Difficulties between the parties continued, and law enforcement was called several times to intervene and mediate parenting disputes between Kelley and Brandon. The motions were heard over six separate hearings between February 2016 and March 2017.
¶ 5 In its December 2017 order adopting the Second Amended Parenting Plan, the court reasoned that Kelley had violated the parenting plans multiple times with "the effect, if not the intention, of denying Brandon meaningful and frequent contact and involvement with his children," which was not in the best interests of the children. Further, Brandon had been excluded from knowing about and participating in decisions regarding the children's schooling, medical care, and counseling.
¶ 6 Kelley maintains that the District Court's finding that she interfered with Brandon's parenting was arbitrary and unreasonable because it was based on behavior that occurred prior to November 2015. Kelley argues that she was unable to develop evidence that explained her behaviors prior to November 2015 because the court ruled such evidence "irrelevant." She argues further that the District Court's findings of fact are clearly erroneous, that it ignored substantive evidence, that it considered her non-compliance with the prior parenting plan but not Brandon's, and that it failed to consider the statutory best-interest factors.
¶ 7 We review evidentiary rulings for abuse of discretion. McClue v. Safeco Ins. Co. , 2015 MT 222, ¶ 8, 380 Mont. 204, 354 P.3d 604. Because the district court sits in the best position to evaluate the best interests of the children, "we must presume that the court carefully considered the evidence and made the correct decision." Hood v. Hood , 2012 MT 158, ¶ 24, 365 Mont. 442, 282 P.3d 671. "Whether we would have reached the same decision as the trial court is not the standard under which we review a court's order for an abuse of discretion." Woerner v. Woerner , 2014 MT 134, ¶ 29, 375 Mont. 153, 325 P.3d 1244. "We review whether substantial evidence in the record supports the court's findings regardless of whether the evidence could support a different outcome as well." Woerner , ¶ 29.
¶ 8 The District Court heard considerable evidence about the case over the course of six hearings. The court provided ample opportunity for each party to present her or his case. Kelley has not demonstrated evidentiary rulings by the trial court that prejudiced her ability to offer evidence substantiating her claims. To the extent Kelley argues that the District Court did not properly weigh the evidence or consider certain testimony, that is within the purview of a district court. It is the function of the trial court to weigh the testimony and determine witness credibility, and "[w]e will not substitute our judgment for that of the district court on such issues." In re Marriage of Kesler , 2018 MT 231, ¶ 17, 392 Mont. 540, 427 P.3d 77. Upon review of the record, we conclude that Kelley was able to adequately present her case and that the District Court's findings are supported by the record.
¶ 9 Kelley argues further that we should reverse because the District Court "focused only on instances of Kelley's non-compliance, ignoring the other required factors." She maintains that the basis for the final parenting plan was the court's displeasure with her, rather than the children's best interests.
¶ 10 A district court must determine a parenting plan "in accordance with the best interest of the child." Section 40-4-212(1), MCA. The statute directs the district court to consider "all relevant parenting factors," which may include the thirteen enumerated factors, in determining the best interest of the child. Section 40-4-212(1), MCA. We have encouraged district courts to make findings on the factors, but we do not require specific findings on each factor. Woerner , ¶ 15. "The court's findings should, at a minimum, 'express the essential and determining facts upon which it rests its conclusions.' " Woerner , ¶ 15 (quoting In re Marriage of Crowley , 2014 MT 42, ¶ 45, 374 Mont. 48, 318 P.3d 1031 ).
¶ 11 A review of the District Court's findings makes clear that it considered the statutory factors in its decision, even though it did not specifically identify them. For instance, the court found that the children have a good relationship with Brandon's extended family in Butte and described Kelley's household in East Helena; those findings addressed § 40-4-212(1)(c), MCA, "the interaction and interrelationship of the child[ren] with the child[ren]'s parent or parents and siblings and with any other person who significantly affects the child[ren]'s best interest." The court also made findings on the "developmental needs of the child[ren]," finding that A.H. had been exhibiting some "troubling behaviors" and that Brandon planned to focus on personal responsibility with the child. Section 40-4-212(1)(i), MCA. "[T]he child[ren]'s adjustment to home, school, and community" was addressed in the court's findings that the children had not done well in East Helena schools. Section 40-4-212(1)(d), MCA. The court also considered the "continuity and stability of care" for the children, finding that they had structure in Brandon's home and "Kelley's household is not structured quite as clearly as Brandon's." Section 40-4-212(1)(h), MCA. Among the examples noted, the substance of the District Court's findings demonstrates its consideration of the best-interest factors in § 40-4-212(1), MCA. The court was not required to address specifically each of the many disputed points of evidence between the parties.
¶ 12 We have determined to decide this case pursuant to Section I, Paragraph 3(c) of our Internal Operating Rules, which provides for memorandum opinions. In the opinion of the Court, the case presents a question controlled by settled law or by the clear application of applicable standards of review. Although the Court deeply regrets the lack of closure for the parties and their children caused by the long delay in the District Court's entry of a final parenting plan, we conclude upon complete review of the record that its decision was not an abuse of discretion or contrary to law. The order adopting a Second Amended Parenting Plan is affirmed.
We Concur:
MIKE McGRATH, C.J.
DIRK M. SANDEFUR, J.
JAMES JEREMIAH SHEA, J.
JIM RICE, J.
Kelley argues that this finding is clearly erroneous because there was no evidence that J.H. had any trouble in school. This dispute does not bear materially on the conclusion that the District Court's findings are grounded in substantial evidence. | [
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Chief Justice Mike McGrath delivered the Opinion of the Court.
¶ 1 Pursuant to Section I, Paragraph 3(c), Montana Supreme Court Internal Operating Rules, this case is decided by memorandum opinion and shall not be cited and does not serve as precedent. Its case title, cause number, and disposition shall be included in this Court's quarterly list of noncitable cases published in the Pacific Reporter and Montana Reports.
¶ 2 Kathleen Vanuka (Kathleen) appeals from an Eighteenth Judicial District order adopting and affirming the decree of dissolution and division of assets and liabilities from her marriage to Robert A. Vanuka (Robert). We affirm.
¶ 3 On December 28, 2011, Robert petitioned for the dissolution of his marriage to Kathleen. On May 30, 2017, the Standing Master issued her final decree dissolving the marriage and dividing the marital property. Kathleen objected to the division of property. On April 9, 2018, after holding a hearing, the District Court adopted and affirmed the Standing Master's findings of fact, conclusions of law, and final decree of dissolution in full, including her determination that Robert and Kathleen equally divide the equity in the marital home. Kathleen appeals, arguing that the District Court should have awarded her the entire marital home.
¶ 4 This Court reviews a district court's decision in dissolution and division of marital property proceedings for an abuse of discretion. In re marriage of Rudolf , 2007 MT 178, ¶ 15, 338 Mont. 226, 164 P.3d 907 (citing In re Marriage of Crilly , 2005 MT 311, ¶ 10, 329 Mont. 479, 124 P.3d 1151 ). A district court abuses its discretion when it acts arbitrarily without employment of conscientious judgment or exceeds the bounds of reason, resulting in substantial injustice. In re marriage of Rudolf , ¶ 15 (citing In re Marriage of Crilly , ¶ 10). This Court reviews a district court's findings of fact for clear error and conclusions of law for correctness. Bock v. Smith , 2005 MT 40, ¶ 14, 326 Mont. 123, 107 P.3d 488 ; Seubert v. Seubert , 2000 MT 241, ¶ 12, 301 Mont. 382, 13 P.3d 365.
¶ 5 Section 40-4-202, MCA, vests a district court with broad discretion to distribute marital property "equitably, considering all of the circumstances of a particular marriage. The theory of equitable distribution recognizes, and attempts to compensate for, each party's contribution to the marriage." In re Marriage of Bartsch , 2007 MT 136, ¶ 20, 337 Mont. 386, 162 P.3d 72. "Equity, not equality, guides a court's discretion in dividing the marital estate." In re Marriage of Garner , 239 Mont. 485, 488, 781 P.2d 1125, 1127 (1989). Section 40-4-202, MCA, requires that a district court equitably apportion all assets and property regardless of which party acquired the property and when it was acquired. In re Funk , 2012 MT 14, ¶ 19, 363 Mont. 352, 270 P.3d 39.
¶ 6 Kathleen argues that the Standing Master and District Court erred in requiring Robert and Kathleen to equally share in the equity of the marital home. Kathleen specifically argues that equal division was inequitable because she contributed more income to the marital estate during the marriage, she could no longer work due to disability, and Robert had separate inheritance assets, including retirement and investment accounts, while she did not. The Standing Master's detailed findings of fact acknowledged Kathleen's contentions. However, the Standing Master also found that Robert contributed significant amounts of his inheritance to the marital estate during the marriage, Kathleen continued to live in the debt-free home after Robert petitioned for dissolution, Kathleen retained the majority of the items in the home, and Kathleen exclusively collected rent from tenants in the home's lower-level.
¶ 7 The Standing Master considered the circumstances of Robert and Kathleen's particular marriage, as well as each party's unique contributions. Based on her findings of fact, the Standing Master concluded it was equitable to split the equity in the marital home evenly between Robert and Kathleen. Kathleen failed to establish clear error in the Standing Master's findings of fact. The District Court did not abuse its discretion in affirming and adopting the Standing Master's findings.
¶ 8 We have determined to decide this case pursuant to Section I, Paragraph 3(c) of our Internal Operating Rules, which provides for memorandum opinions. In the opinion of the Court, the case presents a question controlled by settled law or by the clear application of applicable standards of review.
¶ 9 Affirmed.
We Concur:
JAMES JEREMIAH SHEA, J.
DIRK M. SANDEFUR, J.
BETH BAKER, J.
INGRID GUSTAFSON, J. | [
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Justice Ingrid Gustafson delivered the Opinion of the Court.
¶ 1 Sinda Puryer (Puryer) appeals a May 25, 2017 order of the Eleventh Judicial District Court, Flathead County, dismissing her Amended Complaint against HSBC BANK USA, National Association as Trustee for the holders of Ace Securities Corp. Home Equity Loan Trust, Asset Backed Pass-Through Certificates, series 2006-CW1, The registered holders of Ace Securities Corp. Home Equity Loan Trust, Series 2006-CW1, Ace Securities Corp. Home Equity Loan Trust, Series 2006-CW1, Asset Backed Pass-through Certificates, series 2006-CW1, HSBC Mortgage Corporation (USA), and Nationstar Mortgage LLC (collectively, Lenders).
¶ 2 We restate the issue on appeal as follows:
Did the District Court err by granting Lenders' Motion to Dismiss pursuant to M. R. Civ. P. 12(b)(6) ?
FACTUAL AND PROCEDURAL BACKGROUND
¶ 3 On March 27, 2006, Puryer obtained a $285,750 loan (the Loan) on real property located at 244 Wintercrest Drive in Kalispell, Montana. The Loan was secured by a Deed of Trust on the property from America's Wholesale Lender. The Deed of Trust identified Puryer as the borrower, America's Wholesale Lender as the original lender, Charles J. Peterson as the Trustee, and Mortgage Electronic Registration Systems, Inc. as the "nominee for Lender and Lender's successors and assigns ... a beneficiary under this Security Instrument." On December 3, 2009, the Deed of Trust was assigned to HSBC Bank USA as trustee for the holders of Ace Securities Corp. Home Equity Loan Trust, Asset Backed Pass-Through Certificates, series 2006-CW1. On December 12, 2011, the Deed of Trust was assigned to Bank of America, N.A. On October 15, 2012, the Deed of Trust was assigned back to HSBC.
¶ 4 Due to financial difficulties, Puryer contacted Bank of America for assistance to modify her monthly mortgage payments. Puryer alleged Bank of America told her to stop making her monthly mortgage payment to qualify her for the Home Affordable Modification Program (HAMP). Puryer alleged based on this advice she stopped making her monthly mortgage payments; however, Puryer never qualified for the HAMP. Her last mortgage payment was on October 1, 2007. Puryer has not made any payments on the Loan since October 1, 2007, and she admits she defaulted on the Loan on November 1, 2007. However, she continues to reside on the property.
¶ 5 Since Puryer defaulted on the loan, she has received at least nine Notices of Sale. Puryer received the first Notice of Sale on July 10, 2008, and the last on July 5, 2016. The Notices of Sale contained similar language, which Puryer alleged accelerated all amounts due under the Loan and Deed of Trust. For example, the last Notice of Sale, issued on July 5, 2016, stated the following:
The beneficiary has declared a default in the terms of said Deed of Trust by failing to make the monthly payments due in the amount of $1,962.12, beginning November 1, 2007, and each month subsequent, which monthly installments would have been applied on the principal and interest due on said obligation and other charges against the property or loan. The total amount due on this obligation as of July 15, 2016 is $255,563.04 principal, interest at a rate of 8.35000% totaling $193,193.35, late charges in the amount of $2,164.80, escrow advances of $34,841.35, and other fees and expenses.
Each Notice of Sale was later cancelled and no foreclosure sale took place.
¶ 6 The Deed of Trust contained provisions requiring notice to Puryer prior to accelerating the Loan if default was not cured. The Deed of Trust provided the following:
Acceleration Remedies. Lender shall give notice to Borrower prior to acceleration following Borrower's breach of any covenant or agreement in this Security Instrument ... The notice shall specify: (a) the default; (b) the action required to cure the default; (c) a date, not less than 30 days from the date the notice is given to Borrower, by which the default must be cured; and (d) that failure to cure the default on or before the date specified in the notice may result in acceleration of the sums secured by this Security Instrument and sale of the Property. The notice shall further inform Borrower of the right to reinstate after acceleration and the right to bring a court action to assert the non-existence of a default or any other defense of Borrower to acceleration and sale. If the default is not cured on or before the date specified in the notice, Lender at its option may require immediate payment in full of all sums secured by this Security Instrument without further demand and may invoke the power of sale and any other remedies permitted by Applicable Law.
The Deed of Trust then provided that if the lender invokes the power of sale, lender must notify the trustee and then the trustee or lender can record a notice of sale. It is undisputed that no notice was provided by Lenders to Puryer as required by the Deed of Trust. The Deed of Trust provided the maturity date as April 1, 2036.
¶ 7 Initially, Puryer, appearing pro se, filed a complaint on October 27, 2016. On March 3, 2017, Puryer filed an Amended Complaint. In the Amended Complaint, Puryer alleged six causes of action against Lenders. These causes of action included: (1) declaratory judgment; (2) breach of contract and breach of the implied covenant of good faith and fair dealing; (3) violation of the Fair Debt Collection Practices Act (FDCPA); (4) violation of the Montana Consumer Protection Act (MCPA); (5) negligent or intentional infliction of emotional distress; and (6) lack of authority to foreclose. On March 20, 2017, Lenders moved to dismiss the Amended Complaint pursuant to M. R. Civ. P. 12(b)(6).
¶ 8 On May 25, 2017, the District Court granted Lenders' motion to dismiss. The District Court determined the following: (1) declaratory judgment is improper because the Notices of Sale did not accelerate the maturity date; therefore, the statute of limitations was not triggered by the first Notice of Sale; (2) securitization of the Loan does not invalidate the Deed of Trust; (3) Puryer did not suffer any actual damages from any breach of contract; (4) no special relationship existed to assert a breach of good faith and fair dealing with the named parties, (5) Lenders do not meet the definition of a debt collector under the FDCPA; (6) litigation costs are not sufficient to satisfy the ascertainable loss element under the MCPA; (7) no factual basis existed for a claim of negligent and/or intentional infliction of emotional distress; and (8) lack of authority to foreclose is not a recognized claim. Puryer timely appeals.
STANDARD OF REVIEW
¶ 9 We review a district court's ruling on a motion to dismiss de novo, using the standards set forth in M. R. Civ. P. 12(b)(6). A complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts which would entitle her to relief. A district court's determination that a complaint has failed to state a claim for which relief can be granted is a conclusion of law which we review for correctness. Victory Ins. Co. v. Mont. State Fund , 2015 MT 82, ¶ 11, 378 Mont. 388, 344 P.3d 977 (citations omitted).
¶ 10 A motion to dismiss under M. R. Civ. P. 12(b)(6) has the effect of admitting all well-pleaded allegations in the complaint. In considering the motion, the complaint is construed in the light most favorable to the plaintiff, and all allegations of fact contained therein are taken as true. Dismissal is proper under M. R. Civ. P. 12(b)(6) if the plaintiff would not be entitled to relief based on any set of facts that could be proven to support the claim. Doty v. Mont. Comm'r of Political Practices , 2007 MT 341, ¶ 9, 340 Mont. 276, 173 P.3d 700 (citations omitted).
DISCUSSION
¶ 11 Did the District Court err by granting Lenders' Motion to Dismiss pursuant to M. R. Civ. P. 12(b)(6) ?
¶ 12 An asserted claim is subject to dismissal if, as pled, it is insufficient to state a cognizable claim entitling the claimant to relief. M. R. Civ. P. 12(b)(6). Under Rule 12(b)(6), the court must take all well-pled factual assertions as true and view them in the light most favorable to the claimant, drawing all reasonable inferences in favor of the claim. A claim is subject to dismissal only if it either fails to state a cognizable legal theory for relief or states an otherwise valid legal claim but fails to state sufficient facts that, if true, would entitle the claimant to relief under that claim. Anderson v. ReconTrust Co., N.A. , 2017 MT 313, ¶ 8, 390 Mont. 12, 407 P.3d 692 (citations omitted). The liberal notice pleading requirements of M. R. Civ. P. 8(a) and 12(b)(6) do "not go so far to excuse omission of that which is material and necessary in order to entitle relief," and the "complaint must state something more than facts which, at most, would breed only a suspicion" that the claimant may be entitled to relief. Jones v. Mont. Univ. Sys. , 2007 MT 82, ¶ 42, 337 Mont. 1, 155 P.3d 1247.
A. Declaratory Judgment
¶ 13 Puryer argues the District Court erred in granting Lenders' motion to dismiss. Specifically, Puryer asserts the Notices of Sale accelerated the amount due and constituted a maturity of the entire debt as provided by § 71-1-210, MCA, and thus Lenders had eight years from the first Notice of Sale to enforce the obligation to pay. Puryer maintains the eight-year statute of limitations began to run on July 10, 2008 when she received the first Notice of Sale. Lenders counter the District Court correctly granted their motion to dismiss. Lenders argue, based on the plain language of the Deed of Trust, the Loan was not accelerated and even if the Loan was accelerated the notice of cancellation revoked any acceleration. Thus, the Lenders contend the statute of limitations never began.
¶ 14 The Uniform Declaratory Judgments Act provides a district court with the "power to declare rights, status, and other legal relations whether or not further relief is or could be claimed." Section 27-8-201, MCA. Under Montana law, "a mortgage of real property ... is good against all from the time it is recorded until 8 years after the maturity of the entire debt or obligation secured." Section 71-1-210, MCA. Thus, upon maturity of the entire debt a lender has eight years to enforce the mortgage unless the lender seeks to renew the period of mortgage. Although acceleration of a debt requiring payment of the entire debt may trigger the eight-year statute of limitation pursuant § 71-1-210, MCA, the plain language of the Deed of Trust provides that the Notices of Sale did not accelerate the entire debt.
¶ 15 Acceleration of the debt due under the Deed of Trust was not self-executing. Upon default, the lender was required to give notice to the borrower. The notice must specify (1) the default, (2) the action required to cure the default, (3) a date by which default must be cured, and (4) that failure to cure the default on or before the date specified in the notice may result in acceleration of the sums secured by this Deed of Trust. (Emphasis added.) The plain language of the Deed of Trust does not create a self-executing acceleration clause. See Mont. Solid Waste Constrs. v. Mont. Dept. of Pub. Serv. Reg. , 2007 MT 154, ¶ 24, 338 Mont. 1, 161 P.3d 837 (defining self-executing as "taking effect immediately without the need of any type of implementing action"). Even after providing notice to the borrower, the lender may elect to accelerate the sums secured by invoking the power of sale. We conclude, based on the plain language of the Deed of Trust, that upon default, an implementing action-providing notice-was required to accelerate Puryer's debt.
¶ 16 Inter alia, the Notices of Sale did not accelerate the entire debt to trigger the eight-year statute of limitations pursuant to § 71-1-210, MCA. The Small Tract Financing Act of Montana, §§ 71-1-301 to -321, MCA, allows the use of trust indentures to finance estates of real property that are smaller than 40 acres. Section 71-1-302, MCA. "When a transfer in trust of an interest in real property is made to secure the performance of the obligation ... a power of sale is conferred upon the trustee to be exercised after a breach of the obligation for which the transfer is security." Section 71-1-304(2), MCA. The Act further provides:
Whenever all or a portion of any obligation secured by a trust indenture has, prior to the maturity date fixed in the obligation, become due or been declared due by reason of a breach or default ... the grantor ... at any time prior to the time fixed by the trustee for the trustee's sale if the power of sale is to be exercised, may pay to the beneficiary or the beneficiary's successor in interest the entire amount then due under the terms of the trust indenture and the obligation secured by the indenture ... other than the portion of the principal that would not then be due if a default had not occurred and cure the existing default.
Section 71-1-312(1), MCA (emphasis added). A Notice of Sale does not cause maturity of the entire debt owed if a borrower, at any point, may cure the default by only paying the amount due at that time, rather than being required to pay the entire loan balance. We determine based on the language of the § 71-1-312(1), MCA, the Notices of Sale did not accelerate the entire debt due. As provided in § 71-1-312(1), MCA, payment of only the amount in arrears reinstates the trust indenture. See Midfirst Bank v. Ranieri , 257 Mont. 312, 319, 848 P.2d 1046, 1050 (1993). Contrary to Puryer's arguments, our decision in Bank of America, N.A., v. Alexander , 2017 MT 31, 386 Mont. 305, 389 P.3d 1020, is not applicable. Therefore, the maturity date remains April 1, 2036, because the Notices of Sale failed to accelerate the entire debt. Accordingly, we conclude the eight-year statute of limitations was not triggered and enforcement of the Deed of Trust is not time-barred.
¶ 17 Moreover, Puryer argued the District Court erred by not considering Puryer's motion for summary judgment on the statute of limitations. Having determined the enforcement of the Deed of Trust is not time-barred pursuant to § 71-1-201, MCA, we conclude the District Court did not err by refusing to consider Puryer's motion for summary judgment.
B. Breach of Contract and Breaches of the Implied Covenant of Good Faith and Fair Dealing
¶ 18 Puryer argues the District Court erred in dismissing her breach of contract and breaches of the implied covenant of good faith and fair dealing claims. Specifically, Puryer contends she sufficiently pled damages in her breach of contract claim. Puryer also contends her breach of the implied covenant of good faith and fair dealing was properly pled. Puryer lastly argues a "special relationship" existed to move forward with the tortious breach of the implied covenant of good faith and fair dealing claim.
¶ 19 Lenders argue the District Court did not err in dismissing Puryer's breach of contract and breach of the implied covenant of good faith and fair dealing claims as a matter of law. Lenders maintain the breach of contract claim failed to adequately allege actual damages. Lenders further argue Puryer failed to allege a "special relationship" giving rise to a tortious breach of the implied covenant.
¶ 20 A breach of contract is an actionable wrong regardless of whether actual damages stemmed from the breach. Kitchen Krafters v. Eastside Bank , 242 Mont. 155, 163, 789 P.2d 567, 571 (1990), overruled on other grounds , Busta v. Columbus Hosp. Corp. , 276 Mont. 342, 916 P.2d 122 (1996) ; Rickards v. Aultman & Taylor Mach. Co. , 64 Mont. 394, 400, 210 P. 82, 83 (1922) (the law presumes damages if the pleading sets forth facts showing that plaintiff's legal rights have been violated). "A failure to show actual damages and the resulting inference that none were sustained does not defeat the cause of action." Kitchen Krafters , 242 Mont. at 163, 789 P.2d at 571 (citing Sutherland on Damages Vol. I § 11 (3rd Edition 1903) ). Therefore, an action for breach of contract does not require that the plaintiff sustain any damages. Kitchen Krafters , 242 Mont. at 163, 789 P.2d at 571 (citing Jacobs Sulton Co. v. Union Mercantile Co. , 17 Mont. 61, 42 P. 109 (1895) ). In the absence of proof of actual damages recovery may be for nominal damages. Rickards , 64 Mont. at 400, 210 P. at 83 ; Restatement (Second) of Contracts § 346 (1981).
¶ 21 Puryer's breach of contract claim alleged Lenders breached the Deed of Trust by failing to give Puryer the required notice under the Deed of Trust prior to initiating non-judicial foreclosure. The District Court dismissed Puryer's breach of contract claim because she failed to allege actual damages. The District Court focused its dismissal on Puryer's failure to allege any monetary or property loss stemming from the breach of contract-failure to give notice. However, based on established Montana law, a failure to plead actual damages for a breach of contract claim does not defeat the cause of action. Taking the allegations of the Amended Complaint as true, Puryer has sufficiently stated a claim for breach of contract. As such, the District Court incorrectly dismissed Puryer's breach of contract claim.
¶ 22 Puryer also claimed Lenders breached the implied covenant of good faith and fair dealing. Puryer's Amended Complaint included causes of action for breach of the implied covenant of good faith and fair dealing based in contract and based on the "special relationship" criteria giving rise to a tort. For the reasons stated below, Puryer's contractual and tortious breach of the implied covenant were improperly dismissed.
¶ 23 "Every contract, regardless of type, contains an implied covenant of good faith and fair dealing." Story v. Bozeman , 242 Mont. 436, 450, 791 P.2d 767, 775 (1990), overruled on other grounds, Arrowhead Sch. Dist. No. 75 v. Klyap , 2003 MT 294, 318 Mont. 103, 79 P.3d 250. A covenant of good faith requires "honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade." Section 28-1-211, MCA. "In a great majority of ordinary contracts, a breach of the implied covenant is only a breach of the contract and only contract damages are due." Story , 242 Mont. at 450, 791 P.2d at 775. However, a claim may be brought for tortious breach of the implied covenant where a "special relationship" exists between the parties. Story , 242 Mont. at 451, 791 P.2d at 776. To establish a "special relationship" the following five elements must be present:
(1) the contract must be such that the parties are in inherently unequal bargaining positions; [and] (2) the motivation for entering the contract must be a non-profit motivation, i.e., to secure peace of mind, security, future protection; [and] (3) ordinary contract damages are not adequate because (a) they do not require the party in the superior position to account for its actions, and (b) they do not make the inferior party 'whole'; [and] (4) one party is especially vulnerable because of the type of harm it may suffer and of necessity places trust in the other party to perform; and (5) the other party is aware of this vulnerability.
Story , 242 Mont. at 451, 791 P.2d at 776.
¶ 24 The District Court failed to recognize Puryer's claim for contractual breach of the implied covenant. Puryer's Amended Complaint alleged Lenders "breached the covenant of good faith and fair dealing in their conduct with [Puryer] by not acting honestly and by failing to observe reasonable commercial standards of fair dealing in the trade." Puryer alleged Lenders "attempted to deprive [her] from receiving the benefit of the contract by attempting to foreclose on the mortgage" and not providing the required notice setting forth her ability to cure the default. Construing the complaint in the light most favorable to Puryer and taking all allegations as true, we determine that Puryer has sufficiently pled a claim for contractual breach of the implied covenant to survive a 12(b)(6) motion to dismiss.
¶ 25 Further, the District Court determined, as a matter of law Puryer failed to allege that a "special relationship" existed giving rise to a tortious breach of the implied covenant. The District Court incorrectly conflates the "special relationship" required under Story with the "special circumstances" that would give rise to a fiduciary duty. Primarily, the District Court relies on Morrow v. Bank of America, N.A. , 2014 MT 117, ¶¶ 34-35, 375 Mont. 38, 324 P.3d 1167, where we held that a bank normally does not owe its customer a fiduciary duty unless special circumstances arise that would show that the bank went beyond its ordinary role. Furthermore, the District Court made no analysis regarding whether a "special relationship" as set forth in Story existed under the facts of this case. Thus, the District Court's analysis to dismiss Puryer's tortious breach of the implied covenant is amiss.
¶ 26 Puryer's Amended Complaint alleged a contract existed and based on the Lenders' conduct they breached the implied covenant by not acting honestly and failing to observe reasonable commercial standards of fair dealing. Further, Puryer's Amended Complaint alleged the contract at issue-Deed of Trust-which financed Puryer's personal residence creates a special relationship as required by Story . Taking the allegations as true, Puryer has sufficiently pled both a contractual breach of the implied covenant and a tortious breach of the implied covenant in her Amended Complaint to survive a 12(b)(6) motion to dismiss. A determination of whether a special relationship actually exists giving rise to a tortious breach of the implied covenant claim is more appropriate for summary judgment if the facts are undisputed or at trial. Story , 242 Mont. at 451, 791 P.2d at 776.
C. Fair Debt Collections Practices Act
¶ 27 Puryer argues the District Court erred in dismissing her FDCPA claim. Puryer maintains she set forth a valid basis for her FDCPA claim for Lenders failure to comply with the Deed of Trust's notice requirement. Lenders, however, argue the District Court correctly dismissed Puryer's FDCPA claim as a matter of law. Lenders maintain Puryer's FDCPA claim failed because Lenders are not "debt collectors" under the FDCPA.
¶ 28 The Ninth Circuit Court of Appeals held, generally, that enforcement of a security interest does not constitute debt collection activity under the FDCPA. Ho v. ReconTrust Co. N.A. , 858 F.3d 568, 571-72 (9th Cir. 2017) ("the object of a non-judicial foreclosure is to retake and resell the security, not to collect money .... Thus, actions taken to facilitate a non-judicial foreclosure ... are not attempts to collect 'debt' as defined by the FDCPA"); Dowers v. Nationstar Mortg., LLC , 852 F.3d 964, 969 (9th Cir. 2017) (a party enforcing a security interest under § 1692e is not engaging in debt collection and were not acting as debt collectors under the FDCPA).
¶ 29 However, the definition of debt collector under § 1692f(6) includes a person enforcing a security interest. Dowers , 852 F.3d at 971. Section 1692f(6) states:
Taking or threatening to take any nonjudicial action to effect dispossession or disablement of property if-(A) there is no present right to possession of the property claimed as collateral through an enforceable security interest; (B) there is no present intention to take possession of the property; or (C) the property is exempt by law from such dispossession or disablement.
15 U.S.C. § 1692f(6). The Dowers Court concluded that § 1692f(6)"regulates nonjudicial foreclosure activity." Dowers , 852 F.3d at 971. The Court further determined it was error to dismiss plaintiff's § 1692f claim because "Plaintiffs alleged that Nationstar threatened to take non-judicial action to dispossess Plaintiffs of their home without a legal ability to do so. Such conduct is exactly what Section 1692f(6) protects borrowers against." Dowers , 852 F.3d at 971.
¶ 30 Puryer's Amended Complaint alleged violations under 15 U.S.C. §§ 1692e and 1692f of the FDCPA. Here, the District Court correctly dismissed Puryer's FDCPA § 1692e violation because Lenders do not qualify as debt collectors since Puryer's alleged violation involved non-judicial foreclosure. Dowers , 852 F.3d at 969-70. However, Puryer's claim pursuant to § 1692f was improperly dismissed. Puryer's asserted § 1692f violation is based on Lenders conduct of threatening a non-judicial foreclosure by sending repeated Notices of Sale. An alleged § 1692f violation includes threatening a consumer with non-judicial foreclosure. Dowers , 852 F.3d at 971. Consequently, the District Court erred in dismissing Puryer's alleged § 1692f violation as a matter of law. Therefore, based on Puryer's Amended Complaint, any violations alleged under the FDCPA were properly dismissed except Puryer's alleged § 1692f violation.
¶ 31 The District Court further concluded any FDCPA violations were barred by the statute of limitations pursuant to 15 U.S.C. § 1692k(d).
Section 1692k(d) states that any claim alleged under the FDCPA must be brought "within one year from the date on which the violation occurs." 15 U.S.C. § 1692k(d). The District Court determined Puryer was aware of the violations as early as of July 10, 2008, and had one year from that date to bring her FDCPA violations. Accordingly, the District Court explained that since Puryer did not file her complaint until October 27, 2016, she was time-barred by the one-year statute of limitations pursuant to § 1692k. We disagree.
¶ 32 The plain language of § 1692k(d) states Puryer must bring a FDCPA violation "within one year from the date on which the violation occurs. " (Emphasis added.) Puryer alleged nine separate FDCPA violations with the final violation-Notice of Sale-occurring on July 5, 2016. Puryer initiated suit within the one-year statute of limitations of this last alleged violation. Thus, we determine Puryer is not barred by § 1692k(d) with regards to the alleged violation occurring on July 5, 2016. We conclude the District Court erred in dismissing the entirety of Puryer's FDCPA claim as pled in her Amended Complaint. Viewing the complaint in the light most favorable to Puryer, she has sufficiently pled a violation occurring on July 5, 2016 under § 1692f of the FDCPA. Any other FDCPA violations alleged by Puryer were properly dismissed by the District Court as a matter of law.
D. Montana Consumer Protection Act
¶ 33 Puryer also alleged violations under the MCPA. Similar to Puryer's FDCPA claim, Puryer argues the District Court erred in dismissing the MCPA claim. Puryer maintains she set forth a valid basis for her MCPA claim based on our decision in Jacobson v. Bayview Loan Servicing, LLC , 2016 MT 101, 383 Mont. 257, 371 P.3d 397. Lenders contend the District Court correctly dismissed Puryer's MCPA claim because she failed to allege any factual allegations that would give rise to a claim under the MCPA. Lenders further argue Puryer's MCPA claim failed to allege any "ascertainable loss" stemming from Lenders' conduct.
¶ 34 The MCPA declares "unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce are unlawful." Section 30-14-103, MCA. The MCPA applies to banks engaged in consumer lending and the collection and servicing of loans. Morrow , ¶ 67 (citing Baird v. Norwest Bank , 255 Mont. 317, 328, 843 P.2d 327, 334 (1992) ). A consumer may sue under the act if he or she has suffered "any ascertainable loss of money or property" as the result of an unfair practice. Section 30-14-133, MCA. A violation of the FDCPA can constitute grounds for a violation under the MCPA.
Jacobson , ¶ 48 (citing Morrow , ¶¶ 67-69 ).
¶ 35 First, the District Court determined the factual allegations alleged by Puryer failed to give rise to a MCPA violation. The District Court relied on our decision in Jacobson . In Jacobson , the Jacobsons alleged several violations under the MCPA regarding the nonjudicial foreclosure of their home. Jacobson , ¶ 49. In particular, the Jacobsons alleged the loan servicer violated provisions of the Trust Indenture § 22(c) and § 71-1-306(2), MCA. Jacobson , ¶¶ 5, 6, 49. The Trust Indenture § 22 provided the following:
Acceleration; Remedies. Lender shall give notice to Borrower prior to acceleration following Borrower's breach of any covenant or agreement in this Security Instrument (but not prior to acceleration under Section 18 [transfer of property] unless Applicable law provides otherwise). The notice shall specify: (a) the default; (b) the action required to cure the default; (c) a date, not less than 30 days from the date the notice is given to Borrower, by which the default must be cured; and (d) that failure to cure the default on or before the date specified in the notice may result in acceleration.
...
If the default is not cured on or before the date specified in the notice, Lender at its option may require immediate payment in full of all sums secured by this Security Instrument without further demand and may invoke the power of sale and any other remedies permitted by Applicable Law.
Jacobson , ¶ 5. This language is nearly identical to Puryer's Deed of Trust § 22. While we recognize the Jacobsons alleged several other MCPA violations, this Court stated the lender "violated provisions of the Trust Indenture § 22(c) and § 71-1-306(2), MCA. These violations ... clearly constitute violations of Montana Law [under the MCPA] while also in violation of the FDCPA." Jacobson , ¶ 49. Similarly, Puryer's Amended Complaint specifically alleged "the Defendants' violations of the trust indenture provision, § 22 (C), and § 71-1-306(2), MCA, are also violations of the MCPA." Further, Lenders do not dispute notice was not provided to Puryer as provided in the Deed of Trust § 22. While Jacobson is distinguishable with regards to the gravity of MCPA violations alleged, it clearly indicates Puryer has sufficiently pled a claim for a MCPA violation. Therefore, we cannot conclude, as the District Court did, that Puryer's factual allegations could not give rise to a violation under the MCPA.
¶ 36 Furthermore, the District Court dismissed Puryer's MCPA
claim because she failed to allege any ascertainable loss of money and property as a result of the Lenders' unfair practices. We have rejected Lenders' argument that under the MCPA "ascertainable loss of money and property" requires a showing of "actual damages" such as a foreclosure sale. Jacobson , ¶ 56. In Jacobson , we determined that "costs and fees, lost other opportunities to save her home, suffered a negative impact to her credit, [and] never received a [m]odification" were sufficient to establish a pecuniary loss. Jacobson , ¶ 57 (quoting Wigod v. Wells Fargo Bank, N.A. , 673 F.3d 547 (7th Cir. 2012) ). Puryer's MCPA claim alleged damages of cost and fees, attorney fees, and ascertainable loss of money and property by executing a legal proceeding to stop Lenders' improper foreclosure of her property. Therefore, Puryer sufficiently pled damages recognized by this Court, even if no foreclosure sale took place, to overcome a 12(b)(6) motion to dismiss. Taking Puryer's allegations as true, we conclude she has sufficiently pled a violation under the MCPA.
E. Negligent or Intentional Infliction of Emotional Distress
¶ 37 Puryer argues her infliction of emotional distress claim survives a motion to dismiss because it falls under the continuing tort doctrine. In response, Lenders argue Puryer's infliction of emotional distress claim was insufficiently pled. The District Court dismissed Puryer's claim for negligent or intentional infliction of emotional distress because Puryer failed to articulate any basis for an emotional distress claim and Lenders cannot be held liable for the conduct of others based on joint and several liability. We agree with Lenders.
¶ 38 Under Montana law, a plaintiff's independent or "stand alone" claim for intentional or negligent infliction of emotional distress can be maintained only upon a showing the plaintiff suffered "serious" or "severe" emotional distress as the reasonably foreseeable consequence of the defendant's act or omission. Sacco v. High Country Indep. Press , 271 Mont. 209, 237, 896 P.2d 411, 428 (1995). To constitute "serious" or "severe," the emotional distress must be "so severe that no reasonable person could be expected to endure it." Sacco , 271 Mont. at 234, 896 P.2d at 426. The requirement that the emotional distress be serious or severe was imposed to alleviate concerns of opening the floodgates to numerous and perhaps even fraudulent claims. Sacco , 271 Mont. at 237, 896 P.2d at 428.
¶ 39 Puryer's Amended Complaint stated "[Lenders'] actions of foreclosing on plaintiff's property have caused Plaintiff to live in fear and suffer serious or severe emotional distress to the extent that it has affected Plaintiff's health." However, Puryer admits she has been in default since November 2007. Puryer further alleged the emotional distress stems from Lenders' attempts to foreclose upon her home by sending several Notices of Sale. We agree with the District Court that Puryer's Amended Complaint fails to allege any factual allegations sufficient to constitute "serious or severe" emotional distress that "no reasonable person could be expected to endure it." See Feller v. First Interstate Bank , 2013 MT 90, ¶¶ 38-39, 369 Mont. 444, 299 P.3d 338. Therefore, the District Court properly dismissed Puryer's negligent and/or intentional infliction of emotional distress claim.
CONCLUSION
¶ 40 We hold the District Court did not err in dismissing Puryer's declaratory judgment claim as a matter of law. We hold the District Court incorrectly determined Puryer's Amended Complaint failed to state a claim for which relief could be granted under the standards of M. R. Civ. P. 12(b)(6) on her asserted breach of contract, contractual and tortious breach of the implied covenants of good faith and fair dealing, FDCPA, and MCPA claims as set forth above. We further hold the District Court did not error in dismissing Puryer's negligent and/or intentional infliction of emotional distress claim because she failed to state sufficient facts to entitled her to relief on the claim.
¶ 41 Affirmed in part and reversed in part.
We concur:
MIKE McGRATH, C.J.
DIRK M. SANDEFUR, J.
JAMES JEREMIAH SHEA, J.
Justice Jim Rice, concurring and dissenting.
¶ 42 I concur in the conclusions reached by the Court, except regarding the Fair Debt Collection Act claim. I would affirm the dismissal of that claim.
¶ 43 As the Court notes, recent decisions have clarified that security holders are generally not "debt collectors," and a mortgage is not a "debt," for purposes of the Act. Opinion, ¶¶ 28-29 (citing Dowers v. Nationstar Mortg., LLC , 852 F.3d 964 (9th Cir. 2017) ). A narrow exception to this general rule permits claims against security holders under 15 U.S.C. § 1692f(6), which prohibits taking or threatening to take nonjudicial action to effect dispossession of property if: (A) there is no present right to possession of the property through an enforceable security interest; (B) there is no present intention to take possession of the property; or (C) the property is exempt by law from such dispossession. Consequently, it is incumbent upon a plaintiff asserting a claim against a security holder to clearly allege a violation that falls within § 1692f(6), as all other claims sounding in the Act do not apply. I believe Puryer has failed to do so.
¶ 44 First, the explicit claims made by Puryer under § 1692f(6) in her Amended Complaint are that the Lenders "failed to provide a date to cure the default, as required by the Note and Deed of Trust, and they failed to comply with the requirements for default procedures in the trust indenture, including but not limited to failing to properly notify Puryer regarding the timing of her right to cure." Puryer asserts these are "false representations of Puryer's rights in violation of 15 USC § 1692e(10), and constitute unfair practices in violation of 15 USC § 1692(f)...." However, these allegations do not fall within the parameters of the claims authorized under § 1692f(6). For purposes of these stated claims, which must find support in other sections of the Act, the Lenders are not debt collectors, and the claims must fail.
¶ 45 Beyond her explicit claims, Puryer generally alleges that her "FDCPA and MCPA claims may be based on the same grounds," but her assertions in this regard are very vague, specifically referencing only that Lenders' actions violated the trust indenture. While the Court states that Puryer has stated a claim under § 1692f(6)"based on Lenders conduct of threatening a non-judicial foreclosure by sending repeated Notices of Sale," Opinion, ¶ 30, my reading of the Amended Complaint reveals no articulation of such a claim. Further, even if such language had been used, it would be insufficient alone to state a claim under § 1692f(6), which would also require an assertion that there was no present right to effect dispossession, no present indication to take possession, or that the property is exempt by law from such dispossession.
HAMP is intended to help homeowners by modifying their monthly mortgage payments.
The District Court recognized a special relationship may have existed between Bank of America and Puryer based on Bank of America's advice to stop making mortgage payments. However, as discussed below, the District Court applied the test for whether a fiduciary duty existed, and not the "special relationship" test for tortious breach of the implied covenant of good faith and fair dealing. Nevertheless, the District Court recognized Puryer's Amended Complaint failed to name Bank of America as a defendant and found Bank of America was no longer a party to the action.
Puryer does not appeal the dismissal of her Lack of Authority to Foreclose claim. | [
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] |
Justice Ingrid Gustafson delivered the Opinion of the Court.
¶ 1 Anthony Raelund, Candice Raelund, Raelund Family Trust, (collectively "the Raelunds") and Brooke Anthony Weeks (Weeks) appeal from an order of the Eleventh Judicial District Court, Flathead County, denying two motions filed by the Raelunds: Motion to Set Aside Default and Motion to Set Aside Default Judgment, and two motions filed by Weeks: Motion for Leave to Intervene by Brooke Anthony Weeks and Motion for Brooke Weeks to Join Anthony Raelunds [sic] Motion to Set [sic] Default and Judgment. We affirm.
¶ 2 We restate the issues on appeal as follows:
1. Did the District Court slightly abuse its discretion when it denied the Raelunds' motions to set aside default and default judgment?
2. Did the District Court err when it denied Weeks' motion for leave to intervene?
3. Did the District Court err in its determination of damages?
FACTUAL AND PROCEDURAL BACKGROUND
¶ 3 Lyn C. Rehm (Rehm), her son Erick M. Enz (Erick), and Erick's wife Keelee M. Enz (Keelee) (collectively "the Enzes") own a residential property in Kila which they decided to sell. On November 7, 2014, they entered into a "Lease Option Agreement" (Lease) with the Raelunds. "Anthony Raelud [sic] of the Raelund Family Trust" and "Candice Raelund of The Raelund Family Trust" signed the Lease.
¶ 4 Erick handled the negotiation and administration of the Lease. As Erick later testified, and the District Court found credible, he met with an "older" couple who introduced themselves as Anthony and Candy Raelund. Anthony introduced a younger man as his son Anthony Raelund, Jr. Erick and Keelee witnessed the older man sign the Lease as "Anthony Raelund." Erick did not witness anyone sign for Candice Raelund; rather, the document was later returned signed.
¶ 5 The Lease provided that upon signing, the Raelunds would pay $5,000, which Erick would deem as $850 in rent and $4,150 as a down payment toward the future purchase of the property. The Raelunds would thenceforth pay $2,500 per month; Erick would deem $1,500 as rent and credit $1,000 toward future purchase. Once the Raelunds made down payments totaling $30,000, they would have 60 days to submit $239,900 "paid in cash, certified check, or cashier's check at closing" to purchase the property. Somewhat inconsistently, the Lease also provided that after the Raelunds made a total of $30,000 in down payment, Erick would deliver a quit claim deed and the Raelunds would assume the existing mortgages. The Lease also provided that if the Raelunds defaulted, the Enzes would keep all monies paid as liquidated damages.
¶ 6 Upon signing the Lease, the Raelunds presented Erick with $3,500, rather than $5,000 as agreed upon. Erick accepted the payment, considering $850 as prorated rent for November, and crediting the Raelunds with $2,650 towards the down payment.
¶ 7 From then forward, per the Lease, the Raelunds were expected to pay $2,500 by the fifth day of each month. The Raelunds did not submit a payment by December 5, 2014. On December 8, 2014, they paid only $1,500, informing Erick they intended to pay the additional $1,000 in one year. From January 2015 through July 2016, the Raelunds paid $2,500 each month, albeit sometimes late and sometimes in two installments. When Erick did not timely receive the August 2016 payment, he sent the Raelunds a "Notice to Pay or Quit" on August 18, 2016, which stated they were required to make the August payment, in full, within three days. The Notice provided that if the Raelunds failed to do so, the Lease would terminate and they would have to vacate the property immediately.
¶ 8 Erick testified that he gave the Raelunds "the benefit of the doubt" when they began making late payments. When he contacted the woman he knew as Candice Raelund to discuss the payment issues, she accused Erick of failing to disclose a mold problem in the bathroom. Erick offered to address the issue, but she informed him the Raelunds had fixed it. Candice Raelund also asked Erick for information about the property's mortgages. He initially answered her questions since she was a potential purchaser. However, he soon decided not to share more information because the Raelunds were only renting at that point.
¶ 9 The Kila property has two mortgages, both in Rehm's name with Nationstar as the lender. At around this time, Nationstar (Nationstar) contacted Erick and informed him Rehm had given permission for other people to access her mortgage account. Nationstar produced a written document purporting to authorize "Antonius Anthony Raelund and CC Raelund to be added to my account .... Please accept payments from either party." Rehm denied she had given such permission and she denied the signature on the document was hers.
¶ 10 On August 20, 2016, the Raelunds sent a payment for $1,123.30, in the form of a money order made out to both Erick and Nationstar Mortgage, via certified mail. On August 23, Erick served the Raelunds with a Notice of Eviction. The Raelunds continued to occupy the property and to send payments in lesser amounts, with money orders issued dual-payee to Erick and Nationstar, as follows: $1,132.00 on September 19; $1,173.30 on October 21; $1,132.00 on November 24; and $1,123.30 on December 14. Erick endorsed each money order and forwarded it to Nationstar.
¶ 11 After the December 2016 payment, the Raelunds ceased paying altogether. According to Erick's records, they had paid $22,650 towards the $30,000 down payment.
¶ 12 On January 4, 2017, the Enzes, appearing pro se, filed a Complaint in the Eleventh Judicial District Court in which they sought: a writ of possession; past due rent and pre- and post-judgment interest; actual damages for breach of contract; treble damages for refusal to pay rent pursuant to § 70-24-422(5), MCA ; quiet title; the right to retain all monies paid under the Lease; an order declaring that the Raelunds were not entitled to reimbursement for any alleged repairs, maintenance, or improvements; and attorney fees and costs.
¶ 13 On January 5, 2017, the Enzes received a "NOTICE and BILL" regarding the property. The document stated, in part:
Please produce the verifiable documents proving that ... you actually own this property.... As a mere tenant living on this property I will be happy to return it to its rightful owner, provided that the owner compensates me for my labor, time, efforts, payments, materials, and cash outlay for services rendered to improve and maintain this property, to its maximum habitability, and safe to dwell within and upon. I shall now present this court and you and your company with an itemized invoice payable on demand.... If not paid by the specified time, I shall place a Mechanics lien and begin other collections actions as necessary to receive my just compensation.
The itemization of the alleged expenses included $12,000 for a foundation for a root cellar, $89,000 for mold abatement, $23,000 to renovate a bathroom, $75,000 to clear felled trees and remove the trunks, $9,600 for "House Cleaning Services," and $188,160 for "Total Maintenance at $10.00 per hour 24/7," for a grand total of $605,888. The document was signed "Anthony-B: Raelund a natural man."
¶ 14 The Enzes unsuccessfully attempted to have the Raelunds personally served with the Summons and Complaint. Process Server Lazzaro A. Cutrone filed Affidavits of Due Diligence, in which he averred he visited the Kila property on numerous occasions and although he saw signs of occupation, no one answered the door.
¶ 15 Cutrone also called several telephone numbers Erick provided. His calls usually went unanswered. On one occasion, a male answered and refused to identify himself, but stated he would give the Raelunds a message. On another occasion, a female who identified herself as "Bailey" answered, but claimed she did not know the Raelunds. On January 22, Cutrone reached a male who identified himself as "Dimitri" and who informed Cutrone the Raelunds were out of town but would meet with Cutrone on January 25. Neither "Dimitri" nor any of the Raelunds contacted Cutrone on January 25 and Cutrone was unable to make further contact with "Dimitri."
¶ 16 The Enzes then moved to serve the Raelunds by publication. The District Court granted the motion and the Enzes published the summonses in the Flathead Beacon three times in March 2017.
¶ 17 On April 17, 2017, with no response from the Raelunds, Erick filed a Notice of Intent to Request Entry of Default and Entry of Default Judgment against Anthony Raelund, Candice Raelund, and Raelund Family Trust. Erick posted a copy of this Notice at the Kila property.
¶ 18 On April 18, 2017, "Antonius Raelund" filed a Motion to Vacate Judgment for Fraud and Surprise, with the parties captioned as:
"Antonius-Damascus; Raelund"Candi-Raelund CounterPLAINTIFF,v."Erick M.EnzKeelee M.Enz. andLyn C Rehm" CounterDEFENDANT
¶ 19 On April 21, 2017, the Enzes, now represented by counsel, filed a Motion for Entry of Default against Candice Raelund and Raelund Family Trust. The Enzes also moved the District Court to set a hearing on their Complaint, and to require "Antonius-Damascus; Raelund" to establish he is a real party in interest prior to the hearing.
¶ 20 On April 24, 2017, "Antonius-Damascus; Raelund" filed a "Notice of Pendancy [sic] of Action a.k.a Notice of Lis Pendens." He also filed a counterclaim.
¶ 21 On April 25, 2017, the District Court granted the Enzes' motion to set a hearing, but denied their motion to require "Antonius-Damascus; Raelund" to establish he is a real party in interest prior to the hearing.
¶ 22 The hearing occurred on May 1, 2017. At the outset, the District Court asked if "Anthony Raelund" was present. A man responded in the affirmative and the court seated him at the counsel table. Upon questioning, the man further stated he was the person who had filed documents under the name "Antonius-Damascus; Raelund."
¶ 23 The District Court also asked if "Candace Raeland" was present. A woman responded in the affirmative. Another woman, who later identified herself as "Candy Raelund," interposed that "Candace Raeland" was not a defendant because "she didn't pay anything." The District Court asked "Candy Raelund" if she was "Candace Raeland." "Candy Raelund" denied being Candice Raelund. The woman who identified herself as "Candace Raeland" confirmed to the District Court she had not paid an appearance fee.
¶ 24 The District Court noted the Clerk of Court had already entered default against Candice Raelund and Raelund Family Trust and thus the only issue it was proceeding on was the question of possession involving Anthony Raelund. However, the court then began making inquiry of Candice Raelund:
THE COURT: ... Candace Raeland, are you requesting that the default entered against you be set aside?
"CANDACE RAELUND": I don't understand.
THE COURT: Well, you've filed a document in this case, have you not? Did you sign a document that was filed in this case?
"CANDY RAELUND": You don't understand.
"CANDACE RAELUND": I don't understand.
THE COURT: Okay. Do you not understand because you don't, or because the person sitting beside you is [telling] you to state you don't-
"CANDY RAELUND": Because she has a medical condition and she can't talk.
THE COURT: She just spoke, ma'am.
...
THE COURT: I have listened to Candace speak, and she's responded to several of my questions, and now you're telling me on her behalf that she has a medical condition that prevents her from speaking; is that correct?
"CANDY RAELUND": That's correct.
¶ 25 At that point, the District Court ordered "Candy Raelund" to leave the courtroom for obstructing the court, attempting to practice law without a license, and making false representations. Shortly thereafter, "Candice Raelund" informed the District Court she did not wish to participate in the proceedings and asked to leave. After attempting to ensure she understood the consequences of leaving, the District Court excused her from the hearing.
¶ 26 A notary public testified she had witnessed the signature of the man who had identified himself to the District Court as "Anthony Raelund." She produced her log book where he had printed his name as "Antonius Damascus Raelund" and signed "Anthony Damascus Raelund" underneath.
¶ 27 The Enzes moved for admission of the document from Nationstar purporting to add "Antonius Anthony Raelund" and "CC Raelund" to Rehm's mortgage account. "Antonius-Damascus; Raelund" objected, arguing the document was irrelevant because he had never gone by the name "Antonius Anthony Raelund" and had never signed a document "Anthony A. Raelund" or "Antonius A. Raelund." He further argued it was irrelevant to the present hearing because, "The subject matter today is to see if I'm a party of interest." The District Court responded, "No, it's not.... The topic for today, as I announced earlier in the hearing, is which parties are entitled to possession of the property."
¶ 28 Erick testified that the man he knew as "Anthony Raelund," and whom he witnessed sign the Lease, was not present. He recognized "Antonius-Damascus; Raelund" as having been introduced to him by "Anthony Raelund" as his son "Anthony Raelund, Jr." Erick further testified that he recognized the woman who identified herself to the court as "Candy Raelund" to be "Candice Raelund," the wife of the man who Erick believed to be "Anthony Raelund." He also recognized the woman who had identified herself to the court as "Candice Raelund," but he believed her name was not "Candice." The Enzes entered into evidence an article and accompanying photograph from the Flathead Beacon which identified the Raelund children as Antonius, Bailey, Cassidy, Colton, and Cricket. The woman who identified herself to the District Court as "Candice Raelund" was pictured in the photograph.
¶ 29 Erick's counsel then moved to strike the Motion to Vacate Judgment for Fraud and Surprise filed by "Antonius Raelund," arguing that the man calling himself "Anthony Raelund" in the courtroom was not a real party in interest. The court asked "Antonius-Damascus; Raelund" if he had signed the Motion to Vacate Judgment for Fraud and Surprise and "Antonius-Damascus; Raelund" stated he had. The District Court asked "Antonius-Damascus; Raelund" if he was the person who signed the Lease, and "Antonius-Damascus; Raelund" stated he was. The District Court inquired further:
THE COURT: So Mr. Enz here has testified that it was your father that signed the lease agreement, are you saying that he's mistaken or wrong?
MR. "ANTONIUS-DAMASCUS: [sic] RAELUND": I don't remember my father signing that. And that's my stepfather, by the way.
...
THE COURT: What is his full name.
MR. "ANTONIUS-DAMASCUS: [sic] RAELUND": Brook Weeks.
...
THE COURT: Mr. Raeland, when do you say you signed it?
MR. "ANTONIUS-DAMASCUS: [sic] RAELUND": That's why I went out to Montana, to sign the contract and look at the property.
THE COURT: Mr. Raeland, when is it that you say you signed the document?
MR. "ANTONIUS-DAMASCUS: [sic] RAELUND": I don't remember.
THE COURT: Do you have any recollection at all of signing it?
MR. "ANTONIUS-DAMASCUS: [sic] RAELUND": I remember looking at the contract, and it's my signature on it.
¶ 30 The District Court further questioned "Antonius-Damascus; Raelund" as to why his purported signature on the Lease looked vastly different from his signature in the notary logbook. "Antonius-Damascus; Raelund" offered no explanation. "Antonius-Damascus; Raelund" then claimed he could not specifically recall signing the Lease because he has a poor memory and a "very busy life."
¶ 31 After hearing further testimony, the District Court again inquired of "Antonius-Damascus; Raelund":
THE COURT: All right. Exhibit 5, Mr. Raeland, I'm told is the Lease Option Agreement, are you saying that you signed this?
MR. "ANTONIUS-DAMASCUS: [sic] RAELUND": I believe so, Your Honor.
THE COURT: That's not an answer. Did you sign it or not?
MR. "ANTONIUS-DAMASCUS: [sic] RAELUND": I cannot remember.
THE COURT: I see. I find that you are lying to me, Mr. Raeland. I find that this entire appearance today is nothing more than a scheme that's perpetrated by either your mother, or your stepfather, or both, that you are not Anthony Raeland. I find the testimony of [Erick] to be convincing, and I find as a matter of fact that you are not the party to this lease agreement ....
...
Further, I find that you are not the real party in interest, you did not sign the Lease Option Agreement in Exhibit 5, you have no standing to protest against the default that was taken against the person who signed the Lease Option Agreement who is the real party at interest. The Motion to Strike is granted ....
¶ 32 The District Court also asked "Antonius-Damascus; Raelund" to identify the two women who had been present at the beginning of the hearing. He identified the woman who had represented herself to be "Candice Raelund" as his sister Cassidy Candace Raelund, known to others as either Cassidy or Cass and currently 18 years old, and the other woman as his mother Candy Raelund. "Antonius-Damascus; Raelund" acknowledged that Cassidy would have been approximately 16 years of age when the Lease was signed. He maintained he did not know who signed the Lease as "Candice Raelund," and he believed there were initially only three signatories to the Lease and "she got put on later." He then testified that to the best of his knowledge, his sister Cassidy, and not his mother Candy, signed the Lease as "Candice Raelund." ¶ 33 Upon the Enzes' motion, the District Court entered default against Anthony Raelund and default judgment against Anthony Raelund, Candice Raelund, and Raelund Family Trust. The court commented that while it believed "Antonius-Damascus; Raelund" may sometimes call himself "Anthony Raelund," he was not the "Anthony Raelund" who entered into the Lease. Since that Anthony Raelund had failed to appear, his default was entered.
¶ 34 The District Court further ruled the Raelunds' failure to pay and breach of the Lease was willful. The District Court explained:
With respect to the lien and the request to quiet title, at the outset of the hearing I announced in open court that the issue that would concern the Court at today's hearing would be who is entitled to possession, and this was before the Court became aware of the depth and scope of the fraud that you, Mr. Raeland, were attempting to perpetrate upon this Court. And I find that the lien that was filed, having listened to the testimony of [the notary public], that it was you in fact who signed that lien document, and you have no standing under the contract to file for that lien, you are not in a position to enforce any sort of supposed real estate improvement contract, and therefore I find that the lien was fraudulent at its inception and is void from its creation, and so I'm going to grant that relief.
¶ 35 The District Court offered "Antonius-Damascus; Raelund" an opportunity to be heard. He declined. The District Court issued a writ of possession in favor of the Enzes.
¶ 36 On May 3, 2017, the District Court entered its default judgment against Anthony Raelund, Candice Raelund, and Raelund Family Trust, followed by a Default Judgment Nunc Pro Tunc on May 8, 2017, to correct clerical errors. The damages awarded to the Enzes included the balance of the rent due since August 2016, including prejudgment interest; treble damages pursuant to § 70-24-429, MCA ; post-judgment interest; and attorney fees and costs pursuant to § 70-24-442, MCA.
¶ 37 On June 2, 2017, the Raelunds, now represented by counsel, moved to set aside the default and default judgment, arguing that "Antonius-Damascus; Raelund," who appeared at the May 1, 2017 hearing, was "Anthony Raelund," a party in interest in this matter. The Raelunds further alleged: a man named "Brooke Anthony Weeks"
was the father of Antonius-Damascus; Raelund, a/k/a Anthony Raelund; Weeks signed the Lease; and Weeks did so on behalf of his son Anthony Raelund. The Raelunds alleged the Enzes knew Weeks was signing on behalf of Antonius-Damascus; Raelund, a/k/a Anthony Raelund when he signed the Lease. The Raelunds argued the District Court should set aside the default because Weeks' signing on behalf of Antonius-Damascus; Raelund, a/k/a Anthony Raelund was "newly discovered evidence." The Raelunds argued that if the District Court did not find Antonius-Damascus; Raelund, a/k/a Anthony Raelund to be a real party in interest, it should allow Weeks to intervene as a party in interest.
¶ 38 On June 19, 2017, Weeks moved to intervene and to join the Raelunds' motion to set aside default and default judgment. The Enzes objected to the motions. The District Court denied the motions and it is from this Order that the Raelunds and Weeks appeal.
STANDARD OF REVIEW
¶ 39 We review a district court's denial of a motion to set aside a default or a default judgment for a slight abuse of discretion. This standard requires the reviewing court to weigh the conflicting concerns of respecting the trial court's sound discretion while recognizing the policy favoring trial on the merits. Detienne v. Sandrock , 2017 MT 181, ¶ 22, 388 Mont. 179, 400 P.3d 682 (citation omitted).
¶ 40 A district court's determination regarding standing presents a question of law which we review de novo for correctness. Chipman v. Northwest Healthcare Corp. , 2012 MT 242, ¶ 16, 366 Mont. 450, 288 P.3d 193 (citations omitted).
¶ 41 We review a district court's denial of a motion to intervene as a matter of right under M. R. Civ. P. 24(a) de novo.
Loftis v. Loftis , 2010 MT 49, ¶ 6, 355 Mont. 316, 227 P.3d 1030 (citation omitted).
¶ 42 We review a district court's award of damages for abuse of discretion. An abuse of discretion occurs if the district court acted arbitrarily, without employment of conscientious judgment, or exceeded the bounds of reason. Detienne , ¶ 23 (citations omitted).
¶ 43 A district court's determination of damages is a factual finding which we will uphold unless it is clearly erroneous. A district court's determination of damages is clearly erroneous if it is not supported by substantial evidence, if the court misapprehended the effect of the evidence, or if a review of the record leaves us with a definite and firm conviction that the court made a mistake. When determining whether substantial evidence supports a district court's findings, we will review the evidence in the light most favorable to the prevailing party.
Detienne , ¶ 24 (citation omitted).
DISCUSSION
¶ 44 1. Did the District Court slightly abuse its discretion when it denied the Raelunds' motions to set aside default and default judgment?
¶ 45 The Raelunds argue the District Court erred when it found "Antonius-Damascus; Raelund" was not "Anthony Raelund," the party in interest, and thus concluded he had no standing to pursue these motions to set aside. The Raelunds claim the District Court caused "confusion" by declaring the only issue to be determined at the May 1, 2017 hearing was the issue of possession, and this confusion caused "Antonius-Damascus; Raelund" to "respond[ ] with several different answers" each time the District Court asked him if he had signed the Lease or if he knew whether Weeks had signed the Lease. The Raelunds claim "Antonius-Damascus; Raelund" had "many documents in his possession" at the May 1, 2017 hearing which would have allowed him to prove his case.
¶ 46 The Raelunds further argue the District Court incorrectly applied the three factors a court must consider in deciding whether good cause exists to set aside a default, believing the factors to be conjunctive and considering only the first, instead of weighing all three. The Raelunds assert this alleged misapplication of the law is grounds for reversal.
¶ 47 The Enzes respond the Raelunds created their own problems by presenting one set of facts at hearing and an alternative set of facts in their subsequent motions, and thus the District Court did not abuse its discretion when it refused to set aside default and default judgment. The Enzes argue the District Court correctly determined that "Antonius-Damascus; Raelund" was not a party in interest, and thus not entitled to seek relief. M. R. Civ. P. 17(a)(1). The Enzes argue the inclusion of a party in interest is a threshold issue before a district court can rule upon the controversy, and lacking a party in interest here, the District Court had no basis to set aside a default or default judgment.
¶ 48 The Enzes further argue the District Court did not abuse its discretion in refusing to set aside the entry of default under M. R. Civ. P. 55(c) because the Raelunds failed to show good cause, nor the default judgment under M. R. Civ. P. 60(b) because the Raelunds have not met their burden of proof.
¶ 49 The District Court ruled that "Anthony Raelund" was not entitled to have default set aside under M. R. Civ. P. 55(c), nor default judgment set aside under M. R. Civ. P. 60(b). Taking into consideration the events of the May 1, 2017 hearing and the subsequent briefing, the court reaffirmed its decision that "Antonius-Damascus; Raelund" was not a party in interest. The District Court thus ruled that "Antonius-Damascus; Raelund" lacked standing to move the court to set aside the default and default judgment of "Anthony Raelund."
¶ 50 The question of standing addresses whether a litigant is entitled to have the court decide the merits of a particular dispute. Standing resolves the issue of whether the litigant is a proper party to seek adjudication of a particular issue. Chipman , ¶ 25 (citations omitted).
¶ 51 Here, the District Court concluded "Antonius-Damascus; Raelund" was not a proper party to seek adjudication on the issue of the Enzes' Complaint, and further was not a proper party to seek to have the default and default judgment against "Anthony Raelund" set aside. At hearing, the District Court found the testimony of "Antonius-Damascus; Raelund" wholly incredible.
¶ 52 An assessment of testimony is best made upon observation of the witnesses' demeanor and consideration of other intangibles only evident during live testimony, and therefore, the fact-finder is uniquely in the best position to judge the witnesses' credibility. Thus, we defer to the trial court regarding the credibility of witnesses and the weight to be accorded their testimony. Ditton v. DOJ Motor Vehicle Div. , 2014 MT 54, ¶ 33, 374 Mont. 122, 319 P.3d 1268 (citations omitted). In this case, we defer to the District Court's assessment of the testimony at the May 1, 2017 hearing, including its determination that "Antonius-Damascus; Raelund" did not speak truthfully when he testified under oath that he signed the Lease or that he believed he signed the Lease even though he could not specifically remember doing so.
¶ 53 The District Court was also not impressed with the new explanation "Antonius-Damascus; Raelund" provided in his motions to set aside default and default judgment. Neither are we. The Raelunds do not explain why none of the "several different answers" "Antonius-Damascus; Raelund" offered at hearing included informing the District Court that Weeks signed the Lease as his son's representative. The Raelunds also do not explain why "Antonius-Damascus; Raelund," after denying any recollection of Weeks signing the Lease, remembered a month later that Weeks signed on his behalf. Nor have they explained why "Antonius-Damascus; Raelund" chose not to present evidence allegedly in his possession when the District Court offered him the opportunity to be heard prior to issuing its rulings. We can only conclude that the Raelunds offer no explanations because no plausible explanations exist.
¶ 54 Since "Antonius-Damascus; Raelund" is not a party in interest, he has no standing to seek adjudication. We conclude the District Court committed no abuse of discretion when it denied his motions to set aside default and default judgment in this matter.
¶ 55 2. Did the District Court err when it denied Weeks' motion for leave to intervene?
¶ 56 On appeal, the Raelunds allege the District Court has put them in a no-win situation by concluding "Antonius-Damascus; Raelund" is not the real party in interest while also denying Weeks the opportunity to intervene. The Raelunds argue Weeks must be a party in interest if "Antonius-Damascus; Raelund" is not.
¶ 57 Weeks moved the District Court to intervene under M. R. Civ. P. 24(a)(2), which provides, upon timely motion, the court must permit anyone to intervene who claims an interest relating to the property which is the subject of the action, and is so situated that disposing of the action may impair or impede the movant's ability to protect his interest, unless the existing parties adequately represent that interest. To intervene as a matter of right under M. R. Civ. P. 24(a), the applicant must satisfy four criteria: (1) the application must be timely; (2) the applicant must show an interest in the subject matter of the action; (3) the applicant must show that protection of his interest may be impaired by the disposition of the action; and (4) the applicant must show that his interest is not adequately represented by an existing party. Loftis , ¶ 9 (citations omitted).
¶ 58 Here, the District Court ruled that Weeks had failed to satisfy the second criteria. Since Weeks claimed to have signed the Lease only in a representative capacity, the court reasoned, Weeks was merely an agent and thus not a party in interest. We agree.
¶ 59 Both before the lower court and on appeal, the Raelunds maintain the person who appeared at the May 1, 2017 hearing and identified himself as "Antonius-Damascus; Raelund" is "Anthony Raelund and the real party in interest." The Raelunds contend Weeks signed the Lease "on behalf of his son, Anthony." At hearing, the Raelunds had the opportunity to present this evidence, but did not do so. It was only after the District Court found "Antonius-Damascus; Raelund" wholly incredible in his assertion that he signed the Lease that the Raelunds offered a different story.
¶ 60 Regardless, if Weeks signed the Lease on behalf of another, he was merely acting as an agent and has no interest in the property. Thus, he is not entitled to intervene as a matter of right under M. R. Civ. P. 24(a).
¶ 61 Therefore, we conclude the District Court did not err when it denied Weeks' motion for leave to intervene.
¶ 62 3. Did the District Court err in its determination of damages?
¶ 63 Default judgment for damages must be justified by the pleadings, and the complaint must state a cause of action before a default judgment is justified. Even though the Raelands are subject to the District Court's order of default and default judgment, they have the right to be heard on the issue of damages. See Lindsey v. Keenan, Andrews & Allred , 118 Mont. 312, 320-21, 165 P.2d 804, 809 (1946) (citations omitted). Thus, even though we uphold the District Court's rulings on default and default judgment, we will consider the Raelunds' arguments on damages.
¶ 64 The Raelunds argue the District Court erred in its calculation of default damages. They allege the remedies of Title 70, Chapter 24 (the Landlord-Tenant Act), do not apply because they possessed the property under a contract of sale, which is exempted under § 70-24-104(2), MCA.
¶ 65 The Enzes disagree, arguing the Raelunds' option to purchase never ripened into a contract of sale and thus the Lease was merely a rental agreement with a future, unexercised option, subject to the provisions of the Landlord-Tenant Act. We agree.
¶ 66 The Landlord-Tenant Act does not apply to occupancy by a purchaser under a contract of sale, but does apply to the holder of an option to purchase. Commissioners' Comment to Section 1.202 of Uniform Act, § 70-24-104, MCA. "There is a decided distinction between an option to purchase, which may be exercised or not by the prospective purchaser, and an absolute contract of sale, wherein one of the parties agrees to sell and the other to buy certain property, the sale to be completed within an agreed time." Clark v. Amer. Dev. & Mining Co. , 28 Mont. 468, 479, 72 P. 978, 981 (1903) (citations omitted).
¶ 67 Whether a writing transferring an interest in real estate is a contract of sale or an option to purchase depends not only on particular words and phrases, but also on the parties' intention to be derived from the instrument itself by consideration of its parts, and when that is doubtful, by the circumstances attending it. Pollard v. Bozeman , 228 Mont. 176, 180, 741 P.2d 776, 779 (1987) (citations omitted). An option to purchase is not a sale or even an agreement for a sale; it is a right of election to exercise a privilege, and only when the privilege has been exercised does a contract of sale exist. Pollard , 228 Mont. at 180, 741 P.2d at 779 (citations omitted).
¶ 68 Liquidated damages clauses generally contribute to the conclusion that an agreement is a lease with an option to purchase if the clause provides consideration for an option where the instrument does not affirmatively obligate the prospective purchaser to purchase the property. Pollard , 228 Mont. at 180-81, 741 P.2d at 779 (citation omitted). Here, the Lease contained a liquidated damages clause, allowing the Enzes to retain monies paid if the Raelunds defaulted on the agreement. Although the Lease gave the Raelunds the right to purchase the Kila property, it did not obligate them to do so.
¶ 69 In Pollard , we determined that an ambiguous real estate agreement was a contract of sale where, at the conclusion of the leased term, the tenant could purchase the property for the nominal consideration of $10.00. We noted that the "lease" required the lessee to pay as compensation for the lease "a sum substantially equivalent to or in excess of its value" after which, for nominal consideration, it would own the property. Pollard , 228 Mont. at 181-82, 741 P.2d at 779-80. Here, at the end of the Lease, the Raelunds would not own the property for nominal additional consideration, but rather would either owe an additional $239,900, or assume the existing mortgages.
¶ 70 We conclude the Lease is an option to purchase and not a contract of sale, and subject to the remedies of the Landlord-Tenant Act. Therefore, the District Court did not err in its determination of damages, and we uphold its ruling.
CONCLUSION
¶ 71 We conclude the District Court: did not slightly abuse its discretion when it denied the Raelunds' motions to set aside default and default judgment; did not err when it denied Weeks' motion to intervene; and did not err in its determination of damages.
¶ 72 Affirmed.
We concur:
MIKE McGRATH, C.J.
BETH BAKER, J.
JAMES JEREMIAH SHEA, J.
LAURIE McKINNON, J.
DIRK M. SANDEFUR, J.
JIM RICE, J.
On May 8, 2017, the District Court ordered this motion stricken and, except for the first page, the document was removed from the District Court file.
The District Court ordered this motion stricken and, except for the first page, the document was removed from the District Court file.
Throughout the hearing transcript, "Candice" is sometimes spelled "Candace" and "Raelund" is alternately spelled "Raelund" and "Raeland." We have tried to remain consistent with the District Court record in this Opinion.
Moreover, although the Raelunds tell this Court that "Antonius-Damascus; Raelund" came to the May 1, 2017 hearing with the understanding that the District Court intended only to address the issue of possession, the record demonstrates otherwise. As noted in the findings above, the District Court had to correct his mistaken belief that, "[t]he subject matter today is to see if I'm a party of interest."
We recognize that "Antonius-Damascus; Raelund" testified that Weeks was not his father, but rather his step-father. The Raelunds have offered no explanation as to why Weeks and "Antonius-Damascus; Raelund" later filed affidavits swearing they were father and son. | [
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] |
Submitted on Briefs: January 31, 2018
Decided: June 5, 2018
As Corrected June 8, 2018
For Appellants Mountain Water: William T. Wagner, Stephen R. Brown, Kathleen L. DeSoto, Garlington, Lohn & Robinson, PLLP, Missoula, Montana, Michael Green, D. Wiley Barker, Crowley Fleck PLLP, Helena, Montana, Joe Conner, Adam Sanders, Baker, Donelson, Bearman, Caldwell & Berkowitz, P.C., Chattanooga, Tennessee
For Appellants Carlyle Infrastructure Partners, LP: William W. Mercer, Kyle Anne Gray, Brian Michael William Murphy, Holland & Hart LLP, Billings, Montana
For Appellee: Scott M. Stearns, Natasha Prinzing Jones, Randy Tanner, Boone Karlberg P.C., Missoula, Montana, William K. VanCanagan, Datsopoulos, MacDonald & Lind, P.C., Missoula, Montana, Harry Schneider, Jr., Perkins Coie LLP, Seattle, Washington
For Intervenor Montana Department of Transportation: David L. Ohler, Valerie D. Wilson, Special Assistant Attorneys General, Helena, Montana
Justice Jim Rice delivered the Opinion of the Court.
¶1 This is another appeal concerning the proceeding initiated by the City of Missoula (City) to condemn the water system serving the City, previously owned by Mountain Water Company (Mountain Water) and its upstream holding company, Carlyle Infrastructure Partners, LP (Carlyle) (collectively, Property Owners). Property Owners appeal the District Court's orders resolving their claims for attorney and expert fees. The City cross appeals. We address the following issues:
1. Did the District Court err by denying the facial and as-applied constitutional challenges to the definition under § 70-30-306, MCA, of the "necessary expenses of litigation" a prevailing party is constitutionally authorized to obtain, as the "customary" rate for attorneys and experts "in the county in which the trial is held?"
2. Did the District Court err by determining that Carlyle is a prevailing party and thus entitled to recover litigation expenses?
3. Did the District Court err in awarding attorneys' fees for out-of-state attorneys?
We affirm in part, reverse in part, and remand for further proceedings.
FACTUAL AND PROCEDURAL BACKGROUND
¶2 In January 2014, the City made a final written offer of $50 million to purchase the water system, which was rejected by Property Owners. In February 2014, the City's Mayor made a public presentation introducing the legal team that would handle the City's condemnation lawsuit, which included specialized legal counsel from Seattle, Portland, and Spokane, and experts from New York, Seattle, and Minneapolis. Two Missoula law firms were also added to the City's legal team. In the City's pro hac vice motion, it stated "the City and its Montana counsel require the assistance and resources of a larger firm to prosecute this action." Likewise, Carlyle stated its intention to hire "the most qualified lawyers," and Property Owners ultimately retained attorneys from Denver, Chattanooga, Billings, and Missoula. The parties acknowledge that specialized, out-of-town legal counsel and experts charge higher rates than is customary in Missoula County.
¶3 In April 2014, the City initiated condemnation proceedings against Mountain Water and Carlyle. Carlyle filed a motion to dismiss, and later a motion for summary judgment, seeking dismissal as a party on the ground it was not the owner of the assets for which condemnation was sought. Carlyle argued the action should be prosecuted only against its subsidiary, Mountain Water. The City opposed the motion, arguing that Carlyle, as the ultimate owner who made the integral decisions regarding the water system and sale, was a proper party to the action. The District Court denied the motions, ruling the City had sufficiently alleged that Carlyle was an owner and thus a proper party to the action.
¶4 In August 2014, the District Court issued a scheduling order that gave the parties six months to complete their discovery and pre-trial filings, and scheduled a trial date shortly thereafter. The parties acknowledge that the litigation schedule was demanding, even for the large legal teams employed by both sides. The District Court recognized that the abbreviated time before trial was "undoubtedly demanding and difficult." Ultimately, nearly 450,000 pages of discovery were exchanged, over 100 trial witnesses were identified, and 47 depositions were taken at locations across the country.
¶5 After a three-week bench trial, the District Court entered a preliminary condemnation order in favor of the City, which this Court affirmed. City of Missoula v. Mountain Water Co. , 2016 MT 183, ¶ 103, 384 Mont. 193, 378 P.3d 1113. In the proceeding before the Condemnation Commissioners, Mountain Water sought compensation for the value of the water system, and Carlyle sought severance damages for unfunded pension liabilities. In November 2015, the Condemnation Commissioners determined the value of the water system was $88.6 million, awarding the entire amount to Mountain Water, and awarded no damages to Carlyle.
¶6 Because the value determined by the Commissioners was higher than the City's final offer of $50 million, Property Owners moved for reimbursement of their litigation expenses, arguing they were prevailing parties. Property Owners argued § 70-30-306(2) and (3), MCA, which cap reimbursement for attorney and expert fees to the customary rate in the county where the case is tried, is unconstitutional, both facially and as-applied. The City argued that Carlyle was not a prevailing party because it had received no damages from the Commissioners, that the statute is constitutional, and that Property Owners' expenses were largely unnecessary and poorly documented. In order to establish the necessity and reasonableness of their expenses, Property Owners sought to discover the City's legal bills for purposes of context and comparison.
¶7 The District Court held Mountain Water and Carlyle were both prevailing parties with a right to be reimbursed for their necessary litigation expenses. The District Court precluded discovery of the City's litigation costs, finding them irrelevant to whether Property Owners met the requirements under §§ 70-30-305 and -306, MCA, for compensation of their own litigation expenses, but received testimonial evidence of the rates charged by the City's Missoula counsel in determining the statutory cap to be set for Property Owners' fees. The District Court found the statute constitutional facially and as-applied, and imposed a Missoula County customary rate on all hours billed by Property Owners' attorneys and experts. The District Court further reduced the expense claim by 25% for Mountain Water and 35% for Carlyle, citing deficiencies in their billing records and concluding that "use of out of state counsel, overstaffing and duplication of effort result[ed] in attorney's fees that are not reasonable and necessary." Consequently, the District Court reduced the approximately $7 million claimed by Mountain Water and Carlyle for attorney and expert fees to just over $3.9 million. Mountain Water was awarded approximately $1.8 million in attorney fees and $1 million in expenses, and Carlyle was awarded approximately $900,000 in attorney fees and $223,000 in expenses. ¶8 Property Owners appeal, raising the District Court's denial of their constitutional challenges to the statute. In response to their filing of a notice of constitutional challenge, the Montana Department of Transportation intervened on behalf of the Attorney General. The City cross appeals.
STANDARD OF REVIEW
¶9 This Court exercises plenary review of constitutional issues. Mont. Cannabis Indus. Ass'n v. State , 2016 MT 44, ¶ 12, 382 Mont. 256, 368 P.3d 1131 (citations omitted). We review a district court's rulings on discovery matters for an abuse of discretion. Draggin' Y Cattle Co. v. Addink , 2013 MT 319, ¶ 17, 372 Mont. 334, 312 P.3d 451 (citations omitted). We review a district court's determination of whether a property owner prevailed in a condemnation action for abuse of discretion. Wohl v. City of Missoula , 2014 MT 310, ¶ 12, 377 Mont. 148, 339 P.3d 58 ( Wohl II ) (citations omitted). If legal authority exists to award attorneys' fees, we review a district court's grant or denial of fees for abuse of discretion. Sullivan v. Cherewick , 2017 MT 38, ¶ 10, 386 Mont. 350, 391 P.3d 62 (citations omitted). A district court abuses its discretion when it acts arbitrarily, without employment of conscientious judgment, or in excess of the bounds of reason, resulting in substantial injustice. Wohl II , ¶ 12 (citations omitted).
DISCUSSION
¶10 1. Did the District Court err by denying the facial and as-applied constitutional challenges to the definition under § 70-30-306, MCA, of the "necessary expenses of litigation" a prevailing party is constitutionally authorized to obtain, as the "customary" rate for attorneys and experts "in the county in which the trial is held?"
¶11 The parties' arguments over the validity of the statute begin with whether Article II, Section 29 of the Montana Constitution is self-executing, or whether it requires legislative implementation. Article II, Section 29 provides:
Eminent Domain. Private property shall not be taken or damaged for public use without just compensation to the full extent of the loss having been first made to or paid into court for the owner. In the event of litigation, just compensation shall include necessary expenses of litigation to be awarded by the court when the private property owner prevails.
"To determine whether the provision is self-executing, we ask whether the Constitution addresses the language to the courts or to the Legislature.... If addressed to the Legislature, the provision is non-self-executing; if addressed to the courts, it is self-executing." Columbia Falls Elem. Sch. Dist. No. 6 v. State , 2005 MT 69, ¶ 16, 326 Mont. 304, 109 P.3d 257 (citing State ex rel. Stafford v. Fox-Great Falls Theatre Corp. , 114 Mont. 52, 73, 132 P.2d 689, 700 (1942) ("A provision is self-executing when it can be given effect without the aid of legislation and there is nothing to indicate that legislation is contemplated in order to render it operative.") (citations omitted) ). Property Owners argue the provision is self-executing, while the City argues it is not, "because, while it allows a condemnee to recovery 'necessary' expenses, it provides no guidance or measure as to what constitutes 'necessary.' "
¶12 Article II, Section 29 is addressed to the courts. "Just compensation" for property taken for public use must be "made to or paid into court for the owner." The right to just compensation to a prevailing property owner includes "necessary expenses of litigation to be awarded by the court." It is the task of the courts to determine just compensation when disputed, including the necessary expenses of litigation. While Article II, Section 29, does not define "necessary," legislative action is not required to understand and implement the term. Courts routinely apply terms such as "necessary" in the course of their duties. As such, the provision is self-executing and requires no further legislative action.
¶13 However, as the City notes, even when a constitutional provision is self-executing, the Legislature may pass "legislation for the better protection of the right secured, or legislation in furtherance of the purposes, or of the enforcement, of the provision." Gen. Agric. Corp. v. Moore , 166 Mont. 510, 514, 534 P.2d 859, 862 (1975) (citations omitted). Thus, "[w]hile the legislature is free to pass laws implementing constitutional provisions, its interpretations and restrictions will not be elevated over the protections found within the Constitution," which is a question we consider here. In re Lacy , 239 Mont. 321, 325, 780 P.2d 186, 188 (1989).
¶14 The Legislature has defined "[n]ecessary expenses of litigation" in this context to mean "reasonable and necessary attorney fees, expert witness fees, exhibit costs, and court costs." Section 70-30-306(1), MCA. Further, the Legislature has limited or capped these fees based upon the "customary" rates charged in the county in which the condemnation trial is held:
(2) Reasonable and necessary attorney fees are the customary hourly rates for an attorney's services in the county in which the trial is held. Reasonable and necessary attorney fees must be computed on an hourly basis and may not be computed on the basis of any contingent fee contract.
(3) Reasonable and necessary expert witness fees may not exceed the customary rate for the services of a witness of that expertise in the county in which the trial is held.
Section 70-30-306, MCA. These caps are challenged here. We have previously held that the term "customary hourly rates" requires "that 'reasonable and necessary attorney fees' are to be computed in a condemnation case based on hourly rates typical or common for a non-specific attorney's services in the county in which the trial is held." State v. Am. Bank of Mont. , 2008 MT 362, ¶ 14, 346 Mont. 405, 195 P.3d 844 ( American Bank I ). In American Bank I , ¶ 19, no constitutional challenge was made to § 70-30-306, MCA.
¶15 Property Owners contend the limits upon attorney and expert fees imposed by § 70-30-306, MCA, to the customary rates in the county in which the condemnation trial is held, violates their constitutional right to just compensation. While Property Owners raised both facial and as-applied challenges to the statute in the District Court, their appellate arguments fail to clearly delineate the two, and conceptually weave back and forth between the challenges. The analyses for these challenges are different, Mont. Cannabis Indus. Ass'n , ¶ 14 (citations omitted), and, thus, we take them up in turn.
Facial challenge
¶16 Property Owners argue that the capping of fees under § 70-30-306, MCA, to customary rates in the county facially violates the constitutional right of a prevailing property owner under Article II, Section 29, to recover necessary litigation expenses. They further argue that the clear intent of the Framers was to "award[ ] prevailing parties their actual litigation expenses," (emphasis in original) citing constitutional convention transcripts. They assert that "no reading" of Article II, Section 29, "would allow the condemnor (via the Legislature) to impose an artificial ceiling on the award of fees unrelated to the litigation expenses actually incurred," and that the statute thus "infringes on their constitutional right to full compensation...." They argue that the right to reimbursement, located within the Constitution's Declaration of Rights, is a fundamental right requiring the application of strict scrutiny review of the statute.
¶17 We first note that Property Owners' arguments in support of their claim to expenses "actually incurred" misapply Article II, Section 29, by attempting to link "necessary expenses of litigation" found in the second sentence with "the full extent of the loss" found in the first sentence of the provision. These sentences embody distinct concepts. In the first sentence, the phrase "just compensation to the full extent of the loss" refers to the "[p]rivate property" taken or damaged for public use, and such compensation must be made to, or paid into court for, the owner. Payment of this compensation may or may not require litigation. The second sentence provides that, "[i]n the event of litigation," an owner who prevails is entitled to, in addition to payment for the full loss of the property taken or damaged, "necessary expenses of litigation" as part of "just compensation." See K & R P'ship v. City of Whitefish , 2008 MT 228, ¶ 52, 344 Mont. 336, 189 P.3d 593 ("The only requirement for an award of litigation expenses is that the condemnee prevail by obtaining a judgment in excess of the condemnor's pre-trial offer") (emphasis added) (citations omitted). Under the plain language of the provision, Property Owners are not entitled, as they argue, to reimbursement of the "full extent" of their litigation expenses, or the expenses they "actually incurred," but, rather, only the "necessary expenses of litigation" as determined "by the court." See , e.g. , State by Dep't of Highways v. Helehan , 186 Mont. 286, 289, 607 P.2d 537, 538 (1980) ("The award of attorney's fees in a condemnation case.... is only authorized after notice and a hearing before the District Court.... the amount to be paid is not decided by the defendant in a court condemnation action, but by the District Court."). An owner's "actually incurred" expenses may inform a court's determination of what is "necessary," but do not control it. We agree with the District Court's stated disagreement with the proposition that " 'reasonable and necessary' is synonymous with whatever a client will pay without balking."
¶18 This conclusion is not contrary to the intentions expressed by the delegates to the Constitutional Convention. Property Owners quote a delegate's statement that, "[t]he committee intends, by 'necessary expenses of litigation,' all costs including appraiser's fees, attorney fees and court costs." Montana Constitutional Convention, Verbatim Transcript, March 9, 1972, p. 1825-26 (emphasis added). While it is unnecessary here to consult the convention transcripts, as we have determined the meaning of Article II, Section 29 from its plain language, see Keller v. Smith , 170 Mont. 399, 405, 553 P.2d 1002, 1006 (1976), the words "all costs" in the quote is a reference to all categories of costs, as evident by the language that follows, "... including appraiser's fees, attorney fees and court costs." Had the delegates intended for prevailing owners to be reimbursed for all "expenses of litigation" actually incurred, they would not have qualified the term with the word "necessary."
¶19 Property Owners further argue that this interpretation of Article II, Section 29, fails to make them whole and deprives them of the "net recovery" referenced in our opinions. See K & R P'ship , ¶ 51 (citing State Dept. of Highways v. Olsen , 166 Mont. 139, 148, 531 P.2d 1330, 1335 (1975) ( Article II, Section 29"make[s] the landowner whole ... to the extent that the ... judgment ... would be a 'net recovery' ... where the landowner prevailed.") ). However, our holdings have never suggested making a land owner whole will result in a net recovery that includes reimbursement of unnecessary litigation expenses. Property Owners' claim to all litigation expenses "actually incurred" is simply inconsistent with the plain language of Article II, Section 29, and fails as a facial challenge.
¶20 Resolution of this contention, which is the only basis on which Property Owners challenge the District Court's percentage reduction of their expense claim for failing, by inadequate recordkeeping and duplication, to be "reasonable and necessary," leads us to affirm these reductions. The District Court conducted the process contemplated by Article II, Section 29, to determine the "necessary expenses of litigation to be awarded by the court," and we affirm this part of its orders.
¶21 Turning to the remainder of Property Owners' facial challenge to § 70-30-306, MCA, including the limitation to "customary" rates in the county of trial, we have held that a facial challenge is a "difficult" task, requiring the challenger to demonstrate that "no set of circumstances exists under which the challenged sections would be valid...." Mont. Cannabis Indus. Ass'n , ¶ 14 (brackets and citations omitted). In other words, it must be demonstrated "that the law is unconstitutional in all of its applications." Mont. Cannabis Indus. Ass'n , ¶ 14 (citations omitted). Statutes are presumed constitutional, and the challenger bears the burden of proving a conflict beyond a reasonable doubt. Mont. Cannabis Indus. Ass'n , ¶ 12. Facial challenges do not depend on the facts of a particular case. Citizens for a Better Flathead v. Bd. of Cty. Comm'rs , 2016 MT 325, ¶ 45, 385 Mont. 505, 386 P.3d 567 (citations omitted); see also , e.g. , Mont. Envtl. Info. Ctr. v. Dep't of Envtl. Quality , 1999 MT 248, ¶ 80, 296 Mont. 207, 988 P.2d 1236 ; Ap, Inc. v. Mont. Dep't of Revenue , 2000 MT 160, ¶¶ 27-28, 300 Mont. 233, 4 P.3d 5 ; Roosevelt v. Mont. Dep't of Revenue , 1999 MT 30, ¶¶ 51-52, 293 Mont. 240, 975 P.2d 295. A statute found to be facially unconstitutional cannot be enforced under any circumstances. Citizens for a Better Flathead , ¶ 45 (citations omitted); see also , e.g. , Mont. Envtl. Info. Ctr. , ¶ 80 ; Ap, Inc. , ¶¶ 27-28 ; Roosevelt , ¶¶ 51-52.
¶22 To prevail on this claim, Property Owners must establish that no application of the statute can comport with Article II, Section 29. They fail to carry this difficult burden and, beyond their arguments discussed above, make little or no effort to do so. A condemnation case could involve a minor property for which the owner retains a local attorney and a local expert, for whom "customary" rates in the county of trial would provide an appropriate level of compensation upon prevailing, even if the "necessary" amount of the fees is disputed. Indeed, cases involving significant properties are so handled. In these scenarios, the statute could be constitutionally applied, defeating a facial challenge.
¶23 The City and intervenor Montana Department of Transportation argue vigorously that the right to reimbursement of litigation expenses is not a fundamental right for which strict scrutiny of § 70-30-306, MCA, is required. However, given our holding, we need not address the level of scrutiny applicable to the challenge. Under any level of scrutiny, the Property Owners have not, by their arguments here, established that the statute is either facially inconsistent with Article II, Section 29, or that it is "unconstitutional in all of its applications." Mont. Cannabis Indus. Ass'n , ¶ 14.
As-applied challenge
¶24 As mentioned, the District Court, in addition to imposing a percentage reduction of Property Owners' litigation expense claims on "reasonable and necessary" grounds, also reduced the claim by applying the caps imposed by § 70-30-306(2) and (3), MCA, on the rate of fees charged by Property Owners' attorneys and experts, limiting reimbursement to the "customary" rates in Missoula County, which were significantly lower than the actual fees charged to Property Owners.
¶25 Property Owners argue that the statutory caps, as applied to them in this case, violate their right under Article II, Section 29, to reimbursement of their "necessary expenses of litigation" as part of just compensation. An as-applied challenge alleges that a particular application of a statute is unconstitutional and depends on the facts of a particular case. Citizens for a Better Flathead , ¶ 45 (citations omitted); see also , e.g. , Mont. Envtl. Info. Ctr. , ¶ 80; Ap, Inc. , ¶¶ 27-28 ; Roosevelt , ¶¶ 51-52. When a court holds a statute unconstitutional as applied to particular facts, the statute may be enforceable in different circumstances. Citizens for a Better Flathead , ¶ 45 (citations omitted); see also , e.g. , Mont. Envtl. Info. Ctr. , ¶ 80 ; Ap, Inc. , ¶¶ 27-28 ; Roosevelt , ¶¶ 51-52.
¶26 Property Owners argue that the caps not only imposed reimbursement rates that were substantially lower than their actual rates, but did so arbitrarily without "an assessment of the actual necessity of the litigation expenses" they incurred, by what they deem are "artificial limitations." Property Owners contend that the unique circumstances of this case, including the complex size and nature of the asset being condemned, the City's approach in prosecuting the case using out-of-state lawyers and experts with specialties in the field, the large amount of discovery, and the District Court's imposition of a tight trial schedule made it "necessary" for them, in order to properly defend the action, to consult and hire attorneys and experts who charged rates above the customary rate within the county.
¶27 At the center of Property Owners' as-applied challenge to the statutory caps, and of their demonstration of necessity, was a comparison of the costs of their legal defense efforts with the costs of the City's effort in prosecuting the action. Property Owners sought to discover information concerning the City's hiring of out-of-state counsel and the fees that were charged to represent the City in the action. However, despite acknowledging cases wherein "a comparison of rates provide[ ] a helpful guide in determining whether similarly high rates and hours requested were reasonable," the District Court prohibited such discovery by Property Owners, stating "it is up to [Property Owners] to construct their argument for costs and fees ... without shifting the burden to the City." The District Court thereafter held that Property Owners had failed to carry their evidentiary burden on summary judgment, reasoning they had failed to prove that "local counsel was either unwilling or lacked the special expertise to litigate the case.... Missoula has a large supply of skilled attorneys who routinely handle complex cases, including eminent domain cases."
¶28 On appeal, Property Owners argue, "[l]ike the City, the Property Owners recognized that they, too, needed the experience and resources provided by large firms outside Missoula." Citing newspaper articles speculating on the City's legal bills, they contend that they have "good reason to believe" that the City's expenses equated with or exceeded their claimed litigation expenses.
¶29 We have described the requirement that prevailing property owners be awarded their "necessary expenses of litigation" as a "constitutional directive" which "cannot be frustrated" by statute. Olsen , 166 Mont. at 147, 531 P.2d at 1334 ; see also Wohl v. City of Missoula , 2013 MT 46, ¶ 61, 369 Mont. 108, 300 P.3d 1119 ( Wohl I ). Thus, the critical question is whether it was "necessary" for Property Owners to incur attorney and expert fees above the customary rate within the county. In a uniquely complex Montana case, wherein out-of-state counsel played prominent roles in both prosecuting and defending the action, we think Property Owners were entitled to limited discovery about a relevant consideration to their necessity claim-the approach taken by the City to prosecute the action and the corresponding expenses incurred by the City. Property Owners' defense of the litigation was framed, first, by the approach taken by the City in prosecuting the litigation. Indeed, Property Owners lost their initial lead counsel, a Montana firm, several months after the litigation began, and made the decision, with a view toward the City's efforts, to substitute an out-of-state firm as lead counsel. Few other sources or cases, besides this one, can provide a satisfactory comparison or context for the defense decisions made, and the expenses incurred, by Property Owners. While we take no position on the ultimate validity of an as-applied challenge, we conclude Property Owners were entitled to gather this relevant information in an effort to lay an evidentiary foundation in this unique case, and that the District Court's denial of that opportunity was an abuse of discretion. We emphasize that this does not call for a discovery "fishing expedition" by Property Owners, but is a narrow opportunity to obtain basic information about the City's legal costs, including the specialties or expertise of the outside counsel retained, and the rates and cost of representation related to the condemnation proceeding.
¶30 While we have not defined "necessary," we have extensively defined "reasonable" in the context of litigation expenses, which, though not conclusive, would be instructive in determining what is "necessary." In American Bank I , ¶ 14, we concluded that the non-exclusive, seven-factor test, sometimes referred to as the "
Forrester factors," was inapplicable to the determination of fees under § 70-30-306, MCA, because compliance with the statute required consideration of only the customary charges in the county of trial. However, in view of the constitutional challenge here, these factors would be relevant considerations in the determination of necessary expenses and of the ultimate legal conclusion of whether the statute works to inhibit the constitutional award of such expenses. This ruling does not overturn the rejection of the Forrester factors by American Bank I in cases involving application of § 70-30-306, MCA, but merely permits their use in making an as-applied constitutional challenge to the statute.
¶31 Again, the parties argue over what level of scrutiny to apply to the statute. However, given that reimbursement of "necessary" expenses is a "constitutional directive,"
Olsen , 166 Mont. at 147, 531 P.2d at 1334, a limitation upon reimbursement of litigation expenses proven to be necessary would violate Article II, Section 29, under any level of scrutiny.
¶32 2. Did the District Court err by determining that Carlyle is a prevailing party and entitled to recover litigation expenses?
