State Ex Rel. Industrial Inc. Co. V

No. 13072

I N THE SUPRFm COURT O THE STATE O MONTANA F F

THE STATE O M N A A ex r e l r F OTN INDUSTRIAL INDEMNITY COMPANY, a corporation,

Relator,

THE DISTRICT COURT O THE FOURTH F JUDICIAL DISTRICT O THE STATE OF F MONTANA, I N AND FOR THE COUNTY O F MISSOULA, THE HON. JACK L. GREEN, DISTRICT JUDGE AND TERREL M. FRANCISCO, A d m i n i s t r a t r i x of t h e E s t a t e o f WILLIAM J. FRANCISCO, Lleceased,

ORIGINAL PROCEEDING: Counsel of Record :

For R e l a t o r s :

Marra and Wenz, Great F a l l s , Montana J o s e p h A Marra argued, Great F a l l s , Montana John F. Iwen argued, Great F a l l s , Montana

For Respondents:

Knight, Dahood, Mackay and McLean, Anaconda, Montana C. F. Mackay argued, Anaconda, Montana

Submitted: November 10, 1975

Decided :EEc 3 1191:

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 Com- pensation Division ordered relator to pay 600 weeks of compen- sation, 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 Under the applicable statute, section 9&204, R.C.M. (repealed Section 2, Ch. 493, Laws 1973), 1947,/relator is entitled to be " * * * subrogated only to the extent of either one-half (1/2) of the gross amount paid at the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 conversa- tion 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 recom- mend 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 plain- tiff's attorneys requesting execution of settlement forms, com- promising 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. Plain- tiff'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 subro- gation rights. On January 2, 1975, agreement was reached to place $6,250 (the amount in controversy) in a trust account pending the out- come of the present litigation over the disputed existence of an oral contract and its contents. The amount deposited was arrived

a t a s follows:

(1) R e l a t o r ' s c l a i m e d s e t - o f f o f t h e l a s t 200 weeks o f compensation o r $8,250;

(2) P l a i n t i f f h a s a g r e e d t o t h e l a s t 50 weeks o r $2,000, l e a v i n g $6,250 i n c o n t r o v e r s y .

P l a i n t i f f f i l e d a d e c l a r a t o r y judgment a c t i o n i n d i s t r i c t c o u r t , Missoula County, a s k i n g c o n s t r u c t i o n o f t h e a l l e g e d o r a l contract. R e l a t o r moved t h e c o u r t t o d i s m i s s , under Rule 1 2 , M.R.Civ.P., a s t h e q u e s t i o n i s whether o r n o t a n o r a l c o n t r a c t e x i s t s and i s a d e n i a l o f r e l a t o r ' s r i g h t s t o a t r i a l on t h e m e r i t s a s t o whether o r n o t a n o r a l c o n t r a c t e x i s t s . Relator p e t i t i o n s t h i s C o u r t t o i s s u e a w r i t of s u p e r v i s o r y c o n t r o l o r o t h e r a p p r o p r i a t e w r i t t o p r e v e n t a m i s c a r r i a g e of j u s t i c e .

The i s s u e p r e s e n t e d i n t h i s m a t t e r i s whether a d e c l a r a t o r y judgment a c t i o n i s t h e p r o p e r p r o c e d u r e t o d e t e r m i n e whether o r not a contract actually exists.

A d e c l a r a t o r y judgment a c t i o n may be b r o u g h t t o c o n s t r u e a c o n t r a c t under s e c t i o n 93-8902, R.C.M. 1947:

"Any p e r s o n i n t e r e s t e d under a d e e d , w i l l , w r i t t e n contract o r other writings constituting a contract, o r whose r i g h t s , s t a t u s o r o t h e r l e g a l r e l a t i o n s a r e a f f e c t e d by a s t a t u t e , m u n i c i p a l o r d i n a n c e , c o n t r a c t o r f r a n c h i s e , may have d e t e r m i n e d any q u e s t i o n o f c o n s t r u c t i o n o r v a l i d i t y a r i s i n g under t h e instrument, s t a t u t e , ordinance, c o n t r a c t , o r f r a n c h i s e and o b t a i n a d e c l a r a t i o n o f r i g h t s , s t a t u s , o r other l e g a l r e l a t i o n s thereunder."

