author: MR. JUSTICE GULBRANDSON MR. JUSTICE SHEEHY,

text:
    LINDA M. HART-ANDERSON, Plaintiff and Respondent, v. GERALDINE C. HAUCK and State Farm Insurance Company, Defendants and Appellants.
    No. 85-498.
    Submitted Nov. 24, 1987.
    Decided Jan. 8, 1988.
    748 P.2d 937.

      Christopher P. Thimsen, Billings, for Hauck.
    Dzivi, Conklin & Nybo, William Conklin, argued, Great Falls, for State Farm.
    Crowley Law Firm, Ronald D. Lodders, argued, Billings, for Hart-Anderson.
   MR. JUSTICE GULBRANDSON

delivered the Opinion of the Court.

Defendants Geraldine Hauck and her insurer, State Farm Insurance Company (State Farm), appeal a Yellowstone County District Court jury verdict and judgment which; (1) found Hauck negligent and 100% liable for an automobile accident involving the respondent/plaintiff Linda Hart-Anderson, (2) found that State Farm had breached its statutory obligations to respondent under Montana’s Unfair Claims Settlement Practices Act (the Act), and (3) awarded $687 to respondent for property damages to her car, (4) awarded $25,000 to respondent as compensatory damages for emotional distress, and (5) awarded $687,000 to respondent as punitive damages against State Farm.

A decision was entered by this Court on March 17, 1987. Hart-Anderson v. Hauck (Mont. 1987), [_ Mont. _,] 44 St.Rep. 508. Hart-Anderson petitioned this Court for partial reconsideration under Rule 34, M.R.Civ.P. The petition was briefed by the parties and we granted oral argument. We now withdraw the original opinion and issue this opinion in its place.

Appellant State Farm raises the following issues on appeal:

(1) whether the District Court erred in instructing the jury that Section 33-18-201(7), MCA, applies to third party claimants;

(2) whether the District Court erred in allowing respondent’s expert witness to state legal opinions that State Farm violated the Act;

(3) whether the District Court erred in prohibiting respondent from cross-examining plaintiffs expert witness on his knowledge and interpretation of case law on negligence and rear-end collisions;

(4) whether the District Court erred in instructing the jury that a violation of the Act may be considered as evidence of presumed malice;

(5) whether the District Court committed prejudicial error by refusing to bifurcate the trial into a negligence action and a bad faith action;

(6) whether the evidence is sufficient to support the jury’s verdict that State Farm breached obligations imposed by the Act;

(7) whether the evidence is sufficient to support the award of $25,000 for emotional distress;

(8) whether the District Court erred in submitting the issue of punitive damages to the jury and whether the punitive damages award of $687,000 is supported by the evidence;

(9) whether the punitive damages award violates State Farm’s rights under the excessive fine clause and the due process clause of both the United States and the Montana Constitutions.

Appellant Hauck raises two issues:

(1) whether the District Court erred in instructing the jury that there was no pre-existing damage to plaintiffs car;

(2) whether the District Court erred in instructing the jury that, as a matter of law, the actions of another driver had no bearing upon this case.

Because of instructional and evidentiary errors, we reverse the judgment and remand this cause for a new trial.

On the morning of December 6, 1982, plaintiff was driving her car east on Broadwater Avenue in Billings, Montana. Geraldine Hauck was some distance behind the plaintiff also driving eást on Broadwater. The streets were very icy that morning. Plaintiff planned to turn right at the corner of Broadwater and Tenth Street. As she approached the corner, a large delivery truck entered the intersection from her right. Plaintiff applied her brakes causing her car to slide to the right. Her car hit the curb and bounced back into her lane of traffic. Plaintiff proceeded very slowly around the corner. Appellant Hauck saw that the plaintiff’s vehicle was having trouble on the icy street. Appellant Hauck also planned to turn right on Tenth Street and she attempted to brake her vehicle to avoid the plaintiffs vehicle in front of her. Hauck testified that she could not avoid plaintiff’s vehicle by passing it on the left because of the delivery truck, which was blocking the road on that side. Hauck was unable to slow her car enough to avoid striking the plaintiffs vehicle from the rear. Hauck’s vehicle struck the plaintiffs vehicle and pushed it across Tenth Street and into a car driven by Agnes Heald. No one suffered physical injuries.