¶33 The Legislature has defined when a private property owner prevails:
In the event of litigation and when the condemnee prevails either by the court not allowing condemnation or by the condemnee receiving an award in excess of the final written offer of the condemnor that was rejected ... the court shall award necessary expenses of litigation to the condemnee.
Section 70-30-305(2), MCA.
¶34 On cross appeal, the City argues that because the Commissioners awarded Carlyle no damages, Carlyle is not a prevailing party. We cannot conclude the District Court's determination that Carlyle is a prevailing party entitled to litigation expenses is arbitrarily, lacks conscientious judgment, or exceeds the bounds of reason. The District Court reasoned that Carlyle was a prevailing property owner under the statute because the City had argued, and the District Court determined, that Carlyle was the ultimate property owner and thus should not be dismissed from the action; that Carlyle itself received a final written offer to purchase the water system from the City; and that the final offer of $50 million was less than the $88.6 million awarded. The District Court reasoned that the Commissioners directing the award to Mountain Water as opposed to Carlyle was inconsequential, because at trial, Carlyle allowed its subsidiary Mountain Water to argue for the value of the assets, while Carlyle only argued for severance damages related to unfunded pensions. The District Court reasoned that Carlyle not prevailing on its severance damages claim does not diminish the fact that, through its subsidiary, Carlyle prevailed on the valuation claim. The District Court did not abuse its discretion.
¶35 3. Did the District Court err in awarding attorneys' fees for out-of-state attorneys?
¶36 On cross appeal, the City argues that Property Owners are not entitled to fees for their out-of-state attorneys, "pro hac vice or otherwise," citing § 37-61-215(1), MCA :
It is unlawful for any court within this state to allow attorney fees in any action or proceeding before the court in which attorney fees are allowed by law to either party to an action or proceeding when the party is represented by anyone other than a duly admitted or licensed attorney at law .
(Emphasis added.) Originally, we interpreted this language to mean that an attorney who is not licensed in Montana may not recover attorney's fees. Vaill v. N. Pac. Ry. Co. , 66 Mont. 301, 304-05, 213 P. 446, 447-48 (1923). However, we subsequently overruled this holding, noting:
An opposing view [from Vaill ] has evolved ... wherein it was held that an attorney licensed in one state may recover for services rendered in a state in which he is not duly licensed, if he initially discloses that fact to his client and further informs him of the necessity to associate with local counsel. This is a rule which, in all fairness, we feel impelled to adopt. We find that such an interpretation is better suited to the modern practice of law and in the interests of promoting comity between the states. Such a rule is particularly appropriate in cases such as the instant one, where the attorney in question is a member in good standing of the California Bar. Under these circumstances, neither the spirit nor the intent of [ § 37-61-215(1), MCA ], regulating the right to practice law in this state, has been violated.
Winer v. Jonal Corp. , 169 Mont. 247, 252, 545 P.2d 1094, 1097 (1976). Thus, in Winer , we broadly approved reimbursement of fees for an out-of-state attorney (there, from California), noting such a rule was "particularly appropriate" where the subject attorney was a member in good standing of the California Bar. Winer , 169 Mont. at 252, 545 P.2d at 1097.
¶37 The City argues that Property Owners are not entitled to out-of-state attorneys' fees because allowing "dozens of out-of-state attorneys to work in the shadows on a Montana case and make claims for attorney's fees" does not fall within the spirit of the law. However, we cannot conclude the District Court made a legal error or otherwise acted arbitrarily, lacked conscientious judgment, or exceeded the bounds of reason when it applied Winer , the controlling precedent here, which clearly provides that, when certain requirements not here contested are met, attorneys' fees can be awarded for out-of-state counsel.
CONCLUSION
¶38 We affirm the denial of Property Owners' facial constitutional challenge to § 70-30-306, MCA, and accordingly, their claim to expenses "actually incurred" in the litigation. Given this sole basis for their challenge to the District Court's percentage reductions of their claims for inadequate bookkeeping and duplication, we affirm the District Court's reductions and its determination of "necessary" expenses in this regard. Regarding Property Owners' as-applied constitutional challenge to § 70-30-306, MCA, we reverse and remand for further proceedings to permit Property Owners to conduct limited discovery upon which to lay the factual foundation for their claim.
¶39 Affirmed in part, reversed in part, and remanded for further proceedings consistent herewith.
We concur:
JAMES JEREMIAH SHEA, J.
INGRID GUSTAFSON, J.
DIRK M. SANDEFUR, J.
The statute was declared unconstitutional in State v. Am. Bank of Mont. , No. DV 04-474(B) (11th Judicial Dist. Mont. Oct. 25, 2012), which this Court overturned on other grounds in a memorandum opinion, State v. Am. Bank of Mont. , No. DA 13-0072, 2013 MT 330N, 2013 WL 5929289, 2013 Mont. LEXIS 451 (American Bank II ).
The District Court did not hold that use of out-of-state counsel was per se unnecessary, but that Property Owners' legal coordination was poor and not well documented, resulting in attorney fees that "were not reasonable and necessary in producing work and in coordinating work within a large team."
Forrester v. Bos. & Mont. Consol. Copper & Silver Mining Co. , 29 Mont. 397, 409, 74 P. 1088, 1093 (1904) ; see also Chase v. Bearpaw Ranch Ass'n , 2006 MT 67, ¶ 38, 331 Mont. 421, 133 P.3d 190 (citations omitted).
Winer was decided prior to this Court's adoption of pro hac vice rules of admission in 1986, although, since 1895, pro hac vice admission had been governed by statute. There is no argument here that Winer conflicts with any of the pro hac vice rules. | [
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Justice James Jeremiah Shea delivered the Opinion of the Court.
¶1 Appellants Gerald and Patricia Renenger (collectively "Renengers") appeal the October 26, 2015 and June 9, 2017 Orders of the First Judicial District Court, Lewis and Clark County, granting the State's Motion to Dismiss and Jefferson County's Motion for Summary Judgment. We address the following issues:
Issue One: Whether the District Court erred in dismissing the Renengers' complaint on the grounds that the Jefferson County Attorney and the State were entitled to absolute prosecutorial immunity.
Issue Two: Whether the District Court erred in granting summary judgment to Jefferson County on the grounds that the public duty doctrine applied.
¶2 We affirm.
PROCEDURAL AND FACTUAL BACKGROUND
¶3 On October 6, 2012, the Jefferson County Sheriff's Office (JCSO) received a report from the father of J.S., an eleven-year-old boy. J.S.'s father reported that A.R., age ten, had performed oral sex on J.S. without consent. The case was assigned to a JCSO deputy, who filed an incident report. The JCSO deputy did not conduct a forensic interview but did forward the report to the Jefferson County Attorney's Office. Jefferson County appointed a special deputy prosecutor, Steven Shapiro, to evaluate whether to file a delinquency petition. After reviewing the incident report, Shapiro concluded the report established probable cause to believe that A.R. committed the crime of sexual intercourse without consent, in violation of § 45-5-503, MCA. Shapiro signed an Affidavit, attached to his Motion for Leave to File Petition, attesting to this. The District Court determined there was sufficient probable cause and granted the Motion. Jefferson County brought delinquency proceedings against A.R., and A.R. was arraigned. A forensic interview of J.S. was conducted, and it was determined that the allegations against A.R. were greatly exaggerated. The delinquency proceedings against A.R. were then dismissed.
¶4 On March 30, 2015, the Renengers, A.R.'s parents, filed an amended complaint against Shapiro, the State, and Jefferson County, which included an action pursuant to 42 U.S.C. § 1983 seeking damages based on an alleged violation of A.R.'s constitutional right to be free from unreasonable searches and seizures and a restriction of A.R.'s liberty without due process; a Dorwart claim ; and a malicious prosecution claim. The Renengers alleged that Shapiro signed the probable cause Affidavit with reckless disregard for whether the allegations contained within the Affidavit were false. The State and Shapiro moved to dismiss on grounds of absolute prosecutorial immunity. On October 26, 2015, the District Court granted the Motion to Dismiss. The Renengers also filed a negligence claim against Jefferson County, alleging the County had a duty to avoid affirmative acts that would foreseeably cause harm. Jefferson County moved for summary judgment on the grounds that the public duty doctrine barred the Renengers' claims. On June 9, 2017, the District Court granted Jefferson County's Summary Judgment Motion. The Renengers appeal.
STANDARDS OF REVIEW
¶5 We review de novo a district court's ruling on a motion to dismiss pursuant to M. R. Civ. P. 12(b)(6). Plouffe v. State , 2003 MT 62, ¶ 8, 314 Mont. 413, 66 P.3d 316 ; Martin v. Artis , 2012 MT 249, ¶ 8, 366 Mont. 513, 290 P.3d 687. We review a district court's conclusions of law for correctness. McKinnon v. W. Sugar Coop. Corp. , 2010 MT 24, ¶ 12, 355 Mont. 120, 225 P.3d 1221 (citing Jones v. Mont. Univ. Sys. , 2007 MT 82, ¶ 15, 337 Mont. 1, 155 P.3d 1247 ). A district court's determination that a complaint failed to state a claim presents a conclusion of law. McKinnon , ¶ 12. This Court will construe the complaint in the light most favorable to the non-moving party, McKinnon , ¶ 12, and will take as true all allegations of fact therein, Plouffe , ¶ 8. This Court will affirm a dismissal if we conclude the non-moving party would not be entitled to relief based on any set of facts that could be proven to support the claim. McKinnon , ¶ 12 ; Plouffe , ¶ 8.
¶6 We review a district court's summary judgment ruling de novo. McClue v. Safeco Ins. Co. , 2015 MT 222, ¶ 8, 380 Mont. 204, 354 P.3d 604 ; Wendell v. State Farm. Mut. Auto. Ins. Co. , 1999 MT 17, ¶ 9, 293 Mont. 140, 974 P.2d 623. Summary judgment is appropriate only when no genuine issue of material fact exists, and the moving party is entitled to judgment as a matter of law. Wendell , ¶ 9 ;
M. R. Civ. P. 56(c)(3). The evidence, as well as all justifiable inferences drawn from it, must be viewed in a light most favorable to the non-moving party. Svaldi v. Anaconda-Deer Lodge County , 2005 MT 17, ¶ 12, 325 Mont. 365, 106 P.3d 548. Once the moving party has met its burden of establishing an absence of genuine issues of material fact and entitlement to judgment as a matter of law, the non-moving party must present material and substantial evidence, rather than mere conclusory or speculative statements. Smith v. Burlington N. & Santa Fe Ry. , 2008 MT 225, ¶ 10, 344 Mont. 278, 187 P.3d 639 (quoting Hiebert v. Cascade County , 2002 MT 233, ¶ 21, 311 Mont. 471, 56 P.3d 848 ).
DISCUSSION
¶7 Issue One: Whether the District Court erred in dismissing the Renengers' complaint on the grounds that the Jefferson County Attorney and the State were entitled to absolute prosecutorial immunity.
¶8 42 U.S.C. § 1983 provides citizens a cause of action when state actors violate a federally protected constitutional right. Section 1983 must "be read against the background of [common law] tort liability ...." Monroe v. Pape , 365 U.S. 167, 187, 81 S.Ct. 473, 484, 5 L.Ed.2d 492 (1961), overruled on other grounds by Monell v. Dep't of Soc. Servs. , 436 U.S. 658, 663, 98 S.Ct. 2018, 2022, 56 L.Ed.2d 611 (1978). Any immunities established at common law are viable defenses in a § 1983 action. Pierson v. Ray , 386 U.S. 547, 554-55, 87 S.Ct. 1213, 1217-18, 18 L.Ed.2d 288 (1967).
¶9 Prosecutorial immunity is an established immunity against civil liability. Imbler v. Pachtman , 424 U.S. 409, 422, 427, 96 S.Ct. 984, 991, 993, 47 L.Ed.2d 128 (1976) ; Ronek v. Gallatin County , 227 Mont. 514, 516, 740 P.2d 1115, 1116 (1987) (the abolition of sovereign immunity under the Montana Constitution, Article II, Section 18, did not eliminate the defense of prosecutorial immunity). Prosecutorial immunity extends to the State of Montana, State ex rel. Dep't of Justice v. Dist. Court , 172 Mont. 88, 92-93, 560 P.2d 1328, 1330 (1976), and to Montana counties as well, Ronek , 227 Mont. at 516-17, 740 P.2d at 1116-17.
¶10 To determine whether a prosecutor, or county attorney, is entitled to immunity, courts look to the "nature of the function performed." Kalina v. Fletcher , 522 U.S. 118, 127, 118 S.Ct. 502, 508, 139 L.Ed.2d 471 (1997) (quoting Forrester v. White , 484 U.S. 219, 229, 108 S.Ct. 538, 545, 98 L.Ed.2d 555 (1988) ); Rosenthal v. County of Madison , 2007 MT 277, ¶¶ 27, 29-30, 339 Mont. 419, 170 P.3d 493. A criminal prosecutor is "absolutely immune from civil liability" when performing the traditional functions of an advocate, "regardless of negligence or lack of probable cause."
Rosenthal , ¶¶ 29-30 (citing Imbler , 424 U.S. at 423-24, 96 S.Ct. at 991-92 ); Buckley v. Fitzsimmons , 509 U.S. 259, 273, 113 S.Ct. 2606, 2615-16, 125 L.Ed.2d 209 (1993).
¶11 A county attorney's initial determination of whether to file or maintain criminal charges against a suspect, a county attorney's selection of particular facts to include in a petition, and a county attorney's determination that the evidence is sufficiently strong to justify a probable-cause finding are all traditional prosecutorial functions protected by absolute immunity. Helena Parents Comm'n v. Lewis & Clark Cnty. Comm'rs , 277 Mont. 367, 375, 922 P.2d 1140, 1145 (1996) ; Kalina , 522 U.S. at 129-30, 118 S.Ct. at 509-30 ; Imbler , 424 U.S. at 430-31, 96 S.Ct. at 995-96 ; Rosenthal , ¶¶ 29-30 ; Buckley , 509 U.S. at 272-73, 113 S.Ct. at 2615 (prosecutorial immunity extends to "acts undertaken by a [county attorney] in preparing of the initiation of judicial proceedings," including evaluating evidence assembled by law enforcement); State v. McWilliams , 2008 MT 59, ¶ 29, 341 Mont. 517, 178 P.3d 121. Attesting to the truth or falsity of factual statements underlying a prosecutorial determination of probable cause, however, is the function of a witness. Kalina , 522 U.S. at 130, 118 S.Ct. at 510.
¶12 In Kalina v. Fletcher , the U.S. Supreme Court held that a state prosecutor was not entitled to prosecutorial immunity in a § 1983 action when she acted outside the scope of her duties by personally vouching for the truth of the facts set forth in an affidavit attached to an information charging a man with burglary.
Kalina , 522 U.S. at 121-22, 129-30, 118 S.Ct. at 505, 509-10. The Supreme Court held that by vouching for the truth of the matters stated in the affidavit, the prosecutor placed herself in the position of a complaining witness, rather than an advocate. Kalina , 522 U.S. at 129-31, 118 S.Ct. at 509-10. The Supreme Court reiterated that, but for the fact that the prosecutor essentially swore to the veracity of the information stated in the affidavit, she would have performed an acceptable advocacy role. Kalina , 522 U.S. at 130-31, 118 S.Ct. at 509-10. The Supreme Court also emphasized that under Washington law, a prosecutor need not swear to the truth of the facts in the certification; that was a function "any competent witness might have performed." Kalina 522 U.S. at 129-30, 118 S.Ct. at 509.
¶13 In Fratzke v. Sanders County , a federal district court applied Kalina and further distinguished the difference between swearing to the truth of the underlying facts and swearing to a belief in probable cause:
[The prosecutor] did not offer the probable cause evidence in the motion based on personal knowledge, but based upon information provided to her by others, which she is entitled to do. She did not act as a complaining witness, but instead performed a function which the Kalina Court noted would continue to receive absolute immunity protection-she received, selected, and presented externally-gathered information which she believed provided probable cause to charge the [defendants]. As this falls squarely within the judicial phase of the criminal process ... [the prosecutor] enjoys absolutely prosecutorial immunity from the ... § 1983 claim.
Fratzke v. Sanders County, 2015 WL 4964200 at *4, *5-6, 2015 U.S. Dist. LEXIS 109736, at *10, *14-15 (D. Mont. Aug. 19, 2015) (internal citations omitted). Because the prosecutor's motion for leave to file the information against the defendant did not "contain the sort of personal vouching found in the certification in Kalina ," the prosecutor was not stripped of absolute immunity. Fratzke, 2015 WL 4964200 at *4, *5-6, 2015 U.S. Dist. LEXIS 109736, at *10, *13-15 ; see also Vainio v. State , 2014 Mont. Dist. LEXIS 19, *9-10.
¶14 To initiate a delinquency proceeding via petition in a youth court proceeding:
(1) The county attorney may apply to the youth court for permission to file a petition charging a youth to be a delinquent youth or a youth in need of intervention. The application must be supported by evidence that the youth court may require. If it appears there is probable cause to believe that the allegations of the petition are true, the youth court shall grant leave to file the petition.
Section 41-5-1401, MCA. A petition initiating proceedings must be signed by the county attorney and must set forth with specificity: "(a) the facts necessary to invoke the jurisdiction of the court together with a statement alleging the youth to be a delinquent youth or a youth in need of intervention; [and] (b) the charge of an offense ...." Section 41-5-1402, MCA.
¶15 "A showing of a mere probability that a defendant committed the offense charged is sufficient to establish probable cause to file an information. ... The District Judge is to use common sense to determine whether probable cause exists." State v. Holt , 2006 MT 151, ¶ 28, 332 Mont. 426, 139 P.3d 819 ; State v. Arrington , 260 Mont. 1, 6, 8, 858 P.2d 343, 346, 347 (1993) (holding that even absent the use of a defendant's statements as evidence to support probable cause, there was sufficient evidence for a district court to grant leave to file an information pursuant to § 46-11-201, MCA ); see also State v. Hamilton , 185 Mont. 522, 530-32, 605 P.2d 1121, 1126-27 (1980). "It is not required that information in the affidavit supporting a charge, which might later be found inadmissible at trial, be excised before a determination of probable cause is made." Holt , ¶ 29 ; State v. Elliott , 2002 MT 26, ¶ 26, 308 Mont. 227, 43 P.3d 279 (reiterating that an affidavit need not make out a prima facie case that a defendant committed an offense).
¶16 In this case, the District Court distinguished the present case from Kalina , reasoning: "Shapiro was not vouching for the truth of the information set forth in the affidavit but attesting to the fact that, in his judgment, the information constituted probable cause." The District Court concluded Shapiro performed the function of an advocate and was therefore entitled to absolute prosecutorial immunity.
¶17 The Renengers argue the District Court erred in concluding that prosecutorial immunity applied when Shapiro signed the probable cause Affidavit. The Renengers argue the District Court ignored the arrest warrant oath and affirmation requirement: probable cause to file a criminal charge must be established by a complaining witness attesting to the underlying facts, and because Shapiro acted as that complaining witness when he filed his Affidavit, he was not entitled to immunity. The Renengers further argue that Montana law does not require a prosecutor, or county attorney, to sign an affidavit attesting probable cause. Instead, as in Kalina , any competent witness may attest to the facts.
¶18 Shapiro responds that Kalina is distinguishable from the present case because Shapiro did not act as a complaining witness by personally attesting to the truth of the facts alleged in his Affidavit. Instead, Shapiro acted in his role as advocate and attested to his belief in sufficient probable cause to file a delinquency petition against A.R. Accordingly, Shapiro argues he is shielded from any liability by prosecutorial immunity. We agree.
¶19 Shapiro's Affidavit attached to his Motion for Leave to File Petition stated, in relevant part:
2. Affiant has reviewed reports submitted by the Jefferson County Sheriff's Office and has spoken with the Youth Probation Officer for this Court. These reports pertain to the events hereinafter described, and on the basis of the same, Affiant makes the allegations hereinafter set forth.
...
8. Given the foregoing, the undersigned has reason to believe that the youth A.R. has engaged in activity that if committed by an adult would constitute the offense of sexual intercourse without consent, a felony, in violation of [§] 45-5-503, MCA.
¶20 A review of the actual language of Shapiro's Affidavit and the statutory framework under which he filed it demonstrates Shapiro was not functioning as a complaining witness, but as a county attorney initiating delinquency proceedings. See § 41-5-1401, MCA ; Kalina , 522 U.S. at 128-30, 118 S.Ct. at 509. The Renengers misread Kalina as divesting a county attorney of absolute immunity whenever he signs a probable cause affidavit. Kalina instead holds that an attorney loses the protection of absolute immunity when he or she functions as a complaining witness. See Kalina , 522 U.S. at 130-31, 118 S.Ct. at 510. As required by Title 41, chapter 5, MCA, Shapiro moved for leave to file a petition with an attached affidavit attesting that "the undersigned has reason to believe the youth A.R. has engaged in activity ... in violation of [§] 45-5-503, MCA."
Shapiro concluded, based on the report from JCSO deputies, there was a probability that A.R.
committed the offense and determined that sufficiently established probable cause to file a petition. See Holt , ¶¶ 28-29 ; Woods , 203 Mont. at 405, 662 P.2d at 581. Ultimately, the District Court agreed, and permitted the delinquency petition to be filed against A.R.
¶21 The District Court properly evaluated the purpose and contents of Shapiro's Affidavit to determine whether, in signing it, he functioned as a witness or as an advocate. See Kalina , 522 U.S. at 128-29, 131, 118 S.Ct. at 509, 510. Unlike the prosecutor in Kalina , Shapiro did not attest to the veracity of the underlying information presented in the affidavit. See Kalina , 522 U.S. at 121-22, 130, 118 S.Ct. at 505, 510. Instead, like the prosecutor in Fratzke , Shapiro attested to his belief that, based upon the externally gathered information provided to him, probable cause existed to initiate delinquency proceedings against A.R. See Fratzke, 2015 WL 4964200, at *4, *5-6, 2015 U.S. Dist. LEXIS 109736, at *10, *13-15. This distinction is dispositive.
¶22 Shapiro was entitled to absolute prosecutorial immunity in the preparation of the charging documents and in the signing of the Affidavit of probable cause, regardless of whether some portion of the incident report upon which he relied was deficient or inaccurate. See Rosenthal , ¶¶ 29-30. The District Court correctly concluded that Shapiro and his employer, the State, were entitled to absolute prosecutorial immunity.
¶23 Issue Two: Whether the District Court erred in granting summary judgment to Jefferson County on the grounds that the public duty doctrine applied.
¶24 The public duty doctrine, a rule of common law negligence, provides that a law-enforcement officer does not owe a legal duty to an individual plaintiff where the plaintiff alleges he suffered harm from the officer's breach of the general duty to protect and preserve the peace. Nelson , ¶ 21 ; see also Kent v. City of Columbia Falls , 2015 MT 139, ¶ 23, 379 Mont. 190, 350 P.3d 9 ; Gatlin-Johnson ex rel. Gatlin v. City of Miles City , 2012 MT 302, ¶ 14, 367 Mont. 414, 291 P.3d 1129 ; Massee v. Thompson , 2004 MT 121, ¶ 41, 321 Mont. 210, 90 P.3d 394 ("a governmental entity cannot be held liable for an individual plaintiff's injury resulting from a governmental officer's breach of a duty owed to the general public rather than to the individual plaintiff. ...").
¶25 The public duty doctrine "serves the important purpose of preventing excessive court intervention into the governmental process by protecting the exercise of law enforcement discretion." Nelson , ¶ 21 (internal citations omitted). The public duty doctrine is also intended to protect governmental entities "from liability for failure to adequately enforce general laws and regulations, which were intended to benefit the community as a whole." Gatlin-Johnson , ¶ 14 (quoting E. McQuillin, The Law of Municipal Corporations , § 53.04.25 at 195-97 (3d ed. 2003)). However, the public duty doctrine "was not intended to apply in every case to the exclusion of any other duty a public entity [or official] may have." Bassett v. Lamantia , 2018 MT 119, ¶ 19, 391 Mont. 309, 417 P.3d 299 (quoting Gatlin-Johnson , ¶ 17 ). The duty to behave as a reasonably prudent person does not simply disappear when an officer dons his or her uniform. See Bassett , ¶¶ 22-24, 30 ; § 28-1-201, MCA ("[e]very person is bound ... to abstain from injuring the person or property of another ...."). As we have previously held, law enforcement personnel may be held liable in certain circumstances, even if they were acting in the scope of their official capacity. See Bassett , ¶¶ 22-23 ; Nelson , ¶ 22.
¶26 In Kent v. City of Columbia Falls , we distinguished a claim of negligence based on an affirmative act by a government entity or person (the public duty doctrine does not necessarily apply) from a claim of negligence based on a failure to protect or preserve the peace (the public duty doctrine applies). Kent , ¶¶ 47-50. More recently, in Bassett v. Lamantia , we further clarified that the public duty doctrine "is inapplicable in the rare and limited factual situations ... where the alleged duty breached is not one of a general duty to protect and preserve the peace," but where a plaintiff claims that he was injured directly by an officer's affirmative acts. Bassett , ¶¶ 22, 30-31 (holding the public duty doctrine was inapplicable where a plaintiff alleged a police officer's act of tackling him while pursuing a fleeing suspect caused the plaintiff injury).
¶27 In its Order granting Jefferson County's Motion for Summary Judgment, the District Court held the public duty doctrine applied to bar the Renengers' claims. Finding no duty owed, the District Court did not address the merits of the Renengers' argument.
¶28 The Renengers argue the District Court erred in granting summary judgment to Jefferson County. The Renengers argue their case involves an affirmative act by a public official that harmed A.R. and rendered the public duty doctrine inapplicable. Specifically, they contend that JCSO personnel negligently forwarded A.R.'s case on to the County Attorney's Office to initiate proceedings before adequately investigating J.S.'s father's allegations.
¶29 Jefferson County counters that JCSO personnel's act of sending its case file to Shapiro is not an act which negates application of the public duty doctrine. Moreover, the act which the Renengers allege caused them damages was the actual filing of the delinquency petition by Shapiro on behalf of the State. Shapiro was not obligated to file the petition upon receipt of the JCSO's file. Thus, Jefferson County did not take an affirmative act against the Renengers that rendered the public duty doctrine inapplicable. We agree.
¶30 Although public officials can be held liable for negligence committed on the job, any act of alleged negligence must be analyzed within the context of the official's job and daily duties. See Bassett , ¶¶ 18, 22-23, 28. The process of investigating and passing along evidence to a prosecutor, or county attorney, is a regular function JCSO personnel do as part of their mandate to protect and secure the general public welfare. See Nelson , ¶ 21 ; Gatlin-Johnson , ¶ 14. The choice to pass along the incident report detailing allegations against A.R. is exactly the type of discretionary decision to which the public duty doctrine was intended to apply. See Nelson , ¶ 21.
¶31 Further, the heart of the Renengers' argument is that JCSO failed to do the proper due diligence prior to passing along the incident report to the County Attorney's Office. JCSO personnel failed to conduct a forensic interview and failed to delve a little deeper into the legitimacy of the allegations against A.R. The failure to conduct a forensic interview, though not required by statute or regulation, is not an affirmative act, but rather an omission. The Renengers' proposed expansion of what constitutes an affirmative act by law enforcement would render the public duty doctrine meaningless, as any person charged with a crime would necessarily be harmed when evidence was passed along to county attorneys and charges were filed. Additionally, as JCSO points out, Shapiro was not obligated to file a petition initiating proceedings against A.R. based on the JCSO report, and the District Court was not obligated to conclude there was sufficient probable cause in Shapiro's Affidavit to proceed with filing a delinquency petition against A.R. Numerous intervening procedural steps and decisions by multiple governmental entities occurred between JCSO's initial investigation to the initiation of delinquency proceedings.
¶32 Even if JCSO's action of forwarding the report on for further investigation was not an action precluded from liability by the public duty doctrine, there is no evidence to suggest JCSO personnel behaved in a negligent manner. JCSO personnel did not conduct a forensic interview prior to sending the report to the County Attorney's Office. However, as previously discussed, JCSO was under no statutory or regulatory obligation to do so. This Court has affirmed numerous cases prosecuted to verdict based only on a victim or other complaining witness's statement. See e.g., State v. Gilpin , 232 Mont. 56, 61-62, 70, 756 P.2d 445, 447-48, 453 (1988) (holding sex offense cases, including child victim cases, in Montana do not require corroboration of sex offense victim's testimony and affirming a defendant's conviction for two counts of sexual assault where the only evidence was the victim's testimony); see also State v. Taylor , 2010 MT 94, ¶¶ 27, 30, 356 Mont. 167, 231 P.3d 79 (declining to apply the plain error doctrine and affirming a judgment and sentence for sexual intercourse without consent and misdemeanor sexual assault when the sole evidence was uncorroborated victim testimony); State v. Duncan , 2008 MT 148, ¶¶ 18, 43-45, 48, 56, 343 Mont. 220, 183 P.3d 111 (upholding a conviction for sexual assault and rape where the juvenile victims' testimonies were the only evidence and disagreeing that the State's accidental destruction of physical evidence-which would not have exonerated the defendant-violated the defendant's due process); State v. Rennaker , 2007 MT 10, ¶¶ 16-18, 26-27, 335 Mont. 274, 150 P.3d 960 (affirming a conviction of two counts of incest based on victim's uncorroborated and disputed testimony). Thus, the Renengers' contention that the acceptance of J.S.'s father's account by a JCSO deputy was blatantly negligent and insufficient to initiate an investigation and the filing of a delinquency petition is unavailing.
¶33 The forwarding of the report by JCSO personnel to the County Attorney's Office was not an affirmative act, but a decision that fell under JCSO's discretion in fulfilling its general duty to protect and preserve the peace. Accordingly, the actions of JCSO personnel are precluded from liability under the public duty doctrine.
CONCLUSION
¶34 The District Court correctly concluded Shapiro was entitled to absolute prosecutorial immunity when he signed the Affidavit establishing probable cause to file the petition initiating delinquency proceedings against A.R. The District Court properly extended this immunity to both Jefferson County and the State. Further, the District Court correctly concluded the public duty doctrine prevented recovery against JCSO and properly granted summary judgment to Jefferson County.
¶35 Affirmed.
We Concur:
MIKE McGRATH, C.J.
DIRK M. SANDEFUR, J.
LAURIE McKINNON, J.
BETH BAKER, J.
JIM RICE, J.
INGRID GUSTAFSON, J.
The State represents Shapiro for acts he performed in the underlying youth court matter in his prosecutorial capacity.
A local governmental entity may be held liable under § 1983 when it is shown the entity itself caused the constitutional violation at issue through implementation of a policy or custom of that governmental entity. Dorwart v. Caraway , 1998 MT 191, ¶¶ 19, 115, 290 Mont. 196, 966 P.2d 1121, overruled in part on other grounds by Trs. of Ind. Univ. v. Buxbaum , 2003 MT 97, ¶¶ 29-31, 46, 315 Mont. 210, 69 P.3d 663.
Under Washington Rules of Criminal Procedure, an information must be accompanied by either an affidavit, called a "Certification for Determination of Probable Cause," or "sworn testimony establishing the grounds for issuing a warrant." Kalina , 522 U.S. at 121, 121 n.1, 118 S.Ct. at 505, 505 n.1 (citing Wash. Super. Ct. Crim. R. 2.2(a) : Warrant of Arrest; Wash. Rev. Code. Ann. § 9A.72.085 (1994)).
Both parties refer to the following statute as applicable to the underlying proceedings involving A.R.:
To initiate criminal charges via an information:
(1) The prosecutor may apply directly to the district court for permission to file an information against a named defendant. If the defendant named is a district court judge, the prosecutor shall apply directly to the supreme court for leave to file the information.
(2) An application must be by affidavit supported by evidence that the judge or chief justice may require. If it appears that there is probable cause to believe that an offense has been committed by the defendant, the judge or chief justice shall grant leave to file the information, otherwise the application is denied.
Section 46-11-201, MCA. This reference does not change the Court's probable cause analysis. See State v. Woods , 203 Mont. 401, 405, 662 P.2d 579, 581 (1983) (analyzing an arrest warrant in the context of the Youth Court Statute and reiterating the requirement that such warrants must be based on probable cause and supported by an oath or affirmation as required by the United States and Montana Constitutions).
Jefferson County adopts and incorporates Shapiro and the State's arguments regarding prosecutorial immunity.
There are exceptions to the public duty doctrine where a special relationship exists between a government officer or entity and the injured plaintiff. Nelson , v. Driscoll , 1999 MT 193, ¶ 22, 295 Mont. 363, 983 P.2d 972 ; Gonzales v. City of Bozeman , 2009 MT 277, ¶ 20, 352 Mont. 145, 217 P.3d 487. Neither party alleges a special relationship exists in this case. As the District Court concluded:
The record is devoid of evidence of circumstances necessary to establish a special relationship between JCSO and [the] Renengers. There is no evidence that a statute which was intended to protect a specific class of persons which includes [the] Renengers was violated. There is no allegation that any County agent undertook a specific action to protect [the] Renengers or their property. There is no allegation that [the] Renengers relied on any representation by [JCSO]. There is no evidence that a third-party in the custody of [JCSO] caused harm to [the] Renengers.
The Renengers cite no authority for the proposition that law enforcement is required to conduct a forensic interview prior to initiating delinquency proceedings against a minor, other than the proposition that forensic interviews are best practice in cases involving juvenile victims. | [
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Justice Jim Rice delivered the Opinion of the Court.
¶1 Stephen Held (Held) and Twin Hearts Smiling Horses, Inc., appeal from the Findings of Fact, Conclusions of Law, and Order, Judgment, and Decree entered by the Sixteenth Judicial District Court, Powder River County, following a bench trial. Held raises six issues, but we affirm by addressing the merits of the following:
1. Did the District Court err by concluding that Platt and Welu's mutual mistake claims were not barred by the statute of limitations?
2. Did the District Court err by considering extrinsic evidence to interpret and reform the parties' contract?
FACTUAL AND PROCEDURAL BACKGROUND
¶2 In 2005, David Platt and Diana Cossa-Platt, husband and wife, together with Steve Held and Ginger Held, husband and wife, purchased a 6,000-acre ranch near Broadus in Powder River County, Montana (the property, or ranch), for the sum of $2.2 million. The Helds, Montana residents, lived on the property and ran a cattle ranch. The Platts, New York residents, used the property for occasional recreational visits and as an investment. The Platts did not have experience in managing a large rural property, so Ginger Held suggested that Platts have Steve Held serve as ranch manager and oversee Platts' investment. To formalize this arrangement, Helds and Platts entered into an Operating Agreement under which Steve Held was designated the operator of the agricultural operation on the property, and would be responsible for its financial, legal, and day-to-day management.
¶3 In 2007, Tim Welu, an avid outdoorsman from Texas, became interested in purchasing a portion of the property, intending to make it a hunting property. Held, Platt, and Welu decided to divide the property into three parts, or "parcels," of approximately 2,000 acres each. The three-way division was relative to each party's particular goals: Held's parcel was the best for agricultural use, Welu's parcel included the best hunting ground, and Platt's parcel was the most aesthetically pleasing for recreation.
¶4 Attorney A. Lance Tonn, with whom Held had a prior relationship, was retained to coordinate the transaction (Land Sale). Not specified in the course of Tonn's representation was which party or parties he represented, the scope of his representation and engagement terms, and possible conflicts of interest or the parties' option to seek independent counsel. Held served as the parties' contact with Tonn. Welu and Platt believed that Tonn was "the attorney" for the Land Sale and believed their interests would be protected by the documents.
¶5 In December 2008, before completion of the Land Sale, the parties discussed creating "usage rights" whereby all three parties could access and use the entire ranch property. The parties verbally agreed that they would grant each other access to their respective parcels for their individual pursuits: Welu would have hunting rights, Platt would have recreational rights, and Held would have grazing rights on the entire property. A first draft of a usage agreement was circulated in early December that granted each party and their descendants a 99-year right to use the entire ranch for their specific purposes. However, this draft was not acceptable to the parties, and they instead expressed a desire to narrow the terms of the usage agreement from what they had originally contemplated. On December 20, 2008, Held emailed Tonn, copying Welu and Platt, attempting to express the parties' intent. The email, which became Exhibit 25 at trial, stated, in pertinent part, as follows:
NOT transferring the hunting, grazing and recreational rights; Lance, we've decided it's better if these 'extended rights' don't survive us, nor are they transferable. In other words, if Welu's die or sell, the only hunting rights their survivor/buyer has will be on their own land. Recreation for Platt is the same. In essence then these extended rights are only through our lifetimes. Leaving future owners to negotiate their own deals. Please use your discretion to word it.
(Hereinafter Exhibit 25.)
¶6 On December 30, the Land Sale was consummated, although the parties were not all together for the closing. Welu paid $2 million for his portion of the property. An existing loan and accompanying encumbrance on the property were satisfied, and the Helds and Platts each received $286,253.73 from the proceeds. As planned, the property was divided into three parcels pursuant to a survey, with each party owning approximately 2,000 acres. Apparently, a written agreement was used to guide the closing (Buy-Sell Agreement), but conflicting evidence was presented at trial concerning the content of this Agreement, including whether it contained language about the agreed usage rights or whether it was even signed by all the parties, which could not be resolved by the document trail.
¶7 After completing the Land Sale, the parties decided not to record the putative Buy-Sell Agreement so that the purchase price would be kept private, and instead contemplated preparation of a separate agreement for recording that would address their usage rights (Ancillary Agreement). In January 2009, Tonn sent drafts of the Ancillary Agreement to the parties for review, instructing that "once the Agreement has been placed in final form, I will [circulate it for signature]." The language in the Ancillary Agreement regarding the specified usage rights was identical for each party, and terminated their rights to use the entire property upon conveyance of their respective parcels to a third-party. On January 20, Welu and Held reviewed and approved the Ancillary Agreement. However, Platt never received the document. On January 21, Tonn advised the parties that mistakes in the Ancillary Agreement required its re-drafting, and provided instructions for re-circulating the Agreement. In an email sent to Tonn on July 10, Held expressed frustration that the Ancillary Agreement had not yet been recorded. On August 3, Tonn replied that he had not yet received a signed Ancillary Agreement from Held. On August 20, Held, noting a fully executed agreement with all the parties' signatures had still not been executed, asked Tonn to send a new Agreement for signatures. Consequently, on August 25, Tonn emailed the parties with directions that they should sign a "previously signed" document so that a "fully signed" document could be recorded.
¶8 In October, a new draft of the agreement was circulated and signed by all the parties, and recorded (Recorded Agreement). However, the Recorded Agreement was not identical to the previous agreements. It specified that all the usage rights over the entire ranch were "exclusive" as among the three parties, but while the Agreement contained provisions terminating Platts' and Welus' rights to use the other two parcels ("on the entire ranch") upon conveyance of their parcel to a third party, Held's grazing rights contained no such termination provision.
¶9 The parties were on good terms throughout these transactions and referred to each other as "partners," but things turned sour. Tragically, Tonn passed away in September, 2010. In 2011, Stephen and Ginger Held were involved in a difficult dissolution proceeding that strained the relationship among the parties. In 2012, Welu sued Held in an irrigation system dispute that was ultimately appealed to this Court. In 2014, Platt discovered and received an attorney's opinion that, because of the manner in which the property was surveyed for division, his parcel lacked legal access and, consequently, marketable title. When Held refused to grant an easement across his property to Platt, because he believed Platt had other access, Platt initiated this lawsuit against Held, alleging easement by express grant, prescription, and implication, and praying for reformation of the contract due to mutual mistake and fraud. Welu moved to intervene, which was unopposed and granted. Welu's complaint alleged the Recorded Agreement did not express the intent of the parties regarding usage, based on ambiguities in the Agreement and alleged misrepresentations by Held, and sought reformation, allegations in which Platt joined. Held answered both complaints, denying their allegations and asserting Welu and Platt's claims were barred by the statute of limitations.
¶10 On June 7-8, 2016, the District Court held a bench trial regarding mutual mistake and fraud in the formation of the Recorded Agreement. The parties introduced Tonn's office file, or the "Tonn File," into evidence wholesale. Following trial, the District Court entered its findings of fact, conclusions of law, and order, concluding that the relevant statutes of limitation did not accrue until after this instant lawsuit commenced, and, therefore, Platts and Welu's claims had been timely filed. The court found that "[r]eview of the Tonn file leads to the conclusion that the September 2009 Recorded Agreement was a December 2008 draft of the Ancillary Agreement signed by mistake. A 2009 revision of the Ancillary Agreement was not signed by all parties." It further found that "[t]he Recorded Agreement does not reflect the parties' intent as to the usage rights; Exhibit 25 provides significant guidance to the Court's revision to reflect the parties' meeting of the minds." The District Court reformed the Recorded Agreement consistent with its determination that "[t]he parties intended to grant each other non-exclusive, non-transferrable licenses" to use each other's property, removing the term "exclusive" from Held's grazing rights specifically as well as generally from all usage rights granted under the Agreement; granted a written, express easement in favor of Welu and Platt, as well as their costs; and denied attorney fees to all parties.
¶11 Held appeals. Further facts will be discussed herein.
STANDARDS OF REVIEW
¶12 We review a district court's factual findings for clear error. BNSF Ry. Co. v. Cringle , 2012 MT 143, ¶ 16, 365 Mont. 304, 281 P.3d 203. A finding of fact is clearly erroneous if it is not supported by substantial evidence, if the court misapprehended the effect of the evidence or if, upon reviewing the record, this Court is left with the definite and firm conviction that the district court made a mistake. In re S.T ., 2008 MT 19, ¶ 8, 341 Mont. 176, 176 P.3d 1054. "Substantial evidence is evidence which a reasonable mind might accept as adequate to support a conclusion, even if the evidence is weak or conflicting."
Skelton Ranch, Inc. v. Pondera County Canal & Reservoir Co. , 2014 MT 167, ¶ 27, 375 Mont. 327, 328 P.3d 644. It need not amount to a preponderance of the evidence, but it must be more than a scintilla. Skelton Ranch , ¶ 27.
¶13 We review a district court's conclusions of law to determine whether the district court correctly interpreted the applicable law. Denton v. First Interstate Bank of Commerce , 2006 MT 193, ¶ 18, 333 Mont. 169, 142 P.3d 797.
DISCUSSION
¶14 1. Did the District Court err by concluding that Platt and Welu's mutual mistake claims were not barred by the statute of limitations?
¶15 Held argues that the District Court erred in concluding that the mutual mistake claims accrued "after this lawsuit was initiated, depositions were taken, and the contents of the Tonn file were reviewed[,]" making the claims timely. The parties signed the Recorded Agreement in September 2009. Platt filed his complaint on September 26, 2014, and Welu filed his on March 5, 2015. Held argues that because the parties signed the Recorded Agreement, and the agreement was subsequently recorded, the parties could or should have compared the Recorded Agreement to previous versions of the agreement to make themselves aware of its terms, and thus, any facts necessary to discovery of a mutual mistake were available to them. He further argues that "regardless of which version of the Agreement is reviewed, the language regarding the use rights is nearly identical" so Platt and Welu cannot claim "the same language regarding the use rights suddenly became different five years after the execution of the Agreement." However, while the language may have been similar, there were changes in the Recorded Agreement that granted differing rights to Held than to Platt and Welu.
¶16 The statute of limitations for an action on the grounds of fraud or mistake action is generally two years, but such claims do not accrue "until the discovery by the aggrieved party of the facts constituting the fraud or mistake." Section 27-2-203, MCA. The period of limitation does not begin until "the facts constituting the claim have been discovered or, in the exercise of due diligence, should have been discovered by the injured party. ..." Section 27-2-102(3), MCA. As we have explained, "[t]he statute of limitations for actions based on mutual mistake ... begins to run when the facts are such that the party bringing the action would have discovered the mistake had he exercised ordinary diligence." D'Agostino v. Swanson , 240 Mont. 435, 443, 784 P.2d 919, 924 (1990) (citing Gregory v. City of Forsyth , 187 Mont. 132, 136, 609 P.2d 248, 251 (1980) ). Further, unlike fraud, "mistake, by definition, is unintentional," so in cases of mutual mistake of fact, the "discovery" language of § 27-2-203, MCA, does not require a showing of "concealment" as a "condition precedent to recovery." Gregory , 187 Mont. at 139, 609 P.2d at 252. Pertinent to Held's initial argument, we have also held "the recording of an instrument is to be considered with other facts and circumstances in determining whether the plaintiff is to be charged with notice, either actual or constructive, but that the fact of recording alone will not so charge him." Gregory , 187 Mont. at 138-39, 609 P.2d at 252. We thus consider the District Court's determination from the evidence that the asserted mistakes in the Recorded Agreement could not have been discovered by Platt and Welu by the exercise of ordinary diligence.
¶17 While some of the testimony bears on the merits of the mutual mistake claim, it was also relevant to the parties' understanding and diligence. Welu testified that, when signing the Recorded Agreement, he had "no reason to think" he was signing anything other than "an accurate document" corresponding to the Ancillary Agreement he had previously signed, and consistent with the parties' intentions as expressed in Exhibit 25. Platt agreed that Exhibit 25 accurately reflected the intent of the parties, and believed from the communications with Tonn that the Recorded Agreement reflected that intent. For his part, Held testified that he thought the usage rights among the parties were to be "reciprocal," and only upon the initiation of the lawsuit did he realize the rights were not what he understood them to be, although he believed the Agreement to be substantially accurate and needed only a minor correction for what he described as the "scrivener's error." The District Court also reviewed the entire Tonn file, including Exhibit 25 and other communications, and found that "[t]he Tonn file demonstrates that the usage rights provisions underwent multiple revisions in an effort to memorialize the then-friends' agreement to allow each other access for certain purposes."
¶18 The District Court determined that integral to the parties' failure to discover the mistake was Tonn's representation to the parties that the Recorded Agreement had been "previously signed" and simply needed to be "fully signed," which permitted a reasonable conclusion by the parties that the Recorded Agreement was the same document as the previously circulated, and partially signed, Ancillary Agreement. The District Court stated that Tonn's representations did not put the parties on notice that they were signing a different document, and reasoned that ordinary diligence "does not require that a person carefully review his copy of a recorded document (received from an attorney) to confirm that the recorded document conforms to what he believes he signed." The District Court also reasoned that recordation was not a controlling factor here, because when "a person is notified that a document he has signed has been recorded, ordinary diligence does not require that he seek to obtain a duplicate from the Clerk and Recorder for review."
¶19 The District Court thus concluded that the mistake in the Recorded Agreement was not discoverable by ordinary diligence for multiple reasons, including: (1) the parties' initial trust and friendship; (2) the intent of the parties was correctly expressed in Exhibit 25; (3) the Ancillary Agreement accurately reflected the parties' intent about usage rights; (4) the representation by Tonn, as the attorney for the Land Sale, that the Recorded Agreement was the same agreement that had been "previously signed"; (5) the parties' reasonable assumption that the signed Recorded Agreement contained the same provisions as in the Ancillary Agreement, but that it did not; and (6) no actionable dispute existing until the easement issue arose.
¶20 The District Court's findings were supported by substantial evidence. While the grounds and reasoning cited by the District Court may not have been individually sufficient to satisfy the obligation of ordinary diligence, when the circumstances are considered as a whole, we conclude the court did not err in concluding that the claims could not have been discovered thus accrual could not have occurred until this instant lawsuit, rendering the mutual mistake claim timely filed. Because the District Court proceeded to consider contract reformation on the ground of mutual mistake, we need not consider whether the court erred in also concluding that the statute of limitations did not bar the fraud claims.
¶21 2. Did the District Court err by considering extrinsic evidence to interpret and reform the parties' contract?
¶22 Held argues the District Court erred several ways in determining to reform the parties' Recorded Agreement, including that the District Court's failure to find ambiguity in the Agreement precluded the consideration of extrinsic evidence; the language of the Agreement was plain and no reformation was necessary except to the extent the "scrivener's error" needed to be corrected; and, in interpreting the parties' intentions, the District Court erred by determining that the Agreement would extinguish his grazing usage rights to the other parcels upon a sale of a parcel to a third party, and that his rights were non-transferrable.
¶23 Generally, when the terms of an agreement are reduced to writing by the parties, the writing is considered as containing all those terms and there can be no evidence of the terms of the agreement other than the contents of the writing. Section 28-2-905(1), MCA. However, an exception to this rule permits extrinsic evidence to be admitted when a mistake or other imperfection of the writing is put at issue. Section 28-2-905(1)(a), MCA ; Thibodeau v. Bechtold , 2008 MT 412, ¶ 19, 347 Mont. 277, 198 P.3d 785. Section 28-2-1611, MCA, authorizes a court to revise a contract based on mistake:
When written contract may be revised by court . When, through fraud or mutual mistake of the parties or a mistake of one party while the other at the time knew or suspected, a written contract does not truly express the intention of the parties, it may be revised on the application of a party aggrieved so as to express that intention, so far as it can be done without prejudice to rights acquired by third persons in good faith and for value.
When so revising a contract, the court must presume the parties intended an equitable and conscientious agreement in revising a contract, see § 28-2-1612, MCA, and a contract is to be interpreted to give effect to the mutual intent of the parties. See § 28-3-301, MCA. Revision of a contract requires that a mistake be established by clear and convincing evidence. Thibodeau , ¶ 23. "A mutual mistake occurs when, at the time the contract is made, the parties share a common misconception about a vital fact upon which they based their bargain." South v. Transportation Ins. Co. , 275 Mont. 397, 401, 913 P.2d 233, 235 (1996) (citations omitted). A mutual mistake regarding a material fact is "so substantial and fundamental" a mistake that it "defeat[s] the object of the parties in making the contract." Keller v. Liberty Northwest, Inc. , 2010 MT 279, ¶ 23, 358 Mont. 448, 246 P.3d 434. "Contract law does not uphold agreements which defeat the object of the parties." Keller , ¶ 24.
¶24 Held argues that because the District Court did not find that the Agreement contained an ambiguity, it "erred in receiving evidence and determining the interpretation of the Agreement based upon the intent of the parties." It is correct that an ambiguity in a contract can require the consideration of extrinsic evidence regarding the parties' intent. See Mary J. Baker Revocable Trust v. Cenex Harvest States Coops., Inc. , 2007 MT 159, ¶ 55, 338 Mont. 41, 164 P.3d 851 (if the court determines that an ambiguity is present in the instrument, then "extrinsic evidence may be introduced at trial to allow the trier of fact to determine the intent of the parties in entering into the contract."). However, in the context of a claim of mutual mistake in the formation of the written agreement, an ambiguity is not necessarily required. Section 28-2-1611, MCA, provides that, when a written contract, because of a mistake, "does not truly express the intention of the parties, it may be revised on the application of a party aggrieved so as to express that intention[.]" Such was the claim here-that the Recorded Agreement as written did not accurately reflect the parties' intentions.
¶25 In addition to considering the evidence cited in the above statute of limitations discussion regarding the parties' understanding of the Recorded Agreement, the District Court found that the Tonn File demonstrated the usage rights provisions had undergone multiple revisions to capture the intent of the parties, but this intent was never ultimately memorialized in a signed agreement. The first draft in early December 2008 contained a 99-year reciprocal lease option for usage rights, which Welu testified did not express the intent of the parties, leading to the email to Tonn that became Exhibit 25. The next draft, the Ancillary Agreement, was intended to embody the wishes of the parties as expressed in Exhibit 25, but was not reviewed and signed by all of the parties. Finally, the signed Recorded Agreement was different from the Ancillary Agreement, granting "exclusive" grazing rights over the entire ranch property to Held, apparently for a lifetime encumbrance upon the Platt and Welu properties, while Welu and Platt's usage rights were subject to termination upon sale or transfer. All parties acknowledged, although in differing degree, that the usage rights were not accurately memorialized in the Recorded Agreement. The District Court found that "due to mistake, the parties signed a document that did not reflect their mutual intent as to 'usage rights.' "
¶26 We conclude the District Court's findings were supported by substantial evidence, and that it correctly concluded that the Recorded Agreement did not reflect the parties' intent. The mistakes in the Agreement constituted "vital facts" that defeated the parties' contractual intentions. South , 275 Mont. at 401, 913 P.2d at 235. It was therefore appropriate for the District Court to consider extrinsic evidence and to reform the contract to reflect the parties' true intent. We thus consider whether the District Court erred in the manner that it reformed the Recorded Agreement.
¶27 Held acknowledges the District Court correctly modified the Recorded Agreement to fix the "scrivener's error," so that his grazing usage rights terminated in the same manner as the other parties' rights, but argues that the court erred by further modifying the termination provision. Herd argues the District Court incorrectly interpreted the Agreement, and Exhibit 25, to require that, if one party sold his tract, then the remaining two parties lost their respective usage rights on the sold tract. Rather, Held argues the parties intended to agree that if one party sold his tract, then only the selling party lost his usage rights to the two remaining tracts.
¶28 Both parties cite to Exhibit 25, which again states, in pertinent part:
NOT transferring the hunting, grazing and recreational rights; Lance, we've decided it's better if these 'extended rights' don't survive us, nor are they transferable. In other words, if Welu's die or sell, the only hunting rights their survivor/buyer has will be on their own land. ... In essence then these extended rights are only through our lifetimes. Leaving future owners to negotiate their own deals. ...
Platt and Welu testified to their understanding that the reciprocal use rights of all the parties would terminate upon the sale of any of the parcels by any party, or upon the death of any of the parties. Welu explained that his purpose in entering the transaction was to obtain hunting rights to the entire ranch, but that he did not believe he would retain those rights in the event either Platts or Helds sold their individual parcel. Held testified to his belief that the parties had a larger expectation of the usage rights, including, in his case, that his grazing rights on the other parcels would survive a sale or transfer by Platt or Welu.
¶29 From the evidence, the District Court found as follows:
The parties intended to grant each other non-exclusive, non-transferrable licenses, revocable by the licensors upon death of a licensee or the sale of the licensors' respective parcels. Thus, the parties intended that [ ] each of them could sell their respective parcels free of the usage rights they granted in favor of the other parties. In other words, despite the provision as to irrevocability during their lifetimes, the parties (as licensors) intended to retain the power to revoke the usage rights upon sale of their own parcel. For example, if the Held Parcel is sold to a person or entity not owned primarily by Held, Held can revoke Welus' hunting rights and Platts' recreation rights as to the Held Parcel as of the date of recording of such conveyance.
¶30 The parties' offered viable arguments from the record about their view of the parties' intent. Once it became necessary to consider extrinsic evidence, the District Court was entitled as the factfinder to weigh this testimony and assess its credibility. Further, it carefully traced, assessed, and entered findings of fact about each of the many communications in the Tonn File. It rejected, for example, Held's argument that his grazing rights were intended to be "exclusive" in the sense that a buyer of Platts' or Welus' parcel could not graze livestock upon the buyer's parcel during Held's lifetime.
¶31 Upon review of the record, we conclude that the District Court's findings of fact are supported by substantial evidence, and that its interpretation of the agreement among the parties was correct. We conclude the District Court did not err by considering extrinsic evidence and revising the agreement in a manner that captured the parties' intentions pursuant to § 28-2-1611, MCA. ,
¶32 Affirmed.
We Concur:
MIKE McGRATH, C.J.
JAMES JEREMIAH SHEA, J.
LAURIE McKINNON, J.
DIRK M. SANDEFUR, J.
The parties will be referred herein to by their personal names, rather than their associated business entities. Stephen Held's company is Twin Hearts Smiling Horses, Inc., and Tim Welu first operated Welu, LLC, and now Twin Hearts, LLC.
The District Court found that "sources of information suggest that a buy-sell document containing 'usage rights' may have been part of the closing documents. However, these sources are not definitive in establishing that such a document was signed by all three parties."
The Recorded Agreement provided, as to Platt:
"In the event PLATT sells, trades, or conveys the PLATT tract to a person or entity not owned primarily by PLATT, this exclusive right for recreational purposes on the entire ranch shall terminate as of the date of recording of such conveyance."
Similarly, as to Welu:
"In the event [Welu's entity] sells, trades, or conveys the WELU tract to a person or entity not owned primarily by WELU, this exclusive right to hunt on the entire ranch shall terminate as of the date of recording of such conveyance."
In contrast, the corresponding provision as to Held provided:
"....Held[s] are granted, during their lifetimes, exclusive use of the entire ranch for livestock grazing purposes. The HELD Tract shall be listed with the United States Department of Interior Bureau of Land Management as the base property for all grazing preferences appertaining to the entire RANCH."
Thus, there was no equivalent termination language regarding Held's grazing rights, which Held argued was merely a "scrivener's error." Held agreed that reformation of the Recorded Agreement was necessary, but only to the extent necessary to correct this inconsistency. However questionable it may be that the differences in treatment of Held's rights and the others' rights in the Recorded Agreement can be properly characterized as a "scrivener's error," we use that term in this Opinion to describe this problem.
See Welu v. Twin Hearts Smiling Horses, Inc. , 2016 MT 347, 386 Mont. 98, 386 P.3d 937.
The District Court resolved other issues not challenged on appeal, including: (1) denying Welu's motion to impound rents because of lack of evidence that would allow the court to apportion past rents received by Held for leasing out the entire ranch; (2) denying Platts' motion for a constructive trust premised on unjust enrichment because of Held's grazing leases; (3) denying Held's claim of slander of title; (4) holding Welu could not maintain a claim for actual or constructive fraud against Held; and (5) denying Welu and Platts' request for an express or prescriptive easement. The District Court also determined that Welu was entitled to two implied easements: a necessary easement and an easement from prior existing use. The court determined Platt was entitled to an easement from prior existing use.
The District Court also determined that fraud provided an additional basis for reformation of the contract. Having affirmed the District Court's reformation upon mutual mistake, we decline to address the alternate basis for reformation.
Noting the District Court's Conclusion of Law # 73, which states "[a]s revised herein, the usage rights are non-assignable," Held also argues that the District Court erred "in concluding that [the Held Appellants] were barred from leasing out their grazing rights to third parties." Although the argument is not entirely clear, we believe Held is challenging the loss of his right to lease to third parties his grazing rights on the Platt and Welu parcels. To clarify, while we affirm the District Court's determination that the usage rights were non-assignable and "not transferrable" (Conclusion of Law #25), we do not read these conclusions of law, taken in the context of the usage rights at issue, to prohibit Held from leasing out the grazing rights on his own parcel. The "usage rights" involved only the right of the parties to use the other two parcels. As acknowledged by Welus on appeal, "the usage rights did not exclude each individual owner's use of their own parcel for any purpose," citing Conclusion of Law #20.
Held's briefing raises three additional issues, but provides only several sentences and no authority supporting his arguments for these issues in his opening brief. "Parties must present a reasoned argument to advance their positions, supported by citations to authority. M.R.App.P. 12(1)(f) [now 12(1)(g) ]. When a party fails to do so, our caselaw is well-settled. We will not consider unsupported issues or arguments." Griffith v. Butte Sch. Dist. No. 1 , 2010 MT 246, ¶ 42, 358 Mont. 193, 244 P.3d 321 (citation omitted). | [
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Justice Ingrid Gustafson delivered the Opinion of the Court.
¶1 Marcia Marshall (Marshall) appeals a June 8, 2017 order of the Sixth Judicial District, Park County, granting Safeco Insurance Company and Mid-Century Insurance Company's (collectively, the Defendants) motion to dismiss. We reverse and remand.
¶2 We restate the issue on appeal as follows:
1. Whether the District Court erred in granting the Defendants' motion to dismiss pursuant to M. R. Civ. P. 12(b)(6).
FACTUAL AND PROCEDURAL BACKGROUND
¶3 This case arises from a motor vehicle accident in Park County on February 14, 2010. Marshall was riding as a passenger in a car driven by Kevin Gallivan. Another individual, Peter Kirwan, owned the vehicle driven by Gallivan. Marshall alleged Gallivan's negligence caused the motor vehicle accident. Marshall suffered severe injuries resulting from the accident. Defendant Safeco insured Kirwan, the car owner. Defendant Mid-Century insured Gallivan, the driver. The Defendants provided liability coverage under each separate policy. The Defendants and Marshall entered into a settlement agreement prior to trial resolving the underlying claim.
¶4 Marshall filed an amended complaint against the Defendants on November 2, 2016. Marshall brought claims seeking declaratory judgment and violations under the Unfair Trade Practices Act (UTPA). Marshall alleged the Defendants have utilized and relied upon the collateral source statute or its principles to take a reduction against damages sustained and owed to their insureds or claimants in violation of Montana law. Specifically, Marshall alleged the Defendants used the collateral source statute to justify reduction in her damages notwithstanding the collateral source statute was inapplicable. Further, Marshall's complaint attacks the constitutionally of the collateral source statute under § 27-1-308, MCA.
¶5 The Defendants filed a joint motion to dismiss on January 20, 2017. The District Court granted the Defendants' motion to dismiss. The District Court found our decision in Miller v. State Farm Mut. Auto. Ins. Co ., 2007 MT 85, 337 Mont. 67, 155 P.3d 1278, controlling. The District Court construed "the holding of Miller as providing that an insurer's consideration of a potential future offset under the collateral source doctrine during settlement negotiations does not create a justiciable controversy." Relying on Miller , the District Court concluded Marshall's claim under the UTPA and the Declaratory Judgment Act should be dismissed. Marshall timely appeals.
STANDARD OF REVIEW
¶6 We review de novo a district court's ruling on a motion to dismiss pursuant to M. R. Civ. P. 12(b)(6). Western Sec. Bank v. Eide Bailly LLP , 2010 MT 291, ¶ 18, 359 Mont. 34, 249 P.3d 35. We construe the complaint in the light most favorable to the plaintiffs when reviewing an order dismissing a complaint under M. R. Civ. P. 12(b)(6). A district court should not dismiss a complaint for failure to state a claim unless it appears beyond doubt the plaintiff can prove no set of facts in support of his claim that would entitle him to relief. Jones v. Mont. Univ. Sys ., 2007 MT 82, ¶ 15, 337 Mont. 1, 155 P.3d 1247. A district court's determination that a complaint has failed to state a claim for which relief can be granted is a conclusion of law which we review for correctness. Sinclair v. Burlington Northern & Santa Fe Ry ., 2008 MT 424, ¶ 25, 347 Mont. 395, 200 P.3d 46.
DISCUSSION
¶7 1. Whether the District Court erred in granting the Defendants' motion to dismiss pursuant to M. R. Civ. P. 12(b)(6).
¶8 Marshall argues the District Court erred in dismissing her declaratory judgment claim. Marshall asserts the District Court incorrectly applied Miller to conclude Marshall did not allege a justiciable controversy. Marshall contends that Miller is distinguishable due to the procedural posture. The Defendants maintain the District Court correctly dismissed Marshall's declaratory judgment claim. The Defendants argue Miller is controlling and therefore Marshall's declaratory judgment claim failed to allege a justiciable controversy.
¶9 The District Court concluded declaratory judgment could not be granted without a justiciable controversy and, based on our decision in Miller , concluded a justiciable controversy did not exist. The Uniform Declaratory Judgments Act provides a district court with the "power to declare rights, status, and other legal relations whether or not further relief is or could be claimed." Section 27-8-201, MCA. A district court "may refuse to render or enter a declaratory judgment or decree where such judgment or decree, if rendered or entered, would not terminate the uncertainty or controversy." Section 27-8-206, MCA. A justiciable controversy must exist before a court may exercise jurisdiction under the Declaratory Judgments Act. Northfield Ins. Co. v. Ass'n of Counties , 2000 MT 256, ¶ 10, 301 Mont. 472, 10 P.3d 813.
¶10 The test to determine whether a justiciable controversy exists requires the following:
First, a justiciable controversy requires that parties have existing and genuine, as distinguished from theoretical, rights or interests. Second, the controversy must be one upon which the judgment of the court may effectively operate, as distinguished from a debate or argument invoking a purely political, administrative, philosophical or academic conclusion. Third, it must be a controversy the judicial determination of which will have the effect of a final judgment in law or decree in equity upon the rights, status or legal relationships of one or more of the real parties in interest, or lacking these qualities be of such overriding public moment as to constitute the legal equivalent of all of them.
We apply the justiciable controversy test to actions for declaratory judgment to prevent courts from determining purely speculative or academic matters, entering anticipatory judgments, providing for contingencies which may arise later, declaring social status, dealing with theoretical problems, answering moot questions, or giving abstract or advisory opinions.
Northfield Ins ., ¶ 12 (internal citations omitted).
¶11 In Miller , we determined Miller's declaratory judgment action failed to allege a justiciability controversy. Miller , ¶ 19. Miller was involved in a motor vehicle accident resulting in injury. Miller brought suit against the negligent driver. Miller , ¶ 3. State Farm and Miller engaged in settlement negotiations. State Farm offered to settle the claim with Miller. State Farm's offer reflected a reduction based on the collateral source statute. Miller , ¶ 4. The parties did not enter into a settlement agreement. Miller , ¶¶ 4, 16, 18. Miller then filed an action for declaratory judgment arguing State Farm impermissibly considered the collateral source statute during settlement negotiations. Miller , ¶ 4. Miller did not allege UTPA violations. Miller , ¶¶ 13, 16. State Farm moved for summary judgment arguing a justiciable controversy did not exist. The District Court granted State Farm's motion.
Miller , ¶ 4.
¶12 On appeal, we held Miller's declaratory action claim failed to allege a justiciable controversy. Miller , ¶ 19. We determined Miller improperly brought the declaratory action while settlement negotiations were still ongoing. Miller , ¶ 16. We recognized Miller did not allege any UTPA violations, and thus, was not litigating a claim under any existing rights or interests provided for by the UTPA. Miller , ¶¶ 13, 16. We further refused to dictate what factors a party may or may not consider while engaging in a voluntary settlement process because our opinion would be advisory. Miller , ¶¶ 16, 18. Accordingly, a judgment would not have the effect of a final judgment on any rights, status or legal relationship of the parties because State Farm could simply withdraw its offer and provide a different basis for its offer and Miller could still refuse the offer. Miller , ¶ 18. Thus, our analysis was contingent on the fact Miller and State Farm were engaged in ongoing settlement negotiations when Miller sought the court's intervention.
¶13 The procedural posture of this case distinguishes it from Miller . Unlike Miller , Marshall is litigating a claim under existing rights or interests provided for in the UTPA. Marshall and the Defendants entered into and completed a settlement. Once the Defendants entered into a settlement with Marshall, the insurers became subject to the UTPA. Under the UTPA, insurers have duties and obligations regarding their settlement practices to an insured or third-party claimant. Section 33-18-201, MCA. Thus, the parties have existing and genuine rights arising from the UTPA. Therefore, we determine the first requirement to find a justiciable controversy is met.
¶14 Moreover, a judgment in this case would determine the parties' respective rights and obligations. Unlike Miller , Marshall is not seeking a declaratory judgment too early in the proceedings, which would only serve as an advisory opinion. A declaratory judgment rendered in Miller would not have resolved the controversy because State Farm could have offered something different and Miller could have still rejected the offer. Here, settlement was agreed upon by the parties. Marshall received the settlement. A judgment in Marshall's case would determine the parties' rights, status, or legal relationship by deciding whether the Defendants reduced Marshall's damages by applying the collateral source statute pursuant to § 27-1-308, MCA. Assuming the insurers unlawfully reduced Marshall's damages by relying on the collateral source rule, she would be able to seek recovery. Thus, Marshall's declaratory judgment claim is procedurally different from Miller and presents a justiciable controversy. We hold that the District Court erred in concluding a justiciable controversy did not exist.
¶15 Next, Marshall argues the District Court erred in dismissing her UTPA claim. Marshall alleges a justiciable controversy exists and she has sufficiently pled her UTPA claim. The Defendants argue the District Court properly dismissed Marshall's UTPA claim relying on Miller . The Defendants further contend the District Court properly found that Marshall's UTPA claim does not constitute an independent cause of action. Lastly, the Defendants argue they had a reasonable basis in law for their actions.
¶16 The District Court's reliance on Miller to dismiss Marshall's UTPA claim is misplaced. The District Court interpreted Miller as this Court's refusal to interfere with the settlement negotiation process. However, a UTPA violation under § 33-18-201, MCA, is a claim against an insurer's settlement practices. To hold courts cannot adjudicate an insurer's settlement practices is contrary to the UTPA and our case law. Section 33-18-201(1) - (14), MCA ; see Jacobsen v. Allstate Ins. Co ., 2009 MT 248, ¶ 2, 351 Mont. 464, 215 P.3d 649 and Jacobsen v. Allstate Ins. Co. , 2013 MT 244, 371 Mont. 393, 310 P.3d 452 (challenging Allstate's policies and guidelines designed to promote quick settlement with unrepresented claimants); Lorang v. Fortis Ins. Co., 2008 MT 252, ¶ 89, 345 Mont. 12, 192 P.3d 186 (challenging Fortis's general settlement practices regarding prosthetic claims); Peterson v. Doctors' Co ., 2007 MT 264, ¶ 26, 339 Mont. 354, 170 P.3d 459 (challenging the insurer's conduct during the settlement process). Further, Miller has no bearing on Marshall's UTPA claim. In Miller we specifically noted, "Miller has a right to fair treatment under the UTPA, Miller has not asserted a violation under the UTPA ." Miller , ¶ 16 (emphasis added). Therefore, we determined Miller based solely on the declaratory judgment claim. The District Court misinterpreted Miller as controlling for Marshall's UTPA claim.
¶17 We now turn to whether Marshall sufficiently pled her UTPA claim. While the settlement process belongs to the parties, courts can enforce a settlement agreement and have jurisdiction under the UTPA to oversee claims of unfair settlement practices. Miller , ¶¶ 14, 15. The UTPA provides an insured or third-party claimant an independent cause of action against an insurer's violations under § 33-18-201(1), (4), (5), (6), (9), or (13), MCA. Section 33-18-242(1), MCA. As a threshold matter, a third-party claimant may not file an action under this section until after the underlying claim has been settled. Section 33-18-242(6)(b), MCA. However, an insurer may not be held liable under the UTPA if the insurer had a reasonable basis in law or in fact for their actions with regard to settlement. Section 33-18-242(5), MCA.
¶18 As a threshold, the underlying claim was settled. Marshall's complaint alleged an independent cause of action under the UTPA for the Defendants' violations of their duties and obligations under § 33-18-201(1), (4), (6), and (13), MCA, all relating to the Defendants use of the collateral source statute as an offset to reduce compensation to Marshall. Specifically, Marshall alleged the Defendants failed to conduct an investigation into whether the collateral source statute applied and whether Marshall would be fully compensated. Section 33-18-201(1), MCA. Marshall further alleged the Defendants failed to properly consider the application of the collateral source statute as a deduction; refused to pay claims without conducting a reasonable investigation based upon all available information; and neglected to attempt in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear. Section 33-18-201 (4), (6), MCA. Marshall alleged she was entitled to relief by recovering full payment of her damages because the Defendants unlawfully reduced her damages. Taking Marshall's complaint as true, only for purposes of a Rule 12(b)(6) motion to dismiss, we conclude that Marshall has sufficiently pled a claim under the UTPA for which relief may be granted.
¶19 The District Court further made a sweeping statement that, even if Marshall had an independent cause of action, "the claim must fail because the Defendants had a reasonable basis in law for the position they took on the collateral source issue." Section 33-18-242(5), MCA, provides that an insurer may not be held liable for violating the UTPA if the insurer had a reasonable basis in law for their actions. Questions of reasonableness are generally factual matters properly answered by the finder of fact. Redies v. Attys. Liab. Prot. Soc'y , 2007 MT 9, ¶ 30, 335 Mont. 233, 150 P.3d 930. However, this Court has adopted two exceptions to this rule where the insurer's reasonableness is a question of law for the court to decide: (1) where there was clearly no insurance policy in effect at the time the injury occurred; and (2) where the insurer's basis in law was grounded on a legal conclusion and no issues of fact remained in dispute. Redies , ¶¶ 31-32 (citing Watters v. Guaranty Nat. Ins. Co ., 2000 MT 150, ¶ 69, 300 Mont. 91, 3 P.3d 626 ). The applicable exception in this case would be the second exception.
¶20 Here, it was improper for the District Court to determine whether the Defendants acted reasonably absent a determination the Defendants reasonable basis was solely grounded on a legal conclusion and no issues of fact remained in dispute. Even if the Defendants had a reasonable basis to apply the collateral source statute based on Miller and Winstead v. State Farm , the District Court failed to consider the plain language of the collateral source statute and whether it was applicable in Marshall's case. It is inappropriate for this Court to resolve the question here; such determination is more appropriate on a motion for summary judgment. Accordingly, we determine Marshall had sufficiently pled an independent cause of action under the UTPA to overcome the Defendants' joint motion to dismiss.
CONCLUSION
¶21 For these reasons, we reverse the judgment of the District Court which dismissed Marshall's complaint pursuant to M. R. Civ. P. 12(b)(6), and remand for further proceedings consistent with this opinion.
¶22 Reversed and remanded.
We concur:
MIKE McGRATH, C.J.
JAMES JEREMIAH SHEA, J.
DIRK M. SANDEFUR, J.
LAURIE McKINNON, J.
A threshold requirement to file an action alleging UTPA violations is that the underlying claim has been settled. Section 33-18-242(6)(b), MCA. In Miller , the underlying claim had not been settled and therefore Miller could not file an action alleging any UTPA violations. Miller , ¶ 16.
The Ninth Circuit cited Miller for the proposition that "consideration of the collateral source statute during settlement negotiations is not actionable under the UTPA."Winstead v. State Farm Mut. Auto. Ins. Co. , 669 Fed. Appx. 910 (9th Cir. 2016). However, this is a misstatement of Miller . In Miller , we did not address whether consideration of the collateral source statute was an actionable UTPA violation because no UTPA violations were alleged by Miller. Miller , ¶¶ 13, 16. | [
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Chief Justice Mike McGrath delivered the Opinion of the Court.
¶ 1 Teton Cooperative Reservoir Company (Teton Reservoir) appeals an April 27, 2016 order of the Montana Water Court in Case 41O-84, adjudicating Teton Reservoir's water rights. Teton Cooperative Canal Company (Teton Canal) and Farmers Cooperative Canal Company (Farmers) cross-appeal. We affirm.
¶ 2 We restate the issues on appeal as follows:
Issue One: Whether the Water Court erred in determining that Teton Reservoir's 1902 Notice of Appropriation was valid.
Issue Two: Whether the Water Court erred by applying the equitable doctrine of laches to Teton Reservoir's 1902 Notice of Appropriation.
Issue Three: Whether the Water Court erred in decreeing Teton Reservoir an annual volume totaling 60,000 acre feet for storage in the Bynum Reservoir.
Issue Four: Whether the Water Court erred in refusing to limit Teton Reservoir's wintertime diversions to one-half of the available water in the Teton River.
FACTUAL AND PROCEDURAL BACKGROUND
¶ 3 Teton Reservoir is one of four irrigation companies located on the Teton River. Teton Reservoir was incorporated in May 1906, for the purposes of acquiring, developing, and improving the Bynum Reservoir and to complete one or more diversion canals to take water from the Teton River to the reservoir. Teton Reservoir has acquired four water rights. Teton Reservoir filed a Statement of Claim for each of its four water rights in the current water right adjudication process for the Teton River Basin. However, the only water right claim contested from the Water Court's Order is the claim based on the 1902 Notice of Appropriation (1902 Notice) filed by Donald Bradford (Bradford).
¶ 4 Bradford filed a Notice of Appropriation claiming 3,000 cfs from the Teton River on July 3, 1902. The stated purpose of the 1902 Notice was "for the purpose of irrigating and reclaiming lands lying in said Teton County." The 1902 Notice did not identify a reservoir. Shortly thereafter, Bradford commissioned a survey of the project. Engineer Walter Mathews (Mathews) performed the survey and on November 29, 1902, Mathews filed his survey report. Mathews identified a point of diversion, a reservoir with a 69,500 acre feet capacity, and surveyed over twenty-nine miles of distribution canals. Once Mathews's survey was approved by the Government Land Office (GLO), Bradford acquired the rights of way and tried to obtain funding for the project to develop a canal and reservoir system.
¶ 5 By 1906, Bradford was unable to obtain funding to develop the reservoir and canal system and conveyed the 1902 Notice and the rights of way to the Wagnild group. The Wagnild group incorporated Teton Reservoir in May 1906. Teton Reservoir obtained the funding to develop the Bynum reservoir and canal system (Bynum System). Between 1906 and 1909 construction on the Bynum System progressed. In 1907, the original diversion point was completed. In 1909, Teton Reservoir began to pursue a potential Carey Act project to acquire more land for irrigation.
Pursuing the Carey Act project led to internal conflict among Teton Reservoir's shareholders. Teton Reservoir's shareholders were in direct conflict with one another until 1914. Despite the internal conflicts, Teton Reservoir continued to make progress on the Bynum System. In 1910 and 1911, several engineers discovered problems with the design and construction of the dam that required resolving before Teton Reservoir could divert any water. By 1915, Teton Reservoir had relocated the diversion point because the original diversion point was in a poor location on the river, and it had resolved the dam's design problems. The 1962 Teton County Water Resource survey indicated that Strabane Gage Station started diverting floodwaters to the Bynum Reservoir in 1918.
¶ 6 In 1919, GLO Commissioner Tillman inspected the reservoir site and questioned the proposed Carey Act project. The Water Court found that the inspection marked a shift by Teton Reservoir to return to the original plan to develop the Bynum System and abandon the Carey Act project. Teton Reservoir's board officially abandoned the Carey Act project in 1925 by resolution. Due to Tillman's inspection, local irrigators began to promote formation of the Bynum Irrigation District (BID). In 1920, BID was established. The BID commissioned an engineer to evaluate the status of the Bynum System. Engineer S.B. Robbins issued his report on November 10, 1920, providing recommendations to improve the Bynum System so that it could divert and store water to its fullest capacity. However, BID could not finish the Bynum System until it received approval to sell bonds. Between 1920 and 1925, Teton Reservoir maintained the Bynum System. In 1925, BID received approval to sell bonds, bought eighty percent of Teton Reservoir's stock, and began implementing Engineer Robbins' recommendations. By 1927, Teton Reservoir's current point of diversion, intake canal, reservoir, and distribution canals were in place. When completed, the Teton Reservoir's diversion canal capacity was 1,000 cfs and the Bynum Reservoir had a capacity between 85,000 and 90,000 acre feet.
¶ 7 During that period, Teton Canal developed limited water storage in the Glendora Reservoir under its 1890 Notice of Appropriation.
Teton Co-Op. Canal Co. v. Teton Coop. Reservoir Co ., 2015 MT 344, 382 Mont. 1, 365 P.3d 442 (hereinafter Teton Canal I ). In 1936, Teton Canal expanded its water storage capacity with the development of the Eureka Reservoir. Teton Canal again expanded the Eureka Reservoir in 1947 and 1957. Teton Canal I , ¶ 14. In 2015, this Court determined that the Eureka Reservoir use could not relate back to Teton Canal's 1890 Notice and must be given a separate priority date. Teton Canal I , ¶¶ 55, 57. We affirmed the Water Court's determination that the priority date for the Eureka Reservoir is December 7, 1936. Teton Coop. Canal Co. v. Teton Coop. Reservoir Co. , 2018 MT 20, ¶ 17, 390 Mont. 210, 412 P.3d 1.
¶ 8 In 1908, the District Court issued a decree adjudicating water rights on the upper Teton River. Perry v. Beattie , Case No. 371 (Mont. 11th Judicial Dist., March 28, 1908) (hereinafter Perry decree). The Perry decree adjudicated Teton Canal's predecessors' and Farmers' predecessors' water rights. Teton Reservoir was not a party to the Perry decree. Significantly, Teton Reservoir never sought to reopen the Perry decree to establish its water rights in relation to other appropriators.
¶ 9 Historically, Teton Reservoir's water rights have been administered by the water commissioner appointed by the District Court to distribute water under the Perry decree. In 1946, the water commissioner refused to turn water into Teton Reservoir's ditch, and Teton Reservoir passed a resolution instructing the directors to take steps to clarify Teton Reservoir's water rights. However, the Water Court found no evidence indicating that effort had been undertaken. In 1952, the water commissioner again shut off Teton Reservoir's water diversion to provide water to Farmers. Teton Reservoir objected but did not file a formal dissatisfied water user complaint. Teton Reservoir, Farmers, and the water commissioner met with the District Court to discuss the administration of water. In 1953, the District Court directed the water commissioner to continue delivering the total decreed right to Farmers before Teton Reservoir. Teton Reservoir did not dispute the District Court's direction.
¶ 10 In 2006, for the first time, Teton Reservoir filed formal objections to Teton Canal's water right claims. The objection asserted that the Eureka Reservoir use could not relate back to Teton Canal's 1890 Notice. In 2009, Teton Reservoir filed a Dissatisfied Water User Complaint in District Court because Water Commissioner Leonard Blixrud reduced Teton Reservoir's flow to half the available flow in the Teton River. Teton Reservoir alleged that the water commissioner did not have the authority to administer Teton Reservoir's water rights as they were not part of the Perry decree. Teton Reservoir sought injunctive relief to restrain the water commissioner from interfering with its diversions. On September 21, 2009, the District Court resolved Teton Reservoir's Dissatisfied User Complaint, finding that Teton Reservoir had voluntarily participated in the administration of the Perry decree for nearly forty-seven years and it was judicially estopped from asserting otherwise.
¶ 11 Specifically, the District Court determined:
[Teton Reservoir] has known since the first appointment of a water commissioner over 47 years ago, that is was not a decreed water user under the Perry v. Beattie decree. [Teton Reservoir] has maintained its position of participating with the decree's administration for the past 47 years. Water reports of [Teton Reservoir's] water usage since 1964 have been filed in these legal proceedings; [Teton Reservoir] has paid the water commissioner since 1964 for its water; and [Teton Reservoir] has benefited from consistent management by a water commissioner of [Teton Reservoir's] water for the past 47 years. ... Lastly, to allow [Teton Reservoir] to change its position would disrupt the orderliness and consistency of water distribution along the Teton River. [Teton Reservoir] is the largest off stream reservoir on the Teton. [Teton Reservoir's] reservoir, Bynum, has a holding capacity of 90,000 acre feet of water. [Teton Reservoir] seeks annually to fill Bynum to capacity. Other storage appropriators such as Farmers' and [Teton Canal] store water and rely on distribution of water during the non-irrigation season as well. To allow an unregulated upstream diversion to [Teton Reservoir's] reservoir would be injurious to these other storage rights and decreed users downstream who have come to rely on the water commissioner's control and regulation of [Teton Reservoir's] water usage.
However, the District Court recognized that "the significance of prior history and usage set forth in the depositions of Judge McPhillips and Commissioner Bud Olson will be for the Montana Water Court and not this Court to decide" and "this Court has no authority to decrease a water right in order to avoid a cessation of in-stream flow."
¶ 12 Beginning on December 10, 2012, the Water Court held a four-day hearing to adjudicate Teton Reservoir's water rights. Bud Olson, who served as the water commissioner from 1962 to 2000, testified that he consistently delivered water to Teton Reservoir even though it was not a part of the Perry decree. Olson treated Farmers and Teton Canal as senior to Teton Reservoir for all water deliveries. Olson further testified that he would limit Teton Reservoir's wintertime diversions based on requests of the Department of Montana Fish, Wildlife, and Parks (the Department) for instream flow. Olson noted that the request by the Department was one he chose to respect and was not dictated by any decreed water right.
¶ 13 Subsequent water commissioners followed Olson's policy of treating Teton Reservoir as junior to those rights in the Perry decree. Leonard Blixrud, a former Farmers officer, board member, and water commissioner followed Olson's policy. Blixrud testified that: (1) Teton Reservoir's water was administered as junior to Farmers and Teton Canal, (2) if Teton Reservoir's 1902 Notice had senior priority it would take everything in the river and effectively "destroy" Farmers and seriously impact Teton Canal, and (3) Farmers and Teton Canal shareholders rely on Teton Reservoir's water being administered as a junior right to obtain enough irrigation water to stay in business.
¶ 14 Teton Canal shareholder Charles Crane also opposed giving Teton Reservoir's 1902 Notice senior priority. Crane testified that stored water in the Eureka Reservoir allows Teton Canal shareholders to irrigate late into the growing season when its priority is out of date, and that without the stored water in the Eureka Reservoir, Teton Canal would be out of water by July 1st most years. He asserted that changing past practice would have a serious impact on the ability of Teton Canal and its shareholders to meet their financial obligations.
¶ 15 BID president and Teton Reservoir board member Mark DeBruycker testified regarding Bynum Reservoir's volume. DeBruycker stated that Teton Reservoir estimates total available volume each year and limits the annual allotment to fifty percent of the available water. DeBruycker testified a full allotment requires diverting 40,000 acre feet. DeBruycker indicated that Teton Reservoir's practice favors carryover water for the next year rather than increasing the allotment to its shareholders because of the uncertainty of available flow from year to year.
¶ 16 The Teton River water commissioner records and Teton Reservoir's table of reservoir levels provide limited historical information on Teton Reservoir's diverted volume to the Bynum Reservoir. However, the 1962 Teton County Water Resources Survey stated that the "average annual storage is 75,000 acre feet with a drawdown of about 35,000 to 40,000 acre feet of water used during the irrigation season." Upon examination of these records along with DeBruycker's testimony, the Water Court found that Teton Reservoir diverted as much water as possible when it was available. The Water Court determined that Teton Reservoir had two goals: (1) provide its shareholders full allotment, and (2) store sufficient carryover water for the following year.
¶ 17 John Peebles also testified regarding the flow amount Teton Reservoir diverts during wintertime. John Peebles owns property downstream from Teton Reservoir's point of diversion. He testified that Teton Reservoir often takes the entire flow of the river during its wintertime diversions. The Water Court noted the November 1985 water commissioner's record also indicated that Teton Reservoir was getting the entire flow.
¶ 18 After the four-day hearing, the Water Court issued an Order on April 27, 2016. The Water Court concluded: (1) Teton Reservoir is barred by laches from claiming senior priority of its 1902 Notice; (2) Teton Reservoir's 1902 Notice complied with the 1885 Montana Appropriation Act; (3) Teton Reservoir is entitled to a 60,000 acre feet volume limit on its 1902 Notice for the Bynum Reservoir; and (4) Teton Reservoir is not restricted to one-half of the available flow in the Teton River during its wintertime diversions.
STANDARD OF REVIEW
¶ 19 This Court reviews the Water Court's decisions using the same standards applied to district court decisions. Teton Co-op. Reservoir Co. v. Farmers Coop. Canal Co ., 2015 MT 208, ¶ 9, 380 Mont. 146, 354 P.3d 579. We review the Water Court's findings of fact to determine if they are clearly erroneous. Skelton Ranch, Inc. v. Pondera Cnty. Canal & Reservoir Co. , 2014 MT 167, ¶ 26, 375 Mont. 327, 328 P.3d 644. A finding of fact is clearly erroneous if it is not supported by substantial evidence, if the trial court misapprehended the effect of the evidence, or if after reviewing the entire record this Court is left with the definite and firm conviction that a mistake was committed. Skelton Ranch, Inc ., ¶ 27. Evidence is substantial if "a reasonable mind might accept [it] as adequate to support a conclusion, even if the evidence is weak or conflicting. It need not amount to a preponderance of the evidence, but it must be more than a scintilla." Skelton Ranch, Inc ., ¶ 27. We review the Water Court's conclusions of law to determine if they are correct. Skelton Ranch, Inc ., ¶ 26 ; Wicklund v. Sundheim , 2016 MT 62, ¶ 9, 383 Mont. 1, 367 P.3d 403.
DISCUSSION
¶ 20 Issue One: Whether the Water Court erred in determining that Teton Reservoir's 1902 Notice of Appropriation was valid.
¶ 21 A properly filed statement of claim for an existing water right "constitutes prima facie proof of its content ...." Section 85-2-227(1), MCA ; W.R. Adj. R. 19. This prima facie validity may be overcome if the objector "prove[s] by a preponderance of the evidence that the elements of the original claim 'do not accurately reflect the beneficial use of the water right as it existed prior to July 1, 1973.' " Nelson v. Brooks , 2014 MT 120, ¶ 37, 375 Mont. 86, 329 P.3d 558 (quoting W.R. Adj. R. 19). Teton Reservoir properly filed its statement of claim for existing water rights; accordingly, the claim serves as prima facie evidence that the information contained in it is true. Section 85-2-227(1), MCA ; W.R. Adj. R. 19. Therefore, Teton Canal and Farmers had the "burden to show by a preponderance of the evidence that the information in the claim is incorrect." Marks v. 71 Ranch, Ltd. P'ship , 2014 MT 250, ¶ 16, 376 Mont. 340, 334 P.3d 373 (citations omitted).
¶ 22 In its cross-appeal, Teton Canal argues that Teton Reservoir's 1902 Notice failed to comply with Montana's 1885 Appropriation Act (1885 Act). Teton Canal argues that the 1902 Notice had several fatal flaws, including: (1) the place of intended use description was vague; (2) it failed to identify a reservoir; (3) Bradford's intent was speculative when filed; and (4) it failed to construct the canal and reservoir system with reasonable diligence.
¶ 23 Teton Reservoir argues that the 1902 Notice complied with Montana's 1885 Act. More specifically, Teton Reservoir contends that the 1885 Act does not require a specific place of use description or require identification of a storage reservoir. Teton Reservoir further maintains that under the 1902 Notice it exercised reasonable diligence in constructing the Bynum System in compliance with the statute.
¶24 The 1885 Act required a notice of appropriation to state the quantity of claimed water and the purpose of claimed water, as well as the place of intended use, means of diversion, date of appropriation, name of appropriator, name of stream, and an accurate description of point of diversion. Section 89-810, RCM (1947) (repealed 1973). When filing a notice of appropriation, "the claimant must have an intention to apply the water to a useful or beneficial purpose." Bailey v. Tintinger , 45 Mont. 154, 178, 122 P. 575, 583 (1912). An appropriator's intent must be determined by acts and surrounding circumstances at the time of the appropriation. Wheat v. Cameron , 64 Mont. 494, 501, 210 P. 761, 763 (1922). Under the 1885 Act, Teton Reservoir's 1902 Notice could not "ripen into a valid appropriation until the ... statutory requirements for a completed appropriation [were] met." Montana Dep't of Natural Resources & Conservation v. Intake Water Co. , 171 Mont. 416, 431, 558 P.2d 1110, 1118 (1976). Section 89-811, RCM (1947) (repealed 1973), provided that an appropriator has a valid appropriation if the appropriator "proceeds to prosecute the excavation or construction of the work by which the water appropriated is to be diverted." In Intake , we interpreted § 89-811, RCM, concluding that an appropriator is not required to commence "actual on-site excavation or construction of the diversion works" to preserve its priority date, but the appropriator must demonstrate that it made a "steady on-going effort in good faith ... to prosecute the construction of the project under the circumstances." Intake , 171 Mont. at 436, 558 P.2d at 1121 ; Teton Canal I , ¶ 45.
¶ 25 Teton Canal argues that the place of intended use and omission to identify a reservoir invalidated Teton Reservoir's 1902 Notice. The 1902 Notice claimed 3,000 cfs from the Teton River "for the purposes of irrigation and reclaiming lands by lying in said Teton County." The 1902 Notice identified the intended place of use as Teton County. There was no statutory requirement that the intended place of use description had to include a specific land description. The Water Court found that diverting 3,000 cfs would require irrigating a large area and therefore the description of "Teton County" was sufficient. The Water Court correctly determined that the 1902 Notice's intended place of use was sufficient. Further, the statutory requirement for a valid notice of appropriation did not require that an appropriator identify a specific reservoir at the time of filing of a water right. The Water Court correctly determined failure to identify a reservoir in the notice of appropriation did not invalidate Teton Reservoir's 1902 Notice.
¶ 26 Teton Canal also asserts that Bradford's intent at the time of filing was speculative. The record reflects that when Bradford filed the 1902 Notice he intended to develop a large water diversion and storage system for the purpose of "irrigating and reclaiming lands in Teton County." Upon filing the 1902 Notice, Bradford commissioned a survey by Mathews. Mathews filed his report with the GLO on November 29, 1902. The report and survey provided details for the project Bradford intended to develop. Mathews's report included a survey of a reservoir with a capacity of 69,500 acre feet and twenty-nine miles of distribution canals. Additionally, in 1903, Bradford acquired the rights of way for the Bynum System from the GLO. Bradford's acts and surrounding circumstances at the appropriation show his intent to create a large diversion and reservoir system for the purpose of irrigation in Teton County. The Water Court correctly determined that Bradford showed intent to develop a large diversion and reservoir system under the 1902 Notice and planned to put such water to beneficial use.
¶ 27 Finally, Teton Canal argues that the Bynum System was not prosecuted with due diligence under the 1902 Notice. Bradford filed his Notice of Appropriation on July 3, 1902. Between July 3, 1902, and 1906, Bradford commissioned a survey, acquired the rights of way, and tried to obtain funding for the project to develop the Bynum System. In 1906, the 1902 Notice and all of the rights of way were conveyed to Teton Reservoir. From 1906 to 1909, Teton Reservoir progressed with the construction of the Bynum System, including completing the original point of diversion.
¶ 28 In 1910 and 1911, engineers discovered problems with the design and construction of the Bynum Reservoir's dam, which required repairs before water could be stored. The Water Court found that Teton Reservoir resolved these issues by 1915. Additionally, in 1915, Teton Reservoir relocated the point of diversion. The Water Court found that the Bynum System was sufficiently developed by 1915 to divert some water, store that water, and deliver it to irrigators. In 1918, Teton Reservoir began diverting floodwaters into the Bynum Reservoir.
¶ 29 In 1920, an engineer was hired to assess the current status of the Bynum System. The engineer documented Teton Reservoir's ongoing issues with the headgate, intake canal, and dam. He made recommendations to improve the system. Between 1920 and 1925, Teton Reservoir maintained the Bynum System until it could finish the project. By 1925, BID received approval to sell its bonds and began improving the Bynum System. In 1927, Teton Reservoir's current point of diversion, intake canal, reservoir and distribution canals were completed.
¶ 30 The record reflects that Teton Reservoir made steady on-going efforts to prosecute the construction and development of the Bynum System. The evidence shows that after filing the 1902 Notice, Teton Reservoir's predecessors continued to develop the Bynum System despite construction and design issues and lawsuits until 1927. Although the evidence shows that the Bynum System was sufficiently developed by 1915 to divert some water, any water delivery "constitute[d] a fraction of the eventual capacity of the [Teton Reservoir's] system." The evidence further shows that after 1915, Teton Reservoir continued to develop and improve the Bynum System until the system was completed in 1927. Upon completion, the Bynum System could divert and store water to its fullest capacity as contemplated by the 1902 Notice. Based on the evidence, we conclude that Teton Reservoir sufficiently prosecuted the construction of the Bynum System with due diligence until its completion in 1927. Thus, Teton Reservoir complied with § 89-811, RCM (1947) (repealed 1973). The Water Court correctly concluded that the 1902 Notice was a valid appropriation under the 1885 Act.
¶ 31 Issue Two: Whether the Water Court erred by applying the equitable doctrine of laches to Teton Reservoir's 1902 Notice of Appropriation.
¶ 32 Teton Reservoir argues on appeal that the Water Court erred in determining that it is barred by laches from asserting its senior priority date over Teton Canal. Teton Reservoir contends that it was entitled to presume the water commissioners were properly distributing water according to priority and had no duty to reopen the Perry decree. Teton Reservoir further maintains that the Water Court erred when it relied on Teton Canal's conclusory statements showing prejudice.
¶ 33 Laches is an equitable remedy that can apply when a person is negligent in asserting a right.
Cole v. State ex rel. Brown , 2002 MT 32, ¶ 24, 308 Mont. 265, 42 P.3d 760 (citations omitted). Laches exists "where there has been an unexplainable delay of such duration or character as to render the enforcement of an asserted right inequitable, and is appropriate when a party is actually or presumptively aware of his rights but fails to act." Cole , ¶ 24 (quoting Larson v. Undem , 246 Mont. 336, 340, 805 P.2d 1318, 1321 (1990) ). Laches is not a mere matter of elapsed time, but rather, it is principally a question of the inequity of permitting a claim to be enforced. Cole , ¶ 25 (citing Hunter v. Rosebud Cnty. , 240 Mont. 194, 199, 783 P.2d 927, 930 (1989) ).
¶ 34 Laches applies only if the court finds lack of diligence by the party against whom the defense is asserted and prejudice to the party asserting the defense. Wicklund , ¶ 40 (internal citations omitted). Lack of diligence may be demonstrated when a claimant contemporaneously believes another is violating his or her right, yet the claimant allows the alleged unlawful act to continue without objection. Algee v. Hren , 2016 MT 166, ¶ 9, 384 Mont. 93, 375 P.3d 386. A party is held to be presumptively aware of his rights where the circumstances of which he is cognizant are such as to put a person of ordinary prudence on inquiry. Cole , ¶ 24. A party asserting laches must provide evidence, more than conclusory statements, to prove prejudice. Anderson v. Stokes , 2007 MT 166, ¶¶ 20-21, 338 Mont. 118, 163 P.3d 1273.
¶ 35 In this case, the Water Court found that Teton Reservoir failed to assert its senior priority water right to the prejudice of Teton Canal. This lack of diligence can be traced to 1936, the year that Teton Canal developed the Eureka Reservoir. Teton Reservoir was aware of Teton Canal's development of the Eureka Reservoir and that the Eureka Reservoir would provide additional water storage not previously available to Teton Canal. Teton Canal began storing water in the Eureka Reservoir in 1937. Teton Reservoir was further aware of Teton Canal's expansions of the Eureka Reservoir in 1947 and 1957. However, at no point, until objections were filed in 2006, did Teton Reservoir contend that Teton Canal's storage right in the Eureka Reservoir was junior to its 1902 Notice.
¶ 36 Moreover, Teton Reservoir knew its 1902 Notice was not adjudicated in the Perry decree in 1908. Teton Reservoir allowed the Perry decree to control the administration of its water rights despite not being a party to the decree. In 1946 and 1952, Teton Reservoir took issue with the water commissioner's administration of its water right, yet remained silent despite passing an internal resolution to clarify its water rights. Teton Reservoir could have filed a petition to reopen the Perry decree to establish its rights regarding the 1902 Notice but decided against it. Teton Reservoir allowed the Perry decree to control its diversions of water from the Teton River since at least 1940 despite knowing that its water rights were not adjudicated in the Perry decree. Thus, Teton Reservoir failed to diligently assert it had a senior priority water right.
¶ 37 For nearly seventy years, Teton Reservoir acquiesced in the water commissioners' administration, knowingly allowing Teton Canal to store water with a junior priority water right. The Water Court correctly concluded that Teton Reservoir's delay in bringing a claim for a senior priority right against Teton Canal constituted an unexplainable delay and was of such character as to render enforcement of its newly asserted right inequitable.
