Mattingly v. First Bank of Lincoln

96-678

No. 96-678

IN THE SUPREME COURT OF THE STATE OF MONTANA

1997

JACK MATTINGLY,

Plaintiff and Appellant,

v.

FIRST BANK OF LINCOLN, GERRY MALEK, d/b/a MALEK
REALTY; and AUGUST "GUS" HABETS,

Defendants and Respondents.

APPEAL FROM: District Court of the First Judicial District,
In and for the County of Lewis and Clark,
The Honorable Thomas C. Honzel, Judge presiding.

COUNSEL OF RECORD:

For Appellant:

David K. W. Wilson, Jr., and Jonathan Motl; Reynolds, Motl
and Sherwood; Helena, Montana

For Respondents:

Gary L. Davis; Luxan & Murfitt; Helena, Montana
(for Respondent First Bank Lincoln)

Submitted on Briefs: June 12, 1997

Decided: October 28, 1997
Filed:

__________________________________________
Clerk

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Justice Jim Regnier delivered the Opinion of the Court.

In July 1993, plaintiff and appellant Jack Mattingly filed an action in the
District
Court for the First Judicial District in Lewis and Clark County against First Bank of
Lincoln, real estate agent Gerry Malek, and August Habets to recover damages incurred
in connection with the 1987 purchase and sale of a service station located in
Lincoln,
Montana. Mattingly brought suit alleging that at the time he purchased the service
station
from Habets, the defendants, including First Bank through whom Mattingly obtained
financing, knew of underground contamination on the service station property but
failed
to disclose its presence.
Mattingly asserted claims against First Bank for constructive fraud,
negligence, and
negligent misrepresentation, and punitive damages. First Bank subsequently filed a
motion for summary judgment, which the District Court granted in a June 2, 1995,
order.
Mattingly timely filed a motion to alter or amend pursuant to Rule 59(g), M.R.Civ.P.,
arguing the court had improperly overlooked a number of issues of material fact. On
August 11, 1995, the District Court denied Mattingly's motion to alter or amend.
Mattingly appeals the decision of the District Court granting First Bank's motion for
summary judgment. For the reasons discussed below, we reverse.
We find the following issues dispositive on appeal:
1. With respect to Mattingly's claim for negligent misrepresentation, did the
District Court err in finding that First Bank made no representation to Mattingly
upon
which he might rely to his detriment?
2. With respect to Mattingly's claim for constructive fraud, did the District
Court err in finding no special circumstances giving rise to a duty on the part of
First
Bank to disclose to Mattingly any information it may have had regarding the
contamination?
3. With respect to Mattingly's claim for constructive fraud, did the District
Court err in finding that First Bank gained no advantage by failing to disclose the
presence of the contamination?
4. Did the District Court err in granting First Bank's motion for summary
judgment on Mattingly's claim for punitive damages?
FACTUAL BACKGROUND
In July 1983, while installing a new sewer line on the south side of Highway 200
in Lincoln's city center, a construction crew discovered a pocket of gasoline
floating on
the groundwater at a depth of six feet. Further investigation by the Water Quality
Bureau
(WQB) and the Montana Department of Health and Environmental Sciences (DHES)
indicated that petroleum leaking from underground storage tanks at three gasoline
retail
businesses operating at the main intersection of Highway 200 and Stemple Pass Road
had
contaminated approximately 1.4 acres of land in the area. One of the three service
stations involved, "Gus's Exxon," was owned at the time by Habets.