At the time of the accident, Hauck had an automobile insurance policy with State Farm. Hauck promptly reported the accident to State Farm. On December 17,1982, the plaintiff submitted her accident report and claim for $687 to State Farm. Plaintiffs initial written accident report did not mention that she had slid into the curb. However, shortly after she filed her report, the plaintiff admitted to State Farm’s adjuster, Doyle Hailey, that she did slide into the curb. Hailey told plaintiff that he would only pay 50% of the cost of repairing her car because he believed that she was also negligent. Prior to this offer, Hailey did not interview witness Heald or the police officer who investigated the accident. In late December 1982, Heald filed her accident report and claim with State Farm. Heald did not see the plaintiff’s vehicle strike the curb and her report made no mention of that fact.

Plaintiff believed that State Farm should pay 100% of her claim. An attorney called Hailey on behalf of plaintiff and stated that plaintiff was not negligent, that it was clear that Hauck was 100% liable, that the refusal to pay all of plaintiff’s damages was unjustified, and that plaintiff would accept a settlement payment of 90% of her damages. In January 1983, Hailey telephoned the attorney, stated that plaintiff was 50% negligent and refused to pay plaintiff 90% of her damages. Plaintiff secured counsel and filed this action alleging that Hauck had been negligent and that State Farm had violated the Unfair Claims Settlement Practices Act.

The District Court held the jury trial in this case in May 1985. Plaintiff’s counsel read an agreed statement of facts into the record in the jury’s presence. Among other things, the statement said,

“Defendant State Farm Insurance Company has offered to pay 50 percent of plaintiff’s damage. This offer was communicated at the time of State Farm’s first contact with the plaintiff and has never been increased or decreased.”

State Farm’s counsel moved to amend the second sentence quoted above. He claimed he had informed plaintiff’s counsel that he did not agree to that sentence but that his partner signed the statement (apparently not knowing of the dispute). The plaintiff filed a trial brief which admits that State Farm offered to settle both the bad faith action and the negligence action for a total of $5,000. Therefore, we find that the second sentence quoted above, pertaining to the increase or decrease of the offer, was misleading and should be stricken from the agreed statement of facts upon retrial.

Appellant Hauck introduced evidence at trial of two repair estimates submitted by plaintiff. One estimate was dated October 8, 1982, approximately two months before the accident occurred. That estimate was for $687. The mechanic who prepared that estimate testified that he believed the date on the estimate was mistaken. He also testified that he had previously said, in a statement given to Hailey, that as far as he could remember the estimate was written in October and not in December. The date of plaintiff’s other estimate was September 15, 1982, almost three months before the accident occurred. The estimate was for $750. The mechanic who prepared that estimate testified that he did not remember making the estimate but admitted, at his deposition, that as far as he knew the date on the estimate was correct.

The plaintiff called two expert witnesses to testify at trial. Albert Benoit, now retired but previously the branch claims manager for Farmers Insurance Group for 25 years, testified that Hauck was 100% at fault in the accident and that plaintiff was not negligent at all. Benoit testified, without objection, that State Farm 1. violated Subsection (4) of the Act by refusing to pay the claim without conducting a reasonable investigation based upon all the available information, 2. violated Subsection (6) of the Act by neglecting to attempt in good faith to effectuate prompt, fair and equitable settlement of the claim where liability was reasonably clear, and 3. violated Subsection (7) of the Act by compelling plaintiff to institute litigation to recover amounts due by offering substantially less than the amount recovered. Earl Hanson, an experienced Billings attorney, also testified as an expert witness. Hanson testified that Hauck was clearly 100% negligent and that the plaintiff was not negligent in the accident. He further testified, over objection, that State Farm agents violated Subsections (6), (7) and possibly (4) of the Act in the way they handled plaintiff’s claim.

Counsel for State Farm attempted to cross-examine Hanson as to case law involving negligence and rear-end collisions. After plaintiff’s objection, the District Court refused to allow this cross-examination. Counsel for State Farm made an offer of proof citing two Montana Supreme Court cases, cases from Texas, Tennessee, and California, and several Montana District Court cases.

Plaintiff also called Thomas Poindexter, an eye witness, to testify at trial. He testified that the delivery truck was a contributing factor to plaintiff hitting her brakes and sliding into the curb. He also testified that if plaintiff had not applied her brakes because of the truck, causing her to slide into the curb and come almost to a stop, that the accident would not have occurred.

The District Court instructed the jury, over State Farm’s objection, that Subsection (7) of the Act applied to and protected any person, rather than only insureds. The District Court also instructed the jury, over objection, that the jury could consider a violation of the Act as evidence of presumed malice. The jury returned the verdict described above. This appeal followed.

