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No. 99-531 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

2000 MT 309 

302 Mont. 431

15 P.3d 1198

ROSE STUART and DOUGLAS STUART, 

Plaintiffs and Appellants,

v.

FIRST SECURITY BANK, HAVRE, MONTANA,

Defendant, Respondent, and Cross-Appellant.

APPEAL FROM: District Court of the Twelfth Judicial District, 

In and for the County of Hill,

The Honorable John Warner, Judge presiding.

COUNSEL OF RECORD:

For Appellants:

Larry Jent, Williams & Jent, LLP, Bozeman, Montana

For Respondent:

Chris R. Young, Attorney at Law, Havre, Montana

Submitted on Briefs: March 6, 2000 

Decided: December 7, 2000

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Filed:

__________________________________________

Clerk

Justice Terry N. Trieweiler delivered the opinion of the Court.

¶1 The Plaintiffs, Rose and Douglas Stuart, brought this action in the District Court for the 

Twelfth Judicial District in Hill County to recover damages incurred when the Defendant, 

First Security Bank of Havre, denied their loan application. The Stuarts alleged that they 

were denied an agricultural operating loan by the First Security Bank of Havre in violation 

of the Montana Human Rights Act, Title 49, Chapter II, MCA. The District Court 

dismissed the claim following a motion for summary judgment by the Bank. The Stuarts 

now appeal the judgment of the District Court and the Bank cross-appeals the amount of 

attorney fees awarded. We affirm the judgment of the District Court.

¶2 While the parties raised several issues on appeal, we restate the issues presented and 

find the following to be dispositive:

¶3 1. Did the District Court apply the correct standard for deciding this discrimination 

claim?

¶4 2. Did the District Court err when it awarded summary judgment to the Bank?

¶5 3. Did the District Court err when it awarded the Bank attorney fees?

FACTUAL BACKGROUND

¶6 Rose Stuart and her son Douglas owned and operated Stuart Farms. During the 1980s, 

Stuart Farms became the largest farming operation on the Fort Belknap Indian Reservation 

in northcentral Montana. Rose is an enrolled Assiniboine tribal member on the Fort 

Belknap Indian Reservation who began farming her mother's allotment in 1962 along with 

her non-Indian husband Bill Stuart. Douglas, their only son, is recognized by the federal 

government as a Native American and, as a direct descendant of an original allottee, is 

allowed to inherit and own reservation property in trust. 

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¶7 Stuart Farms experienced economic difficulties in the early 1990s. As a result, Rose 

and Douglas filed for Chapter 11 bankruptcy protection. On January 12, 1993, the Stuarts 

applied for an agricultural operating loan of $150,000 for the 1993 crop year from First 

Security Bank of Havre. The loan was to be secured by the assignment of crop insurance 

and government deficiency payments, along with a first priority lien on all growing crops. 

While Rose's reorganization plan had been confirmed by the Bankruptcy Court in May 

1992, Douglas was still involved in bankruptcy proceedings at the time the Stuarts 

submitted their loan application.

¶8 On February 8, 1993, Douglas wrote a letter assuring the Bank that his attorney would 

draft the documents necessary to perfect the Bank's liens on the growing crops. Douglas 

also offered additional security for the loan in the form of certificates of deposit. 

¶9 On February 10, 1993, Bank president Charles R. Celania presented the Stuart loan 

application to the Executive Loan Committee. Celania mistakenly presented a loan request 

for approximately $250,000, which represented the loan guarantees proffered by the 

Stuarts rather than the principal loan amount. The Bank denied the application in a letter 

dated February 11, 1993. The Bank gave the following reasons for the denial:

(1) The Executive Loan Committee . . . deemed it to be an unnecessary business risk 

to try and perfect the liens on the security offered.

(2) The "father, Bill Stuart, who does the bulk of the work in this farming operation 

could not be replaced in the event he were incapacitated."

(3) The loan you are requesting is on the borderline of the type of loan and in the 

amount for an operation of your size, and is therefore unpalatable when taken in 

consideration with items 1 and 2.

¶10 On February 12, 1993, Douglas sent a letter to the Bank in which he addressed the 

concerns outlined in Celania's denial. Douglas recognized that it was "clearly [Stuarts'] 

obligation and expense" to perfect the liens. Douglas responded to the Bank's concern over 

management succession by stating that he had ample time to farm under his father's 

supervision. Based on this additional information, Douglas expressed his desire that the 

Bank reconsider the loan application. The Bank did not respond to this request.

