No. 86-095 IN THF SUPREME COURT OF THE STATE OF MONTANA 1986

MARY PATMILLER, Plaintiffand Appellant,

CATHOLIC DIOCESEOF GREAT FALLS, BILLINGSAND ROMAN CATHOLIC BISHOP OF GREAT FALLS, jointly and severally, Defendantsand Respondents.

APPEAL FROM: District Court of the Thirteenth JudicialDistrict, In and for the County ofYellowstone, TheHonorable Charles Luedke, Judgepresiding.

COUNSEL OF RECORD:

ForAppellant: Nye & Meyer;Victoria Francisargued,Billings, Montana

For Respondent: Cure,Borer & Davis;Maxon R. Davisargued,~~~~t Falls, Montana Crowley Law Firm; Peter F. Habein,Billings,Montana

Submitted: October 21, 1986 Decided: November 20, 1986

Filed:Mr. JusticeFred J. Weber delivered theOpinion of the Court.
Mary Pat Miller (nowMrs. Mullner) appeals the summary judgment dismissing her wrongful discharge complaint against defendants. The District Court for Yellowstone County concluded that applying the tort ofbad faith in this casewould infringe upon the free exercise of religion. We affirm. The issue is whether the free exercise of religion clauses of the United States and Montana Constitutions bar consideration of the tort of breach of the covenants of good faith and fair dealing in the discharge of Mrs. Mullner for her failuretomaintain discipline in the classroom. The defendants also raise the issue of whether summary jud~ent can be upheld because no breach of the implied covenantof good faith and fairdealing is established in the record. Little Flower School in Billings ispart of the Catholic school system administered by the Catholic Diocese of Great Falls-Billings. Mrs. Mullner taught fifth and sixth grade studentsthere during the schoolyear 1983-84. Her immediate supervisor evaluated her as "outstanding" in every category. Her contract was renewed and she received a $1,000 raise for the 1984-85 schoolyear. During the 1984-85 school year, Mrs. Mullner had a new supervisor (thehead teacher). The new head teacherdid not approve of Mrs. Mullnerls teaching methods. The district court file contains a copy of the head teacher's dated notes documenting her concerns and the concerns of parents, other teachers,and the school administrator about a lack ofdiscipline in Mrs. Mullnerlsclassroom. Mrs. Mullner admits that the head teacher spoke with her "onmore than one occasion"about problems in her classroom. In November 1984 Father Wagner, the school administrator, told Mrs. Mullner that the next day would be her last day of teaching at the school, because she was notproperly disciplining the children inher class. Shewaspaid forthe following fifteendays,pursuant to the termination clause inher teaching contract. Mrs. Mullner filed this suit alleging breach of the covenant of good faith and fair dealing in employment. Discovery was conducted, including depositions of Mrs. Mullner, the head teacher, and Father Wagner. Defendants produced various documents, including copies of Mrs. Mullner's employment contract, her evaluation, and the 1984-85 Little Flower School handbook and code of conduct booklet. The defensemoved for summary judgment that applicationof the tort ofbad faithwould impermissibly interfere with freedom of religion. The District Court granted that motion. Since an affirmative answer to the issue raised by defendants would eliminate the necessity of reaching the constitutional issue, we will discuss defendants' issue first.

Can summary judgmentbe upheld because no breach of the implied covenant of good faith and fair dealing is established in the record? The defendants argue that nothing in the record establishes any breach of an implied covenant of good faith and fair dealing. They maintain that there were no objective manifestations of job security to Mrs. Mullner, and that there were indications to her that she was not performingsatisfactorily. They also maintain that there has been no evidence of lack of good faith on the part of Father Wagner. The defendants' brief to the District Court in support of their motion for summary judgment did not raise this argument. It discussed only the constitutional issue. Issuesnot raisedbefore the district court are generally not considered on appeal. Mont. Ass'n of Underwritersv. State, etc. (1977),172 Mont. 211, 218, 563 P.2d 577, 581. However, this Court has the power to grant summary judgment even when

no motion has been made. Treasure State Industries Inc. 