¶ 38 The Water Court also determined that enforcing Teton Reservoir's senior priority water right would be prejudicial to Teton Canal. The water commissioners administered water based on the Perry decree for nearly seventy years. Finally, in 2009, Teton Reservoir did challenge the authority of the water commissioner to administer water at its headgate. In the 2009 ruling on Teton Reservoir's Dissatisfied Water User Complaint, the District Court held:
[S]torage appropriators such as Farmers' and [Teton Canal] store water and rely on distribution of water during the non-irrigation season as well. To allow an unregulated upstream diversion to [Teton Reservoir's] reservoir would be injurious to these other storage rights and decreed users downstream who have come to rely on the water commissioner's control and regulation of [Teton Reservoir's] water usage.
The Water Court determined that Teton Canal would be injured because it has come to rely on the water commissioner's administration of Teton Reservoir's 1902 Notice as junior to the Perry decreed rights.
¶ 39 Teton Reservoir argues that the Water Court relied on conclusory statements to find prejudice. However, the record supports that allowing Teton Reservoir to assert its senior priority would be injurious to Teton Canal. Teton Reservoir's reservoir, Bynum, is the largest off-stream reservoir of the Teton River. Teton Reservoir has a maximum holding capacity of 90,000 acre feet. In comparison, Teton Canal's Eureka Reservoir has a maximum holding capacity of 5,500 acre feet.
Teton Canal I , ¶ 14. The testimony of Blixrud and Crane asserted that allowing Teton Reservoir to have senior priority would deplete the water in the river and compromise Teton Canal's ability to store water it has relied on for the past seventy years. Crane testified it would adversely affect Teton Canal shareholders because water stored in the Eureka Reservoir is instrumental in irrigating their crops late in the irrigation season. If Teton Canal is not able to fill the Eureka Reservoir, Teton Canal shareholders' businesses will be significantly impacted. Teton Canal and other storage appropriators under the Perry decree have come to rely on Teton Reservoir's junior priority status. There was significant evidence for the Water Court to determine that allowing Teton Reservoir to enforce a senior priority would prejudice Teton Canal. It has relied on Teton Reservoir's "junior priority" for nearly seventy years.
¶ 40 The Water Court correctly concluded that Teton Reservoir is barred by laches from asserting senior priority over Teton Canal for its 1902 Notice water right. Teton Reservoir's 1902 Notice and claim will be administered in the future as junior in priority to Teton Canal's 1936 Eureka storage right. We need not address whether the Water Court properly applied the doctrine of waiver because this issue is dispositive.
¶ 41 Issue Three: Whether the Water Court erred in decreeing Teton Reservoir an annual volume totaling 60,000 acre feet for storage in the Bynum Reservoir.
¶ 42 On cross-appeal, Farmers argues the Water Court erred in decreeing Teton Reservoir an annual volume for storage in the Bynum Reservoir in excess of Teton Reservoir's annual needs. Farmers further contends that Teton Reservoir is not entitled to carryover storage in the Bynum Reservoir. Teton Reservoir argues that it is entitled to 20,000 acre feet of carryover storage in the Bynum Reservoir. Teton Reservoir maintains that substantial evidence supports the Water Court's determination that Teton Reservoir was entitled to carryover storage.
¶ 43 Montana's Water Use Act requires that a final decreed water right must state the amount of water included in the right by volume for "reservoir storage rights." Section 85-2-234(6)(b)(i)-(ii), MCA. Water storage, which stabilizes and conserves water supplies, is encouraged in this state. Farmers , ¶ 12 (internal citations omitted). The controlling principle of Montana water law is the right to beneficially use water-without beneficial use, the right ceases. Curry v. Pondera Cnty. Canal & Reservoir Co ., 2016 MT 77, ¶ 25, 383 Mont. 93, 370 P.3d 440 (internal citations omitted). This Court has acknowledged that an appropriator may have a right to carryover storage in a reservoir for beneficial use in subsequent years. Federal Land Bank v. Morris , 112 Mont. 445, 456, 116 P.2d 1007, 1012 (1941) ; see McDonald v. State , 220 Mont. 519, 537, 722 P.2d 598, 609 (1986).
¶ 44 The record supports the Water Court's decision to limit Teton Reservoir to a volume amount of 60,000 acre feet for storage in the Bynum Reservoir, including 20,000 acre feet for carryover storage. The Water Court recognized that there is no evidence that provides a number for carryover water. Nevertheless, the totality of the circumstances supported a 20,000 acre feet volume limit for carryover storage. We agree.
¶ 45 The record reflects that Teton Reservoir's diversion amounts varied greatly from year to year and it has relied on carryover storage. The Water Court determined that 40,000 acre feet reflected the full allotment to Teton Reservoir shareholders. BID president DeBruycker testified that Teton Reservoir favored carryover water for next year rather than increasing the allotment to its shareholders. The 1962 Teton County Water Resource survey stated the Bynum Reservoir "average annual storage is 75,000 acre feet with a drawdown of about 35,000 to 40,000 acre feet of water used during the irrigation season." The record further supports that Teton Reservoir diverted as much water as it could but rarely filled the reservoir in one year. The Water Court noted the lack of evidence of the amount Teton Reservoir diverted each year for carryover storage stating, "the amount of carryover is less clear, but an additional 20,000 AF is a reasonable figure representing a high average of [Teton Reservoir's] historical diversions." The Water Court relied on what little information was provided by the water commissioner records and Teton Reservoir's table of reservoir levels. The Water Court further recognized there is no evidence indicating that Teton Reservoir's practices in regard to carryover storage have ever resulted in wasting water. Taken together, the record supports the Water Court's determination that Teton Reservoir historically has diverted and relied on carryover storage in the Bynum Reservoir. The Water Court's assignment of 20,000 acre feet of carryover storage in the Bynum Reservoir was supported by substantial evidence.
¶ 46 Issue Four: Whether the Water Court erred in refusing to limit Teton Reservoir's wintertime diversions to one-half of the available water in the Teton River.
¶ 47 On cross-appeal, Farmers also argues that the Water Court erred by not limiting Teton Reservoir to one-half available flow during wintertime diversions. Specifically, Farmers contends the Water Court misapprehended the evidence regarding the water commissioners' historical water management practice. Teton Reservoir argues the Water Court did not err because there was substantial evidence to support that Teton Reservoir's wintertime diversions were not limited to one-half of the available flow. Teton Reservoir maintains that the Water Court did not misapprehend the evidence. The Water Court found that "the evidence at hearing indicates that Water Commissioners Olson and Blixrud did attempt to limit [Teton Reservoir] winter diversions to half the available flow in the Teton River." Despite this evidence, the Water Court determined that this water management tool was not administering any decreed water right or applied in any consistent way.
¶ 48 Farmers argues that the District Court's 2009 order on Teton Reservoir's Dissatisfied Water User Complaint should control. In the order, the District Court directed the water commissioner to reduce the amount of water being diverted to Teton Reservoir "to be consistent with the prior practice of allowing half the river to flow downstream." District courts are granted the authority to supervise the distribution of water that has already been adjudicated and to enforce such water decrees. Baker Ditch Co., 251 Mont. at 255, 824 P.2d at 260 ; § 85-2-406(3), MCA. However, district courts are not vested with the power to determine existing water rights. Section 3-7-501, MCA. Thus, a district court is bound by the existing water decree. Baker Ditch Co., 251 Mont. at 255, 824 P.2d at 260. Therefore, the District Court's order resolving Teton Reservoir's Dissatisfied Water User Complaint did not alter Teton Reservoir's water right and is not controlling in the adjudication of Teton Reservoir's water right by the Water Court.
¶ 49 The Water Court determined that limiting Teton Reservoir to one-half of the available water from the Teton River during its wintertime diversion was a practice or tool implemented by the court-appointed water commissioners to manage the water rights on the Teton River. The water commissioners limited Teton Reservoir's diversion because the Department of Fish, Wildlife and Parks requested that it do so. The Department was not a party under the Perry decree. Teton Reservoir's water right does not contain a provision that restricts its water rights from being enforced in order to avoid a cessation of instream flow. Limiting Teton Reservoir's wintertime diversions to conserve water under the authority of the water commissioners is not based on Teton Reservoir's water right. Thus, the Water Court correctly decreed Teton Reservoir's wintertime diversion based on the 1902 Notice rather than on a practice implemented by the water commissioners.
¶ 50 The Water Court was free to determine based on the evidence available whether Teton Reservoir's water right historically had been limited to one-half of the available flow. Based on the record, the Water Court determined that Teton Reservoir was not limited to one-half of the available flow and there is no indication in the water commissioner records that such a policy was implemented or applied with consistency. The Water Court gave more weight to the testimony of Peebles and the water commissioner records than the testimony of previous water commissioners stating that such policy was implemented. The Water Court's refusal to limit Teton Reservoir's wintertime diversions to one-half of the available flow based on water commissioners' diversion practices was supported by substantial evidence.
CONCLUSION
¶ 51 The Water Court's determination that Teton Reservoir's 1902 Notice was validly appropriated under the 1885 Act was correct. The Water Court's determination that Teton Reservoir is barred by the equitable doctrine of laches from claiming senior priority to Teton Canal's water right is also affirmed. With respect to Farmers' cross-appeal, the Water Court did not err in assigning the Bynum Reservoir a 60,000 acre feet volume limit, including 20,000 for carryover storage, and refusing to limit Teton Reservoir's wintertime diversions.
¶ 52 Affirmed.
We Concur:
JIM RICE, J.
DIRK M. SANDEFUR, J.
JAMES JEREMIAH SHEA, J.
BETH BAKER, J.
The Carey Act was passed in 1894 by the federal government to promote settlement and irrigation of public lands in the West. Specifically, the Act provided a grant of up to one million acres of federal land to each western state "free of cost" if the State could cause such lands to be "irrigated, reclaimed, occupied and not less than twenty acres of each one hundred and sixty acre tract cultivated by actual settlers." 43 U.S.C. § 641.
The 1902 Notice claimed 3,000 cfs. However, Teton Reservoir only claimed 1,000 cfs for its claim, 41O 113433-00.
The Water Court speculated that Teton Reservoir's predecessor was not a party to the Perry decree because Teton Reservoir was not diverting any water by 1908.
By statute, the water court is vested with exclusive jurisdiction relative to all matters relating to the determination of existing water rights within the boundaries of the State of Montana. Section 3-7-501, MCA ; Baker Ditch Co. v. District Court, 251 Mont. 251, 255, 824 P.2d 260, 260 (1992). District courts are granted the authority to supervise the distribution of water that has already been adjudicated and to enforce such water decrees. See § 85-2-406(3), MCA. The district court is bound by the existing water right decrees. Baker Ditch Co., 251 Mont. at 255, 824 P.2d at 260.
Storage in a reservoir may be added after a notice of appropriation is filed to an existing direct flow water right as long as addition of storage does not interfere with the rights of other appropriators. See Whitcomb v. Helena Water Works Co ., 151 Mont. 443, 449, 444 P.2d 301, 304 (1968).
Section 89-835, RCM (1947) (repealed 1973), provided that any time after the entry of a decree, any person who had or claimed a valid water right, prior to the entry of the decree, may petition the court which entered the previous decree for an order making him a party to such decree and establishing his right.
The Act gives the Water Court discretion to declare both flow rate and volume if the water judge determines that both are needed "to adequately administer the right." Section 85-2-234(6)(b)(iii), MCA.
Farmers does not appeal the allocation of 40,000 acre feet representing full allotment to shareholders.
The Water Court noted that the Ownership Index for Basin 41O did not include a Montana Department of Fish, Wildlife and Parks water right claim for the Teton River. | [
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] |
Justice Laurie McKinnon delivered the Opinion of the Court.
¶1 Kristy Brockway, mother of minor child L.R.S., appeals from an order of the Sixth Judicial District Court, Park County, granting Vicki Rae Schwarz and Quentin Gotfried Schwarz, L.R.S.'s paternal grandparents, visitation. We reverse and remand for further proceedings.
¶2 We restate the issue on appeal as:
Absent a consideration of whether the minor child's mother was fit, did the District Court err in awarding visitation, pursuant to § 40-4-228, MCA, to the child's paternal grandparents over mother's objection?
FACTUAL AND PROCEDURAL BACKGROUND
¶3 Kristy Brockway (Mother) and Austin Schwarz (Father) are L.R.S.'s parents. Mother and Father divorced when L.R.S. was a baby, and as part of their dissolution proceeding stipulated to a fifty-fifty parenting schedule. After the parties separated, Father lived with his parents, Vicki and Quentin Schwarz (Grandparents), and, accordingly, L.R.S. also lived with Grandparents during Father's parenting time. Father's brother, Tristan Schwarz, lived with Grandparents as well. Both Father and Tristan struggled with chemical dependency and addiction issues.
¶4 When Father's dependency problems came to light, Mother and Grandparents became concerned with Father's ability to parent L.R.S. Eventually, Father began an out-of-state inpatient treatment program and the District Court ordered that any contact between Father and L.R.S. needed to be approved by L.R.S.'s counselor. Grandparents remained close with L.R.S. and worked with Mother to facilitate visitation. The parties' relationship became strained, however. Mother did not want Tristan around L.R.S. and further requested that Grandparents not discuss Father with L.R.S. Instead, she requested that Grandparents redirect any of L.R.S.'s questions about Father back to her. Mother observed that her instructions were not being followed, as L.R.S. had contact with Tristan and Grandparents discussed Father with L.R.S. Thus, Mother was no longer comfortable with L.R.S.'s contact with Grandparents and stopped allowing visitation.
¶5 Grandparents subsequently filed a petition in District Court, seeking visitation with L.R.S. After a hearing, the District Court issued an order awarding Grandparents visitation pursuant to § 40-4-228(3), MCA, finding that visitation with Grandparents was in L.R.S.'s best interests as analyzed under § 40-4-212, MCA. Mother appeals that order.
STANDARD OF REVIEW
¶6 We review a district court's interpretation and application of statutes for correctness. Polasek v. Omura , 2006 MT 103, ¶ 8, 332 Mont. 157, 136 P.3d 519.
DISCUSSION
¶7 Mother appeals the District Court's order awarding Grandparents visitation. She contends that the District Court misapplied Montana law by failing to determine her fitness as a parent before granting Grandparents visitation. Grandparents respond, arguing that the District Court did not have to determine whether Mother was a fit parent because they stipulated to the fact that she was. Thus, they contend that the District Court acted appropriately in granting them grandparent visitation with L.R.S.
¶8 Natural parents have "a fundamental constitutional right to make decisions concerning the care, custody, and control of their children." Polasek , ¶¶ 14-15 (quoting Troxel v. Granville , 530 U.S. 57, 66, 120 S.Ct. 2054, 2060, 147 L.Ed.2d 49 (2000) ) (internal quotations omitted); accord Glueckert v. Glueckert , 2015 MT 107, ¶ 11, 378 Mont. 507, 347 P.3d 1216 ;
In re C.T.C. , 2014 MT 306, ¶ 18, 377 Mont. 106, 339 P.3d 54. Thus, it is presumed that "a fit parent's wishes are in the best interests of the child." In re C.T.C. , ¶ 14 (citing Polasek , ¶ 15, and In re Grandparent/Grandchild Contact of C.A.G. , 2014 MT 290, ¶¶ 12, 14, 376 Mont. 540, 337 P.3d 751 ). Given parents' constitutional rights to make decisions concerning the care, custody, and control of their children, courts must follow specific statutory guidelines when granting a nonparent's visitation request over a parent's objection. Snyder v. Spaulding , 2010 MT 151, ¶¶ 10-18, 357 Mont. 34, 235 P.3d 578 (explaining how, following our analysis in Polasek , the Legislature amended § 40-9-102, MCA, to better protect parents' constitutional rights).
¶9 There are multiple statutes regarding nonparent visitation requests and the petitioner's relationship with the child dictates which statute applies. On one hand, a "nonparent" may seek visitation with a child under § 40-4-228, MCA. On the other hand, and more specifically, a "grandparent" may seek visitation with a child under § 40-9-102, MCA. Under the rules of statutory interpretation as set forth in § 1-2-102, MCA, courts must apply the more specific provision, § 40-9-102, MCA, to a grandparent's visitation request. Accordingly, the District Court erred when it applied § 40-4-228, MCA, to grant Grandparents' visitation request.
¶10 Further, the District Court's order failed to give Mother's constitutional right as L.R.S.'s parent proper credence. Normal parenting plan standards do not apply to a grandparent's request for contact with his or her grandchild.
Snyder , ¶¶ 10, 17-18. When a grandparent petitions for visitation over a parent's objection, a court must first "make a determination as to whether the objecting parent is a fit parent." Section 40-9-102(2), MCA ; accord Polasek , ¶ 15. Fitness is "determined on the basis of whether the parent adequately cares for the parent's child." Section 40-9-102(2), MCA. If a fit parent objects to grandparent contact, the court can grant contact only if it finds, "based upon clear and convincing evidence, that the contact with the grandparent would be in the best interest of the child and that the presumption in favor of the parent's wishes has been rebutted." Section 40-9-102(4), MCA ; accord Polasek , ¶ 15 ; In re C.A.G. , ¶ 12.
¶11 Grandparents argue that they stipulated to Mother's fitness by not disputing that she was a fit parent, and therefore the District Court's order is sufficient. However, the record does not contain specific evidence of any such stipulation by Grandparents as to Mother's fitness; not disputing Mother's fitness is not the same as stipulating to her fitness. Even if the parties did stipulate that Mother was a fit parent, the District Court did not contemplate Mother's fitness in granting Grandparent's visitation request, which is required by § 40-9-102(2), MCA. Furthermore, the District Court still needed to follow the guidelines in § 40-9-102(4), MCA, for granting grandparent visitation. Accordingly, the District Court could only grant Grandparents visitation with L.R.S. upon finding, based on clear and convincing evidence, that contact with Grandparents was in L.R.S.'s best interests and that the presumption in favor of Mother's wishes was rebutted. See § 40-9-102(4), MCA. The District Court's findings, citing § 40-4-228(3), MCA, and applying § 40-4-212, MCA, best interest factors, are not sufficient. The District Court erred in failing to apply the correct statute and in failing to appropriately protect Mother's constitutional right to parent L.R.S. We therefore reverse and remand this case for further proceedings.
CONCLUSION
¶12 When considering whether grandparents are entitled to visitation over a parent's objection, courts must apply § 40-9-102, MCA. The District Court erred in applying § 40-4-228, MCA, to this case involving grandparent visitation, where § 40-9-102, MCA, is the controlling statute. When determining whether to order grandparent visitation, the court must "make a determination as to whether the objecting parent is a fit parent" based on "whether the parent adequately cares for the" child. Section 40-9-102(2), MCA. Then, visitation may only be granted over a fit parent's objection if the court finds that "contact with the grandparent would be in the best interest of the child and that the presumption in favor of the parent's wishes has been rebutted." Section 40-9-102(4), MCA. In this case, the District Court awarded Grandparents visitation without determining whether Mother was a fit parent and, assuming fitness, without rebutting a presumption in favor of her wishes. We reverse and remand for further proceedings consistent with this Opinion.
We Concur:
MIKE McGRATH, C.J.
DIRK M. SANDEFUR, J.
JIM RICE, J.
Justice Ingrid Gustafson, specially concurring.
¶13 While I concur with the majority that this matter should be reversed and remanded to the District Court for consideration as to whether Grandparents should be provided visitation pursuant to § 40-9-102, MCA, I do not necessarily agree the District Court "failed to give Mother's constitutional right as L.R.S.'s parent proper credence" as stated by the majority.
¶14 It appears Grandparents did not assert Mother was unfit and, in fact, asserted at the hearing they sought only visitation. The District Court noted "both sides in this matter desire a set schedule, should the Court determine that visitation is in the best interests of L.R.S." Based on the parties' positions at the hearing and the District Court's Order on Parenting Plan thereafter, the District Court impliedly found Mother to be fit. The District Court then set forth several considerations in concluding visitation with Grandparents was in L.R.S.'s best interests. While the District Court may very well have reached the same conclusion with regard to grandparent-grandchild contact that it did, the District Court erred in not articulating how the specific standard set forth in § 40-9-102(4), MCA, for granting grandparent-grandchild contact was met. As such, I agree it is appropriate to reverse and remand for specific consideration under § 40-9-102, MCA. | [
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Justice Beth Baker delivered the Opinion of the Court.
¶1 Mark T. Nelson and Jo Marie S. Nelson purchased property from Mary Jo Davis and Anthony Palese, Jr., in 1997. The deed purported to sell the Nelsons the property in its entirety save a portion of the mineral estate reserved in Davis and Palese. After years of farm use, the Nelsons and Davis and Palese leased the property for oil and gas development. In the ensuing title research, the Nelsons' counsel uncovered possible remote heirs with an interest in the property-George Salituro, Jr., and Rose M. Salituro. The Nelsons brought a quiet title action in the Fifteenth Judicial District Court, Roosevelt County, and the District Court ruled in their favor. The court quieted surface title and a one-half interest in the mineral estate in the Nelsons, with the remaining half interest in Davis and Palese. The Salituros appeal. We affirm.
PROCEDURAL AND FACTUAL BACKGROUND
¶2 The parties dispute the ownership of, and title to, a 160-acre tract of land in Roosevelt County, Montana (the "Property"). For purposes of the issues involved in this case, title to the Property is traced back to Paul Bisceglia. Paul died intestate in 1916, leaving behind his wife Louise and their five children. Under a recorded Decree of Distribution issued by a district court to distribute Paul's estate, Louise received a one-third interest in the Property, and each of their five children received a two-fifteenths interest.
¶3 Three of the five children preceded Louise in death and died intestate with no children or spouses. Under the laws of intestate succession, their interests in the Property passed to Louise. Louise died intestate in 1965. There were no probate or intestacy proceedings commenced to distribute Louise's estate. Under the laws of intestate succession, her interests in the Property passed equally to her two surviving children: Rose Bisceglia and Angelo Bisceglia. Thus, after the death of their mother, Rose and Angelo each owned a one-half interest in the Property.
¶4 Rose Bisceglia married twice. She had two children from her first marriage: Josephine Palese and a son who preceded her in death. After her first husband's death, Rose married George Salituro. George Salituro and Rose had no children together. When Rose died intestate in 1987, there were no probate or intestacy proceedings commenced to distribute Rose's estate. Under the laws of intestate succession, her one-half interest in the Property passed in equal one-quarter shares to her surviving daughter-Josephine Palese-and her second husband-George Salituro.
¶5 The parties to this action do not dispute that an interest in the Property passed to George Salituro upon Rose's death. The record shows, however, that Angelo Bisceglia-Rose's surviving brother and intestate successor to a one-half interest in the Property through his parents, Paul and Louise-and Josephine Palese-Rose's surviving daughter and intestate successor to a one-quarter interest in the Property through Rose-did not realize that George Salituro took an interest in the Property upon Rose's death. After Rose's death, Angelo Bisceglia prepared and recorded an affidavit in the property records of Roosevelt County, Montana, accounting for the descendants of his parents. The affidavit does not mention Rose's second marriage. In 1988, Josephine Palese and her husband, along with Angelo Bisceglia and his wife, issued a deed purporting to convey the entirety of the Property to Josephine's two children-Mary Jo Davis and Anthony Palese, Jr. ("Davis and Palese").
¶6 From 1988 to 1997, Davis and Palese leased the Property to Tom Nelson for grazing and grain farming, placed it in the Conservation Reserve Program ("CRP"), and paid all of the property taxes. In 1997, they sold the Property to Mark T. Nelson and Jo Marie S. Nelson (the "Nelsons"), reserving "an undivided one-half of all Grantor's right, title and interest in and to all of the oil, gas and other minerals in and under" the Property. The Nelsons used the Property for grazing and enrolled the Property in CRP. Starting in 2006, the Nelsons began leasing the Property for oil and gas development.
¶7 At some point after mineral production started, a mineral developer sought confirmation of the Property's title. Upon investigation, the Nelsons' attorney discovered the overlooked one-quarter interest that vested in Rose's second husband, George Salituro. George Salituro died intestate in 1991 and no probate or intestacy proceedings were commenced to distribute his estate. Under the laws of intestate succession, his one-quarter interest in the Property passed to his two children from a prior marriage: George Salituro, Jr., and Rose Salituro (the "Salituros"). The Nelsons filed a quiet title action, naming George Salituro's children as defendants. Davis and Palese also filed an answer to the suit.
¶8 The parties filed cross-motions for summary judgment. The District Court granted summary judgment in favor of the Nelsons and Davis and Palese, concluding in part that Davis and Palese had extinguished the Salituros' interest in the Property through adverse possession before transferring it to the Nelsons in 1997. The District Court quieted title in favor of the Nelsons, except for a fifty percent mineral reservation in favor of Davis and Palese.
STANDARDS OF REVIEW
¶9 We review a district court's grant of summary judgment de novo. RN & DB, LLC v. Stewart , 2015 MT 327, ¶ 13, 381 Mont. 429, 362 P.3d 61. We examine the pleadings, affidavits, and discovery materials in the record to determine whether there is a "genuine issue as to any material fact" and whether "the movant is entitled to judgment as a matter of law." M. R. Civ. P. 56(c)(3). On cross-motions for summary judgment in which there are no genuine issues of material fact, we review the district court's conclusions of law to determine whether they are correct. Bud-Kal v. City of Kalispell , 2009 MT 93, ¶ 15, 350 Mont. 25, 204 P.3d 738.
DISCUSSION
¶10 The Salituros raise multiple issues on appeal, arguing that they have an interest in both the surface and mineral estates. Although the District Court discussed alternative bases for its decision, we confine our analysis to the determinative question whether Davis and Palese adversely possessed the Property before conveying it to the Nelsons in 1997.
¶11 The Salituros argue that Davis and Palese never filed an adverse possession lawsuit against the Salituros and are now barred by the statute of limitations from doing so. The Salituros argue that Davis's and Palese's adverse possession claims also fail on the merits because to extinguish the interests of fellow cotenants, a cotenant not only must meet the elements of adverse possession, but also must "oust" fellow cotenants from the property. Relying on YA Bar Livestock Co. v. Harkness , 269 Mont. 239, 887 P.2d 1211 (1994), the Salituros maintain that no ouster occurred here because Davis and Palese never communicated to the Salituros that they were ousting them, nor did Davis and Palese take any other action that was beyond what a cotenant has the right to do.
¶12 Davis and Palese argue that the Salituros failed to raise their limitations argument before the District Court and therefore are barred from doing so on appeal. Davis and Palese maintain that they ousted the Salituros and adversely possessed the Property under § 70-19-407, MCA. The Nelsons argue in the alternative that if Davis and Palese did not adversely possess the Property, then the Nelsons did. Relying on Fitschen Bros. Commercial Co. v. Noyes' Estate , 76 Mont. 175, 246 P. 773 (1926), both argue that a conveyance of the whole property to a stranger to the cotenancy, together with taking possession thereof, amounts to an ouster of one's cotenants.
¶13 The Salituros did not argue to the District Court that Davis and Palese were time-barred from asserting or defending their adverse possession claims. It is well established that we will not address an issue raised for the first time on appeal. See Becker v. Rosebud Operating Servs. Inc. , 2008 MT 285, ¶ 17, 345 Mont. 368, 191 P.3d 435. We turn to the merits of the claim.
¶14 "For a claim of adverse possession to succeed, the claimant must prove that the property was claimed under color of title or by actual, visible, exclusive, hostile and continuous possession for the full statutory period of five years." YA Bar Livestock Co. , 269 Mont. at 244, 887 P.2d at 1213. In addition, the claimant must have paid all taxes due on the property during the statutory period. Section 70-19-411, MCA. Section 70-19-407, MCA, governs adverse possession under color of title. It provides that a party may adversely possess property if he or she "entered into the possession of the property under claim of title, exclusive of other right" and continued in occupation and possession for five years. A person enters into possession under claim of title pursuant to the statute when the person holds land under "any instrument purporting to convey the land or the right to its possession, provided the claim is made thereunder in good faith." Fitschen , 76 Mont. at 196, 246 P. at 779. For a party to possess and occupy a property under § 70-19-407, MCA, the party must "usually cultivate[ ] or improve[ ]" the property, protect it "by a substantial enclosure," use it "for pasturage," or put it to "the ordinary use of the occupant." Section 70-19-408(1)(a)-(c), MCA.
¶15 Generally, when a cotenant is in possession of shared property, that cotenant's possession is not hostile to the rights of another cotenant, but is presumed "to be the possession of his cotenants and himself." Fitschen , 76 Mont. at 197, 246 P. at 779. This Court has recognized the exception "that one tenant in common may so enter and hold as to render the entry and possession adverse, and amount to an ouster of a cotenant." Fitschen , 76 Mont. at 197, 246 P. at 779. Although a cotenant claiming sole title must "oust" the other cotenants, "this does not necessarily imply an actual physical ouster, but it is sufficient if the grantee claims exclusive ownership and by his conduct denies the right of others to any interest in the property." Fitschen , 76 Mont. at 198, 246 P. at 779. A cotenant can oust a fellow cotenant by providing notice that he or she is claiming an interest hostile and adverse to the fellow cotenant's interest. YA Bar Livestock Co. , 269 Mont. at 246, 887 P.2d at 1214-15. "Where one goes into possession of property under deed, or deeds, executed by a cotenant, and purporting to convey the entire property, such possession is hostile to that of the cotenant, and he is charged with knowledge of the hostile character thereof." Fitschen , 76 Mont. at 199, 246 P. at 780 (internal quotations omitted).
¶16 The Salituros argue that under our precedent in YA Bar Livestock Company , a cotenant in possession must provide actual notice to the non-possessing cotenants of their ouster. But YA Bar Livestock Company did not change the rule established in Fitschen that an out-of-possession cotenant is charged with knowledge of the hostile character of a cotenant's possession if the cotenant in possession entered under color of title. See Fitschen , 76 Mont. at 199, 246 P. at 780. Rather, we held that YA Bar had not entered into possession under color of title. Ernest B. Harkness purported to convey the entirety of a tract of land to YA Bar Livestock Company, a corporation of which he was president and majority shareholder. As the executor of his mother's estate, Harkness knew that he held this property in a cotenancy with four siblings and six nieces and nephews. Armed with that knowledge, Harkness's conveyance of the entire property to YA Bar was not made in good faith, and YA Bar was charged with notice of its cotenants' interests. We held that a grantor could not create color of title by conveying land that he did not own to a corporation of which he was president and majority shareholder. YA Bar Livestock Co. , 269 Mont. at 249, 887 P.2d at 1216. YA Bar had not provided actual notice to the known cotenants that its occupation of the property was hostile to their claims. Thus, YA Bar's adverse possession claims failed because it could not demonstrate that it ousted its cotenants either through taking possession under color of title or by providing actual notice that its possession was hostile to its cotenants' interests. YA Bar Livestock Co. , 269 Mont. at 246, 248, 887 P.2d at 1215, 1216.
"[Color of title is created by] a title that is imperfect, but not so obviously so that it would be apparent to one not skilled in the law. Under Montana law, an instrument which purports to convey land or the right to its possession is sufficient color of title as a basis for adverse possession if the claim is made in good faith ."
YA Bar Livestock Co , 269 Mont. at 248, 887 P.2d at 1216 (quoting Joseph Russell Realty Co. v. Kenneally , 185 Mont. 496, 503, 605 P.2d 1107, 1111 (1980) (internal quotations and citations omitted)).
¶17 Unlike YA Bar, Davis and Palese entered into possession under color of title. Upon Rose Bisceglia's death, Angelo Bisceglia, Josephine Palese, and George Salituro were cotenants in the Property. Two of the cotenants-Angelo Bisceglia and Josephine Palese-purported to convey the entirety of the Property to Davis and Palese, who were third parties to the cotenancy. Davis and Palese recorded this deed. Davis and Palese both stated in affidavits that they believed they received the entirety of the Property in the 1988 deed. These statements are uncontradicted in the record. The Salituros presented no evidence in the District Court and do not argue on appeal that Angelo Bisceglia and Josephine Palese had actual knowledge of George Salituro's interest. And the public record in Roosevelt County included an affidavit of heirship from Angelo Bisceglia purporting to account for all Bisceglia heirs. On this record, we conclude that Davis and Palese had no actual or constructive knowledge that they were cotenants with anyone. Although the 1988 deed could not convey title to the entirety of the Property because Angelo Bisceglia and Josephine Palese did not own the Property in its entirety, the deed gave Davis and Palese color of title to the entirety of the Property because the deed purported to convey the entirety of the Property, was not void on its face, and was made in good faith. See Fitschen , 76 Mont. at 196, 246 P. at 779.
¶18 After the 1988 deed, Davis and Palese leased the Property to Tom Nelson, enrolled it in CRP, and paid all of the property taxes. These actions meet the requirements for possession and occupation of the Property under § 70-19-408, MCA. We agree with the Salituros that many of the acts upon which Davis and Palese rely to demonstrate possession and occupation would be consistent with holding an interest in a cotenancy if Davis and Palese's entry were not hostile. But because they entered under a recorded deed that purported to convey to them the entirety of the Property, Davis and Palese's initial entry of the Property was "obviously consistent with the disclaimer and disavowal of other tenants' interests." See Fitschen , 76 Mont. at 198, 246 P. at 779. Their entry under color of title constitutes ouster. Five years after the 1988 lease, Davis's and Palese's claims to the Property in its entirety ripened into good title. When Davis and Palese conveyed the Property to the Nelsons in 1997, the Salituros' interests in the Property already had been extinguished. The District Court correctly quieted titled to the Property in favor of the Nelsons, except for and subject to Davis and Palese's combined fifty percent mineral reservation.
CONCLUSION
¶19 The District Court's judgment is affirmed.
We Concur:
MIKE McGRATH, C.J.
JAMES JEREMIAH SHEA, J.
JIM RICE, J.
DIRK M. SANDEFUR, J.
LAURIE McKINNON, J.
INGRID GUSTAFSON, J.
Mary Jo Davis transferred her interest in the Property to the Layne Stuart Davis and Mary Jo Davis Revocable Trust Dated 8-2-2011. Mary Jo Davis and Layne Stuart Davis appear in this action as its trustees.
The principles espoused in Fitschen are consistent with the clear weight of authority that ouster occurs when one cotenant purports to convey the entire property to a party that was not previously a cotenant, a deed of transfer is recorded, and the transferee takes possession of the property. Under such circumstances no additional direct notice is required. See, e.g. , Thompson v. Odom , 279 Ala. 211, 184 So.2d 120, 131-32 (1966) ; Parsons v. Sharpe , 102 Ark. 611, 145 S.W. 537, 538-39 (1912) ; Smith v. Lemp , 31 Del.Ch. 1, 63 A.2d 169, 170 (1949) ; Morrison v. Byrd , 72 So.2d 657, 658 (Fla. 1954) ; Jordan v. Robinson , 229 Ga. 761, 194 S.E.2d 452, 455 (1972) ; Jordon v. Warren , 602 So.2d 809, 816 (Miss. 1992) ; Nelson v. Christianson , 343 N.W.2d 375, 378 (N.D. 1984) ; Lummus v. Brackin , 59 N.M. 216, 281 P.2d 928, 929 (1955) ; Kennedy v. Rinehart , 281 Or. 391, 574 P.2d 1119, 1122 (1978) ; see also 3 Am. Jur. 2d Adverse Possession § 204 (2018). A minority of jurisdictions hold that a deed purporting to transfer the entire estate to a non-cotenant party does not meet the requirements of notice and ouster. See, e.g. , Johnson v. McLamb , 247 N.C. 534, 101 S.E.2d 311, 313 (1958). | [
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Justice Beth Baker delivered the Opinion of the Court.
¶1 Twenty years ago, this Court held that a statute preventing a woman from obtaining a lawful medical procedure-a pre-viability abortion-from a health care provider of her choosing unconstitutionally infringed her right to individual privacy under Montana's Constitution.
Armstrong v. State , 1999 MT 261, ¶¶ 2, 75, 296 Mont. 361, 989 P.2d 364. We used the term "health care provider"
to refer to any physician, physician assistant-certified, nurse, nurse-practitioner or other professional who has been determined by the appropriate medical examining and licensing authority to be competent by reason of education, training or experience, to perform the particular medical procedure or category of procedures at issue or to provide the particular medical service or category of services which the patient seeks from the health care provider.
Armstrong , ¶ 2, n.1. Six years later, the Montana Legislature amended § 50-20-109(1)(a), MCA, to restrict the performance of pre-viability abortions to licensed physicians and physician assistants-certified. 2005 Mont. Laws, ch. 519, § 27. Plaintiffs, a Certified Nurse Practitioner (CNP) and Certified Nurse Midwife (CNM), filed this action in 2018, seeking a declaratory judgment that the statute violates Montana's constitutional right of privacy, equal protection, and dignity. They moved for a preliminary injunction. Both parties submitted affidavits, and neither requested an evidentiary hearing. After considering the affidavits and legal arguments presented by all parties, the District Court granted that relief on April 4, 2018. Pursuant to M. R. App. P. 6(3)(e), the State appeals on the alternative grounds that the District Court:
1. lacked jurisdiction because the Plaintiffs do not have standing to seek relief on their claims; or 2. improperly issued an advisory opinion on claims that were not ripe for a preliminary injunction, did not establish irreparable harm, and did not seek to preserve the status quo.
We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
¶2 Plaintiff Jane Doe is a CNM and women's health nurse practitioner who practices midwifery in Montana and is proceeding in this matter under a pseudonym by leave of court. Plaintiff Helen Weems is a CNP in Montana who has been board certified in family practice by the American Nurses Credentialing Center since 1999 and re-certified every five years since. Weems co-owns a primary care clinic in Whitefish that offers comprehensive health services for men and women, including reproductive health care services. The other owner is Susan Cahill, a licensed physician's assistant (PA), who performs early-term abortions as part of her practice. Both Plaintiffs allege that the performance of early-term abortions is within their scope of practice and that they could perform such services but for Montana's statutory restriction.
¶3 In support of their motion for preliminary injunction, Plaintiffs presented evidence that APRNs routinely perform procedures within their scope of practice that are similar in skill to or more complex than early-term abortions and that carry comparable or greater risk. Plaintiff Weems described her experience with inserting and removing Intra-Uterine Devices (IUDs), dilating the cervix, and performing endometrial biopsy, a procedure that involves inserting instruments into the uterus to remove a tissue sample from the uterine lining. She described these procedures as comparable to those used in an aspiration procedure for abortion. She also attested that she has prescription authority from the Board of Nursing and a U.S. Drug Enforcement Authority (DEA) license, which permits her to prescribe schedules II through V controlled substances. Weems attested to her experience, prior to moving to Montana, with independently dispensing mifepristone and misoprostol for medication abortions-drugs that are not controlled substances and that carry less danger than controlled substances.
¶4 Plaintiffs also presented evidence to show that early abortion safety, efficacy, and patient acceptability is the same as between physicians and physician assistants, nurse practitioners, and certified nurse midwives. Finally, they offered evidence of the limited access to abortion services in Montana and the impact the restriction on authorized providers has on the availability of those services.
¶5 The State submitted as its evidence a chart from the Montana Board of Nursing identifying and listing websites for the relevant national organizations that set standards for nurse practitioners and certified nurse midwives. It also submitted a one-page description of the scope of practice for nurse practitioners from the American Association of Nurse Practitioners and a one-page summary definition of midwifery and scope of practice of certified nurse-midwives and certified midwives from the American College of Nurse Midwives. The State pointed out that abortion is not listed within the scope of practice in these documents, nor is it included in the Montana Board of Nursing's administrative rules governing APRN standards and practice.
¶6 The District Court held that Plaintiffs were entitled to a preliminary injunction under § 27-19-201(2), MCA, because they had made a showing that enforcement of § 50-20-109(1)(a), MCA, prior to the conclusion of litigation would cause irreparable injury.
STANDARDS OF REVIEW
¶7 We review the grant or denial of a preliminary injunction for manifest abuse of discretion. Davis v. Westphal , 2017 MT 276, ¶ 10, 389 Mont. 251, 405 P.3d 73. A manifest abuse of discretion is one that is "obvious, evident, or unmistakable." Davis , ¶ 10 (quoting Shammel v. Canyon Res. Corp. , 2003 MT 372, ¶ 12, 319 Mont. 132, 82 P.3d 912 ). "The grant or denial of injunctive relief is a matter within the broad discretion of the district court based on applicable findings of fact and conclusions of law." Davis , ¶ 10 (citing Shammel , ¶ 11 ; Walker v. Warner , 228 Mont. 162, 166, 740 P.2d 1147, 1149-50 (1987) ). To the extent the ruling is based on legal conclusions, "we review the district court's conclusions of law to determine whether the interpretation of the law is correct." City of Whitefish v. Bd. of Cty. Comm'rs of Flathead Cty. , 2008 MT 436, ¶ 7, 347 Mont. 490, 199 P.3d 201. Issues of justiciability, such as standing and ripeness, also are questions of law, for which our review is de novo. Reichert v. State , 2012 MT 111, ¶ 20, 365 Mont. 92, 278 P.3d 455.
DISCUSSION
¶8 1. Do Weems and Doe have standing to challenge the statute?
¶9 Courts have power to resolve actual cases or controversies, requiring a plaintiff to show, "at an irreducible minimum," that she "has suffered a past, present, or threatened injury to a property or civil right, and that the injury would be alleviated by successfully maintaining the action." Schoof v. Nesbit , 2014 MT 6, ¶ 15, 373 Mont. 226, 316 P.3d 831 (internal quotations omitted). "A plaintiff's standing may arise from an alleged violation of a constitutional or statutory right." Mitchell v. Glacier County , 2017 MT 258, ¶ 11, 389 Mont. 122, 406 P.3d 427 (citing Schoof , ¶ 23 ).
¶10 The State argues that neither Weems nor Doe has standing to challenge § 50-20-109(1)(a), MCA, because abortion is outside their scope of practice. Irrespective of the statute, the State maintains that "[a]s of the issuance" of the District Court's preliminary injunction order, the harm posited by the Plaintiffs was conjectural and hypothetical. The State maintains that the Plaintiffs have not presented an actual case or controversy because their scope of practice-with or without the statute-does not extend to abortion procedures.
¶11 The State's standing argument is conjoined with its argument that the Plaintiffs' request for a preliminary injunction was not ripe for adjudication. Standing and ripeness are separate but related inquiries within a court's justiciability analysis:
To meet the constitutional case-or-controversy requirement for standing, the plaintiff must clearly allege a past, present, or threatened injury to a property or civil right, and the injury must be one that would be alleviated by successfully maintaining the action. Note that standing may rest not only on past or present injury, but also on threatened injury. Ripeness and mootness, in turn, can be seen as "the time dimensions of standing." Ripeness asks whether an injury that has not yet happened is sufficiently likely to happen or, instead, is too contingent or remote to support present adjudication, whereas mootness asks whether an injury that has happened is too far beyond a useful remedy.
Reichert , ¶ 55 (internal citations omitted). "Whether framed as an issue of standing or ripeness, the [constitutional] inquiry is largely the same: whether the issues presented are definite and concrete, not hypothetical or abstract." Reichert , ¶ 56 (quoting Wolfson v. Brammer , 616 F.3d 1045, 1058 (9th Cir. 2010) ) (alteration in original).
¶12 We address below the ripeness argument as it relates to the request for preliminary injunction. We have little trouble concluding, however, that Weems and Doe have standing to bring their complaint. We held in Armstrong that when "governmental regulation directed at health care providers impacts the constitutional rights of women patients," the providers have standing to challenge the alleged infringement of such rights. Armstrong , ¶¶ 8-13. We concluded that the plaintiff health care providers had standing "to assert on behalf of their women patients the individual privacy rights under Montana's Constitution of such women to obtain a pre-viability abortion from a health care provider of their choosing." Armstrong , ¶ 13.
¶13 The Plaintiffs' Complaint presents the same issue. The central dispute between the parties, discussed further below, is whether § 50-20-109(1)(a), MCA, is the regulatory barrier that prevents Weems and Doe from performing aspiration and medication abortion procedures, or whether the Board of Nursing must act first to authorize such procedures within the Plaintiffs' scope of practice before the statute comes into play. That issue presumably will be front and center as the litigation proceeds toward resolution on the merits. For standing purposes, however, the Complaint includes sufficient allegations that, but for the existence of the statutory restriction, Weems and Doe would be able to include medication and aspiration abortion procedures within their competency training and independent practices. Plaintiffs allege that APRNs are independent and autonomous health care practitioners, authorized to provide services within the scope of practice to which they are trained. The Complaint further alleges that the Montana Board of Nursing does not identify specific procedures that APRNs may or may not perform. Rather, the Board's regulations provide that APRNs have "full practice authority." The Complaint alleges that the Board "charges APRN licensees to know their own role and population focus using the standards of their professional organization." The Complaint alleges that "Montana law does not single out any health service as beyond an APRN's scope of practice, except abortion."
¶14 The State's standing argument is circular: it maintains that Plaintiffs cannot challenge the statute unless they are licensed to perform the procedure in question, but acknowledges that the statute prevents them from seeking such licensure. Weems and Doe plainly are impacted by the statute; as it stands, the law precludes the "appropriate medical examining and licensing authority" from making a determination that they are competent to perform the medical procedures at issue. Armstrong, ¶ 2, n.1. The Complaint's allegations are sufficient to show a "concrete," rather than an abstract or hypothetical, injury that allows Weems and Doe to have their claims adjudicated in the courts of Montana. See Schoof , ¶¶ 12-23 (concluding that individual alleging interest in county's fiscal decisions had standing to pursue claim that county violated constitutional and statutory right to know and public participation requirements); Gryczan v. State , 283 Mont. 433, 443-46, 942 P.2d 112, 118-120 (1997) (granting lesbian and gay plaintiffs standing to challenge constitutionality of statute criminalizing same-sex sexual conduct despite lack of prosecution, because they were "precisely the individuals against whom the statute is intended to operate"); Lee v. State , 195 Mont. 1, 7, 635 P.2d 1282, 1285 (1981) (holding that Uniform Declaratory Judgments Act allows a plaintiff to "test the constitutional validity of a statute directly affecting him").
¶15 2. Did the District Court manifestly abuse its discretion or commit an error of law in granting preliminary injunctive relief?
¶16 The State argues that the District Court's preliminary injunction constituted an advisory opinion because neither Weems nor Doe presently is adequately trained to perform abortion procedures. The State maintains that the court made speculative assumptions in granting Plaintiffs the preliminary relief they requested. Because women seeking abortions "do not have a currently existing right" to have Weems or Doe perform that procedure, which the State argues would require additional action by the Montana Board of Nursing, the injunction will have no practical effect. The court's injunction prevents no harm, the State suggests, because there are no patients who could have abortion services provided by Weems or Doe irrespective of the statute. Finally, because Weems and Doe "have not been expressly authorized by their licensing authority to perform abortions," the State argues that the District Court's action upends the status quo, contrary to the purposes of a preliminary injunction.
¶17 Section 27-19-201, MCA, provides for issuance of a preliminary injunction on several enumerated grounds, only one of which need be met for an injunction to issue. BAM Ventures, LLC v. Schifferman , 2019 MT 67, ¶ 14, 437 P.3d 142 ; Davis , ¶ 24 ; Shammel , ¶ 15 ; Sweet Grass Farms, Ltd. v. Bd. of Cty. Comm'rs of Sweet Grass Cty. , 2000 MT 147, ¶ 27, 300 Mont. 66, 2 P.3d 825 ; Stark v. Borner , 226 Mont. 356, 359-60, 735 P.2d 314, 317 (1987). The District Court relied on subsection (2), allowing a preliminary injunction "when it appears that the commission or continuance of some act during the litigation would produce a great or irreparable injury to the applicant[.]" Section 27-19-201(2), MCA. An applicant for preliminary injunction must make "some demonstration of threatened harm or injury, whether under the 'great or irreparable injury' standard of subsection (2), or the lesser degree of harm implied within the other subsections of § 27-19-201, MCA." BAM Ventures , ¶ 16.
¶18 When considering whether to grant or deny a preliminary injunction, the trial court "should restrict itself to determining whether the applicant has made a sufficient case to warrant preserving a right in status quo until a trial on the merits can be had." Knudson v. McDunn , 271 Mont. 61, 65, 894 P.2d 295, 298 (1995) (citing Porter v. K & S P'ship , 192 Mont. 175, 181, 627 P.2d 836, 839 (1981) ). An applicant need only establish a prima facie case, not entitlement to final judgment. City of Whitefish , ¶ 25 (citing Knudson , 271 Mont. at 65, 894 P.2d at 298, and Porter , 192 Mont. at 183, 627 P.2d at 840 ). The court does not determine the underlying merits of the case in resolving a request for preliminary injunction. BAM Ventures , ¶ 7 (citing Caldwell v. Sabo , 2013 MT 240, ¶ 19, 371 Mont. 328, 308 P.3d 81 ). In the context of a constitutional challenge, an applicant for preliminary injunction need not demonstrate that the statute is unconstitutional beyond a reasonable doubt, but "must establish a prima facie case of a violation of its rights under" the constitution. City of Billings v. Cty. Water Dist. of Billings Heights , 281 Mont. 219, 227, 935 P.2d 246, 251 (1997). "Prima facie" means literally "at first sight" or "on first appearance but subject to further evidence or information." Prima facie , Black's Law Dictionary (10th ed. 2014).
¶19 Our cases make clear that Montana's constitutional right to privacy is implicated when a statute infringes on a person's ability to obtain a lawful medical procedure. Armstrong , ¶ 62 ; Mont. Cannabis Indus. Ass'n v. State , 2012 MT 201, ¶ 27, 366 Mont. 224, 286 P.3d 1161. But not every restriction on medical care impermissibly infringes that right. Wiser v. State , 2006 MT 20, ¶ 15, 331 Mont. 28, 129 P.3d 133. " Armstrong did not hold that there is a right to see a health care provider who is not licensed to provide the services desired." Wiser , ¶ 16. The right to health care instead is the
fundamental privacy right to obtain a particular lawful medical procedure from a health care provider [who] has been determined by the medical community to be competent to provide that service and who has been licensed to do so.
Wiser , ¶ 15 (quoting Armstrong , ¶ 62 ). Armstrong leaves no doubt that early-term abortion is a "lawful medical procedure" that may be performed for a consenting patient by a provider "determined by the appropriate medical examining and licensing authority to be competent [to provide that service]." Armstrong , ¶ 2, n.1, ¶ 62. The issue for ultimate resolution in this case is whether the Board of Nursing must approve APRNs, or Doe and Weems in particular, to conduct such procedures, or whether they could obtain competency to do so as part of an independent or collaborative practice but for the statutory restriction. Because Weems and Doe presently are not providing abortion services and are not expressly licensed to do so, the State argues that their request for preliminary injunctive relief is not ripe for adjudication.
¶20 Weems testified by affidavit that, without the statutory restriction, her DEA license presently would permit her to prescribe and dispense the medications for a medication abortion. Weems also attested that there is no list of services that determines what is in her scope of practice; rather, the scope includes care in which she trains and builds her skills under supervision sufficient to become a proficient provider.
¶21 This characterization finds support in the standards referred to in the State's exhibits. According to the American Association of Nurse Practitioners, APRNs are independent practitioners whose autonomous practice "requires accountability to the public for delivery of high-quality health care." Materials referenced in the Board of Nursing chart the State submitted include core competencies for Family Nurse Practitioners (FNPs), stating that the FNP "is prepared to care for individuals and families across the lifespan," including women's reproductive health and performance of gynecology procedures. Women's health nurse practitioners are expected to have "knowledge of legal/ethical issues and regulatory agencies relevant to gender-specific issues," within which they are to provide "culturally appropriate reproductive and primary care for women of all ages" and prescribe medications "within [their] scope of practice." NONPF, Competencies , supra , at 82-84. "Independent practice" "[r]ecognizes independent licensure of nurse practitioners who provide autonomous care and promote implementation of the full scope of practice." NONPF, Competencies , supra , at 87.
¶22 The State's Exhibit C defines midwifery to encompass "a full range of primary health care services for women from adolescence beyond menopause." The Standards for Practice of Midwifery, referenced in the Board of Nursing chart, indicate that the practice "is the independent management of women's health care, focusing particularly on pregnancy, childbirth, the post-partum period, care of the newborn, and the family planning and gynecologic needs of women." The core competencies in gynecologic care "include but are not limited to ... [c]ounseling, clinical interventions , and/or referral for unplanned or undesired pregnancies[.]" The midwife must be "in compliance with the legal requirements of the jurisdiction where the midwifery practice occurs." ACNM, Standards , supra , at 1.
¶23 Administrative Rules of the Montana Board of Nursing recognize APRN practice as "an independent and/or collaborative practice" and provide that a licensed APRN "may only practice in the role and population focus in which the APRN has current national certification." Admin. R. M. 24.159.1406(1). The rules allow an APRN who is granted prescriptive authority to "prescribe, procure, administer, and dispense legend and controlled substances pursuant to applicable state and federal laws and within the APRN's role and population focus." Admin.
R. M. 24.159.1461(1). The Board of Nursing's rules do not identify a specific list of medications the APRN may or may not prescribe. Weems's established prescriptive authority and prior experience prescribing and dispensing drugs for medication abortion comprise prima facie evidence that, but for the statute, she could do so in Montana as well. The record has not been developed regarding the Board of Nursing's position, if any, on the regulatory limits of APRN practice when it comes to aspiration abortion. Materials referenced in the Affidavit of Suzan Goodman, M.D., submitted by Plaintiffs, indicate that "there is a decades-long history of [APRNs, CNMs, and PAs] providing first trimester aspiration abortions in collaborative settings and training doctors in abortion care in states where physician-only restrictions do not exist." , On review of the preliminary injunction record, we conclude that Plaintiffs presented adequate evidence to justify their claim for preliminary relief on the ground that the statute presents a barrier to their ability to develop competencies for and perform the lawful medical procedures of early-term abortion.
¶24 The State asserts that Plaintiffs nonetheless did not demonstrate irreparable harm because, as the District Court recognized, Weems has not completed her training in abortion care and Doe currently practices in a health care system that does not permit abortions to be performed. Because of their own circumstances, the State posits that the Plaintiffs' request for preliminary injunctive relief was not ripe for adjudication.
¶25 We have recognized harm from constitutional infringement as adequate to justify a preliminary injunction. City of Billings , 281 Mont. at 231, 935 P.2d at 253 ; Mont. Cannabis Indus. Ass'n , ¶ 15. Though not every constitutional infringement may support a finding of irreparable harm, federal courts most commonly recognize privacy and First Amendment violations as causing irreparable injuries. See Elrod v. Burns , 427 U.S. 347, 373, 96 S.Ct. 2673, 2690, 49 L.Ed.2d 547 (1976) (plurality); Nelson v. NASA , 530 F.3d 865, 881-82 (9th Cir. 2008), rev'd on other grounds , 562 U.S. 134, 131 S.Ct. 746, 178 L.Ed.2d 667 (2011) ; Ne. Fla. Chapter of the Ass'n of Gen. Contractors of Am. v. City of Jacksonville , 896 F.2d 1283, 1285 (11th Cir. 1990) ; McDonell v. Hunter , 746 F.2d 785, 787 (8th Cir. 1984) ; Deerfield Med. Ctr. v. City of Deerfield Beach , 661 F.2d 328, 338 (5th Cir. 1981). Plaintiffs' evidence of injury included affidavits that the statute prevents APRNs "from even being trained in abortion care in this State," including the "hands-on training [Weems] need[s] to complete [her] training." Weems also attested that, in the few weeks her clinic had been open, she had seen several patients eligible for a medication abortion who would have elected that method, but who were in the clinic when Cahill was unavailable and were unable to obtain the medication. Weems testified that delay can mean a patient becomes ineligible for a medication abortion or may have difficulty missing work or school and arranging transportation for a subsequent appointment, particularly when traveling from out of town. Without the statutory restriction, Weems's DEA license would allow her imminently to provide the lawful dispensation of the necessary medication. The District Court did not manifestly abuse its discretion in finding that this evidence established that enforcement of the statute prior to the conclusion of litigation would cause irreparable injury.
¶26 Finally, the State argues that the District Court wrongly issued a preliminary injunction to reverse, instead of to preserve, the status quo. Unlike the plaintiff in Armstrong , the State urges, the Plaintiff providers have not been "engaged in the practice of providing abortions" and are not "expressly authorized by their licensing authority to perform abortions." Status quo means "the last actual, peaceable, noncontested condition which preceded the pending controversy." Porter , 192 Mont. at 181, 627 P.2d at 839 ; see also Davis , ¶ 24. That a statute has been on the books for some time is not the relevant inquiry when entertaining a request to enjoin it. See , e.g. , Gryczan , 283 Mont. at 443-44, 942 P.2d at 118-19. Weems and Cahill opened their clinic in February 2018. The State's argument misses the point that the condition the Plaintiffs contest is the bar posed to their practice by the physician/PA restriction and whether they otherwise would need express authorization from their licensing authority to engage in the independent practice of providing abortion services. The rights "preserv[ed] ... in status quo," Knudson , 271 Mont. at 65, 894 P.2d at 298, by the District Court's injunction are the rights of women patients to obtain the lawful medical procedure recognized in Armstrong . The Complaint contests the later-enacted statute's alleged infringement of those rights. Weems and Doe presented sufficient evidence at this stage of the proceedings to support their claim that the statute bars their ability to perform the lawful medical procedures of medication or aspiration abortion and to complete appropriate training for the aspiration procedure. Given the fundamental right at issue, that showing was sufficient to establish that their claim for preliminary injunction was not "too contingent or remote to support present adjudication," Reichert , ¶ 55, and that enforcement of the statute prior to conclusion of the litigation would cause irreparable harm. The State has not shown an error of law or manifest abuse of discretion in the District Court's ruling.
CONCLUSION
¶27 The District Court's April 4, 2018 preliminary injunction is affirmed.
We Concur:
MIKE McGRATH, C.J.
DIRK M. SANDEFUR, J.
INGRID GUSTAFSON, J.
Both CNPs and CNMs are Advanced Practice Registered Nurses (APRN). See Admin. R. M. 24.159.1413.
The procedures Plaintiffs seek to provide are aspiration and medication abortions, both of which are carried out in the early stages of pregnancy. Medication abortion is available up to ten weeks, and aspiration abortion is an outpatient procedure used throughout the first trimester.
The moving party's burden to defeat the presumptive constitutionality of a statute thus arises in litigating the merits of the complaint; a plaintiff is not required to sustain that ultimate burden to obtain a preliminary injunction.
Am. Ass'n of Nurse Practitioners, Scope of Practice for Nurse Practitioners , AANP (Winter 2015), https://storage.aanp.org/www/documents/advocacy/position-papers/ScopeOfPractice.pdf [https://perma.cc/MV68-Q96H].
Mont. Dep't of Labor & Indus., Montana Board of Nursing Recognized National Professional Organizations (NPO) for APRN Scope and Standards of Practice , DLI (Aug. 2018), http://boards.bsd.dli.mt.gov/Portals/133/Documents/nur/aprn_sop_documents.pdf [https://perma.cc/K3SJ-8YDH].
Nat'l Org. of Nurse Practitioner Faculties, Population-Focused Nurse Practitioner Competencies , NONPF 9 (2013), https://c.ymcdn.com/sites/www.nonpf.org/resource/resmgr/competencies/populationfocusnpcomps2013.pdf [https://perma.cc/H2NE-VFTN] [hereinafter NONPF, Competencies ]
Am. Coll. of Nurse-Midwives, Definition of Midwifery and Scope of Practice of Certified Nurse-Midwives and Certified Midwives , ACNM (Dec. 2011), http://www.midwife.org/ACNM/ files/ACNMLibraryData/UPLOADFILENAME/000000000266/Definition%20of%20Midwifery%20and%20Scope%20of%20Practice%20of%20CNMs%20and%20CMs%20Feb%202012.pdf [https://perma.cc/ASK9-EAWB].
Am. Coll. of Nurse-Midwives, Standards for the Practice of Midwifery , ACNM 1 (Sept. 24, 2011), http://www.midwife.org/ACNM/files/ACNMLibraryData/UPLOADFILENAME/000000000051/Standards_for_Practice_of_Midwifery_Sept_2011.pdf [https://perma.cc/RFK5-4C2Y] [hereinafter ACNM, Standards ].
Am. Coll. of Nurse-Widwives, Core Competencies for Basic Midwifery Practice , ACNM 5 (Dec. 2012), http://www.midwife.org/ACNM/files/ACNMLibraryData/UPLOADFILENAME/000000000050/Core%20Comptencies%20Dec%202012.pdf [https://perma.cc/N78R-K5ML] (emphasis added).
Am. Pub. Health Ass'n, Provision of Abortion Care by Advanced Practice Nurses and Physician Assistants , APHA (Nov. 1, 2011), https://www.apha.org/policies-and-advocacy/public-health-policy-statements/policy-database/2014/07/28/16/00/provision-of-abortion-care-by-advanced-practice-nurses-and-physician-assistants [https://perma.cc/8JZ7-8QXS].
The California rule the Dissent cites shows that APRNs may be qualified by training to perform an abortion by aspiration techniques. Importantly, California does not have a statute prohibiting such practice; on the contrary, it allows APRNs to perform medication and aspiration abortions, the latter subject to "standardized procedures developed" by the Board of Registered Nursing. Cal. Bus. & Prof. Code §§ 2253, 2725.4 (LexisNexis 2019). According to Dr. Goodman's affidavit, the California law resulted from a six-year project evaluating the safety and efficacy of advanced practice clinicians providing early abortion. California, unlike Montana, has detailed statutes addressing many different medical procedures and prohibitions. See e.g. , Cal. Bus. & Prof. Code, div. 2, ch. 5 art. 12. Montana, by and large, leaves such matters to rulemaking by the appropriate licensing boards. See § 37-3-203, MCA (authorizing Board of Medical Examiners to adopt rules to carry out regulatory responsibilities for practice of medicine, podiatry, acupuncture, physician assistant practice, and nutritionist practice); § 37-8-202, MCA (prescribing rulemaking authority of Board of Nursing, including rules regarding authorization for prescriptive authority of advanced practiced registered nurses and educational requirements and other qualifications applicable to recognition of advanced practice registered nurses); § 37-8-409, MCA (requiring Board of Nursing to issue APRN certificates upon verification of "board-approved national certifying body appropriate to the specific field of advance practice registered nursing" and "other qualification requirements that the board prescribes"). Though largely unhelpful to the analysis, the California example lends support to the ripeness of Plaintiffs' claim that § 50-20-109(1)(a), MCA, poses a barrier to any such review by this State's Board of Nursing.
The Dissent does not address this prima facie evidence that, but for the statute, Weems imminently could provide her patients with the medication required for this procedure. It recognizes that whether APRNs safely and competently can provide abortions is "a question for the Montana Board of Nursing," Dissent, ¶ 32, but overlooks that the Board's rules authorize Weems to dispense medication without restriction. | [
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Justice Ingrid Gustafson delivered the Opinion of the Court.
¶1 Shawnna McLaughlin (Shawnna) appeals from the Amended Findings of Fact, Conclusions of Law and Order Re: Respondent's Notice of Intent to Relocate issued November 1, 2017 by the Standing Master in the Eighteenth Judicial District Court and affirmed on March 19, 2018 by the District Court. The parenting plan contained therein provides for the parties' child to reside on a primary basis in Montana. We affirm.
¶2 We restate the issue on appeal as follows:
Did the District Court abuse its discretion in ordering the parenting plan which provides for the child to continue to reside on a primary basis in Montana?
FACTUAL AND PROCEDURAL BACKGROUND
¶3 Shawnna and Robert "Brent" Northcutt (Brent) met in Boston, Massachusetts where Shawnna was residing when the parties began their relationship. Shawnna moved to Bozeman in January 2011 to reside with Brent. Although they never married, they resided together in Bozeman until they separated in May 2013. During the time they lived together they had a child, G.M.N., born in July 2011. Brent has another daughter, A.N., from a prior relationship. Brent has had sole custody of A.N. since she was one and one-half years old, and she is now a teenager. A.N. resided with Brent and Shawnna during their entire relationship. A.N. and G.M.N. are very close. G.M.N. resided continuously with A.N. from her birth until the parties separated and since then they frequently spend time together during Brent's parenting time.
¶4 On July 30, 2014, the parties entered into a written Stipulated Final Parenting Plan. That plan provided for a two-week rotating schedule, where during Week 1, Brent parented G.M.N. from Tuesday at 6:00 p.m. until Friday at 7:00 a.m., and during Week 2, Brent parented G.M.N. from Thursday at 6:00 p.m. until Sunday at 4:00 p.m. Shawnna and Brent both testified that Brent parents G.M.N. more time than the Stipulated Parenting Plan provides. Both also testified the other was a good parent and had a strong relationship with G.M.N. Given that G.M.N. is in school on a full-time basis and the parties two-week rotating schedule, the time the parties actually spend with G.M.N. when she is awake before and after school and on weekends is nearly equal. The Standing Master found that, "the parties share nearly equal parenting time."
¶5 In considering each parent's relationship with G.M.N., the Standing Master found "both parents are actively involved in [G.M.N.'s] care and upbringing." Most importantly, based on the evidence presented at hearing the Standing Master concluded the emotional support and consistency and stability of care each parent provided G.M.N. was substantially equal- G.M.N. had a strong bond with Shawnna and a strong bond with Brent, A.N., and Janelle (Brent's girlfriend)-and it was in G.M.N.'s best interests to have frequent and continuing contact with both families.
¶6 Both Shawnna and Brent have specialized occupations. Shawnna worked as a trauma and then an ER nurse prior to moving to Montana. In Montana, Shawnna worked as an ER nurse in Livingston for 6 to 8 months, but her primary work has been as an ER charge nurse for Bozeman Deaconess Hospital (BDH) from November 2012 until September 16, 2016. Shawnna's employment with BDH was terminated after a dispute with BDH which resulted in a Settlement/Non-Disclosure Agreement which prohibits her from future employment with BDH or its owned affiliates in Big Sky and Bozeman. Brent works as a MySQL database engineer with Oracle. Given the specialty of his work, there are few locations where he could work. In the past, he has received other job offers to relocate to Silicon Valley or Seattle but he has turned them down to remain in Bozeman to be close to G.M.N. Although he generally works 7:30 a.m. to 4:30 p.m., his work schedule is flexible and he can work from home when needed to accommodate the needs of his children.
¶7 Although Brent believes Shawnna to be a good mother, he does not trust her. Brent testified and Shawnna admitted that after her termination from BDH Shawnna did not tell Brent she had lost her job. Not only did she not tell him, she lied to him that she continued to be employed at BDH. Shawnna also did not tell Brent she received a DUI in February 2016, resulting in suspension of her driver's license. At the time she received the DUI, she was exercising parenting time with G.M.N., who was with a babysitter. After being arrested and released, she went home and cared for G.M.N. As a result of the DUI, Shawnna's driver's license was suspended and at the hearing she testified she expected it to be reinstated on March 27, 2017.
¶8 Shawnna now desires to move to Boston to live closer to family and where she believes she will have better employment opportunities. She desires G.M.N. to move with her. After being terminated from her employment, Shawnna sought employment with only three places in the Bozeman area, one of which she declined to attend a telephone interview and instead elected to have lunch with girlfriends. Shawnna admitted there is a part-time ER nurse position available in Livingston where she worked before and there are 3 or 4 private urgent cares in Bozeman and Belgrade but she has not sought employment with them. Shawnna also admits she did not seek employment closer to Bozeman in Billings or Missoula and admitted there are ER nurse positions available in Billings.
¶9 Finally, rather than discussing her potential move with Brent, Shawnna instead filed a Notice of Intent to Relocate. Brent learned of her desire to move when he was served with the Notice. Brent objected and a hearing was held before the Standing Master on March 17, 2017, following which the Standing Master issued her Findings of Fact, Conclusions of Law and Order denying Shawnna's request to relocate with G.M.N. Shawnna then filed a Notice of Specific Objections and Request for Review, after which the Standing Master issued an Amended Findings of Fact, Conclusions of Law and Order Re: Respondent's Notice of Intent to Relocate on November 1, 2017. Shawnna filed new specific objections and request for review, on which the District Court held a hearing in March 2018. On March 19, 2018, the District Court affirmed the Standing Master's November 1, 2017, amended order denying Shawnna's request to relocate with G.M.N., from which Shawnna now appeals. Additional facts will be referenced in the discussion below.
STANDARD OF REVIEW
¶10 In a case tried before a standing master, we apply the same standard of review to an adopted master's findings as we do to a district court's. Patton v. Patton , 2015 MT 7, ¶ 17, 378 Mont. 22, 340 P.3d 1242. We review the underlying findings in support of a districts court's decision regarding modification of a parenting plan under the clearly erroneous standard. Guffin v. Plaisted-Harman , 2010 MT 100, ¶ 20, 356 Mont. 218, 232 P.3d 888 ( Guffin II ). We review a district court's conclusions of law to determine if they are correct. In re the Parenting of C.J ., 2016 MT 93, ¶ 12, 383 Mont. 197, 369 P.3d 1028.
¶11 A district court has broad discretion when considering the parenting of a child, and we must presume the court carefully considered the evidence and made the correct decision. In re C.J. , ¶ 13 (citation omitted). It is not this Court's function to reweigh conflicting evidence or substitute its judgment regarding the strength of the evidence for that of the district court. In re A.F. , 2003 MT 254, ¶ 24, 317 Mont. 367, 77 P.3d 266. Rather, the ultimate test for adequacy of findings of fact is whether they are sufficiently comprehensive and pertinent to the issues to provide a basis for decision, and whether they are supported by the evidence presented. In re Marriage of Wolfe , 202 Mont. 454, 458, 659 P.2d 259, 261 (1983). Accordingly, absent clearly erroneous findings, we will not disturb a district court's decision regarding a parenting plan unless there is a clear abuse of discretion. In re C.J. , ¶ 13.
DISCUSSION
Did the District Court abuse its discretion in ordering the parenting plan which provides for the child to continue to reside on a primary basis in Montana?
¶12 Cases involving a proposed relocation of a parent with a child are difficult as they are rarely amenable to compromise and involve balancing a parent's right to resettle in another location, protecting the best interests of the child, and the competing rights of the other parent. Although the mother has a constitutional right to travel and relocate, this right does not outweigh the father's right to have regular and ongoing parental contact with his daughter and the child's right to a relationship with her father. E.g. , In re M.C. , 2015 MT 57, ¶ 8, 378 Mont. 305, 343 P.3d 569. In cases where a parent is exercising her right to travel, as is the case herein, the Court must try to reconcile the interests of both parents with the best interests of the child.
¶13 Shawnna asserts the District Court erred in denying her request to relocate to Boston with G.M.N. She asserts Brent failed to provide legitimate, case-specific reasons and evidence that it is not in G.M.N.'s best interests to relocate with Shawnna to Boston. From review of the record, we do not find these assertions persuasive.
¶14 In pertinent part, § 40-4-212, MCA, provides:
(1) The court shall determine the parenting plan in accordance with the best interest of the child. The court shall consider all relevant parenting factors, which may include but are not limited to:
(a) the wishes of the child's parent or parents;
(b) the wishes of the child;
(c) the interaction and interrelationship of the child with the child's parent or parents and siblings and with any other person who significantly affects the child's best interest;
(d) the child's adjustment to home, school, and community;
(e) the mental and physical health of all individuals involved;
(f) physical abuse or threat of physical abuse by one parent against the other parent or the child;
(g) chemical dependency, as defined in 53-24-103, or chemical abuse on the part of either parent;
(h) continuity and stability of care;
(i) developmental needs of the child;
(j) whether a parent has knowingly failed to pay birth-related costs that the parent is able to pay, which is considered to be not in the child's best interests;
(k) whether a parent has knowingly failed to financially support a child that the parent is able to support, which is considered to be not in the child's best interests;
(l) whether the child has frequent and continuing contact with both parents, which is considered to be in the child's best interests unless the court determines, after a hearing, that contact with a parent would be detrimental to the child's best interests. In making that determination, the court shall consider evidence of physical abuse or threat of physical abuse by one parent against the other parent or the child, including but not limited to whether a parent or other person residing in that parent's household has been convicted of any of the crimes enumerated in 40-4-219(8)(b).
(m) adverse effects on the child resulting from continuous and vexatious parenting plan amendment actions.
¶15 In pertinent part, § 40-4-219, MCA, provides:
(1) The court may in its discretion amend a prior parenting plan if it finds, upon the basis of facts that have arisen since the prior plan or that were unknown to the court at the time of entry of the prior plan, that a change has occurred in the circumstances of the child and that the amendment is necessary to serve the best interest of the child. In determining the child's best interest under this section, the court may, in addition to the criteria in 40-4-212, also consider whether:
(a) the parents agree to the amendment;
(b) the child has been integrated into the family of the petitioner with consent of the parents;
(c) the child is 14 years of age or older and desires the amendment;
(d) one parent has willfully and consistently:
(i) refused to allow the child to have any contact with the other parent; or
(ii) attempted to frustrate or deny contact with the child by the other parent; or
(e) one parent has changed or intends to change the child's residence in a manner that significantly affects the child's contact with the other parent.
¶16 In her Amended Findings of Fact, Conclusions of Law and Order Re: Respondent's Notice of Intent to Relocate, the Standing Master detailed her consideration of each of the factors referenced in §§ 40-4-212 and -219, MCA. The Court specifically found that G.M.N. is too young, then at age five, to rely heavily on her wishes. Both parents desired G.M.N. to reside with them on a primary basis upon Shawnna's relocation to Boston. The Standing Master conscientiously considered G.M.N.'s interaction and interrelationships with her parents, siblings, and with other persons, namely Janelle, who significantly affect G.M.N.'s best interests. It is not disputed that in addition to her close relationships with Shawnna and Brent, G.M.N. has a very close relationship with her half-sister A.N. as well as with Brent's girlfriend Janelle. The Standing Master found G.M.N. to have four primary relationships-with Shawnna, Brent, A.N., and Janelle.
¶17 The Standing Master found Brent and Shawnna to be equal co-parents in terms of providing relational support and both equally able to provide continuity and stability of care for G.M.N. In considering the best interest factors under § 40-4-212, MCA, the Standing Master concluded the "factors are balanced fairly evenly in favor of either Mother or Father being primary residential custodian of G.M.N." If G.M.N. relocated to Boston her contact and interaction with three of her four closest relationships would be significantly reduced, whereas if she remained in Bozeman her contact and interaction with only one of her four closest relationships would be significantly affected. The Standing Master found that although G.M.N. "is easily adaptable, she is very connected and well-adjusted to her home, school, and community in Montana." Although Shawnna testified to having a large extended family in the Boston area, the Standing Master specifically considered this and did not give it much weight noting that G.M.N. has never been to Boston, has only briefly met two of Shawnna's extended family, and "has not developed any significant ties" with Shawnna's family. Shawnna herself admitted G.M.N. has school and neighborhood friends in Montana with whom she is closely connected. The Standing Master's finding, "G.M.N. is well-adjusted to her life in Montana and has created emotional ties with family and friends that currently do not exist for her in Boston," is supported by the record.
¶18 The Standing Master considered the living situation of the parties.
Brent continues to reside in Bozeman. He and Janelle purchased a home together approximately a year prior to the hearing. He and Janelle considered purchasing a home closer to Belgrade where Shawnna resides but decided that it would be better to maintain A.N. in her current school. This way neither A.N. nor G.M.N. had to change schools-G.M.N. could remain in her school as Shawnna was residing in the district and had given Brent no indication she intended to relocate. Had they known of Shawnna's proposed move, it may have altered his and Janelle's decision as to where to purchase their home. While Shawnna asserts she believes there would be better employment opportunities for her in Boston, she has not secured work there nor made specific housing arrangements. Shawnna desires to be an ER nurse but testified she worked in other areas of nursing prior to becoming an ER nurse and it would be possible for her to obtain other employment as a nurse. The Standing Master recognized Shawnna would have increased employment opportunities in Boston and carefully considered Shawnna's efforts to obtain employment in the Bozeman area and in Montana, finding she had only applied to three Bozeman area positions and had declined to participate in an offered interview with one, electing instead to go to lunch with girlfriends. Further, she has not sought employment with urgent care facilities not owned by BDH in the Bozeman area.
¶19 Although neither parent has willfully or consistently frustrated or denied the other parent contact with G.M.N., Shawnna's failure to inform Brent regarding both her termination from employment and her conviction for DUI and resultant suspension of her driver's license raised concerns with the Standing Master regarding Shawnna's ability to care for G.M.N. and G.M.N.'s stability in life should G.M.N. relocate with Shawnna to Boston.
¶20 Shawnna misconstrues the findings and conclusion of the Standing Master and District Court in her conclusion that the Standing Master and District Court failed to presume Shawnna would move and to then consider G.M.N.'s best interests. Shawnna further asserts the Standing Master failed to consider the "heavy burden" on Brent to provide sufficient proof that a travel restriction is in the best interest of G.M.N. as required by our holdings in Guffin v. Plaisted-Harman , 2009 MT 169, ¶ 9, 350 Mont. 489, 209 P.3d 225 ( Guffin I ); Guffin II , 2010 MT 100, 356 Mont. 218, 232 P.3d 888 (collectively, Guffin ); and In re Custody of D.M.G. , 1998 MT 1, ¶ 31, 287 Mont. 120, 951 P.2d 1377. Upon thorough consideration of the §§ 40-4-212 and -219, MCA, factors, the Standing Master determined it was in G.M.N.'s best interests to continue to reside on a primary basis in her home community of Bozeman/Belgrade, Montana where she has lived since her birth.
¶21 The situation here is far different than that of Guffin or D.M.G . In Guffin, prior to their marriage both parties spent their lives in Kalispell, Montana, they got married in Kalispell in 2001, and then had two children in Kalispell. In February 2006, the parties moved to Terry, MT for father to pursue different work. Guffin I , ¶ 3. The parties separated in September 2007, and in November 2007, father quit his job and moved two hours away from mother and the children to Ekalaka, Montana. Guffin II , ¶ 2. In February 2008, the parties filed a joint parenting plan which the court adopted whereby the children resided with mother on a primary basis and thereafter the children did in fact reside on a primary basis with mother. Guffin II , ¶ 3. In March 2008, mother told father she intended to move back to Kalispell but did not provide written notice of this intention. Guffin II , ¶ 4. In June 2008, mother moved back to Kalispell. At the end of father's summer parenting time, he moved to amend the parenting plan faulting mother for providing him only oral, not written notice, of her intention to move. In granting father's request to amend the parenting plan, the district court explicitly stated mother should have to "pay the price" of reduced parental contact since she was the one who decided to move to Kalispell. Guffin II , ¶ 5. Upon appeal, this court reversed, holding mother had a constitutional right to travel and could not be penalized for exercising this right and confirming "[a]ny decision as to custody of the children must be based upon a careful examination of what is in their best interests." Guffin I , ¶¶ 11-12.
¶22 Upon remand the district court found mother to be a fit parent with supportive family in Kalispell and that the children had a positive relationship with mother's boyfriend. Guffin II , ¶ 25. The district court did not conclude either parent's location would have any significant advantages or disadvantages for the children. Guffin II , ¶ 10. Instead, the district court again concentrated on mother's "unilateral" decision to move, the timing of her decision to move, and her failure to follow the written notice requirement of § 40-4-217, MCA, rather than the best interests of the children. Guffin II , ¶ 29. The district court again amended the parenting plan to designate father as the primary custodial parent. Guffin II , ¶ 7. Upon appeal, this court again reversed, holding the determination of a parenting plan should focus solely on the best interests of the children and consideration of a parent's decision to relocate may not be held against the parent unless it exemplifies a willful and consistent attempt to frustrate or deny the other parent contact with the children. Guffin II , ¶ 33.
¶23 In D.M.G. , mother and father never married but had twin boys. When the boys were born mother quit her job, stayed home, and became the boys' primary caregiver, although father was actively involved with the boys. In re Custody of D.M.G. , ¶ 2. When mother and father separated, mother moved with the boys to Oregon for better job opportunities and to be closer to her mother and other family. Father did not initially object to mother moving with the boys. In re Custody of D.M.G. , ¶ 3. The district court determined it was in the children's best interests to require mother to relocate back to Montana or, failing to do so, she would lose her status as the primary physical custodian of the children. In re Custody of D.M.G. , ¶¶ 1, 7. In reversing the district court, this Court held the mother enjoyed a constitutional right to interstate travel, and the father had failed in his burden to provide legally sufficient proof that the best interests of the parties' children would be best served by requiring the mother to relocate back to Montana. We determined the district court failed to apply § 40-4-212(3)(a), MCA, which established a presumption in favor of the preexisting custodial parent. In re Custody of D.M.G. , ¶ 43.
¶24 Unlike Guffin and D.M.G ., this case does not involve a situation where the moving parent was determined to be the primary parent. Here, the Standing Master determined both parties to have equally strong relational ties with G.M.N. and to be good parents each equally capable of meeting all the daily demands of parenting. As G.M.N. is in school on a full-time basis and given the parties two-week rotating schedule with Brent having some additional time with G.M.N., the time the parties actually spend with G.M.N. when she is awake before and after school and on weekends is nearly equal. The Standing Master properly concluded Brent and Shawnna parent G.M.N. on a near equal basis, are equally bonded with G.M.N. and are equally able to parent and meet G.M.N.'s needs. More importantly, rather than punishing Shawnna for her impending relocation the Standing Master carefully considered the best interest factors under §§ 40-4-212 and -219, MCA. The Standing Master's findings and conclusions indicate G.M.N. has no real ties to Boston or to relatives there but significant relationships in her home community in Montana.
¶25 While a parent cannot be penalized for moving, this does not preclude a court from considering the impact the move has on the best interests of the child regarding the factors in §§ 40-4-212 and -219, MCA. E.g. , In re Marriage of Williams , 2018 MT 221, ¶ 19, 392 Mont. 484, 425 P.3d 1277. The Standing Master and District Court did not punish Shawnna for moving, but rather appropriately considered Shawnna's decision to move, her motivation therefor, and her efforts at securing work closer to Bozeman in addition to considering G.M.N.'s best interests under the § 40-4-212, MCA, best interest factors and the additional best interest considerations set forth in § 40-4-219, MCA. Although the Standing Master considered G.M.N.'s relationship with Shawnna to be strong and recognized that increased work opportunities existed for Shawnna in Boston, the Standing Master found these factors did not override or outweigh the considerable benefits to G.M.N. of remaining on a primary basis in the Bozeman area, especially in light of her very positive relationships with Brent, A.N., and Janelle.
¶26 In sum, Shawnna does not really disagree with the facts found by the Standing Master, but rather disagrees with her interpretation of those facts. Shawnna urges us to substitute her interpretation of the facts to find the Standing Master and, in turn, the District Court abused their discretion. We decline to do so. A standing master has broad discretion when considering the parenting of a child, and we must presume she carefully considered the evidence and made the correct decision. In re C.J. , ¶ 13. The Standing Master appropriately considered and weighed the evidence presented and the conflicting perceptions and testimony presented and made findings of fact supported by the evidence and her conclusions of law were correct. It is not this Court's function to reweigh conflicting evidence or substitute its judgment regarding the strength of the evidence for that of the standing master. In re A.F. , ¶ 24. Further, the District Court applied the correct standard of review to the Standing Master's findings of fact and conclusions of law.
CONCLUSION
¶27 We conclude the Standing Master's findings are sufficiently comprehensive and pertinent to the issues, comprehensively set forth the basis for the decision, are supported by the evidence presented, and are not clearly erroneous. The Standing Master's conclusions of law were correct. The Standing Master employed conscientious judgment in reaching her decision and the affirmation by the District Court was not error.
¶28 We affirm.
We concur:
MIKE McGRATH, C.J.
LAURIE McKINNON, J.
JAMES JEREMIAH SHEA, J.
DIRK M. SANDEFUR, J.
The factors set forth in § 40-4-212 (e), (f), (g), (i), (j), (k), and (m) are not implicated herein as the parties agree there are no mental or physical health problems of the parties or anyone involved, no chemical dependency issues, no unusual developmental needs of G.M.N., and no allegations of failing to pay birth-related costs, failing to financially support G.M.N., or continuing and vexatious parenting plan actions. Similarly, the factors set forth in § 40-4-219(1)(a), (c), and (d) are not applicable to the circumstances of this case.
Section 40-4-212, MCA, no longer contains rebuttable presumptions favoring custody to the parent who has provided most of the primary care during the child's life. | [
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] |
Justice Beth Baker delivered the Opinion of the Court.
¶ 1 Kenneth E. O'Brien filed a petition for a writ of mandate with the Eleventh Judicial District Court, Flathead County, requesting that the court compel and command the Flathead County Treasurer to issue him a tax deed or appear and show cause why it should not do so. The District Court denied the petition. O'Brien appeals. We affirm the court's denial of a writ of mandate.
PROCEDURAL AND FACTUAL BACKGROUND
¶ 2 In July 2013, Flathead County purchased a tax lien on Lot 4, Block 1, of Hillcrest Terrace after the property taxes became delinquent. The owner and occupant, James Ralph Connor, did not redeem the property within the thirty-six month redemption period. After the redemption period ended, the County assigned the tax lien to K&J Investments, LLC. O'Brien is a member of K&J Investments. The County sent notice to K&J Investments in January 2017 that the company must provide the notice required under § 15-18-212(1)(b), MCA, within 120 days to the occupant of the property and to each party listed on a property title guarantee, or the County would cancel K&J Investment's property tax lien.
¶ 3 K&J Investments mailed the required notice to the property owner, Connor, on February 17, 2017, and provided proof of notice to the County on March 1, 2017. The notice stated that the redemption period expired on April 21, 2017. K&J Investments mailed the required notice to the occupant of the property on March 10, 2017, and provided proof of notice to the County on March 23, 2017. The notice to the occupant stated that the redemption period expired on May 17, 2017. Both notices were returned unclaimed. O'Brien explains that K&J Investments sent two separate notices with different expiration dates because the County informed K&J Investments that it must send a separate notice to the occupant of the property, even though Connor was both the owner and the occupant.
¶ 4 O'Brien alleged in his petition that on or about May 31, 2017, Flathead County Treasurer, Adele Krantz, allowed Connor to redeem the property. After Connor redeemed the property, K&J Investments attempted to tender a check for the redemption proceeds and requested that a tax deed be issued. The County Treasurer declined to issue a tax deed, informing K&J Investments that the taxpayer has the right to redeem the property up until the time a tax deed is issued.
¶ 5 In September 2017, K&J Investments assigned its interest in the property to O'Brien. Two months later, O'Brien filed his petition for a writ of mandate, arguing that the County Treasurer had a statutory duty to issue a tax deed upon expiration of the time periods outlined in the notices from K&J Investments to the owner and occupant. The District Court denied the petition. O'Brien then filed a motion for reconsideration under Rule 60, which the District Court also denied. O'Brien never served the County Treasurer in the District Court proceedings, and the County did not file any responsive briefing. The County has filed a brief on appeal, and O'Brien has replied.
STANDARD OF REVIEW
¶ 6 We review a district court's decision to issue or deny a writ of mandamus for correctness.
Victor Fed'n of Teachers Local 3494 v. Victor Sch. Dist. No. 7 , 2018 MT 72, ¶ 9, 391 Mont. 139, 414 P.3d 1284.
DISCUSSION
¶ 7 O'Brien argues that the District Court incorrectly denied his petition for a writ of mandate because the County Treasurer has a clear legal duty to issue him a tax deed. He maintains that § 15-18-211, MCA, requires the County Treasurer to issue a tax deed to the purchaser of a property tax lien if property is not redeemed within the time allowed under the statutes. Section 15-18-211(1), MCA (2015) ("[I]f the property tax lien is not redeemed in the time allowed under 15-18-111, the county treasurer shall grant the purchaser a tax deed for the property."). He argues that the period for redemption expired on April 21, 2017, or on May 17, 2017, and that after this time the County Treasurer was obligated to issue a tax deed for the property in question. O'Brien contends that a writ of mandate is appropriate because he does not have an adequate remedy at law.
¶ 8 "A writ of mandamus compels 'the performance of an act that the law specially enjoins as a duty resulting from an office, trust, or station.' " Victor Fed'n of Teachers Local 3494 , ¶ 13 (quoting Citizens for a Better Flathead v. Bd. of Cnty. Comm'rs , 2016 MT 325, ¶ 58, 385 Mont. 505, 386 P.3d 567 ); see § 27-26-102(1), MCA. A writ of mandate is available when "(1) the party who applies for it is entitled to the performance of a clear legal duty by the party against whom the writ is sought; and (2) there is no speedy and adequate remedy available in the ordinary course of law." Citizens for a Better Flathead , ¶ 58 (internal quotations omitted). "To constitute an adequate remedy, the alternative must be one that itself enforces the performance of the particular duty." Jefferson County v. Dep't of Envtl. Quality , 2011 MT 265, ¶ 30, 362 Mont. 311, 264 P.3d 715 (internal quotation omitted).
¶ 9 Section 70-28-101, MCA, authorizes an action "by any person or persons ... claiming title to real estate against any person or persons ... who claim or may claim any right, title, estate, or interest therein ... adverse to plaintiff's ownership ... for the purpose of determining such claim or possible claim and quieting title to said real estate." Section 15-18-411, MCA, addresses quiet title actions "brought to set aside or annul any tax deed or to determine the rights of a purchaser to real property claimed to have been acquired through tax proceedings or a tax lien sale." Section 15-18-412, MCA, sets forth the procedures to be followed for the proceedings described in § 15-18-411, MCA, and incorporates procedures governing quiet title actions as specified in § 70-28-101 through -109, MCA. See Section 15-18-412(5), MCA. Sections 70-28-101 through -113, MCA, provide for actions to quiet title to real estate generally, and §§ 15-18-411 through -412, MCA, provide specific procedures for quiet title actions involving property rights that a party claims to have acquired through a tax deed or tax lien sale. See Getter v. Beckman , 236 Mont. 377, 380, 769 P.2d 714, 716 (1989). In a proceeding under § 15-18-411, MCA, a district court has the authority to order the delinquent taxpayer to make a deposit for the costs of the delinquency with the court and, if the taxpayer fails to do so, to enter a decree "quieting the title of the purchaser as against the true owner." Section 15-18-412(2)(a), MCA. The district court also is authorized "to order the department or any tax officer ... to do any other act necessary to enable the court to do complete justice." Section 15-18-412(7), MCA.
¶ 10 O'Brien maintains that §§ 15-18-411 and -412, MCA, are applicable only in actions where a tax deed already has issued. He claims to have acquired an interest in Lot 4, Block 1, of Hillcrest Terrace through "tax proceedings or a tax lien sale," but insists that § 15-18-411, MCA, provide him with no cause of action because the County Treasurer has not issued him a tax deed. See § 15-18-411(1)(a), MCA. The plain language of § 15-18-411, MCA, however, clearly contemplates an action either to quiet title to a tax deed or "to determine the rights of a purchaser to real property claimed to have been acquired through tax proceedings or a tax lien sale." Section 15-18-411(1)(a), MCA. Thus, O'Brien may seek to quiet title through the processes provided in §§ 15-18-411 and -412, MCA, and §§ 70-28-101 through -109, MCA. The statutes provide the district court with sufficient authority to order the issuance of a tax deed "to do complete justice." See Section 15-18-412(7), MCA. The issues that O'Brien argues in his mandamus petition may be raised and developed in a quiet title action. A quiet title action provides O'Brien with a speedy and adequate remedy in the ordinary course of law. The District Court correctly determined that O'Brien was not entitled to a writ of mandate.
CONCLUSION
¶ 11 The District Court order is affirmed.
We concur:
INGRID GUSTAFSON, J.
LAURIE McKINNON, J.
DIRK M. SANDEFUR, J.
JAMES JEREMIAH SHEA, J.
The statutes governing tax liens and tax lien sales were amended in 2017. See 2017 Mont. Laws ch. 67. The 2017 amendments apply only to tax delinquencies that begin on or after the effective date of the act, March 2, 2017. See 2017 Mont. Laws ch. 67, §§ 45, 46. The delinquency at issue in this case arose before the effective date. All references to statutes in this Opinion are to the 2015 Montana Code Annotated. | [
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5
] |
Justice Dirk Sandefur delivered the Opinion of the Court.
¶1 Associated Management Services, Inc. (AMS) and Daniel R. Ruff and Ruff Software, Inc. (collectively Ruff) litigated numerous claims and counterclaims in the Montana Thirteenth Judicial District Court, Yellowstone County, over the parties' relative rights regarding the web-based payroll processing software, TimeTracker, developed by Ruff and licensed to AMS. Ultimately, the District Court granted summary judgment to Ruff, declaring the parties' 2008 licensing agreement valid and enforceable and effectively ruling that AMS had no right to TimeTracker other than as provided under the terms of the licensing agreement. Conversely, the court granted summary judgment to AMS on Ruff's counterclaims (breach of the licensing agreement, tortious interference with third-party relations, conversion, misappropriation of intellectual property, violation of the Montana Uniform Trade Secrets Act (MUTSA), and unjust enrichment). Ruff appeals the District Court's judgments denying its second motion to compel discovery related to its counterclaims, granting summary judgment to AMS on those counterclaims, and denying Ruff's motion for attorney fees as the prevailing party on AMS's claims. AMS cross-appeals the court's judgments adjudicating the validity of the 2008 licensing agreement. We affirm.
ISSUES
¶2 We address the following restated issues on appeal:
1. Did the District Court erroneously grant summary judgment in favor of Ruff that the 2008 TimeTracker licensing agreement was valid and enforceable and that AMS had no right to TimeTracker other than as provided by the agreement?
2. Did the District Court erroneously grant summary judgment in favor of AMS on Ruff's counterclaims?
3. Did the District Court abuse its discretion in denying Ruff's second motion to compel discovery?
4. Did the District Court abuse its discretion in denying Ruff's motion for attorney fees as the prevailing party on AMS's claims?
BACKGROUND
¶3 AMS is a Montana business corporation engaged in the business of providing payroll and related business services to the members and affiliates of Associated Employers (AE). AE is a non-profit association of large regional employers and the parent company of AMS. From 1993-2011, Diane Ruff was the managing executive of AMS. During Diane's tenure, AMS employed her son, Daniel R. Ruff, as a Support Services Specialist under one-year employment contracts. In pertinent part, Daniel's successive employment contracts expressly provided that all "materials prepared by Ruff as part of his employment with AMS," including all "files concerning Ruff's activities as Support Services Specialist," would "belong to and remain property of AMS." Inter alia , Daniel's contract-specified duties included "[m]anag[ing] or facilitat[ing] the information technology function for the AMS server and clients"; maintaining AMS's client-based payroll system; "understand[ing] and review[ing] payroll software and processes to determine and implement efficiencies";
and "other responsibilities as assigned and required."
¶4 In 2006, in response to a client's interest, AMS offered to develop an Internet-based payroll time-tracking program with financial support from the interested client. When the client declined, Daniel proposed to Diane that AMS unilaterally develop the proposed software but Diane declined due to cost. Daniel then informally offered to develop the software at his own expense on the understanding that he would own the end product. Diane authorized him to proceed. At his own expense, Daniel retained the help of a former AMS consultant and proceeded with the project. Ultimately named TimeTracker, the finished product was a web-based program that allowed AMS clients to collect, maintain, and process payroll-related information and to integrate the client payroll information with other AMS-owned payroll software. Daniel installed and hosted TimeTracker on a Ruff-owned server located at AMS. Daniel spent over $20,000 of his own money in the development of TimeTracker.
¶5 In early 2007, as the development of TimeTracker progressed, Diane, acting in her capacity as the chief executive officer of AMS, e-mailed AMS counsel, Tim Filz, and instructed that "Dan needs to have an LLC set up for a web-based program he is developing." In accordance with Diane's instruction, Filz subsequently chartered Ruff Software, Inc., with Daniel as the sole principal. Aside from this initial informal agreement between Diane and Daniel, no other agreement existed between Ruff and AMS during the development of TimeTracker from 2007 into 2008. However, on June 1, 2008, in advance of AMS's online deployment of TimeTracker for client use, AMS (through Diane) and Ruff Software, Inc. (through Daniel) executed a written software licensing agreement, which was drafted by Filz pursuant to Diane's prior instruction and which:
(1) described TimeTracker as "certain software developed by Ruff" including "updates and future revisions ... regardless of the form ... or trade name under which the software is marketed";
(2) provided that "[a]ll such proprietary software programs and related material, with a proprietary notice in human- or machine-readable form, are proprietary and confidential";
(3) authorized "AMS to use and ... sublicense the TimeTracker Software" exclusively to AE members;
(4) provided that "Ruff shall retain all rights" in TimeTracker "not granted herein" including the right to license TimeTracker to other parties;
(5) required AMS to pay Ruff 90% "of all fees collected from" AE members "for [the] use of" TimeTracker;
(6) provided that "[t]he term of this license shall be perpetual and shall survive the termination of Dan Ruff's employment with AMS," and that Ruff had the right to market TimeTracker directly to AE members in the event that AMS "quit promoting" it or "terminated its arrangements with" AE members; and
(7) included an express integration clause and provision for the prevailing party to recover reasonable attorney fees, costs, and other related expenses in the event of a breach of the agreement.
Pursuant to the agreement, AMS made TimeTracker available to its clients from the Ruff-owned server at AMS over Internet access provided by AMS. AMS maintained the Ruff server as required by the agreement but, at its discretion, did so through Daniel as part of his employment duties during his continuing tenure at AMS.
¶6 In simplified terms, TimeTracker, as installed on the Ruff server for use by AMS sublicensees, consisted of a functional component and a database component. Essentially the brain of the TimeTracker program, the functional component performed and produced desired end-user processing and output of end-user data, as inputted and stored in the database component. Daniel created the functional component through the use of Visual Basic Script (VBS), a standard alpha-numeric computer programming language, resulting in a complex set of coded alpha-numeric instructions constituting the source code for the functional component. Software developers generally do not include the alpha-numeric source code in or with an end-user program. Distinct from the alpha-numeric source code, the functional component of an installed end-user program generally consists of executable machine code. Machine code is a binary code set produced by processing the original alpha-numeric source code through a special computer program (compiler) which converts the source code into a binary code directly executable by computer processors (hardware).
¶7 Distinct from the functional component, the TimeTracker database component consisted of a relational database, which was composed of data structures (i.e. a table or sets of linked tables, with each table subdivided in matrix form into vertical columns (fields) and horizontal lines (records)) for structured storage of related information and, as referenced in this case, "stored procedures and triggers" that stored, retrieved, and processed data in and from the database as directed by the functional component. The "stored procedures and triggers" were essentially the programming interface between the functional component and the database data. Daniel created the TimeTracker data structures and associated "stored procedures and triggers" through the use of a Structured Query Language (SQL), a special alpha-numeric programming language used to create relational databases and provide the necessary interface operations between the functional component of a computer program and the database on which it operates. As installed on the Ruff server, the TimeTracker software consisted of the pre-compiled binary machine code constituting the functional component of the program and the uncompiled SQL source code (alpha-numeric code) constituting the TimeTracker database structures and associated database "procedures and triggers." Consequently, access to the installed and executable TimeTracker program on the Ruff server afforded access to the uncompiled alpha-numeric source code constituting the TimeTracker database component but not to the original source code for the functional component of the program.