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In 1986, at the behest of the WQB, Stiller and Associates completed a study
(Stiller report) which confirmed the presence of gasoline contaminated groundwater
in the
quarter mile area stretching westward from the main intersection location of the
three
gasoline service stations. Following various press accounts of the spill, and by
virtue of
the fact that Lincoln is a small community, general knowledge of the contamination
became widespread throughout the Lincoln area, and within the First Bank organization
itself. Indeed, First Bank's property rested in such close proximity to the
contaminated
area that, as a part of its initial investigation in 1983, DHES sought permission
from then
bank president Susan Hemmer to excavate on the bank's property near the "leading edge
of the plume."
In May 1987, Habets listed "Gus's Exxon" for sale with Malek's real estate
brokerage firm. Later that same month, Mattingly entered into a contract with Habets
pursuant to which he agreed to purchase the station for $79,000, contingent upon his
ability to obtain institutional financing. Habets did not disclose to Mattingly
that the
property had been contaminated.
Mattingly then met with First Bank Vice-President Joe Dolan to inquire about
obtaining a loan for the purchase of the property. At the time of Mattingly's loan
application, First Bank had a loan committee comprised of all the bank's board
members.
Among the committee's more active members were bank president Hemmer, as well as
director and shareholder John Mulcare. Mulcare also owned and operated Handi-Mart,
located across the street from the station purchased by Mattingly, and one of the
three
stations identified as a source of the contamination. Mulcare knew of the
contamination,
as evidenced by his attendance at a November 24, 1984, meeting with DHES officials
during which they explained the potential liability all three station owners faced
due to
the contamination. Moreover, Mulcare obtained a copy of the 1986 Stiller report
which
apportioned probable partial responsibility for the contamination to Mulcare's Handi-
Mart, as well as to Gus's Exxon.
Prior to approving loans on commercial real estate, First Bank made it a
practice
to conduct some form of appraisal of the property to determine its value. First
Bank did
not require a formal written appraisal in this case because of Mattingly's large down
payment on the property. Instead, prior to First Bank's approval of Mattingly's loan
request, Dolan conducted a physical inspection of the service station property to
obtain
an impression regarding its value for the purpose of determining whether First Bank
would be secure in its loan. At the time of the inspection, Dolan was aware of
contamination in the area.
First Bank's loan committee met on June 8, 1987, to determine whether to approve
Mattingly's loan request. All of the loan committee members, including Hemmer and
Mulcare, were aware of the contamination. Mulcare, who had direct knowledge of the

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contamination, did not mention the contamination issue and abstained from discussing
or
voting on the loan request because Mattingly was a business competitor. Hemmer, who
had direct knowledge of the contamination but did not know of the Stiller Report,
also
remained silent with respect to the issue of contamination. Dolan, who was
relatively
new to the Lincoln area, possessed only general knowledge of the contamination. He
did
not know of the Stiller Report, and essentially relied on other bank board members
for
information regarding the community. Without any discussion of the contamination
present on the property in question, the committee approved Mattingly's loan request
in
the amount of $56,000. Closing took place at First Bank's Lincoln office on June 22,
1987. None of the documents associated with the transaction, including the buy-sell
agreement, contained any disclosure of the contamination.
After taking possession of the property, Mattingly wanted to remodel and expand
his business, so he applied with First Bank to obtain a second loan in the amount of
$127,000. After meeting on August 17, 1987, First Bank's loan committee denied
Mattingly's application. Mattingly subsequently obtained an SBA-guaranteed loan in
the
amount of $105,000 through Norwest Bank in Great Falls. Mattingly used the loan
money to pay the remaining balance on the loan from First Bank, and to remodel the
service station.
Mattingly first learned of the contamination in July 1991 when he was in the
process of selling his property. That sale fell through due to the contamination,
which
has since prevented Mattingly from selling the property. In a letter dated July 9,
1992,
the DHES first informed Mattingly of his potential liability for the clean up of the
contamination.
Mattingly filed this suit against Habets, Malek, and First Bank in July 1993.
In
his second amended complaint, filed December 13, 1993, Mattingly alleged claims
against Habets for actual fraud, negligent misrepresentation, violation of Montana's
hazardous waste law õ 75-1-715(6)(d)(ii), MCA, and for punitive damages. Mattingly
brought claims against Malek for actual fraud, negligent misrepresentation,
violation of
his statutory duty as a real estate licensee pursuant to õ 37-51-321, MCA, and
punitive
damages. Finally, Mattingly brought claims against First Bank for constructive
fraud,
negligence, negligent misrepresentation, and punitive damages.
Mattingly subsequently settled his claims with Malek, and Habets signed a
confession of liability on December 22, 1995. On March 1, 1996, the court issued an
order of liability, finding Habets liable for breach of contract, negligent
misrepresentation, and violation of õ 75-10-715(6)(d)(ii), MCA. Following a nonjury
trial on the issue of damages, the District Court issued an order finding Habets
liable for
actual damages in the amount of $435,000. On September 20, 1996, the court entered
a final judgment in this case, incorporating its prior order granting summary

