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No. 00-749
IN THE SUPREME COURT OF THE STATE OF MONTANA
2001 MT 314
MOUNTAIN WEST FARM BUREAU
MUTUAL INSURANCE COMPANY,
Plaintiff,
v.
WALLACE HALL, GLENN HALL and KELTZ HALL,
Defendants,
v.
MARTIN KILMER and CAROLYN KILMER,
Defendants and Appellants,
v.
MEDCENTER ONE, INC.,
Defendant and Respondent.
APPEAL FROM: District Court of the Seventh Judicial District,
In and for the County of Richland,
The Honorable Richard G. Phillips, Judge presiding.
COUNSEL OF RECORD:
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For Appellants:
Gene R. Jarussi (argued), Jarussi & Bishop, Billings, Montana; Thomas Dickson, Dickson Law Firm,
Bismarck, North Dakota
For Respondents:
Jacque Best (argued), Michael Johnson (argued), Habedank Law Firm, Sidney, Montana; Timothy
Lervick, Rolfson, Schultz, Lervick & Geiermann, Bismarck, North Dakota
For Amicus Curiae:
Katharine S. Donnelley, Brand Boyar, Browning, Kaleczyc, Berry & Hoven, Helena, Montana
(Association of Montana Health Care Providers)
Heard: June 19, 2001
Submitted: June 19, 2001
Decided: December 31, 2001
Filed:
__________________________________________
Clerk
Justice Patricia O. Cotter delivered the Opinion of the Court.
¶1 Martin and Carolyn Kilmer (Kilmers) appeal from an order issued by the Seventh
Judicial District Court, Richland County, granting Medcenter One, Inc.'s (Medcenter)
motion for partial summary judgment. The District Court's order precluded Kilmers from
recovering Medcenter's alleged pro rata share of attorney fees from a settlement fund
subject to Medcenter's lien. We reverse and remand.
¶2 We restate the sole issue on appeal as follows:
Does our opinion in Sisters of Charity v. Nichols preclude application of the
common fund doctrine to the case at bar?
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FACTUAL AND PROCEDURAL BACKGROUND
¶3 On April 1, 1999, Martin Kilmer was a passenger in a vehicle driven by Keltz Hall on a
North Dakota highway. Hall lost control of the vehicle and Martin suffered severe injuries
as a result of the single vehicle accident. Martin received medical attention from
Medcenter, a North Dakota hospital. Despite Medcenter's efforts, Martin's injuries
rendered him a quadriplegic. Medcenter perfected a hospital lien in North Dakota and
Montana for the value of its services, approximately $309,000.
¶4 Hall possessed no vehicle, homeowners', or farm and ranch insurance coverage.
However, Hall's father Wallace, co-owner of the vehicle Hall was operating, did have a
motor vehicle insurance policy through Mountain West Farm Bureau (Mountain West).
This policy had a maximum limit of $500,000 with an additional $30,000 in no-fault
coverage. The policy contained a step-down provision which limited Mountain West's
liability to $25,000 per person for passengers other than the named insured or a relative of
the named insured.
¶5 Initially, Mountain West claimed Kilmers were entitled to only $25,000 under
Wallace's policy pursuant to the step-down provision. However, after negotiating with
Kilmers' attorney, Mountain West agreed to proffer the policy limits of $530,000. On
October 29, 1999, Mountain West filed a complaint for interpleader naming the above
captioned parties and subsequently tendered $530,000 to the District Court. Medcenter
cross-claimed against Kilmers seeking satisfaction of its lien. Kilmers cross-claimed
against Medcenter seeking reduction in Medcenter's recovery for a pro rata portion of their
attorney fees incurred in negotiating Mountain West's $530,000 tender. Upon stipulation
of the parties, the District Court subsequently dismissed Defendants Wallace Hall, Glenna
Hall, and Keltz Hall from the action.
¶6 On December 29, 1999, Medcenter moved for partial summary judgment, arguing it
was not liable for a pro rata portion of Kilmers' attorney fees. Following a June 13, 2000,
hearing, the District Court concluded that the facts existing herein are indistinguishable
from those in Sisters of Charity v. Nichols (1971), 157 Mont. 106, 483 P.2d 279.