¶8 Following execution of the 2008 license agreement, AMS began sublicensing TimeTracker for remote Internet use by its AE clients. Over the period of June 30, 2008, through December 15, 2015, AMS regularly paid Ruff 90% of the revenue generated on TimeTracker, totaling $83,641.73, in accordance with the licensing agreement. While the AMS board of directors apparently did not have formal notice of the licensing agreement until early 2013 when first referenced in management financial reports to the board after Diane left the company, AMS board meeting minutes manifest that its new executive director, Greg Roadifer, specifically raised concerns about the agreement to the board on April 23, 2013. The meeting minutes further indicate that the board directed Roadifer to "talk to Dan about AMS purchasing the TimeTracker system for a fair price and then Dan's wage could also be adjusted upward to reflect this."
¶9 After unfruitful discussions regarding the sale of TimeTracker in 2013, the issue returned to the fore in 2014 when Roadifer issued a memo criticizing Daniel for maintaining exclusive knowledge and control of the TimeTracker system, not acting professionally, and not being a "team player." The memo ultimately encouraged Daniel to leave the company to avoid "this awkward place you are in." In response, Daniel gave immediate notice of intent to leave AMS, which he did in September of 2014. In advance of leaving, Daniel provided AMS (through Roadifer) the credentials (user name and password) for administrative access to the Ruff server and TimeTracker. After leaving AMS, Daniel continued to provide consulting services to AMS to facilitate AMS's continued use and sublicensing of TimeTracker to AMS clients under the 2008 licensing agreement.
¶10 On March 26, 2015, six months after Daniel left the company, AMS (through Roadifer) e-mailed Ruff and again inquired if Ruff would "consider selling" TimeTracker to AMS. Referencing AMS's intent to "develop a new small business [Human Resource Information System] for [its] Members," Roadifer explained that "we need to be able to modify, change, and adapt the TimeTracker program and system to work with our new HRIS web-based software." In conjunction with the anticipated purchase of AMS's own server and new router to host its current and future web-based software, Roadifer further advised that "[w]e would like to consider moving [the Ruff] server" to the new AMS router for "more flexibility and fail-safe protection." By e-mail response dated March 30, 2015, Daniel stated his plan to market TimeTracker "outside of AMS" unless AMS accepted his offer to buy "the website, source code, hardware, and everything that is TimeTracker" for $120,000.
¶11 On April 19, 2015, upon authorization of the AMS board, Roadifer e-mailed Daniel and, in reference to AMS's plan to "build" its own "HRIS system" and AMS's stated need to revise "the current TimeTracker ... to work with the new HRIS," counteroffered to buy TimeTracker and the Ruff server for $60,000. Roadifer explained that "[w]e would originally use the source code but would eventually transition away to a newer web technology with our new HRIS." On April 23, 2015, Ruff responded with its own counteroffer setting forth three different options under which AMS could either: (1) buy TimeTracker for $120,000 (as originally offered by Ruff); (2) buy TimeTracker for $60,000 (as originally counteroffered by AMS) plus $3,000 per month until AMS developed its own software with similar function; or (3) pay nothing, terminate the 2008 licensing agreement, and Ruff would then provide TimeTracker directly to AMS's clients. Ruff's April 23, 2015 e-mail further advised AMS that, "[r]egardless of the option chosen," Ruff would "no longer offer consulting services for the AMS payroll system effective June 1, 2015."
¶12 Without response to the Ruff counteroffer, and unknown to Ruff, AMS immediately made several unsuccessful attempts to access the Ruff server at AMS to copy the installed TimeTracker program for installation on an AMS-owned server for uninterrupted use by AMS's AE clients under the 2008 licensing agreement. With the assistance of a third-party computer consultant, AMS was ultimately able to access the Ruff server without Daniel's knowledge and copy the installed TimeTracker program for installation on the AMS server. On April 24, 2015, Roadifer e-mailed AMS's lead software developer, James Collins, and requested a meeting to discuss AMS's contemplated development of an AMS-owned replacement for TimeTracker. AMS separately e-mailed Collins the credentials (user name and password) for administrative access to TimeTracker as previously installed on the Ruff server.
¶13 In consultation with Roadifer and other AMS personnel, Collins subsequently developed AMS's own payroll software system known as SlatePay. Like TimeTracker, SlatePay consisted of a functional component, initially coded in a standard alpha-numeric computer programming language, and a database component, consisting of a database and related programming interface controlled by the functional component. However, unlike TimeTracker, AMS created the SlatePay database component (database and programming interface) through the use of NoSQL, a special alpha-numeric programming language used to create and interface with non-relational databases. Unlike the relational database used in TimeTracker, a NoSQL database stores data in a less-structured, non-tabular form. To the end-user, programs based on SQL and NoSQL databases can have similar appearance and function based on entirely different internal database architecture and structure. With access to the uncompiled source code for TimeTracker's database component (TimeTracker's SQL-based database and "stored procedures and triggers"), Collins extracted AMS's client data from the TimeTracker database and converted it for input into SlatePay's NoSQL database. ¶14 Upon obtaining an installation copy of TimeTracker (functional and database components) from the Ruff server, re-installing TimeTracker on the AMS server, and embarking on development of the competing SlatePay program, AMS preemptively filed suit against Ruff in the Montana Thirteenth Judicial District Court. Based on its interpretation of Ruff's three-option counteroffer, AMS's original complaint alleged anticipatory breach of the 2008 licensing agreement by Ruff and sought declaratory judgment to preserve AMS's rights under the agreement. AMS alleged that Ruff planned to deny AMS access to TimeTracker and then market it directly to AMS's clients unless AMS paid a "stated sum." Consequently, AMS further requested preliminary and permanent injunctive relief enjoining Ruff from interfering with AMS's right to use TimeTracker under the 2008 agreement.
¶15 Following a record stipulation for dissolution of an ex parte temporary restraining order and unsuccessful mediation, Ruff filed an answer denying all of AMS's original complaint allegations and asserting various affirmative defenses and counterclaims, including breach of the 2008 licensing agreement, tortious interference with third-party relations, conversion, misappropriation of intellectual property, MUTSA violation, and unjust enrichment. Ruff's answer described TimeTracker as a "website [that] consists of several components," including compiled machine code (functional component) residing on the Ruff server at AMS together with SQL-based source code constituting the database component of the program. Ruff further sought declaratory judgment adjudicating the validity and enforceability of the 2008 licensing agreement and an injunction enjoining AMS from sharing or modifying the TimeTracker software, using TimeTracker in the development of AMS's own payroll-processing software, and requiring AMS to grant Ruff access to the Ruff server at the AMS facility. AMS subsequently filed an amended complaint asserting for the first time that AMS "owned" TimeTracker and that the 2008 licensing agreement was invalid as an unauthorized corporate act. In response, Ruff asserted additional counterclaims that AMS materially breached the licensing agreement and violated MUTSA by allowing unauthorized third-party access to the Ruff server to copy the installed TimeTracker software for use by AMS in developing its SlatePay software.
¶16 A central basis for Ruff's theft-based counterclaims (i.e. conversion, misappropriation of intellectual property, and MUTSA violation) and related discovery requests were two e-mails Daniel unexpectedly received in June 2015 from "slatepayroll.com" and addressed to him at "AE Widgets." Recognizing the name "AE Widgets" as part of a fictitious data set he created in 2007 for use in the development and testing of TimeTracker, Daniel first suspected that AMS was using TimeTracker to aid in the development of what became its competing SlatePay software. Based on that suspicion, Ruff subsequently propounded various discovery requests for production of specified documents including but not limited to all internal AMS e-mail communications regarding the development of SlatePay.
¶17 On October 2015, Ruff moved for summary judgment on the validity of the 2008 licensing agreement and AMS's claimed ownership of TimeTracker. Following the appearance of new counsel for AMS, the District Court granted Ruff's motion, ruling that the 2008 licensing agreement was a valid and enforceable contract executed within the actual or ostensible authority of AMS's corporate agent, Diane Ruff, and in any event subsequently ratified by AMS board acknowledgment and performance. The court accordingly dismissed AMS's competing declaratory judgment claims, thereby effectively ruling that AMS had no right to TimeTracker other than as provided by the licensing agreement.
¶18 On March 22, 2016, in the wake of AMS's boilerplate responses to Ruff's requests for production (e.g. not relevant, privileged, or not likely to lead to discovery of relevant evidence), Ruff filed a motion to compel more particular AMS responses related to the development of SlatePay including, inter alia , any and all internal AMS e-mails from April 2015 through June 2015 containing the words "TimeTracker," "SlatePay," or various iterations thereof. Ruff also moved for compelled production of SlatePay design and data-structure documentation, lists of SlatePay data field names, SlatePay source code, and any other technical information or related correspondence potentially probative of AMS's alleged use of TimeTracker code or features in the development of SlatePay. On June 1, 2016, the District Court partially granted Ruff's motion to compel, ordering production of a limited scope of internal AMS correspondence and e-mail communications, but held Ruff's request for production of the SlatePay source code in abeyance pending hearing.
¶19 At hearing on June 13, 2016, Daniel conceded that, contrary to his earlier discovery requests, he did not need access to the SlatePay source code to assess whether AMS had converted or incorporated portions of TimeTracker into SlatePay. Moreover, AMS presented testimony from in-house software developer James Collins that, though he designed SlatePay to access the SQL-based TimeTracker database component to convert the stored AMS client data from the SQL format used by TimeTracker to the NoSQL format used by SlatePay, he had not otherwise examined or considered the TimeTracker source code in the development of SlatePay. Daniel testified that he was unable to rebut Collins's testimony because AMS had failed to provide the previously requested internal e-mails and because Ruff's retained expert was unavailable for the June 13th hearing. Based on Daniel's concession and Collins's unrebutted testimony, the District Court denied the balance of Ruff's motion to compel and allowed AMS to go forward with the development and marketing of SlatePay.
¶20 Following the June 13th hearing and prior to responding to AMS's pending motion for summary judgment on Ruff's counterclaims, Ruff moved for a continuance pursuant to M. R. Civ. P. 56(f) for additional time to: (1) obtain production of the AMS correspondence and internal e-mails compelled under the District Court's June 1st order; (2) depose Collins and other AMS personnel; and (3) allow Ruff's retained software expert to analyze the information obtained. The court granted Ruff's motion and ordered AMS to file a written certification of compliance with the June 1st order.
¶21 On August 24, 2016, Ruff filed a response to AMS's motion for partial summary judgment on the Ruff counterclaims. Two days later, in dispute of AMS's August 22nd certification of compliance with the June 1st discovery order, Ruff filed a second motion to compel additional production from AMS on the assertion that the "central issue at the heart of the litigation remains in dispute" due to AMS's failure to respond to previously propounded discovery requests, thereby preventing Ruff's expert from evaluating "whether and to what extent AMS leveraged TimeTracker in the creation of SlatePay." Ruff characterized AMS's response to the District Court's June 1st discovery order as a "2,000-page document dump" of "purportedly responsive materials" that "were largely irrelevant" and which "clearly omitted certain" previously requested documents such as internal AMS communications related to TimeTracker and the development of SlatePay between April and June 2015.
¶22 On September 26, 2016, the District Court conducted a hearing on Ruff's second motion to compel, the parties' cross-motions for summary judgment on Ruff's counterclaims, and a new Ruff motion for leave to assert additional counterclaims (bad faith and abuse of process). On October 12, 2016, with rulings on those matters still pending following the September 26th hearing, Ruff deposed AMS's lead software designer James Collins. Two days later, Ruff filed a supplement to its second motion to compel asserting that Collins' deposition testimony disclosed for the first time the existence and substance of previously requested, but yet unproduced, e-mails from AMS executive director Roadifer to Collins in 2015 regarding AMS's intent to develop what became SlatePay, as well as a separate AMS e-mail transmittal to Collins of the credentials for administrative access to TimeTracker. Collins' deposition testimony further revealed that he had also exchanged a number of other previously requested, but as yet unproduced, e-mails with AMS information technology supervisor, Tracy Roadifer, about the development of SlatePay. Ruff further informed the District Court that Collins testified that he could easily create a previously requested list of SlatePay functions and features, user interfaces, and sample data.
¶23 On October 24, 2016, the District Court issued a written order denying Ruff's second motion to compel, denying its motion for leave to add additional counterclaims, and granting summary judgment on both parties' motions, thereby dismissing all remaining AMS claims against Ruff and all Ruff counterclaims against AMS. The District Court further ruled that neither party was entitled to attorney fees on the ground that neither had proven a breach of the 2008 licensing agreement by the other and thus neither was the prevailing party "[i]n the event of a breach" within the meaning of the contract attorney fees provision.
¶24 On November 7, 2016, Ruff filed a motion for contract attorney fees as the prevailing party in the dispute over the validity and enforceability of the 2008 licensing agreement or, alternatively, pursuant to § 27-8-313, MCA (discretionary attorney fees on successful declaratory judgment). Pursuant to M. R. Civ. P. 60(b), Ruff filed a separate motion requesting that the District Court set aside its grant of summary judgment to AMS on the Ruff counterclaims and related denial of Ruff's motion to add additional counterclaims. Ruff again asserted that Collins' deposition testimony revealed that AMS failed to produce previously requested internal AMS communications vital to his counterclaims. Ruff asserted that the Collins' deposition testimony confirmed Ruff's suspicions that AMS had accessed the TimeTracker database and converted its data for use in SlatePay. The District Court denied Ruff's Rule 60(b) motion on the ground that, in light of the existing facts of record, Collins' deposition testimony revealed no new information that was either relevant or reasonably likely to lead to the discovery of relevant information. The court further denied Ruff's motion for attorney fees. Ruff appeals and AMS cross-appeals.
STANDARDS OF REVIEW
¶25 This Court reviews a district court's grant or denial of summary judgment and related conclusions of law de novo for correctness. Bitterrooters for Planning, Inc. v. Mont. Dep't of Envtl. Quality , 2017 MT 222, ¶ 15, 388 Mont. 453, 401 P.3d 712 ; McClue v. Safeco Ins. Co. of Illinois , 2015 MT 222, ¶ 8, 380 Mont. 204, 354 P.3d 604. We review a district court's discretionary rulings on discovery matters for an abuse of discretion. Jacobsen v. Allstate Ins. Co ., 2009 MT 248, ¶ 53, 351 Mont. 464, 215 P.3d 649.
DISCUSSION
¶26 1. Did the District Court erroneously grant summary judgment in favor of Ruff that the 2008 TimeTracker licensing agreement was valid and enforceable and that AMS had no right to TimeTracker other than as provided by the agreement?
¶27 The District Court granted summary judgment to Ruff that the 2008 licensing agreement was a valid and enforceable contract executed within the actual or ostensible authority of AMS's corporate agent Diane Ruff and subsequently ratified by AMS board acknowledgment and performance. The court accordingly dismissed AMS's competing declaratory judgment claims, thereby effectively ruling that AMS had no right to TimeTracker other than as provided by the licensing agreement. AMS asserts that the District Court erred because Daniel created TimeTracker within the scope of his AMS employment and that the agreement was thus void due to lack of consideration. AMS alternatively asserts that the agreement is voidable by the corporation as an unauthorized act of a corporate agent and legally not subject to subsequent ratification due to a conflict of interest.
a. Sufficiency of Consideration
¶28 Legal obligations arise by contract or operation of law. Section 28-1-102, MCA. The essential elements of a contract consist of identifiable and capable parties, mutual assent, a lawful object, and "sufficient cause or consideration." Section 28-2-102, MCA. Legally sufficient contract consideration requires: (1) a benefit offered by a promisor to another, or a promisor's offer to suffer a detriment to the other; (2) offered by the promisor in exchange for or to induce a reciprocal benefit from or detriment suffered by the other; and (3) the offered exchange or inducement involves a benefit to which the other is not already "lawfully entitled" or a detriment that the promisor is not already "lawfully bound to suffer." Section 28-2-801, MCA. Absent affirmative proof to the contrary upon substantial evidence, a written contract is presumed to be supported by "good and sufficient consideration." Sections 26-1-602(38) and 28-2-804, MCA. A party seeking to invalidate a written contract has the burden of proving lack of sufficient consideration. Section 28-2-805, MCA ; Hodgkiss v. Northland Petroleum Consol. , 104 Mont. 328, 334, 67 P.2d 811, 814 (1937).
¶29 Here, Ruff made a threshold factual showing pursuant to M. R. Civ. P. 56 that, apart from his express employment contract duties, he and AMS, through its chief executive officer, orally agreed that Daniel would develop what became TimeTracker for commercial use by AMS on the understanding that Daniel would retain ultimate ownership of the software. Beyond genuine material dispute on the record presented, the rudimentary agreement benefitted AMS by allowing it to provide a beneficial service to the constituent membership of its parent organization, AE. The agreement reciprocally benefitted Daniel by allowing him to create and hold a contract interest in a commodity of value, albeit then unspecified. Though the threshold development agreement, as manifest on the evidentiary record, did not specify the parties' relative ownership and use rights, it was nonetheless a simple exchange of reciprocal promises regarding a lawful object of mutual benefit to both parties.
¶30 As development of TimeTracker neared completion, the parties built on the informal agreement to establish the more formal 2008 licensing agreement. Similar to the initial informal agreement, the licensing agreement manifestly allowed AMS to provide payroll services to members of AE. Regardless of other cost considerations not evident on the face of the agreement, the licensing agreement further expressly benefitted AMS by allowing it to retain 10% of the revenue generated from sublicensing the product for use by its clients. The licensing agreement expressly, clearly, and unequivocally identified the contract parties as AMS, acting by and through Diane Ruff in her capacity as AMS's "Executive Director," and Ruff Software, Inc., by and through Daniel as its "President/Owner."
¶31 AMS asserts that the apparent mutual consideration for the licensing agreement was nonetheless deficient or illusory because AMS already "owned" TimeTracker as the work-product of an employee, pursuant to §§ 39-2-403 and -409, MCA, the express terms of Daniel's 2007 and 2008 employment contracts, and the supplemental terms of the AMS employee handbook. A "benefit agreed to be conferred" or detriment "suffered or agreed to be suffered" by a promisor to the benefit of another is not valid contract consideration if the other is already "lawfully entitled" to receive the benefit or the consideration involves a detriment the promisor is already lawfully obligated to suffer. Section 28-2-801, MCA. Moreover, except for compensation due, "[e]verything that an employee acquires by virtue of employment ... belongs to the employer." Section 39-2-102, MCA ; see also §§ 39-2-403 and -409, MCA (general duty of employee to protect and prioritize the interest of the employer over the employee's own interest in a similar business).
¶32 Though we have not heretofore construed the interplay between §§ 39-2-102, -403, and -409, MCA, the employment relationship is primarily a contractual relationship. Section 39-2-101, MCA. The relative rights of the employer and employee are generally a matter of contract except as otherwise expressly provided by statute. Sections 28-1-102, 28-2-102, -602, -701, and 39-2-101, MCA ; Gentry v. Douglas Hereford Ranch, Inc. , 1998 MT 182, ¶ 38, 290 Mont. 126, 962 P.2d 1205 ; see also § 39-2-912(2), MCA (written contracts of employment not subject to Wrongful Discharge Act). While §§ 39-2-403 and -409, MCA, generally impose a duty on an employee to protect and prioritize the employer's interest over any employee interest in a similar business, that general duty does not preclude, limit, or impair the right and ability of an employer and employee to separately contract regarding matters related to but outside the scope of the employment contract.
¶33 The construction or interpretation of a contract is a question of law. Krajacich v. Great Falls Clinic, LLP , 2012 MT 82, ¶ 13, 364 Mont. 455, 276 P.3d 922. Courts must give effect to the manifest intent of the parties as it existed at the time of contract formation. Krajacich , ¶ 13. If the language of a written agreement is clear and unambiguous, "the duty of the court is to apply the language as written." Estate of Pruyn v. Axmen Propane, Inc. , 2009 MT 448, ¶ 47, 354 Mont. 208, 223 P.3d 845. Here, Daniel's governing employment contracts expressly provided that all "materials prepared by Ruff as part of his employment with AMS," including all "files concerning Ruff's activities as Support Services Specialist ," would "belong to and remain property of AMS." (Emphasis added.) Pursuant to the plain meaning of its clear and unequivocal language, this employment contract provision applied only to materials and files prepared by Daniel within the scope of his contract-defined employment as an AMS Support Services Specialist.
¶34 In pertinent part, Daniel's annual employment contracts specified that his employment duties included "[m]anag[ing] or facilitat[ing] the information technology function for the AMS server and clients"; maintaining the payroll system; "understand[ing] and review[ing] payroll software and processes to determine and implement efficiencies"; and "other responsibilities as assigned and required ." (Emphasis added.) Nothing in the plain meaning of the express language of the employment contracts evinces any provision or intent to include software development as part of Daniel's AMS employment duties or responsibilities. Though an apparent implicit term of Daniel's employment agreement with AMS, the general prohibition in the AMS employee handbook against personal use of company resources is insufficient to override an independently supported agreement between the parties specifically authorizing and providing for Daniel to develop TimeTracker to the parties' mutual benefit.
¶35 On the Rule 56 record, Ruff made a threshold factual showing that, apart from Daniel's express contract employment, he and AMS (through its chief executive officer) orally agreed that Daniel would develop what became the TimeTracker software at his own expense for use by AMS on the understanding that Ruff would retain a contract interest in the end-product. Further evidencing this threshold fact are the consistent terms of the 2008 licensing agreement, the fact of AMS's execution of the licensing agreement with a party (Ruff Software, Inc.) who was not an AMS employee, and AMS's consistent pre-dispute contract performance and payments to Ruff over a seven-year period. AMS's responsive reference to Daniel's express contract duties and the general prohibition in the AMS employment handbook of personal use of company resources are insufficient to raise a genuine issue of material fact to the contrary or to support AMS's related assertion that the 2008 licensing agreement was not supported by legally sufficient consideration.
b. Mutual Assent-Agency Principles
¶36 AMS nonetheless asserts that the 2008 licensing agreement is invalid or unenforceable due to lack of mutual assent on the ground that Diane Ruff executed the agreement in an agency capacity without authorization of AMS's board of directors. Agency is "the fiduciary relation which results from the manifestation of consent by one person to another" that the agent shall act on behalf of the principal subject to the principal's control and consent. Butler Mfg. Co. v. J & L Implement Co. , 167 Mont. 519, 523, 540 P.2d 962, 965 (1975). See also Restatement (Third) of Agency § 1.01 (2006) ; § 28-10-101, MCA (agent is one who represents another in dealings with third parties). Except as otherwise provided by statute, a principal may authorize an agent to perform any act that the principal may lawfully perform. Section 28-10-105, MCA. A principal may create an agency relationship by prior authorization or subsequent ratification of the representative acts of another. Section 28-10-201, MCA.
¶37 An agent has the authority actually or ostensibly conferred upon the agent by the principal. Section 28-10-401, MCA. Actual authority is authority that a principal either "intentionally confers" upon the agent or intentionally or negligently "allows the agent to believe the agent possesses." Section 28-10-402, MCA. Ostensible authority is authority that a principal intentionally or negligently "allows a third person to believe the agent possesses." Section 28-10-403, MCA. A principal may confer actual or ostensible authority upon an agent by express authorization or circumstantial implication. Freeman v. Withers , 104 Mont. 166, 172, 65 P.2d 601, 603 (1937). An actual or ostensible agent has implied authority to "do everything necessary, proper, and usual in the ordinary course" of the principal's business "for effecting the purpose of the agency." Section 28-10-405(1), MCA. A disclosed principal is liable in contract to third parties for the representative acts of an agent within the scope of the actual or ostensible authority conferred on the agent by the principal. Restatement (Third) of Agency § 6.01 ; see also §§ 28-10-401 and -405, MCA. Accordingly, unless otherwise "specially restricted" by board directive or bylaw, "a general or managing officer or agent" of a corporation has actual or ostensible authority to "enter into any contract which is usual, proper, or necessary ... in the ordinary transaction of the company's business." Audit Servs., Inc. v. Elmo Rd. Corp. , 175 Mont. 533, 536, 575 P.2d 77, 79 (1978).
¶38 Here, it is beyond genuine material dispute on the Rule 56 record that, at all times pertinent, Diane Ruff was the chief executive officer of AMS with general authority to act on behalf of the corporation within the broad scope of AMS's ordinary course of business. AMS was engaged in the business of, inter alia , providing payroll recordkeeping and processing services to its clients, including but not limited to the acquisition of software necessary or helpful to that end. It is beyond genuine material dispute on the Rule 56 record that the 2008 licensing agreement and its subject matter were within the scope of the ordinary course of AMS's business.
¶39 AMS's corporate counsel drafted the licensing agreement for Diane Ruff's signature in the name of the corporation. AMS made no affirmative factual showing disputing Diane's authority to enter into the licensing agreement without prior authorization of the AMS board. AMS made no affirmative factual showing that Diane had any reason to believe that either the initial informal agreement or the subsequent licensing agreement was outside the scope of her authority as the chief executive officer of AMS. AMS further made no affirmative factual showing that Daniel had any non-speculative reason to believe that Diane was not authorized to enter into the development and licensing agreements or that Diane actively or intentionally concealed the existence and terms of the licensing agreement from the AMS board. The mere facts that Diane and Daniel were mother and son and that the AMS board was not formally or specifically aware of the licensing agreement until the new AMS executive director raised "concerns" about it in 2013 after Diane left the company are insufficient without more to raise a genuine issue of material fact as to whether Diane was acting outside the scope of her actual or ostensible authority when she executed the licensing agreement seven years earlier. On the Rule 56 record presented, we hold that Ruff was entitled to judgment that Diane executed the 2008 licensing agreement within the scope of her actual and ostensible authority as the chief executive officer of AMS.
¶40 The District Court alternatively ruled that, even if arguendo Diane had executed the licensing agreement outside the scope of her actual or ostensible authority, AMS nonetheless ratified the agreement after she left the company. A principal may create an agency relationship by subsequent ratification of the representative acts of another. Section 28-10-201, MCA. "A contract which is voidable solely for want of due consent may be ratified by a subsequent consent." Section 28-2-304, MCA. Ratification is the affirmative confirmation of a prior act. Erler v. Creative Fin. & Inv. , 2009 MT 36, ¶¶ 25-26, 349 Mont. 207, 203 P.3d 744. A principal with knowledge of the material facts may ratify a prior unauthorized act or transaction by express declaration or implicitly by acts, statements, or conduct which reasonably manifests an intent to affirm or be bound by the act. Erler , ¶¶ 25-26 ; Freeman , 104 Mont. at 172, 65 P.2d at 603. Thus, a principal may ratify an unauthorized act by "knowingly accepting or retaining the benefit of the act." Section 28-10-211, MCA.
¶41 Implicit ratification is "usually clearly shown" where the principal "voluntarily recognizes" the act as binding and "proceeds to perform the obligations which it imposes." Freeman , 104 Mont. at 172, 65 P.2d at 603. Though mere acquiescence is not necessarily conclusive of ratification, voluntarily performance or payment on a previously unauthorized contract by a principal with knowledge of the material facts is presumptive proof of ratification where the party who entered into the agreement was a previously established agent of the principal and the principal's subsequent performance or payment is inconsistent with any other intention. Freeman , 104 Mont. at 172, 65 P.2d at 603 ;
Larson v. Marcy , 61 Mont. 1, 9, 201 P. 685, 687 (1921). Ratification rests, inter alia , upon the principle of equitable estoppel and "the duty of the principal to repudiate" an unauthorized act of an agent "within a reasonable time after discovery." Larson , 61 Mont. at 9, 201 P. at 687. See also Butler Mfg. Co. , 167 Mont. at 526, 540 P.2d at 966 (duty to repudiate or disavow unauthorized act of agent immediately upon discovery). Thus, a principal with knowledge who acquiesces and affirmatively performs or pays on a previously unauthorized but otherwise lawful and beneficial act of a previously established agent is equitably estopped from later asserting that the act was unauthorized ab initio .
¶42 Here, it is beyond genuine material dispute on the Rule 56 record that the AMS board was specifically aware of the 2008 licensing agreement at least as early as April 2013 when the new executive director raised concerns about it following Diane Ruff's retirement. It is similarly beyond genuine material dispute that, despite knowledge of the agreement and the mother-son relationship between Diane and Daniel, AMS continued to perform and pay on the contract for an additional two years until negotiations broke down on AMS's offer to buy-out the contract. The pre-dispute conduct of AMS between April 2013 and 2015 clearly evidences that AMS highly valued its continued use of TimeTracker and acquiesced to be bound under the terms of the 2008 licensing agreement. Even if Diane was not authorized to enter into the licensing agreement in the first instance, AMS's acquiescence and affirmative performance and payment on the contract from 2013 to 2015 is presumptive proof of manifest intent to ratify the agreement. Aside from self-serving argument, AMS made no affirmative factual showing to the contrary.
c. Alleged Corporate Conflict of Interest Transaction
¶43 In the absence of a sufficient responsive showing to preclude summary judgment on Ruff's actual and ostensible authority and ratification showings, AMS selectively cites §§ 35-1-461 and -463, MCA, for the proposition that the 2008 licensing agreement was void ab initio as a conflict of interest transaction as defined by § 35-1-461, MCA. Consequently, AMS asserts that, absent a majority vote of uninterested AMS directors, the agreement was void as a matter of law pursuant to § 35-1-463, MCA. AMS asserts that the conflict of interest "deprived" Diane Ruff of any "actual or ostensible authority" that she may otherwise have had and that, as a matter of law, a transaction that is void ab initio is not subject to ratification.
¶44 Corporate directors have statutory fiduciary duties of reasonable care, good faith, and loyalty. Section 35-1-418, MCA. Corporate officers have similar fiduciary duties. Sections 35-1-442 and -443, MCA. However, the compliance oversight and remedies for violation of those duties is different for directors than officers. Corporate directors serve at the discretion and oversight of the shareholders. See §§ 35-1-424, -425, and -462(1), MCA (shareholder authority to remove directors, actions for judicial removal of directors, and derivative actions against corporation or board of directors to adjudicate or enforce rights of corporation as a whole). In contrast, corporate officers serve at the discretion and oversight of the board of directors. See §§ 35-1-416(2) and -444(2), MCA (board of directors' authority to direct and remove officers). The board of directors has plenary authority over corporate officers within the scope of the corporate bylaws, as determined by the board, see §§ 35-1-416, -441, -442, and -444, MCA. While wrongful acts of corporate officers may conceivably be subject to derivative action by the shareholders or corporation to the extent of the utility of that remedy, the Montana Business Corporations Act (MBCA) does not expressly define or address conflict of interest transactions involving corporate officers. See Title 35, chapter 4, MCA.
¶45 In contrast, the MBCA provides a remedy for redress of director conflict of interest transactions but the remedy is limited to derivative actions involving director conflict of interest transactions, as narrowly defined by § 35-1-461(2), MCA, and which fall outside of the statutory safe-harbor for transactions that are either "fair to the corporation" under the "circumstances at the time" regardless of disclosure or those disclosed by the director with knowledge and approved by a majority vote of uninterested directors (or a majority vote of all uninterested shares). Section 35-1-462, MCA. See also Warren v. Campbell Farming Corp. , 2011 MT 324, ¶ 11, 363 Mont. 190, 271 P.3d 36 ; Commission Comments to § 35-1-461, MCA. Director conflict of interest transactions are corporate transactions in regard to which a director knows at the time of the transaction that the director or a related person is interested. Section 35-1-461(1), (2) and -462(1), MCA. See also Commission Comments to § 35-1-461, MCA. A derivative action is "a civil suit" asserted by one or more shareholders, or the board of directors, against the corporation or board to adjudicate or enforce a right of the corporation as a whole. See § 35-1-541, MCA. See also § 35-1-462(1), MCA ; S-W Co. v. John Wight, Inc ., 179 Mont. 392, 399, 587 P.2d 348, 352 (1978).
¶46 As a threshold matter of law, §§ 35-1-461 and -463, MCA (narrow definition of director conflict of interest transactions and safe-harbor from derivative action attacks), apply only to director conflict of interest transactions within the scope of § 35-1-462, MCA, and when a director conflict is at issue in a derivative action asserted by shareholders against the corporation or board, or by the board against the corporation. See §§ 35-1-461, -462, -463, and -541, MCA. Here, regardless of whether Diane Ruff was an AMS board member or officer at the time of execution of the 2008 licensing agreement, and despite the fact that she and Daniel were related, this action is not a derivative action as defined by § 35-1-541, MCA. Rather, this action involves claims and counterclaims by and between a corporation and a third party (Ruff) who, on this record, was neither an AMS shareholder or director. Thus, as a threshold matter of law, §§ 35-1-461 and -463, MCA, have no application here.
¶47 Moreover, even if §§ 35-1-461 and -463, MCA, were applicable here, an undisclosed director conflict of interest transaction is neither void ab initio per se, nor voidable at the discretion of the corporation. See Commission Comments to § 35-1-461, MCA (discussing MBCA departure from prior statutory scheme). Rather, undisclosed director conflict of interest transactions are merely subject to damages and injunctive relief, in a derivative action, upon proof that the transaction was unfair to the corporation under the totality of the circumstances. See 35-1-462(2)(c), MCA. Apart from the threshold fact that this is not a derivative action, AMS has further made no claim or showing of entitlement to damages or injunctive relief against Ruff. We hold that the District Court correctly granted Ruff summary judgment that the 2008 licensing agreement was valid and enforceable in accordance with its express terms, thereby effectively ruling that AMS had no right to TimeTracker other than as provided under the terms of the agreement.
¶48 2. Did the District Court erroneously grant summary judgment in favor of AMS on Ruff's counterclaims?
¶49 On the asserted ground that genuine issues of material fact precluded summary judgment, Ruff asserts that the District Court erroneously granted summary judgment to AMS on the Ruff counterclaims for breach of contract, tortious interference with third-party relations, conversion, misappropriation of intellectual property, MUTSA violation, and unjust enrichment. On appeal, Ruff asserts that the following facts and assertions were sufficient to raise a genuine issue of material fact precluding summary judgment: (1) AMS "lied to Ruff by saying it would consult the [AMS] board about" Ruff's counteroffers in the TimeTracker purchase negotiations; (2) AMS "immediately contacted its lead software developer" after purchase negotiations stalled "to begin work on a [TimeTracker] replacement"; (3) AMS hired a third-party consultant to access the Ruff server and copy TimeTracker for installation on the AMS server; (4) AMS preemptively "[f]iled a lawsuit against Ruff and obtained a temporary restraining order" to "shield its 'use' of TimeTracker from scrutiny"; (5) AMS "[a]ttempted to use the lawsuit, TRO, and Ruff's former lawyers to coerce the sale of TimeTracker;" (6) AMS provided "lead software developer instructions on how to access TimeTracker"; (7) AMS used personnel with TimeTracker experience to assist in the development of SlatePay; and (8) "[a]t the very least," AMS "linked TimeTracker's database to SlatePay via an SQL adapter."
a. Ruff's Breach of Contract Counterclaim
¶50 The primary essence of Ruff's breach of contract claim is that AMS breached the 2008 licensing agreement by copying TimeTracker from the Ruff server, reinstalling and using the software on the AMS server, excluding Ruff from administering AMS's continued use of TimeTracker, and denying Daniel access to the Ruff-owned server at AMS after negotiations broke-down. Ruff asserts that AMS further breached the agreement, and violated MUTSA, by allowing a retained third-party consultant to access the Ruff server to make a backup copy of TimeTracker.
¶51 The construction or interpretation of a contract is a question of law. Krajacich , ¶ 13. If the language of a written agreement is clear and unambiguous, the court must apply the language as written. Estate of Pruyn , ¶ 47. The 2008 licensing agreement expressly authorized AMS to perpetually "use" and "sublicense" TimeTracker for use by its AE clients. In return, the agreement required AMS only to make specified contract payments, bill AMS's clients for TimeTracker use, maintain "the web server hosting TimeTracker onsite" at AMS, and provide "broadband access to AMS users." As recognized by the District Court, the agreement did not require AMS to host TimeTracker on Ruff's server-only to host it on an onsite web server maintained by AMS. The agreement similarly did not require AMS to maintain and administer TimeTracker exclusively through Daniel, whether in his employment capacity or in his capacity as Ruff's principal. The agreement further expressly contemplated that AMS's perpetual right to use TimeTracker would survive Daniel's eventual departure from AMS's employ. In the manifest absence of an express prohibition or limitation, the agreement's express authorization for perpetual onsite use and maintenance by necessity implicitly authorized AMS to copy the installed version of TimeTracker for reinstallation and use on another onsite server.
¶52 Ruff made no responsive showing that AMS interfered with Ruff's ownership of the Ruff server apart from acting to protect AMS's contract right to continued use of TimeTracker. Daniel admitted that AMS, not Ruff, owned the user or customer data maintained in the TimeTracker database and that he had no authorization to access the data except as an employee or contract consultant of AMS. It is beyond genuine material dispute on the Rule 56 record that, regardless of the temporary restraining order and AMS's copying of the installed version of TimeTracker, Ruff at all times had a complete copy of the installed version of TimeTracker as well as exclusive possession and control over the uncompiled source code for the TimeTracker functional component. Nothing in the licensing agreement expressly or implicitly required AMS to provide infrastructure or support to assist Ruff in soliciting AMS clients or providing TimeTracker to new clients.
¶53 Moreover, nothing in the language of the licensing agreement precluded AMS from employing a third-party computer consultant to assist in the administration of AMS's licensed use of TimeTracker. Ruff made no factual showing that the third-party consultant retained by AMS to copy the installed version of TimeTracker was involved in any capacity, or to any extent, other than as a limited contract agent of AMS for that purpose. Regardless of Ruff's retained contract interest in TimeTracker, Ruff made no non-speculative factual showing that the consultant did anything other than assist AMS in its licensed use of TimeTracker. Under these circumstances, Ruff's asserted factual showings and speculative arguments regarding AMS's alleged unscrupulous, post-dispute conduct were insufficient to raise a genuine issue of material fact regarding the parties' relative rights and obligations under the clear and unequivocal terms of the licensing agreement. We hold that the District Court correctly granted summary judgment on Ruff's counterclaim for breach of the 2008 licensing agreement.
b. Ruff's Conversion, Intellectual Property, and Trade Secret Counterclaims
¶54 Brief examination of the essential elements of the Ruff counterclaims for conversion, misappropriation of intellectual property, and MUTSA violation similarly manifest their common insufficiency on the Rule 56 record. The essential elements of common law conversion are: (1) a claimant's right of possession or control over the subject personal property; (2) the intentional exercise of possession or control over the property by another inconsistent with the right of the owner and without right or consent; and (3) resulting damages to the claimant. Gebhardt v. D.A. Davidson & Co. , 203 Mont. 384, 389, 661 P.2d 855, 858 (1983).
¶55 Apart from conversion, the common law further recognizes two related but distinct theories of misappropriation of intellectual property-contract-based misappropriation and property right-based tortious misappropriation. See Apfel v. Prudential-Bache Securities Inc. , 81 N.Y.2d 470, 600 N.Y.S.2d 433, 616 N.E.2d 1095, 1097-98 (N.Y. 1993) (distinguishing breach of non-disclosure agreement, contract misappropriation of intellectual property, and tortious misappropriation of property right-based intellectual property). Accord Nadel v. Play-by-Play Toys & Novelties, Inc. , 208 F.3d 368, 374-78 (2nd Cir. 2000) (construing Apfel ).
¶56 As a specialized variant of a breach of contract theory, the elements of a claim for contract misappropriation of intellectual property are:
(1) an agreement for one to communicate an idea or knowledge to another in return for valuable consideration;
(2) the idea or knowledge had value to the recipient at the time of contract formation regardless of whether "grossly unequal" or of "dubious value" in relation to the consideration paid or provided in return;
(3) the recipient breached the agreement; and
(4) resulting damages to the claimant based on breaching party's beneficial use of the idea or knowledge.
See Apfel , 600 N.Y.S.2d 433, 616 N.E.2d at 1097-98 (emphasizing freedom of contract and subjective assessment of value). Accord Nadel , 208 F.3d at 376-80. While a truly novel idea or knowledge is presumed to be of value to a recipient who paid or pledged valuable consideration to acquire it, an idea or knowledge need not be truly original or novel to be of value to a recipient as a matter of contract consideration. Apfel , 600 N.Y.S.2d 433, 616 N.E.2d at 1098 (noting that a buyer may nonetheless "reap benefits from such a contract in a number of ways," such as "by not having to expend resources pursuing the idea through other channels or by having a profit-making idea implemented sooner rather than later"). Accord Nadel , 208 F.3d at 374-80 (distinguishing relaxed novelty standard for contract claims from more stringent absolute novelty standard for tort claims).See also §§ 26-1-602(38) and 28-2-804, MCA (written contract presumed to be supported by "good and sufficient consideration"). Nonetheless, an idea or knowledge that is obvious, previously or generally known, or merely derivative or a variant thereof is presumed to have no value to the recipient as contract consideration. Nadel , 208 F.3d at 378-80 (obvious or generally known idea is imputed to the recipient as a matter of law thus rendering it valueless as contract consideration). Accord Soule v. Bon Ami Co. , 201 A.D. 794, 195 N.Y.S. 574, 575-76 (N.Y. App. Div. 1922) (idea to increase manufacturer profits by increasing wholesale price to retailers without increase in retail price merely a variant or derivative of an obvious or commonly known concept).
¶57 The essential elements of a property rights-based claim for tortious misappropriation of intellectual property are:
(1) an idea was communicated by the claimant to another in confidence;
(2) the idea was novel and original;
(3) the recipient used the idea to the recipient's benefit; and
(4) resulting damages to the claimant based on the tortfeasor's beneficial use of the idea or knowledge.
See Apfel , 600 N.Y.S.2d 433, 616 N.E.2d at 1097-98 ; Alevizos v. John D. & Catherine T. MacArthur Found. , 764 So.2d 8, 11 (Fla. App. 1999). An idea may give rise to a cognizable property right or interest only if novel and original. Apfel , 600 N.Y.S.2d 433, 616 N.E.2d at 1098 ; Paul v. Haley , 183 A.D.2d 44, 588 N.Y.S.2d 897, 902 (N.Y. App. Div. 1992) (idea that is not novel is not cognizable as property and thus cannot be misappropriated or stolen); Downey v. Gen. Foods Corp. , 31 N.Y.2d 56, 334 N.Y.S.2d 874, 286 N.E.2d 257, 259 (1972) (ideas are cognizable and protectable as property rights only if novel and original).
¶58 For purposes of tort liability, an idea or knowledge that is obvious, already known or possessed by the recipient, generally or commonly known or available, or merely a variant, derivative, or progression thereof is not novel or original. Alevizos , 764 So.2d at 11-12 ; Apfel , 600 N.Y.S.2d 433, 616 N.E.2d at 1098 ; Paul , 588 N.Y.S.2d at 903. Accord Downey , 334 N.Y.S.2d 874, 286 N.E.2d at 259-60 (idea to market an existing product under a name that was merely descriptive of an obvious characteristic of the product and a variant of a previously known concept).
Not every 'good idea' is a legally protectible [sic] idea. ... [A]n idea which is a variation on a basic theme will not support a finding of novelty. ... Even though an idea need not reflect 'the flash of genius' to warrant protection, it must show genuine novelty and invention, and not merely a clever or useful adaptation of existing knowledge. ... Improvement of standard technique or quality, the judicious use of existing means, or the mixture of known ingredients in somewhat different proportions-all the variations on a basic theme-partake more of the nature of elaboration and renovation than of innovation.
Paul , 588 N.Y.S.2d at 903 (internal citations and punctuation omitted). Ideas which are not novel "are in the public domain and may freely be used by anyone with impunity." Ed Graham Prods. v. Nat'l Broad. Co. , 75 Misc.2d 334, 347 N.Y.S.2d 766, 769 (N.Y. Sup. Ct. 1973).
¶59 In contrast to the common law protection of intellectual property, MUTSA defines the term "trade secret" as any "information or computer software, including a formula, pattern, compilation, program, device, method, technique, or process, that:
(a) derives independent economic value ... from not being generally known ... [or] readily ascertainable by proper means by other persons who can obtain economic value from its disclosure or use; and
(b) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
Section 30-14-402(4), MCA. In pertinent part, MUTSA defines actionable "misappropriation" of a trade secret as the "disclosure or use of a trade secret of another without express or implied consent by a person who ... used improper means to acquire knowledge of the trade secret." Section 30-14-402(2)(b)(i), MCA. As used in § 30-14-402(2)(b)(i), MCA, and as pertinent here, "improper means" includes theft, misrepresentation, or breach of a duty to maintain secrecy.
¶60 The common essence of Ruff's theft-based counterclaims (conversion, misappropriation, and MUTSA violation) is the allegation that TimeTracker contained proprietary or trade secret information that AMS accessed and beneficially used to Ruff's detriment. However, as noted by the District Court, and manifest on the Rule 56 record, Ruff had no legal copyright, trademark, or patent protection for TimeTracker. Ruff's theft-based claims were grounded in the terms of the 2008 licensing agreement. However, as previously analyzed herein, AMS used and accessed the installed TimeTracker program in accordance with the terms of the licensing agreement. Moreover, Ruff made no responsive factual showing rebutting AMS's showings that AMS did not have access to the uncompiled source code for TimeTracker's functional component and that AMS lacked sufficient technical expertise to reverse-engineer it from the compiled machine code to which it did have access.
¶61 Further, Ruff admitted that AMS exclusively owned the customer data that it copied from TimeTracker's SQL-based database for conversion into SlatePay's NoSQL database. While AMS had access to the uncompiled SQL source code constituting the TimeTracker database component, Ruff made no factual showing rebutting AMS's expert showing that TimeTracker's "stored procedures and triggers" (i.e. TimeTracker's SQL-based programming interface) were fundamentally incompatible and unusable by design and nature with SlatePay's NoSQL-based database structure.
¶62 Even to the extent that AMS may or could have nonetheless modeled or adapted certain SlatePay features, functions, or processes on certain logical structures, functions, or processes evident from the SQL-based TimeTracker database component, Daniel testified that TimeTracker's uncompiled SQL-based "stored procedures and triggers" were unencrypted and "open." Ruff made no evidentiary showing that Daniel made any effort to maintain the asserted confidentiality or secrecy of TimeTracker's SQL-based "stored procedures and triggers." In contrast, AMS made an unrebutted expert showing that TimeTracker's functionality and processes were "very understandable" and characteristic of "well documented process flows" provided "by literally hundreds of vendors out there." Lastly, in contrast to the express specification in the 2008 licensing agreement that Ruff would designate any asserted proprietary information in the software, TimeTracker did not include any such proprietary notice or designation.
¶63 In the face of these facts and beyond cursory characterization as trade secret or proprietary information, Ruff has failed to make any particularized showing as to how or on what basis TimeTracker's "stored procedures and triggers," design, functionality, or features are novel, unique, or substantially different from those available in, or derived or adapted from, other commonly available payroll time tracking software. Ruff has further failed to make any affirmative factual showing that AMS's conduct and use of TimeTracker caused damages or detriment to Ruff. Under these circumstances, Ruff's conversion claim fails as a matter of law due to lack of proof of wrongful dominion or use and lack of damages. Ruff's contract misappropriation fails due to lack of proof of breach of the 2008 licensing agreement and lack of damages. Ruff's tortious misappropriation claim fails due to lack of proof of novelty, originality, and damages. Ruff's MUTSA claim fails due to lack of proof of improper acquisition, independent economic value based on knowledge not generally known or readily ascertainable, and damages. We hold that the District Court correctly granted AMS summary judgment on Ruff's counterclaims for conversion, contract and tortious misappropriation of intellectual property, and MUTSA violation.
c. Ruff's Unjust Enrichment Counterclaim ¶64 Unjust enrichment is an equitable claim for restitution to prevent or remedy inequitable gain by another. N. Cheyenne Tribe v. Roman Catholic Church ex rel. Great Falls/Billings Dioceses , 2013 MT 24, ¶¶ 36-39, 368 Mont. 330, 296 P.3d 450 ; Restatement (Third) of Restitution and Unjust Enrichment § 1 (2011) ("person who is unjustly enriched" is liable "in restitution"). Forms of restitution available upon proof of an unjust enrichment claim include direct restoration of the benefit conferred or gained, or imposition of a constructive trust to the same effect. Volk v. Goeser , 2016 MT 61, ¶ 45, 382 Mont. 382, 367 P.3d 378 (noting broad discretion of court "to impose" or "declare" a constructive trust upon proof of elements of unjust enrichment); N. Cheyenne Tribe , ¶¶ 38-39 ("unjust enrichment serves as a unifying principle for a wide variety of equitable claims" which the court may vindicate by restitution including imposition of a constructive trust); Restatement (Third) of Restitution § 1 cmts. c and e (distinguishing between restitution as a remedy and restitution as a theory of liability). In any form, the measure of restitution is the amount of the defendant's inequitable gain. N. Cheyenne Tribe , ¶ 38. ¶65 The essential elements of an unjust enrichment claim are: (1) a benefit conferred on one party by another; (2) the other's appreciation or knowledge of the benefit; and (3) the other's acceptance or retention of the benefit under circumstances that would render it inequitable for the other to retain the benefit without compensating the first party for the value of the benefit. N. Che yenne Tribe , ¶¶ 33 and 36. 23 While restitution remains an available remedy to prevent a party from unjustly benefitting from "fraud, accident, mistake, undue influence, the violation of a trust, or other wrongful act," see In re Estate of McDermott , 2002 MT 164, ¶ 26, 310 Mont. 435, 51 P.3d 486 (discussing constructive trusts), unjust enrichment does not necessarily require proof of a wrongful act or conduct. Vol k , ¶¶ 45 and 50 (affi rming imposition of constructive trust where defendant "has done nothing wrong"); N. Che yenne Tribe , ¶¶ 29-35 and 38-39 (disc ussing constructive trusts); Restatement (Third) of Restitution § 1 cmt. f. Unjust enrichment merely requires proof that a party unjustly gained something of value, regardless of wrongful conduct. N. Che yenne Tribe , ¶ 38; Rest at ement (Third) of Restitution § 1 cmt. a.
¶66 Here, citing Estate of Pruyn , ¶ 64 (unjust enrichment requires proof of "misconduct or fault on the part of the defendant or that the defendant somehow took advantage of the plaintiff"), the District Court granted summary judgment to AMS on Ruff's unjust enrichment claim on the grounds that "unjust enrichment is a remedy for those parties who do not have a valid contract and cannot seek compensation for an alleged breach" and that this dispute arose in the context of a valid contract that AMS did not breach. However, the court's analysis overlooked our subsequent holding that unjust enrichment no longer requires proof of a wrongful act or conduct. N. Cheyenne Tribe , ¶¶ 30-35 and 39 (noting statutory abandonment of former requirement for proof of a wrongful act or conduct as a prerequisite for a constructive trust). Accord Volk , ¶¶ 45 and 50 (affirming imposition of constructive trust where defendant "has done nothing wrong");
Restatement (Third) of Restitution § 1 cmt. f. Thus, the District Court erroneously granted summary judgment to AMS on Ruff's unjust enrichment claim on the ground AMS did not commit a wrongful act.
¶67 Nonetheless, "[a] valid contract defines the obligations of the parties as to matters within its scope, displacing to that extent any inquiry into unjust enrichment." Restatement (Third) of Restitution § 2(2). Accord Welu v. Twin Hearts Smiling Horses, Inc. , 2016 MT 347, ¶ 36, 386 Mont. 98, 386 P.3d 937 (unjust enrichment inapplicable where matter at issue governed by an enforceable contract); Pruyn , ¶ 63 (unjust enrichment "is an obligation created by law in the absence of an agreement between the parties"). Consequently, unjust enrichment applies in the contract context only when a party renders "a valuable performance" or confers a benefit upon another under a contract that is invalid, voidable, "or otherwise ineffective to regulate the parties' obligations."
Restatement (Third) of Restitution § 2(2) cmt. c. See also Robertus v. Candee , 205 Mont. 403, 407, 670 P.2d 540, 541-42 (1983) (unjust enrichment available in contract context to non-breaching parties precluded from seeking contract damages because statute of frauds rendered otherwise governing contract unenforceable); Restatement (Third) of Restitution §§ 31 and 36 (availability of unjust enrichment where governing contract is indefinite, unenforceable, or does not address aftermath of a material breach); Restatement (Second) of Contracts §§ 283 cmt. c and 373-77 (1981) (addressing various contract-related scenarios where an otherwise governing contract is rescinded, unenforceable, or ineffective to address consequences of a material breach).
¶68 Here, as correctly concluded by the District Court, the 2008 licensing agreement was a valid and enforceable contract comprehensively governing the parties' respective rights and obligations regarding TimeTracker. As further correctly concluded by the court on the record presented, AMS was not in breach of the agreement and acted lawfully within its contract rights. Ruff made no affirmative material showing to the contrary. AMS was thus entitled to judgment as a matter of law that it was not unjustly enriched under the facts and circumstances in this case. We hold that the District Court correctly granted AMS summary judgment on Ruff's unjust enrichment claim.
d. Ruff's Counterclaim for Tortious Interference with Business Relations/Prospective Economic Advantage
¶69 The essential elements of tortious of interference with business relations or prospective economic advantage are: (1) an intentional act or conduct by the alleged tortfeasor; (2) performed by the tortfeasor "without right or justifiable cause"; (3) performed for the purpose of causing damage or loss to another; and (4) resulting damages. Maloney v. Home & Inv. Ctr., Inc. , 2000 MT 34, ¶ 41, 298 Mont. 213, 994 P.2d 1124 (distinguishing tortious interference with contractual relations). Here, as correctly concluded by the District Court, AMS acted lawfully within its contract rights regarding TimeTracker and did not impede or interfere with Ruff's ability to independently market TimeTracker, either to existing AMS clients or to new clients. It is further beyond genuine material dispute on the Rule 56 record that, except for a brief period in accordance with a temporary restraining order, AMS did not deny Ruff access to the Ruff server and, in any event, had no obligation to allow Ruff to independently host TimeTracker to third parties from AMS's premises or via Internet service or infrastructure provided by AMS. Ruff further made no particularized, non-speculative showing of damages suffered as a result of AMS's alleged tortious conduct. We hold that the District Court correctly granted AMS summary judgment on Ruff's counterclaim for tortious interference with business relations or prospective economic advantage.
¶70 3. Did the District Court abuse its discretion in denying Ruff's second motion to compel discovery?
¶71 In response to AMS's certification of compliance with the District Court's June 1, 2016 discovery order, Ruff filed a second motion to compel additional production from AMS. In support of the motion, Ruff asserted that the "central issue at the heart of the litigation remains in dispute" due to AMS's failure to respond to previously propounded discovery requests, thereby preventing Ruff's retained computer expert from evaluating "whether and to what extent AMS leveraged TimeTracker in the creation of SlatePay." Ruff further characterized AMS's response to the June 1st order as a "2,000-page document dump" that did not include previously requested documents, including internal AMS communications related to TimeTracker and the development of SlatePay between April and June 2015. Ruff supplemented the motion based on the subsequent deposition testimony of AMS's lead software developer James Collins, who attested to his recollection of various, as yet unproduced, internal e-mail communications between Collins and other senior AMS personnel regarding AMS's intent and progress in the development of its SlatePay software after negotiations for the purchase of TimeTracker stalled. ¶72 Except as otherwise limited by court order pursuant to M. R. Civ. P. 26(b)(2) and (c), a party may request and obtain discovery of any non-privileged information that is relevant to any claim or defense at issue, or reasonably likely to lead to the discovery of relevant information. M. R. Civ. P. 26(b)(1). In response to a formal request for production, the responding party must make reasonable inquiry and then either produce the information requested, state an objection including the particular reasons for the objection, or file a motion for a protective order. M. R. Civ. P. 26(g)(1) and 34(b)(2)(B) ; Richardson v. State , 2006 MT 43, ¶ 46, 331 Mont. 231, 130 P.3d 634 ; Patterson v. State, Dep't of Justice, Motor Vehicle Div. , 2002 MT 97, ¶ 15, 309 Mont. 381, 46 P.3d 642. If the responding party objects to a request for production on the ground of privilege, the objection must specifically identify the privilege asserted and describe the nature of the withheld information in a manner sufficient to enable the propounding party to assess the claim without disclosure of the privileged information. M. R. Civ. P. 26(b)(6)(A). Conclusory, pattern, or boilerplate objections that merely assert that a discovery request is privileged, overly broad, unduly burdensome, irrelevant, or not reasonably likely to lead to relevant information are insufficient and unresponsive. Redland Soccer Club, Inc. v. U.S. Dept. of the Army , 55 F.3d 827, 856 (3rd Cir. 1995) ; Josephs v. Harris Corp. , 677 F.2d 985, 991-92 (3rd Cir. 1982) ; Walker v. Lakewood Condo. Owners Ass'n , 186 F.R.D. 584, 586-87 (C.D. Cal. 1999) ; Obiajulu v. City of Rochester , 166 F.R.D. 293, 295 (W.D. N.Y. 1996) ; Compagnie Francaise d'Assurance v. Phillips Petroleum Co. , 105 F.R.D. 16, 42-43 (S.D. N.Y. 1984). The party resisting discovery must specifically state how each contested discovery request is overly broad, burdensome, or not relevant or reasonably likely to lead to discovery of relevant information. Redland Soccer Club , 55 F.3d at 856 ; Josephs , 677 F.2d at 991-92. If a request seeks production of information that is only partially objectionable, the responding party must produce all non-objectionable information requested. M. R. Civ. P. 34(b)(2)(C). A discovery request is presumed to be proper if the responding party fails to timely object or seek a protective order. Patterson , ¶ 15. Failure or refusal to fully and fairly answer proper discovery requests "essentially prevents the case from progressing" and warrants appropriate sanction as applicable under M. R. Civ. P. 26(g) and 37. Linn v. Whitaker , 2007 MT 46, ¶ 15, 336 Mont. 131, 152 P.3d 1282.
¶73 Contrary to AMS's certification and related assertions, Collins' eleventh-hour deposition testimony in fact demonstrated that AMS
failed to produce, or adequately explain its failure to produce, a quantum of previously existing records of non-privileged internal AMS communications which, at least at the time of the original discovery requests, were potentially relevant to claims then at issue in this case. Equally disturbing, the record indicates that the District Court failed to demand a particularized showing as to why or on what basis AMS withheld records within the scope of Ruff's discovery requests as privileged or otherwise not calculated to lead to the discovery of relevant information.
¶74 In the face of AMS's initial non-descriptive boilerplate responses, and subsequent written and in-court assertions that it had fully produced all discoverable information requested or compelled, Ruff ultimately made a particularized showing that AMS's prior discovery responses were incomplete. However, while we are reluctant to ignore AMS's manifestly non-responsive boilerplate discovery responses and the District Court's apparent acceptance of AMS's bald representations as to the content of disputed documents, the narrow issue on appeal is whether the District Court's rationale for denying Ruff's second motion to compel constituted an abuse of discretion.
¶75 Ruff filed its second motion to compel in response to AMS's potentially dispositive motion for summary judgment. The previously requested information regarding the design, data structures, and functionality of AMS's SlatePay program was again at issue, as well as suspected internal AMS e-mails and correspondence (involving AMS Executive Director Greg Roadifer, IT Supervisor Tracy Roadifer, software developer James Collins, and third-party AMS clients) regarding AMS's intent and progress in the development of SlatePay. Ruff and his retained expert continued to assert that this information was crucial to assess the manner and extent to which AMS used or "leveraged" TimeTracker to develop SlatePay. The District Court acknowledged that the outstanding discovery requests were not new, but determined the requests to be futile to Ruff's counterclaims in the face of the material facts then of record to which no genuine issue existed. We agree.
¶76 Contrary to its prior assertion, Ruff had previously acknowledged that it did not need access to SlatePay's source code to assess whether AMS had used TimeTracker to develop SlatePay. Ruff also does not dispute on appeal the District Court's observation that Ruff's requests for information regarding SlatePay's design, data structures, and functionality sought production of documentation that, though producible anew, AMS did not possess. Ruff likewise does not contest on appeal AMS's assertion that many of the requested documents either contained SlatePay source code or personal third-party information.
¶77 As described by Ruff, the unproduced internal AMS communications were largely, if not exclusively, preliminary 2015 communications regarding AMS's intent and efforts to develop SlatePay, including, inter alia , the transmittal to Collins of the Ruff-provided credentials for administrative access to the Ruff server and the installed version of TimeTracker. As a matter of law, the requested internal AMS communications could not have altered or affected the legal interpretation of the clear and unambiguous language of the 2008 licensing agreement. Based on its narrow focus on SlatePay and AMS's conduct rather than TimeTracker, the requested discovery could not in any event have given rise to a genuine issue of material fact regarding facts that were then of record, beyond genuine material dispute, regarding the evidentiary and legal insufficiency of TimeTracker and the 2008 licensing agreement as support for Ruff's counterclaims.
¶78 As correctly concluded by the District Court based on the facts then of record beyond genuine material dispute, AMS was acting within the scope of its contract rights when it accessed the Ruff server and copied TimeTracker for installation on AMS's server. It was further beyond genuine material dispute that TimeTracker's SQL-based database structure and "stored procedures and triggers" were open, unencrypted, and without proprietary designation as contemplated by the 2008 licensing agreement. Ruff's SlatePay-focused discovery requests could not in any event rebut AMS's factual showings that: (1) TimeTracker's SQL-based "stored procedures and triggers" were incompatible and unusable with SlatePay's NoSQL database and programming interface; (2) AMS owned the customer data in the TimeTracker database; and (3) TimeTracker's "stored procedures and triggers" were not novel, original, or undiscoverable by AMS upon lawful use of TimeTracker under the 2008 licensing agreement. In contrast to Ruff's SlatePay-focused discovery requests, the facts and issues that were fatal to Ruff's claims had to do with what AMS was authorized to do under the 2008 licensing agreement and what TimeTracker was and was not on the then-existing Rule 56 record. Though we do not approve of AMS's discovery responses, the discovery requested under Ruff's second motion to compel was nonetheless futile on its face under the particular facts and circumstances then of record in this case. We hold that the District Court did not abuse its discretion in denying Ruff's second motion to compel.
¶79 4. Did the District Court abuse its discretion in denying Ruff's motion for attorney fees as the prevailing party on AMS's claims?
¶80 Ruff asserts that it is entitled to attorney fees under the attorney fees provision in the 2008 licensing agreement or, alternatively, pursuant to § 27-8-313, MCA. In pertinent part, the 2008 licensing agreement expressly provided:
In the event of a breach of this agreement, the party at fault shall and will pay to the other party all ... reasonable attorneys' fees ... which may be incurred by the said other party in enforcing such party's rights hereunder.
Narrowly focusing on AMS's breach of contract claim against Ruff, the District Court ruled that the contract attorney fees provision did not apply pursuant to its express terms because there was no adjudicated breach of the 2008 licensing agreement as alleged by AMS.
¶81 Contract attorney fees provisions are reciprocal to both parties regardless of express benefit only to one. Section 28-3-704(1), MCA. We construe the imprecise language at issue to provide that, in the event of an adjudicated breach of the agreement, the breaching party shall be liable to the non-breaching party for attorney fees incurred to enforce the contract rights of the non-breaching party. While it expressly applied only to the benefit of a party who prevailed on a claim that the other party breached the agreement, the contract provision at issue also reciprocally benefited a non-breaching party who prevailed against an adverse breach of contract claim. Section 28-3-704(1), MCA. AMS's declaratory judgment claims were contract-based and inextricably intertwined with Ruff's breach-based counterclaims. Without need to sort out the parties' breach-based claims, neither party was the prevailing party on their intertwined contract claims. Ruff prevailed on AMS's contract claims but AMS prevailed on Ruff's contract counterclaims. We hold that the District Court correctly denied Ruff's claim for contract attorney fees.
¶82 Ruff alternatively asserts that it is entitled to attorney fees pursuant to § 27-8-313, MCA. As a narrow statutory exception to the American Rule, district courts have discretion to grant supplemental relief, including attorney fees, "based on a declaratory judgment or decree ... whenever necessary or proper." Section 27-8-313, MCA ; Trustees of Indiana Univ. v. Buxbaum , 2003 MT 97, ¶ 46, 315 Mont. 210, 69 P.3d 663. However, a supplemental award of attorney fees is not necessary and proper in every case and certainly not automatic to a prevailing party. Mungas v. Great Falls Clinic, LLP , 2009 MT 426, ¶ 44, 354 Mont. 50, 221 P.3d 1230. A court may award attorney fees under § 27-8-313, MCA, only if (1) warranted by equitable considerations under the particular facts and circumstances of each case and (2) "necessary and proper" under § 27-8-313, MCA, as indicated by the three-part "tangible parameters test." Davis v. Jefferson Cnty. Elec. Office , 2018 MT 32, ¶ 13, 390 Mont. 280, 412 P.3d 1048 ; Mungas , ¶ 45 ; United Nat'l Ins. Co. v. St. Paul Fire & Marine Ins. Co. , 2009 MT 269, ¶ 38, 352 Mont. 105, 214 P.3d 1260.
¶83 Here, as noted by the District Court, Ruff prevailed on AMS's declaratory judgment claim, but the claim was not frivolous. As further noted by the court, Ruff made no non-speculative showing that AMS instituted this action in furtherance of an improper motive. In that regard, AMS's claims were no less meritorious than Ruff's counterclaims. Ruff has made no showing that equitable considerations warranted a supplemental award of attorney fees in order to afford meaningful relief under the totality of the circumstances in this case. We hold that the District Court did not abuse its discretion in denying Ruff's alternative claim for attorney fees under § 27-8-313, MCA.
CONCLUSION
¶84 We hold that the District Court correctly granted Ruff summary judgment that the 2008 licensing agreement was valid and enforceable in accordance with its express terms and that AMS had no right to TimeTracker other than as provided under the terms of the agreement. We hold further that the District Court correctly granted summary judgment on the Ruff counterclaims for breach of the 2008 licensing agreement, tortious conversion, contract and tortious misappropriation of intellectual property, MUTSA violation, tortious interference with business relations or prospective economic advantage, and unjust enrichment. We hold finally that the District Court did not abuse its discretion in denying Ruff's second motion to compel or claim for attorney fees.
¶85 Affirmed.
We concur:
MIKE McGRATH, C.J.
JAMES JEREMIAH SHEA, J.
BETH BAKER, J.
JIM RICE, J.
Title 30, chapter 14, part 4, MCA.
AMS further asserts that it is entitled to attorney fees as the prevailing party to that extent.
Over the course of her AMS tenure, Diane Ruff variously served as the executive director, president, and a board member of AMS.
The District Court subsequently construed the essence of this language to mean that the TimeTracker software and related materials were "proprietary and confidential" only to the extent so designated by "a proprietary notice in human- or machine-readable form."
A computer programming language is a standard set of coded alpha-numeric syntax and commands used to control or instruct basic computer functions necessary to produce computational and algorithmic data processing, output, and control of other hardware devices.
AMS lead software designer (James Collins) testified that SlatePay functioned in a manner similar to TimeTracker but with certain additional functions and features that worked in conjunction with other AMS programs.
As admitted by AMS, and repeatedly cited by Ruff as evidence or indicia that AMS unlawfully used or "leveraged" TimeTracker to develop SlatePay, Collins used an "SQL adapter" program to convert the SQL-formatted AMS customer data in the TimeTracker database into a NoSQL format for input into SlatePay's NoSQL database.
On November 3, 2015, the District Court granted Ruff's motion to disqualify the law firm of Christensen, Fulton & Filz, PLLC, as AMS's litigation counsel due to the involvement of lawyer Tim Filz as AMS's former counsel and a material witness in this matter.
The Court also enjoined AMS from further development or use of SlatePay pending hearing.
In parallel, the AMS employee handbook generally prohibited employees from engaging in activities or using company facilities, equipment, or computing resources for personal convenience or profit.
Inter alia , AMS relies on its affidavit showings that: (1) Daniel instructed his development assistant (Joe Krueger) to avoid reference to Ruff Software and refer to TimeTracker as "Powered by AMS"; (2) the TimeTracker manual drafted by Daniel made no reference to Ruff Software; and (3) Daniel referred to TimeTracker in an employment-related e-mail to AMS clients as "our online website TimeTracker" on "our own website" and "webserver ... in our office." Without more, those facts are insufficient to raise a genuine issue of material fact as to the meaning of the clear and unambiguous terms of the written licensing agreement or whether Diane Ruff was acting outside the scope of her actual or ostensible authority when she executed the licensing agreement.
While § 35-1-462, MCA, does not preclude derivative attack on corporate actions on other statutory or common law grounds, (see Commission Comments to § 35-1-461, MCA ) and Warren , ¶¶ 26-36, AMS squarely challenges the 2008 licensing agreement as a director conflict of interest transaction, as defined by § 35-1-461, MCA, within the scope of § 35-1-462, MCA, as referenced in § 35-1-463, MCA.
Moreover, in the face of Ruff's affirmative showing that the 2008 licensing agreement was sufficiently supported by reciprocal consideration and otherwise ratified by the AMS board after April 2013, the mere facts of the familial relationship between Diane and Daniel and the 90% royalty right would be insufficient on the Rule 56 record presented to raise a genuine issue of material fact as to whether the agreement was objectively unfair to AMS under the totality of the circumstances.
Consistent with this interpretation, Daniel advised AMS in his April 23, 2015 e-mail that Ruff "will no longer offer consulting services for the AMS payroll system effective June 1st, 2015."
See also Paul v. Haley , 183 A.D.2d 44, 588 N.Y.S.2d 897, 902-04 (N.Y. App. Div. 1992) (distinguishing common law-protected ideas from federal law-copyrightable expressions of ideas ).
Referenced here for clarity as a separate element of the contract claim, this element is essentially no more than a subject matter-specific consideration of the threshold sufficiency of the idea or knowledge as contract consideration. See Apfel , 600 N.Y.S.2d 433, 616 N.E.2d at 1097-98 ; Nadel , 208 F.3d at 374-80.
Ruff made much ado about the fact that AMS's access to the TimeTracker database component also allowed AMS to access and use the fictitious "AE Widgets" data set created by Ruff for use in the initial development and testing of TimeTracker. However, Ruff made no showing, or even assertion, that the fictitious data set was itself confidential information.
AMS made an unrebutted expert showing that, though access to TimeTracker's uncompiled SQL-based "stored procedures and triggers" would have allowed AMS to copy or modify the TimeTracker database component, or to develop an SQL-based variant, any such copy, modification, or variant of the TimeTracker database structure or "stored procedures and triggers" would have been incompatible and unusable with SlatePay's NoSQL based database structure and programming interface.
In the field of computer software, "open" or "open source" is a term describing software that is unencrypted and available for unlicensed use, modification, or variation by others.
"The law of restitution is predominantly the law of unjust enrichment" and is "concerned with identifying those forms of enrichment that the law treats as 'unjust' for purposes of imposing liability." Restatement (Third) of Restitution § 1 cmt. b. Unjust enrichment "is enrichment that lacks an adequate legal basis; it results from a transaction that the law treats as ineffective to work a conclusive alteration in ownership rights." Restatement (Third) of Restitution § 1 cmt. b. Unjust enrichment applies to "nonconsensual and non-bargained benefits in the same way" that tort liability applies to "nonconsensual and non-licensed harms." Restatement (Third) of Restitution § 1 cmt. d.
A constructive trust is an equitable remedy applicable when "a person holding title to property is subject to an equitable duty to convey it to another on the ground that the person holding title would be unjustly enriched if he were permitted to retain it." Section 72-33-123, MCA. Thus, rather than a predicate claim for relief, a constructive trust is generally an equitable remedy available upon proof of an unjust enrichment claim. See § 72-33-123, MCA. Accord , Restatement (Third) of Restitution § 3 cmt. a (discussing equitable disgorgement of resulting profits as another remedy for an unjust enrichment claim involving "conscious wrongdoing").
See also Volk , ¶ 53 ("court sitting in equity is empowered to determine all questions involved in the case, and to fashion an equitable result that will accomplish complete justice. ... [T]he measure of relief must be shaped by the circumstances of the affected parties and the equity of the transaction ... [C]ourt may ... consider any other factors it deems pertinent to its obligation to work an equitable result"). See also N. Cheyenne Tribe , ¶¶ 30-32 (noting codification of equity).
To the extent that Pruyn and its cited underpinnings hold that unjust enrichment necessarily requires proof of a wrongful act or conduct, these cases are hereby overruled.
In the District Court's October 24, 2016 order denying Ruff's second motion to compel, the court noted that AMS's "counsel, as an officer of the Court, informed the Court [that] the emails in question are not emails that have any factual information or statement about TimeTracker versus SlatePay or development of SlatePay. Instead, the emails contained mostly, if not all, source code which had been precluded by the Court from disclosure (and which Defendants agreed they did not need), or customer information (confidential user data) to be input into either program."
This admitted fact rendered immaterial the fact that AMS used an "SQL adapter" to convert TimeTracker's SQL-formatted data to the NoSQL format used by SlatePay.
As further noted by District Court, Ruff failed to show good cause for untimely seeking leave to amend to add additional counterclaims (abuse of process and bad faith), and for related supplemental discovery, based on facts and circumstances known or alleged by Ruff from the outset of this litigation. | [
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Argued: September 22, 2017
Submitted: September 26, 2017
Decided: August 7, 2018
Rehearing Denied: September 18, 2018
For Appellant McLean & McLean, PLLP: Timothy B. Strauch (argued), Strauch Law Firm, PLLC, Missoula, Montana
For Appellant Michael McLean : Patrick T. Gallagher, Wall, McLean & Gallagher, PLLC, Anaconda, Montana
For Appellee: Martha Sheehy (argued), Sheehy Law Firm, Billings, Montana, Bradley J. Luck, Garlington, Lohn & Robinson, PLLP, Missoula, Montana
For Intervenors and Appellants Michelettis: William M. O'Leary (argued), Fleming & O'Leary, PLLP, Butte, Montana
For Amicus Curiae Property Casualty Insurers Associates of America: Mikel L. Moore, Moore, Cockrell, Goicoechea & Johnson, P.C., Kalispell, Montana
For Amicus Curiae Montana Trial Lawyers Association: Justin P. Stalpes, Beck, Amsden & Stalpes, PLLC, Bozeman, Montana
Justice James Jeremiah Shea delivered the Opinion of the Court.
¶ 1 Michael McLean, McLean & McLean, PLLP, Miantae McConnell, and Joseph and Marilyn Micheletti challenge the entry of summary judgment in favor of ALPS Property & Casualty Insurance Company ("ALPS") by the Third Judicial District, Deer Lodge County. We restate the issues as follows:
Issue One: Whether the District Court erred by granting summary judgment in favor of ALPS on rescission of the Policy and declaring it void ab initio as to Michael McLean and M&M.
Issue Two: Whether the District Court erred in determining that no coverage existed as to third-party claimants McConnell and the Michelettis.
¶ 2 We affirm in part, reverse in part, and remand for further proceedings consistent with this Opinion.
FACTUAL AND PROCEDURAL BACKGROUND
¶ 3 David McLean ("David") and Michael McLean ("Michael"), father and son, practiced law together in the Anaconda firm of McLean & McLean, PLLP ("M&M"). From 2008 until 2014, the McLeans and M&M were insured against professional liability under successive, one-year "claims-made" policies issued by ALPS. The last annual term to be covered was from January 1, 2014 to January 1, 2015.
a. David's actions
¶ 4 David represented Paul Lang, a California resident, for claims arising from the death of his brother, Lee Lang, on behalf of Lee's estate. In March 2009, David received $150,000 in insurance proceeds on the claims, which he deposited into M&M's trust account. Over the next three months, David withdrew these proceeds for his personal use and also took another $28,963 from Lee's estate. Prior to his death in 2014, Paul was in poor health and in need of financial support, but David did not respond to Paul's inquiries about the status of Lee's estate. Paul then died. In response to inquiries from the State of Montana about Lee's estate, and from the Riverside County (California) Public Administrator's Office about Paul's estate, David falsely reported that there were no assets in either estate for distribution.
¶ 5 While representing Anaconda Copper City Bowl, Inc., in the sale of a bowling alley, David took at least $30,379 between April 2010 and May 2013 from Copper City Bowl and a brokerage firm assisting with the sale. In response to inquiries about the missing funds, David lied to cover up his theft.
¶ 6 While representing Patricia Lemmon on a personal injury claim in 2010, David settled for $20,000 without Lemmon's consent. David forged her signature, took the money, and told Lemmon the case had been delayed.
¶ 7 While representing Aaron Johnson in an automobile accident case in 2008, David received insurance payments totaling $23,500, which he deposited into M&M's trust account and withdrew the same day for his own use. David remitted only $10,000 to Aaron after either commingling his own funds or misappropriating other client funds. David also represented Aaron in a slip and fall accident in 2011, obtaining a settlement of $103,200, which David deposited in M&M's trust account and withdrew for personal use over a period of three months. David lied to Aaron and Aaron's wife, Lillian, who were elderly and in need of money, about why the funds had not been dispersed to them. Aaron has since passed away.
¶ 8 While representing Laverne Johnson regarding a slip and fall accident, David settled the case without Johnson's permission for $67,500. David then forged Johnson's signature and deposited the settlement check into M&M's trust account in 2012. Within two weeks, David withdrew the entire amount for his personal use and lied to his client about the status of the case.
¶ 9 While representing Miantae McConnell in a dental malpractice claim in July 2013, David settled the case for $60,000 without McConnell's permission, forged her signature, and lied to McConnell about her case being delayed. Within three weeks of depositing the settlement in M&M's trust account, David withdrew all the funds for personal use.
¶ 10 David represented James and Peggy Hareland in a suit against Northwestern Energy, which settled for $4,072 in February 2014.
David deposited the funds in M&M's trust account and withdrew them the same day. He lied to his clients about the status of the case.
¶ 11 Between March 2009 and June 2014, David served as the Secretary/Treasurer of the Montana Chapter of the American Board of Trial Advocates ("ABOTA"). He stole between $32,714 and $34,950 from ABOTA accounts by forging signatures on checks and falsifying bank statements.
¶ 12 In January 2015, the Commission on Practice ("COP") entered findings regarding these matters, which were subsequently approved by this Court. In the Matter of David M. McLean , No. PR 14-0737, Or. (Mont. Mar. 17, 2015). The COP determined that David's thefts commonly involved settling cases without client permission, forging client signatures, depositing the funds into M&M's trust account, disbursing funds to himself, and making false statements to clients and other parties that were designed to cover-up his actions. The COP found that additional thefts had likely occurred, but based upon the record as constituted, determined that David stole at least $522,564.
b. Insurance conduct and claims
¶ 13 During their engagement with ALPS, the McLeans and M&M annually submitted a policy renewal application. Their last renewal application was dated and submitted November 14, 2013, for purposes of renewing coverage for the 2014 policy year ("2013 Application"). As in past years, David, on behalf of M&M and in his capacity as an individual attorney of M&M, and Michael, in his capacity as an individual attorney of M&M, separately answered the following question on the 2013 Application:
Are you aware of or do you have knowledge of any fact, circumstance, act, error, or omission that could reasonably be expected to be the basis of a claim against you, regardless of the merit of such claim? If yes, please complete a Claim Information Supplement for each claim or potential claim.
(Emphasis in original.) David and Michael both answered "no" to this question and provided no supplemental information about any fact or claim. David and Michael then signed their respective names under the following statement on forms labeled "Individual Attorney Supplement":
I understand information submitted herein becomes a part of my firm's Professional Liability Application and is subject to the same terms and conditions.
M&M was the "Named Insured" under the Policy, while David and Michael were listed as "insured attorneys."
¶ 14 On July 22, 2014, a staff member at M&M noticed irregularities in M&M's IOLTA trust account and informed Michael. Michael reviewed the trust account and confronted David the same day. The next day, both Michael and David reported the thefts to the Office of Disciplinary Counsel ("ODC"). The day after that, Michael reported the matter to ALPS.
¶ 15 In August 2014, ALPS received notice from McConnell and Lillian Johnson of their claims. ALPS accepted defense of the claims, subject to, as stated in its letters, "a full reservation of its rights including, but not limited to, its right to rescind the Policy and to recoup any defense costs.... If the Policy is rescinded, the Policy would afford no coverage...." On August 20, 2014, ALPS sent M&M a notice of cancellation of the Policy, effective September 4, 2014, for nonpayment of premiums. ALPS then canceled the Policy, refunding excess premiums of $231.41 to the McLeans and refused to accept further premiums. On September 11, 2014, Michael sent a letter to ALPS asserting that he appeared to fit the definition of an "innocent insured" under Section 4.3 of the Policy. Michael's letter did not dispute that the Policy had been properly cancelled, but he requested tail coverage, or extended coverage after the cancellation or termination of a claims-made policy, for himself alone, under the Extended Reporting Period Endorsement ("ERE") Provision 4.4.1. On September 24, 2014, Michael sent a second letter to ALPS, asserting that notice of the cancellation was defective, returning the $231.41 pro-rated cancellation check, and requesting that ALPS apply the $231.41 toward the premium for an ERE. The same day, ALPS sent Michael a letter stating that ALPS would provide Michael with a defense with respect to certain claims, subject to a reservation of rights, including the right to rescind the Policy.
¶ 16 On September 26, 2014, after investigating the matter, ALPS
notified the McLeans that it was rescinding the Policy as to M&M. The notice of rescission purported to rescind coverage as of January 1, 2014. ALPS refunded all premiums that had been paid for the policy term: $6,657.59. ALPS provided the following reason for rescission:
You are hereby notified in accordance with the terms and conditions of the above mentioned Claims Made Lawyers Professional Liability [P]olicy, and in accordance with the law, that the above mentioned policy is rescinded as of the inception date with no coverage being afforded.
Reason(s) for rescission of coverage of insurance:
Misrepresentation, omission, concealment of facts, and incorrect statements by the Named Insured in the application for insurance which were fraudulent and material to the acceptance of the risk and hazard assumed by the Company. The Company in good faith would not have issued the policy if the true facts had been made known to the Company as required by the application for insurance or otherwise.
¶ 17 The McLeans refused the refunded premiums. On October 8, 2014, ALPS filed this declaratory action, seeking a declaration that the Policy was properly rescinded or, in the alternative, that there was no coverage for claims made under the Policy, and seeking reimbursement of defense costs. M&M counterclaimed, seeking a declaration that the Policy was still in force and claiming damages for breach of contract. Michael counterclaimed in his individual capacity, seeking similar remedies and adding several claims, including infliction of emotional distress, violation of the Montana Unfair Claims Practices Act, and breach of contact for refusing to recognize him as an "innocent insured" under the Policy and refusing to issue an ERE.
¶ 18 After ALPS filed this declaratory action, Joseph and Marilyn Micheletti ("Michelettis") notified ALPS of a potential malpractice claim against David, unrelated to the thefts. David had been retained by the Michelettis in a slip and fall accident, which occurred in a Costco retail store in Colorado. David filed suit against Costco in Montana shortly before Montana's three-year statute of limitations had expired. Costco asserted the affirmative defense that Colorado's two-year statute of limitations applied, thus barring the Michelettis' claim. When David's thefts became known, the Michelettis obtained new counsel and entered into a settlement with Costco, which the Michelettis assert was discounted due to the statute of limitations issue. The Michelettis intervened in this action, seeking coverage under the Policy for their claim against David.
¶ 19 As a result of a disciplinary proceeding initiated by ODC, David was disbarred and ordered to pay restitution for his thefts. David pled guilty to two counts of federal wire fraud, and was sentenced to a forty-two month federal prison term.
¶ 20 The District Court in this action granted summary judgment to ALPS. It determined that ALPS properly rescinded the policy, which rendered it void from the inception of the coverage period for David, Michael, M&M, and the third-party claimants. The District Court also held, even absent a valid rescission, the third-party claims, including the Michelettis' claim, were not covered under the terms of the Policy.
¶ 21 M&M, Michael, McConnell, and the Michelettis' appeal, challenging the District Court's determinations that rescission was proper, that Michael and M&M are not entitled to coverage as innocent insureds, that McConnell is not entitled to coverage, and that the Michelettis are not entitled to coverage for their non-theft related claims. Michael also claims eligibility to purchase an ERE to extend coverage after the expiration of the 2014 Policy term.
STANDARD OF REVIEW
¶ 22 We review a district court's summary judgment ruling de novo. Wendell v. State Farm Mut. Auto Ins. Co. , 1999 MT 17, ¶ 9, 293 Mont. 140, 974 P.2d 623. Summary judgment is appropriate only when no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. M. R. Civ. P. 56(c) ;
Modroo v. Nationwide Mut. Fire Ins. Co. , 2008 MT 275, ¶ 19, 345 Mont. 262, 191 P.3d 389. Once the moving party has met its burden of establishing an absence of genuine issues of material fact and entitlement to judgment as a matter of law, the non-moving party must present material and substantial evidence, rather than mere conclusory or speculative statements. Smith v. Burlington N. & Santa Fe Ry. , 2008 MT 225, ¶ 10, 344 Mont. 278, 187 P.3d 639 ; Wendell , ¶ 9. This Court reviews a district court's conclusions of law to determine whether they are correct and its findings of fact to determine whether they are clearly erroneous. Pilgeram v. GreenPoint Mortg. Funding, Inc. , 2013 MT 354, ¶ 9, 373 Mont. 1, 313 P.3d 839.
DISCUSSION
¶ 23 Issue One: Whether the District Court erred by granting summary judgment in favor of ALPS on rescission of the Policy and declaring it void ab initio as to Michael McLean and M&M.
¶ 24 A party may rescind a contract if the rescinding party's consent was "obtained through duress, menace, fraud, or undue influence...." Section 28-2-1711, MCA. To accomplish a non-consensual rescission, the rescinding party "shall rescind promptly upon discovering the facts that entitle the party to rescind.... [and] [t]he rescinding party shall restore to the other party everything of value that the rescinding party has received from the other party ... or shall offer to restore everything of value...." Section 28-2-1713, MCA. Courts may consider principles of equity and "may require the party to whom [rescission] is granted to make any compensation or restoration to the other which justice may require." Section 28-2-1716, MCA.
¶ 25 Title 33 governs the formation and termination of insurance contracts specifically. The statute upon which the District Court relied in holding that ALPS was entitled to rescission of the policy provides as follows:
(1) All statements and descriptions in any application for an insurance policy or annuity contract or in negotiations for an insurance policy or annuity contract by or on behalf of the insured or annuitant are considered representations and not warranties.
(2) Misrepresentations, omissions, concealment of facts, and incorrect statements do not prevent a recovery under the policy or contract unless:
(a) fraudulent;
(b) material either to the acceptance of the risk or to the hazard assumed by the insurer; or
(c) the insurer in good faith would either not have issued the policy or contract or would not have issued a policy or contract in as large an amount or at the same premium or rate or would not have provided coverage with respect to the hazard resulting in the loss if the true facts had been made known to the insurer as required either by the application for the policy or contract or otherwise.
Section 33-15-403, MCA. Section 33-15-403, MCA, was a clear repudiation of the common law of warranties but also created a narrow remedy at law for insurers to "prevent a recovery" under an insurance policy if the specific elements of the statute, regarding statements made during the application process, were established.
¶ 26 Notably, § 33-15-403, MCA, does not use the term, "rescission" of the policy, or the more modern terms "unilateral rescission" and "avoidance," to describe the remedy for fraud or material misrepresentation in the insurance application process. Rather, § 33-15-403, MCA, states that "a recovery under the policy" may be "prevent[ed]" if the misrepresentations, omissions, concealment of facts, or incorrect statements were fraudulent, material, or would have affected the insurer's decision to issue the policy. Section 33-15-403, MCA. Our early case law applying § 33-15-403, MCA, and its predecessor, lacks substantive analysis importing a right of rescission into the statute. See Lentz v. Prudential Ins. Co. , 164 Mont. 197, 204, 520 P.2d 769, 772 (1974) (citing McLane v. Farmers Ins. Exch. , 150 Mont. 116, 118, 432 P.2d 98, 99 (1967) ). Nevertheless-and notwithstanding the absence of any rescission language in the statute-the progeny of Lentz have described the statute as a "rescission" provision that voids a policy ab initio when the statutory elements of both § 33-15-403, MCA, and § 28-2-1713, MCA, are satisfied, without precisely distinguishing its legal remedy from the general equitable remedy of rescission upon fraudulent inducement. See e.g., Steinback v. Bankers Life & Cas. Co. , 2000 MT 316, ¶¶ 12, 19, 302 Mont. 483, 15 P.3d 872 (affirming the district court's ruling that the insurance company was entitled to rescind a policy pursuant to § 33-15-403, MCA ); Mount Vernon Fire Ins. Co. v. Gabelhausen, 2017 WL 2960204, 2017 U.S. Dist. LEXIS 106125, at *22, *28 (D. Mont. July 10, 2017) (rescission of an insurance contract permitted pursuant to § 33-15-403, MCA ).
¶ 27 Here, the District Court's holding rests entirely upon the premise that § 33-15-403, MCA, bestows a right of rescission on insurance providers. The District Court's conclusion is understandable to the extent that this Court's previous rulings, cursory as they may have been, appear to read § 33-15-403, MCA, and § 28-2-1713, MCA, in pari materia , to allow for the substantive remedy of rescission. The Dissent agrees, contending:
[Section] 33-15-403, MCA, created a rescission remedy at law, applicable in a narrow, specific set of circumstances-in the insurance contract only, in the application process only, to which the insurer is entitled to relief only if the elements of the statute are established. Additional equitable considerations such as those 'which justice may require' stated in § 28-2-1716, MCA, are not considered, because the Legislature has provided a precise definition of materiality allowing rescission in § 33-15-403, MCA....
Dissent, ¶ 45. This contention illustrates precisely the legal infirmity-as well as the inequity-of such an interpretation. This Court has selectively grafted the remedy of rescission onto § 33-15-403, MCA, via § 28-2-1713, MCA, while simultaneously disallowing, with no explanation or legal basis whatsoever, any consideration of equitable exceptions as would otherwise be provided by § 28-2-1716, MCA, or by common law. The result is a hodgepodge that, for innocent insureds such as Michael, is all stick and no carrot. Under the Dissent's rationale, an innocent insured can pay premiums for years; then, upon finding out that a partner has committed acts of malfeasance, immediately report the malfeasance to the appropriate authorities and the insurer-precisely as the policy requires-and yet despite having done nothing wrong himself, he has no reasonable expectation that his own coverage will continue because no justice is required in that scenario.
¶ 28 Section 28-2-1713, MCA -which applies to contracts generally-sets forth the necessary procedures to rescind a contract without the mutual consent of the parties. Section 33-15-403, MCA -which applies specifically to insurance policies-sets forth the substantive remedies available to an insurer. Significantly absent from those substantive remedies is the right of rescission. When the Legislature has adopted a statutory scheme that sets forth the remedies available specifically in the insurance policy context, it is not the province of this Court to selectively incorporate remedies from a more general statutory scheme. "When a general and particular provision are inconsistent, the latter is paramount to the former, so a particular intent will control a general one that is inconsistent with it." Section 1-2-102, MCA ; State v. Feight , 2001 MT 205, ¶ 21, 306 Mont. 312, 33 P.3d 623. Thus, it is irrelevant that the District Court held that ALPS satisfied the procedures of § 28-2-1713, MCA, because § 33-15-403, MCA, does not provide for the substantive right of rescission.
¶ 29 The Dissent contends that this Court cites to "no supportive authority [ ] to conclude that § 33-15-403, MCA, does not provide for rescission of an insurance contract." Dissent, ¶ 43. In fact, the authority is the plain language of the statute itself. A plain language reading of § 33-15-403, MCA, belies the notion that the statute allows for rescission of an insurance policy. When a policy is rescinded, it is as though it never were. Jacobsen v. Allstate Ins. Co. , 2009 MT 248, ¶ 51, 351 Mont. 464, 215 P.3d 649 (quoting Black's Law Dictionary 1306 (6th ed. West 1990) ). Yet the very statute upon which the District Court relied to render the Policy in this case "as though it never were," expressly provides that certain misrepresentations, omissions, concealment of facts, and incorrect statements will "prevent a recovery under the policy " (emphasis added). It is axiomatic that recovery cannot be prevented "under a policy" that never existed.
¶ 30 When interpreting statutes, "the goal ... is to give effect to the legislature's intent, begin[ning] with the text of the statute." Giacomelli v. Scottsdale Ins. Co ., 2009 MT 418, ¶ 18, 354 Mont. 15, 221 P.3d 666 ; Smith , ¶ 22 ("[t]he starting point for statutory interpretation is the plain language of the statute itself...."). "In the construction of a statute, the office of the judge is simply to ascertain and declare what is in terms or in substance contained therein, not to insert what has been omitted or to omit what has been inserted." Section 1-2-101, MCA. By its plain language, § 33-15-403(2), MCA, allows for the prevention of a recovery under the policy. This is the remedy the Legislature created. It is not the province of this Court to insert a remedy of rescission into a statute where none exists. Although the Dissent correctly notes that we are overruling precedent that incorrectly inserted the remedy of rescission into § 33-15-403, MCA, Dissent, ¶¶ 43, 47, stare decisis does not require us to perpetuate incorrectly-decided precedent. To the contrary, we are obligated to overrule precedent where it appears the "construction manifestly is wrong." E.g., State ex rel. Perry v. Dist. Ct. , 145 Mont. 287, 310, 400 P.2d 648, 660 (1965). This Court judicially amended § 33-15-403, MCA, in violation of § 1-2-101, MCA, and fundamental cannons of statutory construction. Insofar as our prior case law incorrectly perpetuated this error, those cases are overruled.
¶ 31 It must be noted, however, that even absent the remedy of rescission, ALPS may properly deny coverage under § 33-15-403, MCA, for claims made against David and M&M because of David's misrepresentations on the application, both in his individual capacity, and as the representative of M&M. Neither party, nor this Court, contests that ALPS was within its rights to prevent any recovery sought under the Policy as to David and prospectively bar claims attributable to him. M&M also acknowledged that it is not entitled to Innocent-Insured Coverage under the Policy, which excludes coverage for the "Named-Insured" entity. David's bad acts, and knowledge of the bad acts, were imputed to M&M, therefore barring any recovery on the firm's part; however, such knowledge is not imputed to Michael. See e.g., Great Am. Ins. Co. v. Christy , 164 N.H. 196, 203, 53 A.3d 538, 544 (2012) ("[t]he innocent insured provision shows that the parties intended to distinguish actual from imputed knowledge and not to penalize insureds who did not have actual knowledge of wrongful acts...."). The prevention of recovery under the Policy as to David and M&M does not bear on the Policy's application to Michael or Michael's ability to purchase an ERE.
¶ 32 Because the Policy was not rescinded, Michael had a reasonable expectation of retaining malpractice liability insurance and the option to purchase an ERE based on Policy provisions and his lack of culpability. "The interpretation of an insurance contract is a question of law." Meadow Brook, LLP v. First Am. Title Ins. Co. , 2014 MT 190, ¶ 14, 375 Mont. 509, 329 P.3d 608 (internal citations omitted). "A court should interpret terms in an insurance policy according to their usual, common-sense meaning as viewed from the perspective of a reasonable consumer of insurance products." Parker v. Safeco Ins. Co. of Am. , 2016 MT 173, ¶ 14, 384 Mont. 125, 376 P.3d 114. Insurance policies are construed against the insurer and in favor of the insured. Parker , ¶ 14 ; Christensen v. Mt. W. Farm Bureau Mut. Ins. Co. , 2000 MT 378, ¶ 27, 303 Mont. 493, 22 P.3d 624 (holding that it "is the rule of construction in Montana that language of limitation or exclusion must be clear and unequivocal; otherwise, the policy will be strictly construed in favor of the insured...."). While the language of an insurance policy governs if it is clear and explicit, Truck Ins. Exch. v. Waller , 252 Mont. 328, 331, 828 P.2d 1384, 1386 (1992), exclusions from coverage will be narrowly and strictly construed because they run "contrary to the fundamental protective purpose of an insurance policy," Farmers Union Mut. Ins. Co. v. Oakland , 251 Mont. 352, 356, 825 P.2d 554, 554 (1992) ; see also Duensing v. Traveler's Cos. , 257 Mont. 376, 380, 384, 849 P.2d 203, 206, 208 (1993).
¶ 33 The reasonable expectations doctrine provides that "the objectively reasonable expectations of insurance purchasers regarding their policy terms should be honored, even if a painstaking study of the policy negates expectations." Kilby Butte Colony, Inc. v. State Farm Mut. Auto. Ins. Co. , 2017 MT 246, ¶ 10, 389 Mont. 48, 403 P.3d 664.
¶ 34 The District Court dismissed Michael's contention that he reasonably expected coverage under the Policy based on its initial erroneous conclusion that the Policy was rescinded under operation of § 33-15-403, MCA. The District Court held: "Given this clear language of rescission based upon misrepresentation and in the context of the Policy as a whole, it would be unreasonable for Michael [ ] to expect that ALPS could not rescind the Policy for misrepresentations in the Policy's application with respect to him."
¶ 35 Section 4.3 of the Policy provides:
4.3 INNOCENT-INSURED COVERAGE
4.3.1 Whenever a Claim otherwise covered by this Policy would be excluded based on Section 3.1.1, coverage will be afforded to any individual Insured who did not personally commit, or personally participate in committing, any such act, error or omission, or in causing such Personal Injury, and who did not remain passive after learning of the act, error, omission, or Personal Injury, provided that each such individual Insured shall have immediately notified the Company and complied with all obligations under this Policy once said Insured obtained knowledge of the act, error, omission or Personal Injury. Nothing in this section shall be interpreted to affect any coverage to a Named Insured that is an entity other than an individual.
Section: 3.1 of the Policy provides:
3.1 THIS POLICY DOES NOT APPLY TO ANY CLAIM ARISING FROM OR IN CONNECTION WITH:
3.1.1 Any dishonest, fraudulent, criminal, malicious, or intentionally wrongful or harmful act, error or omission committed by, at the direction of, or with the consent of an Insured, or any Personal Injury arising from such conduct, subject to Section 4.3 of this Policy ("innocent insured coverage").
¶ 36 The inclusion of an Innocent-Insured Provision evinces the parties' intent "to distinguish from actual imputed knowledge and not to penalize insureds who did not have actual knowledge of wrongful acts." Christy , 164 N.H. at 203, 53 A.3d at 544. The explicit purpose of the Innocent-Insured Provision was to protect individual insured attorneys in the face of deliberate misconduct by a fellow insured. The Innocent-Insured Provision does not create an additional basis for Policy coverage. Rather, the Innocent-Insured Provision, read in conjunction with the ERE Provision, created a reasonable expectation that Michael would be able to purchase ERE coverage when he himself remained blameless.
