### No. 13072 IN

### THE SUPRFm COURT OF THE 

### STATE OF MONTANA 

### 1975

THE 

### STATE OF MONTANA ex relr 

### INDUSTRIAL INDEMNITY 

### COMPANY, a 

### corporation, Relator,

THE 

### DISTRICT COURT OF THE FOURTH JUDICIAL DISTRICT OF THE 

### STATE OF 

### MONTANA, INAND 

### FOR THE COUNTY 

### OF MISSOULA, 

### THE HON. JACK 

### L. GREEN, 

### DISTRICT JUDGE

### AND TERREL 

### M. FRANCISCO, Administratrix of the Estate of WILLIAM J. 

### FRANCISCO, Lleceased,

ORIGINAL PROCEEDING: Counsel of Record: 

### For Relators: 

### Marra and Wenz, Great Falls, Montana JosephA Marra argued, Great Falls, Montana John 

### F. Iwen argued, Great Falls, Montana For Respondents: Knight, Dahood, Mackay and McLean, Anaconda, Montana C. 

### F. Mackay argued, Anaconda, Montana

Submitted: November 10, 1975 Decided

# :EEc31191:

### Mr. Chief Justice James T. Harrison delivered the Opinion of the Court. This is an original application for a writ of supervisory control or other appropriate writ, directing the district court to dismiss a declaratory judgment action and order a trial on themerits, and to permit plaintiff in the district court action, Terrel M. Francisco, to amend her complaint. William J. 

### Franciscodied on June 14, 1968,as a result of an industrial accident allegedly caused by the negligence of

a third party. Relator, Industrial Indemnity Company, was at all times pertinent hereto, the workmen's compensation carrier for Francisco's employer. On July 22, 1968, the Workmen's Compensation Division ordered relator to pay 600weeks of compensation, totalling approximately $28,000. Under the applicable statute, section 9&204, R.C.M. (repealedSection 2, Ch. 493, Laws 1973), 1947,/relator is entitled to be 

### " 

# * * * subrogated only to the extent of either one-half (1/2) of the gross amount paid at the time of bringing action and the amount eventually to be awarded to such employee as compensation under the workmen's compensation law, or one-half

(1/2) of the amount recovered and paid to such employee in settlement of, or by judgment in said action,whichever is the lesser amount. 

## * * *" The statute also gives relator a lien on the cause of action for the amount subrogated. The claim brought against the third party tortfeasor by Francisco's widow (plaintiff)was settled, for the sum of $60,000 on November 14, 1974. Under section 94-204,R.C.M. 1947, relator would be entitled to $14,000 from this settlement,which is one-half of the 600weeks compensation payable under the July 22, 1968 order. The present dispute arises out of a telephone conversation of November 13, 1974,between one of plaintiff's attorneys and relator's claims supervisor. Plaintiff claims an oral contract

### resulted and relator denies that an oral contract was entered into. Relator contends that plaintiff's attorney gave relator's claim supervisor a possible settlement figure for the third party suit of between $6,000 and $7,500 and inquired whether relator would compromise its subrogation interests. The claims supervisor was away from his office so did not have his files available,but it is claimed that he did indicate he would recommend settlementof the subrogation claim for a reduction of the last 100weeks (50 weeks according to plaintiff's attorney) of compensation,provided the settlementwas in the neighborhood of $6,000 to $7,500. InNovember, 1974,relator received letters from plaintiff's attorneys requesting execution of settlement forms, compromising the subrogationrights. None of the forms or letters contained an indication of the actual amount for which the third party claim was settled. The claims supervisor learned of the $60,000 settlement and, after consultationwith relator's counsel, a letter was sent to plaintiff's attorneys advising them relator would demand the full amount of subrogationand further requesting the third party's insurer to name relator as a payee on any draft issued to plaintiff,

so as not to delay or disturb the third party settlement. Plaintiff's attorneys wrote back that the third party settlementwas based on the oral agreement by relator's claim supervisor to accept 50weeks compensation as a compromise to relator's subrogation rights. On January 2, 

### 1975,agreementwas reached to place $6,250 (theamount in controversy) in a trust account pending the outcome of the present litigation over the disputed existence of an oral contract and its contents. The amount deposited was arrivedatas follows: (1) Relator's claimed set-off of the last 200 weeks of compensation or $8,250; (2) Plaintiff has agreed tothe last 50 weeks or $2,000, leaving $6,250 incontroversy. Plaintiff filed a declaratory judgment action indistrict court, Missoula County, asking construction of the alleged oral contract. Relator moved the court todismiss, under Rule 12, M.R.Civ.P., asthe question 

### iswhether or not an oral contract exists and 

### is a denial of relator's rights to a trial on the merits astowhether or not an oral contract exists. Relator petitions thisCourt to issue a 

### writof supervisory control or other appropriate 

### writtoprevent a miscarriage of justice. The issue presented in thismatter iswhether a declaratory judgment action 

### isthe proper procedure todetermine whether or not a contract actually exists. A declaratoryjudgment actionmay be brought toconstrue

a contract under section 93-8902, R.C.M. 1947: "Any person interested under a deed, 

### will, written contract or other writings constituting a contract, orwhose rights, statusor other legal relations areaffected by a statute, municipal ordinance, contract or franchise, may have determined any question of construction orvalidity arisingunder the instrument, statute, ordinance, contract, or franchise and obtain a declarationof rights, status, or other legal relations thereunder." This Court inCarpenter v. Free, 138 Mont. 552, 555, 357 P.2d 882, held the "written contract" language of section 93-8902, does not exclude oral contracts from 

