State ex rel. Industrial Indemnity Co. v. District Court of the Fourth Judicial District , 169 Mont. 10 ( 1975 )

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 Compensation Division ordered relator to pay 600 weeks of compensation totalling approximately $28,000.

Under the applicable statute, section 92-204, R.C.M.1947 (repealed Section 2, Ch. 493, Laws 1973), relator is entitled to be “* * * subrogated only to the extent of either one-half (y2) of the gross amount paid at time of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 (y2) 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 92-204, 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 arisees out of a telephone conversation 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 recommend 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 plaintiff’s attorneys requesting execution of settlement forms, compromising 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. Plaintiff’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 subrogation rights.

On January 2, 1975, agreement was reached to place $6,250 (the amount in controversy) in a trust account pending the outcome of the present litigation over the disputed existence of an oral contract and its contents. The amount deposited was arrived at as follows:

(1) Relator’s claimed set-off of the last 200 weeks of compensation or $8,250;

(2) Plaintiff has agreed to the last 50 weeks or $2,000, leaving $6,250 in controversy.

Plaintiff filed a declaratory judgment action in district court, Missoula County, asking construction of the alleged oral contract. Relator moved the court to dismiss, under Rule 12, M.R.Civ.P., as the question is whether or not an oral contract exists and is a denial of relator’s rights to a trial on the merits as to whether or not an oral contract exists. Relator petitions this Court to issue a writ of supervisory control or other appropriate writ to prevent a miscarriage of justice.

The issue presented in this matter is whether a declaratory judgment action is the proper procedure to determine whether or not a contract actually exists.

A declaratory judgment action may be brought to construe a contract under section 93-8902, R.C.M.1947:

“Any person interested under a deed, will, written contract or other writings constituting a contract, or whose rights, status or other legal relations are affected by a statute, municipal ordinance, contract or franchise, may have determined any question of construction or validity arising under the instrument, statute, ordinance, contract, or franchise and obtain a declaration of rights, status or other legal relations thereunder.”

This Court in Carpenter v. Free, 138 Mont. 552, 555, 357 P.2d 882, 883, held the “written contract” language of section 93-8902, does not exclude oral contracts from its operation:

“* * # it is clear that an action for a declaratory judgment can be maintained to obtain a determination of the rights and duties of the respective parties to an oral contract.”

In Mahan v. Hardland, 147 Mont. 78, 410 P.2d 156, this Court found a declaratory judgment action was not the proper means to construe an oral contract if the terms of the contract are not admitted by all parties.

In Mahan the existence of the oral contract was admitted, but the terms of the contract were not. In the instant case, the very existence of the oral contract is in controversy.

The general rule is stated in 26 C.J.S. Declaratory Judgments § 16, p. 81:

“* * # a declaratory judgment proceeding is primarily intended to construe the meaning of a law, and not to determine the existence of controverted facts, and * * * ordinarily a court will refuse a declaratory judgment which can be made only after a judicial investigation of disputed facts, especially where the disputed questions of fact will be the subject of judicial investigation in a regular action.”

In the instant case, the existence of a controversy as to whether or not an oral contract was made renders this action improper for a declaratory judgment.

The district court erred in denying relator’s motion to dismiss the declaratory judgment action and grant a trial on the merits. The dismissal, in effect, is a finding by the district court that an oral contract exists to be construed. Only a fact determination can make such a finding.

Unless a jury trial is waived, the jury, not the judge, is the ultimate trier of fact. If a fact issue exists, Rule 38(a), M.R.Civ.P., specifically reserves the right to trial by jury.

In Mahan, at p. 85, 410 P.2d at p. 159, quoting from Baumgartner v. Schey, 143 Colo. 373, 353 P.2d 375, it states :

«# * * If the action in which declaratory relief is sought would have been an action at law had it been permitted to mature without intervention of declaratory procedure, the right to trial by jury of disputed questions of fact is not affected. * # *”

Relator is entitled to a trial by jury to determine whether or not an oral contract exists.

For the foregoing reasons we hereby grant relator’s petition for a writ of supervisory control and direct the district 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 proceed to a trial on the merits.

MR. JUSTICES JOHN C. HARRISON and CASTLES concur.