¶ 37 A study of this Policy does not negate Michael's reasonable expectations of continued coverage. See Kilby Butte Colony, Inc. , ¶ 10. There is no dispute that Michael conducted himself exactly as the Policy required when he discovered David's criminal activity. On the same day that he was notified of irregularities in M&M's IOLTA trust account, he confronted David. The next day, he reported the thefts to the ODC. The day after that, he reported the matter to ALPS. Michael reasonably contends that his compliance with the Innocent-Insured Provision of the Policy gave him a reasonable expectation that he would remain covered. It makes no sense to conclude that even though Michael is the very definition of an "innocent insured," and he "immediately notified [ALPS] and complied with all obligations under this Policy once [he] obtained knowledge of the act, error, omission or Personal Injury," in strict compliance with Section 4.3.1, he could have no reasonable expectation that the section would apply to him because the District Court chose to read a rescission provision into § 33-15-403, MCA.
¶ 38 Regarding Michael's expectation of purchasing ERE coverage, Section 4.4.5 of the Policy provided that "[n]o Extended Reporting Period Endorsement ... shall be available to the Named Insured " (emphasis added) if ALPS "cancels or rescinds this Policy or any other policy for misrepresentation in any application...." The District Court concluded it would be unreasonable for Michael to expect an ERE was available to him if ALPS rescinded the Policy for a misrepresentation on any Policy application. There are two fundamental flaws with the District Court's conclusion in this regard. First, as noted above, the Policy was not properly rescinded. Second, Michael was not the "Named Insured," M&M was. Thus, the prohibition on securing ERE
coverage did not apply to him.
¶ 39 Issue Two: Whether the District Court erred in determining that no coverage existed as to third-party claimants McConnell and the Michelettis.
¶ 40 Not everyone who may benefit from performance or suffer from nonperformance of a contract between two other parties may enforce the contract. Kurtzenacker v. Davis Surveying, Inc. , 2012 MT 105, ¶ 20, 365 Mont. 71, 278 P.3d 1002 (citing Diaz v. Blue Cross & Blue Shield of Mont. , 2011 MT 322, ¶ 18, 363 Mont. 151, 267 P.3d 756 ). "A plaintiff cannot assume that he is an intended third-party beneficiary; rather he must show from the face of the contract that it was intended to benefit him." Williamson v. Mont. Pub. Serv. Comm'n , 2012 MT 32, ¶ 40, 364 Mont. 128, 272 P.3d 71. However, if a third-party can show a promise in a contract creates a duty in the promisor to an intended beneficiary to perform the promise, then the intended beneficiary may enforce the duty. See Harman v. MIA Serv. Contracts , 260 Mont. 67, 72, 858 P.2d 19, 22-23 (1993) (citing Restatement (Second) of Contracts § 304 (1981) ). A "claims-made" policy is triggered when a claim is made against the insured during the policy period, regardless of when the wrongful act that gave rise to the claim occurred. See Herron v. Shultz-Foss Architects , 282 Mont. 94, 96-97, 101-02, 935 P.2d 1104, 1105-06, 1108-09 (1997).
¶ 41 Although we have held that the policy was not rescinded and rendered void ab initio, as noted above, ALPS may properly deny coverage under § 33-15-403, MCA, for claims made against David and M&M because of David's misrepresentations on the application, both in his individual capacity, and as the representative of M&M, Opinion, ¶ 30, and under the other exclusionary provisions of the Policy. See Policy §§ 3.1., 3.1.1 ("[t]his policy does not apply to any claim arising from or in connection with: [a]ny dishonest, fraudulent, criminal, malicious or intentionally wrongful or harmful act, error or omission committed by ... an Insured, or any Personal Injury arising from such conduct...."). ALPS cancelled the Policy on August 20, 2014, effective September 4, 2014. The Michelettis' claim against David and M&M was first reported to ALPS over one month after notice of the cancellation of the Policy. The Policy was a claims-made Policy. The Michelettis' claim was not made or reported during the Policy period, thus the claim is not viable. See Herron , 282 Mont. at 96-97, 101-02, 935 P.2d at 1105-06, 1108-09. Although McConnell filed her claim prior to ALPS's September 4, 2014 cancellation, the claim was properly excluded from coverage under Section 3.1.1 of the Policy. The District Court did not err when it determined that the third-party claimants could not recover under the Policy.
CONCLUSION
¶ 42 The District Court erred when it concluded § 33-15-403, MCA, provided for a right to rescind the Policy. ALPS was within its rights to prevent recovery under the Policy as to David and M&M, but not as to Michael. Further, Michael reasonably expected he would be entitled to purchase an ERE under the Policy. The District Court did not err when it concluded that McConnell and the Michelettis' third-party claims were barred because their claims were lodged against David after ALPS had cancelled the Policy or were excluded from coverage under other Policy provisions. We affirm in part, reverse in part, and remand for further proceedings consistent with this Opinion.
We Concur:
MIKE McGRATH, C.J.
DIRK M. SANDEFUR, J.
LAURIE McKINNON, J.
The letter stated in pertinent part:
CANCELLATION: You are hereby notified in accordance with the terms and conditions of the above mentioned Claims Made Lawyers Professional Liability [P]olicy, and in accordance with the law, that your insurance policy ... will be cancelled effective [September 4, 2014]....
REASON(S) FOR CANCELLATION OF INSURANCE: We are cancelling your insurance policy and the insurance coverage provided therein for the following reason(s):
Non-payment of Premium: $1422.10
(Emphasis in original.)
McConnell filed a notice of appeal but did not file a brief. She joins in M&M and Michael's appeal of the judgment.
The common law equitable remedy of rescission is also available to contracting parties and is not limited to the circumstances set forth in Title 28. Pracht v. Rollins , 239 Mont. 62, 68, 779 P.2d 57, 61 (1989) ("[w]hile many of our common law principles have been codified in statutes, a court of equity nonetheless is not bound by the codified laws when fashioning an equitable result....").
Despite describing the statute as a rescission provision, most case law analyzed whether an insurer properly prospectively denied an insured's claim for recovery after discovering material misrepresentations in the policy application. See e.g., Schneider v. Minn. Mut. Life Ins. Co. , 247 Mont. 334, 340-41, 806 P.2d 1032,1036-37 (1991) (holding that a district court did not abuse its discretion when it concluded that the insurer could not deny coverage following revelations of medical information that was false but not material and where the insurer did comply with its own procedures); see also Schlemmer v. N. Cent. Life Ins. Co. , 2001 MT 256, ¶¶ 18, 20, 22, 25, 307 Mont. 203, 37 P.3d 63 (this Court declined to address whether the misrepresentation on the application for health insurance served as a basis to rescind the policy because Schlemmer did not properly raise the argument at the district court. Instead, we limited our holding on this issue to affirming that the district court did not err in concluding Schlemmer materially misrepresented his health on a liability insurance application).
The Dissent asserts that the District Court held that ALPS had established that it was entitled to rescind the contract under the common law and § 28-2-1713, MCA. Dissent, ¶ 53. This is incorrect. The District Court made no holding as to ALPS's right to rescind in any fashion independent of § 33-15-403, MCA. The District Court's error, therefore, was in granting summary judgment to ALPS based on its determination that ALPS could rescind under § 33-15-403, MCA. Although the District Court held that ALPS satisfied the statutory requirements of § 28-2-1713, MCA, this is the statute that sets forth the procedure as to "[h]ow rescission [is] accomplished." The substantive basis for rescission in Title 28 is found at § 28-2-1711, MCA ("[w]hen party may rescind"), which the District Court did not address. Nor did the District Court address rescission under the common law. The Dissent asserts that, based on the District Court's findings, ALPS implicitly met the common law requirements for rescission. Dissent, ¶ 53. However, whether rescission may be accomplished via the common law is not before us. Moreover, as it pertains to Michael, the District Court did not address any equitable considerations as would be required for rescission under the common law. See Pracht , 239 Mont. at 68, 779 P.2d at 61. This holding neither sanctions nor forecloses the possibility that the remedy of rescission via the common law is available generally, or as it pertains to ALPS in this case. This holding does foreclose the selective conflation of certain portions of Titles 28 and 33 to allow rescission as a remedy that is not otherwise provided for by the language of § 33-15-403, MCA.
The Dissent agrees with the District Court and further contends it would be "reasonable to expect there would be no coverage when a policy has been issued upon deception that concealed an extensive misappropriation scheme...." Dissent, ¶ 56. Based on the Dissent's rationale, if one lawyer in a 100-person law firm lied on an insurance application, the other ninety-nine premium-paying lawyers would be excluded from coverage and exposed to potential liability, notwithstanding a complete lack of culpability on their part.
The Dissent contends that because the District Court entered summary judgment without consideration of Michael's culpability, this Court wrongly assumes Michael's innocence. Dissent, ¶ 62. However, no party to the litigation has contended that Michael had any culpability or involvement in David's wrongdoings or asserts Michael does not meet the Policy definition of an "innocent insured." Section 4.3.1 of the Policy:
[An individual Insured] who did not personally commit, or personally participate in committing, any such act, error or omission ... and who did not remain passive after learning of the act, error, [or] omission ... [and who] immediately notified the Company and complied with all obligations under this policy....
The Dissent dismisses Michael's right to purchase ERE coverage by noting that "[w]hile Michael was technically not the 'Named Insured,' but rather an Insured Attorney, this distinction was not sufficient to permit an objectively reasonable expectation that he would be permitted to purchase tail coverage following rescission of the [P]olicy by ALPS for misrepresentation." Dissent, ¶ 59. To be clear, Michael was not just "technically" not the Named Insured. He was not the Named Insured in any way, shape, or form. This is akin to saying that Michael had no reasonable expectation to purchase ERE coverage because he "was technically not David." | [
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¶1 Petitioners Montanans Against Tax Hikes, et al. have filed an original action with this Court seeking declaratory and injunctive relief to determine whether the ballot statement of proposed Initiative 185 meets the requirements of § 13-27-312, MCA. The State of Montana, by and through Attorney General Timothy C. Fox, has filed a response, and the proponents of I-185, Healthy Montana for I-185, the Montana Hospital Association, and the Montana Primary Care Association have filed an amicus brief opposing the petition.
BACKGROUND
¶2 The Constitution of the State of Montana authorizes the people of this state to enact laws by initiative on all matters except appropriations of money and local or special laws. Mont. Const. art III, § 4 (1). Petitions for initiative, accompanied by a draft ballot issue statement of up to 135 words, are initially prepared by the initiative's proponents and submitted to the Secretary of State. Sections 13-27-201, -202(1), MCA. After review, the Secretary of State refers the ballot statement to the Attorney General for determination of legal sufficiency and approval, and for a determination of whether a fiscal note is necessary. Section 13-27-202(4), MCA.
¶3 An original proceeding in this Court is the exclusive remedy for a challenge to the ballot statements approved by the Attorney General. Section 13-27-316(5), MCA. Opponents of a ballot issue have ten days from the date of certification by the Secretary of State to the Governor to file an action and request the Court alter the ballot statement as approved by the Attorney General. Section 13-27-316(2), MCA. Petitioners herein have satisfied the filing requirements of Montana law.
¶4 Prior to circulation, proposed Initiative 185 was referred by the Secretary of State to the Attorney General for a legal sufficiency review pursuant to § 13-27-312, MCA. The Attorney General issued a fiscal statement and provided notice that the initiative was legally sufficient. The Petition was approved for signature gathering as of April 16, 2018. Petitions, each containing the ballot issue statement as approved by the Attorney General, were circulated throughout the State and were signed by the requisite number of registered voters. On July 26, 2018, the Secretary of State certified to the Governor that I-185 had been officially filed, having received a sufficient number of signatures.
¶5 The ballot language approved by the Attorney General for I-185, including the statement of purpose and statements of implication, reads as follows:
INITIATIVE NO. 185
A LAW PROPOSED BY INITIATIVE PETITION
I-185 raises taxes on all tobacco products, amends the definition to include e-cigarettes and vaping products, and dedicates funds. Taxes are increased by $2.00 per pack of cigarettes for a total tax of $3.70 per pack. Taxes on moist snuff increase to the greater of 83% of wholesale or $3.70 per 1.2 ounces. The tax rate increases by 33% of the wholesale price for all other tobacco products including new taxes on e-cigarettes and vaping products. I-185 eliminates the sunset date for expanded Medicaid services for certain low-income adults, which otherwise ends June 30, 2019. I-185 dedicates a percentage of these increased tax revenues for: certain health-related programs, including some of the costs for Montana's current Medicaid program; veterans' services; smoking prevention and cessation programs; and long-term care services for seniors and people with disabilities.
New revenue from increases in tobacco taxes will generate $74.3 million per year by 2023. Revenues may decline as fewer people use tobacco. The State must pay a percentage of the cost of the extended Medicaid services, which increases from 6.77% in 2019 to a cap of 10% by 2021.
[ ] YES ON INITIATIVE I-185
[ ] NO ON INITIATIVE I-185
The ballot statement is precisely 135 words.
DISCUSSION
¶6 The language on the ballot statements must "identify the measure on the ballot so that a Montana voter, drawing on both official and unofficial sources of information and education, will [be able to] exercise his or her political judgment." Harper v. Greely , 234 Mont. 259, 269, 763 P.2d 650, 657 (1988). In preparing and approving a ballot statement, the Attorney General is to "endeavor to seek out parties on both sides of the issue and obtain their advice" and to ensure that the ballot statement "express[es] the true and impartial explanation of the proposed ballot issue in plain, easily understood language and [is] not ... argument or written so as to create prejudice for or against the issue." Section 13-27-312(3), (4), MCA. That process was conducted, and 79 interested parties, including Petitioners, participated. The Attorney General significantly revised the original statement proposed by the Proponents before it was approved and sent to the Secretary of State.
¶7 This Court has upheld ballot statements approved by the Attorney General as long as they employ "ordinary plain language, explaining the general purpose of the issues submitted in language that is true and impartial, and [are] not argumentative or likely to create prejudice either for or against the issue." Stop Over Spending Montana v. McGrath , 2006 MT 178, ¶ 28, 333 Mont. 42, 139 P.3d 788. As long as the Attorney General's wording "fairly states to the voters what is proposed within the Initiative, discretion as to the choice of language ... is entirely his." State ex rel. Wenzel v. Murray , 178 Mont. 441, 448, 585 P.2d 633, 637-38 (1978). However, a court must intervene when a ballot statement's language would prevent a voter from casting an intelligent and informed ballot. ACLU of Montana Foundation v. State , OP 17-0449, 389 Mont. 544, 403 P.3d 1244 (table) (Sept. 19, 2017) ; Citizens Right to Recall v. McGrath , 2006 MT 192, ¶ 16, 333 Mont. 153, 142 P.3d 764.
¶8 Initially, Petitioners contend that the ballot statement is deficient in that it contains false information that is likely to confuse voters. The ballot statement notes that there will be a 33% tax increase on the wholesale price for all tobacco products other than cigarettes and moist snuff. Petitioners contend that the current tax rate for the products is 50% of the wholesale price, and that the initiative raises that rate to 83% of the wholesale price. They argue, "as a matter of mathematical fact," the rate for those products, not including cigarettes and snuff, would increase 66%, from 50% to 83% of the wholesale price. Petitioners suggest that the statement language be altered and replaced with the phrase "the tax rate increases from 50% to 83%."
¶9 The Attorney General agrees that taxes on other tobacco products, including e-cigarettes and vaping products, would go from 50% of the wholesale price to 83%, and he argues use of the 33% increase language refers to the rate increase from 50% to 83%. He argues the use of the term rate does not make the statement false or incorrect. I-185 Proponents also assert that 33% accurately describes the increase from 50% to 83%, and therefore satisfies the statutory requirements.
¶10 While it may be that the Attorney General's ballot statement contains a mathematical misstatement, it does not follow that this Court should alter a technical mistake. The standard of review in these matters is not whether a better statement could have been approved, but rather whether the statement complies with § 13-27-312, MCA. Mont. Consumer Fin. Ass'n v. State , 2010 MT 185, ¶ 11, 357 Mont. 237, 238 P.3d 765 ; Citizens Right to Recall , ¶ 7.
¶11 If the Attorney General's statement captures the purpose and fiscal impacts in summary fashion, and is sufficient to inform the voters of the implication of a vote for or against the measure, it satisfies the requirements of § 13-27-312, MCA. Hoffman v. State , 2014 MT 90, ¶ 16, 374 Mont. 405, 328 P.3d 604. The statement meets that standard.
¶12 Petitioners also disagree with the language of the last sentence in the ballot statement. The sentence notes
I-185 dedicates a percentage of these increased tax revenues for: certain health-related programs, including some of the costs for Montana's current Medicaid program; veterans' services; smoking prevention and cessation programs; and long-term care services for seniors and people with disabilities.
This long sentence attempts to incorporate several different programs that are designated to receive funding through the increased tax. Petitioners contend that it is misleading because it does not include a reference to potential increased funding for the state general fund.
¶13 The ballot statement advises the voter that the funds created by the new taxes will assist funding in certain areas or programs. It is difficult for this Court to discern how a lack of reference to the state general fund creates prejudice for or against the issue, or prevents a voter from making a fully informed decision. The failure to include a vague reference to the state general fund does not make the statement deceptive or prejudicial. The statement uses ordinary plain language explaining the general purpose of the proposal and does not require alteration by this Court. We will not invalidate a ballot statement simply because a better one could be written. Citizens Right to Recall , ¶ 10 ; MEA-MFT v. Fox , OP 14-0283, 375 Mont. 554, 346 P.3d 1134 (table) (May 27, 2014).
¶14 Finally, Petitioners contend that the ballot statement provides no useful context for the tax increase on moist snuff. The Attorney General statement provides that "Taxes on moist snuff increase to the greater of 83% of the wholesale or $3.70 per 1.2 ounces." Nothing in the ballot statement is misleading or confusing. Again, it employs ordinary plain language that explains the general purpose of the proposal. As long as the Attorney General's wording plainly states what is proposed, the choice of language is his. Wenzel , 178 Mont. at 448, 585 P.2d at 637-38.
¶15 Given the 135-word limit on ballot statements, not every detail of an initiative can be explained. See Montana Consumer Fin. Ass'n , ¶ 12 ; Hoffman , ¶ 16.
CONCLUSION
¶16 The Attorney General's ballot statement satisfies the requirements of Montana law. Montanans Against Tax Hikes, et al.'s Petition for Declaratory and Injunctive Relief is DENIED.
The Clerk is directed to provide a copy of this Opinion and Order to all counsel of record.
We Concur:
BETH BAKER, J.
LAURIE McKINNON, J.
JIM RICE, J.
JAMES JEREMIAH SHEA, J.
DIRK M. SANDEFUR, J.
INGRID GUSTAFSON, J. | [
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Justice Jim Rice delivered the Opinion of the Court.
¶ 1 Genet McCann (Genet) appeals from the District Court's entry of judgment as a matter of law in favor of the Defendants, including individuals and corporate entities, at the close of her case-in-chief in the bench trial held on her claims. We affirm and remand for a determination of attorney fees, addressing the following issues:
1. Did the District Court err by granting the motion for judgment in favor of the McCann and corporate Defendants?
2. Did the District Court err by granting the motion for judgment in favor of Defendant Douglas Wold?
3. Did the District Court err in granting Wold attorney fees?
4. Was Genet denied a fair trial?
5. Should Genet be declared a vexatious litigant?
FACTUAL AND PROCEDURAL BACKGROUND
¶ 2 Paul McCann, Sr. (Paul Sr.) passed away in 2013, and his estate included considerable assets, including ownership interests in a number of corporations. After Paul Sr.'s death, a guardianship and conservatorship of his wife, A.M.M., and her interests were established due to her diminished capacity. Paul Sr. and A.M.M. have eight adult children, including five who were involved in related legal proceedings: Thomas McCann, Paul McCann Jr. (Paul Jr.), Genet, Timothy McCann, and Sheila McCann (Sheila).
¶ 3 The District Court appointed Paul Jr. and attorney Douglas Wold to serve as co-conservators of A.M.M.'s estate. Genet, either personally, or as counsel for Timothy, has been involved in unsuccessful litigation challenging the guardianship and conservatorship, including three appeals to this Court. In re Guardianship & Conservatorship of A.M.M. , 2015 MT 250, 380 Mont. 451, 356 P.3d 474 ( In re A.M.M. I ); In re Guardianship & Conservatorship of A.M.M. , 2016 MT 213, 384 Mont. 413, 380 P.3d 736 ( In re A.M.M. II ); and In re Guardianship & Conservatorship of A.M.M. , No. DA 16-0729, 2017 MT 227N, 389 Mont. 544, 2017 WL 4004410, 2017 Mont. LEXIS 566 ( In re A.M.M. III ). Genet was licensed to practice law in Montana, but since the trial in this matter, has been disbarred due to professional misconduct in the guardianship proceedings. In re McCann, 2018 MT 140, 391 Mont. 443, 421 P.3d 265 ( In re McCann I ); In re McCann , No. PR 16-0635, Or. (Mont. June 6, 2018) (In re McCann II ). Genet has attempted to challenge her disbarment several times in U.S. District Court, so far unsuccessfully. In re McCann , No. CV 18-02-H-SEH (D. Mont. Jan. 11, 2018) (In re McCann III ), mandamus denied , No. 18-71154, 2018 U.S. App. Lexis 10532 (9th Cir. Apr. 25, 2018); In re McCann , No. CV 18-03-H-SEH (D. Mont. Jan. 11, 2018) (In re McCann IV ); McCann v. Supreme Court of Montana , No. CV 18-42-H-SEH (D. Mont. June 11, 2018) (McCann v. Supreme Court I ); McCann v. Supreme Court of Montana , No. CV 18-57-H-SEH (D. Mont. June 11, 2018) (McCann v. Supreme Court II ).
¶ 4 In September 2014, Genet, Thomas, and Timothy brought this action against the named corporate Defendants, which are affiliated with the estate; against Sheila and Paul Jr., individually and in their role as directors or officers of the corporate Defendants; and against Paul Jr. and Wold, individually and in their capacity as co-conservators of the estate. Subsequently, Thomas and Timothy withdrew and settled, respectively. Although naming Wold, Genet did not serve him until January 2017, over two years after she filed the complaint and seventeen days before trial. Wold nonetheless appeared ready to defend.
¶ 5 On the scheduled day for trial, Genet arrived several hours late. The District Court introductorily noted that Genet's claims were "not entirely clear," but understood them to constitute a derivative action seeking forced dissolution of the corporations based upon allegations of corporate oppression under § 35-1-938(2)(b), MCA. Genet proceeded to offer evidence in support of her case, which focused primarily on allegations of corporate records mismanagement. Genet called several witnesses, including court-appointed auditor Natalya Abdrasilova, CPA, who testified that she found missing or incomplete stock records, and court-appointed signature analyst Brent Lund, who identified possible forgeries on several stock certificates. Genet also offered testimony, including by a priest, who testified about the wishes of A.M.M., an issue that had previously been litigated in the guardianship and conservatorship proceedings.
¶ 6 During cross-examination of these witnesses, the defense attempted to demonstrate that any failure to properly maintain records had occurred long ago, and that the Defendants, particularly Paul Jr. and Wold, had worked diligently to correct and bring current the corporate shareholder list and financial records. Testimony indicated that the legal standing of the corporations had been neglected or mismanaged in Paul Sr.'s later years, but this had substantially improved due to the efforts of Paul Jr. and Wold. The District Court, Hon. James Manley presiding, had approved annual conservatorship accountings and granted permission for Wold to serve as counsel to resolve legal issues related to the corporations, including wage claims, record requests, an issue with the State Auditor, and unpaid taxes. The original twenty corporations had been structurally reorganized and reduced to eleven corporate entities. Numerous board of director and shareholding meetings had been conducted and, for the first time in a long time, the corporations paid stockholder dividends, which totaled four million dollars during 2016. The reorganization included a process of gifting shares from one of the corporations to the heirs of the estate, including Genet.
¶ 7 At the close of Genet's case-in-chief, the McCann and corporate Defendants moved for judgment as a matter of law, arguing Genet had failed to prove her oppression claim. Specifically, they argued they had already corrected past shortcomings in the management of corporate records, and these matters were insufficient to establish oppression. The District Court granted the motion, reasoning that Genet "wholly failed" to establish an oppression claim.
¶ 8 Likewise, the District Court granted Wold's motion for judgment as a matter of law, concluding an oppression claim could not be maintained against Wold because he was not a director and that the only control he had asserted over the corporations was in his role as a co-conservator of A.M.M.'s estate-an issue Genet was collaterally estopped from relitigating in this proceeding. Further, the District Court held Genet had presented no evidence that Wold had engaged in any false reporting or other misconduct, stating Wold's actions "both as co-conservator and as legal counsel were of high quality and in conformance with his ethical and fiduciary duties...."
¶ 9 Following trial, the District Court granted Wold attorney fees pursuant to the equity exception to the American Rule, reasoning that "since there is no basis for the claims against Mr. Wold, [Genet] never should have named him as a party and had no reason to sue him.... Such an award is necessary to make Mr. Wold whole and is supported by justice, equity, and good conscience." Alternatively, the District Court held that Wold was entitled to fees under § 35-1-547(2), MCA, to the extent the case was a derivative action, acknowledging again that Genet's claims against Wold were not entirely clear. The District Court granted Wold both his pro se fees for preparing to defend the case, attorney fees for counsel he hired to defend him at trial following service of process, and costs. In total, the District Court awarded Wold $56,055.50 in fees and costs.
¶ 10 Genet appealed the District Court's entry of judgment against her claims and the imposition of attorney fees and costs. The McCann and corporate Defendants filed a combined response brief on appeal, and Wold filed a separate response brief. All of the Defendants requested, in their briefing, that Genet be declared a vexatious litigant by this Court.
STANDARD OF REVIEW
¶ 11 The parties dispute the proper standard of review of a judgment entered as a matter of law during a bench trial. However, a judgment as a matter of law, provided for by M. R. Civ. P. 50(a), is only available in jury trials. See M. R. Civ. P. 50(a)(1) ("If a party has been fully heard on an issue during a jury trial and the court finds that a reasonable jury would not have a legally sufficient evidentiary basis to find for the party on that issue, the court may ... grant a motion for judgment as a matter of law") (emphasis added).
¶ 12 In a non-jury trial, the district court may enter a judgment on partial findings, pursuant to M. R. Civ. P. 52(c), when the party pursing a claim has been fully heard and failed to prove the elements of the claim. See 9 James WM. Moore, Moore's Federal Practice: Civil § 52.50 (Matthew Bender 3d ed. 2018). M. R. Civ. P. 52(c), identical to Fed. R. Civ. P. 52(c), provides:
Judgment on Partial Finding. If a party has been fully heard on an issue during a nonjury trial and the court finds against the party on that issue, the court may enter judgment against the party on a claim or defense that, under the controlling law, can be maintained or defeated only with a favorable finding on that issue. The court may, however, decline to render any judgment until the close of the evidence. A judgment on partial findings must be supported by findings of fact and conclusions of law as required by Rule 52(a).
The required findings and conclusions "may be stated on the record after the close of the evidence or may appear in an opinion or a memorandum of decision filed by the court." M. R. Evid. 52(a)(1). When evaluating a motion for judgment on partial findings, the district court "must evaluate and weigh all the evidence, make determinations regarding credibility, and resolve the case on the basis of the preponderance of the evidence." Moore, supra at § 52.51; see also Ritchie v. United States , 451 F.3d 1019, 1022-23 (9th Cir. 2006). Such a determination differs from a judgment as a matter of law in a jury trial because it does not require drawing any inferences in favor of the nonmoving party. Moore, supra at § 52.51; see also Ritchie , 451 F.3d at 1022-23. A judgment on partial findings can be entered even when a prima facie case is established, if the case has been impeached in some way. Moore, supra at § 52.51; see also Martinez v. United States Sugar Corp. , 880 F.Supp. 773, 775 (M.D. Fla. 1995). These distinctions arise because, in a jury trial, the jury is the trier of fact, while in a bench trial, the court is the trier of fact and "may make findings in accordance with its own view of the evidence," without regard to what a reasonable jury could find. Ritchie , 451 F.3d at 1023 (citing Lytle v. Household Mfg., Inc. , 494 U.S. 545, 554-55, 110 S.Ct. 1331, 108 L.Ed.2d 504 (1990) ). Thus, at the close of plaintiff's case in a bench trial, if the trial court, after weighing all evidence presented, is unpersuaded the plaintiff has proven her case, there is no reason for the defense to present a case, and the court may enter a judgment on partial findings.
¶ 13 "Findings of fact, whether based on oral or other evidence, must not be set aside unless clearly erroneous, and the reviewing court must give due regard to the trial court's opportunity to judge the witnesses' credibility." M. R. Civ. P. 52(a)(6) ; see also Ketab Corp. v. Mesriani & Assocs., P.C. , No. 15-56753, 734 Fed.Appx. 401, 410 (9th Cir. 2018). "A finding of fact is clearly erroneous if it is not supported by substantial evidence, if the court misapprehended the effect of the evidence or if, upon reviewing the record, this Court is left with the definite and firm conviction that the district court made a mistake." In re S.T. , 2008 MT 19, ¶ 8, 341 Mont. 176, 176 P.3d 1054 (citations omitted). We review conclusions of law de novo . Giambra v. Kelsey , 2007 MT 158, ¶ 28, 338 Mont. 19, 162 P.3d 134 (citations omitted).
¶ 14 If legal authority exists to award attorney fees, we review a district court's grant or denial of fees for abuse of discretion. City of Missoula v. Mt. Water Co. , 2018 MT 139, ¶ 9, 391 Mont. 422, 419 P.3d 685 (citations omitted). A district court abuses its discretion when it acts arbitrarily, without employment of conscientious judgment, or in excess of the bounds of reason, resulting in substantial injustice. Mt. Water Co. , ¶ 9 (citations omitted).
DISCUSSION
¶ 15 1. Did the District Court err by granting the motion for judgment in favor of the McCann and corporate Defendants?
¶ 16 At the outset, we note that the District Court granted the Defendants' motions for judgment as a matter of law, which, as explained above, was a technically improper motion in a bench trial under M. R. Civ. P. 52(c), adopted in 2011. However, when a trial court enters a judgment as a matter of law, which views the evidence in a light most favorable to the non-moving party, instead of a judgment on partial findings, which requires the court to weigh the evidence to determine whether the non-moving party has proven her case, the error is harmless, because this procedural misstep favors the non-moving party by granting her a more deferential assessment of the evidence by the trial court. See Ortloff v. United States , 335 F.3d 652, 660 (7th Cir. 2003). However, on appeal, we will properly apply the rules to review the motion as one for judgment on partial findings.
¶ 17 Genet argues dismissal of her claims against the McCann and corporate Defendants was improper because she presented substantial evidence of oppression, specifically, in the form of corporate record mismanagement. Citing the standards applicable to judgment as a matter of law, Genet argues that viewing the evidence in the light most favorable to her, she established a case for oppression. However, as explained above, judgment on partial findings can be entered even when a prima facie case has been made, Martinez , 880 F.Supp. at 775, and thus, we consider whether the district court's factual determinations are clearly erroneous and its legal conclusions correct. See M. R. Civ. P. 52(c) ; In re S.T. , ¶ 8.
¶ 18 At the close of Genet's case, the District Court found that while there had been record mismanagement in the past, this evidence was insufficient to support an oppression claim against the Defendants, finding:
[Paul Sr.] was a brilliant businessman in the past but a poor bookkeeper. It appears that, for reasons known only to him, not all [corporate] formalities were followed years ago. But, at the end of the day, the bulk of work to try to pull together and organize these corporations fell on [Paul Jr.] and on Doug Wold. They performed their job well. They have hired the best experts available to pull together over 950 shareholders and to try to stabilize the corporations. There are newly drafted and amended bylaws, the taxes have been brought current, they have straightened out the ownership structure, organized the files, put the checking accounts in proper order, and have addressed and paid wage claims. They have made a significant effort to find shareholders. The corporations are holding shareholding meetings. Twenty or more corporations have now been reduced to eleven.
...
This case was brought in 2014. There was one continuation of the trial. Genet McCann was granted ample time to develop her case. She has wholly failed to establish that any shareholder of any of these corporations [was] oppressed.
¶ 19 These findings, including that corporate recordkeeping errors occurred long ago, had been since remedied, and the corporations had been reorganized for the benefit of the shareholders, has substantial evidentiary support in the record. We are not persuaded the District Court misapprehended the effect of the evidence, nor are we left with any conviction that mistakes were made in the findings. A corporation may be dissolved "in a proceeding by a shareholder if it is established that ... the directors or those in control of the corporation have acted, are acting, or will act in a manner that is illegal, oppressive, or fraudulent...." Section 35-1-938(2)(b), MCA. The District Court's determination that Genet has not established an oppression claim, as no director or other person in control was proven to be acting in an illegal, oppressive, or fraudulent manner, is not in error.
¶ 20 2. Did the District Court err by granting the motion for judgment in favor of Defendant Douglas Wold?
¶ 21 Genet argues the District Court improperly dismissed her claims against Defendant Wold because she presented evidence he exerted control over the corporations and presented an affidavit suggesting Wold engaged in mail fraud, which constituted illegal conduct that could also be used to prove her oppression claim. She further argues Wold's actions as conservator have not been litigated, and therefore the doctrine of collateral estoppel does not prohibit her claims in this proceeding.
¶ 22 Assuming, arguendo, that collateral estoppel did not bar Genet from litigating her oppression claim against Wold, the District Court found no credible evidence had been presented that Wold had engaged in oppression or any other misconduct. On appeal, the only misconduct Genet asserts against Wold is mail fraud. In this regard, the District Court stated in its oral findings that, "You said you're not bringing a fraud claim. If you were, I don't find any evidence of fraud by Mr. Wold." In its written findings, the District Court stated Genet had "failed to present any evidence in support of such claims."
¶ 23 After reviewing the record, we conclude the District Court's determination that Genet presented no evidence at trial that Wold engaged in fraud is not in error. The affidavit upon which Genet relies was signed and presented to the District Court well after trial, as part of the post-trial attorney fee proceedings. We cannot fault the District Court for not considering an affidavit presented after trial. Thus, the District Court's factual finding was not erroneous, and its conclusion of law was correct.
¶ 24 3. Did the District Court err in granting Wold attorney fees?
¶ 25 Genet argues the District Court erred by awarding attorney fees to Wold pursuant to the equity exception to the American Rule. See Foy v. Anderson , 176 Mont. 507, 511-12, 580 P.2d 114, 117 (1978). The Foy exception is narrowly drawn and "is applicable only where the action into which the prevailing party has been forced is utterly without merit or frivolous, and only in cases with particularly limited facts." Erker v. Kester , 1999 MT 231, ¶ 44, 296 Mont. 123, 988 P.2d 1221 (internal quotations and citations omitted). We have upheld an award of fees when a suit is brought personally against a defendant for acts undertaken as a duly appointed officer of the court acting pursuant to a court order, when the suit was without merit. Holmstrom Land Co. v. Hunter , 182 Mont. 43, 48, 595 P.2d 360, 363 (1979).
¶ 26 In granting fees, the District Court found Genet had presented no facts that would merit bringing claims against Wold. Later, when discussing the reasonableness of the fees, the District Court noted it was
absolutely convinced the granting of attorney's fees is warranted. There was no basis for Plaintiff to bring Wold into this lawsuit. The Court will not reiterate its previous decisions on this matter. However, the Court will simply and unequivocally state Wold never should have been sued.
Given these findings and a review of the trial record, we conclude the District Court did not err by awarding fees to Wold. This case constitutes a rare instance that justifies invocation of the Foy exception to award fees. During the pre-trial proceedings, Genet's claims were unclear, and at trial were demonstrated to be "utterly without merit."
As in Holmstrom , Wold had to personally defend himself for actions taken while acting as a court-appointed officer.
¶ 27 Genet argues it was duplicative for the District Court to award Wold his pro se fees, along with fees he incurred for defense counsel, and that it was unreasonable for Wold to hire two attorneys in his defense. The District Court held Wold could be awarded fees under Winer v. Jonal Corp. , 169 Mont. 247, 251, 545 P.2d 1094, 1096 (1976), where we held an attorney who represented himself could recover fees, and reasoned that Wold's pro se fees were reasonable because, for over two years, Wold acted in his own defense as he knew the suit was pending and progressing to trial, and it was reasonable to prepare a possible defense should he be brought into the action. Then, after he was served, Wold was able to proceed to trial without delay with the assistance of hired counsel. Although commenting that the hourly rate charged by Wold was high for Montana, the District Court concluded the fees were nonetheless reasonable given Wold's "experience, competence, reputation, and expertise," and that the fees for Wold's trial attorneys were likewise reasonable, noting the complicated background of this case and the work necessary to prepare for trial. Genet has not demonstrated that the District Court erred in determining fees were supported by legal authority, that the court abused its discretion in awarding pro se fees to Wold and fees for trial counsel, or that there was unreasonable duplication in the efforts of Wold's attorneys, particularly given the complexity of the case and the magnitude of the allegations Genet made against Wold, including fraud and forgery.
¶ 28 Genet also argues Wold is barred from fees under the equitable doctrine of laches. Laches "denies relief to a claimant who has unreasonably delayed or been negligent in asserting a claim, when the delay or negligence has prejudiced the party against whom relief is sought." Algee v. Hren , 2016 MT 166, ¶ 8, 384 Mont. 93, 375 P.3d 386 (citations omitted). Genet argues that Wold "sat on his rights" because, despite knowing the case had been filed in 2014, he did not move to dismiss it until the trial in 2017. Given that Genet did not serve Wold until seventeen days before trial, and thus Wold was not a party with standing to seek dismissal, we find this argument wholly unavailing.
¶ 29 We conclude Genet's appellate arguments are without merit, and thus award Wold his fees for defending this appeal pursuant to the Foy exception, and we remand for a determination of those fees. In calculating the final fee award, we direct the District Court to remove any fees awarded for collection of fees. We have held that "[w]hen attorney fees are awarded in equity, we allow fees-for-fees in the rare case that exceptional circumstances warrant it." Swapinski v. Lincoln Cty. , 2015 MT 275, ¶ 21, 381 Mont. 138, 357 P.3d 329 (citations omitted). Because the District Court did not make any finding that this is such an "exceptional" circumstance, "fees-for-fees" are not warranted.
¶ 30 4. Was Genet denied a fair trial?
¶ 31 Genet briefly raises a number of other issues. She contends she was denied a fair trial because the Defendants committed fraud and forgery of documents in the litigation. However, as explained above, Genet failed to prove this assertion at trial.
¶ 32 Her second assertion is of discovery misconduct. She alleges she was "stonewalled" in her attempts to discover evidence, in particular that the Defendants withheld stock certificates. The District Court determined that Genet's discovery requests sought "nearly all the corporate documents" dating back "decades," and ruled the requests were unduly burdensome and expensive. Finding Genet had been provided the last five years of corporate financial statements, tax records, and reports from court-appointed auditors, the District Court granted the defense motion for a protective order. Genet has not demonstrated how the defense, following entry of the protective order, committed misconduct.
¶ 33 Genet argues the District Court erred by granting the protective order. She asserts a due process violation, but provides no legal analysis about how her rights were violated or what remedy would apply, and thus, we decline to address her argument. See Botz v. Bridger Canyon Planning & Zoning Comm'n , 2012 MT 262, ¶ 46, 367 Mont. 47, 289 P.3d 180. She asserts, with no citations to the record, that the District Court abused its discretion by granting a motion to compel against her, as there was no good faith conferral. See M. R. Civ. P. 37(a)(1). Again, given that Genet has provided no authority or support in the record, we decline to address this issue. See Johnston , ¶ 30.
¶ 34 Third, Genet alleges it was misconduct for the Defendants to report her conduct to the Office of Disciplinary Counsel (ODC). Opposing counsel was a mandatory reporter of misconduct. See M. R. Pro. Cond. 8.3(a). Genet provides no support for her assertion that unfounded complaints were made at ODC with the intention of prejudicing her in this litigation. Further, Genet presents no evidence that the ODC matter was inappropriately made a part of this proceeding. The District Court did not make any findings regarding the ODC matters and the ODC matters were not included in the trial record.
¶ 35 Fourth, Genet argues the District Court improperly made a "heavy-handed threat" when it suggested she desist from her fraud claims. Genet moved the District Court for an order of contempt and sanctions against the Defendants, alleging fraud. The District Court denied the motion, reasoning:
Once again, in her briefs Genet puts forth a number of unfounded accusations and allegations and seemingly only has her word as support for such. This Court has seen no evidence of mail fraud. The allegations of fraudulent stock transfers are merely allegations and have been a recurring theme through Genet's filings.... The Court further cautions Genet from continuing her practice of baseless accusations of those that are a party to this litigation, and especially of those who are not a party. Accusing individuals who are not a party to this litigation of various acts and crimes, such as mail fraud, not only waste the Court's and opposing counsel's time, but also weaken Genet's argument in the eye of this Court.
We disagree that this was a "heavy-handed threat," and cannot conclude the District Court erred by warning a party to cease making baseless accusations that were wasting judicial resources.
¶ 36 Fifth, Genet argues it was error for the District Court not to grant her motion to continue the trial, and that it was error to limit her case-in-chief to five hours without prior notice. Genet provides no legal argument or analysis on these issues. Genet showed up for trial two hours late, and the record reflects the District Court patiently waited for her and then permitted her to proceed with her case. We cannot conclude the District Court abused its discretion in the administration of the trial.
¶ 37 5. Should Genet McCann be declared a vexatious litigant?
¶ 38 This Court may sanction a litigant, including the imposition of a pre-filing order, for vexatious litigation conduct. Stokes v. First Am. Title Co. of Mont., Inc. , 2017 MT 275, ¶ 4, 389 Mont. 245, 406 P.3d 439. Such sanctions may be imposed based on a request included in a brief. M. R. App. P. 19(5). We utilize a five-factor test to determine whether a pre-filing order is justified: (1) the litigant's history of litigation and, in particular, whether it has entailed vexatious, harassing, or duplicative lawsuits; (2) the litigant's motive in pursuing the litigation; e.g., whether the litigant has an objective good faith expectation of prevailing; (3) whether the litigant is represented by counsel; (4) whether the litigant has caused needless expense to other parties or has posed an unnecessary burden on the courts and court personnel; and (5) whether other sanctions would be adequate to protect the courts and other parties. Stokes , ¶ 4 (citing Motta v. Granite Cty. Comm'rs , 2013 MT 172, ¶ 20, 370 Mont. 469, 304 P.3d 720 ).
¶ 39 Here, the Appellees request we declare Genet to be a vexatious litigant and impose a pre-filing order. Genet argues the request should be denied because no findings in this regard were entered by the District Court. However, we held that we could undertake initial consideration of such a matter based upon the motion made in this court, when there was sufficient evidence in the record to impose the order. Stokes , ¶ 4 n.2. In her reply brief, Genet requests leave to respond to the request to declare her a vexatious litigant. Genet had ample opportunity to respond to the request in her reply brief, and did so to some extent. She argues, generally, that her legal position had merit and was not frivolous. However, we consider not just the merits of a single position in a suit, but Genet's litigation history as a whole. Stokes , ¶ 4.
¶ 40 Under the first factor, we find Genet's history of litigation to consistently entail vexatious, harassing, and duplicative lawsuits and fillings. In this case, Genet has repeatedly raised unfounded and serious allegations, including mail fraud, a federal crime, against Defendants and others. Despite warnings from the District Court to cease making allegations that have no factual basis, Genet continued to press unsupported claims against the Defendants throughout the case below, and on appeal. The District Court found many of Genet's motions to be an "attempt to relitigate" matters that had already been decided. In her appellate briefing, she proffers unfounded accusations against the parties and their attorneys, formatted in capitalized letters, such as "EMBEZZLEING," "ILLEGAL POWER MANEUVERING," and "ILLEGAL CRIMINAL CONDUCT." Genet's history exhibits duplicative litigation, including three appeals in the guardianship and conservatorship case, In re A.M.M. I, II , and III , and repeated litigation of her disbarment in federal court, In re McCann III and IV , and twice suing this Court, McCann v. Supreme Court I and II . The Commission on Practice, when recommending her disbarment, entered extensive findings about Genet's actions, including that she:
is truly the poster child of not just a vexatious litigant, but a vexatious lawyer, unwilling or unable to see the outrageous nature of her conduct, both in the district court and in these disciplinary proceedings. Ms. McCann had numerous opportunities to correct or at least mitigate her conduct. In each instance, she took the approach of escalating the dispute by engaging in unprofessional name-calling, accusatory statements of bias, and relying on a hodgepodge of groundless claims and unsupportable theories that failed to articulate a coherent legal position.
¶ 41 Under the second factor, we determine Genet has not had an objectively good faith expectation of prevailing. For instance, Genet's briefing in this appeal generally did not sufficiently support her arguments with citations to the record, citations to authority, and sufficient legal analysis and argument. At trial in this underlying case, the District Court found Genet failed to prove any claims and dismissed her case without hearing from the Defendants. Genet's suits in federal court, which attempt to relitigate her disbarment, have been immediately dismissed for lack of jurisdiction, yet she continued to file them. See In re McCann III and IV ; McCann v. Supreme Court I and II . In In re A.M.M. I , Genet, acting as her brother's counsel, raised several potentially merited issues on appeal, though we ultimately affirmed the District Court. However, she also raised several wholly unsupported issues, including allegations of misconduct by attorneys involved in the case, which were dismissed as improperly raised, untimely, and even improperly served. In In re A.M.M. II , Genet, representing herself and her brother, was found to have attempted to improperly influence her disabled mother, was enjoined from visiting her without others present, and filed "offensive" pleadings with allegations of criminal misconduct against others, including Wold and the district court judge, which had no factual or legal basis. Genet was found to have a "pattern of frivolous, incompetent, offensive and unfounded allegations made against numerous attorneys and others in past pleadings." We affirmed the imposition of Rule 11 sanctions. In In Re A.M.M. III , we found Genet "harassed, intimidated and interfered with" the in-home care services hired to care for A.M.M., and in a memorandum opinion, we affirmed the quashing of a subpoena issued by Genet, and affirmed sanctions against her.
¶ 42 The third factor, whether Genet was represented by counsel, makes her litigation conduct even less excusable, because she herself was an attorney licensed to practice law in Montana, and should have known to not repeatedly initiate unsupported claims. Genet has since been disbarred for failing to follow Montana's Rules of Professional Conduct.
¶ 43 Under the fourth factor, we find Genet's litigation has caused needless expense to other parties or has posed an unnecessary burden on the courts and court personnel. Genet repeatedly relitigates the same issues, which she repeatedly fails to prove.
¶ 44 Under the fifth factor, we find other sanctions have not adequately protected the courts and other parties. Genet has been sanctioned and ordered to pay attorney fees, see, e.g. , In re A.M.M. II and III , and has been disbarred for professional misconduct, In re McCann I and II , but continues to make harassing and unsupported allegations in Montana courts.
¶ 45 Consequently, we grant the Appellees' request to declare Genet McCann a vexatious litigant and impose a pre-filing order. Before Genet McCann can file any pleading in a Montana district court or the Montana Supreme Court, she is required to obtain pre-filing approval from the court in which she seeks to file. The court may reject any filing upon a determination that the claims asserted or allegations made are harassing, frivolous, or contain unsupported allegations.
¶ 46 Affirmed and remanded.
We concur:
JAMES JEREMIAH SHEA, J.
LAURIE McKINNON, J.
DIRK M. SANDEFUR, J.
BETH BAKER, J.
Genet again argues the standard for judgment as a matter of law on this issue. As before, we review under the standard for judgment on partial findings. See M. R. Civ. P. 52(c) ; In re S.T. , ¶ 8.
Genet also asserts that, "The two written Judgments are void on its [sic] face since the Defendant unilateral [sic] changed the oral findings made at the close of trial." We find the oral findings and written findings to be consistent, and that there is no evidence the Defendants acted unilaterally to alter the written judgments signed and entered by the District Court. In any event, the District Court made both oral and written findings that there was no evidence Wold engaged in fraud.
Having determined that fees were appropriate under the Foy exception, we do not address the District Court's alternative basis for fees under § 35-1-547(2), MCA. Also, Genet offers other brief arguments regarding fees, all of which are insufficiently supported. This Court will not conduct legal research on behalf of a party, speculate at a party's precise position, or develop legal analysis that may lend support to that position. Johnston v. Palmer , 2007 MT 99, ¶ 30, 337 Mont. 101, 158 P.3d 998 (collecting cases). Genet asserts it was error to strike her mail fraud expert from the attorney fees hearing, but presents no supporting argument or authority. Genet asserts the fee award violated her First Amendment right to litigation speech, but provides no legal analysis about how her right was violated, or what her remedy would be.
Genet explained her tardiness as being unexpectedly stuck in traffic, though we note she has a history of being late or not showing to proceedings. See In re McCann I and II . We note the record indicates the District Court, despite Genet making many duplicative and unsupported arguments, was patient with Genet throughout the proceedings and understanding of her personal interest in the case. | [
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] |
Justice Ingrid Gustafson delivered the Opinion of the Court.
¶ 1 Jason Klubben (Father) appeals from an order of the Fourth Judicial District Court, Missoula County (Montana Court), determining that it had jurisdiction over the child custody proceeding concerning B.K., his minor child. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
¶ 2 Father and B.K.'s mother, Jessica Smalling (Mother) had an on-again, off-again romantic relationship from approximately 2012 until 2016, during which they separated and reconciled several times. Father and Mother never married. B.K. was born in Montana in 2013 and lived with Mother in Montana. On August 1, 2014, following a major rupture in their relationship, Father moved to Minnesota for work and Mother and B.K. remained in Montana. The parties then again reconciled and in September 2015, Mother and B.K. moved to Minnesota on a temporary basis to live with Father. In addition to B.K., Mother has another child from a prior relationship. Pursuant to agreement with that child's father, Mother would only be absent from Montana for a year or less. According to Mother, the purpose of the move to Minnesota was to increase Father's employment opportunities and allow a return to Montana where he would either find new employment or work remotely from Montana. Father asserts the move was more permanent than that but acknowledged they might have moved to Washington or elsewhere in the future. Mother and B.K. remained in Minnesota eight to nine months until May 21, 2016, when Mother and Father ended their relationship. Thereafter, Mother, B.K., and Mother's other child moved back to Montana. Shortly after moving back to Montana, Mother agreed B.K. could vacation with Father's parents who live in Washington and have had ongoing contact with B.K. throughout her life. The plan was for B.K. to visit her grandparents and then travel with them to and from North Dakota where they would see Father. Upon B.K.'s planned return to Montana, Father advised Mother B.K. was not returning to Montana with his parents. He "took custody" of her on June 24, 2016. Five days later, on June 29, 2016 (at 10:39 a.m., per the Montana Court's Findings of Fact), Mother commenced a child custody proceeding by petitioning the Montana Court to establish a parenting plan for B.K. Five months later, on November 2, 2016 Father initiated a separate custody proceeding in the Fourth Judicial District Court of Minnesota (Minnesota Court) by filing a complaint to establish paternity and resolve parenting issues.
¶ 3 Pursuant to the Uniform Child Custody Jurisdiction and Enforcement Act (UCCJEA) adopted by both Montana and Minnesota, the Montana and Minnesota Courts conferred several times (10/25/16, 11/2/16, 11/9/16, and 1/20/17) to determine which court had jurisdiction over the matter. During these conferences, the courts together with the parties and their attorneys discussed and developed an agreed upon process for determining jurisdiction. At the November 2, 2016 conference, the Minnesota Court suggested the parties file briefs and affidavits upon which to submit the jurisdiction issue. The Minnesota Court further suggested that before proceeding in that manner, the parties consider participation in mediation. At the subsequent conference, it became apparent neither party was willing to participate in mediation and the courts again agreed additional evidence was needed to determine the appropriate jurisdiction. Neither party requested a hearing and counsel for both parties expressed agreement to filing affidavits and legal briefs in support of their respective positions on jurisdiction. The Minnesota Court then expressed, "if we're not going to do it in a mediation style, I tend to think we're maybe better moving into a motion if we're going to expedite it," whereupon the Montana Court responded that Father "has in fact filed here in Montana what essentially is a motion to dismiss for lack of jurisdiction." The Minnesota Court then advised, "I want to make sure that we're efficient and I want to make sure that at the end of this everybody on this call feels well served by two judges who are eager to do our professional best to reach a fair result." Upon the courts and parties agreeing for the Montana Court to rule on Father's motion to dismiss after the parties' submittal of affidavits and legal briefs, the Minnesota court advised, "For the time being then, I'm going to stand down. Our case is more or less on hold while Judge Townsend decides her jurisdictional issue." On December 30, 2016, the Montana Court issued thorough, highly detailed findings of fact and conclusions of law in an Order Re: Jurisdiction Under the UCCJEA and Denying Respondent's Motion to Dismiss for Lack of Jurisdiction. The Montana Court found: the Montana child custody proceeding was commenced prior to Mother being served with the Complaint and Summons prepared for the Minnesota case; the Mother's move to Minnesota with B.K. was a temporary absence from Montana; Montana was the home state of B.K.; Montana has jurisdiction over B.K. and the child custody proceeding; and that, although not part of her consideration for finding Montana jurisdiction, Montana was a convenient forum given Father's allegations regarding Mother's ability to parent as most evidence of those allegations was located in Montana or Washington, not Minnesota. After the Montana Court determined Montana to be the home state of B.K., the courts and parties again conferred on January 20, 2017. At that conference, the Montana Court inquired of the Minnesota Court, "So Judge Wahl, I just wonder if there is anything else that you and I have to do in connection with this case as far as what you think or what Minnesota law might be involved here." The Minnesota Court responded, "I don't see any further involvement for my court or Minnesota courts. I believe the matter is not properly a part of our jurisdiction and you have appropriately asserted the jurisdiction in the Montana courts unless there's some reason for me to be involved, I will bow out."
¶ 4 Father appeals from the Montana Court's December 30, 2016 Order.
STANDARD OF REVIEW
¶ 5 A district court's determination of whether it has subject matter jurisdiction is a conclusion of law reviewed for correctness. In re Marriage of Sampley , 2015 MT 121, ¶ 6, 379 Mont. 131, 347 P.3d 1281.
DISCUSSION
¶ 6 Mother claims Montana is B.K.'s home state and the eight to nine months B.K. spent in Minnesota was a temporary absence from Montana. In opposition, Father claims Minnesota is B.K.'s home state and the time she was absent from Minnesota from May 21, 2016, to the commencement of the child custody proceeding on June 29, 2016, was a temporary absence from Minnesota. The District Court agreed with Mother.
¶ 7 At issue here is whether Montana is B.K.'s home state. This issue turns on whether B.K.'s absence from Montana was "temporary" and implicates our codification of the Uniform Child Custody Jurisdiction Act (UCCJA), which was enacted to promote uniformity and discourage jurisdictional conflict. See §§ 40-7-101 to -317, MCA ; Stephens v. Fourth Judicial Dist. Court , 2006 MT 21, ¶ 6, 331 Mont. 40, 128 P.3d 1026. In 1977 Montana adopted the UCCJA. Prior to all 50 states adopting the UCCJA, the disparate and conflicting exercise of jurisdiction over child custody matters encouraged forum shopping, self-help, and re-litigation of custody matters in never ending disputes. Sampley , ¶ 23. The purpose of the UCCJA was to eliminate these problems by establishing uniform criteria for states to exercise jurisdiction of child custody matters. Sampley , ¶ 23 (citing UCCJA § 1 ). The UCCJA aimed to establish a bright-line rule whereby a state could exercise jurisdiction if it was the child's "home state." Sampley , ¶ 23. The six-month requirement for establishing a home state was based on the assumption most children integrate into a community after living in that community for six months. Sampley , ¶ 23 (citing UCCJA § 3 Comment). The UCCJA was revised to help further the Act's goals and address inconsistencies among state interpretation and enforcement of the UCCJA resulting in the UCCJEA, which Montana adopted in 1999. The UCCJEA did not substantially change the definition of "home state" from the UCCJA and Montana did not repeal the UCCJA but instead amended its language. Sampley , ¶ 24. The UCCJEA did not alter the purpose or meaning of the "home state" requirement, and in adopting the UCCJA and UCCJEA definition of "home state" the legislature intended to create a bright-line rule based on the assumption a child's integration into a community occurs after six months of living in a community. Sampley , ¶ 24 (citing Sec. 4, Ch.91, L. 1999).
¶ 8 Section 40-7-201, MCA, provides for establishing initial jurisdiction of a child custody determination:
(1) Except as otherwise provided in 40-7-204, a court of this state has jurisdiction to make an initial child custody determination only if:
(a) this state is the home state of the child on the date of the commencement of the proceeding or was the home state of the child within 6 months before the commencement of the proceeding and the child is absent from this state but a parent or person acting as a parent continues to live in this state.
¶ 9 Pursuant to § 40-7-103(7), MCA, " 'Home state' means the state in which a child lived with a parent ... for at least 6 consecutive months immediately before the commencement of a child custody proceeding.... A period of temporary absence of any of the mentioned persons is part of the period." We previously addressed how courts properly determine what constitutes a temporary absence and what distinguishes a temporary absence from an absence that will not be included as time a child lived in Montana for purposes of § 40-7-103(7), MCA, consistent with the Montana legislature's intent in adopting the definition of "home state":
Forty-nine states have adopted the UCCJEA, and several courts have considered what constitutes a "temporary absence" for the purposes of determining a child's home state. Despite the UCCJEA's purpose of uniform state treatment of child custody jurisdiction issues, these jurisdictions' treatment of the term has been far from uniform. (citations omitted ). Instead, three primary approaches have developed. Some courts have considered only the duration of an absence in determining whether the absence is temporary. (citation omitted ). Others have considered the intention of a child's parent, parents, or other caregivers. (citations omitted ). Still others have adopted a "totality of the circumstances" test, considering factors like the parties' living arrangement, the location of the child's doctor, receipt of public benefits, and frequency of relocation, in addition to duration and intention. (citation omitted ). We are not particularly persuaded by the reasoning of these courts to adopt any of these approaches. The decisions we have reviewed provide little rationale for why any particular approach best gives effect to legislatures' intents in adopting the UCCJEA.
...
A totality of the circumstance approach makes the most sense for determining whether an absence renders the integration assumption unreasonable. We cannot say that a single factor will be dispositive to this determination in all cases; neither the intentions and expectations of the parents nor the duration of the absence will control every situation. Instead, the continued reasonableness of the integration assumption in light of an absence is best considered in the context of the totality of the circumstances surrounding the absence.
While such a standard is somewhat more subjective than the bright-line, six-month rule imposed by the legislature; and while such subjectivity interferes with the UCCJEA's goal of uniform application of child custody jurisdiction laws between states; requiring temporary absences to be measured against the purposes and underlying assumptions of the intended bright-line rule in an objective test seems to provide a rule that is as precise as possible. At the very least, we think that providing such a standard will better promote uniform treatment of child custody jurisdiction than the similar standardless tests of other states.
Sampley , ¶¶ 22, 26-27.
¶ 10 The UCCJEA's intent to create a bright-line rule is based on the assumption a child usually integrates into a community after six months of living there. However, the UCCJEA recognizes this assumption of integration may be rebutted by jurisdictional facts. Thus, the court must apply these jurisdictional facts in the "home state" determination under the UCCJEA. Recognizing the potential for inconsistencies among state interpretation and enforcement in this regard, the UCCJEA contains important judicial communication and cooperation provisions to promote uniformity and reduce and minimize the potential for courts to issue inconsistent, competing jurisdictional orders in child custody proceedings. Section 40-7-107(1), MCA, precludes a court of this state from exercising jurisdiction "if at the time of commencement of the proceeding a proceeding concerning the custody of the child had been previously commenced in a court of another state having jurisdiction ... unless the proceeding has been terminated or is stayed by the court of the other state...." Further, before hearing a child custody proceeding, the court must determine if a child custody proceeding was previously commenced in a court of another state and, if so, "stay its proceeding and communicate with the court of the other state." Section 40-7-107(2), MCA. Section 40-7-139, MCA, then provides the ability for the court to communicate with a court of another state, to allow the parties to participate in the communication, and for a record of the communications between the courts to be kept. Section 40-7-140, MCA, then provides for a court of this state to request a court of another state to hold an evidentiary hearing; order a person to produce evidence; order a child custody evaluation; forward certified copies of the transcript, evidence presented, and evaluation prepared to a court of another state; and order a party to appear in the proceeding. Section 40-7-140, MCA, provides these same abilities to a court of another state. Communication between courts with participation of the parties is designed to reduce potential for courts to be issuing competing, inconsistent orders regarding jurisdiction.
¶ 11 Prior to the Montana Court reaching its determination that Montana was B.K.'s home state, the Montana and Minnesota Courts did exactly what they were supposed to do under the UCCJEA to resolve the jurisdictional issue. On August 16, 2016, the Montana Court set a status conference on Mother's petition for September 6, 2016. Per § 40-7-107, MCA, the Montana Court was in contact with the Minnesota Court prior to setting the status hearing to determine if a child custody proceeding had been previously commenced in Minnesota. The Montana Court learned no action was pending in Minnesota. Father's attorney appeared telephonically at the status hearing on September 9, 2016. The Montana Court advised Father of the need to make a filing in Montana to avoid default and requested Father's counsel notify the court when an action was actually filed in Minnesota so that a UCCJEA conference could be held with the Minnesota Court. On September 19, 2016, Father filed a limited appearance on Mother's petition challenging jurisdiction and seeking dismissal of Mother's petition. Thereafter, the Montana Court set a further status conference on October 25, 2016, at which time the Montana and Minnesota Courts began their several UCCJEA conferences. During these conferences, the courts appropriately determined: 1) the first commenced child custody proceeding was that filed by Mother in Montana, 2) additional evidence from the parties relating to jurisdictional facts was necessary to determine the jurisdictional issue, 3) the process by which the parties would submit affidavits and legal memoranda regarding jurisdiction, and 4) the Montana Court would determine the first-in-time filed motion to dismiss for lack of jurisdiction. As provided for in the UCCJEA, the Minnesota Court stayed its proceedings until the Montana Court determined the first-in-time filed jurisdictional issue. After the Montana Court determined Montana to be the home state of B.K., the courts and parties again conferred on January 20, 2017. At the conclusion of that conference, the Minnesota Court accepted the Montana Court's determination and declined further involvement of the Minnesota Court in the child custody proceeding. The procedure engaged in by the Montana and Minnesota Courts was exactly that provided for by the UCCJEA.
¶ 12 Next, we review the Montana Court's application of § 40-7-201, MCA, and whether a totality of the circumstances supported its finding that the time Mother and B.K. lived in Minnesota was a temporary absence from Montana such that this eight- to nine-month period is included as time living in Montana for purposes of §§ 40-7-103(7) and 40-7-201(1), MCA. Sampley , ¶¶ 22, 26-27. In this case, the Montana Court was correct when it decided that Montana is B.K.'s home state.
¶ 13 Under the UCCJEA, general principles of determining jurisdiction, including a party's domicile, are inapplicable. See § 40-7-201(3), MCA. Instead, the UCCJEA prioritizes home-state jurisdiction for child custody proceedings, under which a state has jurisdiction if it is the child's "home state." Section 40-7-201(1)(a), MCA, provides that a court in Montana has home-state jurisdiction in two manners: (1) if Montana is the child's home state; "or" (2) if (a) Montana was the child's home state "within 6 months before the commencement of the proceeding"; (b) the child is absent from Montana; and (c) a parent continues to live in Montana (emphasis added).
¶ 14 The dissent asserts the time B.K. spent out of Minnesota from May 21, 2016 prior to the commencement of the child custody proceeding on June 29, 2016 was a temporary absence from Minnesota and should be counted as time B.K. resided in Minnesota for purposes of establishing home state jurisdiction under the first manner of § 40-7-201(1)(a), MCA. The Montana Court did not make that finding and instead found that the time B.K. and Mother spent residing in Minnesota was a temporary absence from Montana such that this eight- to nine-month period is included as time living in Montana. From the facts found by the Montana Court, B.K. did not live in Minnesota at least six consecutive months immediately before the commencement of the child custody proceeding and therefore Minnesota was not B.K.'s home state under the first manner provided in § 40-7-201(1)(a), MCA.
¶ 15 In Stephens , ¶¶ 16-17, 331 Mont. 40, 128 P.3d 1026, this Court considered the second manner of establishing home-state jurisdiction under § 40-7-201(1)(a), MCA, because Montana was, at one point, the children's home state; the children were absent from Montana; and father continued to live in Montana. In that case, the Court concluded Montana lost its status as the children's home state when the children spent more than six months living in Arkansas, making Arkansas their home state. Stephens , ¶¶ 10, 17. After the family spent more than six months in Arkansas, the family returned to Montana in May 2005; however, "[mother] removed the children from Montana in August 2005, thereby stopping the six-month clock needed to establish Montana as the 'home state' for purposes of jurisdiction under the UCCJEA." Stephens , ¶ 17.
¶ 16 Pursuant to the Montana Court's finding that the time B.K. and Mother spent residing in Minnesota was a temporary absence from Montana such that this eight- to nine-month period is included as time living in Montana, Montana is also B.K.'s home state under the second manner of establishing home state jurisdiction under § 40-7-201(1)(a), MCA.
¶ 17 We turn then to review of the Montana Court's finding that the time B.K. and Mother spent residing in Minnesota was a temporary absence from Montana such that this eight- to nine-month period is included as time living in Montana. It is not this Court's function to reweigh conflicting evidence or substitute its judgment regarding the strength of the evidence for that of the district court. In re A.F. , 2003 MT 254, ¶ 24, 317 Mont. 367, 77 P.3d 266. Rather, the ultimate test for adequacy of findings of fact is whether they are sufficiently comprehensive and pertinent to the issues to provide a basis for decision, and whether they are supported by the evidence presented. Rose v. Rose , 2016 MT 7, ¶ 22, 382 Mont. 88, 364 P.3d 1244. Even when there is a conflict in the evidence, this Court will uphold the district court's determinations where there is substantial credible evidence to uphold its findings of fact and conclusions of law. Bock v. Smith , 2005 MT 40, ¶ 27, 326 Mont. 123, 107 P.3d 488.
¶ 18 The Montana Court reviewed the initial and responsive affidavits of both Mother and Father and the affidavit of Mathew Vantassel, the father of Mother's other child. While the facts set forth in these affidavits do not conflict with each other, Mother and Father disagreed as to how the courts should interpret those facts in determining whether Mother intended to remain indefinitely in Minnesota. It is not this Court's function to reweigh evidence or substitute its judgment regarding the strength of the evidence for that of the district court. In Re A.F. , ¶ 24. The Montana Court considered and weighed that evidence and prepared comprehensive findings and conclusions pertinent to the jurisdictional issue supporting the basis of its determination that Montana is B.K.'s home state. The record contains substantial credible evidence supporting the findings and conclusions of the Montana Court.
¶ 19 The dissent asserts that although the term "temporary absence" found in § 40-7-103(7), MCA, is not defined, implicit in this statute is that a "temporary absence" cannot be longer than the six-month "period" and still be a "part" of that period. We do not agree. Consistent with our determination in Sampley , "[a] totality of the circumstance approach makes the most sense for determining whether an absence renders the integration assumption unreasonable" rather than a blanket conclusion that a temporary absence cannot be longer than six months. Sampley , ¶¶ 26-27.
¶ 20 Sampley requires a consideration of the totality of the circumstances, including the physical presence of the child; the integration of the child into the Montana community; the duration of the absence; the parties' living arrangements; the location of B.K.'s other family members; the frequency of relocation; and the parties' intentions. The Montana Court considered the totality of these circumstances and based on substantial credible evidence concluded the time Mother and B.K. spent living in Minnesota was a "temporary absence" from Montana. We conclude the District Court correctly applied the provisions of §§ 40-7-103(7) and -201(1)(a), MCA.
CONCLUSION
¶ 21 Consistent with the requirements and intent of the UCCJEA, the Montana and Minnesota Courts appropriately communicated and cooperated exactly as they were supposed to in order to resolve the jurisdictional issue. The record contains substantial credible evidence supporting the jurisdictional findings and conclusions of the Montana Court. As such, we conclude the Montana Court did not err in finding B.K.'s home state to be Montana and assuming initial subject matter jurisdiction over her child custody proceeding.
¶ 22 Affirmed.
We concur:
JAMES JEREMIAH SHEA, J.
DIRK M. SANDEFUR, J.
BETH BAKER, J.
Although the Complaint is dated June 1, 2016, and Father served the Complaint on Mother June 29, 2016, at 2:30 p.m. (per the Montana Court's Findings of Fact), he did not attempt to file it until October 24, 2016. The Clerk's office apparently refused to file the original Complaint for various deficiencies and an Amended Complaint was ultimately filed on November 2, 2016.
There was some question throughout the District Court case of which party commenced their case first because Minnesota litigation commences when the defendant is served (Minn. R. Civ. P. 3.01 ) while Montana litigation commences when the complaint is filed (M. R. Civ. P. 3 ). Under the UCCJEA, " '[c]ommencement' means the filing of the first pleading in a proceeding." Section 40-7-103(5), MCA ; Minn. Stat. § 518D.102. This is perhaps a conflict of laws question for Minnesota but not at issue here. Here, there is no question that the Montana case was filed June 29, 2016, and the Minnesota case was served on the same day but not successfully filed with the court until November 2, 2016. Thus the Montana case was the first to commence under the UCCJEA.
Prior to the hearing, Father's attorney had sent a letter to the Montana Court's Clerk of Court objecting to jurisdiction and asserting Minnesota had jurisdiction even though he had not yet made a formal filing in Minnesota.
B.K. was in Minnesota not quite 5 months prior to the commencement of the child custody proceeding on June 29, 2016 because she moved back to Montana with Mother on May 21, 2016. The Montana Court determined the time B.K. was outside Montana to be temporary and, as such, included as time living in Montana. | [
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Chief Justice Mike McGrath delivered the Opinion of the Court.
¶ 1 This appeal stems from a district court's denial of a motion to be transported from the courtroom to the Montana State Hospital without handcuffs by an individual, who immediately prior to the motion, was involuntarily committed to the Montana State Hospital.
¶ 2 We restate the issue on appeal as follows:
Does Montana law preclude physical restraint of a seriously mentally ill individual during transportation from a courtroom to a hospital or mental health facility?
FACTUAL AND PROCEDURAL BACKGROUND
¶ 3 J.J. is a thirty-year-old-man with diabetes. As a child, J.J. was diagnosed with Bipolar Disorder -I. Both conditions require J.J. to take daily medication. In May 2016, J.J. was seen by the Gallatin County crisis response team eight times in six days, admitted to the Bozeman Deaconess Hospital emergency room four times in seven days, and had discharged himself from Hope House, a local support program. During his repeated appearances at the hospital J.J. became agitated by other patients and made numerous non-specific threats, one specific threat to kill the guy in the next room, and told nearby officers to just shoot him. In the emergency room J.J. was seen by David Powell, LCSW/MHP, a member of the crisis response team. Powell performed mental health evaluations on J.J. on May 14 and 17, 2016. Powell determined that, based upon his symptoms, J.J. was suffering from "Bipolar I disorder, severe with psychosis," noting that he was "obviously very manic," had "pressured speech," had "very erratic changes in topic" when speaking, and was delusional. Upon discharge from the hospital and Hope House, J.J. was provided a multi-day supply of his medication for both of his conditions. He either lost them or did not take them.
¶ 4 At Powell's request, on May 17, 2017, the Gallatin County Attorney's Office filed a petition for involuntary commitment. In an affidavit attached to the petition, Powell asserted that J.J. was a danger to himself and others, and that J.J. was unable to provide for his own basic needs or comprehend the very serious consequences of his failure to take his diabetes medication. The District Court scheduled an evidentiary hearing on the commitment and assigned Adrian Utsch, LCPC/MHP, to conduct an independent examination of J.J. prior to the hearing. After the petition was filed, J.J. fell into a diabetic coma and was again taken to the emergency room. The District Court ordered that J.J. be held at the Montana State Hospital (MSH) until the hearing.
¶ 5 On May 23, 2016, immediately prior to the hearing, J.J. received the court ordered mental health evaluation. Utsch concluded J.J. was suffering from severe and chronic mental illness, that he was a danger to himself or others, and in danger of further decompensation unless he continued to receive treatment. Utsch testified that during the evaluation J.J. was manic and told Utsch that he had heard his father's voice telling him to kill himself but that J.J. had never taken steps to do so. At the hearing, Powell testified that J.J. posed an imminent danger to himself because of his mental disorder. When responding to a question concerning any statements J.J. made concerning self-harm or harm to others, Powell relayed J.J.'s actions in the emergency room where J.J. asked a police officer to shoot him, and threatened another patient.
¶ 6 J.J. and counsel were present at the hearing and objected to any involuntary commitment. The District Court found J.J. to be suffering from Bipolar I Disorder and that he was substantially unable to provide for his own basic health and safety needs. The District Court ordered J.J. involuntarily committed to MSH for a period of no more than three months. After the District Court pronounced its decision, counsel requested J.J. not be handcuffed in the sheriff's vehicle on the way to MSH. The District Court stated, "that goes above and beyond what I can order and I assume, Deputy Murphy, that probably for transport he does have to be restrained, doesn't he, in the vehicle?" Deputy Murphy replied in the affirmative. J.J. protested. The District Court ruled "I can't change the fact you have to be restrained with handcuffs in the car."
¶ 7 J.J. appeals the denial of his request to not be handcuffed.
STANDARD OF REVIEW
¶ 8 This Court reviews a district court's commitment order to determine whether its findings of fact are clearly erroneous and its conclusions of law are correct. In re C.K. , 2017 MT 69, ¶ 10, 387 Mont. 127, 391 P.3d 735. A determination by a trial court is afforded reasonable presumption as to its correctness and will not be disturbed on appeal unless there is a mistake of law or a finding of fact which is not supported by substantial credible evidence that would amount to a clear abuse of discretion. In re B.W.S., 2016 MT 340, ¶ 9, 386 Mont. 33, 386 P.3d 595 (citing In re M.B. , 2009 MT 97, ¶ 11, 350 Mont. 76, 204 P.3d 1242 ).
DISCUSSION
¶ 9 Does Montana law preclude physical restraint of a seriously mentally ill individual during transportation from a courtroom to a hospital or mental health facility?
¶ 10 The State asserts J.J.'s argument is not reviewable, as it is being made for the first time on appeal, because his in-court motion failed to specify his right to be free from restraint or mention the statute governing that right. We disagree. J.J. raised an issue before the District Court, the District Court then had the opportunity to rule, and made a ruling. J.J. is not raising the issue of being handcuffed in the sheriff's vehicle on the way to MSH for the first time on appeal. The State's assertion regarding whether J.J. argued that a specific statute applies is unpersuasive.
¶ 11 The State frivolously argues J.J.'s notice of appeal is defective because J.J. stated he was appealing "from the final judgment or order entered in such action on 23rd day of May 2016"; yet, his request regarding the handcuffs came after the District Court order pronouncing his involuntary commitment. The State cites to State v. Spotted Blanket for the proposition that we will not consider an appeal from an order not designated in the notice of appeal. 1998 MT 59, ¶ 12, 288 Mont. 126, 955 P.2d 1347. In 2003, this Court determined that a notice of appeal that uses the language from the final judgment is not a deficient notice of appeal. State v. Gardner , 2003 MT 338, ¶ 19, 318 Mont. 436, 80 P.3d 1262. We noted Spotted Blanket , but held that a notice of appeal from the final judgment is sufficient under § 46-20-104, MCA. Gardner , ¶ 19.
¶ 12 As to the merits, J.J. argues Montana law provides a specific statutory right to be free from physical restraint and isolation while involuntarily committed, which applies to the transportation of patients who have been involuntarily committed to MSH. The State argues the right to be free from physical restraint and isolation does not apply outside of a hospital or mental health facility.
¶ 13 It is well established that when construing a statute, it must be read as a whole and no term should be isolated from the context of the statute. State v. Price , 2002 MT 229, ¶ 47, 311 Mont. 439, 57 P.3d 42. The intent of the Legislature is to be determined from the plain language of the statute. If the intent can be determined from the plain language of a statute, a court "may not go further and apply any other means of interpretation." Section 1-2-102, MCA ; State v. Boulton , 2006 MT 170, ¶ 12, 332 Mont. 538, 140 P.3d 482.
¶ 14 Title 53, chapter 21, part 1, MCA, comprehensively regulates State interaction with the seriously mentally ill. A reflection of the breadth of such regulation is the involvement at various points of the Department of Health and Human Services, the Mental Disabilities Board of Visitors, county attorneys, and district courts. See, e.g. , § 53-21-104, MCA (powers and duties of the Mental Disabilities Board); § 53-21-106, MCA (requiring the Department of Health and Human Services to certify "professional persons" in connection with treatment of the seriously mentally ill); § 53-21-114(1), MCA (requiring the county attorney to inform involuntarily detained or examined persons of constitutional rights within three days of detention or examination); § 53-21-116, MCA (district court's obligation to appoint counsel if a person alleged to be seriously mentally ill is unrepresented); § 53-21-121, MCA (county attorney's duties in connection with filing petition for commitment); § 53-21-122, MCA (district court's obligation to determine probable cause when petition for commitment filed); § 53-21-127, MCA (district court's dispositional obligations); and § 53-21-129, MCA (county attorney's duties in connection with emergency detention). The statute also requires public provision of other costs associated with involuntary commitment, including transportation. Section 53-21-132, MCA.
¶ 15 Notwithstanding the comprehensive nature of Montana law in this area, the statutes provide no guidance regarding the manner of transportation of individuals committed, voluntarily or involuntarily. Section 53-21-113, MCA, requires a sheriff to transport voluntarily committed individuals if no one else is available. Section 53-21-132, MCA, requires counties to reimburse sheriff's officers for their transportation services.
¶ 16 Montana law does provide patients a statutory right to be free from physical restraint.
Patients have a right to be free from physical restraint and isolation. Except for emergency situations in which it is likely that patients could harm themselves or others and in which less restrictive means of restraint are not feasible, patients may be physically restrained or placed in isolation only on a professional person's written order that explains the rationale for the action. The written order may be entered only after the professional person has personally seen the patient concerned and evaluated the episode or situation that is alleged to call for restraint or isolation. Emergency use of restraints or isolation may not be for more than 1 hour, by which time a professional person must have been consulted and must have entered an appropriate order in writing. The written order is effective for no more than 24 hours and must be renewed if restraint and isolation are to be continued. Whenever a patient is subject to restraint or isolation, adequate care must be taken to monitor the patient's physical and psychiatric condition and to provide for the patient's physical needs and comfort. Physical restraint may not be used as punishment, for the convenience of the staff, or as a substitute for a treatment program.
Section 53-21-146, MCA.
¶ 17 J.J. asserts this statute applies. However, these considerations are inapplicable to the facts here. While transporting a seriously mentally ill individual, a law enforcement officer could not reasonably "monitor the patient's physical and psychiatric condition," or otherwise satisfy some of the statutory requirements. As written, § 53-21-146, MCA, does not contemplate the transportation of seriously mentally ill individuals committed by the State. Nothing in the plain language of the statute leads us to the conclusion that it applies to transportation.
¶ 18 J.J. points out that § 53-21-141, MCA, provides that the district court may make a specific order limiting or removing a legal right of a seriously mentally ill individual who has been involuntarily committed.
Unless specifically stated in an order by the court, a person involuntarily committed to a facility for a period of evaluation or treatment does not forfeit any legal right or suffer any legal disability by reason of the provisions of this part except as it may be necessary to detain the person for treatment, evaluation, or care.
Section 53-21-141, MCA. Clearly, a district court has the authority by statute to order specific limits that could be placed on the respondent's legal rights, which could contemplate a requirement that a defendant be transported in handcuffs. However, the District Court's refusal to require that J.J. not be transported in handcuffs was not an abuse of discretion.
¶ 19 Montana law-enforcement officers owe the public a general duty to preserve the peace and protect the public from harm inflicted by third persons or other independent sources. Bassett v. Lamantia , 2018 MT 119, ¶ 2, 391 Mont. 309, 417 P.3d 299.
Further, "public policy, as determined by the Legislature, our precedent, and general principles of negligence, supports finding that an individual, in this case an officer, owes a duty of care to a plaintiff directly injured by that individual's affirmative acts." Bassett , ¶ 24. In Paull v. Park Cnty. , 2009 MT 321, ¶ 33, 352 Mont. 465, 218 P.3d 1198, we noted that the State owes a duty of ordinary care to prisoners in its actual custody.
Further, long distance transportation of multiple prisoners is more than just driving and is an inherently dangerous activity as a matter of law. Paull , ¶ 22.
¶ 20 J.J. argues that there was no threat of harm to himself or others; therefore, the sheriff's deputy had no reason to restrain him in handcuffs during transportation to MSH. We disagree.
¶ 21 The District Court made findings that in the ten days prior to his transportation in the sheriff's vehicle, J.J. had been highly unstable. J.J.'s mental state had included manic episodes of raging at the hospital, making a death threat and expressing death wishes. Utsch and Powell both testified J.J. was easily distracted and was unable to comprehend the seriousness of the situation. Utsch testified that on May 23, 2016, the day of the hearing and transportation, J.J. was manic, delusional, and told him that he had recently been hearing his father's voice telling him to kill himself. It is not unreasonable to conclude that J.J. may have tried to run from the officer into traffic, attempted to grab at the officer or at the vehicle's controls, or attempted to or actually cause injury to himself, the officer, or the general public.
¶ 22 J.J.'s behavior on the day of the hearing and the ten days prior was unpredictable. The potential for serious injury or harm was high and foreseeable. Handcuffing J.J. during transportation was a necessary precaution to prevent J.J. from injuring himself or harming the sheriff's deputy or another motorist on the highway.
¶ 23 We hold that the District Court did not abuse its discretion when it failed to grant J.J.'s request not to be handcuffed in the sheriff's vehicle during transportation from the Gallatin County Courthouse to the Montana State Hospital.
CONCLUSION
¶ 24 The District Court ruled on J.J.'s motion to not be handcuffed and J.J.'s notice of appeal was sufficient. The District Court did not abuse its discretion when it denied J.J.'s request not to be handcuffed in the sheriff's vehicle during the transfer to the state hospital. Montana law does not preclude using handcuffs to transport a seriously mentally ill individual.
¶ 25 Affirmed.
We Concur:
LAURIE McKINNON, J.
BETH BAKER, J.
INGRID GUSTAFSON, J.
DIRK M. SANDEFUR, J.
JIM RICE, J.
Justice James Jeremiah Shea, specially concurring.
¶ 26 I concur with the Court's resolution of J.J.'s appeal. Section 53-21-146, MCA, does not apply to the transportation of seriously mentally ill individuals committed by the State. Opinion, ¶ 17. The applicable statute, as the Court correctly notes, is § 53-21-141, MCA. I write separately to emphasize that, although the record in this particular case supports the District Court's ultimate determination that J.J. was to be handcuffed during transport, § 53-21-141(1), MCA, would ordinarily require that an involuntarily committed individual not be restrained "[u]nless specifically stated in an order by the court...." In that respect, the District Court was incorrect when it determined that whether or not J.J. had to be restrained "goes above and beyond what I can order...." Opinion, ¶ 6. In fact, as § 53-21-141, MCA, plainly states, the court is the only one that can order an involuntarily committed individual to be restrained during transport.
¶ 27 Section 53-21-141(1), MCA, provides:
Unless specifically stated in an order by the court, a person involuntarily committed to a facility for a period of evaluation or treatment does not forfeit any legal right or suffer any legal disability by reason of the provisions of this part except as it may be necessary to detain the person for treatment, evaluation, or care.
This statute is a guarantee of fundamental rights to involuntarily committed individuals "except as it may be necessary" to limit those rights for treatment, evaluation, or care. The extent to which it may be necessary to limit those rights in any particular case must be "specifically stated in an order by the court." In the absence of such an order, the involuntarily committed individual does not forfeit any legal right or suffer any legal disability-this would include the right to be free of restraints during transport.
¶ 28 The District Court in this case did not comply with § 53-21-141, MCA, when it wrongly concluded "I can't change the fact you have to be restrained with handcuffs in the car." Nevertheless, I concur with this Court's conclusion that the District Court did not abuse its discretion when it denied J.J.'s request not to be handcuffed in the sheriff's vehicle during the transfer to the state hospital because, for the reasons set forth at Opinion, ¶¶ 21-22, the record supported the ultimate determination that it was necessary to restrain J.J. during transport. This Court will affirm the district court when it reached the right result, even if it reaches the right result for the wrong reason. State v. Betterman , 2015 MT 39, ¶ 11, 378 Mont. 182, 342 P.3d 971.
¶ 29 For the foregoing reasons, I concur.
The Concurrence posits that § 53-21-141, MCA, requires a district court order to transport involuntarily committed individuals with any physical restraint. We disagree. The specific exception provided in the statute is addressed to the necessity of a court order "except as may be necessary to detain the person for treatment, evaluation, or care." Clearly that language encompasses the "care" needed to safely transport involuntarily committed individuals.
In Paull, we held a county or other governmental entity that contracts to have prisoners transported may be held vicariously liable for injuries caused by an independent contractor that provides prisoner transport services. Paull , ¶ 22. The State is strictly liable for any injury that results from prisoner transportation regardless of fault. Paull , ¶ 38. | [
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Justice Jim Rice delivered the Opinion of the Court.
¶1 A.K.R. (Father) appeals from the Order and Decree of Adoption issued by the Thirteenth Judicial District Court, Yellowstone County, terminating his parental rights and ordering the adoption of his minor daughter, L.F.R., by her stepfather, K.J.D. We reverse and remand for further proceedings, addressing the following issue:
Did the District Court err by terminating Father's parental rights in violation of his right to counsel?
FACTUAL AND PROCEDURAL BACKGROUND
¶2 L.F.R. is the natural child of Father and S.M.T. (Mother). The District Court found that L.F.R. "has been with [Mother] and in her custody ever since birth," but that L.F.R.'s paternal great-grandparents "have been parenting the minor child under the Final Parenting Plan dated April 16, 2015." Prior to and during the time covered by the Final Parenting Plan, Father failed to exercise his visitation rights with L.F.R., did not financially contribute to L.F.R.'s care, or otherwise be involved "in any meaningful way" with her life.
¶3 In December 2015, Mother married K.J.D., who became L.F.R.'s stepfather. L.F.R. began living with Mother and K.J.D., and, in March 2018, K.J.D. petitioned for termination of Father's parental rights, and for adoption of L.F.R., pursuant to § 42-2-608, MCA. At the May 7, 2018 hearing on the petition, K.J.D., Mother, and L.F.R.'s paternal great-grandparents all appeared and were represented by counsel. Father also appeared, but was not represented by counsel.
¶4 On May 12, 2018, the District Court entered an order terminating Father's parental rights and granting K.J.D.'s petition to adopt L.F.R., concluding the adoption was in L.F.R.'s best interests. The District Court did not address either any position taken by L.F.R.'s great-grandparents on the petition, or the status of their interest under the Final Parenting Plan.
¶5 Father appeals, contending the District Court's failure to notify him of his right to counsel during the proceeding violated his constitutional rights. Additional facts will be discussed herein.
STANDARD OF REVIEW
¶6 The Court's review of constitutional questions is plenary. A.W.S. v. A.W ., 2014 MT 322, ¶ 10, 377 Mont. 234, 339 P.3d 414. We review a district court's decision to terminate parental rights for abuse of discretion, determining whether the court's underlying factual findings were clearly erroneous. J.M. v. R.H. , 2015 MT 231, ¶¶ 11-12, 380 Mont. 282, 354 P.3d 626. Issues of law are reviewed for correctness. J.M. , ¶ 12.
DISCUSSION
¶7 Did the District Court err by terminating Father's parental rights in violation of his right to counsel?
¶8 Appellant argues he was "entitled to have an attorney appointed to represent him" during the adoption hearing, and the District Court's failure to notify him of this right violated equal protection guarantees under Article II, Section 4, of the Montana Constitution and the Fourteenth Amendment of the United States Constitution. Father relies on A.W.S. v. A.W. , arguing that, like the indigent mother therein, he was entitled to legal representation at the hearing, but "was not sufficiently astute to formally request the appointment of an attorney."
¶9 In A.W.S ., we held the statutory provision of counsel for indigent parents facing state-initiated termination of their parental rights under Title 41, MCA, must be extended to indigent parents in private adoption proceedings under Title 42, MCA, on the ground of constitutional equal protection. A.W.S ., ¶¶ 13-26 (citing § 41-3-422(11), MCA ). We reasoned the right to parent a child is fundamental and must be afforded equal protection under the law, regardless of whether the state or a private party was initiating termination of a parent's right. A.W.S. , ¶¶ 16, 18 (citing M.L.B. v. S.L.J. , 519 U.S. 102, 116 n.8, 117 S.Ct. 555, 564, 136 L.Ed.2d 473 (1996) ). We concluded that any indigent parent at risk of permanently losing their parental rights is entitled to " 'benefit from the privilege of assistance by counsel.' " A.W.S. , ¶ 26 (quoting Zockert v. Fanning , 310 Or. 514, 800 P.2d 773, 778 (1990) ); see also In re A.S.A., 258 Mont. 194, 197, 852 P.2d 127, 129 (1993) (holding the Montana Constitution "guarantees indigent parents the right to court-appointed counsel in proceedings to terminate parental rights"); and In re M.V.R. , 2016 MT 309, ¶ 51, 385 Mont. 448, 384 P.3d 1058 ("[P]arents at risk of having their parental rights terminated [have] the right to counsel and the right to appointed counsel if indigent, at all termination proceedings."). Here, Father faced the risk of permanently losing his parental rights to L.F.R. via a private adoption proceeding under Title 42, MCA, and was thus entitled to court-appointed counsel if he qualified as indigent.
¶10 Appellee K.J.D. first argues that Father "failed to object to the adoption at the time of hearing, despite testifying on his own behalf." However, the District Court found in its order that Father "did object to the adoption proceeding," and K.J.D. has not established from the record that this finding is clearly erroneous. Regarding the right to counsel, the parties agree the District Court did not advise Father of his right during the proceeding.
¶11 In response to Father's reliance on A.W.S. , K.J.D. distinguishes that case from this one, arguing that the District Court did not err by failing to notify Father of his right to counsel because Father "did not request appointed counsel, nor did he suggest or imply that he did not have the money to retain an attorney," as the mother in A.W.S. had suggested. K.J.D. argues that, by failing to express a desire for counsel, Father failed to preserve the issue for appeal (citing In re Declaring A.N.W. , 2006 MT 42, ¶ 41, 331 Mont. 208, 130 P.3d 619 ("This Court does not consider an issue presented for the first time on appeal.") ). Indeed, in response to the argument in A.W.S. that mother had failed to raise the issue and preserve it for appeal, we stated that, "where Mother was not advised of any right to counsel, she preserved the issue when she explained that she represented herself only because she did not have the money to employ an attorney." A.W.S. , ¶ 21.
¶12 However, having concluded in A.W.S. that the mother's right to counsel was properly before us as a sufficiently invoked issue, it was not necessary for the Court to address the issue we confront here-whether a parent in a termination proceeding, having received no notice of the right to counsel, can waive the right by mere silence. We conclude the right cannot be so waived.
¶13 We acknowledge our line of authority requiring parties to affirmatively invoke the right to counsel. In J.M. , which, as here, was a parental right termination and adoption proceeding, we held, "[w]hile it does not take 'particular words' to request counsel, some indication must be given to the court that respondent wishes counsel to be appointed because he is indigent or financially unable to secure representation in an involuntary termination proceeding." J.M. , ¶ 25. However, the respondent in J.M. had been represented by private counsel for much of the proceeding, and was notified by the court of his right to obtain new counsel after receiving notice of his attorney's withdrawal. J.M. , ¶ 24. Thus, the record demonstrated the respondent's knowledge of his right to counsel. Similarly, in In re M.V.R. , a state-initiated parental right termination proceeding, we held the district court did not err by failing to appoint another public defender for the indigent mother, when she failed "to indicate to the District Court, in any manner, that she needed another public defender" after she terminated her first public defender, hired private counsel, her private counsel withdrew, and the district court provided notice of her continuing right to counsel. In re M.V.R. , ¶ 51. We reasoned that "Mother was aware of what was required to obtain a public defender," but she had failed to request appointment of other counsel, and thus, "was not denied counsel." In re M.V.R. , ¶ 50. Again, in contrast to Father here, the mother in In re M.V.R. was well aware of her right to counsel.
¶14 Generally, waiver of the right to counsel requires a knowing and voluntary waiver. See § 46-8-102, MCA (a criminal defendant may waive the right to counsel "knowingly, voluntarily, and intelligently"); see also City of Missoula v. Fogarty , 2013 MT 254, ¶ 12, 371 Mont. 513, 309 P.3d 10 (the court should make inquiry of the defendant "to the extent it deems necessary to ensure that the defendant's waiver of counsel is voluntary, knowing, and intelligent"); § 53-21-119(1), MCA (respondent in a civil commitment proceeding may make an "intentional and knowing" waiver of counsel); In re R.W.K. , 2013 MT 54, ¶ 24, 369 Mont. 193, 297 P.3d 318 (respondent's waiver by his counsel was "intentional and knowing"). In the absence of a statutory standard governing waiver of counsel, we held "that to constitute an effective waiver, the waiver must be intelligently and knowingly given." Edward C. v. Collings , 193 Mont. 426, 429, 632 P.2d 325, 327 (1981).
¶15 In A.W.S ., we cited a decision of the Supreme Court of North Dakota that reversed a parental rights termination order because the indigent parent had not been notified of his right to counsel, but was merely informed that he "might want to consult an attorney."
D.D.F. v. N.D. Dep't of Human Servs. (In re Adoption of J.D.F.) , 761 N.W.2d 582, 587 (N.D. 2009). "[W]e cannot conclude that [father] waived his right to counsel 'with eyes open' when the record clearly indicates that he did not know he had such a right." In re Adoption of J.D.F. , 761 N.W.2d at 588 ; see also Moore v. Hall , 62 A.3d 1203, 1211 (Del. 2013) (holding that a father facing termination of his parental rights did not "knowingly and intelligently waive" his right to counsel because after his public defender withdrew, the court failed to notify him of his right to have new counsel appointed).
¶16 We reach the same conclusion here, because we cannot conclude Father knowingly and voluntarily waived his right to counsel. We recognize, as noted above, waiver can arise from a respondent's actions with regard to the right. J.M ., ¶¶ 24-25 ; In re M.V.R. , ¶¶ 50-51 ; State v. Wilson , 2011 MT 277, ¶ 15, 362 Mont. 416, 264 P.3d 1146 (we "look at the particular facts and circumstances surrounding the case, including the background, experience, and conduct of the accused," to determine an effective waiver); see also In re Welfare of G.L.H. , 614 N.W.2d 718, 723 (Minn. 2000) (the determination that a parent's waiver of counsel in a termination proceeding "is voluntary and intelligent can be based on the surrounding circumstances of the case," rather than applying more stringent criminal procedures). However, the record here discloses no indication that Father was notified of his right to counsel, or that he otherwise understood that he was entitled to seek appointment of counsel, and declined to do so. Violation of the right to counsel pervades a proceeding and requires reversal. A.W.S. , ¶ 25 (fundamentally fair procedures, including appointment of counsel for an indigent parent, are required in a proceeding to terminate parental rights).
¶17 Therefore, we reverse the District Court's order and remand for a new hearing. On remand, the District Court is directed to appoint counsel for Father if it determines he is financially eligible. Further, any order ultimately entered in this proceeding regarding the parental rights to L.F.R. should clarify the status of the parenting interests of L.F.R.'s paternal great-grandparents under the Final Parenting Plan dated April 16, 2015.
¶18 Reversed and remanded for further proceedings.
We concur:
MIKE McGRATH, C.J.
LAURIE McKINNON, J.
BETH BAKER, J.
DIRK M. SANDEFUR, J.
The facts recited herein are taken from the District Court's Order and Decree of Adoption. Father did not provide a transcript of the adoption hearing, but we find the record presented here "sufficient to enable [the Court] to rule upon the issues raised." M. R. App. P. 8(2). | [
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For Appellant: Kelly M. Driscoll, Montana Legal Justice, PLLC, Missoula, Montana
For Appellee: Timothy C. Fox, Montana Attorney General, Katie F. Schulz, Assistant Attorney General, Helena, Montana, Joshua A. Racki, Cascade County Attorney, Valerie M. Winfield, Deputy County Attorney, Great Falls, Montana
Chief Justice Mike McGrath delivered the Opinion of the Court.
¶1 M.J. (Mother) appeals from an Eighth Judicial District Court order terminating her parental rights to her two children, J.J.C. and R.G., ages nine and three, respectively. We affirm.
¶2 We restate the issue on appeal as follows:
Whether the District Court abused its discretion when it continued with child custody proceedings before conclusively determining the children's Indian status.
PROCEDURAL AND FACTUAL BACKGROUND
¶3 In 2009, due to concerns about Mother's drug use, the Department of Public Health and Human Services, Child and Family Services Division (the Department) became involved with Mother. In 2011, Mother entered into a voluntary services agreement with the Department. Between 2011 and 2016, the Department continued to receive reports alleging Mother was using drugs. In 2016, after receiving a report that Mother was using methamphetamine and dealing drugs out of her apartment, the Department petitioned for Temporary Investigative Authority (TIA) and later adjudication as youths in need of care (YINC) and temporary legal custody (TLC) of Mother's three children: J.J.C., K.J., and R.G. The children's birth Fathers are: J.C., W.H., and T.G., respectively. The Department alleged that a hair follicle test performed on J.J.C. tested positively for methamphetamine. This petition was the first of two petitions for adjudication and TLC in J.J.C.'s case and the first of three in R.G.'s case.
¶4 In affidavits supporting the TIA and TLC petitions, Child Protection Specialists (CPS) noted they had no reason to believe that any of the children were subject to the Indian Child Welfare Act (ICWA). However, at a May 2016 show cause hearing, the District Court was notified that ICWA possibly applied to K.J. considering K.J.'s father received benefits from the Arapahoe Tribe. The benefits signaled potential for K.J. to meet the "Indian child" designation of ICWA. Yet, further correspondence with the Arapahoe Tribe conclusively determined that ICWA was inapplicable to K.J. The District Court granted the Department authority to investigate and work with the parents and children.
¶5 In October 2016, the Department again filed petitions for adjudication as YINC and TLC for all three children. CPS Mariesa Wallis submitted three identical affidavits in support which included the statement: "To the best of my knowledge and belie[f] the child is an Indian Child subject to [ICWA]." Wallis' affidavit did not reference specific tribes or details concerning possible tribal affiliations. The petition and accompanying affidavits are the sole documents in the record suggesting J.J.C. or R.G. were Indian children.
¶6 The children were adjudicated as YINCs on November 3, 2016, and July 27, 2017. The District Court ordered Mother to complete a treatment plan on November 17, 2016, and August 17, 2017.
¶7 Although TLC was extended to give Mother more time to work on her treatment plan, Mother was not making progress; she repeatedly failed to appear for scheduled visits with the children, did not complete a substance treatment program, and tested positively for methamphetamine.