Concluding that Nichols is still controlling law in Montana, the District Court granted
Medcenter's motion and entered judgment for Medcenter. Kilmers appeal the District
Court's summary judgment ruling.
STANDARD OF REVIEW
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¶7 Our standard of review in appeals from summary judgment rulings is de novo. Motarie
v. Northern Mont. Joint Refuse Disposal Dist. (1995), 274 Mont. 239, 242, 907 P.2d 154,
156. We review a district court's summary judgment to determine whether it was correctly
decided pursuant to Rule 56, M.R.Civ.P., which provides that summary judgment is
appropriate only when there is no genuine issue of material fact, and the moving party is
entitled to judgment as a matter of law. See Motarie, 274 Mont. at 242, 907 P.2d at 156.
¶8 Here, the parties do not present disputed factual issues on appeal. Thus, our role is to
determine, as did the District Court, whether Medcenter is entitled to judgment as a matter
of law. In essence, we need only determine whether the District Court's conclusion
regarding the applicability of this Court's case law is correct.
DISCUSSION
¶9 Does our opinion in Sisters of Charity v. Nichols preclude application of the
common fund doctrine to the case at bar?
¶10 Section 71-3-1114(1)(b), MCA (1999), provides that a hospital has a lien for the value
of services rendered on:
(i) any claim or cause of action that the injured person or the injured person's estate
or successors may have for injury, disease, or death;
(ii) any judgment that the injured person or the estate or successors may obtain for
injury, disease, or death; and
(iii) all money paid in satisfaction of the judgment or in settlement of the claim or
cause of action.
Both parties agree that pursuant to § 71-3-1114(1)(b), MCA (1999), Medcenter has
a valid lien for the medical services rendered to Martin Kilmer immediately
following his accident. However, § 71-3-1114, MCA (1999), is silent on the issue of
attorney fee apportionment.
¶11 In the 2001 session, the Montana Legislature amended § 71-3-1114, MCA, to address
a hospital's pro rata liability for an injured person's attorney fees. Section 71-3-1114(3),
MCA, now states:
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A . . . hospital . . . claiming a lien under this part is not liable for attorney fees and
costs incurred by the injured person, the injured person's estate or successors, or a
beneficiary in connection with obtaining payments or benefits subject to a lien under
this part.
The statute contains no express retroactive application provision.
¶12 Pursuant to § 1-2-201, MCA, every statute adopted after January 1, 1981, takes effect
on the first day of October following its passage and approval unless the enacting
legislation prescribes otherwise. As § 71-3-1114, MCA (2001), contains no express
effective date prescription, both parties agree it has an October 1, 2001, effective date.
Further, no Montana law is retroactive unless the statute expressly so declares. Section 1-2-
109, MCA. Since § 71-3-1114, MCA (2001), contains no retroactive provision and all of
the relevant events pertaining to Kilmers' claim occurred prior to October 1, 2001, § 71-3-
1114, MCA (1999), applies to the case at bar. However, as previously stated, § 71-3-1114,
MCA (1999), contains no attorney fee apportionment provision.
¶13 Montana follows the general American rule that a party in a civil action is not entitled
to attorney fees absent a specific contractual or statutory provision. School Trust v. State
ex rel. Bd. of Com'rs, 1999 MT 263, ¶ 62, 296 Mont. 402, ¶ 62, 989 P.2d 800, ¶ 62.
However, we have recognized equitable exceptions to the American rule. See, e.g., Foy v.
Anderson (1978), 176 Mont. 507, 511, 580 P.2d 114, 117, and Holmstrom Land Co. v.
Hunter (1979), 182 Mont. 43, 48-49, 595 P.2d 360, 363 (affirming award of attorney fees
on equitable grounds despite absence of specific contractual or statutory grant); Goodover
v. Lindey's, Inc. (1992), 255 Mont. 430, 447, 843 P.2d 765, 775 (recognizing limited
equitable exception to general rule when party is "forced into a frivolous lawsuit").