The first issue concerns the court’s instruction to the jury relative to Subsection (7) of the Act. Section 33-18-201, MCA (the Act), states in pertinent part:

“No person may, with such frequency as to indicate a general business practice, do any of the following:
“(4) refuse to pay claims without conducting a reasonable investigation based upon all available information;
“(6) neglect to attempt in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear;
“(7) compel insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions brought by such insureds;
“(9) attempt to settle claims on the basis of an application which was altered without notice to or knowledge or consent of the insured;
“(10) make claims payments to insureds or beneficiaries not accompanied by statements setting forth the coverage under which the payments are being made;
“(11) make known to insureds or claimants a policy of appealing from arbitration awards in favor of insureds or claimants for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration;
“(12) delay the investigation or payment of claims by requiring an insured, claimant, or physician of either to submit a preliminary claim report and then requiring the subsequent submission of formal proof of loss of forms, both of which submissions contain substantially the same information;
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Regarding Subsection (7) of the Act and over appellant’s objection, the trial court instructed the jury that:

“[N]o insurance company may, with such frequency as to indicate a general business practice, do any of the following:. . . Compel any person to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in such actions.” (Emphasis added.)

We set out the above Subsections of the Act to demonstrate that the Act, by its own terms, provides certain protections to insureds, others to claimants and insureds, and another to insureds and beneficiaries. See Royal Globe Ins. Co. v. Superior Court, etc. (1979), 23 Cal.3d 880, 153 Cal.Rptr. 842, 847, 592 P.2d 329, 334.

Using the analysis for statutory construction cited by this Court in Klaudt v. Flink (1983), 202 Mont. 247, 658 P.2d 1065, 1067, 40 St.Rep. 64, 66, we find that Subsection (7) of the Act does not protect third party claimants. The first step of the analysis is whether our interpretation is consistent with the statute as a whole. As stated, the statute extends some protections to insureds, some to insureds and claimants, and another to insureds and beneficiaries. Our interpretation is consistent with these distinctions clearly made in the statute. The second step is whether our interpretation reflects the legislature’s intent considering the plain meaning of the statutory language. The language of Subsection (7) protects “insureds” and plainly that term does not include third party claimants who are not insured by the defendant insurance company. The third step is whether the interpretation is reasonable so as to avoid absurd results. The statute here distinguishes between claimants, insureds and beneficiaries. Our interpretation here recognizes and defers to that distinction. As this Court stated in Klaudt, [202 Mont. at 251], 658 P.2d at 1067, in holding that Subsection (6) of the statute does protect third party claimants,

“It would be absurd to assume that the legislature would insert these words into the statute without them having some meaning, as the legislature is presumed not to pass useless or meaningless legislation.”

Plaintiff incorrectly asserts that the Klaudt Court held that Section 33-18-201, MCA, in its entirety, applies to, and protects third party claimants. The Klaudt Court addressed only Subsection (6) of the statute. We hold that the District Court committed reversible error in instructing the jury that Subsection (7) of the statute applied to any person.

Our interpretation of Subsection (7) of the statute is supported by Green v. Holm, (1981), 28 Wash.App. 135, 622 P.2d 869. In Green, the court addressed a Washington administrative regulation on unfair insurance practice which was almost identical to Section 33-18-201(7), MCA. The court found that the plaintiffs could not successfully state a claim under the regulation because they were third party claimants, not insureds. The Washington Supreme Court has since held that a third party claimant has no cause of action against an insurance company for unfair claims settlement practices. Tank v. State Farm Fire & Cas. Co. (1986), 105 Wash.2d 381, 715 P.2d 1133.

The second issue is the propriety of the expert witness testimony. Appellants objected to attorney Hanson’s opinion testimony that State Farm violated various subdivisions of the statute. Relevant Montana Rules of Evidence are:

“Rule 702. If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education may testify thereto in the form of an opinion or otherwise.
“Rule 704. Testimony in the form of an opinion or inference otherwise admissible is not objectionable because it embraces an ultimate issue to be decided by the trier of fact.”

The Commission Comment to Rule 704, M.R.Evid., provides that:

“[T]he Commission intends this rule to follow the existing Montana practice of not allowing the witness to give a legal conclusion or to apply the law to the facts in his answer.”

Additionally, Section 25-7-102, MCA, provides that:

“[A]ll questions of law, including . . . the construction of statutes and other writings, . . . are to be decided by the court . . . and all discussions of law are to be addressed to the court.”

