Merchants Fire Assur. Corp. v. Watson , 104 Mont. 1 ( 1937 )

I dissent from the opinion prepared by Justice Morris and concurred in by Justices Stewart and Anderson. I concur in the dissenting opinion of Justice Angstman and extend my objections to the majority opinion upon the further grounds, as follows:

This is an action in which the plaintiff first sued to recover upon six promissory notes given as the premium payment on six policies of hail insurance upon the crops then growing on six quarter-sections of land in Fergus county. The defendant answered admitting the execution of the notes but interposed a counterclaim on the six policies for damages from hail on all six of the quarter-sections described. After the case was set down for trial the parties negotiated for settlement and as a result of such negotiations the plaintiff, by a supplemental complaint, alleged that the controversy was settled by such agreement by the defendant waiving all claim for hail loss and his agreement to immediately pay the notes in full, with attorneys' fees and costs, but that the defendant after consummating the agreement (claimed to be an accord) then refused to satisfy the claim as agreed to under such accord. The original controversy therefore rested upon the promissory notes. The accord issue later injected rested upon the question of whether an agreement of the defendant to pay the notes was made under the negotiations mentioned. There were, therefore, two issues for the recovery of one original debt, — the suit on the notes and the issue on the accord.

The important feature of the case rests upon the manner of trial. The law provides that the payment of hail insurance premium notes may be protected by a lien upon the crops issued, consisting of a notice filed with the county clerk by the insurance company. The plaintiff sought to enforce this lien in the suit and claimed that thereby the action assumed an equitable character, and therefore it was an equity action, and because of its equitable character a jury could be requested by either party, but granted by the trial court, or refused, as it might elect. The defendant, whom we will hereafter designate as "the farmer" to more clearly identify him, demanded a jury, but such demand was refused by the trial court. This refusal constituted a legal error, in my opinion, and raises an issue the principle of which is of very great importance not in this case alone but in the general practice of courts in this state.

In the earliest days of the English people from whom we derive our fundamental principles of law, a jury consisted of the neighbors of the parties in court. The more they knew of the matters in issue the better. The procedure gradually changed, until today jurymen uninformed as to the facts are the only competent jurymen. The rigors of law courts and the frequent injustice of the technicalities and fine distinctions made in law courts, together with the inability of law courts frequently to completely administer justice, resulted in the establishment of courts of equity. The distinction between equity courts and law courts is frequently very difficult and technical. In adopting our federal Constitution 150 years ago the difference between equity courts and law courts was recognized and kept distinct (Art. III, sec. 2, Fed. Const.), and remains so distinct to this day, although, as said before, it is often very difficult to determine whether a suit is one in law or in equity. However, when the Montana Constitution was adopted, 100 years later, our section 28 of Article VIII used this definite language: "There shall be but one form of civil action and law and equity may be administered in the same action." In section 23 of Article III of the state Constitution we find: "The right of trial by jury shall be secured to all and remain inviolate, but in all civil cases and in all criminal cases not amounting to felony, on default of appearance or by consent of the parties expressed in such manner as the law may prescribe a trial by jury may be waived." It would seem to every reasonable citizen, therefore, that the right of trial by jury has been preserved in all cases, whether in law or in equity, where a question of fact is in issue in a case. By other provisions in the Constitution all questions of law are reserved to the judge, and the jury must conform to his directions concerning the law involved in that particular case.

In this case the plaintiff, a corporation organized under the laws of New York, insisted that the foreclosure of the hail lien constituted an action in equity and, therefore, it was an action commenced in equity and must be so continued and be tried according to the rules of procedure in equity cases; that is to say, by the court without a jury. Notwithstanding the further fact that this corporation plaintiff claimed under an accord and satisfaction, which all agree is a law action, the court exercising its prerogative, decided that the cause was commenced in equity and it was not bound to grant a jury trial, and it declined to impanel a jury to try this case. The court's decision in this respect is in direct conflict with the case ofBenson-Stabeck Co. v. Farmers', etc., 66 Mont. 395, 214 P. 600, cited in the able dissenting opinion of Mr. Justice Angstman herein. In other words, the court held that where there are both equity and law principles involved, the equity principle should not determine the character of the action — particularly not where the equitable feature was comparatively insignificant — so far as to authorize trial without a jury. I insist that the distinction between equity and law having been abrogated by the Constitution in the two sections above quoted, that instrument thereby provided for a jury in all cases where a question offact is in issue; this case, being one of fact, it must be tried by a jury if demanded. This principle is of very far reaching importance. As said before, the federal courts hold that in every equity case tried in federal courts it is optional with the court to grant a jury when demanded. I do not find any fault with that holding of law by the federal courts under the federal Constitution. I do claim, however, that the two provisions mentioned in our Constitution completely reverse the situation as to the courts of Montana.

