No. 87-363 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1988 

BRUCE A. YOUNG and SHERRI D. YOUNG, 

Husband and Wife; LEO B. EVANS and 

LONA LEE EVANS, husband and wife, and 

RUTH E. PALMER, 

Plaintiffs and Respondents. 

-vsFLATHEAD COUNTY, a Body Corporate, 

Defendant and Appellant, 

and 

FLATHEAD COUNTY BOARD OF COMMISSIONERS, 

a Body Politic; NAKUL S. VERMA, FLATHEAD 

COUNTY ZONING ADMINISTRATOR, 

Defendants. 

and 

ALBERT SEELEY, 

Defendant-Intervenor, Plaintiff 

Cross-Claimant and Respondent, 

and 

HENRY OLDENBURG, 

Defendant and Intervenor. 

APPEAL FROM: District Court of the Eleventh Judicial District, 

In and for the County of Flathead, 

The Honorable Jack L. Green, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Ted Lympus argued, County Attorney, and Jonathan B 

Smith argued, Deputy County Atty., Kalispel.1, Montana 

For Respondent : 

Lawrence F. Daly argued, Missoula, Montana 

Submitted: April 26, 1988 

Decided: June 13, 1988 

Filed: k!!&v 

*4 
Mr. Justice L. C. Gulbrandson delivered the Opinion of the 

Court. 

This is an appeal of findings of fact, conclusions of 

law and judgment of the Eleventh Judicial District Court, 

Flathead County, in favor of defendants-intervenors Albert 

Seeley and Henry Oldenburg (Developers) against 

defendant-appellant, Flathead County (County). The findings 

and conclusions were adopted on April 22, 1982 and amended on 

July 12, 1982. The District Court entertained the damage 

claim and entered findings and conclusions on March 24, 1987 

against the County in excess of two million dollars. A 

motion to alter the judgment, or in the alternative to grant 

Flathead County a new trial was denied June 2, 1987. The 

County appeals. We reverse and remand. for further 

proceedings. 

The following issues have been presented for our 

review: 

1. Did the County's August 13, 1981, change of 

position on the requirement of subdivision review for 

condominium projects give rise to a claim for damaqes by 

Developers? 

2. Was the County's change of position the proximate 

or legal cause of Developers' damages? 

3. Should the County have been entitled to a new trial 

on grounds the District Court erred in not admitting evidence 

on the issue of proximate cause? 

4. Whether Developers1 reliance on the County's 

initial position of no requirement of subdivision review of 

condominium projects was supported by substantial evidence 

and, if so, whether that reliance was reasonable? 

5. Is the County immune from damages under S 2-9-111, 

MCA ? 
6. Did the damages awarded by the District Court 

exceed the statutory limit on governmental liability? 

Reversal of this case is based on the first four i,. C~~~e

and we therefore will not address issues five and six. 

This case arises from a failed condominium development 

on the west shore of Flathead Lake. In the early 1980s, 

Developers approached the County and proposed construction of 

the Caroline Point Estates and Yacht Club condominiums on 28 

acres of unzoned property. Prior to construction, Developers 

requested the parcel be zoned as a planned unit development 

(PUD) in order to construct the projected 84 units. If zoned 

R-2 (rural residential), the area could only hold 56 units 

which would not be financially viable for Developers. 

Deputy County Attorney Charles Kuether (Kuether) , and 

Wil Aiken of the Montana Department of Health and 

Environmental Sciences (DHES), informed Developers the 

project was not a "subdivision" under the Subdivision 

Platting Act, Title 76, Chap. 3 and 4, MCA, and therefore 

would not be subject to subdivision review. 

County Sanitarian Tom Cowan (Cowan) informed Developers 

on September 19, 1980, that sanitary review would not be 

initiated for "several months." Developers contend Cowan 

informed them that the basic concept for sewage treatment was 

approved. However, on December 18, 1980, Developers' 

attorney received a letter from DHES indicating that DHES 

considered the project a subdivision, and therefore subject 

to review. Developers were made aware of this letter. On 

December 23, 1980, the Board of Commissioners of Flathead 

County adopted Resolution 414 which zoned the property PUD. 

Developers commenced construction in late December, 1980. On 

January 6, 1981, and January 19, 1981, Ray Lee, one of 

Developers' partners, received letters from DHES requesting 

an application for sanitary review be filed with t-he 
Subdivision Bureau under the Sanitation in Subdivisions Act. 