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judgment
in First Bank's favor. Mattingly appeals.
DISCUSSION
This Court's standard of review in appeals from summary judgment rulings is de
novo. Treichel v. State Farm Mut. Auto. Ins. Co. (1997), 280 Mont. 443, 446, 930
P.2d
661, 663. (citing Motarie v. Northern Montana Joint Refuse Disposal Dist. (1995), 274
Mont. 239, 242, 907 P.2d 154, 156; Mead v. M.S.B., Inc. (1994), 264 Mont. 465, 470,
872 P.2d 782, 785). This Court reviews a summary judgment order entered pursuant to
Rule 56, M.R.Civ.P., based on the same criteria applied by the district court.
Treichel,
280 Mont. at 446, 930 P.2d at 663 (citing Bruner v. Yellowstone County (1995), 272
Mont. 261, 264, 900 P.2d 901, 903).
In proving that summary judgment is appropriate:
The movant must demonstrate that no genuine issues of material fact exist.
Once this has been accomplished, the burden then shifts to the non-moving
party to prove by more than mere denial and speculation that a genuine
issue does exist. Having determined that genuine issues of material fact do
not exist, the court must then determine whether the moving party is
entitled to judgment as a matter of law. [This Court] reviews the legal
determinations made by the district court as to whether the court erred.

Bruner, 272 Mont. at 264-65, 900 P.2d at 903.
Moreover, the "moving party has the burden of showing a complete absence of any
genuine issue as to all facts considered material in light of the substantive
principles that
entitle the moving party to judgment as a matter of law and all reasonable
inferences are
to be drawn in favor of the party opposing summary judgment." Kolar v. Bergo (1996),
280 Mont. 262, 266, 929 P.2d 867, 869.
ISSUE 1
With respect to Mattingly's claim for negligent misrepresentation, did the
District
Court err in finding that First Bank made no representation to Mattingly upon which
he
might rely to his detriment?
This Court has adopted the definition of negligent misrepresentation set forth
in
the Restatement (Second) of Torts õ 552. See Durbin v. Ross (1996), 276 Mont. 463,
472, 916 P.2d 758, 764. Section 552 provides:
(1) One who, in the course of his business, profession or employment, or
in any other transaction in which he has a pecuniary interest, supplies false
information for the guidance of others in their business transactions, is
subject to liability for pecuniary loss caused to them by their justifiable
reliance upon the information, if he fails to exercise reasonable care or
competence in obtaining or communicating the information.

In Kitchen Krafters v. Eastside Bank of Montana (1990), 242 Mont. 155, 789 P.2d
567 (overruled in part on other grounds by Busta v. Columbus Hosp. Corp. (1996), 276
Mont. 342, 370, 916 P.2d 122, 139), we set out the following elements of a claim for
negligent misrepresentation:
a) the defendant made a representation as to a past or existing

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material fact;

b) the representation must have been untrue;

c) regardless of its actual belief, the defendant must have made
the representation without any reasonable ground for believing it to be true;

d) the representation must have been made with the intent to
induce the plaintiff to rely on it;

e) the plaintiff must have been unaware of the falsity of the
representation; it must have acted in reliance upon the truth of the
representation and it must have been justified in relying upon the
representation;

f) the plaintiff, as a result of its reliance, must sustain damage.