### itsoperation:

" 

## * * * it isclear that an action for a declaratoryjudgment can be maintained toobtain a determination of the rights and duties of the respective parties toan oral contract." InMahan v. Hardland, 147Mont. 78, 410 P.2d 156, this Court found a declaratoryjudgment action 

### was not the proper means to construe an oral contract if the terms of thecontract arenotadmitted by allparties. InMahan the existence of the oral contractwas admitted, but the 

### termsof the contractwere not. In the instant case, the very existence of the oral contract is incontroversy. The general rule 

### is stated in 26 C.J.S. Declaratory Judgments 516, p. 81: 

### " 

## * * 

## * a declaratory judgment proceeding 

### isprimarily intended toconstrue themeaning of a law, and not to determine the existence of controverted facts, and 

## * * * ordinarily a court willrefuse a declaratoryjudgment which can be made only after a judicial investigation of disputed facts, especially where the disputed questions of fact

### willbe the subject of judicial investigation in a regular action." In the instant case, the existenceof a controversy as towhether or not an oralcontractwas made renders this action improper for a declaratoryjudgment. The districtcourt erred indenying relator's motion to dismiss the declaratory judgment action and grant a trial on the merits. The dismissal, in effect, is a finding by the district court that an oral contract exists tobe construed. Only a fact determination can make such a finding. Unless a jury trial iswaived, the jury, not the judge, is the ultimate trierof fact. If a fact issue exists, Rule 38(a), M.R.Civ.P., specifically reserves the right totrialby jury. In Mahan, at

### p. 85, quoting from Baumgartner v. Schey, 143 Colo. 373, 353 P.2d 375, 

### it states: 

### " 

## * * * If the action inwhich declaratory relief 

### is sought would have been an action atlaw had 

### it been permitted tomature without intervention of declaratory procedure, the right to trial by jury of disputed questions of fact is not affected. 

## * * *" Relator is entitled to a trialby jury todetermine whether or not an oral contract exists. For the foregoing reasons 

### we hereby grant relator's petition for a 

### writof supervisory control and direct the district

### court to grant relator's motion to dismiss the declaratory judgment action with permission to plaintiff to amend her complaint

so that thematter may pr



# C e concur: 

# r-? 

# -

Justices

### Mr. Justice Haswell, dissenting: I dissent. Inmy view supervisory control should be denied for two reasons: (1)A declaratory judgment is proper under the pleadings; (2)a declaratory judgment is proper under relator's unpleaded contentions. The only pleading before the district court was the complaint for declaratory judgment. It alleges an oral compromise settlement agreement of a pending lawsuit, the terms thereof, relator's claim of misunderstanding or mistake in entering into the agreement, and an existing controversy by reason thereof. It seeks a declaratory judgment determining the rights and liabilities of the parties under the agreement. There is no allegation or suggestion in the complaint that the terms of the compromise settlement were not in fact agreed to by both parties. The complaint clearly states a claim for relief under section 93-8902,R.C.M. 1947, of the Uniform Declaratory Judgment Act. That statute provides in pertinent part: "Any person 

## * 

## * * whose rights, status or other legal relations are affected by a 

## * * * contract

## * * * may have determined any question of construction or validity arising under the 

## * * * contract

## * * * and obtain a declaration of rights, status or other legal relations thereunder." Oral contracts or arguments are subject to adjudication under the Uniform Declaratory JudgmentsAct. Carpenter v. Free, 138 Mont. 552, 357 P.2d 882. Inmy view, the district court was correct in denying relator's motion to dismiss on the pleadings before it. Relator's unpleaded contention is that a declaratory judgment action is improper because the existence of the contract or agreement is disputed. Although there were statements

on oral argument and in relator's brief that the existence of a contract is denied, the gist of relator's position, as I understandit, is not that a compromise settlement agreement was not in factmade, but, that it 

### is invalid because of mistake, 

### misrepresentation or fraud. The validityof an agreement 

### is subject to adjudication under the express 

### termsof the Uniform Declaratory Judgments Act, section 93-8902, R.C.M. 1947, quoted above. Wehave recently affirmed a declaratory judgment upholding the validity of a 

### series of hospital contracts against a contention that one of the contracting parties had no authoritytoenter into the contracts on behalf of the state, Montana Deaconess Hospital v. Dept. of S.R.S., Mont

# . , 538 P.2d 1021, 32 St.Rep. 801; and have granted an original declaratory judgment upholding the validityof a city's contract to 

### sell Special Improvement Dis

### trict bonds bearing 7-3/4% interest. Stateex rel. The City of i 734AG!.Uk MOnt. Townsend v. D. A. Davidson 

### &&&iny, 

## , 531 P.2d 370,

If the rule

### wereotherwise, insurance policy questions commonly determined indeclaratory judgment actionswhich involve the validity of the contract could no longer be adjudicated in such actions, e.g. where payment of premiums was disputed or where representations of physical condition inprocuring life insurance

### were inissue. The existence of factual issues concerning the validity of the agreement inthe instant case 

### isno impediment toa declaratoryjudgment asthe Actprovides in section 93-8909, R.C.M. 1947: "When a proceeding under this act involves a determination of an issueof fact, such issue may be tried and determined inthe same manner as issues of factare tried and determined in other civilactions inthe court inwhich the proceeding ispending." Inmy view thedistrictcourt's denial of relator'smotion to dismiss 

### was correct and did not involve an implied finding thatan oral contract existstobe construed. The districtcourt's order did not preclude a jury trial on any disputed question of fact.For the foregoing reasons, I would dismiss relator's application for a 

### writof supervisory control.

Justice