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Associated Dermatology & Skin Cancer Clinic of Helena, P.C. v. Fitte

Supreme Court of Montana

December 28, 2016

ASSOCIATED DERMATOLOGY AND SKIN CANCER CLINIC OF HELENA, P.C. PROFIT SHARING PLAN AND TRUST FOR THE BENEFIT OF STEPHEN D. BEHLMER, M.D., Plaintiff and Appellant,
v.
ROBERT S. FITTE, Defendant and Appellee. KEVIN DETIENNE AS PERSONAL REPRESENTATIVE OF THE ESTATE OF VIBEKE B. DETIENNE, KEVIN DETIENNE AS TRUSTEE OF THE VIBEKE DETIENNE LIVING TRUST, AND KEVIN DETIENNE, INDIVIDUALLY, Plaintiffs and Appellants,
v.
ROBERT S. FITTE, Defendant. MOUNTAIN WEST FARM BUREAU MUTUAL INSURANCE COMPANY, Joined Party.

          Submitted on Briefs: October 12, 2016

         District Court of the First Judicial District, In and For the County of Lewis and Clark, Cause No. DDV-2013-690 Honorable Mike Menahan, Presiding Judge

          For Appellants: Erik B. Thueson, Thueson Law Office, Helena, Montana

          Scott L. Peterson, Morrison, Sherwood, Wilson & Deola, PLLP, Helena, Montana (Attorneys for Associated Dermatology)

          Thomas A. Budewitz, Attorney at Law, Townsend, Montana (Attorney for Kevin DeTienne)

          For Appellee: Curt Drake, Patricia H. Klanke, Drake Law Firm, P.C., Helena, Montana (Attorneys for Robert S. Fitte)

          Randall G. Nelson, Jared S. Dahle, Nelson & Dahle, P.C., Billings,

          Martha Sheehy, Sheehy Law Firm, Billings, Montana (Attorneys for Joined Party Mountain West Farm Bureau)

          OPINION

          Laurie McKinnon, Justice

         ¶1 This is an appeal from an order granting summary judgment in favor of Appellee Robert S. Fitte (Fitte) and Joined Party Mountain West Farm Bureau Mutual Insurance Company (Mountain West). Appellants Associated Dermatology and Skin Cancer Clinic of Helena, P.C. Profit Sharing and Trust Benefit of Stephen D. Behlmer, M.D. (Behlmer) and Kevin DeTienne as Personal Representative of the Estate of Vibeke B. DeTienne, Kevin DeTienne as Trustee of Vibeke B. DeTienne Living Trust, and Kevin DeTienne, Individually (DeTienne) attempted to execute judgments obtained against Fitte in their respective underlying lawsuits by attaching the proceeds of a commercial liability policy issued to Fitte by Mountain West. Mountain West moved to deposit the proceeds of the commercial policy into an existing interpleader action following a determination in a separate declaratory proceeding in federal court that the commercial policy covered Fitte's actions. The underlying proceedings filed by Behlmer and DeTienne against Fitte were consolidated and the District Court considered the question of whether Behlmer and DeTienne were entitled to execute judgments secured outside the pending interpleader action and attach the proceeds of the commercial policy. The District Court granted summary judgment in favor of Fitte and Mountain West, discharged the writs of execution against Fitte and Mountain West, and stayed their execution until the interpleader court could apportion the funds. We affirm.

         ¶2 We restate the dispositive issues as follows:

1. Whether the District Court correctly concluded that the proceeds from the commercial policy must be distributed through the interpleader.
2. Whether deposit of funds is required to establish the interpleader court's jurisdiction under M. R. Civ. P. 22.

         FACTUAL AND PROCEDURAL BACKGROUND

         ¶3 Fitte, an insured of Mountain West, was burning trees damaged by beetle kill near his driveway on June 23, 2012. Fitte was concerned the trees would fall and damage his vehicles, including the truck Fitte used for his residential remodeling business operated from his home. The fire got out of control and burned a substantial area of the Scratch Gravel Hills near Helena, Montana, affecting approximately thirty-five of Fitte's neighbors. Many properties and vehicles were damaged or destroyed by what has become known as the Corral Fire.

         ¶4 On January 2, 2013, Behlmer filed a complaint against Fitte for damages to its property. On January 31, 2013, DeTienne filed its complaint against Fitte.[1] Fitte had three insurance policies with Mountain West: a personal liability policy with a limit of $300, 000; a commercial general liability policy covering Fitte's business with a limit of $1, 000, 000; and an automobile liability policy with a limit of $500, 000.[2] Mountain West accepted coverage under the personal policy, but disputed coverage under the commercial policy and maintained that Fitte was not engaged in the business of siding or contracting at the time of the fire. On February 25, 2013, Mountain West filed a declaratory action in federal court to resolve the coverage issue.

