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,SkjelsetLawOffices,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 

### appealby plaintiff Richard Shubert 

### of an order 

### of theFourth Judicial DistrictCourtgrantingthedefendant'smotions for summary judgment on shubertlsclaim 

### forbreach 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'smotion for summary judgment on plaintiffqsclaim 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 theMontana Unfair Trade PracticesAct. The defendant filed its initial answer and filed an amended answer after learning 

### that the firewas 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 2claim should be dismissed as 

### it pertained 

### to him. He also agreed that Fireman'swas entitled 

### to a judgment against him on the issue of restitution. 

### A hearing on themotion 

### for summary judgmentas it pertained to Shubert, was held and the District Court issued its order and judgment. Amotionby Shubertto reconsiderthejudgment concerned only the issue of the restitution counterclaim. The motion was denied and this appeal followed. "UnderRule 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 amatter 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 lawpresent 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. InWoodhouse, a woman attempted to recover from her insurance company for personal possessions lost in a trailer fire. PatriciaWoodhouse 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 companyconcluded that coveragewasprecluded 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,dishonestorcriminalactsdone by or atthe instigationof 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 doneby

# ... any insured, partner....It Coverage isprecluded 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 firewas 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 thenhewould notbe 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 thereforerestitution is appropriate. Fireman's citesMcDonald

v. Northern Ben. Ass'n (1942), 113 Mont. 595, 131 P.2d 479, for the proposition that when an insurerhas paid a claim for lossunder a mistake of fact, it is entitled to recover the amount paid. In 5McDonald, theplaintiff'shusband 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 thepast fiveyears, both statements being false. Shortly after McDonald's death, the defendantmade 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, 131P.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. Thepartners obtained the insuranceproceedsbased on a fraud,

even though Shubertwas unaware of the fraud. Under the insurance contract,thepolicywas void and thepartners were not entitled to any of the payments made on the insurance loss. Fireman's mayrecover 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 ordiminished 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 circumstancesmay be a defenseora partial defense if the conduct of the recipientwas not tortious and he was no more at fault for his receipt,retention or dealing with the subjectmatter than was the claimant. Restatement of Restitution 5 142. Shubert states in his brief that the insurance "proceeds received from Respondent in thismatter 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 debtsdoes not constitute a change of circumstances which would prevent restitutionby 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 forrestitution for the insurance proceeds. Shubert argues that laches, waiver and equitable estoppel apply to thiscaseand warrant reversing the District Court judge's order. These issueswere 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 evenpled 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. "ThisCourt 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 CERTIFICATEOFSERVICE 

### Ihereby certifythat thefollowingorderwas sentby United Statesmail,prepaid, tothe following

### named:

DOUGLASG.SKJELSET AttorneyatLaw P.O.Box4102 Missoula,MT59806-4102 JohnE.Bohyer,Esq. Crowley,Haughey,Hanson,Toole&Dietrich 

### P.0.Box2529 Billings,MT 59103-2529

EDSMITH CLERKOFTHESUPREMECOURT STATEOFMONTANA