¶8 On February 12, 2018, the Department filed its Petition for Permanent Legal Custody and Termination of Parental Rights concerning Mother's parental rights to J.J.C. and R.G. The petition alleged that Mother failed to complete her treatment plan and sought termination pursuant to § 41-3-609(1)(f), MCA. The petition further noted: "Petitioner believes that the above-named Youths are NOT Indian Children subject [to] [ICWA]." The supporting CPS affidavit affirmed this statement.
¶9 Following a termination hearing on May 24, 2018, the District Court terminated Mother's parental rights to J.J.C. and R.G. The District Court's order stated: "Youths are NOT Indian Children subject to the provisions of [ICWA]."
STANDARD OF REVIEW
¶10 This Court reviews a district court's decision to terminate parental rights for an abuse of discretion. In re T.S. , 2013 MT 274, ¶ 21, 372 Mont. 79, 310 P.3d 538. A district court abuses its discretion only if it acts arbitrarily, without employment of conscientious judgment, or exceeds the bounds of reason resulting in substantial injustice. In re Declaring A.N.W. , 2006 MT 42, ¶ 29, 331 Mont. 208, 130 P.3d 619. We review a district court's findings of fact to determine whether they are clearly erroneous and its conclusions of law to determine whether they are correct. In re T.S. , ¶ 21. A finding of fact is clearly erroneous if it is not supported by substantial evidence, if the court misapprehended the effect of the evidence, or if this Court is left with a definite and firm conviction that the district court made a mistake. In re T.W.F. , 2009 MT 207, ¶ 17, 351 Mont. 233, 210 P.3d 174.
DISCUSSION
¶11 Whether the District Court abused its discretion when it continued with child custody proceedings before conclusively determining the children's Indian status.
¶12 A court may terminate parental rights when (1) a child has been adjudicated as a YINC; (2) an appropriate treatment plan approved by the court has not been complied with by the parent or has not been successful; and (3) the conduct or condition of the parent rendering him or her unfit is unlikely to change within a reasonable time. Section 41-3-609(1)(f), MCA. Each factor must be supported by clear and convincing evidence. Section 41-3-609(1), MCA.
¶13 On appeal, Mother argues the CPS affidavit declaring that J.J.C. and R.G. were Indian children gave the District Court reason to know the children may be subject to ICWA. Therefore, Mother asserts, the District Court erred when it categorized J.J.C. and R.G. outside the scope of ICWA without first making a conclusive determination, corroborated by a tribe, that the children were not Indian children pursuant to ICWA. Mother requests that the matter be reversed and remanded back to the District Court to determine the children's Indian status and ICWA applicability.
¶14 ICWA provides heightened federal standards for child custody proceedings involving Indian children. Congress enacted ICWA with the goal "to protect the best interests of Indian children and to promote the stability and security of Indian tribes and families. ..." 25 U.S.C. § 1902. ICWA applies only if a child meets the definition of an Indian child, meaning he or she is under eighteen, unmarried, and either: (1) enrolled as a Tribal member; or (2) eligible for enrollment and a biological parent is an enrolled member. 25 U.S.C. § 1903(4). For ICWA determination purposes, "tribes have ultimate authority to decide who qualifies as an 'Indian child.' " In re A.G. , 2005 MT 81, ¶ 14, 326 Mont. 403, 109 P.3d 756.
¶15 The Bureau of Indian Affairs (BIA) guidelines and regulations provide direction for when and how a court must verify whether an Indian child is involved. This Court has historically referred to the BIA guidelines as persuasive authority for interpreting ICWA. In re C.H. , 2000 MT 64, ¶ 12, 299 Mont. 62, 997 P.2d 776. New BIA guidelines for implementing ICWA were issued in February 2015 which replaced and superseded the 1979 guidelines. Guidelines for State Courts and Agencies in Indian Child Custody Proceedings, 80 Fed. Reg. 10,146, 10,147 (BIA 2015). The BIA then engaged in a notice-and-comment period, whereby the 2015 guidelines served as the proposed regulations. New regulations were issued in June 2016 with an effective date of December 12, 2016. The current regulations provide that, during child-custody proceedings, a district court "must ask each participant ... whether the participant knows or has reason to know that the child is an Indian child [and] instruct the parties to inform the court if they subsequently receive information that provides reason to know the child is an Indian child." 25 C.F.R. § 23.107(a) (2016) (emphasis added). The 2016 regulations replace the "reason to believe" language found in the previous guidelines, with the current "reason to know" standard.
¶16 Although neither party discussed the applicability of the BIA guidelines and regulations throughout these proceedings, both the 2015 proposed regulations and the current regulations serve as persuasive authority. In re C.H ., ¶ 12. The current regulations were not in place when J.J.C.'s proceedings began in May 2016; however, they controlled for the entirety of R.G.'s 2017 proceedings.
¶17 Regardless of whether the "reason to know" or "reason to believe" standard applied, the District Court did not err when it applied the non-ICWA statutory standards. Apart from the October 2016 affidavits, the District Court had neither a reason to believe nor a reason to know that J.J.C. and R.G. were Indian children subject to ICWA. Prior to the May 2016 hearing, the Department presented the District Court with three separate affidavits, each of which stated that to the best of the CPS's "knowledge and belief" none of the children were Indian children. The Department had no indication that ICWA should apply to J.J.C. or R.G. At the May 5, 2016 show cause hearing the District Court specifically inquired: "[T]he first question I have ... is there an [ICWA] issue here?" Counsel responded affirmatively only as to K.J. Moreover, over the next two years of proceedings, no additional information was presented to either the Department or the District Court that either J.J.C. or R.G. were Indian children.
¶18 Even if the October 2016 affidavits were sufficient to meet the reason to know threshold, Mother provides no facts, other than the statements in the October 2016 affidavits, that J.J.C. and R.G. are Indian children. She has not alleged that the children are enrolled members of a tribe, or that she or the children's fathers are enrolled. Remanding the matter for determination of the children's status would have no significant impact on the result.
CONCLUSION
¶19 The District Court's findings were not based on misapprehension of the evidence, and review of the record does not establish that a mistake was made. The District Court's conclusion of law, that ICWA is inapplicable, is correct.
¶20 Affirmed.
We Concur:
JAMES JEREMIAH SHEA, J.
LAURIE McKINNON, J.
BETH BAKER, J.
JIM RICE, J.
K.J. was initially part of these proceedings, but was subsequently dismissed with custody to the birthfather, W.H. K.J. is not included in this appeal.
"The final rule, therefore, uses the statutory language 'reason to know,' rather than 'reason to believe,' as was used in the proposed rule. This is to be more consistent with the statutory text and to be clear that the rule does not set a different standard for triggering notice than what is provided for in ICWA." Indian Child Welfare Act Proceedings, 81 Fed. Reg. 38,777, 38,803 (June 14, 2016). Since codification of the 2016 regulations, this Court has mistakenly used the "reason to believe" and "reason to know" standards interchangeably. We acknowledge that the standards are discrete and that the "reason to know" standard governs. | [
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Justice Laurie McKinnon delivered the Opinion of the Court.
¶1 Jessica Gazelka appeals from an order of the First Judicial District Court, Lewis and Clark County, granting St. Peter's Hospital (the Hospital) partial summary judgment. We affirm on alternate grounds and address the following issue:
Does Montana's Preferred Provider Agreements Act violate the Equal Protection Clause of the Montana Constitution?
FACTUAL AND PROCEDURAL BACKGROUND
¶2 This is the second appeal in this case and we previously set forth a detailed factual background in Gazelka v. St. Peter's Hospital , 2015 MT 127, 379 Mont. 142, 347 P.3d 1287. Pertinent to this appeal, in 2010 and 2011, Gazelka sought and received treatment from the Hospital for various injuries and symptoms. The Hospital billed Gazelka directly because she did not have health insurance when she received the treatments at issue. However, almost all of Gazelka's treatment costs were either covered by another party's insurance or significantly discounted by the Hospital's 50% financial-need discount.
¶3 Gazelka filed suit in District Court, arguing that the statutes authorizing the Hospital's billing practices violate the Equal Protection Clause of Article II, Section 4, of the Montana Constitution. The Montana Preferred Provider Agreements Act (MPPAA), §§ 33-22-1701 to -1707, MCA, permits Preferred Provider Agreements (PPAs) in Montana. A PPA is an agreement between an insurer and a healthcare provider reducing the amount of money a provider will accept as satisfaction for an insured person's treatment. Thus, two patients may ultimately pay different amounts for treatment depending on whether the patient is insured or uninsured and, if insured, depending on the terms of a particular PPA. If a patient is uninsured, she pays the amount the provider charged, less any discount she may receive through a provider's financial assistance program. Uninsured persons are not parties to and do not benefit from PPAs. If a patient is insured, she or her insurer pays the amount the provider agreed to accept as satisfaction for that treatment pursuant to the negotiated PPA. Providers frequently have PPAs with multiple insurers, and therefore one insurer's PPA may be more favorable to a patient, requiring her or her insurer to pay less.
¶4 Gazelka contended that the MPPAA unconstitutionally discriminates against uninsured patients and patients insured by the insurers that did not negotiate the most favorable PPA. She noted that the patients insured by the insurer that negotiated the most favorable PPA pay less for the same treatment than all other patients. Thus, Gazelka asked the District Court to find that the MPPAA violates the Equal Protection Clause of Article II, Section 4, and moved for partial summary judgment. The Hospital responded with its own motion for partial summary judgment, arguing that the MPPAA is constitutional. The District Court agreed with the Hospital, concluded that the MPPAA creates similarly situated classes but does not violate Gazelka's right to equal protection, and granted the Hospital's motion for partial summary judgment. Gazelka appeals. We affirm the District Court's decision on alternate grounds, as we determine that Gazelka failed to identify similarly situated classes.
STANDARD OF REVIEW
¶5 We review a grant of summary judgment de novo. Goble v. Mont. State Fund , 2014 MT 99, ¶ 14, 374 Mont. 453, 325 P.3d 1211. Summary judgment is appropriate when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. M. R. Civ. P. 56(c)(3). If there are no genuine issues of material fact, we review a district court's conclusion that the moving party is entitled to judgment as a matter of law for correctness. Mont. Cannabis Indus. Ass'n v. State , 2016 MT 44, ¶ 11, 382 Mont. 256, 368 P.3d 1131, cert. denied , --- U.S. ----, 136 S. Ct. 2523, 195 L.Ed.2d 844 (2016).
¶6 This Court exercises plenary review of constitutional issues. Mont. Cannabis Indus. Ass'n , ¶ 12. A statute is presumed constitutional unless it "conflicts with the constitution, in the judgment of the court, beyond a reasonable doubt." Powell v. State Comp. Ins. Fund , 2000 MT 321, ¶ 13, 302 Mont. 518, 15 P.3d 877. The party challenging the statute's constitutionality bears the burden of proving the statute is unconstitutional beyond a reasonable doubt. Goble , ¶ 15. If any doubt exists, it must be resolved in favor of the statute. Mont. Cannabis Indus. Ass'n , ¶ 12.
DISCUSSION
¶7 Montana's equal protection guarantee embodies "a fundamental principle of fairness: that the law must treat similarly-situated individuals in a similar manner." McDermott v. State Dep't of Corr. , 2001 MT 134, ¶ 30, 305 Mont. 462, 29 P.3d 992. "The function of the equal protection clause 'is to measure the validity of classifications created by state laws.' " ISC Distribs. v. Trevor , 273 Mont. 185, 195, 903 P.2d 170, 176 (1995) (quoting ARA Servs. Inc. v. Sch. Dist. , 590 F.Supp. 622, 629 (E.D. Pa. 1984) (quoting Parham v. Hughes , 441 U.S. 347, 358, 99 S.Ct. 1742, 1749, 60 L.Ed.2d 269 (1979) )). Article II, Section 4, of the Montana Constitution provides:
The dignity of the human being is inviolable. No person shall be denied the equal protection of the laws. Neither the state nor any person, firm, corporation, or institution shall discriminate against any person in the exercise of his civil or political rights on account of race, color, sex, culture, social origin or condition, or political or religious ideas.
Mont. Const. art. II, § 4. By its own terms, Article II, Section 4, protects against two distinct types of unequal treatment. First, it generally provides that "[n]o person shall be denied the equal protection of the laws." Mont. Const. art. II, § 4. The provision then more specifically provides that "[n]either the state nor any person, firm, corporation, or institution shall discriminate against any person in the exercise of his civil or political rights on account of race, color, sex, culture, social origin or condition, or political or religious ideas." Mont. Const. art. II, § 4. The second, more specific guarantee clearly applies to both public and private action; neither the state nor a private party may discriminate against a person in the exercise of his civil or political rights based on an included class. The first, more general guarantee, however, does not name a specific actor. We have never before directly considered whether state action is required for a plaintiff's Article II, Section 4, general equal protection claim.
¶8 The 1972 Constitutional Convention's Bill of Rights Committee intended Article II, Section 4, to eradicate "public and private discriminations based on race, color, sex, culture, social origin or condition, or political or religious ideas." Montana Constitutional Convention, Committee Proposals, February 22, 1972, p. 628; Verbatim Transcript, March 7, 1972, p. 1642. The Delegates designed the provision to provide more protection than the federal Equal Protection Clause. Montana Constitutional Convention, Committee Proposals, February 22, 1972, p. 628; Verbatim Transcript, March 7, 1972, p. 1642. The second, more specific equal protection guarantee of Article II, Section 4, effectuates those intentions, and our precedent consistently recognizes that Article II, Section 4, provides even more protection than the federal Equal Protection Clause. See, e.g. , Snetsinger v. Mont. Univ. Sys. , 2004 MT 390, ¶ 58, 325 Mont. 148, 104 P.3d 445 (citing Cottrill v. Cottrill Sodding Serv. , 229 Mont. 40, 42, 744 P.2d 895, 897 (1987) ).
¶9 The United States Constitution contains a comparable, general, Equal Protection Clause, which provides, "No State shall ... deny to any person within its jurisdiction the equal protection of the laws." U.S. Const. amend. XIV, § 1. The provision specifically provides that states cannot deny people equal protection of the laws. "[T]he action inhibited by the [Equal Protection Clause] is only such action as may fairly be said to be that of the States. Th[e Fourteenth] Amendment erects no shield against merely private conduct, however discriminatory or wrongful." Shelley v. Kraemer , 334 U.S. 1, 13, 68 S.Ct. 836, 842, 92 L.Ed. 1161 (1948). See also Am. Mfrs. Mut. Ins. Co. v. Sullivan , 526 U.S. 40, 50, 119 S.Ct. 977, 985, 143 L.Ed.2d 130 (1999) (quoting Blum v. Yaretsky , 457 U.S. 991, 1002, 102 S.Ct. 2777, 2785, 73 L.Ed.2d 534 (1982) ). Thus, in order to assert a viable federal equal protection claim, a plaintiff must demonstrate that state action, not merely private conduct, denied him equal protection of the laws. See , e.g. , Burton v. Wilmington Parking Auth. , 365 U.S. 715, 721-22, 81 S.Ct. 856, 860, 6 L.Ed.2d 45 (1961).
¶10 In a similar manner, we consistently state that "the principal purpose of Montana's Equal Protection Clause is to ensure that Montana's citizens are not subject to arbitrary and discriminatory state action ." Powell , ¶ 16 (emphasis added) (citing Davis v. Union Pac. R.R. Co. , 282 Mont. 233, 240, 937 P.2d 27, 31 (1997) (citing Godfrey v. Mont. Fish & Game Comm'n , 193 Mont. 304, 306, 631 P.2d 1265, 1267 (1981) ("The principal purpose of the [federal and state] Equal Protection Clause[s] ... is to ensure that persons who are citizens of this country are not the subject of arbitrary and discriminate state action."))). See also Mont. Cannabis Indus. Ass'n , ¶ 15 ; Timm v. Mont. Dep't of Pub. HHS , 2008 MT 126, ¶ 30, 343 Mont. 11, 184 P.3d 994. Accordingly, based on the plain language of Article II, Section 4 ; the Constitutional Convention Transcripts; comparable federal precedent; and our consistent, decades-long interpretation of Article II, Section 4 ; we conclude that Montana's general Equal Protection Clause, "No person shall be denied the equal protection of the laws," offers protection only against state action.
¶11 Thus, as a threshold matter, a plaintiff alleging that she was denied equal protection of the laws under Article II, Section 4 's general Equal Protection Clause must demonstrate that the State is responsible for the alleged rights violation. A plaintiff's claim of private discrimination will only prevail if he alleges that he was discriminated against "in the exercise of his civil or political rights on account of race, color, sex, culture, social origin or condition, or political or religious ideas." Mont. Const. art. II, § 4. We have previously stated, while analyzing state action under the federal Equal Protection Clause, that "[p]rivate conduct abridging [an] individual right does no violence to the Equal Protection Clause unless the state in any of its manifestations has been found to have become involved in such conduct to a significant extent."
In re Will of Cram , 186 Mont. 37, 43, 606 P.2d 145, 149 (1980) (citing Burton , 365 U.S. at 722, 81 S.Ct. at 860 ). "It is only when the State 'so far' insinuates itself into a 'position of interdependence' that it becomes a 'joint participant' in the challenged activity or where private conduct becomes 'so entwined' with governmental policies that a constitutional violation occurs." In re Will of Cram , 186 Mont. at 43, 606 P.2d at 149 (quoting Evans v. Newton , 382 U.S. 296, 299, 86 S.Ct. 486, 488, 15 L.Ed.2d 373 (1966) ).
¶12 Gazelka bases her equal protection claim on the fact that the MPPAA permits the Hospital to bill insured persons differently than uninsured persons. One's status as an insured or uninsured is not one's "race, color, sex, culture, social origin or condition, or political or religious ideas," see infra ¶¶ 25-27, and therefore Gazelka's claim relies on Montana's general Equal Protection Clause, "No person shall be denied the equal protection of the laws," Mont. Const. art. II, § 4. Our concern in this case is that Gazelka's general equal protection claim may not be properly premised upon an action of the state. We held in Bustell v. AIG Claims Service, Inc. , 2004 MT 362, ¶ 22, 324 Mont. 478, 105 P.3d 286, that a workers' compensation statute requiring hourly attorney fees for a claimant's attorney did not create two separate classes of claimants because "[t]he amount of those fees awarded is not relevant to any discriminatory treatment of the claimants themselves." A claimant's fees depended on her contractual arrangement with her attorney, and the statute required only that she get credit off the contractual fee for the hourly amount awarded. Bustell , ¶ 22. Furthermore, the Supreme Court analyzed a similar issue regarding insurance under federal state action precedent, and held that a state statute authorizing private conduct by insurers-even in an area subject to state regulation-did not turn that private conduct into "state action." Am. Mfrs. Mut. Ins. Co. , 526 U.S. at 51-54, 119 S.Ct. at 986-87.
¶13 In 1987, the Montana Legislature enacted the MPPAA to allow PPAs between insurers and healthcare providers. The MPPAA's purpose is to allow insurers to "negotiate and contract" with providers to:
(1) provide health care services to its insureds or subscribers at a reduction in the fees customarily charged by the provider; or
(2) enter into agreements in which the participating providers accept negotiated fees as payment in full for health care services the health care insurer is obligated to provide or pay for under the health benefit plan.
Section 33-22-1702, MCA. To accomplish its stated purpose, the MPPAA provides that insurers may enter into PPAs with healthcare providers relating to health care services. Section 33-22-1704(1), MCA. These PPAs may include terms relating to "the amounts an insured may be charged for services rendered" and "the amount and manner of payment to the provider." Section 33-22-1704(1)(a)(i)-(ii), MCA. The MPPAA thus permits insurers, on behalf of their insureds or subscribers, to negotiate and contract with healthcare providers for reduced fees. In exchange for accepting reduced fees, a healthcare provider may receive an exclusive agreement that encourages insured patients to use the provider. The provider benefits from the agreement because it is assured substantial patient volume. The benefits a patient receives based on her insurer's PPA with a provider is a function of varying conditions and factors, including the terms of the PPA, the premiums paid by the patient, and the different volumes of patients who are insured by an insurer. See also St. Vincent Hosp. & Health Ctr. v. Blue Cross & Blue Shield , 261 Mont. 56, 58, 862 P.2d 6, 7-8 (1993).
¶14 By its express terms, the MPPAA authorizes private parties-healthcare providers and insurers-to negotiate rates and enter into contractual relationships. Gazelka broadly states that statutes such as the MPPAA are state actions subject to the Equal Protection Clause. The Hospital does not contest that statement and does not raise lack of state action as an issue to this Court. Under the MPPAA, the amount a provider agrees to accept as payment from an insurer depends on the terms of a specific PPA, which is a contract negotiated by private entities; any cost-benefit an insured patient receives based on the PPA is attenuated from the MPPAA. Thus, the fact that some patients are uninsured or insured by companies that do not negotiate the most favorable PPA may not be a product of state action. Here, Gazelka still has a claim pending before the District Court, as she also alleged that the MPPAA permits insurers and healthcare providers to unlawfully restrain trade in violation of § 30-14-205, MCA. Gazelka's unlawful restraint of trade claim is premised, in part, upon the state's action in enacting the MPPAA. In Montana Cannabis Industry Association v. State , ¶¶ 15-18, we analyzed a statute authorizing the private production and sale of medical marijuana as state action subject to a general equal protection analysis. In that case, the state was a named party to the action, whereas, here, the Hospital is the only named defendant. Accordingly, because the parties did not brief the issue and because the question is not appropriately before this Court, we decline to determine whether the Hospital entering into PPAs with insurers pursuant to the MPPAA constitutes state action. We do not want to rule on the state action issue, which is not before us, and unintentionally disturb the remaining pending litigation. Instead, we proceed to evaluate Gazelka's equal protection claim based on her proposed classes upon which the District Court conducted its analysis, without addressing whether the MPPAA constitutes state action. We hold, however, that the general equal protection guarantee of Article II, Section 4, which provides, "No person shall be denied the equal protection of the laws," requires state action.
¶15 The general equal protection guarantee of Article II, Section 4, requires that "persons similarly situated with respect to a legitimate governmental purpose of the law must receive like treatment." Goble , ¶ 28 (quoting Rausch v. State Compen. Ins. Fund , 2005 MT 140, ¶ 18, 327 Mont. 272, 114 P.3d 192 ). When analyzing whether a law treats similarly situated persons alike, courts conduct a three-step equal protection analysis. First, we "identify the classes involved and determine if they are similarly situated." Goble , ¶ 28. Second, we "determine the appropriate level of scrutiny to apply." Goble , ¶ 28. Third and finally, we "apply the appropriate level of scrutiny to the challenged statute." Goble , ¶ 28. If the first step is not satisfied because the challenged statute does not create classes of similarly situated persons, we end our analysis. Powell , ¶ 22. Accordingly, to assert a viable equal protection claim, a plaintiff "must demonstrate that the state has adopted a classification that affects two or more similarly situated groups in an unequal manner." Mont. Cannabis Indus. Ass'n , ¶ 15 (internal quotations and citations omitted).
¶16 We begin by "identify[ing] the classes involved and determin[ing] whether they are similarly situated." Snetsinger , ¶ 16 (quoting Henry v. State Comp. Ins. Fund , 1999 MT 126, ¶ 27, 294 Mont. 449, 982 P.2d 456 ). We have explained that a classification within a law can be established in one of three ways:
First, the law may establish the classification "on its face." This means the law by its own terms classifies persons for different treatment ... Second, the law may be tested in its "application." In these cases the law either shows no classification on its face or else indicates a classification which seems to be legitimate, but those challenging the legislation claim that the governmental officials who administer the law are applying it with different degrees of severity to different groups of persons who are described by some suspect trait ... Finally, the law may contain no classification, or a neutral classification, and be applied evenhandedly. Nevertheless the law may be challenged as in reality constituting a device designed to impose different burdens on different classes of persons.
State v. Spina , 1999 MT 113, ¶ 85, 294 Mont. 367, 982 P.2d 421 (quoting John E. Nowak, et al., Constitutional Law 600 (2d ed. 1983)) (omissions in original). Statutes may treat certain people differently, but may not base the disparate treatment on "a classification that is wholly unrelated to some legitimate state purpose." McDermott , ¶ 30. Accordingly, a "statute does not violate the right to equal protection simply because it benefits a particular class," as discrimination only exists when people in similar circumstances are treated unequally. Wrzesien v. State , 2016 MT 242, ¶ 9, 385 Mont. 61, 380 P.3d 805 (quoting Bean v. State , 2008 MT 67, ¶ 13, 342 Mont. 85, 179 P.3d 524 ); Goble , ¶ 29. To identify similarly situated classes, we "isolate the factor allegedly subject to impermissible discrimination. Thus, two groups are similarly situated if they are equivalent in all relevant respects other than the factor constituting the alleged discrimination." Goble , ¶ 29 (internal citations omitted).
¶17 We have found similarly situated classes in a variety of equal protection challenges. See , e.g. , Satterlee v. Lumberman's Mut. Cas. Co. , 2009 MT 368, ¶ 16, 353 Mont. 265, 222 P.3d 566; Snetsinger , ¶ 27 ; Reesor v. Mont. State Fund , 2004 MT 370, ¶ 12, 325 Mont. 1, 103 P.3d 1019. For example, in Goble v. Montana State Fund , we determined that a statutory scheme created two similarly situated classes: (1) workers who qualify for disability benefits, and (2) workers who qualify for disability benefits but who are denied those benefits due to incarceration. Goble , ¶ 32. The only distinguishing factor between the two classes was incarceration. Goble , ¶ 32. Similarly, in Caldwell v. MACo Workers' Compensation Trust , 2011 MT 162, ¶ 16, 361 Mont. 140, 256 P.3d 923, we determined that a statute created two similarly situated classes: (1) vocational rehabilitation claimants eligible to receive social security retirement benefits, and (2) vocational rehabilitation claimants not eligible to receive social security retirement benefits. The only distinguishing factor between the two classes was the statute's deemed-retired provision, which was based on age. Caldwell , ¶ 18.
¶18 On the other hand, we have declined to find similarly situated classes when the alleged classes are sufficiently distinguishable. See , e.g. , Kohoutek, Inc., v. State , 2018 MT 123, ¶¶ 30-38, 391 Mont. 345, 417 P.3d 1105 ; Wrzesien , ¶¶ 8-12. In Powell v. State Compensation Insurance Fund , we determined that (1) "family member caregivers who are subject to the limitation on compensation" were not similarly situated to (2) "non-family member caregivers who are not subject to the limitation on compensation." Powell , ¶¶ 23-26. We concluded that there were several distinguishing factors between the care a family member provides and the care a non-family member provides, which justified the disparate treatment. Powell , ¶¶ 24-25. Likewise, in Wilkes v. Montana State Fund , 2008 MT 29, ¶¶ 11, 27, 341 Mont. 292, 177 P.3d 483, we determined that (1) "permanently partially disabled workers with actual wage loss who suffer reduced earning capacity" were not similarly situated to (2) "permanently partially disabled workers without actual wage loss who nevertheless suffer reduced earning capacity." We concluded that the distinguishing factor-actual wage loss-plainly related to the statute's underlying justification and thus sufficiently distinguished the two classes, rendering them dissimilar. Wilkes , ¶¶ 20, 26-27.
¶19 We applied Wilkes 's reasoning in Montana Cannabis Industry Association , ¶¶ 17-18, determining that (1) persons whose medical condition could be treated effectively with pharmaceutical drugs were not similarly situated to (2) persons whose medical condition could be treated solely or most effectively with marijuana. We decided that the single distinguishing factor-use of medical marijuana, a substance prohibited by federal law-was a fundamental difference that sufficiently distinguished the classes and rendered them dissimilar. Mont. Cannabis Indus. Ass'n , ¶ 18.
¶20 Recently, in Kohoutek v. State , we held that a statute providing a discount based on a liquor store's 1994 sales data of unbroken cases of liquor did not create two similarly situated classes. Kohoutek , ¶ 37. Liquor store owners challenged the statute on the basis that it created (1) an undercompensated class that was similarly situated to (2) an overcompensated class. Kohoutek , ¶ 35. We concluded that whether a store's unbroken case sales grew, stayed the same, or diminished after 1994 was attributable to that store's independent business decisions, not to the statute. Kohoutek , ¶ 37. We held that "[t]hose independent business decisions created fundamental differences that sufficiently distinguish[ed] the classes and render[ed] them dissimilar for equal protection purposes." Kohoutek , ¶ 37.
¶21 Gazelka contends that the MPPAA creates similarly situated classes consisting of (1) patients insured by the insurer that negotiated the most favorable PPA, and (2) uninsured patients and patients insured by the insurers that did not negotiate the most favorable PPA. Gazelka notes that those in the first class pay the lowest rate for treatment, while those in the second class do not benefit from the most favorable PPA and therefore pay higher rates for the same treatment. Gazelka further separates the second class into two alternative classes: (1) all patients, insured and uninsured, who are not insured by the insurer that negotiated the most favorable PPA, and (2) uninsured patients, who never benefit from PPAs. The Hospital responds that the classes are not similarly situated because of the many fundamental differences between the groups of patients.
¶22 The District Court determined that Gazelka properly alleged similarly situated classes, concluding that (1) patients insured by the insurer that negotiated the most favorable PPA were similarly situated to (2) uninsured patients and patients insured by the insurers that did not negotiate the most favorable PPA. The court determined that the distinguishing factor between the two groups was the cost-benefit of the most favorable PPA. The District Court's determination was based on its recognition that patients without the most favorable PPA pay more for the same treatment. We disagree. We conclude instead that the MPPAA does not create two separate classes because the identified classes are fundamentally different and therefore sufficiently distinguishable for purposes of an equal protection analysis.
¶23 Gazelka fails to identify similarly situated classes. "[D]iscrimination cannot exist in a vacuum; it can be found only in the unequal treatment of people in similar circumstances."
Goble , ¶ 29 (quoting Freeman v. City of Santa Ana , 68 F.3d 1180, 1187 (9th Cir. 1995) ). Here, Gazelka's proposed similarly situated classes face circumstances that are far from similar. The classes include patients who have different insurers, have different PPAs with varying terms and conditions, pay different premiums, have different negotiated payments, and are insured by companies that have different volumes of insured patients. More fundamentally, the classes are not similarly situated because insured patients who have contracts with insurers and pay insurance premiums are in completely different positions than uninsured patients who do not have contracts with insurers or pay for the benefits of negotiated, reduced fees. Further, Gazelka's alleged class of uninsured patients who never benefit from PPAs includes patients, like Gazelka, who may benefit from the Hospital's 50% financial-need discount, which provides even more favorable fees than the PPA negotiated by the insurer with the most favorable PPA. Indeed, if the Court were to accept that Gazelka, as an uninsured, was similarly situated to those who pay for insurance benefits, any contract facilitated by a statute could become the basis for an equal protection challenge by those who have not received the benefit of the contract.
¶24 The circumstances here are so diverse as to render the proposed classes fundamentally dissimilar for purposes of an equal protection analysis. Whether a patient has to pay more, less, or the same as another patient is attributable to numerous and varying circumstances; including, to highlight only a few, different insurers, different PPAs, different premiums, and different provider financial-need discounts. We conclude that Gazelka's proposed classes are not similarly situated and that she has not satisfied the first step of the equal protection analysis. Therefore, our inquiry ends and Gazelka's equal protection claim fails. See Mont. Cannabis Indus. Ass'n , ¶ 15 ; Powell , ¶ 22. We hold that the MPPAA does not deny Gazelka equal protection of the laws because the classes are not similarly situated.
¶25 Finally, we address Gazelka's allegation that the Hospital unconstitutionally discriminates against her based on her social condition as an uninsured person. See Mont. Const. art. II, § 4 ("Neither the state nor any person, firm, corporation, or institution shall discriminate against any person ... on account of ... social origin or condition ...."). Gazelka contends that uninsured persons are members of an economically disadvantaged class, as those who are uninsured frequently lack income, education, and employment. The Hospital argues that one's uninsured status is not a social condition.
¶26 We agree with the Hospital and determine that whether one has health insurance is not a social condition for purposes of equal protection analysis. The Constitutional Convention Delegates included the phrase social origin or condition "to cover discriminations based on status of income and standard of living." Montana Constitutional Convention, Verbatim Transcript, March 7, 1972, p. 1642; see also McClanathan v. Smith , 186 Mont. 56, 69, 606 P.2d 507, 514 (1980). A social condition "relates to one's economic status or rank in society" and the constitutional provision seeks to prohibit "discrimination which results solely because one is poor."
McClanathan , 186 Mont. at 69, 606 P.2d at 514. In McClanathan v. Smith , we determined that one's status as "a parent and totally disabled person" was not a social condition within the meaning of Article II, Section 4. McClanathan , 186 Mont. at 69, 606 P.2d at 514. Similarly, we conclude that having no health insurance is not a social condition.
¶27 We are unable to conclude that having health insurance results solely from a person's social condition. Gazelka offered considerable evidence from experts opining that the uninsured in America are members of an economically disadvantaged class: poor, unhealthy, less educated, and financially vulnerable. This may be true. But a correlation between financial disadvantage and lack of health insurance does not prove that the Hospital's entry into PPAs with certain insurers discriminates against individuals because they are poor. A person's uninsured status may be related to his or her economic status, but it is not exclusively related to the social condition of being poor. Bearing some relation to economic status is not the same as discrimination based on economic status itself. And there is nothing in the MPPAA that establishes differential health care pricing against the poor. Accordingly, we reject Gazelka's broad construction of "social condition" as including those who do not have health insurance. The MPPAA authorizes contractual arrangements that reduce treatment costs and therefore makes healthcare more affordable. Section 33-22-1702, MCA. The MPPAA does not create impermissible classifications based on one's social condition, income, or economic status, and the Hospital does not discriminate by entering into agreements the Act authorizes.
CONCLUSION
¶28 The general equal protection guarantee of Article II, Section 4, of the Montana Constitution, which provides, "No person shall be denied the equal protection of the laws," requires state action. The MPPAA does not create classes of similarly situated individuals and therefore does not deny uninsured patients and patients insured by the insurers that did not negotiate the most favorable PPA equal protection. Further, one's uninsured status is not a social condition for purposes of Article II, Section 4, analysis. Therefore, the MPPAA, which authorizes the Hospital's billing practices, does not deprive Gazelka of her right to equal protection of the laws.
We concur:
MIKE McGRATH, C.J.
JIM RICE, J.
BETH BAKER, J.
DIRK M. SANDEFUR, J.
INGRID GUSTAFSON, J.
JAMES JEREMIAH SHEA, J.
We recognize that Article II, Section 4, contains a separate privilege, "The dignity of the human being is inviolable," which recognizes that all human beings have an innate dignity. Walker v. State , 2003 MT 134, ¶ 72, 316 Mont. 103, 68 P.3d 872. That privilege is not at issue in this appeal.
This conclusion is also supported by Montana Constitutional Law scholars:
Article II, section 4 reaches beyond the boundaries of traditional equal protection. The language is unique to the extent it recognizes human dignity as a dimension of, or corollary to, the concept of equal protection of the law. The language also portends to create a right to equality within the realm of private activity, eliminating the "state action" requirement attached to the comparable provision of the U.S. Constitution. The private anti-discrimination "equal protection" guarantee is limited to the exercise of civil and political rights. The section enlarges the protected class to include not only race but also color, sex, culture, social origin or condition, and political and religious ideas.
Larry M. Elison & Fritz Snyder, The Montana State Constitution: A Reference Guide 35 (2001) (emphasis added).
At the outset of this case, the Hospital filed a motion to dismiss Gazelka's equal protection claim for failure to state a claim upon which relief can be granted. The Hospital argued that Gazelka, a private individual, could not sue the Hospital, a private entity, for violations of the Montana Constitution. To support its position, the Hospital primarily cited Sunburst Sch. Dist. No. 2 v. Texaco, Inc. , 2007 MT 183, 338 Mont. 259, 165 P.3d 1079, and Dorwart v. Caraway , 2002 MT 240, 312 Mont. 1, 58 P.3d 128. The District Court denied the Hospital's request, focusing on Article II, Section 4 's second, more specific equal protection guarantee, emphasizing that "any person, firm, corporation, or institution" is expressly prohibited from discriminating "against any person in the exercise of his civil or political rights on account of race, color, sex, culture, social origin or condition, or political or religious ideas." After the District Court denied its motion to dismiss, the Hospital answered Gazelka's complaint. In its answer, the Hospital asserted an affirmative defense that Gazelka's alleged constitutional violation is not a proper basis for a private cause of action against a private party. The issue does not appear to have been argued further. | [
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Justice Laurie McKinnon delivered the Opinion of the Court.
¶ 1 Pursuant to Section I, Paragraph 3(c), Montana Supreme Court Internal Operating Rules, this case is decided by memorandum opinion and shall not be cited and does not serve as precedent. Its case title, cause number, and disposition shall be included in this Court's quarterly list of noncitable cases published in the Pacific Reporter and Montana Reports.
¶ 2 Benette Ann Johnson (Mother) appeals from an order of the Thirteenth Judicial District Court, Yellowstone County, granting Eric Michael Johnson's (Father) motion to amend the parties' parenting plan. We affirm.
¶ 3 Mother is the biological parent of A.R.J., who is not Father's biological child but who Father historically treated as his daughter. In 2006, Mother and Father married and later had two children together, K.L.J. and S.S.J. Mother and Father divorced in 2012, at which time the District Court issued a parenting plan. The plan granted Mother primary parenting of the children and provided Father with supervised parenting time based on abuse allegations Mother brought against Father. Thereafter, substantial procedural history exists regarding the parties' parenting of the children, with multiple district court judges and a standing master presiding over the case at various times.
¶ 4 Relevant to this appeal is the District Court's grant of visitation to Mother's adoptive parents, the Bernhardts. In December 2013, the court issued an order granting the Bernhardts grandparent contact and visitation with the children pursuant to § 40-4-228, MCA. The order provided that the children spend five hours each Tuesday with the Bernhardts. Later, in July 2015, the court reaffirmed its December 2013 visitation order and further granted the Bernhardts make-up visitation time for times when the children were unavailable on Tuesday.
¶ 5 Also relevant to this appeal is the District Court's modification of the parties' parenting plan. In June 2014, the court amended the original 2012 parenting plan at Father's request, providing him unsupervised visitation. In 2015, the court appointed a Guardian Ad Litem (GAL). In November 2016, a standing master reaffirmed the June 2014 amended parenting plan. Thereafter, Mother frustrated Father's and the Bernhardts' time with the children, failed to keep Father apprised of the children's medical and educational statuses, and made unsubstantiated allegations of sexual and physical abuse against Father. In May 2017, Father filed a motion and brief asking the District Court to once again amend the parenting plan. Mother opposed the amendment and the court subsequently ordered the GAL to interview the minor children. Mother frustrated the GAL's attempts to interview the children, and on September 27, 2017, the GAL filed a motion for permission to interview the children at Father's residence. The court granted the motion but the GAL was unable to finish his interviews with the children until October 2, 2017.
¶ 6 One day later, on October 3, 2017, the court held its scheduled hearing on Father's motion to amend the June 2014 parenting plan. At the hearing, the GAL testified about the information he was able to compile over Mother's attempts to frustrate his interviews of the children. The court ultimately granted Father's request to amend the parenting plan, finding that a change in circumstances existed due to Mother's alienation of Father and that an amendment was in the children's best interests. The October 2017 parenting plan essentially reversed the parties' previous parenting arrangement. It provided that the children would live primarily with Father and visit Mother. Father worked nights and had a good relationship with the Bernhardts-he often stayed with them during his parenting time. Therefore, the court found that, if Father were called in to work at night when the children were sleeping at the Bernhardts, the Bernhardts could watch the children until the next morning. The court's order also reinforced the Bernhardts' Tuesday afternoon contact and visitation with the children.
¶ 7 Mother appeals the District Court's order modifying the parenting plan, raising three issues. First, Mother argues the District Court abused its discretion by modifying the parenting plan. When reviewing a district court's decision to modify a parenting plan, we review its findings for clear error. Jacobsen v. Thomas , 2006 MT 212, ¶ 13, 333 Mont. 323, 142 P.3d 859. Findings are clearly erroneous if they are not supported by substantial evidence, the court misapprehended the effect of the evidence, or our review of the record convinces us that a mistake was made. In re Marriage of Oehlke , 2002 MT 79, ¶ 17, 309 Mont. 254, 46 P.3d 49. When the findings upon which the court based its decision are not clearly erroneous, we will reverse a district court's decision only where the district court clearly abused its discretion. Oehlke , ¶ 9.
¶ 8 Section 40-4-219, MCA, provides that a court may, in its discretion, amend a prior parenting plan if it finds "that a change has occurred in the circumstances of the child and that the amendment is necessary to serve the best interest of the child." In determining what is in the children's best interest, the court may consider whether "one parent has willfully and consistently: (i) refused to allow the child to have any contact with the other parent; or (ii) attempted to frustrate or deny contact with the child by the other parent." Section 40-4-219(1)(d)(i)-(ii), MCA. The party seeking to modify a parenting plan carries a heavy burden of proof to show a change of circumstances. In re Marriage of D'Alton , 2009 MT 184, ¶ 11, 351 Mont. 51, 209 P.3d 251. However, a district court has broad discretion when considering a child's parenting. Child custody cases present a court with difficult decisions, and, accordingly, we presume the court carefully considered the evidence and made the correct decision. In re Marriage of Whyte , 2012 MT 45, ¶ 23, 364 Mont. 219, 272 P.3d 102.
¶ 9 We conclude the District Court's findings are not clearly erroneous, as they are supported by substantial evidence. The court found, based on substantial evidence, that: Mother frustrated and interfered with the children's relationship with Father and with the Bernhardts; Mother prevented all interaction between Father and K.L.J. and S.S.J.; Mother's claims that Father sexually and physically abused the children were without merit; and Mother frustrated Father's right to have knowledge and input about the children's education and healthcare. The District Court's findings demonstrate that a change in circumstances occurred and that amending the parenting plan was necessary to serve the children's best interests, especially in light of Mother's refusal to allow the children to have contact with Father. See § 40-4-219(1)(d)(i)-(ii), MCA. The District Court did not clearly err in its findings and we affirm its decision to modify the parenting plan.
¶ 10 Second, Mother argues the District Court violated her due process rights by providing the Bernhardts contact and visitation with the children. "[P]arents have a fundamental constitutional right to make decisions concerning the care, custody, and control of their children." In re C.T.C. , 2014 MT 306, ¶ 14, 377 Mont. 106, 339 P.3d 54 (internal quotations omitted). Accordingly, in the context of a grandparent's claim for visitation, courts presume that fit parents act in their child's best interest. Polasek v. Omura , 2006 MT 103, ¶¶ 14-15, 332 Mont. 157, 136 P.3d 519. Based on that presumption, before a court may grant a petition "for grandparent-grandchild contact over the objection of a parent whose parental rights have not been terminated, the court shall make a determination as to whether the objecting parent is a fit parent." Section 40-9-102(2), MCA. We have previously held that "nonparents" may seek visitation with a child under § 40-4-228, MCA, but that "grandparents" must seek visitation under the more specific statute, § 40-9-102, MCA. Schwarz v. Schwarz , 2018 MT 48, ¶ 9, 390 Mont. 366, 414 P.3d 285.
¶ 11 Mother contends the District Court violated her due process rights because it failed to determine her fitness before granting the Bernhardts contact and visitation with the children. See § 40-9-102, MCA. In December 2013, the court granted the Bernhardts contact and visitation with the children pursuant to § 40-4-228, MCA, the "nonparent" visitation statute and, in July 2015, followed-up with a second order regarding the Bernhardts visitation. In those orders, the court did not consider "grandparent" visitation under § 40-9-102, MCA, and did not determine Mother's fitness. However, Mother appealed neither the court's December 2013 order granting the Bernhardts grandparent contact and visitation nor the court's July 2015 follow-up order. She now only appeals the court's October 2017 order, which simply reinforced the court's previous orders granting grandparent contact and visitation. Accordingly, Mother waived her argument regarding the Bernhardts' contact and visitation. Because the issue is not appropriately before this Court, we decline to fault the lower court for failing to apply § 40-9-102, MCA, and determine Mother's fitness.
¶ 12 In further regard to the Bernhardts' contact with the children, Mother contends the court erred by allowing the Bernhardts to watch the children if Father is called in to work on nights when the children are sleeping at the Bernhardts'. Mother reasons that provision runs afoul of the parenting plan's right-of-first-refusal clause, which provides that, if one parent cannot personally watch the children for more than two and one-half hours during his or her parenting time, that parent must ask the other parent to watch the children before asking a third party. We conclude the District Court was within its discretion to provide that the Bernhardts could watch the children if Father was called in to work at night. See Whyte , ¶ 23 (stating that district courts have broad discretion in considering parenting issues).
¶ 13 Third, Mother argues the District Court denied her due process when it did not require the GAL to file a written report prior to the court's October 3, 2017 hearing regarding Father's motion to amend the parenting plan. Pursuant to § 40-4-205(5), MCA, a GAL must mail his report "to counsel and to any party not represented by counsel at least 10 days prior to the hearing." In this case, the GAL did not prepare a written report prior to the October 3, 2017 hearing. The District Court excused the GAL's failure to mail a written report, finding that Mother obstructed the GAL's ability to timely interview the children and present a written report. A review of the record confirms that Mother prohibited the GAL from timely interviewing the children and we conclude the District Court did not err by permitting the GAL to testify even though he had not yet prepared his written report.
¶ 14 Finally, we address the Bernhardts' request for Mother to pay their costs on appeal. We conclude an award of costs is not necessary in this case and accordingly decline the Bernhardts' request.
¶ 15 We have determined to decide this case pursuant to Section I, Paragraph 3(c) of our Internal Operating Rules, which provides for memorandum opinions. This appeal presents no constitutional issues, no issues of first impression, and does not establish new precedent or modify existing precedent.
¶ 16 Affirmed.
We concur:
MIKE McGRATH, C.J.
INGRID GUSTAFSON, J.
DIRK M. SANDEFUR, J.
JAMES JEREMIAH SHEA, J. | [
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] |
Justice Ingrid Gustafson delivered the Opinion of the Court.
¶ 1 Pursuant to Section I, Paragraph 3(c), Montana Supreme Court Internal Operating Rules, this case is decided by memorandum opinion and shall not be cited and does not serve as precedent. Its case title, cause number, and disposition shall be included in this Court's quarterly list of noncitable cases published in the Pacific Reporter and Montana Reports.
¶ 2 Aaron Larson (Aaron) appeals from the May 9, 2018 Findings of Fact, Conclusions of Law, and Order Denying Respondent's Motion to Lift Restraining Order (May 2018 Order) of the Thirteenth Judicial District, Yellowstone County. We affirm.
¶ 3 Aaron and Marla were previously married and then divorced. Aaron is the subject of a Permanent Order of Protection entered March 24, 2006, that prevents any contact with Marla. Aaron moved the court to lift this restraining order. Following hearing on October 19, 2017, the District Court entered its May 2018 Order denying Aaron's Motion to Lift Restraining Order. Aaron appeals.
¶ 4 The Montana Rules of Appellate Procedure require the appellant to present a concise, cohesive argument which "contains the contentions of the appellant with respect to the issues presented, and the reasons therefor, with citations to the authorities, statutes, and pages of the record relied on." In re McMahon , 2002 MT 198, ¶ 6, 311 Mont. 175, 53 P.3d 1266 (quoting M. R. App. P. 12(1)(g), formerly M. R. App. P. 23(a)(4) ). This Court will not consider unsupported issues or arguments. In re Custody of Krause , 2001 MT 37, ¶ 32, 304 Mont. 202, 19 P.3d 811. Furthermore, it is not this Court's obligation to research a party's position or to develop legal analysis to support it. State v. Hicks , 2006 MT 71, ¶ 22, 331 Mont. 471, 133 P.3d 206.
¶ 5 In his Opening Brief, Aaron generally asserts he desires to have the restraining order lifted as, "Removing this would be [a] career and health benefit." Aaron does not assert any error on the part of the District Court, does not cite or mention any legal authority, and does not make any reference to the record. Aaron has failed to present us with any cogent or articulable argument upon which we could find fault with the District Court's ruling.
¶ 6 Notwithstanding Aaron's failure to present an argument and the general inadvisability of a permanent order of protection, we have reviewed the District Court's May 2018 Order and find no reversible error.
¶ 7 We have determined to decide this case pursuant to Section I, Paragraph 3(c) of our Internal Operating Rules, which provides for memorandum opinions. In the opinion of the Court, the case presents a question controlled by settled law or by the clear application of applicable standards of review.
¶ 8 Affirmed.
We concur:
JAMES JEREMIAH SHEA, J.
LAURIE McKINNON, J.
DIRK M. SANDEFUR, J.
JIM RICE, J.
While during a contentious dissolution and for a short time thereafter a restraining order may be necessary and advisable, a court should use permanent restraining orders sparingly as they can result in a variety of unintended consequences including educational, employment, and financial barriers. After litigants finalize their divorce and are no longer dealing with the issues between them, their contentiousness usually decreases significantly and they typically move on with their lives independently without need for a permanent restraining order. | [
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Justice Beth Baker delivered the Opinion of the Court.
¶1 Shoshon Edith Anderson obtained a final order of protection from the Justice Court against Bryan Wayne Larson in 2015. Larson filed a motion to dissolve the final order of protection nearly two years later. The Justice Court denied his motion, and Larson appealed. The District Court ruled that Larson's appeal was an untimely appeal of the order of protection. Larson argues that the District Court was incorrect because he sought to dissolve the order, not to appeal it. We reverse and remand to the District Court for consideration of the appeal on the merits. PROCEDURAL AND FACTUAL BACKGROUND
¶2 Anderson and Larson were married in 2014 and divorced in 2015. After the decree was entered, Anderson filed for a temporary order of protection in the Justice Court, alleging that Larson was stalking her. The Justice Court issued a temporary order of protection, which it made permanent following a hearing on November 23, 2015. The final order of protection against Larson expires on November 23, 2019.
¶3 On October 19, 2017, Larson filed a "Combined Motion and Brief to Dissolve Final Protection Order" in the Justice Court. Larson argued that the order of protection had not been based on evidence that implicated a potential threat to Anderson, that he had never made threats against her either before or after the issuance of the order of protection, that he had complied with the provisions of the order of protection during the nearly two years since it had been granted, that the order of protection negatively affected his employment and his ability to travel outside the United States, and that Anderson was no longer living in Montana and had no need for an order of protection. Larson stated that despite being charged by Teton County with stalking Anderson, he had entered into a deferred prosecution agreement, and that the charges had been dismissed with prejudice in 2017. He stated that Anderson opposed "a stipulation to dissolve the order despite the absence of any threat to her safety or wellbeing." He cited Albrecht v. Albrecht, 2011 MT 316, 363 Mont. 117, 266 P.3d 1275, for the proposition that the Justice Court has the authority to either continue or terminate the order of protection apart from Anderson's wishes.
¶4 On October 30, 2017, Anderson's attorney moved for additional time to respond to Larson's motion and brief. On October 31, 2017, without Anderson's response, the Justice Court denied Larson's motion to dissolve the order of protection, stating in its order that there was "no basis" to dissolve it before the specified termination date. On November 22, 2017, Larson filed a notice of appeal. Larson's appeal stated that he "hereby appeals to the District Court from all orders and judgments entered herein, including the Justice Court's Order entered in this action on the 31st day of October 2017, and appeals all appealable issues in this matter."
¶5 Anderson moved to dismiss Larson's appeal on December 4, 2017. Without awaiting response, the District Court issued an order denying Larson's appeal on December 6, 2017. The District Court's order stated:
A review of the transmitted file provides that the final judgment was rendered on November 23, 2015. As provided by Montana Code Annotated § 40-15-302, the Respondent had the right to appeal the final Order of Protection issued November 23, 2015. Appeals from Justice Court are governed by Montana Code Annotated § 25-33-102, which requires the appeal to be filed within 30 days of the judgement [sic]. Respondent failed to timely file an appeal on that Order. The Teton County Justice Court's sua sponte order denying Respondent's Motion for relief of said judgement [sic] nearly two years after it was rendered does not constitute an appealable issue.
STANDARD OF REVIEW
¶6 We review a district court's conclusions of law for correctness. Albrecht, ¶ 9.
DISCUSSION
¶7 Larson argues that the District Court erred as a matter of law by treating his appeal of the Justice Court's order denying his motion to dissolve the order of protection as an appeal of the order of protection itself. Larson maintains the District Court incorrectly denied his appeal as untimely. Anderson has not appeared in this appeal or filed a response.
¶8 Section 40-15-204, MCA, addresses issuance of temporary and permanent orders of protection. Section 40-15-204(5), MCA, provides that an order of protection "may continue for an appropriate time period as directed by the court or be made permanent.... The order may be terminated upon the petitioner's request that the order be dismissed." We held in Albrecht that a district court has authority under § 40-15-204(5), MCA, to dismiss or terminate an order of protection, even if the request comes from the respondent instead of from the petitioner. Albrecht, ¶¶ 15-16.
¶9 Section 40-15-302(1), MCA, grants a party the right to appeal an order of protection issued by a justice court to a district court for immediate review. Section 25-33-102, MCA, establishes that appeal to a district court must be made within thirty days after a judgment is rendered.
¶10 Here, Larson did not file his motion to dissolve the order of protection pursuant to § 40-15-302(1), MCA, which allows an appeal and immediate review of an order of protection by a district court.
Instead, Larson filed his motion to dissolve the order of protection pursuant to § 40-15-204(5), MCA, the statute authorizing a court to continue, make permanent, or terminate an order of protection. Once the Justice Court denied Larson's motion to terminate the order of protection, Larson appealed the order denying his motion to the District Court. In accordance with § 25-33-102, MCA, Larson brought his appeal within thirty days after the Justice Court denied his motion.
¶11 On the record presented in this case, we conclude that the District Court erred in denying Larson's appeal as untimely. Larson could not appeal the November 2015 order of protection, but he could appeal the Justice Court's 2017 refusal to terminate it, and he did so timely.
CONCLUSION
¶12 The District Court's order denying Larson's appeal is reversed, and the case is remanded for consideration of the appeal on the merits.
We Concur:
LAURIE McKINNON, J.
DIRK M. SANDEFUR, J.
INGRID GUSTAFSON, J.
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Justice Jim Rice delivered the Opinion of the Court.
¶1 Claimant City of Fort Peck (Fort Peck) appeals the order entered by the Montana Water Court determining the volume of water to which Fort Peck is entitled pursuant to its Claim 40E 182897-00 in Missouri River Basin (Basin 40E), between the Musselshell River and Fort Peck Dam. We affirm and address the following issue:
Did the Water Court err by entering conclusions in contradiction to the pretrial order and violate Fort Peck's due process rights?
FACTUAL AND PROCEDURAL BACKGROUND
¶2 Water Claim 40E 182897-00 is a municipal water right claimed by Fort Peck, which lies on the northeast end of Fort Peck Reservoir, southeast of Glasgow, and has a present population of 251 people. Fort Peck came into existence in 1934, during construction of the Fort Peck Dam, when the town was built to house workers on the dam project. Fort Peck and the surrounding area then reached a population of over 10,000 people, and local amenities included a hotel, theatre, hospital, school, stores, dormitories, bunkhouses, as well as homes. Fort Peck's population dropped dramatically after the dam was completed, and the town no longer boasts a school, hospital or grocery store. Although evidence varied, it appears Fort Peck's population has also suffered a gradual decline since 1990. The town's hotel and theatre continue to open seasonally.
¶3 Fort Peck originally claimed a volume of 1,500 acre-feet per year (AFY) based upon an assumed continuous, year-round diversion of 930 gallons per minute. During the claim examination process, the Department of Natural Resources and Conservation (DNRC) added an issue remark to the claim questioning the claimed volume. The Water Court ordered Fort Peck to meet with the DNRC to attempt resolution of the issue remark, and ordered the DNRC to file a memorandum with its recommendations for resolution. The parties were unable to resolve the remark, and the DNRC filed a recommendation that the volume on the claim be set at 206 AFY, based upon available evidence. The Water Court joined the State of Montana pursuant to § 85-2-248(7)(a), MCA. In its order joining the State, the Water Court stated that "[t]he prima facie status of Fort Peck's claimed volume has been overcome by evidence showing it has not used that volume for the last twenty-five years and has no plan to do so in the future," but reserved for trial a ruling on the presumption of nonabandonment for municipal water rights claims under § 85-2-227(4), MCA. At the request of the parties, the Water Court stayed the case pending a decision by this Court in City of Helena v. Cmty. of Rimini , 2017 MT 145, 388 Mont. 1, 397 P.3d 1, in which § 85-2-227(4), MCA, was at issue. After issuance of this Court's decision in City of Helena , the case proceeded on hearing track, W. R. Adj. R. 16(c), and the parties engaged in discovery.
¶4 The parties submitted a proposed joint pretrial order on June 29, 2018. Pertaining to the arguments here, the parties agreed to the following within the proposed order, including a reduction of Fort Peck's claim to 773 AFY:
AGREED FACTS
...
4. Fort Peck has historically beneficially used 223 AFY ... which includes 17 AFY for backwash of its water treatment plant.
5. The capacity of Fort Peck's water treatment and distribution system is 1500 AFY.
CONTENTIONS
1. Fort Peck is entitled to a decreed volume ... that reflects its actual historical beneficial use of water plus a volume for future use commensurate with its reasonably anticipated future needs.
Fort Peck further contends:
2. Fort Peck is entitled to a 773 AFY volume to meet its actual historical beneficial use of water and its reasonably anticipated future needs.
The State further contends:
3. Fort Peck has abandoned the portion of [its] Statement of Claim ... that exceeds the amount of its actual historical beneficial use of water plus reasonably anticipated future needs.
...
ISSUES OF LAW
1. Has the State met its burden of overcoming the presumption of nonabandonment pursuant to § 85-2-227(4), MCA, for any portion of Statement of Claim 40E 182897-00?
...
4. Has Fort Peck abandoned any portion of Statement of Claim 40E 182897-00?
The parties agreed that Fort Peck had satisfied two of the criteria in § 85-2-227(4), MCA, necessary to confer a presumption of nonabandonment of the entirety of Fort Peck's claim of 1,500 AFY, requiring the State to rebut the presumption in order to prove abandonment by Fort Peck of "any portion" of its claim.
¶5 The Water Court adopted the parties' proposed pretrial order, and in its adoption order provided the following explanation of the case for trial: "The City of Fort Peck claims that the correct volume for its right is 773 AFY. The State of Montana agrees it has the burden of proof to show that the City of Fort Peck's volume is something other than the 1,500 AFY claimed on the Statement of Claim."
¶6 The case proceeded to trial before the Water Court in July 2018, and the Court entered its Order Regarding Volume and Order Closing Case in October 2018. The Court therein summarized the parties' trial positions as follows:
Prior to trial, the parties filed a joint pretrial order. Although the parties disagree on the volume Fort Peck should receive, they agree Fort Peck is entitled to receive a volume equal to historical beneficial use plus reasonably anticipated future needs. In Fort Peck's view, 773 acre-feet per year fairly encompasses historical beneficial use plus reasonably anticipated future needs. In the State's view, the amount is 206 AFY or less.
¶7 The Court concluded that Fort Peck qualified for the presumption of nonabandonment, that the presumption was overcome by the State, and that Fort Peck was entitled to a volume of 171 AFY "for current use and reasonably foreseeable future use."
¶8 Fort Peck appeals.
STANDARD OF REVIEW
¶9 We apply the same standards of review to decisions of the Water Court as we do the district court. In re Crow Water Compact , 2015 MT 353, ¶ 14, 382 Mont. 46, 364 P.3d 584. We review the Water Court's findings of fact to determine whether they are clearly erroneous, and we review the Water Court's "conclusions of law de novo to determine whether they are correct." In re Crow Water Compact , ¶ 14.
DISCUSSION
¶10 Did the Water Court err by entering conclusions in contradiction to the pretrial order and violate Fort Peck's due process rights?
¶11 Fort Peck argues the Water Court erroneously contradicted the pretrial order without a valid basis to do so under M. R. Civ. P. 16. It emphasizes the parties' joint contention that Fort Peck was entitled to a volume reflecting its actual historical beneficial use plus a volume for reasonably anticipated future needs, the agreed fact that Fort Peck's historical beneficial use was 223 AFY, and the State's contention that Fort Peck had abandoned the portion of its claim that exceeded its historical beneficial use and anticipated future needs. Fort Peck offers, "[s]tated differently, the only issue at trial was how much additional water, over and above the 223 AFY volume, as agreed by the parties, is necessary for Fort Peck's reasonably anticipated future needs." Fort Peck argues the Water Court also erred by basing the volume determination of 171 AFY on the town's current use, instead of actual historical use, in addition to its anticipated future use, as stated in the pretrial order. As relief, Fort Peck asks that we simply order the volume of its claim to be 223 AFY based upon the measure of the town's historical use, and call it a day. Fort Peck's argument is well-articulated, but there are additional governing principles at work here that persuade us to reject it.
¶12 Under M. R. Civ. P. 16(d), the pretrial order "controls the course of the action unless the court modifies it." See also Byrum v. Andren , 2007 MT 107, ¶ 39, 337 Mont. 167, 159 P.3d 1062 ("the pretrial order controls the subsequent course of the action."). Under Rule 16(e), the court "may modify the order issued after a final pretrial conference only to prevent manifest injustice." Consequently, "parties may not assert issues or other matters which were not included in the pretrial order." Travelers Indem. Co. v. Andersen , 1999 MT 201, ¶ 34, 295 Mont. 438, 983 P.2d 999. "The purpose of pretrial orders is to simplify issues, prevent surprise and allow counsel to prepare their cases for trial based on the pretrial order. A legal theory or factual issue for trial must be at least implicitly included in the pretrial order[.]" Weimar v. Lyons , 2007 MT 182, ¶ 20, 338 Mont. 242, 164 P.3d 922 (internal quotations and citations omitted). However, we have also held that "a district court possesses wide discretion in deciding whether to allow a party to raise a factual issue or legal theory not explicitly raised in the pretrial order, but the court must be mindful not to prejudice the parties[,]" Byrum , ¶ 39, and that "pretrial orders should be liberally construed to permit any issues at trial that are embraced within [their] language." Weimer , ¶ 20; see also M. R. Civ. P. 15(b)(2) ("When an issue not raised by the pleadings is tried by the parties' express or implied consent, it must be treated in all respects as if raised in the pleadings.... failure to amend does not affect the result of the trial of that issue."); Nw. Union Tr. Co. v. Worm , 204 Mont. 184, 189-90, 663 P.2d 325, 327-28 (1983) (stating under M. R. Civ. P. 15(b) that failure to raise an issue in the pretrial order will not preclude parties from raising it at trial where the issue is implicit); Pub. Serv. Co. v. Bd. of Water Works , 831 P.2d 470, 481-82 (Colo. 1992) (holding the Water Court did not err in granting a dismissal based on an issue that the pretrial order did not specify for determination at trial, where that issue was "within the scope of issues set forth in the pretrial order" and the issues set for trial clearly encompassed that issue).
¶13 In addition to the parts of the pretrial order emphasized by Fort Peck, there were also statements implicating a broader inquiry for trial. The stated issues of law included whether the State "met its burden of overcoming the presumption of nonabandonment pursuant to § 85-2-227(4), MCA, for any portion of" Fort Peck's claim, and, correspondingly, whether Fort Peck had "abandoned any portion of" its claim (emphasis added). Although Fort Peck may well have read these phrases as limited to the portion of its claim in excess of a baseline consisting of its historical and future uses, given the joint contention, the Water Court read the pretrial order more broadly. In its order adopting the pretrial order, the Water Court clarified that Fort Peck was claiming that "the correct volume for its right is 773 AFY," while the State had the burden to prove the volume was "something other than the 1,500 AFY claimed on the Statement of Claim." (Emphasis added). Thus, in setting "the subsequent course of the action," Byrum , ¶ 39, the Water Court clearly provided notice to the parties of a broader inquiry. Neither party raised concerns with the Water Court's order. In its final order, while issued after trial, the Water Court reaffirmed this view of the proceeding, explaining the parties' trial positions as follows: "In Fort Peck's view, 773 acre-feet per year fairly encompasses historical beneficial use plus reasonably anticipated future needs. In the State's view, the amount is 206 AFY or less ." (Emphasis added).
¶14 Importantly, § 85-2-227, MCA, the statute establishing presumptive nonabandonment of municipality water rights, which is at the core of this case, provides that "a water judge may determine all or part of an existing water right to be abandoned based on a consideration of all admissible evidence that is relevant, including, without limitation, evidence relating to acts or intent occurring in whole or in part after July 1, 1973." Section 85-2-227(3), MCA. This statute provides for a broader consideration in presumptive nonabandonment cases, gives notice of the contours of the issue before the Water Court, and is consistent with the interconnected nature of water rights on a common source and the general need to preserve the resource. Fundamentally, the Water Court cannot grant a volume that is greater than the beneficial use established by the evidence, McDonald v. State , 220 Mont. 519, 534-35, 722 P.2d 598, 608 (1986), subject to, of course, in cases such as this, application of the presumption of nonabandonment provided to municipalities under the statute. See § 85-2-227(3) - (4), MCA.
¶15 This discussion also illustrates the flaw in Fort Peck's argument that the Water Court erred in considering the town's current use despite the pretrial order's reliance on historical use. The statute uniquely requires the abandonment inquiry to include, "without limitation," consideration of uses that occurred after July 1, 1973, and necessarily requires consideration of current as well as future uses. As the Water Court explained:
Ordinarily, a water user faced with a long history of nonuse of part of its right would be faced with rebutting a presumption of abandonment. The statute changes the starting position of a municipal claimant that has not used its water right for a prolonged period. A municipality meeting the statute's criteria is entitled to a presumption of nonabandonment.... Abandonment can still be proven if a preponderance of evidence shows that the amount of water claimed is more than the amount needed to satisfy the current use plus normal increases in population over a reasonable period.... [T]he growing cities doctrine embodied in § 85-2-227(4), MCA was intended to allow towns like Fort Peck to protect existing uses plus a reasonable amount of water for foreseeable needs....
See also City of Helena , ¶ 37 (purpose of the Growing Cities Doctrine is to allow municipalities " 'to obtain appropriations of water that will satisfy the needs resulting from a normal increase in population within a reasonable period of time.' ") (quoting Denver v. Sheriff , 105 Colo. 193, 96 P.2d 836, 841 (1939) ). Thus, as the State correctly argues, the statute does not "make historical beneficial use the touchstone for municipalities," and historical use, standing alone, "does not insulate a claim from a finding of total or partial abandonment." As the Water Court noted, this will be advantageous to the typical, growing, municipal claimant, whose claim would not be limited to demonstrable historical use. The difficulty presented for Fort Peck is that its population has been declining and its water use has been declining from historical levels.
¶16 The Water Court held that Fort Peck qualified for the presumption of nonabandonment of its claim under § 85-2-227(4), MCA, by satisfying the statutory criteria, including obtaining a filtration waiver under the federal Safe Drinking Water Act, 42 U.S.C. 300(f), et seq. However, upon the State's evidentiary showing, the Water Court held that the statutory presumption of nonabandonment of some portion of Fort Peck's claim had been overcome. In determining the correct volume for the claim, the Water Court noted that the town's population had not increased since the filing of its water reservation application in 1991, and that the population of the surrounding areas, including the City of Glasgow, has also been in decline. The town's expert forecasted a population growth rate increase of 1.07% per year beginning in 2020, which would result in a population of 382 by 2055, but the Water Court found "no credible data indicating when the town's future population will exceed 1,200 people, if ever," which is the population that could live in a "full build-out of the town," including vacant platted lots and currently undeveloped space, predicating the town's claim to future needs of 550 AFY. The Water Court found the claim for future use was not credible, and that the town had never used more than one-third of its water treatment plant's capacity. Premised upon evidence it found to be credible of a growth in population to 384 people in forty years, and applying average per capital consumption rates, the Court determined that the claim required a volume of 154 AFY, plus 17 AFY for back-flushing filters of the treatment plant, for a total of 171 AFY.
¶17 Fort Peck also argues that its due process rights were violated because it was not provided notice or an opportunity to present evidence concerning current use or abandonment of historical volume. Procedural due process requires both notice and the "opportunity for a hearing appropriate to the nature of the case." Eldorado Coop Canal Co. v. Hoge , 2016 MT 145, ¶ 32, 383 Mont. 523, 373 P.3d 836. "These requirements are flexible and are adapted by the courts to meet the procedural protections demanded by the specific situation." Eldorado Coop Canal Co. , ¶ 32 (internal citations omitted). As discussed above, notice of the issue before the Water Court was provided throughout the proceeding, and as a matter of governing law. Fort Peck was able to participate in every step of the process that resulted in the Water Court's order, including presenting testimony, exhibits, and objecting at trial. Moreover, the record reflects that several exhibits introduced at trial, which both parties stipulated to, demonstrated Fort Peck's current use of water. In addition, three witnesses were questioned about Fort Peck's current use during the trial. Thus, Fort Peck had both notice that their current use might be considered, and the opportunity to present evidence of their use and nonabandonment. We conclude that Fort Peck had adequate notice and an opportunity to be heard before the Water Court entered its final order, both for purposes of the pretrial order and for due process, and that the Water Court's conclusions were correct.
¶18 Affirmed.
We concur:
MIKE McGRATH, C.J.
LAURIE McKINNON, J.
DIRK M. SANDEFUR, J.
JAMES JEREMIAH SHEA, J.
This case also included claim 40E 165372-00 by the United States of America (Army Corps of Engineers), filed for a municipal right for the same 1500 AFY volume and the same November 23, 1934 priority date. On January 7, 2016, the Water Court consolidated claims 40E 182897-00 and 40E 165372-00. During case proceedings, the United States withdrew claim 40E 165372-00 as a duplicate of claim 40E 182897-00.
"If an unresolved issue remark involves nonperfection or abandonment, the water court shall join the state of Montana through the attorney general as a necessary party to resolve the issue remark." Section 85-2-248(7)(a), MCA.
Unrelated to the claim issues on appeal here, in 1991 Fort Peck filed an application for a water reservation, available to political subdivisions to reserve water for future uses, for which an additional 100 AFY was made available to Fort Peck. See § 85-2-316, MCA ; Admin. R. M. 36.16.101, et seq. While noting that the validity of Fort Peck's reservation was not at issue in this proceeding, the Water Court stated in its final order that the reservation "provides an additional cushion in case future growth" of the town exceeds that which the Court found from the evidence.
Unless the context requires otherwise, the Montana Rules of Civil Procedure govern practice in the Water Court. W. R. Adj. R. 2(b).
The State referenced the specific volume of 206 AFY at several points in the proceeding, which was also the volume recommended by the DNRC and the town's largest historical beneficial use. This amount, when added to the 17 AFY for back-flushing the town's water treatment plant, made up 223 AFY. Although not specifically stated in the pretrial order, the State, during the proceeding, argued that 206 AFY should be "the largest amount of water," and that there was evidence "that would justify and warrant a finding below that figure."
As the State notes, this claim presented a unique scenario because Fort Peck was formerly owned by the Army Corp of Engineers, and there are no records reflecting pre-1973 use for purposes of assessing "existing water rights" defined in § 85-2-102(12), MCA, as rights existing prior to July 1, 1973. Therefore, the parties agreed to treat Fort Peck's 1990 use data as its historical beneficial use because it was the highest volume reflected by the available records.
Added to its historical use of 223 AFY, this alleged future use brought the town's claim to a total volume of 773 AFY. | [
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] |
Justice Dirk M. Sandefur delivered the Opinion of the Court.
¶1 Plaintiffs Audrey O'Keefe and Tim Beardsley appeal the judgment of the Montana Fifth Judicial District Court, Madison County, granting Defendants Mustang Ranches Association, et al., summary judgment that the pertinent deeds of conveyance and referenced subdivision plat established a 60' wide roadway easement straddling the boundary of Plaintiffs' adjoining lots to the benefit of the other platted subdivision lots for ingress and egress to and from the subdivision and adjoining off-plat land. Plaintiffs also appeal the court's subsequent grant of summary judgment denying their damages claims in trespass and for property damage resulting from a self-help removal and destruction of the gate(s) placed across the roadway by Plaintiffs to limit access to the adjoining land to themselves and their guests. We affirm.
¶2 We address the following restated issues on appeal:
1. Whether the District Court erroneously concluded that Elk Valley Road burdened Lots 70 and 71 to the benefit of other subdivision lot owners for ingress and egress to and from the adjoining off-plat land?
2. Whether the District Court erroneously concluded that Plaintiffs had no right to obstruct Elk Valley Road and thus no right to compensatory damages in trespass and for removal of the obstruction?
FACTUAL AND PROCEDURAL BACKGROUND
¶3 Mustang Ranches Subdivision (Mustang Ranches) is a rural residential subdivision in Section 29, Township 6, Range 1 East, Madison County, Montana. The former ranch property includes 86 twenty-acre lots with platted roadways and common areas. Shining Mountains North, a limited partnership, was the subdivider and most recent common owner of the property. Shining Mountains North subdivided the property in 1973 by filing an unreviewed subdivision plat prior to the effective date of the 1973 Montana Subdivision and Platting Act (Title 76, chapter 3, MCA). The Lee Metcalf Wilderness (hereinafter "USFS land" ) borders on the eastern perimeter of the subdivision along the eastern boundaries of Lots 41-45, 54, 55, 70, 71, and 86. The Mustang Ranches plat does not identify, describe, or depict the adjoining USFS land.
¶4 Upon filing of the subdivision plat, Shining Mountains North filed a separate written declaration of protective covenants reciprocally burdening and benefitting the subdivision lands. In pertinent part, the covenants limited use of subdivision lands to "residential purposes only" and charged the Mustang Ranches Association (Association), a Montana non-profit corporation, with oversight and maintenance "of all common areas," including "grading and maintenance of the major traverse roads," and maintenance of "the existing ranch fencing around the perimeter of the property. ..." Pursuant to the covenants and unrecorded Association bylaws, the Association membership includes all record owners of subdivision lots who are current on their membership dues. Though the non-record rules and regulations of the Association reference the adjoining USFS land, the recorded Mustang Ranches covenants do not.
¶5 The Mustang Ranches plat clearly depicts and labels a connected network of 60' wide roadways within the subdivision. Every subdivision lot borders on at least one of the platted roadways. The platted roadway network thus provides multiple points of ingress and egress to and from the subdivision and adjoining exterior lands at various points around the perimeter of the subdivision. Subdivision lots currently access the public road system by direct or indirect connection to a county road from the west terminus of the platted Airport Road running along the southern boundary of the subdivision to its southwest corner (southwest corner of Lot 8).
¶6 Four of the platted interior roadways (McDeed Creek Road, Elk Valley Road, Shell Creek Road, and Cedar Mountain Road) run east to west with eastern termini on the eastern boundary of the subdivision and adjoining USFS land. The mid-line of the Elk Valley Road runs along the southern boundaries of Lots 71-78 and the adjoining northern boundaries of Lots 63-70. The road thus runs over a 30' strip of land within each of those lots. Any ingress or egress to or from the subdivision and adjoining USFS land via Elk Valley Road must necessarily pass over one or both of the 30' wide strips within and along the adjoining boundary between Lots 70 and 71. See Figures 1-2. Like other interior subdivision roadways, Elk Valley Road currently remains unimproved-essentially two wheel tracks across a barren field.
Figure 1 - Mustang Ranches Subdivision Figure 2 - Platted Elk Valley Road
¶7 By 1985 warranty deed (recorded 1987), Shining Mountains North conveyed Lot 71 to Bob and Audrey Chamberlin by reference to the previously filed Mustang Ranches plat but "[s]ubject to easements and restrictive covenants and reservations of record. ..." In 2012, Plaintiff Audrey O'Keefe (formerly Audrey Chamberlin), acquired sole title to Lot 71 from Bob Chamberlin via a recorded quitclaim deed that conveyed the lot by reference to the Mustang Ranches plat "together with all tenements" and "appurtenances."
¶8 By 1982 warranty deed (recorded 1992), Shining Mountains North conveyed Lot 70 to Ronald Lerch by reference to the previously filed Mustang Ranches plat but "[s]ubject to easements and restrictive covenants and reservations of record. ..." Following mesne conveyances by recorded deeds from Lerch to Lennis and Connie Williams (1992) and then from Connie to Lennis (1999), Plaintiff Tim Beardsley acquired Lot 70 in 2002 by recorded warranty deed from Lennis Williams. The 1992, 1999, and 2002 deeds all conveyed Lot 70 by reference to the previously filed Mustang Ranches plat.
¶9 Beardsley and his guests have used Lot 70, via Elk Valley Road, for seasonal access to and from the adjoining USFS land for recreational purposes, primarily elk hunting. There is no record evidence of any other use of Lot 70 or 71 by the current or prior owners of those lots. Like Elk Valley Road, Lots 70 and 71 remain unimproved lots platted over a barren field.
¶10 For some time after the 1973 subdivision of the former ranch land, a preexisting stock fence continued to exist along the eastern perimeter of the subdivision and adjoining USFS land. There is no evidence that the stock fence had any purpose other than to control ranging ranch stock. The record indicates that the stock fence was gone, down, or otherwise open at the east end of the Elk Valley roadway before the dispute arose in this case.
¶11 Sometime prior to 2015, Beardsley became aggrieved with other Mustang Ranches landowners "trespassing" over his land on the platted Elk Valley Road to access the adjoining USFS land for elk hunting or other seasonal recreational purposes. According to Beardsley, the perceived trespassers would occasionally drive down and park their vehicles on Elk Valley Road either as a vantage point for spotting elk coming down from the mountains on the adjoining USFS land or as a point of entry thereto. With O'Keefe's "knowledge and consent," Beardsley placed a cable gate (a cable hung between two wooden posts) across the platted Elk Valley Road where it crosses the western boundaries of Lots 70 and 71, along with approximately 100 feet of fencing running north and south from each end of the gate along the western boundary of each lot, thereby blocking access on the road over those lots from the interior of the subdivision to and from the eastern terminus of the road and adjacent USFS land. The gate remained undisturbed and unchallenged for several years until taken down by persons unknown. Within months, Beardsley installed another gate to again similarly block access over the eastern end of Elk Valley Road.
¶12 Another onsite incident occurred at some point in 2013 or 2014 when a Mustang Ranches lot owner, who was also an Association officer, passed through the gate when left open by one of Beardsley's friends who had left his vehicle unattended on the road. While Beardsley's friend was away on the adjoining USFS land, the Mustang Ranches landowner immobilized the unoccupied truck by removing one of its wheels and then left. Following a criminal prosecution of the landowner, the roadway dispute later flared up again when two Mustang Ranches lot owners, who were also Association officers, took a backhoe down the east end of Elk Valley Road and dug up Beardsley's cable gate posts, leaving the posts and cable on the ground.
¶13 On April 20, 2015, Beardsley and O'Keefe responded by filing a complaint in the Montana Fifth Judicial District Court for declaratory and injunctive relief. The plaintiffs asserted that the east end of Elk Valley Road, from the western boundary lines of Lots 70 and 71 to the east terminus of the road on the eastern boundary of the subdivision, benefitted only those lots to the exclusion of the other Mustang Ranches lots. Plaintiffs further sought compensatory and punitive damages based on trespass and asserted property damage to Beardsley's cable gate and fencing. In 2017, following hearing on the parties' cross motions, the District Court granted the Association, et al., summary judgment that the Mustang Ranches Plat and pertinent conveyances of subdivision lots by the common owner created a roadway easement over the disputed segment of Elk Valley Road to the benefit of the other Mustang Ranches lots for ingress and egress to and from the adjoining off-plat land. In 2018, the Court further granted summary judgment to the Association, et al., on Plaintiffs' damages claims based on its earlier ruling and resulting conclusion that Plaintiffs thus had no right to compensation for property damage to a wrongfully placed gate removed from the road easement way by easement holders. Upon entry of final judgment encompassing the District Court's summary judgment rulings, Plaintiffs timely appealed.
STANDARD OF REVIEW
¶14 We review district court grants or denials of summary judgment de novo for conformance to M. R. Civ. P. 56. Alexander v. Mont. Developmental Ctr. , 2018 MT 271, ¶ 10, 393 Mont. 272, 430 P.3d 90 (citing Borges v. Missoula Cty. Sheriff's Office , 2018 MT 14, ¶ 16, 390 Mont. 161, 415 P.3d 976 ). A court may grant summary judgment only upon a sufficient record showing that no genuine issue of material fact remains and a party "is entitled to judgment as a matter of law." M. R. Civ. P. 56(c)(3). We review district court conclusions and applications of law de novo for correctness. Alexander , ¶ 10 (citing Borges , ¶ 16 ).
DISCUSSION
¶15 1. Whether the District Court erroneously concluded that Elk Valley Road burdened Lots 70 and 71 to the benefit of other subdivision lot owners for ingress and egress to and from the adjoining off-plat land?
¶16 An affirmative easement is a nonpossessory interest in land authorizing one to use the property of another for a particular purpose. Blazer v. Wall , 2008 MT 145, ¶ 24, 343 Mont. 173, 183 P.3d 84. Easements arise by express grant or reservation in a written instrument of conveyance, written declaration of covenant, operation of law (implication from necessity or prior use), or prescription. Blazer , ¶ 26 ; Restatement (Third) of Property (Servitudes) § 2.1 (2000). See also §§ 70-21-201(1), -301, -302, MCA (public recording of real property instruments, definition of "conveyance," and effect of recording). Easements are either "appurtenant" or "in gross." Blazer , ¶ 24. See also §§ 70-17-101, -102, MCA. Appurtenant easements benefit a particular parcel of land to the burden of another and perpetually run with title to both. Blazer , ¶ 24. See also §§ 70-15-101(3), -105, 70-17-10l, MCA. Appurtenant easements must have a servient estate and a dominant estate. Blazer , ¶ 24. See also § 70-17-103, MCA. Except as otherwise provided by the originating instrument of conveyance or covenant, an easement created by express grant or reservation is presumed appurtenant to the servient and dominant estates. Broadwater Dev., L.L.C. v. Nelson , 2009 MT 317, ¶ 34, 352 Mont. 401, 219 P.3d 492.
¶17 Express easements must satisfy certain title, severance, and substantive requirements. First, a grantor must have title to both the intended dominant and servient estates. See §§ 70-1-519, 70-17-104, MCA ("transfer vests in the transferee ... the actual title" held by the transferor in "the thing transferred" and "servitude can be created only by one" with "a vested estate in the servient tenement"). Second, an express easement by grant or reservation arises only upon severance of the intended dominant and servient estates from common ownership. Ruana v. Grigonis , 275 Mont. 441, 448-51, 913 P.2d 1247, 1252-54 (1996) ; Restatement (Third) of Property (Servitudes) § 2.1 cmt. c (2000). See also §§ 70-17-105, -111(1)(a), MCA ("owner of the servient tenement" cannot hold "servitude thereon"-extinguishment of servitude upon vesting of title to servient and dominant estates in same owner); Broadwater Dev. , ¶ 36 (effect of merger of title); Mularoni v. Bing , 2001 MT 215, ¶ 29, 306 Mont. 405, 34 P.3d 497 (merger of title). Third, an express easement must arise from a written instrument of conveyance that is substantively sufficient to convey the severed estate, grant or reserve the intended easement, identify the dominant and servient estates, and indicate the nature and scope of the right reciprocally burdening and benefitting the servient and dominant estates. Walker v. Phillips , 2018 MT 237, ¶¶ 14-18, 393 Mont. 46, 427 P.3d 92 ; Yorlum Props. Ltd. v. Lincoln Cty. , 2013 MT 298, ¶¶ 14-27, 372 Mont. 159, 311 P.3d 748 ; Davis , ¶¶ 19-34.
¶18 A transfer of fee title or creation of lesser non-possessory easement or servitude by grant or reservation must generally occur in a signed writing identifying the grantor and grantee and which further includes language sufficient to both describe the fee or lesser interest conveyed or reserved and effect the conveyance. See §§ 70-1-501, -502, -507, -519, 70-20-101, -103, MCA. A conveyance of real property by reference to a record subdivision plat, certificate of survey (COS), or attached map incorporates the plat, certificate, or map into the instrument as if set forth therein in its entirety. Section 76-3-304, MCA (reference to statutorily compliant subdivision plats);
Kosel v. Stone , 146 Mont. 218, 222, 404 P.2d 894, 896-97 (1965) (reference to pre-1973 statutory subdivision plat); City of Billings v. Pierce Packing Co. , 117 Mont. 255, 261, 161 P.2d 636, 638 (1945) (reference to common law subdivision plat); Restatement (Third) of Property (Servitudes) § 2.13 cmt. a (2000) (reference to plat or map). Consequently, to create an easement by express grant or reservation, an instrument of conveyance and any referenced subdivision plat, certificate of survey, or map of record must be sufficient together to express clear and unambiguous grantor intent to grant or reserve an easement in a manner that clearly and unambiguously describes or otherwise manifests with reasonable certainty the intended dominant and servient estates, use, and location of the easement. Walker , ¶¶ 14-18 (deed language, referenced COS, and subsequently filed corrected COS not signed by grantor sufficiently manifested grantor intent, easement elements, and compliance with statute of frauds); Yorlum , ¶¶ 14-27 (amended subdivision plat and deed reference to original subdivision plat sufficient to create express easement despite lack of precise location description); Davis , ¶¶ 19-34 (deed and referenced COS and declaration of covenants sufficient together to manifest intent to reserve easement and indicate the purpose/burden, on-survey servient estates, and on and off-survey dominant estates); Blazer , ¶¶ 26-76 (deed and referenced COS insufficient to clearly and unambiguously indicate either an intended off-survey or on-survey dominant estate); Pearson v. Virginia City Ranches Ass'n , 2000 MT 12, ¶¶ 18-26, 298 Mont. 52, 993 P.2d 688 (conveyance of lots by reference to subdivision plat sufficient to reserve a depicted bridle path easement burdening affected lots to benefit of all other subdivision lots); Kelly v. Wallace , 1998 MT 307, ¶ 51, 292 Mont. 129, 972 P.2d 1117 (deed language conveying property "subject to existing [60' wide] easements ... as depicted on" attached "plat" insufficient to create apparently intended easement due to failure to clearly express intent to reserve an easement and adequately indicate intended dominant estate); Tungsten Holdings, Inc. v. Parker , 282 Mont. 387, 390, 938 P.2d 641, 642-43 (1997) (deed and reference plat depicting 40' wide meandering strip labeled "[L]ot 34" insufficient to expressly reserve roadway easement due to ambiguity as to whether subdivider intended a roadway or irregular lot); Ruana , 275 Mont. at 448-51, 913 P.2d at 1252-54 (deed and referenced COS insufficient to clearly express intended easement elements); Bache v. Owens , 267 Mont. 279, 285-86, 883 P.2d 817, 821-22 (1994) (deed and referenced COS sufficient to reserve depicted roadway easement over severed tract to benefit of retained tract); Halverson v. Turner , 268 Mont. 168, 172-74, 885 P.2d 1285, 1288-89 (1994) (deed and reference to COS sufficient to reserve depicted roadway easement over severed tract); Benson v. Pyfer , 240 Mont. 175, 178-80, 783 P.2d 923, 925-26 (1989) (conveyances of lots by reference to subdivision plat burdens affected lots with sufficiently described/depicted easement to common benefit of other subdivision lots); Majers v. Shining Mountains , 219 Mont. 366, 369-71, 711 P.2d 1375, 1377-78 (1986) (conveyance of lots by reference to subdivision plat substantively sufficient to reserve easements for depicted streets, parks, and other open areas over affected lots to benefit of all other subdivision lots); Kuhlman v. Rivera , 216 Mont. 353, 359, 701 P.2d 982, 985 (1985) (unilateral grant of easement across existing roadway sufficient to create easement despite lack of consideration from grantee). See also §§ 70-1-501, -502, -507, 70-17-103 through -106, 70-20-101, -103, -201(6), MCA ; Restatement (Third) of Property (Servitudes) § 2.7 cmt. f (2000). Only in this manner can the instruments of conveyance provide the requisite record notice to property owners and buyers of the dominant and servient estates and the benefit and burden respectively appurtenant thereto. See Walker , ¶¶ 17-18 ; Blazer , ¶¶ 51, 54. See also §§ 70-21-201(1), -301, -302, MCA (purpose and effect of recording instruments of conveyance).
¶19 While the qualifying deed language "subject to" is generally insufficient alone to create an easement by grant or reservation, Wild River , 248 Mont. at 400-02, 812 P.2d at 346-47, the deeds that severed Lots 70 and 71 from common ownership in this case expressly conveyed them by reference to the previously filed Mustang Ranches Plat "[s]ubject to easements and ... reservations of record. ..." (Emphasis added.) Compare Wild River , 248 Mont. at 400-02, 812 P.2d at 346-47 (conveyance "subject to ... easement ... shown" on referenced COS without indicia of intent to reserve an easement). Taken together in order as a whole, the qualifying deed language in this case refers to the previously filed plat as earlier referenced in the deeds. However, even with the additional qualifying language of "reservation" not present in the Wild River deed, the original conveyances severing Lots 70 and 71 from common ownership and the referenced Mustang Ranches plat were sufficient to newly reserve the disputed easement over those lots only to the extent that the referenced plat clearly and unambiguously indicates the intended servient and dominant estates, use, and location of the new easement. See Restatement (Third) of Property (Servitudes) § 2.2 cmt. d (2000). Accord Walker , ¶ 13 ("coupled with" a plat, COS, or map of record incorporated by reference, the qualifying deed language "subject to" may be together sufficient to newly create an express easement by grant or reservation). See also Yorlum , ¶¶ 15-17 ; Bache , 267 Mont. at 286, 883 P.2d at 821.
¶20 The Mustang Ranches plat clearly subdivided a contiguous parcel of commonly owned land into smaller lots and a connected network of clearly-labeled subdivision roadways. A parcel of land may be reciprocally servient and dominant to other parcels of land formerly under common ownership. See Restatement (Third) of Property (Servitudes) §§ 1.7, 2.1 cmt. c, 2.14 (2000) (general plan developments); see also Hudson v. Irwin , 2018 MT 8, ¶¶ 18-20, 390 Mont. 138, 408 P.3d 1283 (discussing general plan developments). Here, neither the Mustang Ranches plat, nor any other instrument of conveyance, COS, or map of record, depicts or describes any off-plat parcel either owned by the common grantor or previously burdening the subdivided land. Thus, as a matter of law, the common grantor could not have previously granted or reserved an easement over any of the Mustang Ranches lots to the benefit of other commonly owned land, whether on-plat or off. See §§ 70-17-105, -111(1)(a), MCA ; Broadwater Dev. , ¶ 36 ; Mularoni , ¶ 29. Under these circumstances, the severance of Mustang Ranches lots from common ownership by conveyance with qualifying deed language of "reservation" and by reference to the previously filed Mustang Ranches plat manifests clear and unequivocal intent of the common owner and grantor to create a common plan subdivision wherein every lot touched by the depicted network of connected subdivision roadways would be burdened by the roadways to the common benefit of all other subdivision lots. In turn, the deeds and referenced plat similarly manifest clear and unambiguous grantor intent to reciprocally benefit each so-burdened lot to the similar burden of other subdivision lots touched by the connected roadway network. The connected roadway network, with multiple roadway termini around the perimeter of the subdivision, clearly and unambiguously manifests the intended purpose and use of the depicted roads-to create and allow multiple points of ingress and egress to and from subdivisions lots and adjoining exterior lands over which rights of way or entry may independently have existed at the time or thereafter.
¶21 The Mustang Ranches plat clearly labels, depicts, and describes by dimension the Elk Valley Road as a "60' Road Easement" traversing over and through Lots 70 and 71 along their adjoining boundary from the interior of the subdivision to its eastern perimeter. The 1982 and 1985 deeds that severed Lots 70 and 71 from common ownership by reference to the previously filed Mustang Ranches plat, "[s]ubject to easements and ... reservations of record," thus clearly and unambiguously manifest the common grantor's intent to have the portion of Elk Valley Road traversing Lots 70 and 71 burden those lots to the common benefit of the other subdivision lots, with Lots 70 and 71 to reciprocally benefit from the balance of the connected subdivision roadway network to the burden of the other lots affected thereby. (Emphasis added.)
¶22 By analogy to Blazer , Plaintiffs assert that the severing conveyances and referenced Mustang Ranches plat at most manifest the common grantor's intent to create an easement over the disputed segment of the platted Elk Valley Road to the exclusive benefit of Lots 70 and 71. We disagree. Blazer involved a seven-tract division of land straddling a state highway (Whitefish Stage Road) between Whitefish and Kalispell in Flathead County. Blazer , ¶ 2. In 1979, the common owners (Davis and McCready) filed a COS subdividing a parcel of land bisected by the highway into seven smaller tracts-two adjoining tracts (Tract 1 and 4) on the west side of the highway and the other five on the east side of the highway. Blazer , ¶¶ 2-4. Each of the five eastside tracts bordered either the highway or an intersecting county road to the north. Blazer , ¶¶ 3-5. The two westside tracts adjoined along their respective southern and northern boundaries, with their eastern boundaries running along the west side of the highway. Blazer , ¶¶ 3-5.
¶23 The originating 1979 COS clearly depicted a strip of land, labeled "30' Easement Road," running east to west over Tract 1 inside its northern boundary between its western boundary and the highway. Blazer , ¶¶ 3-5. At the northwest corner of Tract 1, the depicted roadway turned and ran south inside the west boundaries of the adjoining Tracts 1 and 4 where it terminated at adjoining off-survey land to the south. Blazer , ¶¶ 3-5. The COS did not identify or depict the off-survey lands to the north and west of Tract 1 and to the south and west of Tract 4. After filing the COS, one of the common owners (Davis) "assumed ownership" of the two tracts (Tracts 1 and 4) on the west side of the highway and the other (McCready) "assumed ownership" of the other five tracts (Tracts 2, 3, and 5-7) on the east side of the highway. Blazer , ¶¶ 2-5. Davis thereafter used the depicted roadway over Tracts 1 and 4 as a farm road between the highway and other off-survey lands that "he owned to the south and west of Tract 4." Blazer , ¶ 5.
¶24 In 1987, by reference to the 1979 COS, Davis conveyed Tract 1 to the Lockmans, "SUBJECT TO [a] 30 foot road easement as shown on" the COS. Blazer , ¶ 6. Through a series of conveyances starting in 1999, the Sugar Shack Land Trust ultimately acquired Tract 1 to the benefit of the Waldhers. Blazer , ¶ 7.
¶25 In 1989, by reference to the 1979 COS, Davis sold Tract 4 to the Fosters who later subdivided it into an eastern tract and a western tract. Blazer , ¶ 8. The Fosters then sold the new western sub-tract of Tract 4 to Blazer. Blazer , ¶ 8. Later in 1989, Blazer acquired the lands to the south and west of Tract 4 from Davis, thus giving Blazer ownership of the western sub-tract of Tract 4 and the adjoining off-survey lands to the south and west. Blazer , ¶ 9.
¶26 In 2003, Blazer sued the Tract 1 owner and interested parties for declaratory and injunctive relief based on his asserted claim of right to use the easement depicted over Tract 1 in the 1979 COS. Blazer , ¶¶ 11-12. Blazer asserted that the easement benefitted both Tract 4 and his adjoining off-survey properties to the south and west. Blazer , ¶¶ 11-13. Reversing a subsequent judgment in favor of Blazer, we held that the 1979 COS and 1987 Davis-Lockman deed that severed Tract 1 from common ownership with the retained Tract 4 and Davis's adjoining off-survey lands were insufficient to clearly and unambiguously express his intent to reserve the depicted easement over Tract 1, whether for the benefit of Tract 4 or Davis' adjoining off-survey lands. Blazer , ¶¶ 46-77. As a preliminary matter, we held that the qualifying language "subject to" in the 1987 Davis-Lockman deed was insufficient alone to create an easement. Blazer ¶¶ 28-29. As to Davis's retained off-survey lands, we further held that the deed and referenced COS were insufficient together to reserve the depicted easement benefitting the off-survey lands because nothing in the COS clearly described or depicted those lands with reasonable certainty as an intended dominant estate over Tract 1. Blazer , ¶¶ 46-54. As to on-survey Tract 4, we held that 1987 deed and referenced 1979 COS were even insufficient to reserve the depicted easement over Tract 1 to the benefit of on-survey Tract 4 due to ambiguity on the face of the COS as to whether Davis intended to reserve the depicted easement for the benefit of the original Tract 4 (which already bordered the highway) or the other five tracts created by the COS on the other side of the highway. See Blazer , ¶¶ 56-77.
¶27 Blazer is only superficially analogous here. Granted, as in Blazer , the parties here are disputing whether the conveyances severing Lots 70 and 71 from common ownership by reference to a record plat depicting a roadway easement over those lots were sufficient to burden them to the benefit of the other subdivision lots, thereby allowing the owners of other subdivision lots to access adjoining but unidentified off-plat land. However, unlike in Blazer , the Defendants here are not asserting that the pertinent deeds and referenced Mustang Ranches plat created an easement over Lots 70 and 71 to the benefit of (i.e., running with title to) the adjoining off-plat land. Unlike in Blazer , the Defendants here are asserting that the pertinent deeds and referenced subdivision plat were sufficient to create an easement over Lots 70 and 71 to the benefit of (i.e., running with title to) the other subdivision lots-not unidentified off-plat land.
¶28 As to the on-plat lands at issue here, Blazer is similarly analogous only to the superficial extent that the on-plat issue in Blazer was whether the pertinent deed and referenced COS were sufficient to reserve a depicted easement over one on-survey tract (Tract 1) to the benefit of another on-survey tract (Tract 4). However, the qualifying deed language in Blazer ("subject to" the COS-depicted "easement") did not include the additional qualifying deed language of "reservation" present here. Blazer 's Tract 4 holding further uniquely turned on an ambiguity on the face of the COS as to which of the on-survey tracts the grantor intended the depicted easement to benefit-the retained adjoining tract over which the depicted easement also traversed on the west side of the highway or the five tracts then in common ownership on the other side of the highway. No similar circumstance and resulting ambiguity exists here-the Mustang Ranches subdivision is wholly contained within a contiguous larger parcel without similar bisection, includes a platted network of connected roadways, and none of the subdivision lots at issue have independent adjoining access to an identified, previously existing public roadway as in Blazer . Blazer is thus legally and factually distinguishable in all material regards.