         ¶5 Realizing the extent of damage and the potential number of claimants affected, on March 25, 2013, Mountain West filed an interpleader action in the First Judicial District Court. Not wishing to require each claimant to pay an appearance fee or retain counsel, particularly since informal resolution of claims remained a possibility, Mountain West named Fitte as the nominal defendant. On May 31, 2013, Mountain West moved to deposit the $300, 000 personal liability limit with the interpleader court. However, Mountain West explained in its motion that depositing the commercial policy proceeds of $1, 000, 000 with the interpleader court would require it to give up its right to litigate the coverage issue in federal court. Mountain West maintained that depositing the policy limits in the state interpleader court would deprive the federal court of jurisdiction over the res as the funds were the subject matter and substance of the dispute in federal court. Nonetheless, Mountain West represented that "[c]ertainly, if a court of last resort adjudicated the business policy as applicable to the Fitte loss, then Mountain West would deposit the funds in [the interpleader] action (if the parties were unable to reach agreement as to apportionment of the funds), but it cannot be asked or expected to do so until an adverse final judgment were entered in the federal court." DeTienne intervened in the interpleader action and argued that Mountain West named the wrong party and should have named each of the claimants. DeTienne consented, however, to deposit of the $300, 000 in the interpleader on condition that the deposit would not be construed as a release of Mountain West from its potential liability under all the policies. The court ordered that the $300, 000 be deposited in the interpleader action; that Mountain West "shall not dispense the funds without further notice to all landowners, who shall be given an opportunity to be heard and/or appear;" and that all parties' rights and claims "shall be fully preserved, unaffected, and not prejudiced by the deposit of the funds."

         ¶6 Meanwhile, Behlmer, DeTienne and Fitte had been negotiating regarding the underlying lawsuits. Fitte admitted liability in both proceedings and, with respect to Behlmer, stipulated to a judgment which was entered on July 12, 2013. Behlmer and Fitte agreed to arbitrate damages and, in accordance with the arbitration results, the court issued a judgment in favor of Behlmer against Fitte for $500, 000. As part of the arbitration, Behlmer agreed it would satisfy its judgment only through Fitte's insurance and not against Fitte personally. In the DeTienne lawsuit, a confessed judgment against Fitte was entered for $1.9 million on October 16, 2013. DeTienne also agreed not to execute against Fitte personally.

         ¶7 On August 19, 2013, the federal court resolved the coverage dispute and held that the commercial policy covered the fire damage. Thereafter, Behlmer filed a notice of levy and attachment against the proceeds of the commercial policy on September 30, 2013; DeTienne filed a writ of execution against the proceeds of the commercial policy on November 14, 2013. Mountain West moved to deposit the $1, 000, 000 commercial policy limits in the interpleader court and to discharge both attachments filed by Behlmer and DeTienne.

         ¶8 In a consolidation order stipulated to by the parties, the writs of execution were withdrawn and Mountain West's motions to discharge the writs were deemed moot. At the request of the District Court, the parties filed cross-motions for summary judgment on the issue of whether the $1, 000, 000 commercial policy should be apportioned through the interpleader action or should be applied to satisfy the Behlmer and DeTienne judgments apart from the interpleader proceedings. In its order granting summary judgment to Fitte and Mountain West, the District Court reasoned that Mountain West filed its complaint in interpleader prior to Behlmer and DeTienne having secured judgments against Fitte. At the time Behlmer and DeTienne secured their judgments, the interpleader action had been initiated even though the disputed funds of $1, 000, 000 had not been deposited. The District Court recognized that an action for interpleader under Montana's law did not have a deposit requirement and concluded that the date upon which the interpleader action is deemed initiated "can be only the date the action was filed." The District Court determined that the complaint in interpleader, having been filed on March 25, 2013, preceded entry of the Behlmer and DeTienne judgments and that, accordingly, the proceeds belonged to the interpleader court and were neither Fitte's property nor a debt owed to him. The District Court ruled that the insurance funds were not subject to attachment and execution by Behlmer or DeTienne outside of the interpleader action.

         STANDARD OF REVIEW

         ¶9 This Court reviews an order granting summary judgment de novo, applying the same M. R. Civ. P. 56(c) criteria as the district court. Summary judgment is appropriate where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. This Court reviews a district court's conclusions of law de novo. Newbury ...


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