With this statutory framework in mind, we examine case law bearing on the issue presented. In Safeco Ins. Co. v. Ellinghouse (Mont. 1986), [223 Mont. 239,] 725 P.2d 217, 43 St.Rep. 1689, this Court recently addressed the plaintiff’s use of expert legal testimony in an insurance bad faith case. In Safeco, Ellinghouse was originally sued in a negligence action. Safeco, his insurer, initially accepted coverage of the claim and retained counsel to represent him. Over a year later, Safeco determined that an insurance policy exclusion applied to the claim and that there was no coverage under the policy. Safeco secured Ellinghouse’s signature on a “non-waiver” agreement and, a month later, formally denied coverage to Ellinghouse. Ellinghouse later secured his own counsel and settled the negligence claim out of court. Meanwhile, Safeco had filed a declaratory judgment action to determine whether Ellinghouse had liability coverage under the policy. Ellinghouse counterclaimed against Safeco for: among other things, bad faith. Ellinghouse introduced expert legal testimony that:

“[I]t was a general principle of law that prejudice was always presumed to exist whenever a representation of coverage had been made and a defense provided, that the ‘courts are quite unanimous in saying that insurance companies must either deny coverage immediately or thereafter be estopped from doing so,’ and that the ‘completed operations’ exclusion had ‘no application’ to this case.’ ”

Safeco, 725 P.2d at 224. There was also apparently expert legal testimony on what Safeco’s legal duties were in the case, on what the legal effect of the non-waiver agreement was, and that Safeco wrongfully denied coverage. This Court held that such testimony was not reversible error under the unique facts of that case, given that the trial court held there was coverage as a matter of law. However, this Court said, “[a]s a general rule, an attorney cannot advise the jury as to the law of the case.” Safeco, 725 P.2d at 225.

The Second Circuit Court of Appeals in Marx & Co., Inc. v. Diners’ Club, Inc. (2d. Cir. 1977), 550 F.2d 505, stated reasons which help explain the general rule later cited in Safeco. In Marx, the court held that the federal district court erred in permitting an expert witness to give his opinion as to the parties’ legal obligation under contract for registration of stock. Among other things, the expert opined (1) that the defendant had no legal excuses for nonperformance and (2) as to what was required of the defendant under the “best efforts” obligation under the contract. In condemning the testimony, the federal court stated:

“[S]uch testimony “amounts to no more than an expression of the [witness’] general belief as to how the case should be decided.” McCormick on Evidence, Section 12 at 26-27. The admission of such testimony would give the appearance that the court was shifting to witnesses the responsibility to decide the case. McCormick on Evidence, Section 12 at 27. It is for the jury to evaluate the facts in the light of the applicable rules of law, and it is therefore erroneous for a witness to state his opinion on the law of the forum.” (Citation omitted.)

Marx & Co., Inc., 550 F.2d at 510. The court further cautioned that,

“[W]e must be especially careful not to allow trials before juries to become battles of paid advocates posing as experts on the respective sides concerning matters of domestic law.”

Marx & Co., Inc., 550 F.2d at 511.

Here, the jurors had the ability and the competence, based upon their common experiences and knowledge, to decide whether (1) State Farm refused to pay plaintiffs claim without conducting a reasonable investigation based upon all available information; and (2) State Farm neglected to attempt in good faith to effectuate a prompt, fair and equitable settlement of a claim in which liability had become reasonably clear. Hanson’s challenged testimony, opining that State Farm violated Subsections (4), (6) and (7) of the Act invaded the province of the jury and simply instructed the jury how to decide the case. That testimony was highly prejudicial to State Farm and, therefore, we hold that the District Court committed reversible error in admitting Hanson’s legal opinions.

Appellants did not object to the respondent soliciting legal opinions from Benoit and we do not here address the propriety of that testimony. For a further discussion of expert legal testimony, see Kulak v. Nationwide Mutual Insurance Company (1976), 40 N.Y.2d 140, 386 N.Y.S.2d 87, 351 N.E.2d 735.

The third issue concerns the District Court’s ruling restricting State Farm’s cross-examination of attorney Hanson. By way of qualifying Hanson as an expert legal witness, plaintiff elicited Hanson’s testimony that he has practiced law for almost twenty years, that he has given speeches to professional organizations on topics including bad faith and insurance bad faith, that he had worked in the insurance business and that he was generally familiar with the principles of evaluating liability in rear-end car crashes. On cross-examination, Hanson agreed that he tries to read this Court’s decisions soon after they are decided and that the law in most states is similar to Montana law with regard to rear-end collision and liability.