¶29 The terms of the originating instruments of conveyance determine the permissible scope of use of express easements. Section 70-17-106, MCA ; Woods v. Shannon , 2015 MT 76, ¶ 12, 378 Mont. 365, 344 P.3d 413. If the originating conveyance grants or reserves an easement in only general terms, without restriction, the permissible scope of use includes any purpose reasonably related to the general purpose expressed. Woods , ¶ 12 ; Clark v. Pennock , 2010 MT 192, ¶ 25, 357 Mont. 338, 239 P.3d 922. If the general grant or reservation is vague or ambiguous, a court may resort to pertinent extrinsic evidence such as the nature and character of the dominant and servient estates, the prior and subsequent use of the properties, the character of the surrounding area, the nature and character of any common plan of development for the area, and the consideration, if any, paid for the easement. Woods , ¶ 12 ; Restatement (Third) of Property (Servitudes) § 4.1 cmt. d (2000). However, if the originating conveyance expressed the intended purpose or use of the easement in specific terms, such as for ingress/egress, access, or roadway purposes, the permissible scope of use must be determined from the specified terms without resort to extrinsic evidence. Woods , ¶ 14. See also Clark , ¶ 27. Except as otherwise limited by the terms of the instruments of conveyance, individuals entitled to use an express easement include the dominant estate owner, family, tenants, and other expressly or implicitly authorized invitees. Woods , ¶ 15 ; City of Missoula v. Mix , 123 Mont. 365, 374, 214 P.2d 212, 217 (1950).
¶30 Here, even if the disputed roadway segment benefits the other lot owners, Plaintiffs assert that the disputed use of the roadway nonetheless unreasonably increases the originally contemplated burden on the servient estates. However, the only disputed use shown on the Rule 56 record is occasional use of the disputed segment of Elk Valley Road by other subdivision lot owners to access or temporarily view the adjoining USFS land, temporary incidental parking within the platted roadway, and occasional removal of roadway obstructions. Upon creation of an easement by grant or reservation, a rebuttable presumption arises "that the parties 'anticipated such uses as might reasonably be required by a normal development of the dominant tenement.' " Tungsten Holdings, Inc. v. Kimberlin , 2000 MT 24, ¶ 33, 298 Mont. 176, 994 P.2d 1114, (quoting Restatement of Property § 484 cmt. b (1944)), overruled on other grounds by Shammel v. Canyon Res. Corp. , 2003 MT 372, ¶ 12, 319 Mont. 132, 82 P.3d 912. Plaintiffs have made no Rule 56 factual showing that the disputed use of Elk Valley Road exceeds the frequency or intensity of use reasonably attendant or contemplated with a connected roadway network commonly serving an 86-lot rural residential subdivision. Plaintiffs have thus failed to demonstrate that the disputed use has or will unreasonably increase the burden of Elk Valley Road on Lots 70 and 71. We hold that the 1982 and 1985 warranty deeds that severed Lots 70 and 71 from common ownership, together with the referenced Mustang Ranches plat, created a 60' roadway easement (Elk Valley Road) over those lots to the benefit of the other Mustang Ranches lots for ingress and egress to and from the subdivision and adjoining lands. We hold further that the District Court correctly denied Plaintiffs summary judgment that the disputed use of Elk Valley Road by other subdivision owners either unreasonably increases the intended burden on Lots 70 and 71 or otherwise unreasonably interferes with Plaintiffs' use of those lots.
¶31 2. Whether the District Court erroneously concluded that Plaintiffs had no right to obstruct Elk Valley Road and thus no right to compensatory damages in trespass and for removal of the obstruction?
¶32 Even if the length of Elk Valley Road benefits all other Mustang Ranches lots, Beardsley and O'Keefe assert that they still had the right to place a gate across the road to prevent unauthorized public access across their property. Except as otherwise provided by the terms of the originating instruments of conveyance, the owner of the servient estate may make any use of the servient estate that does not unreasonably interfere with reasonable permissible use of the easement by the dominant estate owner(s). Mix , 123 Mont. at 372, 214 P.2d at 216 ; Restatement (Third) of Property (Servitudes) § 4.9 (2000). Accord Musselshell Ranch Co. v. Seidel-Joukova , 2011 MT 217, ¶ 19, 362 Mont. 1, 261 P.3d 570. However, in balance of the respective rights of the dominant and servient estate owners, a servient estate owner may place and maintain a gate across a roadway easement only as necessary for the owner's reasonable use of the servient estate without unreasonable interference with the permissible use of the easement by the dominant estate owner(s). Gabriel v. Wood , 261 Mont. 170, 177-78, 862 P.2d 42, 46-47 (1993), overruled on other grounds by Shammel , ¶ 12. Accord Strahan v. Bush , 237 Mont. 265, 268-69, 773 P.2d 718, 721 (1989).
¶33 Except as provided by the terms of the originating instruments of conveyance, the reservation or grant of an easement to the benefit of the owner of the dominant estate, or those authorized thereunder, does not create any right in the general public to use the easement. Woods , ¶ 15 ; Mix , 123 Mont. at 373-74, 214 P.2d at 216-17. In Gabriel , we held that the owner of the servient estate had the right to place a gate across a common road upon proof that "[the] gate was reasonably necessary to prevent injury to the landowner's horses" and "to prevent vandalism and theft" in the wake of prior losses caused by trespassers. Kimberlin , ¶ 39 (discussing Gabriel , 261 Mont. at 177-78, 862 P.2d at 46-57. In contrast, in Kimberlin , we held that the owner of the servient estate had no right to place a gate across the disputed roadway in the absence of proof that the gate was "reasonably necessary" for the protection or enjoyment of the servient estate. Kimberlin , ¶ 40.
¶34 Here, while the owners of Lots 70 and 71 certainly have a right to exclude the general public from traversing over their property via Elk Valley Road, they have no right to unreasonably interfere with the rights of other Mustang Ranches lot owners, including those authorized thereunder, or the Association, as granted by the covenants, to use the roadway easement to the full extent authorized by the terms of the originating instruments of conveyance. In the wake of defeat of their asserted claim for exclusive ownership and use of the disputed segment of Elk Valley Road, Plaintiffs now resort to the assertion that they nevertheless have the right to place and maintain a gate across the road to prevent unauthorized access by the general public. However, as in Kimberlin and unlike in Gabriel , Plaintiffs have made no supported, non-speculative factual showing beyond cursory assertion that a gate is necessary for that purpose and would not unreasonably interfere with permissible use of the roadway by other subdivision owners. Under these circumstances, the District Court correctly concluded that Beardsley and O'Keefe had no right to place or maintain the subject gates across Elk Valley Road.
¶35 Plaintiffs have further provided no authority or analysis for the proposition that a dominant estate owner may not remove a wrongfully placed gate obstructing an easement way. In the absence of a right to place the gate across the road in the first instance on the record in this case, Plaintiffs have similarly failed to make a supported Rule 56 factual showing that, regardless of their easement rights, the Defendants nonetheless acted unreasonably to Plaintiffs' detriment in the removal of the subject gate(s) from the platted roadway. See Restatement (Third) of Property (Servitudes) § 4.10 cmt. e (2000) (right of dominant estate owner to reasonably maintain, repair, and improve servient estate within scope of easement). While we caution that property loss caused by similar self-help removal of a gate from a private easement way may conceivably be compensable upon proof that, regardless of easement right, a dominant estate owner or covenant-authorized association nonetheless acted unreasonably under the circumstances, Plaintiffs have simply failed to meet their Rule 56 factual burden in this case. We hold that the District Court correctly granted summary judgment to the Association, et al., on Plaintiffs' asserted damages claims.
CONCLUSION
¶36 We hold that the District Court correctly granted summary judgment that the pertinent deeds and referenced subdivision plat created a roadway easement (Elk Valley Road) over Lots 70 and 71 to the benefit of the other Mustang Ranches lots and that the disputed use of the roadway by or through subdivision lot owners did not unreasonably interfere with use of the servient estates. We further hold that the District Court correctly granted summary judgment to the Association, et al., on Plaintiffs' asserted damages claims.
¶37 Affirmed.
We concur:
MIKE McGRATH, C.J.
INGRID GUSTAFSON, J.
JAMES JEREMIAH SHEA, J.
The 1973 Act imposed more rigid standards and specifications for subdivisions and other divisions of land, as defined by the Act, including, inter alia , local government review and approval of subdivisions. See Title 76, chapter 3, MCA. Prior to 1973, §§ 11-601 through 11-614, R.C.M. 1947, more liberally allowed subdivisions of land by mere filing of unreviewed subdivision plats subject to certain platting and dedication requirements.
The Lee Metcalf Wilderness includes four units in the Madison Range in southwest Montana managed by the United States Forest Service (3 units) and United States Bureau of Land Management (1 unit) within the Beaverhead-Deerlodge and Gallatin National Forests. See The University of Montana, Lee Metcalf Wilderness , https://perma.cc/4UVX-RMRN (last visited July 31, 2019); The University of Montana, Wilderness Acreage Breakdown for the Lee Metcalf Wilderness , https://perma.cc/R9TU-88GA (last visited July 31, 2019).
In accordance with the covenants, the developer executed and recorded an "Assignment and Deed" in 1983 which conveyed to the Association "[a]ll powers, rights and authority to administer all matters regarding ... the overseeing and maintenance of all common areas and roadway easements ... as shown on" the previously filed Mustang Ranches plat. As subsequently adopted and thereafter amended pursuant its non-record bylaws, the Association's non-record "Rules & Regulations" provided that: (1) "[o]nly current (paid up) members, spouses, and resident children ... are allowed" to use subdivision roadways to access adjoining USFS lands; (2) "[g]uests may use the [subdivision] common areas only when accompanied by a current member" of the Association; (3) "[w]heeled vehicles must stay on existing roads"; (4) "[t]respassing on another member's property is not allowed"; (5) "[g]ates or fences on or across [Mustang Ranches] roads or the associated 60' easements are not permitted"; (6) "[a]ny unapproved gates [or] fences ... on or across [subdivision] roads or easements must be removed"; and (7) "[v]ehicles are not permitted on other property owner's land."
The platted widths of the McDeed Creek, Shell Creek, and Cedar Mountain roadways respectively run within the boundaries of Lots 86, 55, and 45 as those roadways approach their respective eastern termini on the boundary between the subdivision and adjoining USFS land.
In contrast, a negative easement is a nonpossessory interest in land that imposes a specific restriction on another's use of the other's own property. Blazer , ¶ 24. In modern American law, the historically distinct concept of a negative easement is subsumed into the concept of a restrictive covenant. See Restatement (Third) of Property (Servitudes) § 1.2(4), cmt. h (2000).
See §§ 70-17-201, -203, MCA (real property covenants).
Easements may also arise by government condemnation or public dedication. Davis v. Hall , 2012 MT 125, ¶ 19, 365 Mont. 216, 280 P.3d 261.
Easements in gross burden a parcel of land to the personal benefit of an individual and thus do not perpetually run with title to the burdened parcel. Blazer , ¶ 24.
Servitudes "designed to implement real estate development plans ... are created by many overlapping transactions. The conveyance of each parcel in the development simultaneously transfers the benefits of previously created servitudes on other parcels, creates new burdens on the developer's remaining land for the benefit of the conveyed parcel, and imposes new burdens on the transferred parcel for the benefit of the rest of the land in the development." Restatement (Third) of Property (Servitudes) § 4.1 cmt. d (2000). See also Restatement (Third) of Property (Servitudes) § 2.7 cmt. f (2000) ("[s]ervitudes for general-plan developments and common-interest communities ... are created when the first conveyance of a lot or unit is made pursuant to the development plan").
The deed term "reservation" or "reserves" historically indicated a grantor's intent to retain the referenced interest for "regrant" to subsequent grantees of the common grantor's estate while use of the terms "exception," "excepting" or "except for" indicated intent to retain the referenced right for the grantor's own use. Wild River Adventures, Inc. v. Bd. of Trs. of Sch. Dist. No. 8 of Flathead Cty. , 248 Mont. 397, 401, 812 P.2d 344, 346 (1991) (citing 3 Powell on Real Property, § 407, pp. 34-39 to 34-42). Under the modern common law of conveyances, these restrictive deed language terms are generally synonymous-merely stating or indicating grantor intent to burden the conveyed property severed from common ownership with a retained interest or restriction to the benefit of the grantor's retained lands. Wild River , 248 Mont. at 401, 812 P.2d at 346. Accord Restatement (Third) of Property (Servitudes) § 2.2 cmt. d (2000).
The lack of a precise description of the location of an intended easement is not fatal to an express easement if the general location of the intended easement is reasonably ascertainable from the instrument, referenced plat, COS, map, prior existence or use, or other extrinsic evidence. Yorlum , ¶¶ 22-27.
Prior to the effective date of the 1973 Subdivision and Platting Act, "plat" referred either to a map of a surveyed parcel of land (indicated by lines, marked courses of lines, and parcel quantity) or a surveyed subdivision of land mapped to scale into specific lots, roadways, and other areas of particular dimension and quantity. City of Missoula v. Bakke , 121 Mont. 534, 542-43, 198 P.2d 769, 773-74 (1948) (Adair, J., dissenting). Compare § 76-3-103(1), (4), (6), (12), and (16), MCA (definitions of "Certificate of Survey," "Division of Land," "Final Plat," "Plat," and "Subdivision").
Distinguishing Wild River , 248 Mont. at 400-02, 812 P.2d at 346-47 (deed language "subject to" insufficient alone to create new easement), the Blazer dissent contrarily asserted that, read together, the qualifying deed language "subject to" clarified or supplemented the COS to together manifest clear intent to reserve the depicted easement over Tract 1 to the highway to the benefit of the retained on-survey tract (Tract 4) adjoining the burdened estate. Blazer , ¶¶ 82-92 (Morris, J., dissenting). We have since so held on a different fact pattern lacking the ambiguity found in Blazer . See Walker , ¶ 13.
The disputed use of Elk Valley Road by other subdivision lot owners is thus further presumptively consistent with the concurrently created "residential purposes only" restriction in the Mustang Ranches protective covenants. In the absence of any cited legal authority to the contrary and the further absence of any Rule 56 factual showing that the disputed use of the roadway easement by other subdivision owners is substantially different than the use of the easement by Beardsley and his permittees, we decline to further address Plaintiffs' cursory assertion that the disputed use violates the "residential purposes only" restriction of the Mustang Ranches covenants.
This holding does not address or implicate whether and to what extent, if any, subdivision lot owners may or may not have the right to traverse or enter upon adjoining lands vis-à-vis the independent rights or restrictions of the owners of those off-plat lands. | [
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Justice Ingrid Gustafson delivered the Opinion of the Court.
¶1Petitioner/Appellant/Cross-Appellee Kayle Jo Hardman, f/k/a Kayle Jo Moore (Kayle) and Respondent/Appellee/Cross-Appellant Shannon Moore (Shannon) cross-appeal the Combined Order on Motion for Lien and Counter Motion to Vacate the Decree of Dissolution issued by the Montana Eleventh Judicial District Court, Flathead County, on July 2, 2018.
¶2 We restate the issues on appeal as follows:
1. Did the District Court have jurisdiction to divide any portion of the proceeds from Shannon's California personal injury lawsuit?
2. Did the District Court err when it denied Kayle's request for half of the proceeds from Shannon's California personal injury lawsuit?
¶3 We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
¶4 In 2005, Kayle and Shannon married in California. In 2011, Shannon and a co-worker were injured while working alongside a road in Humboldt County, California, at a jobsite supervised by the California Department of Transportation (Caltrans). After the accident, Shannon and his co-worker filed a lawsuit against Caltrans. In 2013, the parties separated and Kayle moved to Montana. After living in Montana for 100 days, Kayle filed a Petition for Dissolution (Petition) on September 25, 2013. Attached to the Petition, as Exhibit A, is a document which states, in full:
A lawsuit is pending in the State of California, due to an on the job accident involving the Respondent in August 2011. The accident left the Respondent with a disability of Post Traumatic Stress Disorder (P.T.S.D). A settlement is expected in favor of the Respondent.
The Petitioner request all debts of the parties will be paid off with the proceeds of the settlement. This includes personal loans from Patti Hardman, Quita Moore, Judy Moore, Ed and Carolyn Gellner and the American Express credit card. All of which were used to help with living expenses after the [Respondent's] disability took place. Petitioner requests the residual proceeds are to be split 50/50 between the Respondent and Petitioner.
¶5 On March 10, 2014, Kayle filed an Amended Petition for Dissolution (Amended Petition). The Amended Petition contains an identical Exhibit A to that found attached to the Petition. Both the Petition and Amended Petition were served on Shannon in California. Shannon did not appear or otherwise respond to either the Petition or Amended Petition, and the Clerk of Court issued an Entry of Default on May 5, 2014. The District Court held a hearing on the Amended Petition on May 20, 2014, noted that Shannon's default had previously been entered, and determined Kayle's proposed distribution of property and debts to be fair and equitable. The District Court issued its Findings of Fact, Conclusions of Law and Final Decree of Dissolution (Decree) on May 20, 2014. The District Court's Decree includes an identical Exhibit A as those found on both the Petition and Amended Petition. Kayle sent the Shannon a Notice of Entry of Decree on May 20, 2014.
¶6 On February 1, 2017, Shannon received a jury verdict for medical expenses, lost earnings, and noneconomic damages in the amount of $2,727,587.11 in his personal injury lawsuit against Caltrans. After Kayle learned of the verdict, she filed a Motion for Contempt, to Enforce Decree, and for Order to Show Cause on March 28, 2017. Kayle sought to be awarded half of the proceeds of Shannon's California personal injury lawsuit under the Decree. On May 8, 2017, attorney Peter F. Carroll filed a Notice of Special Appearance and Motion to Dismiss on behalf of Shannon. On May 9, 2017, the District Court held a hearing on the motion for contempt and denied it as premature. On July 6, 2017, attorney Carroll filed a Notice of Withdrawal and Notice of Change of Address, in which he withdrew from representing Shannon and informed the parties that Shannon had moved to Tennessee.
¶7 On July 13, 2017, counsel for Kayle filed a Uniform District Court Rule 10 Notice, informing Shannon that he had 21 days to appoint new counsel or appear in person, as well as informing Shannon that Kayle had, simultaneously with filing the Rule 10 notice, filed a Motion for Lien and Brief in Support. On August 9, 2017, the District Court issued an Order Establishing Lien, which, in relevant part, granted Kayle 50% of the proceeds from Shannon's personal injury lawsuit.
¶8 On November 14, 2017, attorney Carroll again appeared on behalf of Shannon and filed a Motion to Vacate Judgment. After the parties briefed this motion, the District Court held a hearing on April 25, 2018. Following the hearing, the District Court issued an Order which vacated its August 9, 2017 Order Establishing Lien because it was prematurely issued and ordering Shannon to respond to the July 13, 2017 Motion for Lien. After an extension, Shannon filed his Response in Opposition to Motion for Order Establishing Judgment Lien and Counter Motion to Vacate the Decree of Dissolution of Marriage in Whole or Part on May 15, 2018. After the parties briefed both motions, the District Court issued its Combined Order on Motion for Lien and Counter Motion to Vacate the Decree of Dissolution on July 2, 2018. The parties cross-appeal.
STANDARD OF REVIEW
¶9 Whether a court has jurisdiction is a legal conclusion, which we review de novo.
Capital One, NA v. Guthrie , 2017 MT 75, ¶ 10, 387 Mont. 147, 392 P.3d 158 (citing Pinnow v. Mont. State Fund , 2007 MT 332, ¶ 13, 340 Mont. 217, 172 P.3d 1273 ).
¶10 Review of a district court's interpretation of a judgment presents an issue of law, and we review the district court's interpretation to determine whether it is correct. Levens v. Ballard , 2011 MT 153, ¶ 10, 361 Mont. 108, 255 P.3d 195 (citing Harland v. Anderson Ranch Co. , 2004 MT 132, ¶ 20, 321 Mont. 338, 92 P.3d 1160 ).
¶11 A district court is vested with broad discretion to apportion the marital estate in a manner equitable to each party under the circumstances. In re Funk , 2012 MT 14, ¶ 6, 363 Mont. 352, 270 P.3d 39 (citing § 40-4-202, MCA ). We review a district court's division of marital property to determine whether the court's findings of fact are clearly erroneous and its conclusions of law are correct. Absent clearly erroneous findings, we will affirm a district court's division of property unless we identify an abuse of discretion. Funk , ¶ 6. As we have stated previously, each case must be examined individually, with an eye to its unique circumstances. In re Marriage of Spawn , 2011 MT 284, ¶ 9, 362 Mont. 457, 269 P.3d 887.
DISCUSSION
¶12 1. Did the District Court have jurisdiction to divide any portion of the proceeds from Shannon's California personal injury lawsuit?
¶13 In the Decree, the District Court awarded numerous personal debts solely to Shannon. These debts included a total of $13,700 in personal loans from friends and family incurred after Shannon's accident and disability. In addition, the District Court included a special provision which stated:
Husband shall pay the total of [$7,088.85] to Wife which represents 1/2 of total owed to Bank of the West, in monthly increments of $300.00 until paid in full beginning April 1, 2014. If this debt is unpaid at time of [settlement] the Respondent must pay it out of his proceeds.
Shannon argued that the District Court did not have jurisdiction to divide any portion of his California personal injury lawsuit proceeds.
¶14 A district court has broad discretion to apportion a marital estate in a manner equitable to each party under the circumstances. In re Marriage of Parker , 2013 MT 194, ¶ 46, 371 Mont. 74, 305 P.3d 816. In making apportionment, a district court must consider:
the duration of the marriage and prior marriage of either party, the age, health, station, occupation, amount and sources of income, vocational skills, employability, estate, liabilities, and needs of each of the parties, custodial provisions, whether the apportionment is in lieu of or in addition to maintenance, and the opportunity of each for future acquisition of capital assets and income.
Section 40-4-202(1), MCA.
¶15 In this case, after Shannon's default, the District Court divided the property and debts of the parties as requested by Kayle. Because Kayle lived in Montana for more than 90 days prior to filing the action for dissolution, the District Court had jurisdiction to hear the dissolution action. Section 40-4-104(1), MCA ; see also § 40-4-105(1)(c), MCA. "Jurisdiction to hear the divorce gives jurisdiction over all the rest of the problems of custody, support and division of property." Wilson v. Wilson , 186 Mont. 290, 296, 607 P.2d 539, 542 (1980).
¶16 The District Court had jurisdiction to hear the dissolution action and therefore also had jurisdiction to divide the parties' marital debts and property. The District Court awarded all the personal loan debts incurred after Shannon's injury solely to Shannon, along with half of the parties' debt to Bank of the West. It further included a provision that Shannon would be required to pay these debts out of the proceeds of his California lawsuit if Shannon had not paid these debts by the time that lawsuit was completed. We have previously held that it is not an abuse of discretion for a district court to apportion proceeds from a pending lawsuit in a dissolution proceeding. In re Marriage of Hodge , 2003 MT 146, ¶ 16, 316 Mont. 194, 69 P.3d 1192. Under the unique circumstances of this case, the District Court had both the jurisdiction and the discretion to apportion a part of Shannon's lawsuit proceeds in the conditional event that Shannon did not pay his marital debts. This provision of the Decree is only relevant because Shannon has not yet paid those debts. Indeed, Shannon has still not received any proceeds from his lawsuit and it is entirely possible that this condition is never met because he could simply pay off his marital debts at any point. The District Court did not abuse its discretion in including the special provision requiring Shannon to pay his marital debts out of his lawsuit proceeds if those debts were still unpaid at the time of settlement.
¶17 Relatedly, Shannon argues that the District Court did not have jurisdiction to issue a lien on his lawsuit proceeds. The District Court, in its Combined Order on Motion for Lien and Counter Motion to Vacate the Decree of Dissolution, granted Kayle a lien on Shannon's lawsuit proceeds in the amount of $7,088.85. At the April 25, 2018 hearing both the District Court and counsel for Kayle agreed that an additional separate lien in Montana was not necessary as Kayle could simply take the Decree to California and seek to have it enforced as a foreign judgment. The lien issued by the District Court in this case is essentially superfluous then, as both the Decree and the lien award Kayle the same amount and require the funds be paid by any settlement proceeds only if that amount is not paid before such proceeds, if any, are distributed. The status of the parties and the amount of money due to Kayle are fundamentally the same regardless of the lien-the only difference being that Kayle could additionally seek to have the lien enforced as a foreign judgment. The amount of money due to her is unchanged. As we have determined that the District Court had jurisdiction to divide a portion of the proceeds from Shannon's California personal injury lawsuit in the Decree, the District Court's issuance of a lien which may be enforced only by filing in California added nothing to Kayle's rights under the Decree.
¶18 2. Did the District Court err when it denied Kayle's request for half of the proceeds from Shannon's California personal injury lawsuit?
¶19 The District Court included Exhibit A as an attachment to its Decree. Exhibit A states, in relevant part, that "The Petitioner request all debts of the parties will be paid off with the proceeds of the settlement. ... Petitioner requests the residual proceeds are to be split 50/50 between the Respondent and Petitioner." Kayle argues that the inclusion of this language means that she is entitled to half of the proceeds from Shannon's California personal injury lawsuit. The District Court found, after reviewing the record, that neither the plain language of the Decree nor the statements of the District Court at the dissolution hearing support Kayle's contention. We agree.
¶20 "While we generally encourage trial courts to make accommodations for parties choosing to represent themselves ... [a]ny latitude given to self-represented litigants cannot be so wide as to prejudice the other party." Cox v. Magers , 2018 MT 21, ¶ 15, 390 Mont. 224, 411 P.3d 1271 (internal citation and quotations omitted).
¶21 From the time Kayle first filed for dissolution in 2013 and through the time the District Court issued its Decree in 2014, Kayle was unrepresented by counsel and proceeding pro se. Shannon did not appear in the action at all during this period and was defaulted. Kayle essentially argues that her language requesting half of the proceeds from Shannon's California personal injury lawsuit is imprecise, but its intent was clear. Kayle asserts that not awarding her half of the proceeds would be elevating form over substance. This contention is incorrect. The plain language of Exhibit A-identical in the Petition, Amended Petition, and Decree-includes a request that the debts of the parties be paid from the proceeds of Shannon's anticipated settlement and a separate request for Kayle to receive half of the proceeds from Shannon's anticipated settlement. The District Court, in the Decree, partially adopted Kayle's first request with its special provision requiring Shannon to pay the $7,088.85 debt of out the lawsuit proceeds if that debt remained unpaid at the time of settlement. It did not adopt Kayle's second request for half of Shannon's personal injury lawsuit proceeds.
¶22 At the May 20, 2014 dissolution hearing, the District Court did not ask Kayle any questions about her request for half of Shannon's potential lawsuit proceeds. While Kayle contends this demonstrates the District Court's intent to grant her request for half of those proceeds, the District Court did not specifically grant this request in its Decree. The District Court included Exhibit A in the Decree and specifically imposed a requirement for Shannon to pay his unpaid debts out of his lawsuit proceeds. If the District Court intended to specifically award Kayle what she requested-half of Shannon's lawsuit proceeds for herself-it could have done so. It did not. Kayle made a request, and the District Court, by not adopting Kayle's request, implicitly denied it. While pro se litigants are awarded latitude, that latitude cannot be so great as to prejudice other parties. Cox , ¶ 15. Kayle asked the District Court, and this Court on appeal, to award her nearly $1.4 million of Shannon's award for future lost wages, medical bills, and noneconomic damages after he was disabled in an accident at work. The District Court is required to divide the marital estate equitably. Funk , ¶ 6. In this case, for this Court to transform Kayle's request to an award, when the District Court had the opportunity to specifically make an award in the Decree but did not do so, would do great prejudice to Shannon and would be extremely inequitable. Shannon is the party who was disabled, and Shannon is the party who will live with that disability for the rest of his life. Under the circumstances of this marriage, in no sense could Kayle's interpretation of the Decree-awarding her nearly $1.4 million from the amount meant to compensate Shannon for his lifelong disability-be considered an equitable distribution of the marital estate.
¶23 The District Court's interpretation of its Decree is an issue of law. Levens , ¶ 10. The District Court correctly denied Kayle's request for half of the proceeds from Shannon's California personal injury lawsuit.
CONCLUSION
¶24 The District Court did not err when it determined that it had jurisdiction to impose a special provision related to payments from the proceeds of Shannon's California personal injury lawsuit or when it denied Kayle's request for half of the proceeds from Shannon's California personal injury lawsuit.
¶25 Affirmed.
We concur:
MIKE McGRATH, C.J.
DIRK M. SANDEFUR, J.
BETH BAKER, J.
JIM RICE, J.
Kayle's attorney indicated she believed Kayle's California counsel had already filed the Decree in California and was attempting to enforce it as a foreign judgment. | [
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Justice Ingrid Gustafson delivered the Opinion of the Court.
¶1 Tracy L. Schilling (Tracy) appeals from the March 14, 2017 order of the Fourth Judicial District Court, Missoula County, denying Tracy's Motion to Amend Parenting Plan, determining Tracy failed to establish a changed circumstance. The order further granted John R. Schilling, Jr.'s, (John) Motion for Child Support Calculation and Motion for Attorney Fees. The court later assessed attorneys' fees and costs in the amount of $20,534.14. We reverse and remand.
¶2 We restate the issues on appeal as follows:
1. Did the District Court err in concluding there was no change in circumstance pursuant to § 40-4-219(1), MCA, that would require a hearing?
2. Did the District Court err in awarding Appellee attorneys' fees and costs?
3. Did the District Court err in amending child support and concluding the amended support should commence as of April 1, 2016?
FACTUAL AND PROCEDURAL BACKGROUND
¶3 Tracy and John were previously married and divorced. They have one child together, N.K.S., currently 12 years old. At the time of their divorce, they entered into a Stipulated Parenting Plan, which was drafted by John's attorney as Tracy was not represented by counsel. That Stipulated Parenting Plan provided John would serve as the sole custodian of N.K.S. The Stipulated Parenting Plan contemplated Tracy would be moving away from the Missoula area and when she did so she would have parenting time on designated holidays, specified time during summers, and other time "by agreement of the parties." Tracy moved to Idaho shortly thereafter and from March 2013 through March 2016 N.K.S. resided with John in Missoula. Tracy traveled to Missoula as often as she could to spend time with N.K.S. Tracy submitted into evidence her calendars whereby she asserts she exercised 132 overnights with N.K.S. in 2014, 114 overnights in 2015 and 25 overnights in the first 3 months of 2016. She asserts she also spent several additional days each year in Missoula with N.K.S. John does not believe Tracy exercised as much time with N.K.S. as she asserts. Although the parties dispute the exact time Tracy spent with N.K.S. after she moved to Idaho, they both admit it was considerably more than the specified holiday and summer time set forth in the Stipulated Parenting Plan.
¶4 On March 4, 2016, John filed a Notice of Intent to Move with N.K.S. to West Yellowstone, Montana. In his Notice, John asserted that amendment of the parenting plan was not necessary as he did not anticipate his change of residence would have a significant impact on Tracy's parenting time. Tracy did not agree with John's assertion and filed an objection to John's Notice. In her objection, Tracy asserted John's move would add an additional 300 miles distance between her and N.K.S., significantly affecting her ability to see and spend time with N.K.S. At the time of filing her objection, she also filed a Motion to Amend [Stipulated] Parenting Plan asserting a number of concerns regarding John's parenting.
¶5 On July 22, 2016, the District Court held a hearing for the limited purpose of considering John's relocation to West Yellowstone with N.K.S. and its effect on Tracy's contact. Further, the District Court heard arguments regarding whether Tracy met the threshold requirement of a change in circumstance under § 40-4-219(1), MCA, to amend the parenting plan. The District Court, ruling from the bench, found John's move to West Yellowstone had not negatively impacted Tracy's visitation with N.K.S. because John would drive N.K.S. to Missoula for the parental exchanges. The District Court issued its order on March 14, 2017, finding Tracy had not established the prerequisite of a change in circumstance, which would allow the District Court to consider amending the parenting plan. The District Court then determined John to be the prevailing party and, as such, determined John was entitled to an award of attorneys' fees and costs. The District Court also concluded amendment of child support was appropriate since more than three years had elapsed since the court's prior child support order. Ultimately, the District Court ordered Tracy to pay $583.00 per month in child support commencing April 1, 2016, and to pay John's attorneys' fees and costs of $20,534.14.
STANDARD OF REVIEW
¶6 We review the underlying findings in support of a district court's decision to modify a parenting plan under the clearly erroneous standard. Guffin v. Plaisted-Harman , 2010 MT 100, ¶ 20, 356 Mont. 218, 232 P.3d 888 (citation omitted). We review a district court's conclusions of law to determine if they are correct. In re the Parenting of C.J ., 2016 MT 93, ¶ 12, 383 Mont. 197, 369 P.3d 1028 (citation omitted). A district court has broad discretion when considering the parenting of a child, and we must presume the court carefully considered the evidence and made the correct decision. C.J. , ¶ 13 (citation omitted). Accordingly, absent clearly erroneous findings, we will not disturb a district court's decision regarding parenting plans unless there is a clear abuse of discretion. C.J. , ¶ 13 (citation omitted).
DISCUSSION
¶7 1. Did the District Court err in concluding there was no change in circumstance pursuant to § 40-4-219(1), MCA, that would require a hearing?
¶8 In pertinent part § 40-4-219(1), MCA, provides:
The court may in its discretion amend a prior parenting plan if it finds, upon the basis of facts that have arisen since the prior plan or that were unknown to the court at the time of entry of the prior plan, that a change has occurred in the circumstances of the child and that the amendment is necessary to serve the best interest of the child.
The pivotal question is whether John's relocation with N.K.S. from Missoula, Montana, to West Yellowstone, Montana, constitutes a change in circumstances of N.K.S. requiring the District Court to have a hearing to determine if amendment of the parenting plan is necessary to serve N.K.S.'s best interests.
¶9 Tracy asserts John's relocation to West Yellowstone is a significant change in circumstance for N.K.S. as it substantially impacts N.K.S.'s contact with her. She asserts from March 2013 through March 2016, prior to John's move to West Yellowstone, she exercised substantial parenting of N.K.S. During this time, Tracy asserts she parented N.K.S. as follows:
• 2014: 132 overnights and an additional 14 days.
• 2015: 114 overnights and an additional 7 days.
• 2016 (January through April): 25 overnights and an additional 5 days.
The time Tracy has parented N.K.S. after the parties' dissolution through to the time when John and N.K.S. moved to West Yellowstone has significantly exceeded the specific periods of parenting provided to her in the parties' Stipulated Parenting Plan and Order.
¶10 John asserts his relocation to West Yellowstone is not a change in circumstance as he intends to bring N.K.S. to Missoula for Tracy to exercise her parenting time. Tracy counters that since John moved, not only has she been precluded from exercising the additional time with N.K.S. the parties have historically agreed to, but John has not consistently brought N.K.S. to Missoula and has instead required she meet him in Butte or drive to West Yellowstone to pick up N.K.S.
¶11 The parties' Stipulated Parenting Plan and Order provides Tracy shall enjoy parenting on particular holidays and summer time and additional time "by agreement of the parties." The District Court noted, "that any additional parenting time exercised by Tracy beyond what was spelled out in the Parenting Plan was by agreement of the parties." The District Court concluded John's move to West Yellowstone did not negatively impact Tracy's parenting time with N.K.S. "according to the stipulated Parenting Plan because John would drive NKS to Missoula for the parental exchanges provided for in the Stipulated Plan." The District Court's order denying Tracy's Motion to Amend Parenting Plan implies Tracy will not be entitled to exercise the additional time she has historically exercised with N.K.S. as such will no longer be mutually agreed to by the parties. It follows that this lack of mutual agreement is occasioned by the fact John no longer resides in Missoula and would have to drive nearly 300 miles each way to take N.K.S. to Missoula.
¶12 Merely because the parties' Stipulated Parenting Plan provides they may mutually agree on additional parenting time for Tracy does not mean the additional time they have historically agreed upon should not be considered in determining whether Tracy's parenting time is negatively impacted by John's move or in determining if there has been a change in N.K.S.'s circumstances as a result of John's move. When a parenting plan provides for additional time as the parties may agree, the court should consider the additional time agreed to by the parties and whether it is of such nature, extent, and duration to constitute a de facto modification of the original parenting schedule in itself.
¶13 In considering Tracy's parenting time, she has enjoyed parenting time under the particular periods set forth in the parties' Stipulated Parenting Plan and the additional time to which she and John have historically mutually agreed. The evidence shows John's relocation to West Yellowstone has reduced the amount of time N.K.S. spends with Tracy and is a change in N.K.S.'s circumstance. Indeed, the District Court found John's move constituted a significant enough change, along with the passage of time, to warrant modification of child support to include expenses related to John's travel from West Yellowstone to Missoula to effectuate Tracy's parenting time. The evidence in the present case establishes as a matter of law a change in N.K.S.'s circumstances has occurred as a result of John's move to West Yellowstone. As such, the District Court erred in concluding otherwise. We reverse and remand for hearing and determination of whether amendment of the parenting plan is in N.K.S.'s best interests.
¶14 2. Did the District Court err in awarding Appellee attorney fees and costs?
¶15 The parties' Stipulated Parenting Plan, drafted by John's attorney, provides two enforcement paragraphs:
10. ENFORCEMENT. This Parenting Plan shall be made an integral part of any decree of dissolution of marriage provided by law or equity. This Parenting Plan shall be binding upon the parties, their personal representatives, heirs, and assigns. Should any action be commenced to enforce, modify, or interpret any provision contained herein, the court, as a cost of suit, shall award reasonable attorneys' fees to the successful party.
14. ENFORCEMENT. Should either party be required to retain the services of counsel to enforce any provision of this Parenting Plan, the prevailing party in any proceeding shall be entitled to recover from the non-prevailing party his or her attorneys' fees and costs.
Tracy asserts these two paragraphs are conflicting as they offer different terms for the award of attorney fees and, further, are ambiguous in the treatment of attorney fees. Tracy argues both provisions appear to be applicable to "Enforcement," but the case does not involve an enforcement action. She asserts this case involves an objection to relocating N.K.S. to West Yellowstone as well as her Motion to Amend [Stipulated] Parenting Plan. Finally, she asserts she was not represented by counsel at the time she entered into the Stipulated Parenting Plan and, as John's attorney drafted the document, the ambiguity should be resolved in her favor. Conversely, John asserts paragraphs 10 and 14 are not in conflict and, at most, are redundant.
¶16 The District Court found these provisions were not inconsistent and John was entitled to recover his attorneys' fees and costs for enforcing the existing parenting plan and recovering child support.
¶17 The District Court erred in concluding the action involved enforcing the existing parenting plan. John filed his Notice of Intent to Move advising he intended to move with N.K.S. to West Yellowstone, Montana, on April 1, 2016, and that he did not anticipate any modification to the visitation schedule agreed to by the parties as he intended to bring N.K.S. to Missoula to effectuate the visiting schedule agreed to by the parties. Tracy objected to John's move asserting the move would significantly reduce the time she spends with N.K.S. and then also filed a Motion to Amend the Final Parenting Plan. This matter involved consideration of John's Notice to Move and Tracy's objection thereto and whether John's move with N.K.S. constituted a change in circumstance warranting further consideration as to whether amendment of the parenting plan was in N.K.S.'s best interests. As previously discussed, the District Court erred in not considering the additional parenting time the parties historically agreed to in concluding the move would not negatively impact Tracy's contact with N.K.S. and, as such, was not a changed circumstance. As we reversed on that issue above and have remanded back to the District Court for hearing and determination of whether amending the parenting plan is in N.K.S.'s best interests, it is appropriate to vacate the award of attorneys' fees and costs. Determination as to whether the enforcement paragraphs contained in the parties' Stipulated Parenting Plan are applicable or in conflict is, at best, premature. We vacate the award of attorneys' fees and costs and remand to the District Court for further consideration consistent with this Opinion.
¶18 3. Did the District Court err in amending child support and concluding the amended support should commence as of April 1, 2016?
¶19 At the time the parties entered into their Stipulated Parenting Plan, they agreed given "the earning capacity of each parent and the allocation of the income tax exemption, as well as the parties' arrangement for health care costs and premiums and daycare costs, no support shall be paid by Mother to Father." The District Court noted that since Admin. R. M. 37.62.2103 and 37.62.2117 allow for recalculation of child support if more than three years has passed since child support was established, it was appropriate to grant John's request for calculation of child support and ordered Tracy to commence paying child support April 1, 2016.
¶20 Tracy asserts the District Court erred with regard to ordering child support and in commencing it when it did. She asserts John did not make a motion for child support such that she was not on notice it was at issue. Tracy further asserts the District Court acted arbitrarily in calculating child support by failing to conduct a hearing and failing to rely on verified evidence of the parties' financial circumstances and cost of health insurance coverage.
¶21 It is noted that the Rules cited by the District Court deal with situations where child support is calculated and ordered by the Child Support Enforcement Division, which did not occur here. Regardless, the evidence supports reviewing child support based on John's loss of employment in Missoula, obtaining new employment in West Yellowstone, attendant changes to health insurance, and the long-distance travel costs incurred by both parents resulting from John's move.
¶22 Further, the District Court did not err in concluding John made a sufficient request for child support to put Tracy on notice it was at issue, nor did it err in concluding child support should commence April 1, 2016. John specifically requested calculation of appropriate child support in his March 25, 2016 Combined Response. This was served on Tracy, via mail to her counsel of record, on March 25, 2016. This effectively put Tracy on notice of John's request for child support.
¶23 Section 40-4-208(1), MCA, permits modification of support "only as to installments accruing subsequent to actual notice to the parties of the motion for modification." Based on this, the District Court properly determined child support should commence April 1, 2016, the first full month after Tracy received notice of John's request to calculate appropriate child support.
¶24 Child support is not only dependent upon the financial circumstances of the parties and cost of health insurance, but on the residential schedule of the parenting plan and the long-distance visitation costs the parties will incur to effectuate the parenting schedule. As we have remanded this case to the District Court for hearing and determination as to whether amendment of the parenting plan is in N.K.S.'s best interests, it is appropriate to vacate the monthly child support calculated by the District Court and remand the calculation of child support to the District Court for further consideration consistent with this Opinion.
CONCLUSION
¶25 The District Court's finding there was no change in circumstance pursuant to § 40-4-219(1), MCA, with John's move nearly 300 miles further away was clearly erroneous. Thus, this matter is reversed and remanded to the District Court for hearing and consideration as to whether amendment of the parenting plan is necessary to meet N.K.S.'s best interests. As we reverse and remand on this issue, it is necessary to vacate the award of attorneys' fees and costs and the monthly child support amount and remand for further consideration of these matters consistent with this Opinion.
We Concur:
MIKE McGRATH, C.J.
LAURIE McKINNON, J.
JIM RICE, J.
JAMES JEREMIAH SHEA, J.
DIRK M. SANDEFUR, J.
BETH BAKER, J. | [
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Justice Beth Baker delivered the Opinion of the Court.
¶1 The State filed a petition to involuntarily commit S.D. after she attempted to kill herself and expressed ongoing suicidal ideation and hopelessness. After the initial hearing, S.D.'s attorney filed a waiver of her rights, which included her signed consent to involuntary commitment. The District Court approved the waiver and ordered S.D.'s commitment. On appeal, S.D. argues that the District Court violated her statutory and due process rights when it committed her without holding a hearing. We affirm.
PROCEDURAL AND FACTUAL BACKGROUND
¶2 In January 2017, the State filed a petition against 71-year-old S.D., alleging that she suffered from a mental disorder and required involuntary commitment. The State submitted and incorporated by reference a report by a mental health professional, Jami M. Flickinger (Flickinger), who had examined S.D. Flickinger's report stated that S.D. had made efforts to kill herself while residing in two different assisted living facilities. It stated that at one of the facilities S.D. used a nurse's unattended keys to access most of her medications, and at another facility S.D. had tried-unsuccessfully-to break a mirror to cut herself. According to Flickinger's report, S.D. admitted "ongoing suicidal ideation and hopelessness due to her physical and mental health condition." Flickinger's opinion was that S.D.'s mood was depressed and her affect flat, that she had no insight into the nature of her condition, and that she had inadequate judgment and impulse control. Flickinger also described S.D. as possessing a clear stream of thought without bizarre or illogical elements or spontaneous expressions of hallucinatory, illusional, or delusional thoughts or perceptions. Flickinger recommended that S.D. be committed to the Montana State Hospital for up to 90 days.
¶3 The State's petition for involuntary commitment listed the procedural rights available to S.D. under §§ 53-21-115 to -118, MCA. Flickinger's report, incorporated in the petition by reference, included a list of the same procedural rights, except for information about the right to voluntarily take necessary medications. Based on the State's petition, the District Court issued an order that scheduled both an initial appearance and an adjudicatory hearing and designated two people to act as alternates as S.D.'s appointed friend.
¶4 The State appeared at the initial hearing before the District Court, and S.D. and her attorney appeared via videoconference. The record does not reflect whether S.D.'s appointed friend was present. The District Court ensured that all parties could see and hear one another and then advised S.D. of her civil commitment procedural rights. After advising S.D. of her rights, the District Court asked her if she had any questions. S.D. replied, "No, I don't have any questions right now."
¶5 That same morning, S.D. and her attorney filed a "Waiver of Hearing on Petition" with the District Court. The waiver stated that S.D. acknowledged that she had received a copy of the State's petition; that she discussed the petition with her attorney; and that she was aware of the "fundamental rights" set forth in the petition, as well as other rights. The waiver included several paragraphs that described the procedural rights in §§ 53-21-115 to -118, MCA, and stated that S.D. was aware, understood, and/or had knowledge of those; it also stated that S.D. had been informed by her attorney that she had the right to a jury trial and the right to appeal any final ruling. The waiver stated S.D.'s belief that she needed treatment for a "mental disease or disorder." It continued, "I wish to avoid any further hearings and I do hereby waive my right to attend any future hearings." S.D. then expressly waived all her listed rights except the right to receive treatment, and she consented to the court entering an order for her involuntary commitment to the Montana State Hospital for a period not to exceed 90 days.
¶6 S.D. and her attorney both signed the waiver. S.D. signed immediately beneath the following text:
I further certify that 1) I have discussed this waiver with my attorney; 2) I understand the rights listed above; 3) it is my desire and intent to voluntarily waive these rights; and 4) I have discussed the nature of these proceedings with my attorney and I understand the purpose of these proceedings.
S.D.'s attorney signed below text that stated:
I certify that 1) I have discussed this waiver with the [R]espondent; 2) I am satisfied that the Respondent understands the rights listed above; 3) I believe it is the Respondent's desire and intent to voluntarily waive these rights; and 4) I have discussed the nature of these proceedings with the Respondent and I am satisfied that the Respondent understands the purpose of these proceedings.
The record does not reflect whether S.D.'s appointed friend participated in S.D.'s decision to sign the waiver or whether Flickinger concurred.
¶7 The District Court issued an order that day committing S.D. to the Montana State Hospital for up to 90 days. The Court stated in the order that it had considered the reasons for the waiver pursuant to § 53-21-119, MCA, and was satisfied that the "Respondent is aware of the waiver of hearing after having consulted with her attorney, and is capable of making a knowing decision therein."
STANDARD OF REVIEW
¶8 Due process claims in involuntary civil commitment cases are subject to plenary review. In re N.A., 2014 MT 257, ¶ 10, 376 Mont. 379, 334 P.3d 915. We review an involuntary civil commitment order to determine whether the district court's findings of fact are clearly erroneous and its conclusions of law are correct. In re R.W.K., 2013 MT 54, ¶ 14, 369 Mont. 193, 297 P.3d 318. We require strict adherence to the involuntary commitment statutory scheme, considering the "utmost importance of the rights at stake." In re Mental Health of L.K.-S., 2011 MT 21, ¶ 15, 359 Mont. 191, 247 P.3d 1100.
DISCUSSION
¶9 S.D. argues that the District Court erred as a matter of law when it committed her to the Montana State Hospital upon her signed waiver without a hearing or trial. She contends that the court could not accept her waiver without "a hearing about the waiver, in a courtroom, in front of a judge." The State responds that the record establishes that S.D. was capable of making a knowing and intentional waiver, and the court did not need to hold a hearing.
¶10 Title 53, chapter 21, MCA, authorizes and prescribes the process for involuntary commitment of individuals for mental health treatment. This system is part of a "rather recent development" in the law to establish "strong procedural safeguards to protect the interests of those facing involuntary civil commitment" that are "focused on improving the fairness and accuracy of the process." In re S.M. , 2017 MT 244, ¶ 24, 389 Mont. 28, 403 P.3d 324. Those procedural safeguards are spelled out in §§ 53-21-115 to -118, MCA. Section 53-21-119, MCA, governs waiver of those rights. It provides in part:
(1) A person may waive the person's rights, or if the person is not capable of making an intentional and knowing decision, these rights may be waived by the person's counsel and friend of respondent, if a friend of respondent is appointed, acting together if a record is made of the reasons for the waiver. The right to counsel may not be waived. The right to treatment provided for in this part may not be waived.
(2) The right of the respondent to be physically present at a hearing may also be waived by the respondent's attorney and the friend of respondent with the concurrence of the professional person and the judge upon a finding supported by facts that:
(a)(i) the presence of the respondent at the hearing would be likely to seriously adversely affect the respondent's mental condition; and
(ii) an alternative location for the hearing in surroundings familiar to the respondent would not prevent the adverse effects on the respondent's mental condition; or
(b) the respondent has voluntarily expressed a desire to waive the respondent's presence at the hearing.
¶11 Breaking it down, this statute prescribes that: (1) all statutory rights afforded a respondent in a civil commitment proceeding may be waived, except for the right to counsel and the right to treatment, see In re S.M. , ¶ 30 (rejecting constitutional challenge to statute prohibiting waiver of right to counsel); (2) if capable of doing so, a respondent may waive her own rights, see In re R.W.K. , ¶ 10 (upholding trial court's conclusion that respondent was capable of waiving his rights and stipulating to commitment); (3) if the respondent is not capable, her rights may be waived only when her counsel and appointed friend agree on the waiver and make a record of it, see In re L.K.-S. , ¶¶ 22-26 (reversing commitment where record did not show appointed friend's concurrence in waiver); In re P.A.C. , 2013 MT 84, ¶ 13, 369 Mont. 407, 298 P.3d 1166 (reversing involuntary commitment where the record did not establish that respondent was capable of making an intentional and knowing decision to waive her rights); and (4) if the court holds a hearing and the respondent is not there, the hearing may go forward in her absence only if the respondent's attorney and friend waive her presence, with the concurrence of the designated professional, and the presiding judge makes the factual findings required by subsection (2), see In re Matter of Mental Health of L.K. , 2009 MT 366, ¶ 19, 353 Mont. 246, 219 P.3d 1263 (concluding that district court could not conduct commitment hearing in respondent's absence without a record that appointed friend or professional person concurred, and with "no record of findings supported by facts as required by § 53-21-119(2)(a) and (b), MCA.").
¶12 Applying these statutory requirements, we have held that a district court may not accept a respondent's stipulation to involuntary civil commitment "without first making an affirmative determination on the record-based upon the evidence presented, including the representations of the respondent and/or his attorney and friend-that the person to be committed understands his procedural rights, and that he waives those rights intentionally and knowingly." In re A.M., 2014 MT 221, ¶ 15, 376 Mont. 226, 332 P.3d 263. The nature and extent of the record regarding the respondent's waiver depends upon the facts and circumstances of the case. In re P.A.C., ¶ 14. More "diligent" inquiry would be appropriate if the respondent's capacity to waive her rights is in doubt, such as "perhaps involving input from the professional person who evaluated the respondent." In re P.A.C., ¶ 14. But the record does not necessarily have to reflect more than that the attorney had "discussed the matter with her client; that the client desired to waive his rights; and that the attorney was satisfied that her client understood his rights and the nature of the proceeding." In re P.A.C., ¶ 14.
¶13 In In re R.W.K., the respondent appeared at his involuntary commitment hearing with his attorney and his appointed friend. R.W.K.'s attorney represented to the District Court that he had met with R.W.K. and his appointed friend, that R.W.K. understood his involuntary commitment procedural rights and the nature of the proceedings, and that he stipulated to the allegations of the petition and agreed to a commitment at the Montana State Hospital. The District Court determined that R.W.K. was capable of making an intentional and knowing decision, accepted R.W.K.'s waiver and stipulation based on his attorney's representations, and issued an order with a finding that R.W.K. "understands all procedural rights and that he waives those rights knowingly." In re R.W.K., ¶ 10. On appeal, R.W.K. argued that the District Court violated his rights under § 53-21-119(1), MCA, by failing to question him personally about the waiver. We affirmed the validity of the waiver, holding that the District Court could rely correctly on the attorney's representations of R.W.K.'s waiver and need not have made further inquiry. In re R.W.K, ¶ 24.
¶14 In In re P.A.C. , the respondent's attorney appeared without respondent P.A.C. at the commitment hearing. The attorney informed the District Court she had met with P.A.C. and informed her of "all her rights, including the right to be present, and she declined." In re P.A.C., ¶ 4. The District Court then proceeded with the hearing and committed P.A.C., and she appealed. We held that the record did not show that P.A.C. was capable of making an intentional and knowing waiver under § 53-21-119(1), MCA, and that the District Court should have made further inquiry to "satisfy itself that the waiver is intentional and knowing, and [to ensure] that the record reflect[ed] the district court's acceptance of the sufficiency of counsel's representations as to the waiver, or of any other evidence presented on the issue." In re P.A.C., ¶ 16. We clarified that a respondent does not need to attend a hearing before her attorney can convey her waiver of her right to attend, noting that "[s]uch a requirement would elevate form over substance and would be a disservice to the respondent who does not wish to attend." In re P.A.C., ¶ 15.
¶15 Here, S.D. expressly acknowledged in the written waiver her understanding of her rights and of the purpose of the proceedings. After discussion with S.D., her attorney made an affirmative representation attesting to his satisfaction with her understanding and expressed no concern that she was not capable of waiving her own rights. The representations from S.D. and her attorney demonstrate that S.D. waived her rights and consented to commitment intentionally and knowingly. Those representations were "made by the respondent [her]self" and placed on the record in S.D.'s attested written waiver. In re A.M. , ¶ 16. The record also included Flickinger's report, which indicated that S.D. had a clear stream of thought and no sign that she lacked an ability to make her own knowing decision about the proceedings.
¶16 The question S.D. presents is whether the District Court was required to assess in open court her capacity to make an intentional and knowing waiver. Unlike our decisions in In re L.K. , In re P.A.C. , and In re L.K.-S. , this case does not involve a commitment hearing held in the respondent's absence. Nor is the issue governed by our decision in In re A.M. , where the court accepted a stipulation to commitment when "neither [the respondent] nor his attorney made any representations" regarding the respondent's understanding of his procedural rights or whether "he had the capacity to knowingly and intentionally waive" them, and the district court made no inquiry or record in that regard. In re A.M. , ¶ 14. Here, the District Court's order committing S.D. reflected consideration of S.D.'s waiver under § 53-21-119(1), MCA. The order expressed the court's satisfaction that S.D. was aware of the waiver of her rights after having consulted with her attorney and that S.D. was capable of making a knowing decision.
¶17 Comparing the processes in criminal cases is not particularly helpful in resolving the question on appeal. Criminal procedure statutes provide different procedural requirements, stating for example that a plea of guilty must be entered "in open court." Section 46-16-105(1)(a), MCA. We have recognized that "the Sixth Amendment [to the United States Constitution] and Article II, Section 24, of Montana's Constitution [ (setting forth the rights of the accused) ] do not apply to civil commitment proceedings." In re J.S. , 2017 MT 214, ¶ 19, 388 Mont. 397, 401 P.3d 197. Civil commitment proceedings instead are protected by the constitutions' Due Process Clauses. In re J.S. , ¶ 15 ; In re S.M. , ¶ 15. In that regard, "the process afforded to respondents in civil commitment proceedings is the subject of a 'considered legislative response,' and we should be cautious to extend constitutional protections that 'place the matter outside the arena of public debate and legislative action.' " In re S.M. , ¶ 25 (quoting Dist. Attorney's Office v. Osborne , 557 U.S. 52, 73, 129 S.Ct. 2308, 2322, 174 L.Ed.2d 38 (2009) ).
¶18 Under § 53-21-119(1), MCA, the only rights a respondent may not waive are the right to counsel and the right to treatment. The statute does not require the court to hold a hearing in order to allow a commitment hearing to be waived and does not require a waiver to be made in open court. This Court's imposition of such requirements would add language impermissibly. See § 1-2-101, MCA. Rather, the record before the committing court-whether presented orally or in writing-must support the substantive determination of a valid waiver. See In re A.M. , ¶ 15.
¶19 On the record presented in this case, we conclude that both S.D.'s waiver and the District Court's order committing her are sufficient to find an intentional and knowing waiver pursuant to § 53-21-119(1), MCA. It was not necessary for the court to set a hearing to inquire further into her waiver of rights. The District Court complied with the requirements of § 53-21-119(1), MCA, in accepting S.D.'s waiver without a hearing and did not violate her right to due process.
CONCLUSION
¶20 The District Court's order of commitment is affirmed.
We concur:
MIKE McGRATH, C.J.
JAMES JEREMIAH SHEA, J.
INGRID GUSTAFSON, J.
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] |
Chief Justice Mike McGrath delivered the Opinion of the Court.
¶1 Daniel Iverson and Wilks Ranch Montana, LTD (Wilks Ranch) appeal from a Montana Water Court order holding they failed to prove a long period of continuous nonuse and therefore failed to show Gene Klamert or his predecessors' presumed intent to abandon the water rights. We affirm.
¶2 We restate the issues on appeal as follows:
1. Whether the Water Court erred in concluding that Wilks Ranch and Iverson failed to establish a continuous period of nonuse.
2. Whether failure to assert water rights through the water commissioner is the equivalent of nonuse.
3. Whether the Water Court erred in not addressing the issue of partial abandonment.
4. Whether the Water Court erred in concluding the appropriate remedy for Wilks Ranch and Iverson would be to file a dissatisfied water user complaint or pursue contempt proceedings.
PROCEDURAL AND FACTUAL BACKGROUND
¶3 Gene Klamert currently holds five decreed irrigation rights for diversion from Flatwillow Creek, all of which represent water rights originally decreed in Fraser v. Shields et al ., No. 764 (10th Jud. Dist. Petroleum Cty. Sept. 26, 1953) (hereinafter Fraser decree). The Flatwillow Creek basin, with its headwaters in the Big Snowy Mountains, is approximately forty-seven miles long, six miles wide, and was described in testimony as "an all or nothing creek" that is susceptible to drought because it lacks a large, high elevation catchment. All five of Klamert's claims share the same points of diversion and place of use and include two issue remarks indicating that fewer acres were irrigated than claimed. Below are the priority dates and flow rates for each claim:
Claim Priority Date Flow Rate 40B 9163-00 April 1, 1900 4.00 cfs 40B 9164-00 July 19, 1895 5.00 cfs 40B 9165-00 July 19, 1895 5.00 cfs 40B 9166-00 April 25, 1882 15.00 cfs 40B 9167-00 June 15, 1899 5.00 cfs
¶4 The above claims were filed by Klamert's predecessor in interest, the Nebraska Feeding Company (NFC). NFC sold the property in 1983 and over the course of the next decade or so the property passed between five different owners including: First Continental Corporation (FCC); Aetna Casualty and Surety Company of Illinois; Sunrise Farms, Inc.; Terry and Coral Langstraat; and finally, Klamert. The property was also leased by seven separate lessees between 1984 and 1998. In 1993, Terry Langstraat and Klamert leased the property with an option to buy and in 1994 they purchased the property under the name Sunrise Farms, Inc. (f/k/a Golden Eagle Farms, Inc.). Several years later, Langstraat and Klamert decided to split the property and, in 1998, Klamert purchased the property at issue here.
¶5 From 1980 to 2012, a water commissioner was appointed to distribute water in accordance with the Fraser decree. In addition to the water commissioner, who ensured priority and recorded use of water, the Flatwillow Improvement Association (FIA), an entity formed by the Fraser decree water users, was responsible for billing users. The water commissioner and the FIA maintained independent records documenting water use.
¶6 In 2012, Klamert filed motions to correct his water right claims and the United States Bureau of Land Management (BLM) and Daniel Iverson filed timely objections. Klamert's claims also received counterobjections from Ned Tranel and notices of intent to appear from Janna and Michael Taylor (later substituted by Twin Creeks Farm and Ranch, LLC) and Wilks Ranch. Wilks Ranch later filed a motion to intervene on Klamert's claims, which the Water Court granted.
¶7 BLM's objections and the issue remarks, which did not identify abandonment as an issue, were resolved through a January 2013 stipulation between Klamert and BLM. The terms of the stipulation corrected the legal description for place of use and reduced the number of acres irrigated. Twin Creeks Farm and Ranch, LLC, also adopted the terms of the stipulation. Following the stipulation, neither BLM nor Twin Creeks Farm and Ranch, LLC, participated in subsequent proceedings.
¶8 The Klamert property, located downstream from most Fraser decree water users on Flatwillow Creek, possesses one of the largest and the most senior right in the decree-40B 9166-00. Located upstream from the Klamert property is Iverson's ranch, a property that has been in the Iverson family for over seventy-five years. All of Iverson's water rights are junior to Klamert's claim in 40B 9166-00. Wilks Ranch also owns real property on Flatwillow Creek situated upstream from the Klamert property and has three water rights administered under the Fraser decree, all of which are junior to Klamert's claim in 40B 9166-00.
¶9 In August 2016, following the stipulation between Klamert and BLM, a five-day evidentiary hearing was conducted before a Water Master in Roundup, Montana. Wilks Ranch and Iverson's primary contention involved Klamert's alleged abandonment of his rights, particularly in claim 40B 9166-00. They asserted that the water commissioner and billing records establish neither Klamert nor his predecessors in interest used or called for water for a period of at least seventeen years, spanning from 1988 to 2004. Klamert challenged the veracity of the records and presented multiple witnesses who testified that they either irrigated or witnessed irrigation on the Klamert property during the alleged period of nonuse.
¶10 The Water Master's Report, issued on June 13, 2017, rejected the notion that Klamert's water rights had been abandoned, holding Wilks Ranch and Iverson failed to establish a continuous period of nonuse. The report also recommended acceptance of the stipulation between BLM and Klamert and removal of the issue remarks. Wilks Ranch and Iverson objected to the Water Master's Report, alleging factual and legal errors. The Water Court heard arguments on January 23, 2018, and issued its order adopting the Water Master's Report on June 6, 2018. The Water Court rejected all issues raised by Iverson and Wilks Ranch and concluded that the Water Master's recommendations were based on substantial credible evidence, the Water Master did not misapprehend the effect of the evidence, and, following review of the record, the Court was not left with a definite and firm conviction that a mistake had been made. Wilks Ranch and Iverson now appeal.
STANDARDS OF REVIEW
¶11 In cases involving a water master's report and a water court order adopting the water master's report, two standards of review apply: the standard the water judge applies to the water master's report and the standard this Court applies to the water court's opinion. City of Helena v. Cmty. of Rimini , 2017 MT 145, ¶ 11, 388 Mont. 1, 397 P.3d 1. The water court reviews the water master's findings of fact for clear error and the water master's conclusions of law for correctness. Skelton Ranch, Inc. v. Pondera Cnty. Canal & Reservoir Co. , 2014 MT 167, ¶ 25, 375 Mont. 327, 328 P.3d 644. The water court may adopt, modify, or reject the water master's report, in whole or in part, or may receive further evidence or recommit it with instructions. Skelton Ranch , ¶ 25.
¶12 This Court reviews the water court's order de novo, to determine whether it correctly applied the clear error standard of review to the water master's findings of fact and whether its conclusions of law were correct. Skelton Ranch , ¶ 26. Whether the standard of review was applied correctly is a question of law. City of Helena , ¶ 12. We review the water court's findings to determine whether they are clearly erroneous. City of Helena , ¶ 12. A factual finding is clearly erroneous if it is not supported by substantial evidence, if the trier of fact misapprehended the effect of the evidence, or if this Court is left with a definite and firm conviction that a mistake has been made. City of Helena , ¶ 13. Substantial evidence is evidence that a reasonable mind might accept as adequate to support a conclusion, even if the evidence is weak or conflicting. Skelton Ranch , ¶ 27. DISCUSSION
¶13 1. Whether the Water Court erred in concluding that Wilks Ranch and Iverson failed to establish a continuous period of nonuse.
¶14 "[A] water right does not mean possession of a quantity of water, but its beneficial use ." 79 Ranch v. Pitsch , 204 Mont. 426, 433, 666 P.2d 215, 218 (1983). Consistent with this principle, Montana water law provides: "[w]hen the appropriator or his successor in interest abandons or ceases to use the water for its beneficial use, the water right ceases." 79 Ranch , 204 Mont. at 432, 666 P.2d at 218 ; § 85-2-404, MCA. A finding of abandonment requires both nonuse and intent to abandon. Heavirland v. State , 2013 MT 313, ¶ 23, 372 Mont. 300, 311 P.3d 813. Whether a water right has been abandoned is a question of fact that depends on the conduct, acts, and intent of the parties claiming the use of the water. Heavirland , ¶ 31.
¶15 The objector bears the initial burden of proving a long period of continuous nonuse of the claimed water right. Skelton Ranch , ¶ 53. While abandonment of a water right is a question of fact, ten successive years of nonuse raises, in effect, a rebuttable statutory presumption of intent to abandon. Section 85-2-404(2), MCA ; 79 Ranch , 204 Mont. at 434, 666 P.2d at 219. This statutory presumption applies only after all existing water rights have been adjudicated in accordance with Title 85, chapter 2, MCA. 79 Ranch , 204 Mont. at 434, 666 P.2d at 219. However, even if the existing water rights have not been adjudicated, and therefore do not fall under the purview of § 85-2-404(2), MCA, this Court has held that nine years of nonuse represents "very potent evidence" of intent to abandon. Smith v. Hope Mining Co., 18 Mont. 432, 438, 45 P. 632, 634 (1896). "[I]ntent to abandon 'need not be proved directly, but may be inferred from all the circumstances of the case.' " Heavirland , ¶ 31 (quoting Denver by Bd. of Water Comm'rs v. Snake River Water Dist ., 788 P.2d 772, 776 (Colo. 1990) ). If a continuous period of nonuse is established, the burden of proof then shifts to the claimant to produce specific evidence rebutting that presumed intent. 79 Ranch , 204 Mont. at 433, 666 P.2d at 218 ;
Heavirland , ¶ 19. Mere expressions of hope or desire regarding future water use will be insufficient to overcome the presumption. 79 Ranch , 204 Mont. at 433, 666 P.2d at 218.
¶16 On appeal, Wilks Ranch and Iverson (hereinafter Objectors) contend that the Water Master was presented with substantial and credible evidence that no irrigation occurred between 1988 and 2004 and Klamert's failure to take the decreed water rights through the commissioner raised the rebuttable presumption of abandonment. Accordingly, they assert that the Water Master should have shifted the burden to Klamert to rebut the presumption and the Water Court erred when it held otherwise.
¶17 Objectors presented evidence indicating that between 1988 and 2004 the various owners and lessees of the Klamert property did not assert their water rights through the water commissioner. Specifically, Objectors pointed to water commissioner records showing no water use occurred on the Klamert property during the seventeen-year period. However, both the Water Master and the Water Court disagreed with Objectors' assertion that the records presumptively established a period of nonuse between 1988 and 2004. The Water Court reasoned that although the commissioner records were instructive, Klamert's evidence undermining the credibility of the records was also persuasive and thus, the Water Master's Report was based on substantial, credible evidence.
¶18 During the period of alleged nonuse there were three water commissioners appointed to enforce the terms of the Fraser decree-Bill Meserve, Bob Wiltse, and Jay Smith. The Water Master found that although the water commissioners generally recorded the same type of information including dates of use, water users, measurements of flow, etc., the records were notably inconsistent among commissioners. "Some commissioner records [were] clear and easy to decipher while others [were] more cryptic and chaotic." Some records were missing, unclear on what year was being addressed, and "often in disarray." Further, there were no specific rules for water commissioners regarding record keeping or water measuring protocol and commissioners received little to no training. Bill Meserve, who was the water commissioner for twelve years of the alleged period of nonuse, had a reputation as a poor record keeper and water users sought outside assistance from the Montana Department of Natural Resources and Conservation to ensure the accuracy of his recording. Evidence and testimony established that some calls for water went unrecorded and water commissioners were occasionally unaware of the basis for the water rights they administered. Further, the Water Master found the commissioner records "reflect[ed] that very few, if any, calls for water were actually made."
¶19 FIA records for the alleged period of nonuse similarly demonstrate that neither Klamert nor his predecessors in interest were billed for water use between 1988 and 2004. The Water Master declined to interpret FIA records as substantial proof that no irrigation occurred and noted that although the FIA records were "generally more organized and consistent" than the commissioner records, they were not more credible. Moreover, testimony and other evidence established that it was often unclear who should receive FIA bills and which person would be responsible for payment. "In certain instances, there was confusion whether landowners or lessees should pay the bills, and there were issues with double billing."
¶20 The Water Master also heard evidence supporting Klamert's assertion that irrigation took place between 1988 and 2004. Sig Pugrud, who resided on the Klamert property from approximately 1989 to 1992, testified that she witnessed irrigation on the north, west, and southwest fields during the period she lived there. Toby Stahl testified that he irrigated on three different occasions between 1998 and 2003. John Hughes, Klamert's upstream neighbor, stated that there were no long periods of nonuse on the Klamert property and that he personally saw water running in a particular ditch between 1988 and 1992. The Water Master also noted that Brad Kinsey "succinctly and credibly" testified to water use that occurred in 1997. Moreover, the Water Master found that testimony from Tom Osborne, Klamert's expert witness, bolstered the credibility of lay witness testimony. And, to further undermine intent to abandon, Klamert offered evidence that ditches were regularly maintained during the alleged period of nonuse.
¶21 Throughout the five-day evidentiary hearing, the Water Master heard testimony from twenty lay witnesses, eight experts, and was presented with over one hundred exhibits. In sum, the record before the Water Master, and eventually the Water Court, was voluminous. Evidenced by the Water Master's comprehensive report, the Water Master carefully considered all evidence before issuing a reasoned analysis. While the Objectors point to FIA and commissioner records as evidence of nonuse, the Water Master found both were "plagued by completeness and credibility concerns." The water judge "may consider all relevant evidence in the determination and interpretation of existing water rights. Relevant evidence under this part may include admissible evidence arising before or after July 1, 1973." Section 85-2-227(2), MCA. While relevant, the commissioner and FIA records are not dispositive. The Water Court did not err when it held substantial, credible evidence supported the Water Master's findings that actual water use occurred between 1988 and 2004.
¶22 2. Whether failure to assert water rights through the water commissioner is the equivalent of nonuse.
¶23 The Objectors alternatively argue that even if water use did occur, water use outside the terms of the Fraser decree, or in their words "illegal use," cannot be used to defeat claims of abandonment. In other words, failure to assert water rights through the commissioner is the equivalent of nonuse. The Water Court rejected this reasoning and found that water use on the Klamert property was lawfully appropriated considering 40B 9166-00 is the most senior water right in the Fraser decree and water users therefore had authority to take water from Flatwillow Creek any time water was available. This Court agrees with the Water Court's analysis.
¶24 To support their position, Objectors rely on Warren v. Senecal , 71 Mont. 210, 228 P. 71 (1924). In Warren , this Court held that a person cannot obtain a valid water right through trespass and that water appropriation "necessarily implies rightful diversion by lawful means." Warren , 71 Mont. at 220, 228 P. at 75. Objectors interpret this holding to mean that the "diversion and appropriation of water must always be legal to ripen into, and to maintain, the water right." Even so, nowhere in Warren does this Court equate failure to follow water commissioner protocol with nonuse or "illegal use." Such a reading would unduly extend the Warren holding and would be inconsistent with existing abandonment jurisprudence.
¶25 Objectors also cite to S Bar B Ranch Co. v. Gordon, Case 40J-4 (MT Water Ct. June 6, 2016) to support their contention that the Water Court's holding violates the equitable clean hands doctrine. The doctrine is based on a "fundamental principle of equitable jurisprudence that one who seeks equity must do equity." Kauffman-Harmon v. Kauffman , 2001 MT 238, ¶ 13, 307 Mont. 45, 36 P.3d 408 ; § 1-3-208, MCA. "Accordingly, this Court will not aid a party whose claim had its inception in the party's wrongdoing, whether the victim of the wrongdoing is the other party or a third party." Kauffman-Harmon , ¶ 19. In S Bar B Ranch Co ., the Water Court addressed the clean hands doctrine but found that it did not apply. S Bar B Ranch Co ., Case 40J-4 (MT Water Ct. June 6, 2016). We find the doctrine similarly inapplicable here. Although the Water Master recognized that Klamert and his predecessors did not appear in the water commissioner and FIA records between 1988 and 2004, the Water Master also noted that the records were fraught with error and, for many of those years, the landowners and lessees paid dues, attended meetings, and Klamert even served on the FIA Board. The Water Master further acknowledged that reporting to the water commissioner was inconsistent among other Flatwillow Creek water users. In light of these circumstances, Objectors fail to establish that Klamert attempted to "take advantage of [his] own wrong." Section 1-3-208, MCA.
¶26 3. Whether the Water Court erred in not addressing the issue of partial abandonment.
¶27 Objectors argue the Water Master should have entered findings specific to the alleged abandonment of each individual claim and that the Water Court erred in declining to address the issue of partial abandonment. "[A] water judge may determine all or part of an existing water right to be abandoned based on a consideration of all admissible evidence that is relevant, including, without limitation, evidence relating to acts or intent occurring in whole or in part after July 1, 1973." Section 85-2-227(3), MCA (emphasis added). Objectors contend that partial abandonment should have been considered: (1) at the section nine point of diversion beyond Headquarters Road; (2) for all acres under the section sixteen point of diversion and place of use; and (3) for all acres under the section two point of diversion and place of use. The Water Master broadly contemplated use at each of these points of diversion and places of use and found the evidence weighed against a continuous period of nonuse. As the Water Court pointed out, Objectors offered "little, if any, evidence addressing individual claims, save for general references to claim 40B 9166-00 as the most senior right in the Fraser Decree." Accordingly, the Water Master's Report reflects the evidence Objectors presented at the hearing. It is apparent from the report that the Water Master weighed the relevant evidence before concluding no long period of continuous nonuse occurred for any of Klamert's claims. Failure to delineate specific findings for each individual claim did not amount to clear error.
¶28 4. Whether the Water Court erred in concluding the appropriate remedy for Wilks Ranch and Iverson would be to file a dissatisfied water user complaint or pursue contempt proceedings.
¶29 The Water Court found that if Objectors took issue with Klamert's failure to report diversions to the water commissioner the proper remedy would be a dissatisfied water user complaint pursuant to § 85-5-301, MCA, or contempt proceedings under § 85-5-406, MCA. Objectors assert that a claim under § 85-5-301, MCA, is unavailable to them because they lack standing. Section 85-5-301, MCA, provides:
A person owning or using any of the waters of the stream or ditch or extension of the ditch who is dissatisfied with the method of distribution of the waters of the stream or ditch by the water commissioner or water commissioners and who claims to be entitled to more water than the person is receiving or to a right prior to that allowed the person by the water commissioner or water commissioners may file a written complaint, duly verified, setting forth the facts of the claim.
In Luppold v. Lewis , 172 Mont. 280, 285, 563 P.2d 538, 541 (1977), this Court interpreted the statutory language:
A careful reading indicates there are two means to achieve standing: First the user is dissatisfied with the method of distribution by the water commissioner and claims to be entitled to more water than he is receiving, or second, the user is dissatisfied with the method of distribution by the water commissioner and is entitled to a right prior to that allowed him by such water commissioner.
(Emphasis added). Objectors' circumstances place them outside the scope of either approach considering neither Iverson nor Wilks Ranch felt entitled to more rights or water than they were receiving. Indeed, Objectors claim they were receiving more water than anticipated under the Fraser decree due to Klamert's alleged nonuse. In any event, alternative measures for enforcement of the Fraser decree and proper delivery by a water commissioner were not questions before the Water Master or Water Court. Rather, the only issue raised was whether Klamert's water rights had been abandoned. The Water Master and Water Court squarely addressed this issue and were under no obligation to discuss alternative remedies.
CONCLUSION
¶30 For the aforementioned reasons, the Water Court's adoption of the Water Master's Report did not amount to reversible error.
¶31 Affirmed.
We Concur:
DIRK M. SANDEFUR, J.
BETH BAKER, J.
INGRID GUSTAFSON, J.
JIM RICE, J.
Ned Tranel eventually withdrew his counterobjections to Klamert's claims during discovery.
Objectors also cite to a Colorado case, Grand Valley Water Users Ass'n v. Busk-Ivanhoe , Inc., 386 P.3d 452 (Colo. 2016). Because it is not binding authority and we find the case factually distinguishable, we decline to address it in further detail. | [
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Justice Beth Baker delivered the Opinion of the Court.
¶1 Employers Mutual Casualty Company ("Employers Mutual") filed a declaratory judgment action in the Seventeenth Judicial District Court, Valley County, to determine its obligations to defend and to indemnify Continental Resources, Inc. ("Continental") under a commercial general liability ("CGL") insurance policy it issued to Black Rock Testing, Inc. ("Black Rock"). Employers Mutual appeals the order of the District Court denying its motion for summary judgment, granting Continental's motion for summary judgment, and dismissing Employers Mutual's first amended complaint. The District Court held in part that Continental was entitled to a defense as an additional insured under the Employers Mutual insurance policy. We restate the issues on appeal as follows:
1. Did the District Court err as a matter of law when it determined that Employers Mutual must defend Continental as an additional insured under the CGL insurance policy issued to Black Rock? and
2. Did the District Court err as a matter of law when it determined that the pollution exclusion in the CGL insurance policy did not apply to exclude coverage?
We reverse on Issue 1 and therefore do not reach Issue 2.
PROCEDURAL AND FACTUAL BACKGROUND
¶2 This is an appeal from a declaratory judgment action initiated by Employers Mutual to determine its duties to defend and to indemnify Continental and other defendants in an underlying wrongful death lawsuit (the "Underlying Suit") filed by the Estate of Zachary Buckles. The Underlying Suit arose from Buckles's death on April 28, 2014, at a well site near Alexander, North Dakota. Buckles was working as a flow tester at the site. Continental owns or leases the well site. At the time of Buckles's death, Continental had a master service contract with BH Flow Testing to perform flow testing at the site. BH Flow Testing subcontracted the work to Black Rock, which subcontracted the work to Jansen Palmer, doing business as Black Gold Testing, with which Buckles was working at the time.
¶3 Black Rock had a CGL insurance policy (the "Policy") through Employers Mutual. After the Estate of Buckles brought suit, Continental made a tender to Employers Mutual to provide it with a defense, alleging that Continental was an additional insured under the Policy. Employers Mutual denied the tender.
¶4 In July 2015, Employers Mutual filed this declaratory judgment action. Among other issues, Employers Mutual sought a determination that Continental is not an additional insured under the Policy and that Employers Mutual does not have duties to defend or to indemnify Continental in the Underlying Suit. Continental answered Employers Mutual's complaint and filed counterclaims seeking a declaratory judgment of its rights under the Policy and alleging breach of the insurance contract, bad faith, and violations of the Unfair Trade Practices Act. Employers Mutual filed its first amended complaint on May 31, 2016. Before Continental filed its answer, Employers Mutual moved for summary judgment against Continental. Continental responded with its own motion to dismiss the first amended complaint or, alternatively, for summary judgment on Employers Mutual's duty to defend. Much of the briefing on the cross-motions focused on whether Employers Mutual had provided necessary evidence to make an unequivocal demonstration that Continental was not an additional insured and whether Continental proffered any evidence to raise a genuine issue of material fact in response to Employers Mutual's statement of undisputed facts.
¶5 After both motions were fully briefed, the District Court entered an order denying Employers Mutual's motion and granting Continental's motion. The District Court explained that it could not grant summary judgment to Employers Mutual because there was a genuine issue of material fact regarding the status of an "additional interested party" under the policy. But it granted Continental's motion for summary judgment, explaining that Employers Mutual failed to make an unequivocal demonstration that Continental is not an additional insured under the Policy. On motion from Employers Mutual, the District Court certified its order "as final in its entirety for purposes of appeal" pursuant to M. R. Civ. P. 54(b), and we authorized the appeal to proceed. M. R. App. P. 4(4)(b).
STANDARDS OF REVIEW
¶6 Summary judgment is proper only when no genuine issues of material fact exist and the moving party is entitled to judgment as a matter of law. Plum Creek Mktg., Inc. v. Am. Econ. Ins. Co. , 2009 MT 264, ¶ 21, 352 Mont. 56, 214 P.3d 1238. The party seeking summary judgment has the initial burden of showing a complete absence of any genuine issue of material fact in "the pleadings, the discovery and disclosure materials on file, and any affidavits" and that the party is entitled to judgment as a matter of law. See M. R. Civ. P. 56(c)(3) ; Davis v. Westphal , 2017 MT 276, ¶ 12, 389 Mont. 251, 405 P.3d 73. The burden then shifts to the party opposing the motion to show either the existence of a genuine issue of material fact or that the moving party is not entitled to judgment as a matter of law on the undisputed facts of the record. Davis , ¶ 12. The court must view the record in the light most favorable to the non-moving party and draw all reasonable inferences against summary judgment. Davis , ¶ 12. But "the court has 'no duty to anticipate or speculate' regarding contrary material facts." Davis , ¶ 12 (quoting Gamble Robinson Co. v. Carousel Props. , 212 Mont. 305, 312, 688 P.2d 283, 287 (1984) ). We review a district court's conclusions of law for correctness. Plum Creek Mktg., Inc. , ¶ 21.
DISCUSSION
¶7 1. Did the District Court err as a matter of law when it determined that Employers Mutual must defend Continental as an additional insured under the CGL insurance policy issued to Black Rock?
¶8 Employers Mutual challenges the District Court's determination that it had a duty to defend Continental. It argues on appeal that Continental is not an additional insured under the Policy as a matter of law. First, Continental does not meet the contractual requirements to be an automatic additional insured under the Policy: there is no evidence in the record that Black Rock and Continental executed a Master Service Contract before Buckles's death or that Continental leased a premises or equipment to Black Rock. Second, Employers Mutual argues that Continental is not listed as an additional insured in the Policy, and the unambiguous waiver of subrogation endorsement does not grant additional insured status.
¶9 In response, Continental relies on our holdings in Tidyman's Management Services, Inc. v. Davis , 2014 MT 205, ¶ 29, 376 Mont. 80, 330 P.3d 1139 ( Tidyman's I ), and Farmers Union Mutual Insurance Co. v. Staples , 2004 MT 108, ¶ 22, 321 Mont. 99, 90 P.3d 381, to argue that the District Court correctly required Employers Mutual to "unequivocally demonstrat[e]" that the claim against Continental did not fall within the coverage of the Policy. Continental maintains that because Employers Mutual cannot unequivocally demonstrate that claim does not fall within the coverage of the Policy, it violated the duty to defend by refusing to defend under a reservation of rights while seeking a court determination of its duties.
¶10 As this Court explained in Staples , "the general rule is that the insurer has a duty to defend when a complaint filed against its insured sets forth the facts which bring the event within the policy provisions." Staples , ¶ 20 (quoting Graber v. State Farm , 244 Mont. 265, 270, 797 P.2d 214, 217 (1990) ); see also Plum Creek Mktg., Inc. , ¶ 31. Thus, before a duty to defend can arise under policy provisions based on claims in a complaint, the party seeking insurance coverage must be an insured under the policy. See Staples , ¶ 20. "An insurer must defend unless there exists an unequivocal demonstration that the claim against the insured does not fall under the policy's coverage." Plum Creek Mktg., Inc. , ¶ 31 (quoting Farmers Union Mut. Ins. Co. v. Rumph , 2007 MT 249, ¶ 14, 339 Mont. 251, 170 P.3d 934 ). "The interpretation of an insurance policy presents a question of law."
Plum Creek Mktg., Inc. , ¶ 31.
¶11 This case raises the fundamental question whether Continental qualifies for any coverage under the subject policy regardless of the claim. Unlike Tidyman's I and Staples , the answer to this question is readily determined from the insurance policy in question and does not challenge or depend on the veracity of the allegations in the underlying complaint. Rather, the question raised in this appeal is a matter of contract interpretation, which is a question of law. See Plum Creek Mktg., Inc. , ¶ 31.
¶12 Black Rock is the only named insured on the Policy issued on February 18, 2014. The Policy includes a Commercial General Liability Coverage Form, laying out the general provisions of the insurance contract. This form is organized into five sections: Section I - Coverages; Section II - Who Is An Insured; Section III - Limits Of Insurance; Section IV - Commercial General Liability Conditions; and Section V - Definitions. The Policy then contains a number of endorsements directly amending or adding to the CGL coverage form. The issues on appeal center around two of these endorsements: the Liability Extension Endorsement and a separate endorsement added to the Policy on April 21, 2014 (the "April Endorsement"). We discuss each in turn.
¶13 Employers Mutual first argues on appeal that Continental does not meet the requirements to be an automatic additional insured under the Liability Extension Endorsement to the Policy: (1) the written Master Service Contract between Black Rock and Continental was not executed before Buckles's death, because Continental had not signed the contract at the time of Buckles's death; and (2) there is no evidence that Continental is a lessor of a premises or equipment to Black Rock or a state or political subdivision. In support of its arguments, Employers Mutual produced the Master Service Contract between Black Rock and Continental and the Policy and its endorsements.
¶14 The Liability Extension Endorsement to the Policy states that it amends Section II - Who Is An Insured of the CGL coverage form. The amended provisions provide for automatic additional insured status only for specified relationships. First, Black Rock, the named insured, must have a written contract with a person or organization that is in effect and executed before a covered occurrence and requires it to add the person or organization as an additional insured. Second, in order for a third party to be covered as an automatic additional insured under this endorsement, the third party must be (1) "[t]he manager or lessor of a premises leased to" Black Rock with whom Black Rock has "agreed per a written contract ... to provide insurance, but only with respect to liability arising out of the ownership, maintenance or use of that part of the premises leased to" Black Rock; (2) "[a]ny state or political subdivision with which [Black Rock] ha[s] agreed per a written contract ... to provide insurance," but only in regard to certain activities for which the state or political subdivision has issued a permit; or (3) "[a]ny person or organization from which [Black Rock] lease[s] equipment with whom [Black Rock] ha[s] agreed per a written contract ... to provide insurance with respect to liability for 'bodily injury', 'property damage' or 'personal and advertising injury' caused in whole or in part by [Black Rock's] maintenance, operation, or use of equipment leased to [Black Rock] by such person(s) or organization(s)." No party argues that Continental is a state or political subdivision. Therefore, Continental can be covered under the automatic additional insured provisions only if it is a manager or lessor of a premises to Black Rock or a lessor of equipment to Black Rock that has contracted with Black Rock to provide insurance for liability arising out of Black Rock's maintenance, operation, or use of such leased premises or equipment.
¶15 Even assuming the Master Service Contract was executed and in force before Buckles's death-a point the parties dispute-the Master Service Contract between Continental and Black Rock does not help Continental. The Master Service Contract between Continental and Black Rock-which is the only written agreement requiring Black Rock to maintain insurance coverage for Continental in the record-is what it proclaims itself to be: a service contract. It does not provide for the leasing of a premises or any equipment from Continental to Black Rock. In fact, the only two mentions of equipment use in the contract provide that Black Rock represents that all of its equipment has been thoroughly tested, inspected, and is safe and that any equipment that Black Rock uses or furnishes in connection with the work under the Master Service Contract does not infringe on any licenses or patents.
¶16 In its summary judgment briefing before the District Court, Employers Mutual maintained that it was undisputed that Continental did not fall within any of these categories, because the Master Service Contract did not fall within the unambiguous requirements for automatic additional insured coverage in the Liability Extension Endorsement. Employers Mutual produced the Policy and the Master Service Agreement between Black Rock and Continental. Our interpretation of these documents is a matter of law. See Plum Creek Mktg., Inc. , ¶ 31. These documents establish unequivocally that Continental was not an automatic additional insured under the policy. In its District Court briefing, Continental failed to produce any evidence to raise a genuine issue of material fact whether Black Rock and Continental were parties to a written agreement that would qualify under the automatic additional insured provision of the Policy. Continental's Rule 56(f) affidavit requesting further discovery did not identify what additional discovery it needed from Employers Mutual to demonstrate that it was a lessor of a premises or equipment to Black Rock. This makes sense, as we would expect evidence of any leasing agreement between Continental and Black Rock to be in Continental's control. Continental produced no evidence or affidavits of any such agreements before the District Court. In its briefing before this Court, Continental speculates that leasing of equipment could have occurred "depending on the context of how the term 'lease' is used in the Policy." At the summary judgment phase, however, such speculation without any evidence to support it is not enough to raise a genuine issue of material fact. See Davis , ¶ 12. Upon review of the record, we hold that Employers Mutual was entitled to summary judgment that Continental was not an automatic additional insured under the terms of the Liability Extension Endorsement.
¶17 We next address Employers Mutual's contention that Continental is excluded from coverage under the Policy because Continental is not named as an additional insured. Continental maintains that the April Endorsement named it as an "additional interested party." It argues that because this term is not defined in the Policy, it is ambiguous and can be fairly interpreted as synonymous with "additional insured."
¶18 The first page of the April Endorsement provides the date the endorsement was issued and its effective dates. It states: "In consideration of the premium charged the following item ... additional interested parties ... is changed to read: (see page two for endorsement description)." Page two states: "Class 87734 and Form CG2404 have been amended adding waiver of subrogation Continental Resources, Inc." Attached is an updated general liability policy declarations form with an endorsement schedule, an updated general liability schedule, and the referenced Form CG2404. Form CG2404, titled "Waiver of Transfer of Rights of Recovery Against Others to Us," states that Employers Mutual "waive[s] any right of recovery [it] may have against the person or organization" shown on the declarations page "for injury or damage arising out of" Black Rock's ongoing operations or work performed under a contract with that person or entity. The updated declarations form shows the addition of Form CG2404 to the Policy and lists Continental Resources under that form. The updated general liability schedule shows changes to Black Rock's premium related to the April Endorsement in a table format.
¶19 Employers Mutual maintains that the April Endorsement is simply a subrogation waiver that waives any right it may have to recover against Continental in certain circumstances. Continental argues that the April Endorsement adds it as a named additional insured. Continental puts a great amount of weight on the charges listed on the updated general liability schedule. Continental argues that the form shows two separate charges: a $ 0 charge and a $ 15 charge. Continental maintains that the $ 15 premium was charged for adding the "additional interest" and $ 0 was charged for the subrogation waiver described in Form CG2404.
¶20 Interpreting whether the April Endorsement adds Continental Resources as an additional insured is a matter of contract interpretation that can be determined as a matter of law. See Plum Creek Mktg., Inc. , ¶ 31. Although the April Endorsement does not define "additional interest" or "additional interested parties," the descriptions in the April Endorsement and the forms attached make clear that the April Endorsement waives Employers Mutual's subrogation rights against Continental. We reject Continental's argument that the April Endorsement also fairly may be read to add Continental as an additional insured under the Policy. Upon review of the table showing the premium changes on the updated general liability schedule, it is clear that the $ 0 is listed next to the change in class number and the $ 15 charge is listed next to the information identifying the addition of Form CG2404 to the Policy. Further, the April Endorsement provides no description of coverage for Continental under the Policy and does not state that it amends Section II of the Policy entitled, "Who Is An Insured." The explicit incorporation of Form CG2404 and that form's explanation of the subrogation waiver demonstrate plainly that the April Endorsement is not for purposes of adding Continental as an insured. The District Court erred in determining that genuine issues of material fact remained to be determined regarding the status of an "additional interested party" under the Policy, because the interpretation of this term is a question of law. We conclude that the April Endorsement does not extend additional insured status to Continental.
¶21 Under any reasonable interpretation of the insurance contract and its endorsements, the Policy does not cover Continental as an additional insured. Thus, Employers Mutual owes no duty to defend or indemnify Continental under the Policy.
¶22 2. Did the District Court err as a matter of law when it determined that the pollution exclusion in the CGL insurance policy did not apply to exclude coverage?
¶23 Because we determine that Continental is not an additional insured under the Policy, we need not address whether the Policy's pollution exclusion applies.
CONCLUSION
¶24 We reverse and remand to the District Court with instructions to grant Employers Mutual's motion for summary judgment and enter judgment that Employers Mutual owes no duty to defend or indemnify Continental under the Policy.
We Concur:
MIKE McGRATH, C.J.
LAURIE McKINNON, J.
JIM RICE, J.
INGRID GUSTAFSON, J.
Three other motions decided in the same order affecting Black Rock and other defendants are not at issue on appeal, and Black Rock was dismissed from the action without prejudice by stipulation.
Continental argues that this issue was not certified as final for appeal under Rule 54(b). In its certification order, the District Court explained that the "specific issues related to the adjudicated claims, [Employers Mutual's] duty to defend and whether [Employers Mutual] met its burden and provided an 'unequivocal showing' that [Continental] was not an additional insured, would not be brought before the appellate court again and would, after ruling by the appellate court, be fully adjudicated." Thus, the District Court certified as final its determination that Continental was an additional insured and that Employers Mutual owed it a duty to defend. The question of Continental's status as an automatic additional insured is properly before this Court on appeal.
The record contains two versions of the Policy. Continental argued below that the two versions of the Policy were substantively different and conflicted with one another. The District Court did not determine that the two versions were substantively different and Continental does not renew that argument on appeal. The provisions we rely on in this Opinion are identical in both versions. | [
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Justice Beth Baker delivered the Opinion of the Court.
¶1 The United States District Court for the District of Montana certified a question to this Court to address the Estate of Darrell L. Ward's third-party claim to stacked liability limits in an aircraft insurance policy that covered multiple aircraft. We accepted the question and have reformulated it pursuant to M. R. App. P. 15(4) as follows:
Is the Estate of Darrell L. Ward entitled to stack the limits of liability coverage for three separate aircraft under the terms of an insurance policy issued to the pilot of an aircraft in which Ward was a passenger at the time it crashed?
¶2 We conclude that the answer to the reformulated question is no.
PROCEDURAL AND FACTUAL BACKGROUND
¶3 Mark Melotz was piloting his aircraft, FAA Number N9936T, with Darrell Ward as a passenger. The plane crashed, and both Melotz and Ward were killed. At the time of the accident, Melotz insured N9936T and two other aircraft under one insurance policy issued by U.S. Specialty Insurance Company ("USSIC"). Melotz paid a separate premium for each aircraft.
¶4 The policy's applicable coverage provision provides as follows:
1. What We Cover
We will pay damages you , and anyone we protect, are legally required to pay for bodily injury or property damage caused by an occurrence during the policy period.
...
e. Coverage DL covers bodily injury to passengers and others and property damage in a combined limit of liability for each occurrence which includes a lower limit for each passenger .
The most we will pay for bodily injury to each passenger is shown in item 6DL opposite "each person". The most we will pay for all bodily injury and property damage is shown in item 6DL opposite "each occurrence".
The policy identifies each aircraft on the coverage identification page in item 6 with a $100,000 limit for "each person," and a $1,000,000 limit for "each occurrence," as follows:
?
The policy defines an "occurrence" as "a sudden event ... involving the aircraft during the policy period, neither expected nor intended by you , that causes bodily injury ."
¶5 Following Ward's death, USSIC paid Ward's Estate $100,000-the per-passenger limit for bodily injury claims involving N9936T. The Estate argued that it was entitled to stack the coverage of each aircraft's per-passenger limit, for a total of $300,000. USSIC filed a declaratory judgment action in the United States District Court for the District of Montana, seeking a declaration that it was under no duty or obligation to pay more than $100,000 to Ward's Estate under the terms of the policy and that USSIC's aircraft policy coverage for passengers cannot be stacked. The Estate and USSIC submitted cross-motions for summary judgment. The U.S. District Court certified to this Court the question of stacking insurance coverage limits in aviation cases.
STANDARD OF REVIEW
¶6 M. R. App. P. 15(3) permits this Court to answer a question of law certified to it by another qualifying court. Our review of a certified question is "purely an interpretation of the law as applied to the agreed facts underlying the action." N. Pac. Ins. Co. v. Stucky , 2014 MT 299, ¶ 18, 377 Mont. 25, 338 P.3d 56 (internal citation omitted).
DISCUSSION
¶7 The interpretation of an insurance contract is a question of law. Fisher v. State Farm Mut. Auto. Ins. Co. , 2013 MT 208, ¶ 11, 371 Mont. 147, 305 P.3d 861. General rules of contract law apply to insurance policies. Kilby Butte Colony, Inc. v. State Farm Mut. Auto. Ins. Co. , 2017 MT 246, ¶ 10, 389 Mont. 48, 403 P.3d 664. "When interpreting an insurance contract, we accord the usual meaning to the terms and the words used, and we construe them using common sense." Fisher , ¶ 13 (citing Modroo v. Nationwide Mut. Fire Ins. Co. , 2008 MT 275, ¶ 23, 345 Mont. 262, 191 P.3d 389 ). An insurance contract is ambiguous if it is "reasonably subject to two different interpretations." Fisher , ¶ 15 (internal citations omitted). Whether a provision of an insurance contract is "reasonably susceptible to two different interpretations" is determined from "the viewpoint of a consumer with average intelligence, but untrained in the law or insurance business." Fisher , ¶ 15 (internal citations omitted). A provision is not ambiguous "just because a claimant says so or just because the parties disagree as to [its] meaning." Fisher , ¶ 15 (internal citations omitted).
¶8 The USSIC policy provides coverage in a "combined limit of liability for each occurrence which includes a lower limit for each passenger ." The Coverages and Limits of Liability table states, "The most we will pay under each coverage we provide is shown below for each aircraft." The policy defines aircraft as the aircraft shown on the Coverage Identification Page of the policy, where N9936T and two other aircraft are listed. The limit of liability for each aircraft is $100,000 for each passenger, up to a combined limit of $1,000,000 for each occurrence. An occurrence is a "sudden event ... involving the aircraft ... that causes bodily injury ." (Bold emphasis in original; italicized emphasis added). The policy does not define the word "involving," but a common-sense reading of that term makes plain that it refers to the aircraft that is a part of the sudden event that caused bodily injury. See Involve, Oxford English Dictionary (Compact ed. 1971) ("to enfold, envelop, entangle, include"). The aircraft that was part of the crash resulting in Ward's and Melotz's deaths was N9936T. Although the word "aircraft" could refer to either the singular or the plural, the provision must be read as a whole. See Farmers All. Mut. Ins. Co. v. Holeman , 1998 MT 155, ¶ 25, 289 Mont. 312, 961 P.2d 114. Reading the entire clause, it is unambiguous that the aircraft must be "involved" to be part of an occurrence.
¶9 An unambiguous insurance provision is enforced unless the provision violates public policy or is against good morals. Fisher , ¶ 25. Having determined that the USSIC policy unambiguously includes only the aircraft that is part of the sudden event, we next consider the Estate's argument that public policy requires the stacking of the third-party liability coverage. "As a general rule, the Montana public policy is prescribed by the legislature through its enactment of statutes." Hardy v. Progressive Specialty Ins. Co. , 2003 MT 85, ¶ 32, 315 Mont. 107, 67 P.3d 892 (citing Duck Inn, Inc. v. Mont. St. Univ. , 285 Mont. 519, 523-24, 949 P.2d 1179, 1182 (1997) ).