The second letter stated continuing construction would 

violate the Act. A notice of violation was subsequently 

issued as Developers did not slow construction. 

The County claims Lee also met with Ed Casne of DHES 

and was told the project was a subdivision. Developers claim 

they received additional assurances at this time from 

Kuether. Relying on these assurances, Developers claim they 

finalized their ownership interests in the property in 

January of 1981. At a February 11, 1981, meeting, Kuether 

stated the County disagreed with the DHES designation and the 

issue was likely to be decided through litigation. On 

February 13, 1981, the Commissioners re-approved the PUD 

designation in Resolution No. 421. On this same day, Dr. 

John Drynan, director of DHES, requested an opinion from the 

Montana Attorney General as to whether condominium 

developments are subdivisions subject to review. 

On March 6, 1981, DEIES conducted a hearing on its 

notice of violation earlier issued to Developers. The 

hearing resulted in a stipulation entered into between DHES 

and Developers which allowed construction of four model 

units, to be used to promote "pre-sales," a combination 

recreation center/caretakerrs residence and a marina. 

Developers were also allowed to maintain a sales office on 

the project so that construction and production schedules 

were not halted. DHES issued findings of fact and 

conclusions of law April 27, 1981 that stated since 

Developers relied on previous assurances, equity demanded 

they be allowed to continue with the above-stated limited 

construction. 

Opponents of the development filed a complaint on March 

13, 1981, alleging the condominium project was a subdivision 

subject to review. Construction continued on the units 
allowed by the stipulation and Developers claim they planned 

to "presell" 11 of the next 15 units before further 

construction would occur. 

By June of 1981, Developers invested over $900,000 in 

the project. Because additional operating capital was needed 

until pre-sales began to generate revenue, Developers 

borrowed $200,000 from First Interstate Bank of Kalispell and 

an additional $325,000 from a Canadian bank. Formal 

application for sanitary approval purposes was sent to DHES 

on June 24, 1981. On June 30, and July 19, 1981, Developers 

met with the County Sanitarian who informed them no problems 

were yet encountered. 

The Attorney General Opinion, 39 A.G.Op., No. 28, was 

issued July 28, 1981, and held condominium projects were 

subdivisions subject to review. In this opinion, the 

Attorney General relied on the intention of the Legislature 

that a broad definition of "condominiumt1 was intended when 

the Sanitation in Subdivisions Act definitions were adopted 

in 1973. The Attorney General stated: 

It is the public policy of this state to 

extend present laws controlling water 

supply, sewage disposal, and solid waste 

disposal to include individual wells 

affected by adjoining sewage disposal and 

individual sewage systems to protect the 

quality and potability of water for 

public water supplies and domestic uses 

and to protect the quality of water for 

other beneficial uses, including uses 

relating to agriculture, industry, 

recreation, and wildlife. 

This expression of legislative concern 

regarding water supply, sewage disposal, 

and solid waste disposal logically 

includes concern for the impact of the 

high density development that is 

characteristic of condominiums. 
On August 13, 1981, the County Attorney wrote 

Developers' counsel and advised him to cease project 

construction until. subdivision approval was attained. The 

letter imposed restrictions on further sales. By August 13, 

1981, cost on the construction project had reached 

$1,065,578. 

Developers continued to attempt to secure sanitation 

approval from the State and County and the State and County 

continued their review of the project. After the influx of 

money ceased, Developers were forced to abandon the project 

and absorb significant losses. Developers could not secure 

further financial support and because they purchased the 

property on an installment contract, were forced to default. 

In response to the complaint filed by project 

opponents, Developers, specifically Seeley as 

court-authorized intervenor, filed a "Cross-Claim for 

Declaratory Relief against defendant Flathead County" on 

September 24, 1981. The cross-claim contained seven counts. 

Count I11 sought to estop the County from enforcing the 

subdivision review requirement. It alleged the County 

Attorney interpreted the regulations requiring subdivision 

review as being inapplicable to the development and 

Developers justifiably relied and acted upon these 

interpretations. Paragraph V of Count I11 states "[tlhat in 

August of 1981, the county, through the office of the county 

attorney, arbitrarily, capriciously and without 

justification" prohibited further construction resulting in 

financial damage. The cross-claim concluded with a prayer 

for declaration that the project was exempt from subdivision 

review and that Developers are "entitled to damages in an 

amount to be shown at trial." 