State Farm’s counsel then attempted to cross-examine Hanson about an Idaho case reported in the Pacific Reporter and about a Texas Court of Civil Appeals case. Counsel sought to show through these cases that the following driver in rear-end collision cases is not always 100% liable. The District Court sustained plaintiff’s objection to this line of questioning. State Farm then made an offer of proof that various cases demonstrated that in rear-end collisions similar to the instant case the following driver was not 100% liable. The cases included reported cases from Montana, California, Idaho, Texas and Tennessee, Montana District Court decisions, and cases where Hanson’s law firm took positions allegedly inconsistent with his testimony on negligence. The court refused to allow State Farm to use any of these cases in cross-examination. The record demonstrates that State Farm’s attempted use of case law was designed, at least in part, to test attorney Hanson’s expertise.

This Court has zealously guarded the right of cross-examination. In this regard, we have stated:

“Rule 705, Mont.R.Evid., mandates that the opinion of a qualified expert is admissible, and if opposing counsel believe the opinion is not founded on sufficient data, cross-examination is the shield to guard against unwarranted opinions.”

Stewart v. Casey (1979), 182 Mont. 185, 193, 595 P.2d 1176, 1180.

“The right of cross-examination may not be unduly restricted and may extend not only to facts stated by the witness in his direct ex-animation, but to all other facts connected with them which tends to enlighten the jury upon the question in controversy.”

State Highway Commission v. Bennett (1973), 162 Mont. 386, 391, 513 P.2d 5, 8.

We hold that the District Court erred in precluding the cross-examination of Hanson on the Montana decisions, both Supreme Court and District Court, and on the cases involving Hanson’s law firm. Appellants were entitled to test the knowledge, competency and qualifications of the expert witness. We do not rule on the use of foreign decisions as a District Court may properly exclude their use if they present evidence only repetitive or cumulative to evidence abducted from Montana cases. In sum, we find that Montana cases are preferred in cross-examination of this kind, especially where the expert witness has conceded his familiarity with Montana law.

The fourth issue concerns the District Court’s instructions on presumed malice. The court gave instruction Number 27 stating:

“You are instructed that when a person knows or has reason to know of facts which create a high degree of risk of harm to the substantial interests of another, and either deliberately proceeds to act in conscious disregard of or indifference to that risk, or recklessly proceeds in unreasonable disregard of or indifference to that risk, his conduct meets the standard of willful, wanton, and/or reckless to which the law of this State will allow imposition of punitive damages on the basis of presumed malice.”

That standard is a correct statement of the law under Owens v. Parker Drilling Co. (Mont. 1984), [207 Mont. 446,] 676 P.2d 162, 41 St.Rep. 66. The controversy here arises from the court’s instruction Number 29, which states:

“If you find that State Farm Insurance Company has violated the Unfair Claims Settlement Practices Act, then such violation may be considered by you as evidence of presumed malice, as that term is defined in these instructions.”

State Farm argues that this instruction allows the jury to disregard the Owens standard and predicate a finding of presumed malice upon a statutory violation alone. We agree. Conceivably, a jury could use the challenged instruction to perform an “end-run” around the Owens standard for presumed malice. Moreover, the Owens Court addressed the newly formulated standard for presumed malice and stated:

“The standard is equally applicable to statutory violations and other wrongful conduct. Thus, where a statute is designed to protect the substantial interests of a person from a high degree of risk, and the statute is violated either intentionally or recklessly, a jury question of punitive damages is raised.” (Emphasis in original.)

Owens, 676 P.2d at 165. Owens requires an intentional or reckless statutory violation for the issue of punitive damages to go to the jury. The instruction here allows the jury to consider a statutory violation as evidence of presumed malice. Thus, the jury could find that State Farm had negligently violated the Unfair Claims Settlement Practices Act and they could further consider that negligent violation as evidence of presumed malice. That is not the law under Owens. We hold that the District Court erred in giving instruction Number 29.

The fifth issue is whether the District Court should have bifurcated this trial into a negligence action and a bad faith action. Given our holding today, we need not address the propriety of the District Court’s refusal to bifurcate. Upon retrial, this action will be bifurcated and tried in accordance with our decision in Fode v. Farmers Ins. Exchange (Mont. 1986), [221 Mont. 282,] 719 P.2d 414, 43 St.Rep. 814.

Because we remand this cause for a new trial on all issues, we decline to address issues six, seven, eight and nine listed above and the two issues raised by appellant Hauck.

Reversed and remanded.

MR. CHIEF JUSTICE TURNAGE and MR. JUSTICES HARRISON and WEBER concur.

MR. JUSTICE SHEEHY,

dissenting:

This reversal is a follow-up from the unfortunate decision of this Court in Safeco Ins. Co. v. Ellinghouse (1986), [223 Mont. 239,] 725 P.2d 217, 43 St.Rep. 1689. This reversal evinces a growing elitist philosophy on this Court, a distrust of juries which bodes no good for insurance claimants in this state.