¶11 On April 12, 1993, Rose, concerned that the Bank's unfavorable opinion of Douglas 

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jeopardized the application, requested that a loan application for $150,000 be resubmitted 

to the Committee in her name only. Despite these concerns, Rose continued to include 

Douglas' assets and crop insurance payments in her resubmitted loan application. 

¶12 The Bank denied Rose's resubmitted loan application on April 19, 1993. The Bank 

based its denial on Rose's 19 percent equity in her operation, her unsatisfactory 

performance on previous credit arrangements with other financial institutions, and the high 

risk associated with extending her additional credit.

¶13 During this time, the Bank was being evaluated by the Federal Reserve Board of 

Minneapolis for its adherence to Community Reinvestment Act (CRA) standards. The 

FRB performs such audits as a regular part of its responsibilities. One audit dated August 

16, 1994, found the Bank to be in "substantial non-compliance" with CRA requirements. 

In particular, the FRB criticized the Bank's loan denial procedure and provided the Bank 

with denial forms entitled "Notice of Adverse Action Taken and Principal Reasons." As a 

result, the Bank issued a "Notice of Adverse Action Taken" form to the Stuarts. The 

reasons the Bank selected from the denial form included "excessive obligations in relation 

to income," "value or type of collateral not sufficient," and "management succession." 

¶14 The Stuarts filed a claim with the Montana Human Rights Commission on July 21, 

1994. In March 1996, the Human Rights Commission issued a right-to-sue letter as 

required by § 49-2-509, MCA. The Stuarts filed their Complaint with the District Court on 

November 15, 1996. In their Complaint, the Stuarts alleged that the Bank's denial of the 

loan based on their racial status as Native Americans and on Rose's status as a Native 

American woman violated the Montana Human Rights Act and resulted in damages to 

their real estate, mental and emotional pain and suffering, humiliation, an altered course of 

life, and other damages. The Stuarts also sought to recover attorney fees pursuant to § 49-

2-509, MCA, and punitive damages based on allegations of the Bank's actual malice. 

¶15 The District Court granted the Bank's motion for summary judgment on May 5, 1999. 

The Bank then moved to recover costs pursuant to § 25-10-501, MCA, and attorney fees 

pursuant to § 49-2-509(6), MCA. The District Court awarded attorney fees in the amount 

of $4510.00 and costs in the amount of $3191.64. The Stuarts now appeal the District 

Court's summary judgment and award of attorney fees. The Bank cross-appeals the 

amount of fees awarded by the District Court. 

STANDARD OF REVIEW

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¶16 Our standard of review of appeals from summary judgment is de novo. Motarie v. 

Northern Montana Joint Refuse Disposal Dist. (1995), 274 Mont. 239, 242, 907 P.2d 154, 

156. We apply the same criteria which is applied by the district court pursuant to Rule 56

(c), M.R.Civ.P. Spinler v. Allen, 1999 MT 1960, ¶ 14, 295 Mont. 139, ¶ 14, 983 P.2d 348, 

¶ 14. The moving party must establish both the absence of genuine issues of material fact 

and entitlement to judgment as a matter of law. Hadford v. Credit Bureau of Havre, Inc., 

1998 MT 179, ¶ 14, 289 Mont. 529, ¶ 14, 962 P.2d 1198, ¶ 14. Once the moving party has 

met its burden, the opposing party must present material and substantial evidence, rather 

than mere conclusory or speculative statements, to raise a genuine issue of material fact.

Hadford, ¶ 14.

DISCUSSION

ISSUE 1

¶17 Did the District Court apply the correct standard for deciding this discrimination 

claim?

¶18 The Stuarts contend that the District Court erred when it applied the analysis outlined 

in Heiat v. Eastern Montana College (1996), 275 Mont. 322, 912 P.2d 787, to decide 

whether the Bank's motion should be granted. The Stuarts argue that "the Court's reliance 

on the McDonnell Douglas presumption, as modified by this Court in [Heiat], was 

misplaced." The Stuarts urge this Court to adopt the "preponderance" standard articulated 

in Wright v. Southland Corp. (11th Cir. 1999), 187 F.3d 1287. 

¶19 However, the Stuarts fail to demonstrate how their proposed standard differs from the 

standard we adopted in Heiat. In the summary judgment context where discrimination has 

been alleged, the plaintiff must allege a prima facie case by establishing that he or she is a 

member of a protected class and that someone in a different class was treated differently. 

