National Surety Corp. v. Kruse

National Surety Corporation, plaintiff below, brought action against defendants under sections 9835.1-9835.16, Revised Codes of Montana 1935. The purpose of the action was to procure a declaratory judgment as to plaintiff's rights and obligations under a bond which it had executed as surety for M.L. Barr, a wholesale produce dealer, as such rights might be affected by a certain order of the commissioner of agriculture of the state of Montana (hereinafter designated as the commissioner), relating to a controversy between defendants M.L. Barr and T.B. Reagan over the purchase of apples.

The case was submitted to the district court upon the pleadings and an agreed statement of facts of which the following is a brief summary of those material herein:

Plaintiff as surety and defendant M.L. Barr as principal had executed to the state of Montana a bond, under which Barr was operating as a wholesale dealer in agricultural products under sections 2443.1-2443.16, Revised Codes of 1935. During the term of the bond, defendant Reagan filed a claim with the commissioner alleging that defendant Barr had failed to pay him the sum of $367.75 due him as the purchase price of a quantity of apples which Reagan had sold to him. After due notice, a hearing was held on said complaint before said commissioner, resulting in an order by the commissioner that defendant Barr and plaintiff National Surety Company "shall pay T.B. Reagan $367.75."

Both Reagan's complaint and the findings and order of the commissioner are set forth at length in the record. Thereafter plaintiff instituted this action for a declaratory judgment for the purposes hereinabove indicated. Following the making of findings of fact and conclusions of law, the court rendered a declaratory judgment of which the validity of paragraphs VI and VII, reading as follows, is assailed by the plaintiff on this appeal:

"VI. That to avoid a multiplicity of suits, and there being no dispute as to the facts herein and this court having jurisdiction of all the parties, this court now has jurisdiction to give and make declaratory judgment in favor of the said defendant Reagan and against the said defendant Barr in the sum of $367.75 and interest thereon at the legal rate from and after the 15th day of March 1945.

"VII. That the plaintiff herein, National Surety Corporation, is liable upon its bond to the defendant T.B. Reagan in the amount of $367.75 and interest thereon at the legal rate from and after the 15th day of March, 1945."

Appellant's brief contains no specifications of error and its appeal is from the judgment as a whole. We are therefore compelled to rely solely on the argument of counsel in their briefs for a statement of the errors which they claim.

We think this case would warrant the application of section 9751, Revised Codes of Montana 1935, which provides as follows: "Whenever the record on appeal shall contain a bill of exceptions or statement of the case properly settled, setting forth any order, ruling, or proceeding of the trial court against the respondent, affecting his substantial rights on the appeal of said cause, together with the objection and exception of such respondent properly made, and reserved, settled, and allowed in such bill of exceptions or statement, the supreme court on such appeal shall consider such orders, rulings, or proceedings, and the objections and exceptions thereto, and shall reverse or affirm the cause on said appeal according to the substantial rights of the respective parties, as shown upon the record. And no cause shall be reversed upon appeal by reason of any error committed by the trial court against the appellant, where the record shows that the same result would have been attained had such trial court not committed an error or errors against the respondent."

True, no cross assignment of error was made by respondent, but neither did appellant make any assignment of error. Having excused the lack of assignment by one, the same consideration should be extended to the other.

The controlling question before the court on this appeal is whether the district court had jurisdiction to enter as a part of its judgment paragraphs VI and VII thereof in which it pronounced a declaratory judgment in favor of Reagan and against Barr in the sum of $367.75 and also a declaratory judgment that the plaintiff National Surety Corporation is liable to the defendant Reagan on its bond in said amount.

Validity of paragraphs VI and VII of declaratory judgment. This action was brought for the purpose of having a court determine by declaratory judgment the effect of a certain decision and order made by the commissioner regarding the liability of defendant Barr and his surety, plaintiff herein, for payment for a quantity of apples sold by Reagan to Barr. Examination of the agreed statement will show that no factual question was presented which would give the court the right to determine the question of liability for the price of the apples as between the defendants Barr and Reagan.

The rule in Montana as well as in other jurisdictions, seems[1] to be well settled that a judgment must be based on a verdict or findings of the court and must be within the issues presented to the court. In Morse v. Morse, 116 Mont. 504,154 P.2d 982, 984, this court said: "``There is no principle of law more firmly established than that the judgment must follow and conform to the verdict, decision, or findings in all substantial particulars.' 33 C.J. [1169], sec. 106; Butte Electric Ry. Co. v. Mathews, 34 Mont. 487, 87 P. 460."