We begin with the flat statement that Geraldine C. Hauck was 100% negligent in causing the accident. The jury said so. A. G. Benoit, a top flight adjuster for one of the largest underwriting concerns in Billings said so. Earl Hanson, an attorney representing both insurance companies and both insurance claimants, said so. This Court said so in McDonough v. Smith under facts nearly identical:

“Defendant contends, however, that his evidence tended to show that the damage to plaintiffs car was caused by plaintiffs own negligence. True, the answer of the defendant contained such a charge, but there is an entire absence of any evidence to support such allegation. Under the record presented here, the jury would not have been warranted in finding for the defendant on any theory, except that his car did not strike that of plaintiff. There was no evidence from which the jury could have determined that the damage to plaintiffs car resulted from any other cause than that it was struck by the defendant. If they could have found that the cars did not collide, then the reason why plaintiffs car struck the fence resulting in the damage complained of would have rested in conjecture and speculation.”

McDonough v. Smith (1930), 86 Mont. 545, 551, 284 P. 542, 544.

The jury verdict answered the following questions:

“1. Do you find that Defendant Mrs. Hauck was negligent and that her negligence was a proximate cause of the property damage suffered by the Plaintiff, Linda Hart-Anderson? Yes _X
“2. Do you find that Plaintiff Linda Hart-Anderson, was negligent, and that her negligence was a proximate cause of the property damage she suffered? No _X
“3. If your answer to both 1 and 2 was ‘yes’ then assign a percentage to each of them apportioning the negligence which proximately caused the accident between them in the following blanks:
Mrs. Hauck 100%
Mrs. Hart-Anderson 0%
“4. What is the amount in dollars of damage to Mrs. Hart-Anderson’s car which was caused by this accident? $687.00
“5. Did State Farm Insurance Company breach the obligations imposed by the Unfair Claims Settlement Act of Montana as given to you in the instructions? Yes X
“6. Did such breach proximately cause damage to Linda Hart-Anderson? Yes X
“7. What is the dollar amount of damages suffered by Linda Hart-Anderson for emotional distress as defined in these instructions, if any? $25,000.00
“8. Is Linda Hart-Anderson entitled to receive punitive or exemplary damages from State Farm Insurance Company under the instructions given you on punitive or exemplary damages? Yes X
“If ‘yes’ then in what amount? $687,000.00

Under Section 33-18-201, MCA, it is an unfair claims settlement practice for an insurance company to fail to acknowledge and act reasonably promptly upon communications with respect to claims under insurance policies; to refuse to pay claims without conducting a reasonable investigation based upon all available information; to neglect to attempt in good faith to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear; and to compel insureds to institute litigation and recover amounts due by offering substantially less than the amounts ultimately recovered in actions brought by such insureds.

The majority opinion takes umbrage in finding that the District Court instructed the jury that an insurance company should not compel any person, and not just insureds, to institute litigation in order to recover what is justly due that person. The majority finds that the legislature did not “intend” to so protect third party claimants, but only intended to protect “insureds.” I submit that such intent is not what is to be deduced from the whole of Section 33-18-201, MCA, which in broad and repetitive language steps out to protect Montana persons dealing with insurance companies, both insureds and third party claimants. What legislative intent can be distinguished as different when the legislature provides that it is not good faith if the insurer neglects to effectuate prompt, fair and equitable settlements and also provides that insureds should not be forced to go to court to collect their due claims? If an insurance company neglects to effectuate prompt, fair and equitable settlement of claims where liability has become reasonably clear, is it not simply an extension of that neglect to compel third party claimants to go to court or else accept less than is due them? The ignominious result of the majority opinion is that now the District Court cannot instruct the jury that it is bad faith for an insurer to force a third party claimant to go to court to collect his claim, even though by so doing, the insurer “neglects to attempt in good faith to effectuate prompt, fair and equitable settlements” and fails “to acknowledge and act reasonably promptly upon communications with respect to claims.” The kind of nitpicking indulged by the majority in determining the legislative intent of Section 33-18-201(7), MCA, confounds the intent and purpose of the statute.

The majority objects to the statement of the District Court, read to the jury that:

“Defendant State Farm Insurance Company has offered to pay 50% of plaintiff’s damage. This offer was communicated at the time of State Farm’s first contact with the plaintiff and has never been increased or decreased.”