The employer seeking summary judgment must then come forward with a legitimate, 

nondiscriminatory reason for the disparity. Heiat, 275 Mont. at 331, 912 P.2d at 794. If the 

employer does so, the plaintiff must not only produce evidence to establish a prima facie 

case of discrimination, but must also provide evidence which supports at least an inference 

that the employer's offered reasons are a pretext for discrimination. Heiat, 275 Mont at 

331, 912 P.2d at 794.

¶20 Application of the Heiat standard is dependent on whether the plaintiff is making the 

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discrimination claim at trial or upon motion for summary judgment. We noted in Heiat

that the McDonnell Douglas trial court analysis was inapposite in the summary judgment 

context because the plaintiff's burden in each situation differs. Heiat, 275 Mont. at 331, 

912 P.2d at 793. Here, the Stuarts argue for a new standard by focusing on the context in 

which the evidence was presented. 

¶21 The more relevant inquiry is whether the plaintiff's allegations are supported by direct 

evidence of discrimination. The Heiat analysis applies where discriminatory intent can 

only be proven by circumstantial evidence rather than by direct evidence. Reeves v. Dairy 

Queen, Inc., 1998 MT 13, ¶ 15, 287 Mont. 196, ¶ 15, 953 P.2d 703, ¶ 15. We have 

previously defined direct evidence cases as those in which the parties do not dispute the 

reason for the adverse action by the employer, but only whether such action constitutes 

illegal discrimination. Reeves, ¶ 16. Pursuant to the framework provided by Heiat, the 

denial of the Stuart loan constitutes illegal discrimination only if the reasons given by the 

Bank were a pretext for discrimination. Therefore, the case at bar is not a direct evidence 

case. 

¶22 Accordingly, we hold that the District Court properly analyzed the Stuarts' claim 

pursuant to the test outlined in Heiat. 

ISSUE 2

¶23 Did the District Court err when it awarded summary judgment to the Bank? 

¶24 The Stuarts next contend that the District Court erred when it held that they failed to 

provide evidence of discrimination by the Bank. In support of this contention, the Stuarts 

repeat the factual basis for their suit and argue that the District Court impermissibly 

decided disputed issues of fact when it granted the Bank's motion for summary judgment. 

The Stuarts contend that the evidence they presented inferred discrimination and, at the 

very least, raised material issues of fact which should have precluded summary judgment. 

¶25 In a discrimination case, the standard for deciding summary judgment issues is stated 

in Heiat:

The plaintiff must allege a prima facie case of discrimination in her complaint. In 

this context, the plaintiff alleges a prima facie case by asserting that plaintiff is a 

member of a protected class, and that a male colleague with the same credentials, 

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who performs substantially the same work, receives a higher salary. The employer 

seeking summary judgment must then come forward with a legitimate 

nondiscriminatory reason for the disparity. If the employer comes forward with a 

legitimate nondiscriminatory reason, the plaintiff must then, in addition to having 

alleged a prima facie case in the complaint, produce evidence that establishes her 

prima facie case as well as evidence which raises an inference that the employer's 

proffered reason is pretextual. 

Of course, this does not mean that a plaintiff in a discrimination action always 

survives summary judgment when the plaintiff calls the employer's proffered 

explanation into question. Rather than having to demonstrate with specific facts that 

the employer's explanation "is a pretext," she need only introduce evidence which 

raises an inference that the employer's proffered reason is pretextual. To create a 

genuine issue of material fact as to pretext, the plaintiff must not only introduce 

evidence from which a reasonable person could infer that she is qualified, she must 

also introduce evidence that casts doubt on the defendant's contention that there was 

a legitimate business justification for defendant's action. 

Heiat, 275 Mont. at 331-32. 

¶26 The elements of a prima facie discrimination case are set out in the Administrative 

Rules of Montana:

(a) The elements of a prima facie case will vary according to the type of charge and 

the alleged violation, but generally consist of proof:

i. That charging party is a member of a protected class . . . ;

ii. That charging party sought and was qualified for . . . credit or other opportunity 

made available by the respondent; and 

iii. That charging party was denied the opportunity, or otherwise subjected to 

adverse action by respondent in circumstances raising a reasonable inference that 

charging party was treated differently because of membership in a protected 

class. . . . A.R.M. 24.9.610(2).