T h i s Court i n C a r p e n t e r v. F r e e , 138 Mont. 552, 555, 357 P.2d 882, h e l d t h e " w r i t t e n c o n t r a c t " l a n g u a g e o f s e c t i o n 93-8902, d o e s n o t e x c l u d e o r a l c o n t r a c t s from i t s o p e r a t i o n :

" * * * it i s c l e a r t h a t a n a c t i o n f o r a d e c l a r a - t o r y judgment can be m a i n t a i n e d t o o b t a i n a d e t e r - m i n a t i o n of t h e r i g h t s and d u t i e s o f t h e r e s p e c t i v e p a r t i e s t o an o r a l c o n t r a c t . "

I n Mahan v . Hardland, 1 4 7 Mont. 78, 4 1 0 P.2d 1 5 6 , t h i s C o u r t found a d e c l a r a t o r y judgment a c t i o n w a s n o t t h e p r o p e r means t o c o n s t r u e an o r a l c o n t r a c t i f t h e t e r m s o f t h e c o n t r a c t a r e n o t a d m i t t e d by a l l p a r t i e s .

I n Mahan t h e e x i s t e n c e of t h e o r a l c o n t r a c t was a d m i t t e d , b u t t h e t e r m s of t h e c o n t r a c t were n o t . In the instant case, t h e v e r y e x i s t e n c e of t h e o r a l c o n t r a c t i s i n c o n t r o v e r s y .

The g e n e r a l r u l e i s s t a t e d i n 26 C.J.S. Declaratory Judgments 516, p. 81:

" * * * a d e c l a r a t o r y judgment p r o c e e d i n g i s p r i m a r i l y i n t e n d e d t o c o n s t r u e t h e meaning of a law, and n o t t o d e t e r m i n e t h e e x i s t e n c e of c o n t r o v e r t e d f a c t s , and * * * o r d i n a r i l y a c o u r t w i l l r e f u s e a d e c l a r a - t o r y judgment which c a n be made o n l y a f t e r a j u d i - c i a l i n v e s t i g a t i o n of disputed f a c t s , e s p e c i a l l y where t h e d i s p u t e d q u e s t i o n s o f f a c t w i l l be t h e s u b j e c t of j u d i c i a l i n v e s t i g a t i o n i n a r e g u l a r a c t i o n . "

I n t h e i n s t a n t case, t h e e x i s t e n c e of a controversy a s t o whether o r n o t a n o r a l c o n t r a c t was made r e n d e r s t h i s a c t i o n improper f o r a d e c l a r a t o r y judgment.

The d i s t r i c t c o u r t e r r e d i n d e n y i n g r e l a t o r ' s motion t o d i s m i s s t h e d e c l a r a t o r y judgment a c t i o n and g r a n t a t r i a l on t h e merits. The d i s m i s s a l , i n e f f e c t , i s a f i n d i n g by t h e d i s t r i c t c o u r t t h a t a n o r a l c o n t r a c t e x i s t s t o be c o n s t r u e d . Only a f a c t d e t e r m i n a t i o n can make s u c h a f i n d i n g .

Unless a j u r y t r i a l i s waived, t h e j u r y , n o t t h e judge, i s t h e u l t i m a t e t r i e r of f a c t . I f a f a c t i s s u e e x i s t s , Rule 3 8 ( a ) , M.R.Civ.P., s p e c i f i c a l l y r e s e r v e s t h e r i g h t t o t r i a l by j u r y .

I n Mahan, a t p . 8 5 , q u o t i n g from Baumgartner v . Schey, 143 Colo. 373, 353 P.2d 375, it s t a t e s :

" * * * I f t h e a c t i o n i n which d e c l a r a t o r y r e l i e f i s s o u g h t would have been a n a c t i o n a t law had it been p e r m i t t e d t o m a t u r e w i t h o u t i n t e r - v e n t i o n of d e c l a r a t o r y p r o c e d u r e , t h e r i g h t t o t r i a l by j u r y o f d i s p u t e d q u e s t i o n s o f f a c t i s not affected. * * *"

R e l a t o r i s e n t i t l e d t o a t r i a l by j u r y t o d e t e r m i n e whether o r n o t an o r a l c o n t r a c t e x i s t s .