The District Court addressed motions for summary 

judgment and the cross-claims in two phases. Pursuant to 
stipulations setting forth agreed facts and issues, on April 

22, 1982, the District Court entered findings of fact and 

conclusions which were amended on July 12, 1982 and September 

30, 1986. Hearings on the second issue of damages were held 

in October, 1984 and concluded on April 26, 1985. These 

hearings resulted in findings of fact and conclusions of law 

entered on March 24, 1987 and supplemented on June 2, 1987, 

along with a judgment on April 8, 1987 in favor of the 

Developers. The final order, issued June 2, 1987, was filed 

over six years after the complaint was filed. 

On appeal, the findings of the trial court are presumed 

to be correct if supported by substantial evidence and we 

refuse to substitute our judgment for that of the District 

Court where, as here, the District Court is acting as the 

trier of fact and there is substantial evidence to support 

its decision. Department of Revenue v. New Life Fellowship 

of Montana, Inc. (Mont. 1985), 703 P.2d 860, 862, 42 St.Rep. 

401. We will not reverse the District Court absent a showing 

that its determinations were clearly erroneous. Rule 52(a), 

M.R.Civ.P. 

The first three issues presented for our review are 

very similar and we will deal with them jointly as we find 

the District Court erred in its determination of proximate 

cause and in its disallowance of evidence regarding this 

issue. 

Developers are entitled to recover damages if it can be 

shown the alleged negligent representations of the County 

caused the damages and injures suffered by Developers. 

Generally, negligence requires existence of a duty, breach of 

that duty and harm caused by that breach. R.H. Schwartz 

Const. Specialties, Inc. v. Hanrahan (1983), 207 Mont. 105, 

107, 672 P.2d 1116, 1117. In this case, the causation 
question was not adequately satisfied by Developers to allow 

for recovery of damages. 

In the District Court's findings of fact and 

conclusions of law dated March 24, 1987, it found that as of 

August 13, 1981, the necessary sanitary approval had not been 

granted by either DHES or the Flathead county sanitarian. 

The County argues excluded evidence would have shown it had 

further become increasingly apparent that the project would 

not be able to support the 84 proposed units. The PUD 

re-zoning plan that the County had worked out with Developers 

was merely done so that Developers could construct the 

84-unit rather than a 56-unit, project. The District Court 

stated "the stop order issued by the County in the midst of 

construction was not required by considerations of health or 

safety." It went on to find that the stop order's only 

effect was to require "repetitive and redundant" procedures 

that halted the project construction. 

Developers complied with the County order. The 

District Court made a finding that after the order of August 

13, 1981, the project lost favor with county officials. The 

county sanitarian decided he would not approve a sewage 

disposal system for 84 units and as a result of county 

officials' conflicting representations, developers had no way 

to service the underlying debt accumulated in financing the 

project. The District Court, in its findings and conclusions 

of March 24, 1987, made a specific conclusion that the County 

proximately caused Developers' damages. 

The County argues, and we agree, that the District 

Court erred in this finding and in disallowing evidence 

pertaining to the proximate cause issue after August 13, 

1981. This evidence was contained in a number of County 

exhibits that demonstrated Developers continued to work on 
the project well beyond August 13, 1981. Developers sold 

the project over a year later. 

The county sanitarian testified that the sewer system 

review process was not affected by the letter of August 13, 

1981 and that even after this date Developers attempted to 

gain approval in the same manner as before. The County 

claims one of the exhibits was a letter dated October 9, 1981 

to Casne, Chief of the DHES Subdivision Bureau from the 

engineering firm of Thomas, Dean and Hoskins, stating the 

realization that the 84-unit plan was not feasible. Four of 

the exhibits allegedly dealt with the hiring of an 

independent expert by the DHES to study the project in light 

of two conflicting reports previously received by the DHES. 

It is argued that not only did these exhibits show that it 

was unlikely the project would ever receive approval, they 

also demonstrated DHES' effort to analyze Developers ' proposal 

and Developers' continued attempt to salvage the project. 

The County contends a letter of January 13, 1982, which 

was not allowed into evidence, demonstrated Developers' 

continuing effort to revise the plan to receive sewer system 

approval. An off-site treatment system was another design 

consideration proposed and letters in regard to this attempt 

were also not allowed. Other exhibits were offered but 

disallowed that further demonstrated the continuing attempt, 

even into 1983 and 1984, to gain approval for a sewage 

system. 