¶10 Insurance provisions that violate express statutes are contrary to public policy and void. Fisher , ¶ 25. There is no Montana statute that applies specifically to aviation policies. Section 33-23-203(1), MCA, pertains to the stacking of coverage limits on "motor vehicle liability policies." Montana law defines both motor vehicle and aircraft. " 'Motor vehicle' means a vehicle propelled by its own power and designed primarily to transport persons or property on the highways of the state." Section 33-23-204(1)(a), MCA. " 'Aircraft' means a contrivance used or designed for navigation of or flight in the air." Section 67-1-101(4), MCA. Section 33-23-203, MCA, by its terms does not apply to aircraft liability policies. Indeed, Montana does not statutorily regulate aviation insurance in any manner. Compare with, e.g. , Haw. Admin. R. § 19-17.1-8 (Hawaii law requires those persons renting hangar space at public airports to maintain general liability insurance); Md. Code Ann., Trans. § 5-1002 (Maryland law requires liability insurance for aircraft used for commercial purposes). Further, the aircraft liability insurance requirements set forth by Congress apply only to air carriers and charter air carriers, not to general aviation aircraft. 49 U.S.C. § 41112. Enactments of the Montana Legislature and Congress offer no guidance setting forth public policy regarding stacking of general aviation policies because neither has a statute governing the issue. No express statutes apply to the USSIC insurance policy, and it thus does not contravene any public policy set by statute.
¶11 As we observed in Fisher , ¶ 33, when there is no statute guiding the applicable policy, insurance provisions still may be against public policy and therefore void. We have, for example, voided insurance policies' subrogation clauses when they required the insured to reimburse contractual medical payments ("med-pay") benefits from their settlements with a third-party tortfeasor. See, e.g. , Youngblood v. Am. States Ins. Co. , 262 Mont. 391, 397, 866 P.2d 203, 206 (1993) ; Allstate Ins. Co. v. Reitler , 192 Mont. 351, 356, 628 P.2d 667, 670 (1981). We also have voided provisions that render coverage "illusory" by defeating coverage for which the insurer has received valuable consideration. Hardy , ¶¶ 38, 40 (citing Bennett v. State Farm Mut. Auto. Ins. Co. , 261 Mont. 386, 389, 862 P.2d 1146, 1148 (1993) ). In Hardy , the insured purchased a motor vehicle policy that provided $50,000 per person in underinsured motorist coverage for three separate vehicles. Hardy , ¶ 8. Due to an offset in the contract and Montana's minimum mandatory coverage requirements, the insured's coverage would be offset by at least $25,000 in practically all circumstances. Hardy , ¶ 17. Thus, in nearly all conceivable situations the insurer's promise to pay up $50,000 would not be honored. Hardy , ¶ 28. This Court held that since the insurer would hardly, if ever, provide the insured with the amount of coverage she thought that she purchased, the coverage was illusory. Hardy , ¶ 29.
¶12 The policy at issue here does not fall under either of these situations. There is no subrogation clause at issue, nor is the coverage illusory, because the Estate received the maximum benefits of the applicable coverage for the involved aircraft. Melotz paid a premium to cover each aircraft, with benefits limited to $100,000 per passenger and $1,000,000 per occurrence. The policy allowed simultaneous coverage for pilots other than Melotz if they met the Open Pilot Warranty for the named aircraft. The occurrence at issue involved only one insured aircraft. The Estate received the full per-passenger benefit from the involved aircraft's policy. Not allowing the three coverages to be stacked therefore does not render the coverage illusory.
¶13 The Estate argues that the reasonable expectations doctrine requires that USSIC honor the combined coverages Melotz purchased because it charged multiple premiums for multiple coverages. Melotz adds that he had an expectation that the liability coverage purchased for N9936T would be commensurate with all premiums he paid, and because he paid multiple premiums the coverages therefore should be stacked. The " 'reasonable expectations doctrine' mandates that, unless the terms of an insurance policy 'clearly demonstrate an intent to exclude coverage,' an insurance buyer's 'objectively reasonable expectations' regarding the nature of the policy 'should be honored notwithstanding the fact that a painstaking study of the policy would have negated those expectations.' " Lenz v. FSC Secs. Corp. , 2018 MT 67, ¶ 29, 391 Mont. 84, 414 P.3d 1262 (quoting Giacomelli v. Scottsdale Ins. Co. , 2009 MT 418, ¶ 42, 354 Mont. 15, 221 P.3d 666 ). The reasonable expectations doctrine is public policy-based. It requires "liberal construction of insurance contracts in favor of coverage when the policy language is such that 'an ordinary, objectively reasonable person ... would fail to understand' that the policy technically does not provide the coverage at issue or where 'circumstances attributable to'
the insurer would cause 'an ordinary, objectively reasonable person' to believe that the coverage exists." Lenz , ¶ 29 (quoting Bailey v. Lincoln Gen. Ins. Co. , 255 P.3d 1039, 1048-49 (Colo. 2011) ). Under the principle of reasonable expectations, the terms of insurance policies are construed in their plain, ordinary, and popular sense. Appleman on Insurance Law & Practice § 4254 (Richard B. Buckley ed., 2011).
¶14 Whether a claimant has a reasonable expectation to stack insurance coverage depends on the plain, ordinary language of the policy and the status of the claimant. In Chilberg v. Rose , 273 Mont. 414, 419, 903 P.2d 1377, 1380 (1995), we held that a claimant could not stack uninsured motorist coverage on three policies because he did not qualify as an insured under two of the policies.
Chilberg was injured when the vehicle in which he was a passenger was in an accident. Chilberg , 273 Mont. at 415, 903 P.2d at 1378. The vehicle was covered under a policy that provided coverage for medical expenses and for bodily injury caused by uninsured motorists. Chilberg , 273 Mont. at 415, 903 P.2d at 1378. At the time of the accident, the owner also had separate insurance policies on two other vehicles for which he paid separate premiums. Chilberg , 273 Mont. at 415, 903 P.2d at 1378. The three separate policies covered the "named insured" or "any other person while occupying [the] insured car." Chilberg , 273 Mont. at 417, 903 P.2d at 1379. Chilberg alleged that he was entitled to stack the coverages of all three vehicles. Chilberg , 273 Mont. at 415, 903 P.2d at 1378. This Court held that Chilberg did not have a reasonable expectation of coverage under the three policies because he did not qualify as an insured for two of the policies; he was neither the named insured nor a passenger in the other two vehicles. He was therefore not entitled to stack the policies. Chilberg , 273 Mont. at 418, 903 P.2d at 1380. The public policy rationale underlying stacking, "namely prohibiting insurers from defeating coverage which the insured reasonably expected," is not served by stacking the policies when the claimant is not an insured. Chilberg , 273 Mont. at 419, 903 P.2d at 1380.
¶15 We followed similar reasoning in Lierboe v. State Farm Mutual Automobile Insurance Company , 2003 MT 174, 316 Mont. 382, 73 P.3d 800. Lierboe suffered physical injury as a result of an automobile collision. The vehicle Lierboe was driving was covered by a policy that provided med-pay coverage. Lierboe , ¶ 7. Lierboe also had an interest in a corporation that had separate insurance policies providing med-pay coverages for two pickup trucks. Neither truck was involved in the accident. Lierboe , ¶ 8. One truck's policy expressly provided that there was no med-pay coverage for bodily injury "sustained while occupying or through being struck by a vehicle owned or leased by you or any other relative, which is not insured under this coverage." Lierboe , ¶ 12 (emphasis omitted). The truck policy therefore expressly excluded coverage for vehicles not insured under the truck policy. Lierboe did not qualify as an insured under the truck policy because she was not occupying the truck when the accident occurred, and she therefore could not stack the med-pay coverage. Lierboe , ¶ 19. This Court later reaffirmed that Lierboe applies when "a claimant seeks to stack coverages from a vehicle she does not own and from an insurance policy she did not purchase." State Farm Mut. Auto. Ins. Co. v Gibson , 2007 MT 153, ¶ 22, 337 Mont. 509, 163 P.3d 387.
¶16 In contrast, we have held that an insured claimant has a reasonable expectation to recover up to the limits for which the insurer receives separate premiums when the coverage is personal to the insured. Bennett v. State Farm Mut. Auto. Ins. Co. , 261 Mont. 386, 389-90, 862 P.2d 1146, 1149-50 (1993). Bennett was a pedestrian struck by an underinsured motorist. She was insured at the time under two separate State Farm motor vehicle policies. Bennett , 261 Mont. at 387-88, 862 P.2d at 1147. This Court looked to the plain language of the policies to determine what the insured reasonably could expect to recover. Bennett , 261 Mont. at 389-90, 862 P.2d at 1148-49. The insurer paid the limits of one policy. It argued that the underinsured motorist protection of the other policy could not be stacked because an insured cannot reasonably expect that buying a policy on a second car increases the limits of the coverage on the car she already has insured. Bennett , 261 Mont. at 389, 862 P.2d at 1148. This Court noted that State Farm's argument "might be persuasive," but for the clear and unambiguous language of the insurance policy: "We will pay damages for bodily injury an insured is legally entitled to collect from the owner or driver of an underinsured motor vehicle." Bennett , 261 Mont. at 389, 862 P.2d at 1148. The statement made the coverage personal to the insured because it was not dependent upon the insured occupying an insured vehicle. Bennett , 261 Mont. at 389, 862 P.2d at 1148. From the plain language of the policy, the insured therefore "could reasonably expect to recover damages up to the limit of both policies under which she was an insured and for which separate premiums had been paid." Bennett , 261 Mont. at 389-90, 862 P.2d at 1148.
¶17 Relying on Bennett , we clarified in Holeman that a passenger in a covered automobile is entitled to stack underinsured motorist coverages, even if he didn't pay the premiums, when he was an "insured" under the policy. Holeman , ¶¶ 42-44. Holeman was a passenger in an insured vehicle involved in an accident, and the premiums were paid by the owner of the vehicle. Holeman , ¶¶ 7, 11. For purposes of underinsured motorist and med-pay coverage as defined in the policy, Holeman was an "insured." Holeman , ¶ 11. The policy provided that the insurer is required to pay "all sums the 'insured' is legally entitled to recover." Holeman , ¶ 12. This Court reaffirmed that "the justification for stacking lies not in who has paid for the extra protection, but rather that the protection has been purchased," and "the benefits flow to all persons insured." Holeman , ¶ 39 (quoting Sayers v. Safeco Ins. Co. , 192 Mont. 336, 340, 628 P.2d 659, 662 (1981) ). Regardless whether the claimant had any reasonable expectation to coverage when he did not purchase the policy at issue, he undisputedly qualified as an insured under the terms of the policy by virtue of his occupancy in the insured vehicle. Holeman , ¶ 44. Despite the apparent inapplicability of the reasonable expectations doctrine, we applied the public policy considerations set forth in Bennett to permit the claimant to stack the underinsured motorist coverages because he was an "insured" as defined in the policy. Holeman , ¶ 44.
¶18 The Estate argues that liability coverage under the aircraft policy is, for "all intents and purposes, 'personal and portable,' " and stacking should be allowed. The Estate maintains that since the liability policy "followed" Melotz to newly acquired aircraft, temporary substitute aircraft, and aircraft that he did not own, it was personal and portable. In Jacobson v. Implement Dealers Mutual Insurance Company , 196 Mont. 542, 547-48, 640 P.2d 908, 912 (1982), we discussed uninsured motorist coverage as being personal to the insured, explaining that there is no requirement the insured be occupying an insured vehicle. We reasoned that when coverage is personal to the insured, there is no connection to the "automobile listed on the policy." Jacobson , 196 Mont. at 547-48, 640 P.2d at 912. This is the principle we applied in Bennett to extend coverages to the insured pedestrian. The liability benefits at issue here, in contrast, require a connection with the "involved" aircraft listed on the policy. USSIC's policy provides that liability coverage extends only to damage or injury sustained when an aircraft is involved in an occurrence. Although the insured Melotz would have coverage for an occurrence when piloting some other aircraft, the policy would cover bodily injury to a third party only when that aircraft was involved in an occurrence. The policy requires a connection between an occurrence and the involved aircraft to cover bodily injury. Because the liability coverage is tied to the involvement of a particular aircraft, it is not reasonable to expect that the policy would pay more than the limits provided for that aircraft.
¶19 The plain language of the USSIC policy and the Estate's status do not entitle it to a reasonable expectation of stacked liability coverage. The policy defines passenger as "any person who is in the aircraft or getting in or out of it." Coverage is limited to the aircraft involved in the crash. As a passenger in N9936T, Ward was an insured under that policy only. Ward did not have a connection to the other two aircraft because he was not a passenger in either of those aircraft and he was not an insured. The policy states that "the most" USSIC will pay per passenger is $100,000 for each occurrence. Similar to Lierboe and Chilberg , the plain language of the policy makes clear that the aircraft not involved in an accident are not part of the occurrence and coverage for those aircraft is not available for that accident. Ward was not an insured and did not have a reasonable expectation of benefits for additional aircraft owned by Melotz that were not "involved" in the crash.
¶20 Finally, the Estate of Melotz does not have a reasonable expectation under the plain language of the policy that Ward is entitled to stack the coverages. Unlike in Holeman , although Melotz paid premiums for three separate polices, Ward was not an "insured" under Melotz's policies for the uninvolved aircraft. And Melotz did not seek benefits under the policy's "liability to others"
coverage. Melotz did not have a reasonable expectation that a third party would be entitled to stack coverages for which that party was not an insured. Melotz paid for coverage that would pay liability damages for bodily injury caused by an occurrence with a separate coverage limit for each aircraft. Any expectation that a passenger would recover more than the $100,000 limit for the aircraft involved in a crash is not objectively reasonable under a common-sense reading of the policy. See Fisher , ¶¶ 13, 22.
CONCLUSION
¶21 The plain, unambiguous language of the contract limits the coverage to the aircraft that is involved in an accident. There is no statute or public policy that mandates payment of the cumulative coverage for separate aircraft in an aviation liability insurance policy that does not provide for such payment. We hold that Melotz's USSIC policy is not subject to stacking of its passenger liability coverages, and we therefore answer "no" to the reformulated certified question.
We Concur:
MIKE McGRATH, C.J.
JAMES JEREMIAH SHEA, J.
JIM RICE, J.
LAURIE McKINNON, J.
DIRK M. SANDEFUR, J.
INGRID GUSTAFSON, J.
"General aviation" refers to aviation that is neither military aviation nor commercial aviation conducted pursuant to certification under 49 U.S.C. § 41102.
Under N9936T, the Open Pilot Warranty provides coverage for "[a]ny pilot having logged a minimum of 300 hours total time and 10 hours in the same make and model as [that] aircraft" is covered under the policy. Each of the other insured aircraft carried its own requirements for pilot qualifications. | [
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Justice Beth Baker delivered the Opinion of the Court.
¶1 HRC Two Rivers LLC and HRC Cottages Inc. (collectively the "General Partners") appeal the Fourth Judicial District Court, Missoula County, order dismissing their Third-Party Complaint against Aultco Construction Inc. as barred by the principles of res judicata and collateral estoppel. The General Partners assert that a prior suit by their partnership entity does not preclude the General Partners from pursuing their claims against Aultco. We affirm.
PROCEDURAL AND FACTUAL BACKGROUND
¶2 Two Rivers Apartments LLLP (Two Rivers Apartments) contracted with Aultco Construction Inc. (Aultco) to build an eight-plex apartment building in St. Regis. HRC Two Rivers LLC and HRC Cottages Inc. are general partners of Two Rivers Apartments. USA Institutional Two Rivers LLC is a limited partner of Two Rivers Apartments. In 2015, Two Rivers Apartments filed suit against Aultco, alleging negligent construction resulting in mold in the attic of the apartments (the "Two Rivers case"). After two years, the parties signed a mutual release and settlement agreement and agreed to dismiss with prejudice. The District Court so ordered.
¶3 The apartment tenants then filed suit against Two Rivers Apartments and the General Partners, alleging that Two Rivers Apartments failed to give them the statutorily required disclosure of mold testing and its results. The General Partners filed a Third-Party Complaint against Aultco for contribution and indemnity if the General Partners were found liable for damages caused by Aultco's negligent conduct.
¶4 Aultco moved to dismiss the Third-Party Complaint based on res judicata. The District Court granted Aultco's motion on the grounds of either res judicata or collateral estoppel. Reasoning that Aultco's negligence in this case has been litigated, settled, and dismissed with prejudice, and considering that the entities are so intertwined as effectively to be one, the court held that res judicata and collateral estoppel had been satisfied.
STANDARDS OF REVIEW
¶5 We review de novo a district court's ruling on a M. R. Civ. P. 12(b)(6) motion to dismiss. W. Sec. Bank v. Eide Bailly, LLP , 2010 MT 291, ¶ 18, 359 Mont. 34, 249 P.3d 35. We also review de novo a district court's interpretation and application of a statute; the court's application of claim preclusion or issue preclusion is a question of law that we review for correctness. Brilz v. Metro. Gen. Ins. Co. , 2012 MT 184, ¶ 13, 366 Mont. 78, 285 P.3d 494.
DISCUSSION
¶6 The District Court concluded that, because of their interest in Two Rivers Apartments, the General Partners had the opportunity to be included as plaintiffs in the Two Rivers case but chose not to be. The court reasoned that the President of both Two Rivers Apartments and of each of the General Partners, Jim Morton, testified in his deposition that he was the person who made the decision to bring the previous lawsuit against Aultco-choosing whom to include as parties in the original suit but providing no explanation why the General Partners were not named. The District Court concluded further that the General Partners "are so intertwined with Two Rivers [Apartments] as to be the same entity." Because "[t]he matter of Aultco's negligence in this case has been litigated, settled, and dismissed with prejudice," the court dismissed the General Partners' third-party claims based on res judicata, collateral estoppel, or both.
¶7 A final judgment may have a preclusive effect on future litigation by way of either res judicata or collateral estoppel. See Baltrusch v. Baltrusch , 2006 MT 51, ¶¶ 15-18, 331 Mont. 281, 130 P.3d 1267. The two doctrines are based on a judicial policy favoring a definite end to litigation, "whereby we seek to prevent parties from incessantly waging piecemeal, collateral attacks against judgments." Baltrusch , ¶ 15 (internal citation omitted). Although similar, the two doctrines are not the same. See Baltrusch , ¶¶ 15-18. The District Court order overlapped the two doctrines; we consider each in turn. See Baltrusch , ¶¶ 15-18.
¶8 Res judicata, or claim preclusion, bars a party from relitigating a matter that the party already had the opportunity to litigate. Baltrusch , ¶ 15. "This includes claims that were or could have been litigated in the first action." Brilz , ¶ 21 (emphasis in original). Res judicata applies if five elements have been satisfied: (1) the parties or their privies are the same; (2) the subject matter of the present and past actions is the same; (3) the issues are the same and relate to the same subject matter; (4) the capacities of the persons are the same in reference to the subject matter and to the issues between them; and (5) a final judgment has been entered on the merits in the first action. Bugli v. Ravalli County , 2018 MT 177, ¶ 9, 392 Mont. 131, 422 P.3d 131.
¶9 Collateral estoppel, or issue preclusion, is a form of res judicata, and bars the reopening of an issue that has been litigated and resolved in a prior suit. Baltrusch , ¶ 15. Collateral estoppel has four elements: (1) the identical issue raised was previously decided in a prior adjudication; (2) a final judgment on the merits was issued in the prior adjudication; (3) the party against whom the plea is now asserted was a party or in privity with a party to the prior adjudication; and (4) the party against whom preclusion is now asserted was afforded a full and fair opportunity to litigate the issue. McDaniel v. State , 2009 MT 159, ¶ 28, 350 Mont. 422, 208 P.3d 817. To determine whether the issue decided in the prior adjudication is identical to the issue raised in the present case, we compare the pleadings, evidence, and circumstances surrounding the two actions. McDaniel , ¶ 33.
¶10 On appeal, the General Partners challenge the res judicata elements whether the claims in the previous case are the same as those in this case and whether there was a final judgment on the merits binding the General Partners. The General Partners challenge the collateral estoppel elements whether the identical issue previously was decided, whether there was a final judgment on the merits, and whether the General Partners had a full and fair opportunity to litigate.
¶11 Preclusion under either res judicata or collateral estoppel requires a final judgment on the merits. Bugli , ¶ 9 ; McDaniel , ¶ 28. "Voluntary dismissal of an action with prejudice constitutes a final judgment on the merits." Touris v. Flathead County , 2011 MT 165, ¶ 15, 361 Mont. 172, 258 P.3d 1.
The General Partners argue that neither doctrine was satisfied because there was no final judgment in the prior lawsuit as it relates to the General Partners. They argue that the parties' intent governs whether a settlement agreement is a final judgment. The General Partners maintain that because the settlement agreement did not have the word "partners" in it, the parties intended for the General Partners to not be participants in the final judgment.
¶12 The settlement in the Two Rivers case involved two separate written release agreements. The first, stating the terms of the settlement between Two Rivers Apartments and two defendants other than Aultco, provided that the parties expressly agreed to release "the other Parties, as well as the other Parties' respective officers, directors, shareholders, trustees, partners , members, predecessors, successors, employees, attorneys, insurers, representatives, and agents ...." (Emphasis added). In the separate mutual settlement agreement between Two Rivers Apartments and Aultco, the agreement did not specifically identify "partners" as one of the affiliated entities being released. Given the list of parties in the agreement as a whole, however, and the fact that the agreement did not expressly reserve or indicate the parties' intent to reserve any rights of the General Partners, we agree with the District Court that the agreement contained insufficient language to support a conclusion that the parties intended to exclude the General Partners from the final settlement agreement and to reserve their right to litigate with Aultco. The agreement plainly intended to bind Two Rivers Apartments and its privies to the settlement.
¶13 The District Court properly concluded that the release operated as effectively on the General Partners as it did on Two Rivers Apartments. The concept of privity in the context of a judgment "applies to one whose interest has been legally represented at trial." Denturist Ass'n of Mont. v. State , 2016 MT 119, ¶ 14, 383 Mont. 391, 372 P.3d 466 (internal citation omitted); see also Taylor v. Sturgell , 553 U.S. 880, 894, 128 S. Ct. 2161, 2172, 171 L.Ed.2d 155 (2008) ("[A] nonparty may be bound by a judgment because she was 'adequately represented by someone with the same interests who [wa]s a party' to the suit." (internal quotations and citation omitted)). Privity exists where "two parties are so closely aligned in interest that one is the virtual representative of the other." Denturist Ass'n of Mont. , ¶ 14 (internal citation and quotation omitted). Privity exists between Two Rivers Apartments and the General Partners because the interests of the entities in the litigation are "closely aligned." Two Rivers Apartments, the entity in which both HRC Two Rivers LLC and HRC Cottages Inc. are general partners, made the same allegation that the General Partners now make: Aultco's negligence caused mold in the apartments. See Denturist Ass'n of Mont. , ¶ 15. The parties reached a settlement on that claim and stipulated that the case would be dismissed with prejudice. Although the District Court did not analyze whether there was a final judgment on the merits, element five of res judicata and element two of collateral estoppel both are satisfied because a binding settlement agreement that dismissed the case with prejudice is a final judgment on the merits. Touris , ¶ 15.
¶14 We turn next to whether the issue and claim in this action are the same as in the Two Rivers case. The General Partners argue that claim preclusion is not proper because the General Partners' claims are not the same claims Two Rivers Apartments made in the Two Rivers case.
The General Partners reason that Two Rivers Apartments made three claims against Aultco in the Two Rivers case: breach of contract, breach of warranty, and negligence. The General Partners maintain that in this case they have made two claims against Aultco: common law indemnity and contributory negligence. The claims thus are not identical, which is required for claim preclusion.
¶15 The General Partners also argue that issue preclusion is not proper because the issue the General Partners raise is not the same issue litigated in the previous lawsuit. The General Partners claim that the relevant issue in the previous lawsuit was whether Aultco was liable for mold in the attic. In the instant matter, the General Partners maintain that the issue the tenants raise is whether Two Rivers Apartments and its privies are liable for not providing notice of the mold to the tenants. The issue the General Partners raise in their Third-Party Complaint is whether, if the General Partners are held liable for failing to provide notice, Aultco is responsible to indemnify the General Partners or contribute to payment of damages.
¶16 Comparing the pleadings, the allegations made in the Two Rivers Complaint and Jury Demand are identical to those made in the General Partners' Third-Party Complaint. See McDaniel , ¶ 33. The Third-Party Complaint alleges that Aultco "failed to build the building in compliance with the specifications and drawings [and that its] failure to construct according to specifications and drawings caused mold to grow in attic spaces." The Third-Party Complaint also alleges that equipment Aultco used was not of good quality, new, or free from defect, and that the construction and services were not in compliance with the requirements of the warranty agreement. Count I claims that Aultco is liable to the tenants as a result of its negligence and that the General Partners are entitled to indemnity from Aultco. Count II claims that Aultco's negligence was the cause of the tenants' damages and Aultco therefore is contributorily liable. The Two Rivers Complaint and Jury Demand alleged that Aultco's negligence, breach of warranty, and failure to construct the building in compliance with the specifications caused mold to grow in the attic spaces. Substantively the General Partners' precise claims were alleged in the Two Rivers Complaint and Jury Demand-Aultco's negligent construction. The District Court did not err in concluding that the same claim of negligence was alleged in the Two Rivers case and in the current case.
¶17 The issue the tenants raise in the case at hand is whether they were notified about mold in the apartments. The issue on which the General Partners are attempting to sue Aultco, however, is the cause of that mold-whether Aultco is responsible for the mold and for the resulting injury. This is the same issue that was litigated and voluntarily settled with prejudice in the Two Rivers case. The General Partners' Third-Party Complaint and the Two Rivers Complaint and Jury Demand have substantively the same allegations. The General Partners do not raise a new issue or claim for purposes of res judicata or collateral estoppel analysis. The District Court correctly concluded that the issues and claims were the same for preclusion purposes.
¶18 Finally, the District Court concluded that the General Partners had a full and fair opportunity to litigate the issues raised in the previous case. Preventing repeated litigation of the same claims serves to "conserv[e] judicial resources." Baltrusch , ¶ 15 ; see also Denturist Ass'n of Mont., ¶ 15. The burden is on the party attempting to defeat the application of collateral estoppel to establish the absence of a full and fair opportunity to litigate. McDaniel , ¶ 42.
¶19 The purpose of the partnership is to operate the apartment complex in which the General Partners have an interest. Morton, the entities' common president, testified that the decision to file the lawsuit was a "combination of the partners' interest." It was Morton's decision as president and representative of the partnership, as well as members of the HRC Cottages Inc. board, to bring the suit and to name the parties. The General Partners offer no explanation why they did not participate as plaintiffs in the Two Rivers case, even though they are privies of Two Rivers Apartments and thus had the opportunity to be named parties. The General Partners allege that neither they nor Two Rivers Apartments were afforded an opportunity to seek indemnification or contribution from Aultco for failing to provide notice of mold to its tenants and should not be barred from doing so now. Yet the General Partners did not seek indemnification or contribution from Aultco for failing to provide notice. Their Third-Party Complaint seeks indemnification or contribution for Aultco's alleged faulty construction that caused the mold-the very issue and claim litigated and settled in the Two Rivers case. The General Partners had the opportunity to pursue their claims against Aultco in the Two Rivers case but inexplicably chose not to be included. The General Partners have not met their burden of establishing the absence of a full and fair opportunity to litigate. The fifth element of collateral estoppel therefore is satisfied.
¶20 The District Court did not err in concluding that all elements of res judicata and collateral estoppel were satisfied. As privies of Two Rivers Apartments, the General Partners could have joined the previous case and now are precluded from relitigating the claims and issues voluntarily dismissed with prejudice against Aultco following the settlement agreement.
¶21 The General Partners maintain that even if the District Court correctly applied the elements of res judicata and collateral estoppel, this Court should adopt an exception to those doctrines when the parties expressly or tacitly agree to split the claim pursuant to Restatement (Second) of Judgments, § 26. The General Partners argue that the absence of the word "partners" from the settlement agreement tacitly preserves the claims between the General Partners and Aultco by splitting the claims. The General Partners concede that they cannot speculate why Aultco omitted "partners" from the release it prepared but maintain that the omission constitutes a tacit agreement.
¶22 The doctrines of res judicata and collateral estoppel "deter plaintiffs from splitting a single cause of action into more than one lawsuit ... thereby conserving judicial resources and encouraging reliance on adjudication by preventing inconsistent judgments." Baltrusch , ¶ 15 (internal citations omitted). By its terms, the settlement agreement does not relieve Two Rivers Apartments or its privies from being bound by the choice of finality of the judgment and the settlement agreement. There is no language or other indication that the parties expressly or tacitly intended to split the claim or to preserve the General Partners' right to sue Aultco. Under the facts of this case, we decline to adopt Restatement (Second) of Judgments § 26 as an exception to res judicata and collateral estoppel.
CONCLUSION
¶23 The District Court did not err in dismissing the General Partners' Third-Party Complaint against Aultco on the grounds of res judicata and collateral estoppel. The General Partners are privies of Two Rivers Apartments and had a full and fair opportunity to litigate their claims in the Two Rivers case. Res judicata and collateral estoppel preclude the General Partners from bringing their Third-Party Complaint when Aultco's negligence has been litigated, settled, and dismissed with prejudice. We affirm.
We Concur:
MIKE McGRATH, C.J.
INGRID GUSTAFSON, J.
JAMES JEREMIAH SHEA, J.
JIM RICE, J.
In a similar case, USA Institutional Two Rivers, LLC v. Aultco Construction, Inc. , No. DA 19-0047, the district court dismissed USA Institutional Two Rivers LLC's Third-Party Complaint against Aultco. This Court stayed the appeal in that case on motion of USA Institutional Two Rivers LLC. | [
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Justice Laurie McKinnon delivered the Opinion of the Court.
¶1 This appeal concerns the distribution of settlement proceeds that arose out of litigation regarding the August 2012 Pine Creek Fire. Pursuant to M. R. App. P. 2(4), we have amended the caption to more accurately reflect the actual alignment and status of the parties.
¶2 Kevin and Courtney Funk, et al. (Funks), along with Scott and Susan Pitman (Pitmans), appeal an order from the Sixth Judicial District Court, Park County, approving the Special Master's recommendation for allocating the Pine Creek Fire settlement proceeds among the Funks; Pitmans; Ann Wilcox, et al. (Wilcoxes); and four other plaintiffs. We affirm.
¶3 We restate and address the following issue on appeal:
Did the District Court clearly err by adopting the Special Master's factual finding that the Wilcoxes lost 60 acres of forested land during the Pine Creek Fire?
FACTUAL AND PROCEDURAL BACKGROUND
¶4 In August 2012, a forest fire (Pine Creek Fire) broke out near the small community of Pine Creek, ravaging thousands of acres of vegetation and decimating numerous residents' properties. Seeking to recover damages for injuries the Pine Creek Fire caused, the Funks, Pitmans, Wilcoxes, and four other property owners all brought claims against multiple defendants whose negligence, they alleged, ignited the fire.
¶5 The District Court appointed a settlement master and ordered all parties to attend a settlement conference, after which the parties agreed to a settlement. Because the settlement proceeds could not cover all the plaintiffs' damages, the District Court appointed a Special Master, and each of the property owners-including the Funks, Pitmans, and Wilcoxes-agreed to submit allocation of the settlement proceeds to him.
¶6 The Special Master received information and exhibits in support of each plaintiff's claims for damages. Certified arborist Tom Yelvington (Yelvington) assisted many of the plaintiffs by estimating the cost to restore the burned vegetation on their properties. Yelvington calculated these restoration costs by determining the costs to remove burned trees and vegetation, purchase replacement trees and vegetation, transport and plant the replacement trees and vegetation, and water and care for the trees and vegetation to ensure their survival. Because many plaintiffs lost hundreds-and sometimes thousands-of trees to the Pine Creek Fire, restoration damages often made up the majority of their total damages claims. The Special Master remarked that the sizable restoration damages claims substantially drove his apportionment of the limited settlement funds.
¶7 The Wilcoxes submitted information to the Special Master that the Pine Creek Fire burned 60 acres of forested land-over 18,500 trees-on their 104 acres of property. Yelvington counted burned trees in two scorched acres representative of the average tree density throughout the Wilcoxes' property. Using the average count of burned trees between the two acres, Yelvington multiplied the average count with the Wilcoxes' estimate that they lost 60 acres of forested land. Thus, Yelvington calculated the Wilcoxes lost over 18,500 trees. Yelvington then used this value to estimate the cost to restore the trees on the Wilcoxes' property as $21,612,938. After reviewing the Wilcoxes' total claims for damages, the Special Master found the Wilcoxes were entitled to a total of $21,734,605 in damages.
¶8 The Pitmans own a 10.5-acre property. They submitted information that the Pine Creek Fire destroyed extensive vegetation on their property, numerous personal items, and a barn containing an art studio. Applying the same methodology, Yelvington estimated the cost to restore the trees on the Pitmans' property to be $612,258. After reviewing the Pitmans' total claims, the Special Master found the Pitmans were entitled to $1,074,908 in damages.
¶9 The Funks own an 18.6-acre property. The information they submitted demonstrated the Pine Creek Fire destroyed business equipment, numerous outbuildings and vehicles, and extensive vegetation. Yelvington did not personally inspect the Funks' property like he had the other plaintiffs', but he used photographs from the Funks, comparable data from neighboring properties (including the Wilcoxes), and the same methodology he used with other properties to estimate the cost to replace the coniferous trees on the Funks' property to be $5,905,749. Thomas Ryan, another vegetation expert, estimated the cost to replace the non-coniferous plants on the Funks' property to be $1,475,500. Together, these figures represented a claim for $7,381,249 in restoration damages. The Special Master expressed concern that, because neither Yelvington, Thomas Ryan, nor any other expert had physically visited the Funks' property, the proof submitted by the Funks in support of their restoration damages was "not on a par" with that submitted by other plaintiffs. Notwithstanding, the Special Master accepted the estimates from Yelvington and Ryan and found the Funks were entitled to $7,706,171 in total damages.
¶10 The Special Master found the total value of all the plaintiffs' damages to be over $32 million. The total value of restoration damages was just under $31 million, making up the lion's share of the overall value-nearly 95%. Of the total settlement funds, the Special Master awarded approximately 66% to the Wilcoxes, 24% to the Funks, and 3% to the Pitmans.
¶11 The Funks and Pitmans separately objected to the Special Master's recommendation in the District Court. They both claimed the Special Master erred by overvaluing the Wilcoxes' claim for restoration damages, which was based on Yelvington's assessment and the Wilcoxes' assertion that they lost 60 forested acres in the fire. In support of their objections, they included an affidavit from Bernard Hallin (Hallin), a professional land surveyor who researched the Wilcoxes' property using Google Earth imaging tools-a common and accurate application used in the surveying field-and concluded the Wilcoxes lost only 22.8 acres of mature pine forest. In response, the Wilcoxes questioned the accuracy of Hallin's Google Earth images and research. They supplied tax assessment records indicating they owned approximately 63 acres of marketable timber. Further, John Wilcox, Ann Wilcox, and John Melin (Melin), an individual helping the Wilcoxes clear dead trees from their property, each supplied an affidavit stating that the Wilcoxes lost approximately 60 acres of forested land in the Pine Creek Fire. The District Court ordered further review of the issue, and the Special Master held an evidentiary hearing.
¶12 Hallin testified on behalf of the Funks and Pitmans. Hallin disagreed with the Wilcoxes' assessment that the Pine Creek Fire burned 60 acres of forested land on their property. Using Google Earth images, he outlined a clearly decimated portion of the Wilcoxes' property and calculated it contained 22.8 acres, which he found were the only acres that burned. However, on cross-examination, Hallin testified his estimate only included burned, mature coniferous trees that were completely decimated by the fire-trees he considered "merchantable timber." He stated, "I was only looking at mature coniferous forest that was ... marketable timber that was decimated." He did not include other species of trees like cottonwoods; smaller, immature coniferous trees; still-living, fire-damaged trees that would die within the next few years; or fire-damaged and dead trees interspersed with healthy trees on other parts of the property.
¶13 Yelvington testified on behalf of the Wilcoxes and reaffirmed his earlier methods of estimating the total burned trees on the Wilcoxes' property. In his calculation of burned acreage, Yelvington included coniferous and non-coniferous trees; trees that were completely decimated or dead because of the fire; trees that would die within one to five years because of the fire; and immature trees with at least a diameter of one or more inches. He stated some trees had severely burned trunks and would eventually die as a result of the fire, yet many of their upper branches still appeared green. He further testified a Google Earth aerial image of these severely damaged trees would incorrectly show they were alive and healthy.
¶14 John Wilcox affirmed that he had almost forty years of experience with the property. He testified that the Google Earth images Hallin used to estimate the burned acres of mature coniferous trees omitted large sections of the property. Referring to the portions of the property the Google Earth images did show, John outlined large groups of trees that had since died because of fire damage even though Hallin considered them alive based on the aerial images. He agreed the tax assessment indicated the property had around 63 acres of marketable timber, but he estimated the property contained between 75 and 80 acres of total tree coverage. He estimated the fire damaged 80% of that total-around 60 acres-stating, "the place looked like the moon after the fire."
¶15 Ann Wilcox also testified that while the tax assessment indicated about 63 acres of marketable timber on her property, she estimated there was about 80 acres of total tree coverage. Ann reviewed several photographs she and John took of sections of the property with burned trees that Hallin failed to include in his estimate of burned acreage based on the Google Earth images. She explained that many trees in the photographs had severely burned trunks but still appeared green on top. She testified that when looking at the treetops from above, it appeared as though some otherwise fire-damaged trees were green and healthy, but "when you walk it, get on the ground, this is what you see, there are green trees in there, but there [are] a lot of dead ones everywhere."
¶16 Finally, Melin, who had been clearing dead trees from the Wilcoxes' property since the Pine Creek Fire, testified. Melin stated he was familiar with determining acreage and using surveys because of his experience with ranching, fencing, and construction. On cross-examination, Melin testified that while he had not counted individual trees removed or remaining on the property, he believed he had removed more trees than were left and that many burned trees remained. He further testified the Wilcoxes lost 60 total forested acres to the Pine Creek Fire.
¶17 The Special Master issued a supplemental report upholding his prior recommendations to the District Court for dividing the settlement proceeds among the plaintiffs. While the Special Master maintained Hallin was a highly qualified land surveyor, he found Hallin underestimated the extent the Pine Creek Fire damaged the trees on the Wilcoxes' property. The Special Master found: (1) Hallin improperly limited the scope of his review to mature and marketable timber whereas Yelvington's approach included burned trees with diameters as small as one to four inches; (2) Hallin failed to include non-coniferous trees like cottonwoods in his analysis; and (3) Hallin did not include trees that were dead or dying but not wholly decimated on other parts of the property. The Special Master found Hallin's limited analysis underestimated the full restoration cost for the Wilcoxes' property while Yelvington's approach analyzed all trees, regardless of species, size, or level of damage. Further, he noted the Wilcoxes' familiarity with their property and their testimonial, photographic, and documentary evidence in support of their claim that they lost 60 acres of forested land during the Pine Creek Fire. Therefore, the Special Master found the Funks and Pitmans failed to show he incorrectly used the Wilcoxes' 60-acre figure and Yelvington's calculations when determining the Wilcoxes' restoration damages.
¶18 The Funks and Pitmans objected to the Special Master's supplemental report in District Court. The District Court held a hearing and heard oral argument about their objections. The District Court held the Special Master correctly interpreted the law for restoration damages and his findings were not clearly erroneous. The District Court denied the Funks' and Pitmans' objections and adopted the Special Master's recommendations for allocating the settlement funds. The Funks and Pitmans appealed.
STANDARD OF REVIEW
¶19 We apply the same standard of review to an adopted special master's report that we do to any other district court order. Maloney v. Home & Inv. Ctr., Inc. , 2000 MT 34, ¶ 28, 298 Mont. 213, 994 P.2d 1124. We review de novo whether a district court applied the correct standard of review to a special master's findings of fact and conclusions of law. Maloney , ¶¶ 28-29. The district court must review the special master's conclusions of law to determine whether they are correct. In re Eldorado Coop Canal Co. , 2016 MT 94, ¶ 16, 383 Mont. 205, 369 P.3d 1034. Under M. R. Civ. P. 53(e)(2), in non-jury actions, "the [district] court must accept the master's findings of fact unless clearly erroneous."
¶20 A factual finding is clearly erroneous: (1) if it is not supported by substantial evidence; (2) if the trier of fact misapprehended the effect of the evidence; or (3) if we are left with a definite and firm conviction that a mistake has been made in light of the evidence as a whole. Eldorado Coop Canal Co. , ¶ 17. "Substantial evidence is evidence which a reasonable mind might accept as adequate to support a conclusion, even if the evidence is weak or conflicting. It need not amount to a preponderance of the evidence, but it must be more than a scintilla." Skelton Ranch, Inc. v. Pondera Cty. Canal & Reservoir Co. , 2014 MT 167, ¶ 27, 375 Mont. 327, 328 P.3d 644.
DISCUSSION
¶21 Preliminarily, we clarify the proper measure of restoration damages. Hallin testified multiple times he was looking only at burned marketable timber when reaching his 22.8-acre estimate. On appeal, the Funks and Pitmans have similarly stated the Wilcoxes failed to provide substantial evidence that they lost "60 acres of mature coniferous pine forest in the fire." (Emphasis added.) However, Montana law does not limit restoration damages to replacing marketable timber: "The cost of restoring property to its pre-injury condition generally constitutes the appropriate measure of damages for temporary injuries." Lampi v. Speed , 2011 MT 231, ¶ 24, 362 Mont. 122, 261 P.3d 1000.
¶22 In Lampi , a case that also involved restoration damages for a negligently-ignited forest fire, we did not limit restoration damages to Lampi's coniferous trees, his marketable or merchantable timber, or his decimated trees alone. Instead, we held the fact finder must determine "what reasonable amount of damages would restore Lampi 's property to its pre-fire condition ." Lampi , ¶ 51 (emphasis added). Neither do we similarly limit the Wilcoxes' damages here: the Wilcoxes are entitled to damages to restore their property to its pre-fire condition. Those damages encompass the costs to restore all trees damaged or decimated by the Pine Creek Fire, including immature, nonmarketable, and non-coniferous fire-damaged trees.
¶23 We turn now to the Funks' and Pitmans' contention that the District Court clearly erred by adopting the Special Master's reports, recommendations, and findings. The Funks and Pitmans do not appear to dispute Yelvington's method of calculating total trees needing replacement. Instead, they disagree with one of Yelvington's inputs-the 60 acres of burned trees the Wilcoxes provided. They argue the Special Master speculated about the acreage because the Wilcoxes "did not provide any substantial evidence to support their claim that they lost 60 acres of mature coniferous pine forest." Instead, they argue substantial evidence supports their view that the Wilcoxes actually lost 22.8 acres of coniferous timber.
¶24 The Wilcoxes counter that Hallin's 22.8-acre estimate omitted numerous burned trees that he should have included because he limited his estimate to decimated, marketable, mature coniferous timber. They also contend they corroborated their 60-acre estimate with supporting documentary and testimonial evidence, including tax assessment records, deeds, photographs depicting burned areas of their property not included in Hallin's estimate, and testimony from John Wilcox, Ann Wilcox, and John Melin.
¶25 "[S]ubstantial evidence that is not mere guess or speculation" must support a judgment for damages. In re Marriage of Mease , 2004 MT 59, ¶ 42, 320 Mont. 229, 92 P.3d 1148. However, the law does not require mathematical precision: we will not deny recovery of damages, even if a party challenges their mathematical precision, "provided the evidence is sufficient to afford a reasonable basis for determining the specific amount awarded." Mont. Petroleum Tank Release Comp. Bd. v. Crumleys, Inc. , 2008 MT 2, ¶ 92, 341 Mont. 33, 174 P.3d 948 (quoting Hallenberg v. General Mills Operations, Inc. , 2006 MT 191, ¶ 32, 333 Mont. 143, 141 P.3d 1216 ).
¶26 The Wilcoxes provided substantial evidence to support their claim that the Pine Creek Fire burned 60 acres of their forested land. In support of their assertion, they provided documentary, photographic, and testimonial evidence. John and Ann Wilcox both testified to having many decades' experience and familiarity with the property. They provided photographs of burned trees from areas of the property that Hallin did not include in his 22.8-acre estimate. They introduced a property tax assessment that indicated the property contained about 63 acres of marketable timber, and they testified that the property contained between 75 and 80 acres of both marketable and nonmarketable trees-of which, they estimated the Pine Creek Fire burned 80%, or about 60 acres. The Wilcoxes also provided testimony from Melin, who was familiar with determining acreage, using surveys, and assessing property boundaries. By the date of the parties' evidentiary hearing, Melin had spent multiple years clearing debris and becoming familiar with the Wilcoxes' property. He also testified he believed the Wilcoxes lost 60 acres of forested land to the Pine Creek Fire.
¶27 The Funks and Pitmans point to Mease to bolster their argument that the Wilcoxes' damages are speculative. In Mease , we stated "[p]roof of damages must consist of a reasonable basis for computation and the best evidence obtainable under the circumstances which will enable a judge to arrive at a reasonably close estimate of the loss." Mease , ¶ 42. There, the petitioner, without documentation to prove his claim, "simply testified that he suffered approximately $1,700 in damage to his credit when he took out two car loans." Mease , ¶ 42. We held the petitioner's claim was speculative because the petitioner himself said the value was approximate and he could have easily produced documentation of the damage to his credit. Mease , ¶ 42.
¶28 Unlike Mease , documentation of the Wilcoxes' burned acreage was difficult to produce. Due to the nature and extent of the Pine Creek Fire, expecting the Wilcoxes to count and document every individual burned tree on over one hundred acres of property would be onerous. The Wilcoxes instead hired an expert arborist who used thorough on-site appraisal procedures-widely accepted in his field-to evaluate the cost to restore the Wilcoxes' property. The Wilcoxes were intimately familiar with the property itself, and they provided corroborating documentary, photographic, and testimonial evidence to prove the size of their property, the acres of trees on it, and the burned acreage they lost.
¶29 The Funks and Pitmans assert Hallin's 22.8-acre estimate proves the Wilcoxes' estimate is unsupported by substantial evidence, yet the Wilcoxes showed Hallin's estimate contains several irregularities. Most prominently, Hallin only included mature, marketable coniferous timber in his calculation. Even so, the Funks and Pitmans were free to challenge the Wilcoxes' claimed damages with evidence of their own-which they did-but conflicting evidence does not establish clear error. See Anderson v. Deafenbaugh (In re G.J.A.) , 2014 MT 215, ¶ 23, 376 Mont. 212, 331 P.3d 835 ; Skelton Ranch, Inc. , ¶ 27. "When a reader reasonably can deduce two or more inferences from the facts, the reviewing court lacks power to substitute its deductions for those of the finder of fact." Anderson , ¶ 23 (quoting Weinheimer Ranch v. Pospisil , 2013 MT 87, ¶ 19, 369 Mont. 419, 299 P.3d 327 ). Ultimately, only the fact finder measures credibility and assigns weight to evidence. The Special Master found the Wilcoxes' evidence to be more reliable, a finding of fact we conclude substantial evidence supports.
¶30 Furthermore, we do not hold the Special Master misapprehended the effect of the Wilcoxes' evidence. Yelvington certainly tied his restoration damages estimate to the Wilcoxes' 60-acre estimate, but substantial evidence supports the Wilcoxes' estimate. We cannot conclude the Special Master misapprehended the evidence merely by his finding one party's evidence more persuasive than the other's. The Special Master also notably relied on the same expert arborist and the same method for calculating restoration damages when he evaluated both the Funks' and Pitmans' claims. Across each of these claims, the evidence was similar and its effect nearly the same.
¶31 Finally, in light of the evidence as a whole, we are not left with a definite and firm conviction that the Special Master made a mistake. The Wilcoxes provided substantial evidence supporting their claim for restoration damages, the Special Master approached each plaintiff's claim using the same methods and evaluation, and the Funks' and Pitmans' alternative estimate of the Wilcoxes' burned acreage fails to include many damaged trees that a court should otherwise include in a claim for restoration damages. The Special Master did not clearly err by finding the Wilcoxes lost 60 acres of forested land to the Pine Creek Fire.
CONCLUSION
¶32 The Special Master correctly sought to find the cost to restore the Wilcoxes' property to its pre-injury condition, not simply the cost to replace their marketable timber. Likewise, substantial evidence supports the Wilcoxes' claim for damages. The Special Master did not commit a clear error, even in light of conflicting evidence, by finding the Wilcoxes lost 60 acres of forested land during the Pine Creek Fire. The District Court correctly upheld the Standing Master's legal conclusions and factual findings. Accordingly, we affirm.
We concur:
MIKE McGRATH, C.J.
INGRID GUSTAFSON, J.
BETH BAKER, J.
JIM RICE, J.
The parties do not dispute whether the Wilcoxes are entitled to restoration damages. Instead, they dispute the restoration damages' value. | [
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Justice Beth Baker delivered the Opinion of the Court.
¶1 This case arises from a stipulated settlement entered into by Roger and Carrie Peters and Draggin' Y Cattle Company, Inc. (collectively, "Plaintiffs") with Junkermier, Clark, Campanella, Stevens, P.C. ("Junkermier"). Junkermier's liability insurer, New York Marine and General Insurance Company ("New York Marine"), intervened to challenge the reasonableness of the settlement. After allowing limited discovery and holding a reasonableness hearing, the Eighteenth Judicial District Court, Gallatin County, determined that the stipulated settlement was reasonable and entered judgment against Junkermier. New York Marine appeals.
¶2 On appeal, we address whether the District Court properly found the settlement agreement reasonable when the insurer provided a defense under a reservation of rights throughout the relevant proceedings, but did not confirm coverage under the policy or file a declaratory action to determine coverage, declined to settle with Plaintiffs for policy limits, and misrepresented the policy limits.
We hold on the facts of this case that the District Court improperly held that the stipulated agreement was reasonable. We reverse and remand for further proceedings consistent with this Opinion.
PROCEDURAL AND FACTUAL BACKGROUND
¶3 This is the fourth time this case has come before this Court on appeal. We restate the facts applicable to the issues in this appeal.
¶4 Roger and Carrie Peters, husband and wife, own Draggin' Y Cattle Company, formerly Alaska Basin Grazing Association. The Peterses have been ranching in Montana since the 1970s. The Peterses were longtime clients of Junkermier, working directly with Larry Addink for accounting services both for themselves and for their various businesses related to their ranching and cattle operations.
¶5 In 2004, Addink advised Plaintiffs that they could structure a sale of real property to their advantage as a tax-deferred exchange pursuant to Internal Revenue Code § 1031. Addink's plan involved selling real estate owned by Alaska Basin and using those proceeds to buy other real estate owned personally by the Peterses. Attorney Max Hansen drafted the closing documents for the transaction. Hansen expressed concern to Roger Peters that the transaction would not qualify for tax deferment under § 1031 because the parties to the exchange were related-the property being purchased to replace the Alaska Basin property was owned by the principals of Alaska Basin. He wrote a letter to Addink expressing these concerns, but explained that he had not provided Plaintiffs with tax advice about the proposed exchange. He wrote that he was leaving tax advice about the transaction to Junkermier because it had structured the deal. The property sales involved in the transaction closed in January 2007.
¶6 In November 2007, Addink learned that, pursuant to a 2002 revenue ruling, the type of transaction he had structured for Plaintiffs was prohibited from qualifying for treatment as a § 1031 exchange by the related-party rule. Addink informed Junkermier of his discovery and Junkermier notified New York Marine of the possible claim against it. Junkermier did not inform Plaintiffs that the transaction would fail to qualify under § 1031 until February 6, 2008. At the February 6 meeting, Junkermier told Plaintiffs that the transaction failed to qualify because of new tax rulings that had changed the law on related parties. Junkermier explained that, due to these recent rulings, the taxes on the transaction could not be deferred and an estimated $2.5 million would be due in state and federal taxes in three weeks. Between the time Addink realized his mistake and Junkermier disclosed the tax consequences to Plaintiffs, the Peterses had taken on additional debt and closed on a deal to purchase the Mountain View Ranch. Roger Peters testified that they would not have purchased Mountain View Ranch had they known about the tax liability. Plaintiffs' expert Robert Storey opined that the tax liability had a significant negative effect on Plaintiffs' ability to retain adequate financing and operating capital to support the ranching operations and real estate financing. He opined that inability to retain adequate financing forced Plaintiffs to dramatically scale back their operations, leading to lost profits close to $8 million.
¶7 Addink and Junkermier crafted a plan to mitigate the tax consequences by seeking an extension for Plaintiffs' 2007 tax filings, restructuring various entities in order to use losses to offset the gain, and negotiating with tax authorities to settle taxes, penalties, and interest due. Addink and Junkermier continued to provide accounting services to Plaintiffs until Plaintiffs terminated the firm in April 2009. Plaintiffs terminated Junkermier after Hansen-whom Plaintiffs had hired to negotiate a tax compromise with the IRS as part of the mitigation plan-told Plaintiffs that Junkermier had misinformed them about the reason the transaction failed to qualify under § 1031.
¶8 New York Marine began providing Addink and Junkermier a defense as early as 2008 against potential claims Plaintiffs could bring. As part of these efforts, New York Marine hired Patrick HagEstad to defend Addink and Junkermier. Plaintiffs filed a complaint in January 2011 against Addink and Junkermier alleging professional negligence, breach of fiduciary duty, and breach of contract. Plaintiffs' first amended complaint, filed in February 2012, included additional allegations of breach of the implied covenant of good faith and fair dealing, misrepresentation, deceit, and constructive fraud, as well as a claim for punitive damages.
¶9 Shortly after the Peterses filed their first amended complaint, New York Marine issued a reservation of rights letter. New York Marine's letter disclaimed any coverage for fraud or punitive damages. Its final paragraph stated, "nothing herein or heretofore should be construed as an admission of coverage or liability by [New York Marine], or as a waiver, estoppel or modification of any of the terms, conditions or limitations of the [New York Marine] Policy and [New York Marine] reserves all rights, remedies and defenses, legal and equitable."
¶10 Throughout the litigation, HagEstad reported to Addink, Junkermier, and New York Marine that the case was defensible and that Plaintiffs most likely would recover less than $250,000 if they succeeded in getting a verdict at trial. On June 10, 2014, Plaintiffs offered to settle all claims against Junkermier and Addink for the policy limits of $2 million in exchange for a full and final release of all claims. HagEstad advised the parties to seek independent counsel, because Plaintiffs' policy limits demand raised issues outside the scope of his representation.
¶11 Addink and Junkermier each retained independent counsel following the policy limits demand. Addink's independent counsel contacted HagEstad and informed him that Addink wanted the case settled within policy limits because Addink believed there was "significant risk" the verdict would be in excess of policy limits. Junkermier also sent a letter to New York Marine demanding that it settle the case within policy limits. HagEstad forwarded the policy limits demand to New York Marine on June 23, 2014, along with his assessment of the case. HagEstad maintained in his letter to New York Marine that he did not think the case was worth more than $250,000. HagEstad explained his views that Plaintiffs were contributorily negligent, that the taxes were not recoverable as damages, and that other claimed damages were speculative. He conceded that if Plaintiffs succeeded on the outstanding legal issues, however, "the damages could be significantly closer to those stated by Plaintiffs in their demand letter." At the time of the policy limits demand, Roger and Carrie Peters, Hansen, and Plaintiffs' damages experts had not been deposed.
¶12 New York Marine, relying on HagEstad's counsel, authorized a counteroffer of $100,000, which HagEstad offered to Plaintiffs on July 11, 2014. Plaintiffs did not respond to this counteroffer before the mediation scheduled for November 12, 2014. Shortly after New York Marine's rejection of the policy limits demand, Addink's personal counsel wrote to New York Marine requesting that it confirm that, because it had rejected the policy limits offer, it would be responsible for any excess verdict. New York Marine did not respond to the letter. Addink's counsel wrote to New York Marine again on August 20, 2014, to inform New York Marine that he would be prepared to enter into separate settlement negotiations with Plaintiffs at the court-ordered mediation to protect Addink's personal assets. New York Marine responded that it would not agree to pay any excess verdict and that if Addink entered into separate settlement with Plaintiffs without its consent Addink would be breaching the terms of the insurance contract. In early September, Junkermier's personal counsel wrote to New York Marine to encourage it to retain separate coverage counsel so that it could be properly advised as to its responsibility for any excess verdict under Montana law, having refused a policy limits demand which the insured wanted to accept.
¶13 Meanwhile, in July 2014, Plaintiffs filed their expert witness disclosure with a report from Robert Storey attached that outlined $12 million in damages, excluding emotional distress and punitive damages. After deposing Plaintiffs' damages experts, HagEstad filed motions for summary judgment on behalf of Junkermier raising issues regarding the statute of limitations, lost profits, emotional distress damages, breach of fiduciary duty and fraud claims, and tax liability damages. The District Court found that "resolution of these pending motions would have turned the value of the litigation in one direction or the other, and subjected the case to further appeal." A hearing was scheduled on these motions for November 14, 2014.
¶14 In October 2014, Plaintiffs reached out to Addink and Junkermier suggesting that the parties enter into a stipulated judgment and covenant not to execute, highlighting the $12 million in damages calculated by its experts, as well as the uncalculated emotional distress and punitive damage claims. In early November, shortly before the scheduled November 12 mediation, Plaintiffs again reached out to Addink and Junkermier to suggest that they enter into a stipulated settlement if the case was unable to settle. Plaintiffs wrote that stipulated settlements with covenants not to execute and assignments of rights are "a legitimate way for insureds to protect themselves from an excess judgment in circumstances where liability is reasonably clear and damages exceed policy limits." They further opined that an insurer's reservation of rights is "another reason that permits the defendants to enter into a stipulated judgment, assignment, and covenant not to execute." Junkermier forwarded the two letters from Plaintiffs to New York Marine and asked New York Marine to "accept responsibility for any failed negotiations" by "indemnify[ing] and hold[ing] harmless [Junkermier] from any excess verdict." None of the correspondence in the record from personal counsel to New York Marine challenged the reservation of rights letter or asked for confirmation of $2 million in coverage under the policy.
¶15 HagEstad wrote to New York Marine a week before the settlement conference that a reasonable settlement value for the case was between $100,000 and $350,000. After this letter from HagEstad, New York Marine responded to Junkermier on November 11, 2014, that its outstanding offer of $100,000 was reasonable and that it "cannot agree to accept liability in excess of policy limits, which are eroded by defense expenses. New York Marine fully understands its duties and obligations to its insured under Montana law and has acted, and will continue to act, in accord with those obligations and in the best interests of its insured." The case failed to settle at the November 12 mediation.
¶16 Immediately following the failed mediation, Addink, Junkermier, and Plaintiffs entered into negotiations that produced a stipulated settlement for $10 million. The settlement acknowledged that New York Marine "has hired defense counsel to defend the defendants against the plaintiffs' claims." But, it continued, New York Marine's "refusal to settle by paying policy limits or, in the alternative, waive policy limits, is unreasonable and constitutes bad faith and a violation of Montana's Unfair Trade Practices Act because the defendants are needlessly being exposed to the substantial likelihood of a financially ruinous excess judgment." The agreement "ends the lawsuit through the entry of a stipulated judgment, that protects the defendants through a covenant not to execute [against Addink's or Junkermier's assets], and that permits the plaintiffs to enforce the stipulated judgment against [New York Marine] through an assignment." Addink, Junkermier, and Plaintiffs signed the agreement on November 13, 2014, the day before the scheduled hearing on the outstanding motions for summary judgment. The settlement was contingent on the parties requesting "a hearing to approve the stipulated judgment as fair and reasonable." If the court did not approve the stipulated judgment, the case would proceed to trial. At the time that the parties entered into the settlement agreement, trial was three weeks away. ¶17 New York Marine moved to intervene in the case on December 8, 2014, to challenge the reasonableness of the stipulated settlement; the District Court granted intervention. The District Court allowed limited discovery on the issue of reasonableness and held a reasonableness hearing on November 9, 2017.
¶18 In its Findings of Fact, Conclusions of Law and Order, the District Court acknowledged, "This is not a breach of the duty to defend case." It explained, however, that clear statutory directives under § 33-18-201(5) and (6), MCA, require insurers to affirm or deny coverage within a reasonable time and to settle a case in good faith. The District Court surmised that when an insurer fails to fulfill these requirements, "its abandonment of its insured is just as certain as if it has breached the duty to defend." Because it determined that New York Marine effectively had abandoned its insured, the District Court relied on Tidyman's Management Services Inc. v. Davis , 2014 MT 205, ¶ 41, 376 Mont. 80, 330 P.3d 1139 ( Tidyman's I ), to presume the pretrial settlement was reasonable and placed on the insurer the burden of proving the settlement was unreasonable. The District Court found the stipulated judgment in the amount of $10 million, in exchange for an assignment and covenant not to execute, was reasonable. It entered judgment of $10 million in favor of Plaintiffs against Junkermier.
STANDARDS OF REVIEW
¶19 We review findings of fact for clear error and conclusions of law for correctness. Abbey/Land, LLC v. Glacier Constr. Partners, LLC , 2019 MT 19, ¶ 33, 394 Mont. 135, 433 P.3d 1230 ( Abbey/Land II ). We review de novo "a district court's decision about which legal standard to apply in assessing the reasonableness of a stipulated judgment." Tidyman's Mgmt. Servs. Inc. v. Nat'l Union Fire Ins. Co. of Pittsburgh , 2016 MT 201, ¶ 8, 384 Mont. 335, 378 P.3d 1182 ( Tidyman's II ).
DISCUSSION
¶20 New York Marine argues on appeal that the District Court erred in finding that the stipulated agreement was reasonable and enforceable and improperly entered judgment on the agreement because New York Marine had defended its insureds throughout the litigation in question. It challenges the District Court's conclusions that it failed to affirm coverage and failed to settle in good faith and its holding that such failures are equivalent to abandoning its insureds. New York Marine maintains that a stipulated judgment entered into without the consent or participation of the insurer is proper only when an insurer has refused to provide a defense to its insured. New York Marine maintains that the District Court erred by presuming that the stipulated settlement was reasonable under Tidyman's I .
¶21 Junkermier and Plaintiffs (collectively, "Appellees") concede that New York Marine did not violate its duty to defend. They contend, though, that New York Marine violated other duties under the insurance contract, the "constellation" of which resulted in the abandonment of Junkermier by its insurer, "just as certain as if it ha[d] breached the duty to defend." Specifically, Appellees argue that New York Marine failed to affirm coverage under the policy or to file a declaratory judgment action to determine coverage; refused to settle within policy limits when liability was reasonably clear and damages were in excess of policy limits; and misrepresented to its insureds that policy limits were eroded by defense costs. Because New York Marine effectively abandoned Junkermier, Appellees argue that Junkermier was entitled to enter into a stipulated judgment without New York Marine's consent and that the District Court properly presumed that the stipulated judgment was reasonable under Tidyman's I .
¶22 This Court has explained that "a pretrial stipulated judgment may be enforceable against the defendant's liability insurer if the insurer breaches its contractual obligation to defend that insured. Under the majority view, when an insurer improperly abandons its insured, the insured is justified in taking steps to limit his or her personal liability." Tidyman's I , ¶ 25 (quoting State Farm Mut. Auto. Ins. Co. v. Freyer , 2013 MT 301, ¶ 34, 372 Mont. 191, 312 P.3d 403 ). In the Tidyman's and Abbey/Land cases, we explained that an insurer that breaches its duty to defend "will be bound by its insured's settlement and any resulting judgment so long as the settlement is reasonable and not the product of collusion." Abbey/Land II , ¶ 34. This is because a breach of the duty to defend is a material breach of the contract that relieves the insured of the reciprocal contract duty to cooperate with the insurer, Abbey/Land II , ¶ 34, and equity thus estops the insurer from denying coverage and raising other contract defenses in subsequent litigation, see Tidyman's II , ¶ 14 ; Farmers Union Mut. Ins. Co. v. Staples , 2004 MT 108, ¶¶ 27-28, 321 Mont. 99, 90 P.3d 381. In that instance "a stipulated settlement is presumed reasonable and the burden is on the insurer to rebut that presumption." Tidyman's I , ¶ 41.
¶23 Appellees allege that four separate actions of New York Marine together resulted in the abandonment of its insured and justified their negotiation of a stipulated settlement and assignment of rights in exchange for a covenant not to execute that is entitled to a presumption of reasonableness. First, Appellees challenge New York Marine's reservation of rights letter. They contend that New York Marine refused to affirm, and thus effectively denied, any coverage under the policy because the final paragraph of the letter stated that "nothing herein or heretofore should be construed as an admission of coverage or liability." Second, they maintain that this failure was compounded when New York Marine failed to file a declaratory judgment action to resolve the underlying coverage issues the reservation of rights letter raised. Third, New York Marine refused an offer to settle the case for policy limits and then refused to acknowledge that in doing so it assumed the risk of an excess verdict at trial. Finally, New York Marine misrepresented its policy limits when it wrote to Junkermier that the policy limits were "eroded by defense costs." Appellees maintain that simply providing a defense to its insured is not enough and that the insureds properly entered into a stipulated settlement, coupled with a covenant not to execute, to protect their personal assets from the risk of an excess verdict.
¶24 Appellees' arguments raise the question whether an insurer "improperly abandons its insured," justifying the insured "in taking steps to limit his or her personal liability" by entering into a confessed judgment, assignment of rights, and covenant not to execute that gives rise to a presumption of reasonableness, when the insured alleges the insurer breached contractual or statutory duties other than the duty to defend. Freyer , ¶ 34 (internal quotations omitted). Our analysis in Freyer , though answering a slightly different question, is instructive. In Freyer , the parties to a stipulated judgment sought enforcement of their settlement against the insurer. We were asked to determine whether the stipulated settlement entered into without the consent of an insurer could be the proper measure of damages in later litigation to recover for a breach of the duty to indemnify. In answering that question, we carefully distinguished between an insurer's duty to defend and its duty to indemnify. Freyer , ¶ 26. We explained that "[t]he duty to indemnify is independent of and narrower than the duty to defend." Freyer , ¶ 26. The duty to defend is triggered "when a complaint against an insured alleges facts, which if proven, would result in coverage." Staples , ¶ 21. "The broader duty to defend requires an insurer to act immediately to defend the insured from a claim. ... On the other hand, the narrower duty to indemnify typically involves complicated interpretational questions that often require legal opinions and separate declaratory actions to determine." Freyer , ¶ 37.
¶25 We held in Freyer that the stipulated judgment was not the appropriate measure of damages when an insurer has provided a defense to the insured, because the stipulated agreement could not fairly be attributed to the insurer's conduct. Freyer , ¶ 35.
We explained that a stipulated judgment is presumptively enforceable as the measure of damages when the insurer has failed to defend, "because the non-defending insurer has left its insured on its own to challenge liability, and the insurer should not be able to 'reach back' and interject itself into a controversy it has sidestepped to 'void a deal the insured has entered to eliminate personal liability.' " Freyer , ¶ 35 (quoting Hamilton v. Md. Cas. Co. , 27 Cal.4th 718, 117 Cal.Rptr.2d 318, 41 P.3d 128, 135 (2002) ). In other words, if the insurer declines to provide a defense against the claims on behalf of the insured in the first instance, the insurer may not put on that defense for its own benefit in later proceedings. In contrast, "when 'the insurer has accepted the defense of the claim, and might have prevailed at trial had the insured and the claimants not settled without the insurer's participation, no presumption of the insured's liability generally arises from the fact or amount of settlement.' " Freyer , ¶ 35 (quoting Hamilton , 117 Cal.Rptr.2d 318, 41 P.3d at 135 ).
¶26 Like the duty to indemnify, the duties that Appellees raise are distinct from the insurer's duty to defend. All of the actions Appellees challenge are possible breaches of the insurance contract, violations of the Unfair Trade Practices Act ("UTPA"), or both. See § 33-18-201(1), (5), and (6), MCA.
¶27 Section 33-18-201, MCA, states in pertinent part:
A person may not, with such frequency as to indicate a general business practice, do any of the following:
(1) misrepresent pertinent facts or insurance policy provisions relating to coverages at issue;
...
(5) fail to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed;
(6) neglect to attempt in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear.
Section 33-18-242(1), MCA, gives an insured an independent cause of action for its insurer's violations of these duties. A plaintiff under this section "is not required to prove that the violations were of such frequency as to indicate a general business practice." Section 33-18-242(2), MCA. The statute further provides what causes of action a plaintiff may bring when an insurer has engaged in unfair claim settlement practices:
An insured who has suffered damages as a result of the handling of an insurance claim may bring an action against the insurer for breach of the insurance contract, for fraud, or pursuant to this section, but not under any other theory or cause of action. An insured may not bring an action for bad faith in connection with the handling of an insurance claim.
Section 33-18-242(3), MCA. In addition to actual damages, a plaintiff may recover compensatory damages proximately caused by any violation of subsections (1), (5), or (6), as well as exemplary damages. Section 33-18-242(4), MCA. Further, "an insured is entitled to recover attorney fees, ... when the insurer forces the insured to assume the burden of legal action to obtain the full benefit of the insurance contract, regardless of whether the insurer's duty to defend is at issue." Mountain W. Farm Bureau Mut. Ins. Co. v. Brewer , 2003 MT 98, ¶ 36, 315 Mont. 231, 69 P.3d 652.
¶28 An insurer is not liable under the UTPA "if the insurer had a reasonable basis in law or fact for contesting the claim or the amount of the claim." Section 33-18-242(5), MCA. Such determinations are generally a question of fact. See Shilhanek v. D-2 Trucking, Inc. , 2003 MT 122A, 79 P.3d 1094 ; see also Estate of Gleason v. Cent. United Life Ins. Co. , 2015 MT 140, ¶¶ 62-63, 379 Mont. 219, 350 P.3d 349 ; Redies v. Attorneys Liab. Prot. Soc'y , 2007 MT 9, ¶ 35, 335 Mont. 233, 150 P.3d 930. An insured has the burden of proving a violation of the act to an independent fact-finder. Peris v. Safeco Ins. Co. , 276 Mont. 486, 493, 916 P.2d 780, 785 (1996). If the elements are established, the statute provides complete recovery for any injury caused by violation of the act.
¶29 In addition to allowing private rights of action for violations of certain duties expressed in the UTPA, § 33-18-242(3), MCA, preserves an insured's common-law right to bring a breach of contract claim. Every insurance contract includes a covenant of good faith and fair dealing, which we have long recognized gives rise to a duty to accept a reasonable offer within policy coverage limits. Gibson v. W. Fire Ins. Co. , 210 Mont. 267, 275, 682 P.2d 725, 730 (1984). "In determining whether to settle, the insurer must give the insured's interest as much consideration as it gives its own interest." Gibson , 210 Mont. at 275, 682 P.2d at 730. An insured may recover compensatory and consequential damages for breach of this duty in a breach of contract action. Freyer , ¶¶ 31, 42-43 ; § 27-1-311, MCA.
¶30 Like in Freyer , the distinctions between when and how these duties and the duty to defend arise are important. In some cases, determining whether an insurance company violated these duties may require an analysis that looks back at what the parties knew at the time the contested actions were taken. See Shilhanek , 2003 MT 122A, 79 P.3d at 1094 ("[W]hat [the insurer] knew, and what it did in the face of that knowledge, goes to the question of whether [the insurer] had a reasonable basis for denying payment."); see also 14 Steven Pitt et al., Couch on Insurance § 200:4 (3d ed. 2007) ("[T]he duty to defend is absolute while the duty to settle is generally more discretionary."). In some circumstances, insureds can bring UTPA claims prior to the resolution of the underlying claim. Peris , 276 Mont. at 492, 916 P.2d at 784. But the insured cannot determine unilaterally that such violations occurred in order to justify a stipulated settlement that would be presumptively enforceable against the insurer in the underlying liability case or in subsequent litigation.
¶31 The facts of this case provide an illustrative example of why insureds cannot use the underlying liability case to bind an insurer to a stipulated settlement amount when they allege that the insurer failed to affirm coverage in a reasonable time. Appellees maintain that New York Marine violated the duty to affirm coverage because it explicitly failed to affirm any coverage under the policy in its reservation of rights letter and that New York Marine should have filed a declaratory judgment action to resolve the question of coverage that its letter created. On the other hand, New York Marine maintains that it reserved its rights to challenge coverage for fraud and punitive damages and did not call into question other coverage under the policy, as evidenced by its continued defense of the claims. It maintains that its reservation of rights letter created no disputes of coverage that needed to be resolved in a declaratory rights action unless fraud was found or punitive damages were awarded. The various arguments both sides make as to how New York Marine violated or did not violate the duty to affirm coverage under § 33-18-201(5), MCA, underscore the reason for a separate framework for presenting such claims in a UTPA action. Failure to file a declaratory judgment action is not abandonment of its insured in the underlying action, but could be part of an alleged violation of § 33-18-201(5), MCA.
¶32 An insured's potentially valid UTPA or contract claims do not render a pre-trial settlement and confessed judgment entered into without the consent or participation of the insurer and enforceable only against the insurer reasonable when the insurer is providing a defense. Plaintiffs argue that the constellation of an insurer's various acts in violation of UTPA duties or in breach of the insurance contract justifies the insured's unilateral action and that the District Court rightly applied the Tidyman's standard to give the settlement amount a presumption of reasonableness. Accepting this would supplant both the insured's common-law contractual remedy and the legislative remedy afforded for an insurer's unfair practices under § 33-18-242, MCA. When an insurer has not confirmed or denied coverage or has not settled in good faith, the insured has remedies, including a breach of contract action and a separate statutory remedy that includes compensatory and punitive damages and attorney fees. It is the failure to provide a defense-which is not addressed in the UTPA-that constitutes improper abandonment, justifying an insured to take steps limiting its personal liability through a settlement that the law recognizes as presumptively reasonable. See Westchester Surplus Lines Ins. Co. v. Keller Transp., Inc. , 2016 MT 6, ¶ 33, 382 Mont. 72, 365 P.3d 465.
¶33 New York Marine accepted defense of the claim and provided a defense throughout the relevant proceedings. The parties strongly dispute the relative strength of their legal positions going into trial. But with the insurer providing a defense, the insureds "might have prevailed at trial had the insured and the claimants not settled without the insurer's participation." Freyer , ¶ 35 (quoting Hamilton , 117 Cal.Rptr.2d 318, 41 P.3d at 135 ). Appellees counter that if the defense had failed, Junkermier faced a potential excess verdict that would have been ruinous to the company, and it was justified in taking steps to prevent that outcome. They maintain that the stipulated agreement was the only way Junkermier could protect itself from an excess verdict after New York Marine rejected the offer to settle for policy limits. We disagree. "It is now fairly established in American jurisprudence that an insurer which in bad faith fails to settle a bona fide third party liability claim against its insured, within policy coverage limits, takes the risk of a judgment by the trier of fact in excess of the coverage limits." Gibson , 210 Mont. at 274, 682 P.2d at 730. We explained that "[t]he effect of such bad faith is to open the policy coverage limits to the extent of the trial result." Gibson , 210 Mont. at 274, 682 P.2d at 730. We have not held an insurer liable for failure to settle within policy limits "when it had a reasonable basis in law or fact for contesting coverage." Freyer , ¶ 47.
¶34 A party asserting a contract or UTPA claim bears the burden to prove the asserted breach of duty and resulting damages. See §§ 26-1-401 through -403, MCA. When an insurer breaches the duty to defend, it loses its right to invoke insurance contract defenses or to assert policy limits. Tidyman's II , ¶ 14. We presume in those cases that the settlement amount agreed to by the insured is reasonable and the insurer is bound by that amount in subsequent actions to enforce the settlement against it. Abbey/Land II , ¶ 34. A reasonableness hearing is not a trial on the merits of an insured's claims against its insurer. It is a limited procedure in which the trial court "may set parameters of the hearing[ ] and determine in its discretion whether and to what extent any further discovery is necessary prior to the hearing." Tidyman's I , ¶ 44. The insurer may challenge in a reasonableness hearing only whether the settlement amount is reasonable or the product of collusion. Abbey/Land II , ¶ 34. The objective of the reasonableness hearing is not "to further punish the insurer," Tidyman's II , ¶ 14, but to ensure that there has not been "mischief in settlement negotiations," Tidyman's I , ¶ 40. Thus, the burden of proving the element of damages in a subsequent breach of contract claim presumptively is removed from the insured or its assignees when the insurer breaches the duty to defend. The corollary, however, is that an insurer does not waive its contract defenses when an insured alleges breaches of other duties, and the same presumptions do not attach to the settlement amount. The insured or its assignees retain the burden to demonstrate by a preponderance of the evidence each element of its claim, including damages. See Freyer , ¶ 43.
¶35 Appellees' settlement agreement called for entry of a stipulated judgment for $10 million, along with a covenant not to execute "that permits the plaintiffs to enforce the stipulated judgment against the Insurer through an assignment." It further required the parties to "request the [District] Court to set a hearing to approve the stipulated judgment as fair and reasonable." Junkermier and Plaintiffs certainly were free to enter into a stipulated settlement and end the lawsuit between them. But the District Court could not find such an agreement "fair and reasonable" for purposes of presuming damages against the defending insurer in subsequent litigation through a breach of contract or UTPA claim. Junkermier or its assignee may not attempt, in the underlying liability case, to litigate the element of damages that it then could assert in a separate action against the insurer for alleged unfair claim practices.
¶36 The remedies available for breach of contract and for UTPA violations provide redress for any injuries Junkermier would have faced from New York Marine's allegedly improper actions. Junkermier was not powerless to protect itself without a stipulated settlement agreement presumed reasonable by the District Court. For example, before trial, Junkermier could have assigned any claim arising from the insurer's alleged violations to Plaintiffs in exchange for a covenant not to execute any resulting excess verdict against the insureds. See Hamilton , 117 Cal.Rptr.2d 318, 41 P.3d at 132. Such a claim would mature if an excess verdict was rendered. See Hamilton , 117 Cal.Rptr.2d 318, 41 P.3d at 132. Alternatively, Junkermier could have sought and paid a settlement to Plaintiffs and sought recovery from New York Marine for itself in a breach of contract or UTPA claim. Peris , 276 Mont. at 493-94, 916 P.2d at 785.
¶37 Enforcement of a judgment against New York Marine is not at issue in this case, and we express no opinion on any claims that may be brought against New York Marine in the future. New York Marine intervened to challenge the reasonableness and the entry of judgment on the stipulated settlement that could be enforced only against it. The violations that Appellees allege are not violations that the insureds unilaterally could determine occurred in order to justify entering into such a stipulated settlement.
¶38 Appellees and their Amici rely on case law from other jurisdictions approving the use of stipulated settlements whenever there is a question regarding coverage or bad faith refusal to settle a claim. Like Montana, all of the states on which Appellees and their Amici rely for this proposition have adopted some form of the Unfair Trade Practices Act from the National Association of Insurance Commissioners' model act. Unlike Montana, however, all but one of these states' Unfair Trade Practice Acts do not allow private rights of action for their enforcement. , Montana's Legislature has provided a statutory remedy that allows recovery of consequential and punitive damages for the violations Appellees raise. The UTPA protects insureds and third-party claimants from unfair settlement practices by insurance companies and provides express remedies to make insureds and claimants whole for a company's violation. We decline to impose as a matter of law a new obligation on a defending insurer, as suggested by Appellees, to file a declaratory judgment action before the resolution of the liability case, when the Legislature has provided an express cause of action and remedies for violations of duties expressed in the UTPA. See §§ 33-18-242, and 1-1-108, MCA ("In this state there is no common law in any case where the law is declared by statute.").
CONCLUSION
¶39 "[T]his Court has never approved a confessed judgment as the proper measure of damages where the insurer defended its insured." Freyer , ¶ 30 (internal quotations omitted).
Where, as here, the insured, without the insurer's agreement, stipulates to a judgment against it in excess of both the policy limits and the previously rejected settlement offer, and the stipulated judgment is coupled with a covenant not to execute, the agreed judgment cannot fairly be attributed to the insurer's conduct, even if the insurer's refusal to settle within the policy limits was unreasonable.
Freyer , ¶ 35 (quoting Hamilton , 117 Cal.Rptr.2d 318, 41 P.3d at 131 ). When an insurer has provided a defense to its insured, a District Court may not approve a stipulated agreement entered into without the consent or participation of the insurer that will be deemed presumptively reasonable against the defending insurer. If the third-party claimant and the insured decide to settle without the insurer's participation, a court may approve the stipulated judgment as between those parties in the underlying liability case, but it will not be presumed reasonable as to the insurer when the insurer is providing a defense. In such cases, the insured must pursue its separate breach of contract or UTPA claims against the insurer and will bear the burden of proving all elements of those claims, including damages.
¶40 The parties in this case stipulated that the settlement would not bind them unless the District Court approved it as "fair and reasonable." Because the District Court's reasonableness determination was based in part on its conclusion that a presumption of reasonableness applied, the entry of judgment must be reversed. We reverse the District Court's order and entry of judgment against Junkermier and remand for further proceedings consistent with this Opinion.
We Concur:
MIKE McGRATH, C.J.
LAURIE McKINNON, J.
JAMES JEREMIAH SHEA, J.
JIM RICE, J.
DIRK M. SANDEFUR, J.
INGRID GUSTAFSON, J.
Draggin' Y Cattle Co. v. Addink , 2013 MT 319, 372 Mont. 334, 312 P.3d 451 (Draggin' Y I ); Draggin' Y Cattle Co. v. Addink , 2016 MT 98, 383 Mont. 243, 371 P.3d 970 (Draggin' Y II ); Draggin' Y Cattle Co. v. Junkermier, Clark, Campanella, Stevens, P.C. , 2017 MT 125, 387 Mont. 430, 395 P.3d 497 (Draggin' Y III ).
Under the agreement, Plaintiffs moved to dismiss Addink from the case with prejudice. The District Court dismissed Addink on November 19, 2014.
In Draggin' Y III , we vacated all orders entered by Judge Huss after the grant of New York Marine's motion to intervene, because he should have recused himself from the case. Draggin' YIII , ¶ 40. This appeal addresses the proceedings before Judge Eddy after remand from our decision in Draggin' Y III .
The assignment of rights in stipulated agreements is an assignment to the plaintiff of the insured's claims against its insurer. See, e.g, Justin A. Harris, Note, Judicial Approaches to Stipulated Judgments, Assignments of Rights, and Covenants Not to Execute in Insurance Litigation , 47 Drake L. Rev. 853, 859 (1999). Thus, an insured may assign to the plaintiff any breach of contract or UTPA claims that it has against its insurer. The parties' agreement in this case, however, did not state it was assigning the insured's claims , but rather "permit[ted] the plaintiffs to enforce the stipulated judgment against the Insurer through an assignment." The language of the parties' settlement agreement demonstrates their belief that the settlement amount presumptively would be enforceable against the insurer as the damages amount in subsequent UTPA or breach of contract actions.
See Alaska Stat. § 21.36.125(b) (2018) ("The provisions of this section do not create or imply a private cause of action for a violation of this section."); Ariz. Rev. Stat. Ann. § 20-461(D) (2019) ("Nothing contained in this section is intended to provide any private right or cause of action to or on behalf of any insured or uninsured resident or nonresident of this state. It is, however, the specific intent of this section to provide solely an administrative remedy to the director for any violation of this section or rule related to this section."); Colo. Rev. Stat. § 10-3-1104(1)(h) (2018) (providing only for an administrative remedy); Farmers Grp., Inc. v. Trimble , 658 P.2d 1370, 1378 (Colo. Ct. App. 1982) (interpreting Colo. Rev. Stat. § 10-3-1104(1)(h) and explaining that "The General Assembly could have added the remedy of a private civil action for damages to its catalog of sanctions. It did not do so, however, and in the absence of any indication of contrary legislative intent, we must assume that the specific remedies designated by the General Assembly exclude all others. We conclude that this statute may not serve as the sole basis for a civil action instituted by private citizens allegedly aggrieved by the conduct of their insurers." (citations omitted)); Iowa Code § 507B.4 (2018) (not providing for a private right of action); Bates v. Allied Mut. Ins. Co. , 467 N.W.2d 255, 260 (Iowa 1991) ("To hold that chapter 507B creates a private cause of action would be in direct contradiction to existing Iowa law and would create a cause of action not intended by the legislature."); Kan. Stat. Ann. § 40-2404(9) (2019) (providing for no private cause of action); Earth Scientists (Petro Servs.), Ltd. v. U.S. Fid. & Guar. Co. , 619 F.Supp. 1465, 1471 (D. Kan. 1985) (interpreting Kan. Stat. Ann. § 40-2404(9) to "not provide a private cause of action"); Me. Rev. Stat. Ann. 24-A § 2164-D(8) (2019) ("This section may not be construed to create or imply a private cause of action for violation of this section."); Minn. Stat. § 72A.201(1) (2019) (providing for an administrative remedy); Morris v. Am. Family Mut. Ins. Co. , 386 N.W.2d 233, 238 (Minn. 1986) (interpreting Minnesota's unfair trade practice act and explaining that it "lack[s] an explicit legislative intention to create a new cause of action in derogation of our common law" and "hold[ing], therefore, that a private person does not have a cause of action for a violation of the Unfair Claims Practices Act"); 40 Pa. Cons. Stat. §§ 1171.5 and 1171.7 (2019) (providing for an administrative remedy); Wyo. Stat. Ann. § 26-13-124 (2019) ; Herrig v. Herrig , 844 P.2d 487, 494 (1992) ("[W]e hold that no implied private right of action exists under § 26-13-124 of the Wyoming Insurance Code.").
The lone exception is Washington. See Wash. Rev. Code § 48-30-015 (2019) (providing for a private right of action for unfair claim settlement practices). As we explained in Abbey/Land II , ¶ 59, however, Washington has a specific statutory process for court-approval of settlement agreements that Montana does not have. Washington law does not provide a meaningful comparison. | [
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CHIEF JUSTICE TURNAGE
delivered the Opinion of the Court. The Department of Revenue (DOR) appeals an order of the First Judicial District Court, Lewis and Clark County, which granted tax-exempt status to cattle owned by Steer, Inc. (Steer), on the basis that the cattle were property owned by an “institution of purely public charity” under §§ 15-6-201(1) (e), and -201(2) (a), MCA. This holding reversed a prior decision of the State Tax Appeal Board (STAB). We reverse the District Court’s order.
DOR raises the following issues:
1. Did the District Court err in finding STAB’s Findings of Fact IX and XI clearly erroneous?
2. Did the District Court err by failing to remand the case to STAB for suitable findings when it found STAB’s Findings of Facts IX and XI clearly erroneous?
3. Did the District Court err when it held that tax-exempt property of an institution of purely public charity need only be owned, and not used, by the institution?
4. Did the District Court err when it found that the requirements of a purely public charity did not preclude uses that are significantly non-charitable in nature?
5. Did the District Court hold that the dissemination of religious teachings is a charitable purpose qualifying the institution for a property tax exemption, and if so, was this an error?
6. Did the District Court err when it found that the production of revenue from property is a charitable purpose qualifying the institution for a property tax exemption?
7. Did the District Court err when it found that the beneficiaries of an institution of purely public charity do not have to be persons who would otherwise be the recipients of aid from local or state Montana governments?
FACTS
Steer, a non-profit North Dakota corporation, conducts a stewardship program that raises funds, and in turn, donates these funds to member evangelical organizations. This unique stewardship program, which originated in 1956 and is currently operating in twenty-eight states, creates a three-way partnership between a donor, a farmer, and a member evangelical organization.
A donor contributes $600.00 increments to Steer, and receives a one-time tax deduction for the charitable contribution. Steer then purchases a livestock unit with each $600.00 contribution.
Steer places the livestock unit with a farmer. The farmer agrees to provide free feed and care to the livestock unit, as well as its offspring. The farmer sells the livestock’s offspring in Steer’s name, and forwards all of the profits from the sale to Steer. The farmer’s costs associated with the care of the livestock unit are tax deductible.
Steer then donates all profits, less twenty-seven percent for administrative and insurance costs, to a member evangelical organization, which can be designated by the donor or farmer. To be a member, an evangelical organization must complete an application and be approved by Steer’s Board of Directors. Once selected, the member evangelical organization must pay Steer an annual membership fee.
The livestock unit is reinvested in this stewardship program and continues to yield profit which is donated to member evangelical organizations until it is too old to produce. The old livestock is then culled and sold, whereby, again, all sale profits go to Steer for distribution to member evangelical organizations. Steer currently has approximately 100 head of cattle in Garfield County, Montana.
From 1982 to 1987, Garfield County’s Assessor classified Steer’s then approximate seventeen cattle as taxable property under § 15-6- 136, MCA, and assessed Steer $485.92 in taxes. Steer appealed to the Garfield County Tax Appeal Board for a refund on April 22,1987 — this appeal was denied. On June 29,1987, Steer further appealed to STAB.
On January 30,1989, STAB denied Steer’s appeal on the basis that Steer did “not advance a charitable purpose. The evidence establishes that the cattle are raised and sold for a profit. The profit is used to advance and further evangelical gospel and doctrine.”
Steer petitioned for judicial review on March 24,1989. On December 18, 1989, the District Court reversed and remanded STAB’s decision, and held that Findings of Fact IX and XI were clearly erroneous:
“Steer, Inc. objects to STAB’s Finding of Fact IX which states that ‘[e]ach missionary recipient has as its principal purpose the dissemination of evangelical gospel and principles.’ Because this finding ignores its commitment to providing services and goods to the needy, Steer, Inc. argues, it shows that STAB failed to look beyond the religious aspect of Steer Inc.’s organization. STAB also found in Finding of Fact XI that ‘[t]he evidence in the case establishes that the cattle and the property owned by Steer, Inc. are not used for any purpose other than the purposes set forth in the Findings of Fact above.’ These findings are clearly erroneous based upon the evidence on the record.”
The District Court further stated that STAB ignored testimony that stated that Steer’s funds were used in projects “that were charitable rather than strictly evangelistic” such as a hospital construction and educational contributions. From this decision, DOR appeals.
STANDARD OF REVIEW
We recognize that in the past this Court has interpreted § 2-4-704, MCA, the standards for judicial review of an administrative ruling, to mean that an agency’s findings of fact are subject to a “clearly erroneous” standard and agency’s conclusions of law are subject to a broader “abuse of discretion” standard. City of Billings v. Billings Firefighters (1982), 200 Mont. 421, 430, 651 P.2d 627, 632; P.W. Berry Co., Inc. v. Freese (1989), 239 Mont. 183, 188, 779 P.2d 521, 524 (Citations omitted). “[A] finding is ‘clearly erroneous’ when, although there is evidence to support it, a review of the record leaves the court with the definite and firm conviction that a mistake has been committed.” Wage Appeal of Montana State Highway Patrol Officers v. Board of Personnel Appeals (1984), 208 Mont. 33, 40, 676 P.2d 194, 198 (Citations omitted). “Appellants carry the burden of showing prejudice from a clearly erroneous decision. “ Terry v. Board of Regents of Higher Education (1986), 220 Mont. 214, 217, 714 P.2d 151, 153 (Citations omitted). An agency’s conclusions of law will be reversed for abuse of discretion “[wjhere it appears that the legislative intent is clearly contrary to agency interpretation.” Billings Firefighters, 200 Mont. at 431, 651 P.2d at 632.
In the future, we will continue to use the “clearly erroneous” standard for reviewing findings of fact. However, in reviewing conclusions of law, our standard of review will be merely to determine if the agency’s interpretation of the law is correct, instead of applying the inappropriate abuse of discretion standard.
In the past, we have applied this standard when reviewing conclusions of law of the Workers’ Compensation Court. See Sharp v. Hoerner Waldorf Corp. (1978), 178 Mont. 419, 423, 584 P.2d 1298, 1301; Wassberg v. Anaconda Copper Company (1985), 215 Mont. 309, 315, 697 P.2d 909, 912; Schaub v. Vita Rich Dairy (1989), 236 Mont. 389, 391, 770 P.2d 522, 523. The reasoning for simply determining if the court’s conclusions are correct is that no discretion is involved when a tribunal arrives at a conclusion of law — the tribunal either correctly or incorrectly applies the law. For that reason, this Court concludes that our standard of review relating to conclusions of law, whether the conclusions are made by an agency, workers’ compensa tion court, or trial court, is whether the tribunal's interpretation of the law is correct.
Our standard of review relating to conclusions of law is not to be confused with our review of discretionary trial court rulings. This has been defined as “encompassing the power of choice among several courses of action, each of which is considered permissible.” See Aldisert, The Judicial Process, 1976, page 759.
Such rulings are usually trial administration issues, scope of cross-examination, post-trial motions, and similar rulings. The standard of abuse of discretion will be applied to these rulings.
ANALYSIS
Because we find reversible error involving two of the seven issues presented on appeal, we will limit our discussion to 1) whether the District Court erred in finding STAB’s Findings of Fact IX and XI clearly erroneous, and, 2) whether the District Court erred when it held that tax-exempt property of an institution of purely public charity need only be owned, and not used, by the institution.
1. Did the District Court err in finding STAB’S Findings of Fact IX and XI clearly erroneous?
STAB’s Findings of Fact IX and XI read as follows:
“IX
“Each missionary recipient has as its principal purpose the dissemination of evangelical gospel and principles.
‘XI
“The evidence in the case establishes that the cattle and the property owned by Steer, Inc. are not used for any purpose other than the purposes set forth in the Findings of Fact above.”
DOR asserts that the District Court incorrectly found Findings of Fact IX and XI clearly erroneous because contrary to the District Court’s holding, STAB did not ignore the fact that Steer, in part, supports charitable projects. Rather, DOR argues that STAB correctly found that Steer’s member evangelical organizations’ principal purpose is to disseminate evangelical gospel and principles. “Principal,” here, does not mean “exclusive” — STAB used the word “principal” to put into perspective Steer’s religious activities compared to its charitable activities.
Additionally, DOR argues that STAB’s Finding of Fact XI properly distinguishes that when considering whether personal property is tax-exempt under Mont. Const. Art. VIII, § 5(1), and §§ 15-6-201(l)(e) and -201(2) (a), MCA, it is the use of the personal property and not the ownership that is determinative. Here, DOR argues that Steer used its cattle exclusively as a capital investment for the production of revenue, which in turn, was donated to member evangelical organizations — Steer was not directly using the cattle as a source of food for the needy.
Finally, DOR argues that the record is void of evidence that Steer was prejudiced by STAB’s decision or that STAB made a mistake. Accordingly, DOR argues that the District Court had no basis to find Findings of Fact IX and XI clearly erroneous in light of Terry and Wage, supra.
We agree with DOR’s arguments. The record indeed contains substantial evidence to support STAB’s finding that Steer’s member evangelical organizations’ principal purpose was the dissemination of evangelical gospel and principles. This finding does not ignore the fact that Steer conducts charitable activities; it does, however, properly balance its charitable activities in relation to its primary, religious activities. Furthermore, we agree with DOR that when considering tax-exempt status, it is the use of the property that is determinative rather than the ownership of the property. See Flathead Lake Methodist Church Camp v. Webb (1965), 144 Mont. 565, 570, 399 P.2d 90, 93. Steer exclusively used the cattle as a capital investment to produce funds, which in turn, were donated to member evangelical organizations that provide beneficial services to the needy; Steer did not directly use the cattle to feed needy people. Finally, we hold that STAB’s decision did not prejudice Steer and the record does not reveal that STAB made a clearly erroneous mistake. Therefore, based on the standards of review under Terry and Wage, the District Court incorrectly found STAB’s Findings of Fact IX and XI clearly erroneous.
2. Did the District Court err when it held that tax-exempt property of an institution of purely public charity need only be owned, and not used, by the institution?
Steer, through its innovative stewardship program, provides a valuable service by raising funds which, in turn, are donated to needy people world-wide. However, the fact that Steer’s unique fund-raising method produces worthwhile results through its member evangelical organizations does not negate its tax obligations under Montana constitutional and statutory mandate. We have already held that Steer’s use of its cattle as a capital investment was determinative in deciding that it did not qualify for a tax-exemption based on being an “institution of purely public charity.” We feel, however, that this case requires us to further clarify “institutions for purely public charity.”
In order to receive tax-exempt status, Steer’s cattle must qualify as “institutions of purely public charity’ under Mont. Const. Art. VIII, § 5(1), and §§ 15-6-201(1) (e) and -201(2) (a) MCA.
The primary focus is whether “institution” means entity or property.
Mont. Const. Art. VIII, § 5(1) provides:
“(1) The legislature may exempt from taxation:
“(a) Property of the United States, the state, counties, cities, towns, school districts, municipal corporations, and public libraries, but any private interest in such property may be taxed separately.
“(b) Institutions of purely public charity, hospitals and places of burial not used or held for private or corporate profit, places for actual religious worship, and property used exclusively for educational purposes.
“(c) Any other classes of property. [Emphasis added.]”
Section 15-6-201(1) (e), MCA, provides:
“(1) The following categories ofproperty are exempt from taxation:
“(e) institutions of purely public charity [Emphasis added]”.
Section 15-6-201(2) (a), MCA, provides:
“(2)(a) The term ‘institutions of purely public charity includes organizations owning and operating facilities for the care of the retired or aged or chronically ill, which are not operated for gain or profit.”
Exemptions from property taxation are to be strictly construed. Cruse v. Fischl (1918), 55 Mont. 258, 265-66, 175 P. 878, 881; Town of Cascade v. Cascade County (1926), 75 Mont. 304, 308, 243 P. 806, 807; Flathead Lake Methodist Camp v. Webb (1965), 144 Mont. 565, 573, 399 P.2d 90, 94-95; Old Fashion Baptist Church v. Montana Dep't of Revenue (1983), 206 Mont. 451, 455, 671 P.2d 625, 627. Taken together, the Montana Constitution and the Montana legislative acts intend “institutions” to mean property or place employed for purely public charitable purposes or activities rather than an entity. The cattle are property and tax is imposed on property. If it is charitable property in its purpose and employment and not for profit or gain of income, taxes áre not imposed. Here, the cattle’s employment was for the gain of income, and therefore, the cattle are taxable.
Mont. Const. Art. VIII, § 5(1) provides that the legislature may exempt property from taxation. The exemptions of property from taxation is clearly left to the discretion of the legislature and as noted, are to be strictly construed. The history and provisions of § 15-6-201, MCA, reflect the many times when this section of the code has been amended to add property to the list of exempted items, which includes such items as residences of the clergy to a bicycle used for personal transportation of the owner. The judiciary may not add livestock to the list of exemptions. Accordingly, we reverse the District Court and hold that Steer’s cattle do not qualify as “institutions of purely public charity,” and therefore, are not tax-exempt.
Reversed.
JUSTICES HARRISON, BARZ, HUNT and MCDONOUGH concur. | [
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