Kitchen Krafters, 242 Mont. at 165, 789 P.2d at 573.
Although a negligent misrepresentation may give rise to actual or constructive
fraud, where it is insufficient to do so, it may "nevertheless give rise to
negligence
liability under õ 27-1-701, MCA, through want of ordinary care of the defendant in
managing his property or person." Bottrell v. American Bank (1989), 237 Mont. 1, 21,
773 P.2d 694, 706.
A threshold element in any claim for negligent misrepresentation is that the
defendant make a representation as to a past or existing material fact upon which the
claim is based. Kitchen Krafters, 242 Mont. at 165, 789 P.2d at 573.
The District Court granted First Bank's motion for summary judgment with respect
to Mattingly's claim for negligent misrepresentation on two grounds. First, the
court
found that First Bank had not conducted a formal appraisal and had accordingly made
no
representation to Mattingly regarding the property's value. Second, the court found
Mattingly could not have relied on any representations by First Bank before deciding
to
purchase the property. In so finding, the court noted that First Bank loaned money
to
Mattingly after he had already entered into a buy-sell agreement with Habets.
Following review of the record, this Court concludes the District Court erred in
determining as a matter of law that the record contained no evidence of misleading
statements made by First Bank to Mattingly and upon which he might have relied in
purchasing the service station. When considering a motion for summary judgment, this
Court must view the evidence in the light most favorable to the party opposing the
motion. Bowen v. McDonald (1996), 276 Mont. 193, 199, 915 P.2d 201, 205. From
this perspective, we conclude that a jury might well have viewed First Bank's conduct
as a representation.
It was First Bank's practice to perform an appraisal prior to approving a loan
on
commercial real estate. Accordingly, prior to First Bank's approval of Mattingly's
loan
request, Dolan inspected the subject property. First Bank concedes that Dolan
visited the

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property and conducted an inspection "to obtain an impression regarding its value
for the
purpose of determining whether First Bank would be secure in its loan." First Bank's
loan committee subsequently approved Mattingly's loan request in the amount of
$56,000.
Beyond these bare facts, however, the parties are in dispute. The parties
dispute
the true nature, scope, and import of First Bank's evaluation of the property. They
additionally dispute whether First Bank's appraisal of the property and subsequent
approval of Mattingly's loan request constituted a representation that the property
had a
value of at least $56,000. Whether First Bank's appraisal of the property, along
with
its subsequent approval of Mattingly's loan request, constitutes a representation
that the
property had a value of at least $56,000 is a question of material fact.
Assuming First Bank's appraisal of the property constituted an affirmative
representation to Mattingly regarding its value, the parties additionally dispute
whether
Mattingly in fact relied upon such a representation in purchasing the property. The
District Court found that even had First Bank misrepresented the property's value
Mattingly could not have relied on that representation in purchasing the property.
In so
concluding, the court correctly noted it was only "after [Mattingly] had entered
into the
buy-sell agreement" that he contacted the Bank to secure financing. However,
Mattingly
expressly conditioned his commitment to purchase the property upon his ability to
obtain
that financing. Finalization of the sale was, therefore, contingent upon First
Bank's
approval of his loan application and, arguably, its determination that the property
was
worth the amount of the loan. Therefore, whether Mattingly relied on any
representation
by First Bank with respect to the property's value in finalizing the sale is an
additional
question of material fact.
Based on the foregoing, we hold the District Court erred in granting summary
judgment with respect to Mattingly's claim for negligent misrepresentation.
Specifically,
we hold the court erred in finding no question of fact as to whether First Bank made
an
affirmative representation regarding the condition or value of the property upon
which
Mattingly might have relied.
ISSUE 2
With respect to Mattingly's claim for constructive fraud, did the District
Court err
in finding no special circumstances giving rise to a duty on the part of First Bank
to
disclose to Mattingly any information it may have had regarding the contamination?

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In addition to claims for negligence and negligent misrepresentation, Mattingly
alleged a claim of constructive fraud against First Bank. The presence of a legal
duty is
an essential element of a claim for constructive fraud. Section 28-2-406, MCA,
defines
constructive fraud as :
(1) any breach of duty which, without an actually fraudulent intent,
gains an advantage to the person in fault or anyone claiming under him by
misleading another to his prejudice or to the prejudice of anyone claiming
under him; or
(2) any such act or omission as the law especially declares to be
fraudulent, without respect to actual fraud.