Lack of approval of the sewage system was fatal to the 

project in addition to any subdivision review requirement. 

These exhibits should have been allowed and 

considered, failure to admit such evidence was error. 

Developers briefly argue "but for" the representations 

by the County, they would never have proceeded with the 

enormous financial project and therefore no damage would have 
occurred. As a consequence, Developers claim, all other 

causes, especially those after August 13, 1981, are 

irrelevant because financial commitment would not have 

occurred. We disagree. 

Liability, in any cause of action, attaches if the 

plaintiff can prove first that defendant's act is a cause in 

fact of injury and then that the injury is the direct or 

indirect result, proximately caused by the negligent act. 

Causation in fact has been determined by the use of the "but 

for" test, argued by Developers, and in rare circumstances 

under a substantial factor examination. Prosser and Keeton, 

The Law of Torts, 5 41, pp. 264-268 (5th ed., 1984). In 

Montana, the distinction between causation in fact and 

proximate cause, now occasionally referred to as legal cause, 

has not generally been made. See, Rudeck v. Wright (Mont. 

1985), 709 P.2d 621, 638, 42 St.Rep. 1380; Kyriss v. State 

(Mont. 1985), 707 P.2d 5, 8, 42 St.Rep. 1487. 

Under causation in fact, the "but for" test has been 

defined as but for defendant's conduct, the event would not 

have occurred, or, conversely, defendant's conduct is not the 

cause of the event, if the event would have occurred without 

the conduct. Rudeck, supra, 709 P.2d at 628. As an uncommon 

alternative to the "but for" test, the "substantial factor" 

test has been designed to deal with problems where 

application of the "but for'' test would allow each of a 

number of defendants to escape responsibility because the 

conduct of one or more others would have been sufficient to 

produce the same result. Judeman v. Montana Deaconess 

Medical Center (Mont. 1986), 726 P.2d 301, 305, 43 St.Rep. 

1747. 

In the case at bar, Developers present a reasonable 

argument that but for the representations of the County they 

would not have proceeded with the project. They claim the 
second event, development of Caroline Point Estates, would 

not have occurred but for the first event, the 

representations of the County. 

However, the representations did not "proximately 

cause1' the damages in this case. In Montana, proximate cause 

is one which in a natural and continuous sequence, unbroken 

by any new, independent cause, produces injury, and without 

which the injury would not have occurred. Jimison v. U.S. 

(D.C. Mont. 1967), 267 F.Supp. 674, aff. 427 F.2d 1133; 

Sztaba v. Great Northern Railway Co. (1966), 147 Mont. 185, 

195-196, 411 P.2d 379, 385. This definition of proximate 

cause incorporates the "but for" definition in the words of 

the last clause "[alnd without which the injury would not 

have occurred." It is from this wording that the distinction 

between cause in fact and proximate, or legal, cause has 

become clouded. Nonetheless, prior to analyzing proximate 

cause, a claimant must satisfy cause in fact. Developers in 

this case could satisfy the "but for" analysis but could not 

show proximate cause. Proximate cause clearly must be 

established to create liability in a negligent defendant. 

Demaree v. Safeway Stores, Inc. (1973), 162 Mont. 47, 54, 508 

P.2d 570, 575; see also, Dvorak v. Matador Services, Inc. 

(Mont. 1986), 727 P.2d 1306, 1311, 43 St.Rep. 1562, 1568-1569 

(where it was determined defendant's conduct must be proven 

as the proximate cause of the claimant's injures to show 

negligence in strict liability). Therefore, Developers had 

to prove an uninterrupted chain of events from the alleged 

negligent act of the County, e.g., erroneous relied-upon 

representations and change of position, to the injuries and 

damage suffered. Further, this chain of events could not be 

broken by any new, independent cause, such as economic 

factors or failure to secure sanitary approval. This burden 

has not been met by Developers as is apparent from the 
evidence which was erroneously excluded by the District 

Court. 