### v. Welch (1977)

## , 173 Mont. 403, 410, 567 P.2d 947, 951. Even so, the complaint's allegation of defendants' bad faith is supportedby Mrs. Mullner's deposition. She further contends that she would have submitted additional evidence on this point, had it been raised in the lower court. Her position is that she reasonably believed her employmentwould continue. We conclude the record does not support summary judgment

on thisbasis.

Do the free exercise of religion clauses of the United. States and Montana Constitutions bar consideration of the tort of breach of the covenants of good faith and fair dealing in the discharge of Mrs. Mullner for her failure to maintain discipline in the classroom? The relevant constitutional provisions are U. S. Const. Amend. I: Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof;

# . .. and Art. 11, § 5,Mont. Const.:Freedomof religion. The state shall make no law respecting an establishment of religion or prohibiting the free exercise thereof. Former Chief Justice Burger has acknowledged for the United States Supreme Court, in regard to the federal provision, that "[clandor compels acknowledgement

# .

# . .thatwe can only dimlyperceive the linesofdemarcation in this extraordinarily sensitivearea of constitutional law." Lemonv. Kurtzman (1971), 403 U.S. 602, 612, 91 S.Ct. 2105, 2111, 29 L.Ed.2d 745, 755. The Courtprovidedmore guidance onapplicationof the free exercise clause in Wisconsin v. Yoder (1972), 406 U.S. 205, 92 S.Ct. 1526, 32 L.Ed.2d 15. In that case, the Court held that a Wisconsin requirement that all children attend school until the age of 16 was unconstitutionalwhen applied to the Amish respondents, because compelling public school attendancebeyond the eighth grade unconstitutionally interfered with their religious beliefs. The Court stated:

The essence of all that has been said and written on the subject is that only those interestsof the highest order and those not otherwise served can overbalance legitimate claims to the free exercise of religion. Yoder, 406 U.S. at 215. We use that standard as our guide. The parties do not dispute that Little Flower School played an important role in the religious mission of the Roman Catholic Church--that is, teaching the students the elements of the Catholic faith. Defendants point out that all aspects of parochial school education, including discipline, are permeated with the religious mission of the school. We agree with the conclusion of the District Court in Lemon that parochial schools constitute an integral part of the religious mission of the CatholicChurch,andwith the statement that 

### "[i] n short, parochial schools involvesubstantial religiousactivity and purpose." Lemon, 403U.S. at 616. This casemust be distinguished from the cases cited by Mrs. Mullner involving such issues aswage rates inparochial schools or the application of neutral principles of law to division of property claimed by various members of a church group. 