The statement read by the District Court is absolutely true. It was the refusal of the insurance company to recognize its 100% obligation for the plaintiff’s damages that brought about the lawsuit. That is what the District Court was informing the jury. It would have been improper for the District Court to read to the jury a statement that later the insurer tried to settle both the bad faith action and the negligence action for a total of $5,000. The latter figure was simply an offer of compromise which would be inadmissible in any event.

Two things may be said with respect to the majority opinion and its treatment of the Earl Hanson testimony. First, all of the things to which Hanson testified were also testified to by the lay insurance adjuster, A.G. Benoit. No objection was made on appeal to the testimony of A.G. Benoit. Yet, this Court reverses on the testimony given by Earl Hanson, which is clearly compatible with the unobjected-to testimony of A.G. Benoit.

Second, the cross-examination of Earl Hanson as proposed by the insurer’s attorney was properly denied by the District Court. Allowance of such cross-examination would have meant that the jury would be trying not only the facts of this case but the facts in other reported cases in this state and other states which were not relevant to the issues presented here. The District Court should be sustained in its statement which in essence told the insurer’s attorney that the jury in this case was going to try one set of facts and one set of facts only.

The majority objection to the giving of court’s instruction No. 29, set forth in the majority opinion, is only further quibbling. Instruction No. 29 has to be read in conjunction with instruction No. 27. Instruction No. 29 merely told the jury that violations of the Unfair Claims Settlement Practice Act could be considered by them as evidence of presumed malice, “as that term is defined in these instructions.’’ (Emphasis added.) Instruction No. 27 told the jury that if the defendant “recklessly proceeds in unreasonable disregard or indifference to [the] risk [of harm], his conduct meets the standard of willful, wanton and/or reckless to which the law of this State will allow imposition of punitive damages on the basis of presumed malice.” The two instructions read together state the law. There is no question that the insurer in this case proceeded deliberately and intentionally to refuse to pay the full damages to which Linda Hart-Anderson was entitled. The majority would require the jury to attempt to determine punitive damages in a vacuum without consideration of the violations of the Unfair Claims Settlement Practice Act. That requirement is absurd.

The majority have withdrawn from their original opinion their comment on instruction No. 30. The court in this case properly instructed the jury, in instruction No. 30:

“More than one person may be responsible for causing injury. If you find that the defendant, Geraldine Hauck, was negligent and that her negligence proximately caused the plaintiffs property damage it is not a defense that some third person may also have been negligent.”

It was following instruction No. 30, that the court gave instruction No. 31, which stated:

“You are instructed that the actions of the driver of the Consolidated Freightways truck have no bearing upon this case as a matter of law. That is to say, the liability, if any, of Geraldine Hauck for the damage to Linda Hart-Anderson’s car is not reduced or eliminated by the fact that the driver of the Consolidated Freightways truck may also have been at fault.”

Those instructions, read together properly state the law of this case. Consolidated Freightways was not a party to this action. Under the theory of joint and several liability, Geraldine Hauck, if liable, was liable for all of that portion of negligence that the jury assigned to her. In that light, jury instruction No. 30 was perfectly proper and should be given again on retrial with instruction No. 31.

More than ever, this case points up the necessity of this Court examining the duty of insurance companies toward third party claimants in the light of the mandatory insurance law. Section 61-6-301, MCA. As I pointed out in my dissent in Fode v. Farmers Insurance Exchange (Mont. 1986), [221 Mont. 282,] 719 P.2d 414, 419, 43 St. Rep. 814, 820, the purpose of the mandatory insurance law is to protect third party motorists on our highways. The duty of the insurer to protect third party claimants and not harass them or refuse to pay their just claims is of greater import under mandatory insurance laws. The rights of the third party claimant now in automobile accident cases arise not merely through the insurance contract between the other motorist and his company but through the determination of the legislature that the general traveling public is to be protected. It is worth repeating the statement in Ferguson v. Employers Mutual Cas. Co. (1970), 254 S.C. 235, 174 S.E.2d 768, 771:

“The primary purpose of a compulsory motor vehicle liability insurance is to compensate innocent victims who have been injured by the negligence of financially irresponsible motorists. Its purpose is not like that of ordinary liability insurance to save harmless the tort feasor himself. The injured person’s rights against the insurer are not derived through the insured as in the case of voluntary insurance. They are statutory and become absolute on the occurrence of an injury covered by the policy.” (Citation omitted.)