Thus, in addressing First Bank's motion for summary judgment with respect to
Mattingly's claim for constructive fraud, this Court must first determine whether the
lower court erred in concluding First Bank owed no duty to Mattingly to disclose any
information it may have had regarding the contamination.
Whether or not a legal duty exists is a question of law for the court's
determination. Simmons v. Jenkins (1988), 230 Mont. 429, 435, 750 P.2d 1067, 1071.
Although the legal duty which often exists in constructive fraud cases is a
fiduciary one,
this Court has previously held that Montana's constructive fraud statute "does not
require
that the plaintiff demonstrate a fiduciary relationship, [but] merely requires the
establishment of a duty." McJunkin v. Kaufman & Broad Home Systems (1987), 229
Mont. 432, 439, 748 P.2d 910, 915. Under certain "special circumstances," neither a
confidential nor a fiduciary relationship is necessary for a finding of constructive
fraud.
Drilcon, Inc. v. Roil Energy Corp. (1988), 230 Mont. 166, 172, 749 P.2d 1058, 1061.
This Court has held special circumstances may exist where one party has acted to
mislead the other in some way. Specifically, this Court has determined that
constructive
fraud may be present "[w]here sellers [of real property], by words or conduct,
create a
false impression concerning serious impairment or other important matters and
subsequently fail to disclose the relevant facts." McGregor v. Mommer (1986), 220
Mont. 98, 109, 714 P.2d 536, 543 (citing Moschelle v. Hulse (1980), 190 Mont. 532,
539, 622 P.2d 155, 159.) Further, in Drilcon, 230 Mont. at 172, 749 P.2d at 1061-
62,
we affirmed a jury instruction on the question of constructive fraud which provided
that
"[w]here a party, by his words or conduct creates a false impression concerning
serious
impairments or other important matters and subsequently fails to disclose relevant
facts,
constructive fraud may be found."
In McGregor, we identified special circumstances justifying submission of the
question of constructive fraud to the jury where sellers of a gas station "made
[misleading
and] general statements about the profitability of the business." McGregor, 220
Mont.
at 109, 714 P.2d at 543. Similarly, in Moschelle, we held special circumstances

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supporting a claim for constructive fraud existed where sellers made misleading
statements regarding the physical condition of the property and the income generated
from
the business. Moschelle, 190 Mont. at 539-40, 622 P.2d at 159. We recognized that
"[w]ithholding relevant facts concerning purchased property can be a fraudulent
act."
Moschelle, 190 Mont. at 539, 622 P.2d at 159.
In McJunkin, buyers of a mobile home brought suit against the manufacturer and
seller, asserting several claims, including one for constructive fraud. McJunkin,
229
Mont. at 439, 748 P.2d at 914. We "recognized that a sufficient duty can arise in
[such]
a commercial transaction," and concluded that "defendants had a duty to refrain from
intentionally or negligently creating a false impression by words or conduct."
McJunkin,
229 Mont. at 439-40, 748 P.2d at 915.
In the present case, the District Court found no special circumstances to
support
Mattingly's claim for constructive fraud, and no factual basis upon which to
predicate the
existence of a duty. In concluding that First Bank had no duty to disclose any
information it may have had regarding the contamination, the District Court found
that
[t]here is no evidence that the Bank made any misleading statements to
Mattingly which he relied on in purchasing the station. The Bank was not
even a party to the transaction. It did not advise Mattingly in any way
regarding the purchase nor did it represent Habets. Moreover, Mattingly
had never previously dealt with the Bank. It was only after he had entered
into the buy-sell agreement that he contacted the Bank to secure financing.
Thus, the Bank did not have a special relationship with Mattingly nor did
it owe him a fiduciary duty.