¶27 The Stuarts alleged a prima facie case of discrimination by the Bank in their initial 

Complaint. The Bank then offered legitimate, nondiscriminatory reasons for denying the 

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Stuarts' loan. The District Court listed the following legitimate reasons for denial based on 

documents in the record and affidavits filed by the Bank in support of its motion for 

summary judgment:

1) The Bank's January 23, 1993, lien search showed five creditors who held 

perfected liens on the growing crops.

2) Douglas was in the middle of a convoluted bankruptcy proceeding.

3) Bank had knowledge of Stuarts' operation and its reliance on Rose's husband. The 

bank was concerned about the future of the operation should Rose's husband 

become incapacitated.

4) Although promised, Stuarts did not produce documentation showing how or 

when the Bank would acquire a first priority lien on the growing crop, crop 

insurance, and government deficiency payments.

5) Rose's Bankruptcy Plan showed Stuarts owing payments to FmHA and Meissner 

Tractors. Both parties held liens against Rose's crops until such debt was paid. The 

Plan also granted a priority lien upon all rents, profits, crops, crop insurance benefits 

and proceeds, and USDA agricultural program payments and benefits to Wilbur and 

Yvonne Bigby. Under the Plan, Rose was prohibited from placing consensual or 

nonconsensual liens upon the property interest to which Bigby's lien attached. 

6) Rose had defaulted on an installment payment contract with the Bureau of Indian 

Affairs (BIA) by failing to make several payments when due.

7) The Internal Revenue Service (IRS) and the Montana Department of Revenue 

had filed tax claims which were entitled to priority under the Bankruptcy Code.

8) Stuarts' prior primary lender, Milk River PCA, had written off approximately 

$2,000,000 of promissory notes executed by Stuarts.

9) Rose's January 14, 1993, financial statement indicates an equity position of 

19.36%.

10) Other financial institutions had denied Stuarts' loan requests.

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¶28 Having established that the first two steps of the Heiat test were met, disposition of 

the issues raised on appeal turns primarily on whether the Stuarts successfully produced 

evidence to support their prima facie case and whether that evidence raised at least an 

inference that the Bank's reasons for denial were pretextual. To raise an inference of 

pretext sufficient to avoid summary judgment, the Stuarts must meet the dual burden of 

demonstrating that the reasons given were false and that discrimination was the real reason 

for the Bank's action. See Heiat, 275 Mont. at 328, 912 P.2d at 791. Our analysis 

necessarily subsumes the Stuarts' related claim that genuine issues of material fact existed 

as to the reasons they were denied credit. 

¶29 As set forth in the Administrative Rules of Montana, the first step in proving a prima 

facie case is demonstrating that the plaintiffs are members of a protected class. The 

evidence in the record establishes that the Stuarts are Native American, and that Rose is a 

65-year-old woman. Admittedly, they are members of a protected class. 

¶30 However, the Stuarts did not produce evidence that they qualified for the loan. The 

Stuarts take issue with Celania's presentation of a loan request for $250,000 rather than the 

$150,000 actually sought. The Stuarts argue that Celania's mistake raises an issue of fact. 

However, because the loan request was modified and resubmitted, we conclude that 

Celania's mistake in the initial presentation did not affect the Executive Loan Committee's 

eventual decision to deny the Stuart loan application. The record indicates that the 

Committee considered the proper amount prior to the Bank's denial of Rose's resubmitted 

loan application on April 19, 1993. 

¶31 The Stuarts argue that they orally assured the Bank that it would enjoy a first priority 

lien as security for the loan. However, the Stuarts fail to cite any authority for the 

proposition that the Bank must consider an applicant qualified based simply on the 

potential borrower's assurances that acceptable security will be provided at a later date. In 

fact, the record reveals that the Bank's lien search turned up prior perfected liens on crops 

still in the ground and insurance payments. Rose's bankruptcy plan granted additional 

priority liens on the growing crops. Moreover, the Stuarts were obligated to get consent 

from the Bankruptcy Court and the IRS before clearing a substantial federal tax lien. 

Despite the Stuarts' oral assurances, the record reveals no evidence of a subordination 

agreement by the prior lienholders or any other concrete proposal by the Stuarts to 

accomplish their stated goal of granting priority to the Bank. Conclusory statements do not 

raise material issues of fact sufficient to overcome a motion for summary judgment. 

Hadford, ¶ 14. We conclude that the Stuarts did not present evidence that they qualified 

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for the loan.