### - See, e.g., Donovan v. Shenandoah Baptist Church (D.C.Va. 1983), 573 F.Supp. 320; Jones v. Wolf (1979), 443 U.S. 595, 99 S.Ct. 3020, 61L.Ed.2d 775. In order to considerMrs. Mullner's contentions,this case requiresan analysis of the discipline methods used in teaching various school subjects, including religion itself. The suggestion ismade that consideration can be given to the methods of discipline without becoming involved with claims which are rooted in a religious belief. Father Wagner's deposition testimony demonstrates why this division of discipline from religious instruction cannot easily be made. He testified that he was not able to successfully teach religion to the students in Mrs. Mullner's classroom because of the absence of proper discipline. This example demonstrates how the failure to discipline in an acceptable manner directly interfered with the teaching of religion,which is one of the aspects of the free exercise of religion. Further, defendants point out that discipline itself is an essential element of the religious faith taught at Little Flower School. A judicial determination of the presence or absence of good faith on the part of Father Wagner would require the court to examine the school's disciplinepolicy asapplied to classroom instruction covering both religious and nonreligious subjects,and to evaluate FatherWagner's interpretation and application of that discipline policy. Such anexamination of necessity would impinge upon elements of the teaching of religion, or the free exercise of religion. We conclude that discipline in the classroom is so intertwined with teaching which in turn is intertwined with religious principles that a court cannot properly make the determination requested here without interfering with a legitimate claim to the free exercise of religion. The breach of the covenant of good faith and fair dealing inemployment is a common-law tortwhichhasbeen recently recognized in Montana but is not universally recognized. Gates v. Life of Montana Ins. Co. (Mont. 1982), 638 P.2d 1063, 39 St.Rep. 16. We apply the Yoder standard as our guide and conclude that Mrs. Mullner's tort claim is not a right "of the highest order and not otherwise served" so as to overbalance defendants' claim to the free exercise of religion. We hold that this suit is barred by the free exercise of religion clauses of theUnited States and Montana Constitutions. Mrs. Mullner argues that resolution of this issue in defendants' favorwill result in excessive government entanglement ~rithreligion, in violation of the Establishment Clause of the United States Constitution. A three-factor balancing test has been developed for evaluating Establishment Clause claims. The factors are: (1)the character and purpose of the institution involved; (2) the nature of the law's intrusion into church affairs; and (3) the resulting relationship between the governmentand the religious authority. Lemon, 403 U.S. at 615. The religious character and purpose of Little Flower School is not disputed. Denying application of the tort of bad faith in this case does not result in an intrusion into church affairs. The resultingrelationship between government and the religious authority is negligible, at best, because our holding applies only to thisparticular situation,and not to allapplicationsof the tort of bad faith to religious organizations. We conclude after examining the three factors set forth in Lemon that prohibiting Mrs. Mullner's lawsuit does not violate the EstablishmentClause. Because allowing Mrs. Mullner's lawsuit to go forward would impermissibly interfere with the free exercise of religion, we affirm the summary judgment of the District Court.

We Concur:

JusticesMr. JusticeFrank B. Morrison, Jr. dissentsas follows: The issue in this case is 

### - not whether the Catholic school officialshave a rightto set conditionsof employment for teachers respecting the discipline of students. Of

course they do. To deny the churches the right to afford a complete religious instruction,and themeans to assure that the student receives the instruction, would be an unconstitutional infringement upon free exercise of religion. Plaintiff's case here does not involve the teaching of religion. Plaintiff's case is premised upon the fact that she was denied due process in connection with her termination. She was not afforded an opportunity to change. She was not given a hearing in which she could explain her position. Although the church is entitled to set whatever standards it wants respecting and imparting religious education to its students, the lawdoes require that certain fairprocedures are necessary in order to accord due process. The dismissed teacher here takes the position that she

was an excellent teacher, disciplined the students, and the complaints lodged againsther are false. Sheonly asks for a hearing to explain her position. The denial of this opportunity does not promote free exercise of religion; rather it denies due process rights and the legal protection of the covenant of good faith and fair deal-inqto the plaintiff. This case represents another example of this Court engaging in "bottom line" decision making without careful legal analysis of the issues. I sense an attitude on the part of themajority that says, "Thecourts have no business interfering in the churches'business". Although thatmay be true when dealing with religious instruction the principlehas no application to a claim that a teacher was denied procedural due process and therefore the covenant to deal fairly and ingood faithwas breached. Iwould reverse and remand for trial.Mr. Justice William E. Hunt, Sr., dissenting:

I agree with the majority opinion that summary judgment cannot be upheld because of any absence of breach of the implied covenantofgood faithand fairdealing. I dissent on the second issue and would hold that the application of the implied covenant of good faith and fair dealing to the facts of this case would not unconstitutionally inhibit the free exercise of religionnor violate the free exercise of religion clauses of the United States and Montana Constitutions. Summary judgmentwas not proper on these grounds and Iwould reverse and remand this case for trialon themerits. Defendant contends Little Flower School played an important role in the religious mission of the Roman Catholic Church and that all aspects of their education are permeated with religious mission. The majority has stated that this case involves the process of discipline and instruction itselfwithin a religious school setting. I have no quarrel with these statements as far as they go but they do not fully address the facts and issuebefore thisCourt. Plaintiff herself acknowledges that she was told shewas dismissed because ofproblems with discipline in her classroom. She does not question that improper discipline can be used as a reason to terminate an employee under the termsof the school'scontract. Ratherher claim addresseswhether shehad notice of the shortcomings that displeased her employer so she could correct them and whether the discipl-ineused by her met the disciplinary standards setoutby her employer,Little FlowerSchool. Nowhere does plaintiff challenge the validity of thatdisciplinary standard. The First Amendment protects against government establishment of religion and prohibition of the free exercise thereof. Art. 11, § 5 of the Montana Constitutj.on provides these sameprotections. I find Cantwellv. Stateof Connecticut (1940),310U.S. 296, 60S.Ct. 900, 84L.Ed. 1213 instructive fordirectionon the issueof freeexercise ofreligion. In its discussion on the FirstAmendment, theU.S. Supreme Court found that:



# ...the Amendment embraces two concepts,--freedom to believe and freedom to act. The first is absolute but, in the nature of things the second cannot be. Conduct remains subject to regulation for theprotection of society.. 

# . . Id. at 303-304, 60S.Ct. at 903, 84L.Ed. at 1218. 

### -



# .

# . .Nothing we have said is intended even remotely to imply that, under the cloak of religion,personsmay,with impunity,commit frauds upon thepublic

# . . . Even the exercise of religionmay be at some slight inconvenience in order that the State may protect its citizens from injury. Id. at 306, 60 S.Ct. 60 S.Ct. at 904, 84L.Ed. at 1219. - The case beforeus involvesaprivate citizen seeking to enforce a common law tort through the courts of this state against her employer, a church-operated school. The cases relied on by the majority regarding excessive entanglement between church and state are not fully applicable here. Rather, a wealth of case law indicatesthat although federal and state courts have no jurisdiction over solely internal ecclesiastical affairs or the validity of religious beliefs, they may exercise jurisdiction over torts incurred by religious institutions and in church controversy which impinges on property or civil rights. Lund v. Caple (Wash.1984), 675 P.2d 226; Turner 

### v. Unification Church (D. R.I. 1978), 473 F.Supp. 367 aff'd (1979) 602 F.2d 458; Saul v. Roman Catholic Church of Arch. of Sante Fe (N.M. 1965), 402 P.2d 48. Federal courtshave directly addressed the issue of whether the free exercise clause immunizesdefendant churches from tort claims. In Turner,the court stated that:



# .... the "operational activities" of a religion, those activities that are not solely in the ideological or intellectual realm, are subject to judicial review and may be regulated to achieve a sufficiently important state objective. Id. at 371-372. 

### - In a similar case Van Schaick v. Church of Scientology of Cal., Inc. (D. Mass. 1982), 535 F.Supp. 1125, the court observed that: Whether or not such i~munityexists depends, in art. on whether the adjudication of the claim hould require a judiciai determination - of 

### - the validity

### -- of a.religiousbelief. 

# . . Causes of actionbased upon someproscribed conduct may, thus, withstand a motion to dismiss even if the alleged wrongdoer acts upon a reliqiousbelief or is organized.for a reli.gicuspurpose. (Emphasis added.) Id. at 1135. 