For t h e f o r e g o i n g r e a s o n s w e hereby g r a n t r e l a t o r ' s pet i t i o n f o r a w r i t o f s u p e r v i s o r y c o n t r o l and d i r e c t t h e d i s t r i c t 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 compro- mise settlement agreement of a pending lawsuit, the terms there- of, 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 lia-

bilities 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 con- tract 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 i t , i s n o t t h a t a compromise s e t t l e m e n t a g r e e m e n t was n o t i n f a c t made, b u t , t h a t i t i s i n v a l i d b e c a u s e o f m i s t a k e , m i s -representation o r fraud.

The v a l i d i t y o f a n a g r e e m e n t i s s u b j e c t t o a d j u d i c a t i o n u n d e r t h e e x p r e s s t e r m s o f t h e Uniform D e c l a r a t o r y Judgments Act, s e c t i o n 93-8902, R.C.M. 1 9 4 7 , q u o t e d above. W e have r e c e n t l y a f f i r m e d a d e c l a r a t o r y judgment u p h o l d i n g t h e v a l i d i t y of a series of h o s p i t a l c o n t r a c t s a g a i n s t a c o n t e n t i o n t h a t one o f t h e c o n t r a c t i n g p a r t i e s had no a u t h o r i t y t o e n t e r i n t o t h e c o n t r a c t s on b e h a l f o f t h e s t a t e , Montana Deaconess H o s p i t a l v . Dept. o f S.R.S., Mont . , 538 P.2d 1 0 2 1 , 32 S t . R e p . 801; and have g r a n t e d a n o r i g i n a l d e c l a r a t o r y judgment u p h o l d i n g t h e v a l i d i t y o f a c i t y ' s c o n t r a c t t o s e l l S p e c i a l Improvement D i s -

t r i c t bonds b e a r i n g 7-3/4% i n t e r e s t . S t a t e e x r e l . The C i t y o f i 734AG!.Uk MOnt. Townsend v . D. A . Davidson &&&iny, , 531 P.2d 370,

I f t h e r u l e w e r e otherwise, insurance policy questions commonly d e t e r m i n e d i n d e c l a r a t o r y judgment a c t i o n s which i n v o l v e t h e v a l i d i t y o f t h e c o n t r a c t c o u l d no l o n g e r b e a d j u d i c a t e d i n such a c t i o n s , e.g. where payment o f premiums was d i s p u t e d o r where r e p r e s e n t a t i o n s o f p h y s i c a l c o n d i t i o n i n p r o c u r i n g l i f e insurance w e r e i n issue.

The e x i s t e n c e o f f a c t u a l i s s u e s c o n c e r n i n g t h e v a l i d i t y o f t h e a g r e e m e n t i n t h e i n s t a n t c a s e i s no impediment t o a d e -c l a r a t o r y judgment a s t h e A c t p r o v i d e s i n s e c t i o n 93-8909, R.C.M.

1947 : "When a p r o c e e d i n g u n d e r t h i s a c t i n v o l v e s a determination of an i s s u e of f a c t , such i s s u e may b e t r i e d and d e t e r m i n e d i n t h e same manner a s i s s u e s o f f a c t a r e t r i e d and d e t e r m i n e d i n o t h e r c i v i l a c t i o n s i n t h e c o u r t i n which t h e proceeding i s pending."

I n my view t h e d i s t r i c t c o u r t ' s d e n i a l o f r e l a t o r ' s m o t i o n t o d i s m i s s w a s c o r r e c t and d i d n o t i n v o l v e a n i m p l i e d f i n d i n g t h a t a n o r a l c o n t r a c t e x i s t s t o be construed. The d i s t r i c t c o u r t ' s o r d e r d i d n o t p r e c l u d e a j u r y t r i a l on any d i s p u t e d q u e s t i o n of f a c t .

F o r t h e f o r e g o i n g r e a s o n s , I would d i s m i s s r e l a t o r ' s a p p l i c a t i o n f o r a w r i t of supervisory c o n t r o l .

Justice