¶32 Nor did they produce evidence which suggested the real reason for the denial was 

their membership in a protected class. An example of the evidence required to establish a 

reasonable inference that the plaintiff was treated differently because of membership in a 

protected class is evidence that a similarly situated person outside the protected class was 

treated more favorably. See A.R.M. 24.9.610(2)(b)(ii). The Stuarts attempted to make such 

a showing by arguing that non-Indian farmers, the McCann brothers and Floyd Frey, 

received loans from the Bank despite similar credit history. However, these allegations 

simply reflect the Stuarts' personal observations and conclusions. Unlike the successful 

plaintiff in Heiat, the record does not include affidavits from the similarly situated 

individuals, nor is there any documentation of their credit history. Without affidavits or 

other testimony from the individuals the Stuarts allege were in a similar financial situation, 

no genuine issue of material fact is raised. 

¶33 The Stuarts submitted the affidavit of expert witness Stella J. Adams. Adams 

reviewed the Bank's policies, the Community Reinvestment Act report, and witness 

depositions before issuing a report. Adams summarized her findings by stating that she 

"cannot eliminate race as a factor in the Bank's decision." Adams further stated that she 

could not ascertain whether the Bank "was motivated . . . by racial animus." These 

statements are not affirmative evidence of racial bias. We agree with the District Court's 

conclusion that "[t]his type of indeterminate ambiguous statement is not enough to raise a 

material issue of fact."

¶34 Adams did postulate that "reasonable cause" exists to believe race, sex, and age were 

factors in the Bank's decision. However, Adams based this opinion on the Bank's failure to 

evaluate Rose's resubmitted application independent of Douglas and, as discussed 

previously, Rose's continued reliance on Douglas' assets in her resubmitted application 

justified the Bank's refusal to evaluate Rose independently. 

¶35 The Stuarts also argue that the Bank modified and supplemented its original reasons 

for denying the loan. The Stuarts contend that the new reasons should not be considered 

on appeal. The Stuarts further suggest that the inclusion of additional reasons creates the 

implication of pretext by the Bank. We note in response that the original reasons given in 

Celania's February 11, 1993 denial letter were sufficient to shift the burden of producing 

evidence back to the Stuarts pursuant to the Heiat analysis. Furthermore, the Stuarts 

modified their loan application by providing additional collateral and requesting 

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resubmission. The Bank provided different reasons for denying the loan because the Stuart 

loan application was never a static proposal. Finally, we recognize that the Bank's issuance 

of a "Notice of Adverse Action Taken" form which gave additional reasons was part of a 

procedure intended to formalize Bank policy and was motivated by the desire to conform 

local lending practices to CRA guidelines. For these reasons, we conclude that the 

additional reasons for denial were properly considered by the District Court. 

¶36 Finally, the Stuarts claim that the FRB report made pursuant to the Community 

Reinvestment Act is direct evidence of discrimination. However, the report does not 

present any issue of fact pertinent to the Stuart loan application. In fact, when the Stuarts 

lodged a complaint with the FRB against the Bank, the board investigated and concluded 

that the CRA report did not contain sufficient evidence to support allegations that the 

Stuart loan was denied on the basis of race, national origin, sex, or age.

¶37 The Stuarts did not produce evidence of discrimination, nor did they raise an inference 

of pretext by demonstrating that the reasons given were false and that discrimination was 

the real reason for the Bank's action. We affirm the District Court's determination that the 

Bank was entitled to summary judgment.

ISSUE 3

¶38 Did the District Court err when it awarded the Bank attorney fees? 

¶39 We review discretionary trial court rulings for abuse of discretion. May v. First Nat'l 

Pawn Brokers, Ltd. (1995), 270 Mont. 132, 134, 890 P.2d 386, 388. 

¶40 The Stuarts dispute the Distict Court's award of attorney fees by arguing that attorney 

fees pursuant to the Human Rights Act are rarely awarded unless the suit was frivolous or 

factually baseless. The Bank disputes the amount of the award based on its contention that 

the District Court arbitrarily set the amount at $4510. We find that the record supports the 

District Court's determination that the Bank was entitled to fees and that an award in the 

amount of $4510 was not an abuse of discretion. We, therefore, conclude that the District 

Court did not err when it awarded attorney fees. 

¶41 For these reasons, we affirm the judgment of the District Court.

/S/ TERRY N. TRIEWEILER 

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We Concur:

/S/ J. A. TURNAGE

/S/ KARLA M. GRAY

/S/ JAMES C. NELSON

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