In order to sustain paragraphs VI and VII of the declaratory judgment in this case, the district court must first have made findings of fact upon which the portions of the judgment referred to could be based. No such findings exist in the record and it does not appear that any such issues were contemplated by the parties or that any attempt was made to present them to the lower court.

In 16 Am. Jur., 338, section 71, the law is stated as follows: "It has been held, however, that where the parties stipulate for the submission of certain questions, the court will not pass upon a question not embraced within the stipulation filed."

Bancroft's Code Practice and Remedies, Volume 3, page 2305, section 1765, states the law as follows: "But the judgment must be limited to the relief demanded or such as is within the issues. A judgment entirely outside the issues made by the pleadings or the evidence is void. It must conform to the pleadings and proof."

To the same effect is 49 C.J.S., Judgments sec. 55. This same rule applies to the entry of judgments under the declaratory judgments Act.

Anderson on Declaratory Judgments, section 189, page 565, says: "The rule with respect to the requirements of findings of fact and conclusions of law in declaratory judgment actions is substantially the same as control such findings and conclusions in ordinary actions at trials before the court * * *. It is a familiar rule of adjective law that findings of fact must conform to and be supported by the pleadings in the case, and cannot go outside of the issues formulated by the pleadings upon which the ultimate conclusion is reached."

Not having any facts before it, either from admissions in the [2] pleadings, or in the agreed statement of facts, as to the merits of the controversy between Reagan and Barr, and no issue thereon having been submitted to it in this action for declaratory judgment, the court could not depart from the case made by the pleadings and statement of facts to determine a matter entirely beyond and outside the issues of the case before it. (16 Am. Jur. 338; Bancroft's Code Practice and Remedies, Vol. III, sec. 1765, p. 2305; City of San Diego v. Cuyamaca Water Co.,209 Cal. 105, 287 P. 475; Reynolds v. Stockton, 140 U.S. 254,11 S. Ct. 773, 35 L. Ed. 464; Anderson on Declaratory Judgments, p. 565.)

We therefore hold that since paragraphs VI and VII of the judgment rendered by the court herein were entirely outside the issues of the case before the court, and since they were not supported by any evidence or admitted facts tending to establish the liability of Barr or his bondsman to pay Reagan, the district court was without jurisdiction to enter said paragraphs of its declaratory judgment.

Authority of Commissioner. The trial court held in paragraph[3] IV of its judgment that the decision and order of the commissioner Kruse did not create, establish or adjudicate any legal liability in any sum or amount in favor of Reagan and against Barr. As we understand it the effect of this holding is to declare that the commissioner had no authority to order Barr to pay Reagan the said sum of $367.75.

It should be remembered that the court did not have the evidence before it which was before Kruse.

So far as we know Barr may have admitted that he owed Reagan that amount. If that were so there could be no valid objection to the commissioner's order. There is reason to believe that Barr did not dispute the fact that he owed this amount to Reagan because he did not see fit to attempt to take an appeal from the order.

Whether, had the commissioner made the order in question on conflicting evidence, he would have been exercising judicial power, we need not decide here. We will not decide a constitutional question unless it is necessarily involved and necessary to a decision.

If under any conceivable facts the order is valid, then we[4] must, where as here, the record is not before us, assume that the facts were such as to justify the making of the order.

The statute, sec. 2443.8, provides that "in the event dealer fails to make informal adjustment or settlement of the charges set forth" in a complaint, the commissioner of agriculture shall give notice of a formal hearing. After the hearing he may dismiss the charges, suspend the license for a specified period, revoke the license, or "make such other appropriate order as may be deemed just and proper." And the order automatically suspends the license until the order is complied with.

Certainly if a dealer admits that he owes a seller a certain[5] amount of money as the purchase price of produce, the commissioner may order it paid to the end that the license shall be suspended until the order is complied with. One of the conditions of the bond is "for the payment, when due, of the purchase price of produce purchased by him."

In our opinion the court erred in holding in effect that the commissioner did not have the authority to order Barr to pay Reagan the sum of $367.75.

The cause is remanded to the lower court with directions to eliminate paragraphs VI and VII of its declaratory judgment and said judgment is reversed in so far as paragraph IV or any other part thereof determines that the commissioner of agriculture had no authority to order defendant Barr to pay defendant Reagan the sum of $367.75, with interest, involved in this action.

Associate Justices Angstman and Metcalf concur.