DELL E. TYLER and RICHARD SHUBERT, 

d/b/a CABIN BAR AND MOTEL, 

-VSFIREMAN'S 

Plaintiffs and Appellants, 

FUND INSURANCE COMPANY, 

Defendant and Respondent. 

APPEAL FROM: District Court of the Fourth Judicial District, 

In and for the County of Missoula, 

The Honorable Ed McLean, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Douglas G. Skjelset, Skjelset Law Offices, Missoula, 

Montana 

For Respondent: 

John E. Bohyer, Crowley, Haughey, Hanson, Toole 

& Dietrich, Billings, Montana 

Submitted on Briefs: July 30, 1992 

Filed: 
Justice R. C. McDonough delivered the Opinion of the Court, 

This is an appeal by plaintiff Richard Shubert of an order of 

the Fourth Judicial District Court grantingthe defendant's motions 

for summary judgment on shubertls claim for breach of the covenant 

of good faith and fair dealing and on defendant's counterclaim for 

restitution in the amount of $276,381.41. We affirm. 

There are two issues on appeal: 

1. Did the District Court err in granting defendant's motion 

for summary judgment on plaintiffqs claim of bad faith? 

2. Did the District Court err in granting defendant's motion 

for summary judgment on defendant's counterclaim for restitution? 

The Cabin Bar and Motel, owned by Dell E. Tyler and Richard 

Shubert as partners, was destroyed by fire. Investigation by the 

Missoula Fire Department and the insurer, Fireman's Fund 

(Fireman's) followed. Fireman's did not make payments to the 

partners for their losses until six months later when Tyler and 

Shubert threatened to file a bad faith action. Thereafter, 

Fireman's paid the partners $276,381.41. 

Tyler and Shubert filed a bad faith claim against Fireman's 

under the Montana Unfair Trade Practices Act. The defendant filed 

its initial answer and filed an amended answer after learning that 

the fire was caused by arson by one of the partners, Dell E. Tyler. 

Later, the defendant filed a motion for summary judgment on a bad 

faith claim and on its counterclaim for restitution. 

Dell E. Tyler filed a response to defendants' motion for 

summary judgment. In this response, he agreed that the bad faith 

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claim should be dismissed as it pertained to him. He also agreed 

that Fireman's was entitled to a judgment against him on the issue 

of restitution. A hearing on the motion for summary judgment as it 

pertained to Shubert, was held and the District Court issued its 

order and judgment. A motion by Shubert to reconsider the judgment 

concerned only the issue of the restitution counterclaim. The 

motion was denied and this appeal followed. 

"Under Rule 56(c), M.R.civ.P., summary judgment is proper if 

the record discloses no genuine issues of material fact, and the 

moving party is entitled to judgment as a matter of law. (citation 

omitted.) In reviewing a motion for summary judgment, we view the 

evidence in the light most favorable to the party opposing the 

motion. (citation omitted.)*' Kaseta v. Northwestern Agency of 

Great Falls (1992), - Mont. -, P.2d , 49 St. Rep. 183, 

184. 

I. 

Shubert contends that there are multiple issues of fact and 

law present in this case so it was improper for the District Court 

to grant summary judgment. Moreover, he argues that the District 

Court erred in awarding summary judgment to Firemanls on Shubertls 

bad faith claim and Fireman's counterclaim for restitution. 

Defendant Fireman's counters that the bad faith claim in settling 

the insurance claim cannot exist where the cause of the fire was 

arson and that arson voided the insurance policy. Further, it 

states that Fireman's was fraudulently induced to pay the losses 

and restitution is the appropriate recourse. 
Fireman's cites Woodhouse v. Farmer's Union Mut. Ins. Co. 

(1990), 241 Mont. 69, 785 P.2d 192, as determinative of this 

action. We agree. In Woodhouse, a woman attempted to recover from 

her insurance company for personal possessions lost in a trailer 

fire. Patricia Woodhouse was coinsured with her ex-husband on the 

trailer awarded to him during their divorce action. She still had 

many possessions in the trailer when her ex-husband intentionally 

burned the trailer, causing a total loss. 

Woodhouse filed a claim for the loss of her possessions but 

the insurance company concluded that coverage was precluded because 

the fire had been intentionally set. Farmer's policy read: 

We do not insure for loss caused directly or indirectly 

by any of the following ... h. Intentional Loss, meaning any 

loss arising out of any act committed: (1) by or at the 

direction of an insured; and (2) with the intent to cause a 

loss. 

Woodhouse, 785 P.2d at 193. The Court agreed with Farmer's that 

the meaning of the contract was clear. Alan Woodhouse, the exhusband, was an "insured" and his act was intentional. Therefore, 

coverage was precluded for him and Patricia, his coinsured. 

The policy provision at issue here states: 

This entire policy shall be void if, whether before or 

after a loss, the insured has willfully concealed or 

misrepresented any material fact or circumstance concerning 

this insurance or the subject thereof, or the interest of the 

insured therein, or in case of any fraud or false swearing by 

the insured relating thereto. (Page 1 of Standard Form Fire 

Insurance Policy). 

The policy also states: 

F. Perils Excluded. The property coverage does not 

insure against loss caused by, resulting from, contributed to 

or aggravated by: 
(11) Any fraudulent, dishonest or criminal acts done 

by or at the instigation of anv insured, partner, or 

ioint adventurer in or of any insured, an officer, 

director, or trustee of any insured ... 

(Page 3 of Commercial Property Coverage Policy). 