¶14 One of the recognized equitable exceptions to the American rule is the common fund
doctrine. Generally, this doctrine authorizes the spread of fees among those individuals
benefitting from the litigation which created the common fund. See Morris B. Chapman &
Assocs., LTD. v. Kitzman (Ill. 2000), 739 N.E.2d 1263, 1271. In Means v. Montana Power
Co. (1981), 191 Mont. 395, 403, 625 P.2d 32, 37, this Court adopted the common fund
doctrine, concluding:
The "common fund" concept provides that when a party through active litigation
creates, reserves or increases a fund, others sharing in the fund must bear a portion
of the litigation costs including reasonable attorney fees. The doctrine is employed
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to spread the cost of litigation among all beneficiaries so that the active beneficiary
is not forced to bear the burden alone and the "stranger" (i.e., passive) beneficiaries
do not receive their benefits at no cost to themselves.
The doctrine entitles the party who created the fund to reimbursement of his or her
reasonable attorney fees from the common fund. Murer v. State Comp. Mut. Ins. Fund
(1997), 283 Mont. 210, 223, 942 P.2d 69, 76. Our decisions in Means and Murer outline
the three elements necessary to establish a common fund.
¶15 First, one party must create, reserve, or increase a common fund. This party is
typically referred to as the active beneficiary. The fund must be an existing, identifiable
monetary fund or benefit to which all of the beneficiaries maintain an interest.
¶16 Second, the active beneficiary must incur legal fees in establishing the common fund.
Medcenter insists the active beneficiary must initiate "active litigation" to satisfy this
element. Since Kilmers did not bring suit against Mountain West to establish the fund,
Medcenter argues Kilmers failed to satisfy the active litigation requirement.
¶17 Medcenter derived this active litigation language from our decisions in Means and
Murer. However, in Murer, the language preceding the "active litigation" reference
appears to dispel Medcenter's argument. We stated:
The United States Supreme Court created the common fund doctrine in Trustees v.
Greenough (1881), 105 U.S. 527, 15 Otto 527, 26 L.Ed. 1157, and has subsequently
applied that doctrine in numerous other cases (citations omitted). These common
fund doctrine cases provide that when a party has an interest in a fund in common
with others and incurs legal fees in order to establish, preserve, increase, or collect
that fund, then that party is entitled to reimbursement of his or her reasonable
attorney fees from the proceeds of the fund itself.
Murer, 283 Mont. at 222, 942 P.2d at 76. The cases cited in Murer merely illustrate the
need to incur legal fees in pursuit of the common fund rather than engage in "active
litigation." In Means and Murer, the active litigation was simply the expense-incurring
mechanism employed by the parties to establish the common fund.
¶18 Third, and finally, the common fund must benefit ascertainable, non-participating
beneficiaries. In Means, we referred to non-participating beneficiaries as inactive or
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passive beneficiaries and defined them as those who fail to retain counsel, or those who
retain counsel who fails to participate in the labors creating the common fund. Means, 191
Mont. at 404, 625 P.2d at 37. Further, to the extent there are inequities in contribution of
participating counsel, the court may intervene to allocate fees accordingly. See Means, 191
Mont. at 404, 625 P.2d at 37.
¶19 Nevertheless, Medcenter argues, and the District Court agreed, that our decision in
Nichols precludes application of the common fund doctrine to the case at bar. In Nichols,
the defendant (Nichols) incurred approximately $2000 in medical expenses after being hit
by an automobile. Nichols hired an attorney who filed a personal injury claim against the
driver and negotiated a settlement for $5000. Meanwhile, the hospital perfected a lien for
the medical services it provided to Nichols. Nichols' attorney attempted to deduct one-
third of the hospital's $2000 lien, claiming the hospital was liable for a pro rata portion of
Nichols' attorney fees incurred in procuring the settlement. Nichols sought to remit the
remaining two-thirds to the hospital in full satisfaction of the hospital's lien. The hospital
filed suit seeking, among other things, judgment against Nichols for the full amount of the
hospital bill. The district court entered judgment for the hospital.