Review of the record indicates the District Court erred in granting First Bank's
motion for summary judgment with respect to the question of constructive fraud.
Specifically, we hold the lower court erred in finding that "[t]here is no evidence
that the
Bank made any misleading statements to Mattingly which he relied on in purchasing the
station."
As discussed above, we concluded that whether First Bank made misleading
statements to Mattingly with respect to the condition or value of the property is a
question
of fact precluding summary judgment. We further concluded that, assuming the
presence
of such a misrepresentation, the question of whether Mattingly relied on that
statement
in purchasing the station is an additional question of fact.
A duty sufficient to support a claim for constructive fraud may arise in a
commercial transaction. McJunkin, 229 Mont. at 439-40, 748 P.2d at 915. Whether
First Bank, by its words or conduct, created a false impression concerning the
contamination, and subsequently failed to disclose relevant facts, is a question of
material
fact. Special circumstances giving rise to a duty on the part of First Bank may

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exist
should a trier of fact find that First Bank misrepresented the value of the property
in light
of the contamination, and that Mattingly relied upon this representation in
purchasing the
property.
Furthermore, First Bank had peculiar knowledge of the environmental hazard.
Mattingly contracted with First Bank to borrow money, unaware of the duties and
financial obligations he was assuming by becoming an owner of environmentally damaged
property. A jury may well conclude that such facts would constitute special
circumstances in this case.
Based on the foregoing, we conclude that the District Court erred in summarily
finding no special circumstances giving rise to a duty on the part of First Bank to
disclose
any information it may have had regarding the ground contamination to Mattingly.
Accordingly, we hold the District Court erred in granting First Bank's motion for
summary judgment on Mattingly's claim for constructive fraud.
ISSUE 3
With respect to Mattingly's claim for constructive fraud, did the District
Court err
in finding that First Bank gained no advantage by failing to disclose the presence
of
contamination?
The District Court granted First Bank's motion for summary judgment on the issue
of constructive fraud on the additional basis that First Bank gained no advantage
over
Mattingly by failing to disclose the contamination. Pursuant to õ 28-2-406, MCA, a
necessary component of any claim for constructive fraud is that, in breaching a
duty, one
party "gain an advantage" over the other.
Mattingly argues that First Bank was advantaged by its alleged decision to
withhold
information regarding the contamination in a number of respects. For instance,
Mattingly
points out that First Bank held the note on Habets' underlying loan, and that, upon
closing the sale with Mattingly, First Bank was able to pay the balance remaining on
Habets' loan. Thus, Mattingly argues, First Bank found in him a borrower who knew
nothing of the contamination and who would accordingly be less likely to default on
his
loan than would a borrower, such as Habets, who knew the property to be seriously
defective. Mattingly also argues that First Bank was advantaged by failing to
disclose the
contamination because, had Mattingly learned of the contamination, he would not have
purchased the property and First Bank would not have been able to collect interest
income
on the loan.
The District Court found that, even assuming First Bank knew of the
contamination, it gained no advantage by failing to disclose its presence.
Specifically,
the court held that "[i]f Mattingly had defaulted on the loan and the Bank
foreclosed on
its mortgage, the Bank might very well have ended up with a piece of property with