This case emphasizes the important difference in viewpoint of the majority and the minority of this court. All of the controverted issues in this case are questions of fact. The equitable features of the lien of the hail insurance company involve no controversy. The farmer claims that while the insurance policies were in effect a hail-storm destroyed his crops to the extent of from 35 to 50 per cent. He was supported in that estimate by the testimony of several of his neighbors, some of whom were also insured and who sustained hail losses from the same storm. The farmer testified that the adjuster who came to view this farmer's losses admitted that on some of the quarter-sections there was at least a 50 per cent. loss. This admission, however, was denied by the adjuster. The farmer testified that he talked of settlement of the case and the payment of the notes but proposed to reserve his counterclaim, that is, the right to later sue on the policies for his losses. This also was denied by the company. This question of reserved right to sue on the counterclaim was decided by the court in favor of the company, notwithstanding the farmer was to get nothing for signing away his right to sue for losses. The amount of the loss was not determined by the court; it held it was all settled by the accord. From a careful reading of the testimony it seems to me very probable that a jury would have reached a very different conclusion from that reached by the judge. However, my argument is not directed to the question whether the judge was right or wrong in his findings of fact, but instead, whether he had the authority to determine these facts in the face of a demand for a jury.

In this day we hear much complaint about the usurpation of authority by courts. This instance illustrates very forcibly one class of cases, and a very numerous class; it is where courts have in my opinion very unjustly and unlawfully enlarged their authority. Moreover, as I said before, the distinction between law and equity is very difficult and courts have, by construing the doubt in favor of equity procedure, enlarged the number and class to a very unreasonable extent of cases in which they may deny a jury. Moreover, modern legislatures by providing for many involuntary liens, as in this instance, have unwittingly encouraged courts to enlarge the scope of equitable procedure, and thereby in many cases unintentionally authorized (under present court holdings) the denial of jury trials in very many cases with the prospect of much growth in that direction.

I believe the error of the continued distinction between law and equity courts arose from the early practice of the federal courts in this Territory, and the failure of our supreme court to appreciate the later effort of the progressive thinking men who prepared our state Constitution, in an effort to set aside this ancient distinction by our above-quoted constitutional provision (sec. 23, Art. VIII) in uniting the two procedures — law and equity — and by the further error of predominating the equity provisions over the law provision, and thereby encouraging in effect the making of a rule that "where there are both equity and law questions involved, the judge has the option to allow or deny a trial by jury." If this construction was again to be considered by an impartial modern court, I feel confident the modern interpretation would set aside the precedent of forty years ago and now follow the clear and fair intent of our Constitution makers in eradicating the distinction between law actions and equity actions. A proceeding involving procedure of our district courts established forty years ago, if clearly wrong, should not be longer recognized, and I appeal to the lawyers, jurists and the thinking public of the state to give this matter careful consideration and see if now is not the proper time to override the precedent that practically displaces our jury system in favor of a usurped and unwarranted court dominance. Definitely stated, I propose that in all cases where issues of both law and equity are presented in the same case, the issue of facts in the law division must, if demanded by either party, be tried by a jury, and the issues of fact in the equity division should also be tried by a jury unless good cause appears for refusal. This restriction on the power of courts will be vigorously opposed in some quarters, and in particular by corporations, especially foreign corporations. They avoid jury trials whenever possible. They take great interest in the selection of judges and rely greatly upon their decisions, which is in itself a strong reason for restricting the power of courts.

As said before, these usurped powers of courts in limiting the right to jury trials are subject to amendment by the courts themselves without further legislation, but the state legislature is not without power to act in the matter. Congress may make only such laws as are directly or impliedly authorized by the federal Constitution; on the contrary, our state legislature may make any laws not prohibited by our state Constitution. Certainly, there is no state constitutional prohibition against defining when jury trials may be demanded. A legislative Act requiring jury trials in cases as above defined would be very salutary and effective. It would not deprive any litigant of any present right or of any property. It would only modify court procedure.

I repeat my dissent to the majority decision for the reasons stated and invite the legislature to investigate this proposed reform of court procedure.