This language is clear and unambiguous. "The property 

coverage does not insure against loss caused by ... criminal acts 

done by ... any insured, partner ....It Coverage is precluded because 

of the arson committed by Dell E. Tyler, the partner of Richard 

Shubert. "An innocent co-partner [can] not recover under a policy 

where arson was committed by a partner because the language of the 

policy specifically barred recovery.. .. " Woodhouse, 785 P.2d at 

193. 

Fireman's argues that the bad faith claim is barred because 

the cause of the fire was arson. We stated in Britton v. Farmer's 

Ins. Group (1986), 221 Mont. 67, 73, 721 P.2d 303, 307, "[als to 

the insured ..., the failure of the insurer to comply with Section 

33-24-102, MCA would be unimportant if in fact Britton had 

committed arson to cause the loss for then he would not be entitled 

to coverage in any event." Here, where the cause of the fire was 

arson, there can be no bad faith action and the District Court was 

correct in granting summary judgment to the Defendant. 

11. 

Fireman's argues that it is at least as innocent as Shubert 

and therefore restitution is appropriate. Fireman's cites McDonald 

v. Northern Ben. Ass'n (1942), 113 Mont. 595, 131 P.2d 479, for the 

proposition that when an insurer has paid a claim for loss under a 

mistake of fact, it is entitled to recover the amount paid. In 

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McDonald, the plaintiff's husband obtained a certificate for death 

benefits from defendant, a mutual benefit association. He 

maintained in the application that he was in good health and had 

not consulted a doctor within the past five years, both statements 

being false. Shortly after McDonald's death, the defendant made a 

partial payment to the deceased's beneficiary, his wife. The 

beneficiary then brought an action against the defendant for 

recovery of the rest of the benefits. Defendant answered that the 

statements given were false. The written application, expressly 

made a part of the contract stated: "1 also agree ... that no 

liability shall exist against the Ass'n. if any of the answers to 

the above questions relative to my health on the date below are 

found to be untrue." McDonald, 131 P.2d at 483. 

The Court concluded that: 

"[tlhere is no doubt that a party is entitled to sue and 

recover money which he has paid by mistake of fact, or of 

mingled fact and law, and which the receiver ought not, in 

equity and good conscience, to retain....The fact that the 

second payment of $50 was made after the defendant had some 

reason to suspect the falsity of the answers to the questions 

concerning the member's health, does not affect the 

defendant's right to recover the money, not in itself having 

the elements of an estoppel, or of a waiver, which latter 

consists of the intentional relinquishment of a known 

right ... and not apparently having caused plaintiff to change 

her position for the worse so as to entitle her in equity and 

good conscience to keep the money.'' 

McDonald, 131 P.2d at 486-487. 

The partners obtained the insurance proceeds based on a fraud, 

even though Shubert was unaware of the fraud. Under the insurance 

contract, the policy was void and the partners were not entitled to 

any of the payments made on the insurance loss. Fireman's may 
recover the money paid for the fraudulent claim. 

Shubert argues that he has had a change of circumstances and 

therefore should not be required to pay restitution to the 

insurance company. He cites the Restatement of Restitution to 

support his argument. Section 142, Restatement of Restitution 

states that: 

(1) The right of a person to restitution from another 

because of a benefit received is terminated or diminished if, 

after the receipt of the benefit, circumstances have so 

changed that it would be inequitable to require the other to 

make full restitution. 

(2) Change of circumstances may be a defense or a partial 

defense if the conduct of the recipient was not tortious and 

he was no more at fault for his receipt, retention or dealing 

with the subject matter than was the claimant. 

Restatement of Restitution 5 142. 

Shubert states in his brief that the insurance "proceeds 

received from Respondent in this matter were used to discharge the 

outstanding debts of the partnership," and therefore are a change 

of circumstances. However, Comment b to Section 142 provides for 

exceptions to the general rule. Comment b states: 

Where money has been paid which the payee has used for 

the payment of debts incurred prior to its receipt, such 

payment of debts does not constitute a change of circumstances 

which would prevent restitution by him. 

Under comment b to 5 142, the use of the insurance proceeds 

falls within the exception to "change of circumstances" and this 

argument falls. 

Finally, § 35-10-307, MCA, reads as follows: "All partners are 

liable.. . (2) jointly for all other debts and obligations of the 

partnership .... " The District Court correctly concluded that 

Shubert, as a partner, albeit an innocent partner, is liable for 
restitution for the insurance proceeds. 

Shubert argues that laches, waiver and equitable estoppel 

apply to this case and warrant reversing the District Court judge's 

order. These issues were not briefed or argued in the lower court 

and thus are not appropriate for review. Shubert's answer to 

Fireman's counterclaim claims that his third defense to the 

counterclaim was laches and his fourth defense was estoppel. 

Waiver was not even pled by Shubert. Other than these contentions, 

there is no real argument or discussion regarding these issues. 

They are not addressed at all by the lower court in its opinion. 

"This Court will not consider for the first time on appeal an issue 

which was not raised in the District Court." Keller v. Dooling 

(1991), 248 Mont. 535, 540, 813 P.2d 437, 441. See also Merriman 

v. Merriman (1991), 247 Mont. 491, 496, 807 P.2d 1351, 1354. 

Affirmed. 

We Concur: / 
November 12, 1992 

CERTIFICATE OF SERVICE 

I hereby certify that the following order was sent by United States mail, prepaid, to the 

following named: 

DOUGLAS G. SKJELSET 

Attorney at Law 

P.O. Box 4102 

Missoula, MT 59806-4102 

John E. Bohyer, Esq. 

Crowley, Haughey, Hanson, Toole & Dietrich 

P. 0. Box 2529 

Billings, MT 59103-2529 

ED SMITH 

CLERK OF THE SUPREME COURT 

STATE OF MONTANA