Further, since other factors -- the economy, failure to 

secure additional financing, and especially the inability to 

secure approval of the sewer system -- had an impact on the 

resulting damage, Developers cannot claim the County's 

representations alone "proximately caused" the damage. Where 

more than one possible cause of damage appears, the plaintiff 

must eliminate causes other than those for which the 

defendant is responsible. Valley Inland Pacific 

Constructors, Inc. v. Clackamas Water District (Or. 1979), 

603 P.2d 1381. Developers' failure to separate the causes 

and damage bars them from arguing proximate cause is 

satisfied in this case. Numerous interruptions in the chain 

of events occurred that could be considered the injury 

causing damage. 

In support,, the County directs this Court's attention 

to the testimony of Albert Seeley that no pre-sales were to 

be closed prior to complete approval of the units' sanitary 

systems. Seeley further admitted that sanitary systems 

approval for the 84 units was never received from the County 

nor DHES. 

Regardless of whether the County made any 

representations that condominiums were or were not subject to 

subdivision review, the fact is that it is likely the project 

would not have been completed because sanitary approval could 

not be secured. The County also points out that in addition 

to the above mentioned factors, the testimony of Developers' 

accountant was that a number of occurrences combined to cause 

the demise of the development. 

We note at this juncture that this argument takes us 

into the fourth issue of whether reliance on the County's 

initial position was reasonable. The District Court stated 
in its conclusions of law of March 24, 1987, that "developers 

justifiably relied upon the representations of Flathead 

County that the Caroline Point condominium project was not 

subject to the Flathead County Subdivision Regulations." 

Further, the court concluded the order prohibiting further 

construction and sales "was the proximate cause of injury to 

the developers entitling the developers to recover from the 

County as damages their net out-of-pocket loss which 

reasonably resulted from their reliance upon previous County 

representations." As previously set forth, the District 

Court abused its discretion in its determination of proximate 

cause of injury in this case. We also hold that the 

conclusion that Developers justifiably relied upon the 

representations was error. 

Ground breaking on the project began December 23, 1980 

after the County Commissioners initially passed the PUD 

required to allow for increased density. Of importance, 

'however, is the letter that was sent by DHES on December 18, 

1980 informing Developers that DHES considered the project a 

subdivision subject to review. Also, a review of the 

statutes in effect at the time shows that "subdivision" did 

include condominiums. The following statutes, state and 

local regulation of subdivisions, provide: 

5 76-4-102 (7) , MCA (1979) -- 

"Subdivision" means a division of land or 

land so divided which creates one or more 

parcels containing less than 20 acres, 

exclusive of public roadways, in order 

that the title to or possession of the 

parcels may be sold, rented, leased, or 

otherwise conveyed and includes any 

resubdivision any condominium or 

area, regardless -- of size, which provides 

permanent multiple space for recreational 

vehicles or mobile homes. 
§ 76-3-103 (15) , MCA (1979) -- 

"Subdivision" means a division of land or 

land so divided which creates one or more 

parcels containing less than 20 acres, 

exclusive of public roadways, in order 

that the title to or possession of the 

parcels may be sold, rented, leased, or 

otherwise conveyed and shall include any 

resubdivision and shall further include 

any condominium or -- area, regardless of 

-- its size, which provides or will provide 

multiple space for recreational camping 

vehicles or mobile homes. (Emphasis 

added. ) 

Developers were represented by counsel during the 

entire period of time at issue. In light of the existence of 

these statutes and the letter that was issued from DHES, the 

question of the reasonableness of the Developers' reliance is 

paramount in determination of this case. 

Developers contend that their reliance was reasonable 

because the County, through its attorney, "promised" it would 

litigate its determination that condominiums were not subject 

to subdivision review. However, agents of the DHES, 

specifically Will Aiken, had also advised Developers that the 

condominium development would not be subject to subdi~rision 

review. 

The County appropriately points out that Developers 

were relying on an interpretation of law, an opinion, that 

the condominiums would not be subject to subdivision review. 

The County Attorney's office maintained no confidential or 

professional relationship with Developers in this case. 

Therefore, the County's opinion -- in light of the State's 

determination that subdivision review would be required set 

out in the letter of December 18, 1980; the fact that 

Developers were represented by their own counsel; the 

existence of the above-mentioned statutes and the actual 
opposition to the lack of subdivision review that was 

expressed by opponents of the project who ultimately filed 

this suit -- was unreasonably relied upon by Developers. 

We reverse and remand for further proceedings 

consistent with this opinion. /' 

We concur: 

&c;s~~ Justices