¶20 On appeal, Nichols proffered two theories in support of her attorney fee
apportionment position. First, Nichols claimed that an implied contract existed between
the hospital and her attorneys for their services and compensation. This Court dismissed
the implied contract argument, stating:
The fact that an incidental benefit was also received by the hospital from her
attorneys' services in the form of settlement proceeds from which its bill could be
paid does not, in itself, create an implied contract by the hospital to pay her
attorneys for their services.
Nichols, 157 Mont. at 111-12, 483 P.2d at 283. Second, Nichols argued the hospital was
obligated to pay a pro rata share of the attorney fees much like a subrogated insurer is
obligated to share attorney fees and costs with its insured in recovering against a third
party. We rejected this subrogation analogy based on the inherently different positions
occupied by a subrogated insurance company and a hospital lien holder. We stated:
The obligation of the subrogated insurer to share in the costs of recovery from a
third party wrongdoer arises because the insurer occupies the position of the insured
with coextensive rights and liabilities and no creditor-debtor relationship between
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them. But here, unlike that situation, the hospital's claim and lien is based upon a
debt owed the hospital by its patient in whose shoes it does not stand for any
purpose, the debt being owed to it by its patient irrespective of the patient's rights
against a third party wrongdoer. Because the substitution principle does not apply
here, no obligation arises on the part of the hospital to share in the costs of recovery
against a third party, and the attempted analogy fails.
Nichols, 157 Mont. at 112-13, 483 P.2d at 283. Therefore, we affirmed the district court's
judgment in favor of the hospital.
¶21 Here, Medcenter analogizes Kilmers' common fund argument to those arguments
posited in Nichols. Medcenter insists Nichols is dispositive to the case at bar. However, in
Nichols, this Court addressed only those implied contract and subrogation issues advanced
by the parties. As neither party raised the common fund issue in Nichols, this Court had no
reason to, and did not, analyze the issues in Nichols in the context of the common fund
doctrine. Kilmers acknowledge that Nichols would bar an apportionment claim brought on
an implied contract or subrogation theory. However, Kilmers insist the common fund
doctrine presents entirely different legal issues. We agree. Therefore, we hold that Nichols
does not preclude application of the common fund doctrine to the case at bar.
¶22 Finally, at oral argument, Medcenter argued that the legislative hearings held in
contemplation of § 71-3-1114, MCA (2001), evince a clear legislative intent to prohibit
our application of the common fund doctrine to the medical services arena. Medcenter
suggests that we should impute the 2001 legislative intent to § 71-3-1114, MCA (1999).
To support this proposition Medcenter cites Fergus Motor Co. v. Sorenson (1925), 73
Mont. 122, 235 P. 422.
¶23 In Fergus, this Court stated:
If it can be gathered from a subsequent statute in pari materia what meaning the
Legislature attached to the words of a former statute, they will amount to a
legislative declaration of its meaning, and will govern the construction of the first
statute.
Fergus, 73 Mont. at 132, 235 P. at 425. Historically, in pari materia statutes were statutes
consistent with one another that referred to the same subject matter. See In re Clark's
Estate (1937), 105 Mont. 401, 409, 74 P.2d 401, 405. Statutes in pari materia should be
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construed together and effect given to both if it is possible to do so. Register Life Ins. Co.
v. Kenniston (1935), 99 Mont. 191, 197, 43 P.2d 251, 254. Presumably, Medcenter
believes the 2001 and 1999 statutes are consistent with one another. We disagree.
¶24 The two statutes do address the same subject matter and are consistent with one
another except for one provision-the attorney fee provision at issue here. The legislative
intent embodied in the 2001 statute fails to inform us of the "meaning the Legislature
attached to the words of [the] former statute," because the 1999 statute does not address
attorney fee apportionment. The statutes are not consistent with regard to a medical
service provider's liability for an injured party's attorney fees. Therefore, Medcenter's in
pari materia argument is without merit.
¶25 For the foregoing reasons, we hold that the District Court erred as a matter of law in
relying on Nichols to grant Medcenter's motion for partial summary judgment. As the
issue on appeal focused primarily on Nichols' application to this case, the parties did not
present arguments on whether Kilmers can satisfy those elements of the common fund
doctrine discussed herein. Therefore, we decline to rule on the doctrine's application to the
case at bar as the dissent suggests we should. Instead, and as requested by Kilmers, we
reverse and remand to allow Kilmers to present arguments in the District Court for the
application of the common fund doctrine in this case.