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little
value, or which perhaps even constituted a financial liability."
Notwithstanding this fact, this Court concludes that whether or not First Bank
gained advantage over Mattingly by failing to disclose the contamination, as
contemplated
by the definition of constructive fraud, is a question of material fact for the
trier of fact.
ISSUE 4
Did the District Court err in granting First Bank's motion for summary judgment
on Mattingly's claim for punitive damages?
By way of his second amended complaint, Mattingly asserted a claim for punitive
damages against First Bank. Because the District Court ordered summary judgment in
First Bank's favor on Mattingly's claims for constructive fraud and negligent
misrepresentation, it also granted First Bank's motion for summary judgment on his
claim
for punitive damages.
Having reversed the District Court's order with respect to Mattingly's claims
for
constructive fraud and negligent misrepresentation, we similarly reverse its grant of
summary judgment on Mattingly's claim for punitive damages.
Pursuant to õ 27-1-221(1), MCA, punitive damages are available where a
defendant is found guilty of actual fraud or actual malice. Accordingly, for the
issue of
punitve damages to reach the jury, Mattingly must present evidence of actual fraud or
malice.
CONCLUSION
In conclusion, we hold that the District Court erred in granting First Bank's
motion
for summary judgment and in making findings as a matter of law when a jury may well
have reached a different conclusion. Specifically, we hold the District Court
erred in
finding that First Bank made no representation to Mattingly upon which he might rely
to
his detriment. We also hold the District Court erred in finding no special
circumstances
giving rise to a duty on the part of First Bank to disclose any information it may
have had
regarding the contamination to Mattingly. Finally, we hold the court erred in
finding that
First Bank gained no advantage by failing to disclose the presence of contamination
and
erred in granting First Bank's motion for summary judgment on the issue of punitive
damages.
On these bases, we reverse the order of the District Court granting First Bank's
motion for summary judgment and remand the case for further proceedings consistent
with this opinion.

/S/ JIM REGNIER

We Concur:

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/S/ J. A. TURNAGE
/S/ W. WILLIAM LEAPHART
/S/ WILLIAM E. HUNT, SR.
/S/ TERRY N. TRIEWEILER
/S/ DOUGLAS G. HARKIN,
District Judge sitting for Justice James C. Nelson

Justice Karla M. Gray, concurring in part and dissenting in part.

I concur in the Court's opinion on issue one and agree that Mattingly must be
permitted to proceed with his negligent misrepresentation claim against First Bank.
I
respectfully dissent, however, from that opinion on issue two, whether he may proceed
on his constructive fraud claim. As a result, I also dissent from issues three and
four,
which need not be reached under a proper resolution of issue two. I would conclude
that,
because no underlying duty has been established on which the constructive fraud claim
can rest, the District Court did not err in granting First Bank's motion for summary
judgment on that claim.
As the Court points out, the existence of a legal duty is a question of law for
the
district court's determination. Moreover, the statute at issue, õ 28-2-406(1), MCA,
clearly requires a foundational duty in a constructive fraud claim, by defining
constructive
fraud as "any breach of duty which, without an actually fraudulent intent, gains an
advantage to the person in fault or anyone claiming under him by misleading another
to
his prejudice. . . ." (Emphasis added.) Simply and plainly, the statute requires an
existing duty, the breach of which accomplishes an advantage to one by means of
misleading another to the second person's prejudice. In other words, the result and
means of breaching the duty remain secondary to the existence of the duty.
The Court's "special circumstances" analysis essentially voids the duty
requirement
of the statutory constructive fraud claim by substituting the result and means of
breaching
the duty for the necessity of an underlying duty which can be breached. In other
words,
the Court determines that genuine issues of material fact exist in that First Bank
may have
gained an advantage over Mattingly by misleading him to his prejudice. It is my view
that, under a straightforward interpretation of the plain words of the statute, the
questions
of whether First Bank "gain[ed] an advantage . . . over [Mattingly] by misleading him
to his prejudice" are factual questions relating to a "breach." Because there can
be no
"breach" without an underlying duty, these matters arise only if, and when, the
underlying duty required by the statute has been established as a matter of law. The
existence of that duty, as the Court agrees, is a question of law for the district
court.

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 96-678

"In the construction of a statute, the office of the judge is simply to
ascertain and
declare what is in terms or in substance contained therein, not . . . to omit what
has been
inserted." Section 1-2-101, MCA. I submit that calling the breach-related elements
of
the statutory constructive fraud claim "special circumstances" effectuates a
judicial repeal
of the duty requirement enacted by the legislature.
For the same reasons, it is my view that Drilcon, Inc. was an erroneous
interpretation of the plain meaning of õ 28-2-406(1), MCA. I would overrule that
case
and hold, with regard to issue two in this case, that the District Court did not err
in
granting First Bank's motion for summary judgment on the basis that no duty existed
on
which to premise a statutory constructive fraud claim.

/S/ KARLA M. GRAY

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