### - In the present case the application of the tort of good faith and fair dealing to the church-operated schooldoes not require a determination of the validity of a religious belief. A clergy administra.torl s religious role, in itself, does not bar application of the tort of good faith or any other common law tort. Religious leaders and organizations

are responsible for breach of duty under common law. This Court has jurisdiction to apply the common law to this situation because such a review of a dismissal for the failure to use proper discipline jn a classroom, whether a.public or religious classroom, does not involve a judicial determination of the validity of a religiousbelief. Further, a series of case law decisions have indicated that neutral application of common law has been constitutionally applied to some circumscribed situations involving internal church disputes. For example, in Konkel

v. Metropolitan Baptist Church, Inc. (~riz. App. 1977)

## , 572 P.2d 99, the court found thatwhere the issue iswhether the expelling organization had acted in accordance with its own regulations the court had jurisd.ictionto determine whether the expulsion was proper. 

## Id. at 100. Other jurisdictions follow a similar view. Ogden Street Church, Etc. v. Gospel Temple Church, Etc. (Colo. App. 19741, 522 P.2d 757; Gospel Tab Body of Christ Church v. Peace Pub. & Co. 

# a an. 1973)

### , 506 P.2d 1135; Mount Zion Baptist Church v. Second Baptist Church (Nev. 1967)

## , 432 P.2d 328;Wolozyn v. Regarek (0kla.

The Supreme Court in Jonesv. Wolf (1979),443U.S. 595, 99 S.Ct. 3020, 61L.Ed.2d 775 stated: The neutral-principles approach cannot be said to "inhibit" the free exercise of religion, any more than do other neutral provisions of state law governing the manner in which churches own property,hire employees,orpurchase goods. Id. at 606, 99 S.Ct. at 3027, 61L.Ed.2d at 786. 

### - Thus since courts have been found to have jurisdiction to settle certain internal church disputes, I believe there is abundant authority for this Court to allow application of neutral tort law to respondent's externaldispute. The majority opinion also relies on Wisconsin v. Yoder (1972), 406 U.S. 205, 92 S.Ct. 1526, 32 L.Ed.2d 15 for the authority that only values of the "highest nature" can be grounds for inhibiting FirstAmendment rights.They do not appear to consider the fact that the Yoder court found that only certain claims would invoke the protection of the First Amendment. The Supreme Court hel-d that:



# .. . to have the protection of the Religion Clauses, the claims must be rooted in religious 

### -- belief. Although a determination ofwhat is a "religious" belief or practice entitled to - constitutional protection may present a most delicate question, the very concept of ordered libertyprecludes allowing every person tomake his own standards on matters of conduct in which society as a whole has important interests.

(Emphasisadded.) Id. at 215-216, 92S.Ct. at 1533, 32L.Ed.2d at 25. 

### - While maintenance of discipline is important to any school,whether public or private, Iwould argue that it is not the correct factor in the equation to apply to the above standard. More accurately this Court should ask whether plaintiff's claim that shewas terminated unfairly or in bad faith is a claim that impinges on the defendant's religious belief. I would argue that application of the tort of bad faith in these circumstances does not do so. Employersowe a duty todeal fairlyand ingood faith in employment relationships. This Court has found that abreach of this duty is a tort. Gates v. Life of Montana Ins. Co.

(Mont. 1983), 668P.2d 213, 40 St.Rep. 1287. Employees have an investment in their employment which is protected. Their very livelihood is dependent on their employment. Loss of employment often jeopardizesthe family home and structure. The State of Montana has a compelling interest in maintaining that structureand stability for the citizens of this state. The duty of an employer to treat an employee fairly and terminate employment in good faith wasrecognizedbecause it struck an importantbalance between the inherent unequality of bargaining power present in many employment relationships. Dare v. Montana Petroleum Marketing Co. (Mont. 1984), 687 P.2d 1015, 41 St.Rep. 1735. The State ofMontana has an important state objective in applying the obligation of good faith to employment relationships including lay teachers at church-operated schools. This common law tort as applied to Little Flower School is not a violation of the First Amendment and Iwould

reverse the grant of summary judgmentand allow plaintiff to bring her action to a jury for trial on the merits of her

case.

Mr. Justice John Conway Harrison, dissentinq.

Idissent. Iwould have this case go to trial and not be decided by summary judgment. /