/S/ PATRICIA COTTER
We Concur:
/S/ KARLA M. GRAY
/S/ JAMES C. NELSON
/S/ JIM REGNIER
/S/ TERRY N. TRIEWEILER
/S/ W. WILLIAM LEAPHART
Justice Jim Rice, dissenting.
¶26 I respectfully dissent from the Court's decision in this matter, believing it to be an
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inadequate response to the issue presented.
¶27 The Appellants raise the issue of whether equities require application of the common
fund doctrine to a hospital lien holder. The Court, however, chooses to address only the
question of whether the holding in Nichols precludes application of the common fund
doctrine. Finding it does not, the Court, rather than resolving the issue raised on appeal,
remands the case to the District Court for another try.
¶28 I do not disagree with the Court's conclusion that Nichols, by itself, does not preclude
application of the common fund doctrine. Nichols predates Means, and the doctrine was
neither argued nor discussed therein. However, the Court further holds that Nichols is
wholly irrelevant to further consideration of the issue, and cannot be relied on as authority.
The Court states:
Kilmers insist the common fund doctrine presents entirely different legal issues. We
agree. Therefore, we hold that Nichols does not preclude application of the common
fund doctrine to the case at bar.
....
For the foregoing reasons, we hold that the District Court erred as a matter of law
in relying on Nichols to grant Medcenter's motion for partial summary judgment.
As requested by Kilmers, we reverse and remand to allow Kilmers to present
arguments in the District Court for the application of the common fund doctrine in
this case.
¶¶ 21, 25 (emphasis added).
¶29 The Court errs in holding that Nichols is irrelevant. Contrary to the Court's statement,
the common fund doctrine does not present entirely different issues. The Court cites to
both Means and Murer for authority, but fails to discuss the entirety of those holdings. In
both cases, this Court held that the common fund doctrine is "rooted in the equitable
concept[ ] of quasi-contract . . ." Murer, 283 Mont. at 222, 942 P.2d at 76. Contract
principles are thus an indispensable consideration in determining the applicability of the
common fund doctrine -just as they were in Nichols, where this Court found that there was
no implied contract which compelled sharing of attorneys' fees. Nichols, while not
necessarily controlling, is nonetheless analogical authority. However, the Court, by
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(1)
erasing Nichols , removes our case law's most significant discussion of contract
principles related to the attorney-hospital conflict at issue here.
¶30 It is this Court's duty to determine the parameters of the common fund doctrine when
asserted against a statutory hospital lien. It should do so, either expanding the rule of
Nichols, or distinguishing Nichols, in accordance with its determination. Here, the Court
removes one piece from the puzzle box, and then sends the puzzle to the District Court to
put together. Because all facts relevant to the issue are of record, and nothing is to be
gained by remanding the case back to the District Court for a second try, I would decide
the issue raised by Appellants.
¶31 In response to this dissent, the Court offers that the parties did not present arguments
regarding the common fund doctrine. That is not correct. The solitary issue presented in
Kilmers' brief was whether the doctrine applied. Their summary of argument stated as
follows:
It is Kilmers' position that the underlying facts make the present case an appropriate
case to apply the common fund doctrine, spreading the costs of litigation among
those who benefitted from it. In addition, it is Kilmers' position that Nichols is not
applicable in the present case because it is legally and factually distinguishable.
Further, the relief requested in their brief's conclusion was for this Court to find that the
common fund doctrine was applicable, and to vacate the judgment in favor of MedCenter.
Kilmers then asked that the matter be remanded only for the trial court to calculate
MedCenter's pro rata share of fees and costs. In response to Kilmers' presentation of this
issue, MedCenter's brief argued against application of the doctrine for some 16 pages in its
brief. I would reach the merits of the issue raised.
/S/ JIM RICE
1. The Court does not state that Nichols is overruled, only that Nichols cannot be relied upon when the
common fund doctrine is asserted.
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