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, IN AND 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 :EEc 3 1 191: 
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 

the merits, and to permit plaintiff in the district court action, 

Terrel M. Francisco, to amend her complaint. 

William J. Francisco died 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 600 weeks of compensation, totalling approximately $28,000. 

Under the applicable statute, section 9&204, R.C.M. 

(repealed Section 2, Ch. 493, Laws 1973), 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 600 weeks 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 settlement of the subrogation claim for a reduction of the 

last 100 weeks (50 weeks according to plaintiff's attorney) of 

compensation, provided the settlement was in the neighborhood of 

$6,000 to $7,500. 

In November, 1974, relator received letters from plaintiff's attorneys requesting execution of settlement forms, compromising the subrogation rights. 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 consultation with relator's counsel, a letter was sent 

to plaintiff's attorneys advising them relator would demand the 

full amount of subrogation and 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 settlement was 

based on the oral agreement by relator's claim supervisor to 

accept 50 weeks compensation as a compromise to relator's subrogation rights. 

On January 2, 1975, agreement was reached to place $6,250 

(the amount 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 arrived 
at as follows: 

(1) Relator's claimed set-off of the last 200 weeks of 

compensation or $8,250; 

(2) Plaintiff has agreed to the last 50 weeks or $2,000, 

leaving $6,250 in controversy. 

Plaintiff filed a declaratory judgment action in district 

court, Missoula County, asking construction of the alleged oral 

contract. Relator moved the court to dismiss, under Rule 12, 

M.R.Civ.P., as the question is whether or not an oral contract 

exists and is a denial of relator's rights to a trial on the 

merits as to whether or not an oral contract exists. Relator 

petitions this Court to issue a writ of supervisory control or 

other appropriate writ to prevent a miscarriage of justice. 

The issue presented in this matter is whether a declaratory 

judgment action is the proper procedure to determine whether or 

not a contract actually exists. 

A declaratory judgment action may be brought to construe 

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, 

or whose rights, status or other legal relations 

are affected by a statute, municipal ordinance, 

contract or franchise, may have determined any 

question of construction or validity arising under 

the instrument, statute, ordinance, contract, or 

franchise and obtain a declaration of rights, status, 

or other legal relations thereunder." 

This Court in Carpenter 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 its operation: 

" * * * it is clear that an action for a declaratory judgment can be maintained to obtain a determination of the rights and duties of the respective 

parties to an oral contract." 

In Mahan v. Hardland, 147 Mont. 78, 410 P.2d 156, this 

Court found a declaratory judgment action was not the proper means 

to construe an oral contract if the terms of the contract are not 
admitted by all parties. 

In Mahan the existence of the oral contract was admitted, 

but the terms of the contract were not. In the instant case, 

the very existence of the oral contract is in controversy. 

The general rule is stated in 26 C.J.S. Declaratory 

Judgments 516, p. 81: 

" * * * a declaratory judgment proceeding is primarily 

intended to construe the meaning of a law, and not 

to determine the existence of controverted facts, 

and * * * ordinarily a court will refuse a declaratory judgment which can be made only after a judicial investigation of disputed facts, especially 

where the disputed questions of fact will be the 

subject of judicial investigation in a regular action." 

In the instant case, the existence of a controversy as 

to whether or not an oral contract was made renders this action 

improper for a declaratory judgment. 

The district court erred in denying 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 to be construed. Only a fact 

determination can make such a finding. 

Unless a jury trial is waived, the jury, not the judge, 

is the ultimate trier of fact. If a fact issue exists, Rule 38(a), 

M.R.Civ.P., specifically reserves the right to trial by jury. 

In Mahan, at p. 85, quoting from Baumgartner v. Schey, 

143 Colo. 373, 353 P.2d 375, it states: 

" * * * If the action in which declaratory 

relief is sought would have been an action at law 

had it been permitted to mature without intervention of declaratory procedure, the right to 

trial by jury of disputed questions of fact is 

not affected. * * *" 

Relator is entitled to a trial by jury to determine whether or 

not an oral contract exists. 

For the foregoing reasons we hereby grant relator's petition for a writ of 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 the matter may pr 

r-? e concur: - C 

Justices 
Mr. Justice Haswell, dissenting: 

I dissent. In my 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 Judgments Act. Carpenter v. Free, 138 

Mont. 552, 357 P.2d 882. In my 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 understand 
it, is not that a compromise settlement agreement was not in 

fact made, but, that it is invalid because of mistake, misrepresentation or fraud. 

The validity of an agreement is subject to adjudication 

under the express terms of the Uniform Declaratory Judgments 

Act, section 93-8902, R.C.M. 1947, quoted above. We have 

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 authority to enter 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 

validity of a city's contract to sell Special Improvement District bonds bearing 7-3/4% interest. State ex rel. The City of 

i 734AG!.Uk MOnt. Townsend v. D. A. Davidson &&&iny, , 531 P.2d 370, 

If the rule were otherwise, insurance policy questions 

commonly determined in declaratory judgment actions which 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 in procuring life 

insurance were in issue. 

The existence of factual issues concerning the validity 

of the agreement in the instant case is no impediment to a declaratory judgment as the Act provides in section 93-8909, R.C.M. 

1947 : 

"When a proceeding under this act involves a 

determination of an issue of fact, such issue 

may be tried and determined in the same manner 

as issues of fact are tried and determined in 

other civil actions in the court in which the 

proceeding is pending." 

In my view the district court's denial of relator's motion to 

dismiss was correct and did not involve an implied finding that 
an oral contract exists to be construed. The district court'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 writ of supervisory control. 

Justice