In the absence of federal regulation of insurance companies’ settlement practices, and the incomplete and limited statutory reach of state regulation, this Court has a duty to protect motorists from the unfair practice that was exhibited by State Farm in this case. Damages of $687 may not loom large in the state’s economy, but are important to the person involved. If the person involved has a choice of either 50% of his damages or going to court, it is more than likely that going to court will be out of the question because of the upfront costs that are necessary. The protection of Linda Hart-Anderson for one-half of $687 may not seem terribly important, but the multiplication of Linda Hart-Andersons by several hundred throughout the State of Montana every year has substantial importance. The jury decided not to condone this business practice of State Farm Mutual. The jury took a proper course in awarding punitive damages. It is a regrettable action for this Court to set aside that award for the flimsy reasons given.

MR. JUSTICE HUNT concurs in the foregoing dissent of MR. JUSTICE SHEEHY.


source: Caselaw Access Project

author: MR. JUSTICE WEBER MR. JUSTICE GULBRANDSON,

license: Public Domain

text:
    GRANT R. McPHERSON, Plaintiff and Appellant, v. STANLEY SCHLEMMER and Linda Schlemmer, Defendants and Respondents.
    No. 87-115.
    Submitted Nov. 3, 1987.
    Decided Jan. 8, 1988.
    Rehearing Denied Feb. 18, 1988.
    749 P.2d 51.

      Douglas J. Wold and Martin R. Studer argued, McCurdy, Wold, Peterson & Fischer, Poison, for plaintiff and appellant.
    Charles E. McNeil and Gary L. Graham argued, Garlington, Lohn & Robinson, Missoula, for defendants and respondents.
    Gene Todd, pro se, for Montana Embryo Transplant Center, amicus curiae.
    Gerald Kitto, pro se, for Gallatin Embryonics, Belgrade, amicus curiae.
    Holland & Hart, Billings, for American Salers Assoc., amicus curiae.
   MR. JUSTICE WEBER

delivered the Opinion of the Court.

Two of Mr. McPherson’s Salers breeder cows were killed when they wandered onto a highway from their pasture on the Schlemmers’ property. Mr. McPherson prevailed in this negligence action against the Schlemmers after a jury trial in the Twentieth Judicial District, Lake County. He appeals two of the District Court’s rulings on damages. We reverse in part, affirm in part, and remand.

The issues are:

1. Did the District Court err by denying Mr. McPherson’s motion for a new trial on the issue of damages for lost profits from his embryo production business as a result of the deaths of his two exotic cows?

2. Did the District Court err by denying Mr. McPherson’s motion to amend the judgment to include prejudgment interest?

The case was submitted to us on an agreed statement of facts, without transcript or exhibits. Our recitation of the facts is therefore limited. Plaintiff Grant McPherson raises pure-blood Salers cattle in the Flathead Valley. His business involves the production and sale of Salers embryos from donor cows. The embryos are sold for implantation into commercial grade surrogate mother cows.

During the spring of 1983, Mr. McPherson entered into an agreement with the Schlemmers whereby some of the Salers donor cows were pastured on the Schlemmers’ property. In April 1983, two of these cows wandered from their pasture and were struck and killed on a highway.

Mr. McPherson brought suit alleging that the Schlemmers negligently failed to keep their pasture gate closed. The Schlemmers denied liability. In his complaint, Mr. McPherson sought to recover damages for the cows’ fair market value, for lost profits caused by the interruption of his embryo production business, and for incidental losses. However, the District Court disallowed proof of lost profits. The jury found the Schlemmers 70% liable and set damages at $101,500 for the fair market value of the cows plus incidental damages. Mr. McPherson’s net judgment was $71,050 plus interest from the date of the verdict.

Following return of the jury verdict, Mr. McPherson sought an award of prejudgment interest, which was denied by the court. Mr. McPherson then filed motions for a new trial and to amend the judgment. The court denied both motions and Mr. McPherson now appeals. He asks this Court to award him prejudgment interest and to grant a new trial at which he may present evidence of his lost profits.

I

Did the District Court err by denying Mr. McPherson’s motion for a new trial on the issue of damages for lost profits from his embryo production business as a result of the deaths of his two exotic cows?

This matter was originally raised in a motion in limine. The District Court ruled that it would admit proof of the fair market value of the cows for breeding purposes, but would not admit proof of loss of use, lost profits, or loss of production of embryos, “because to do so would permit double recovery of damages.” The court stated it would allow proof of the “special atributes [sic] of the Salers Cattle for breeding purposes, which is what makes them worth far more than the average cow.” It ruled, however, that “to then permit stacking of calf crop after calf crop would unjustly double damages and would be based upon speculation.” The court denied Mr. MePherson’s motion for a new trial on the issue of damages for lost profits, without further explanation.

The measure of damages in a tort case is the amount which will compensate the plaintiff for all the detriment proximately caused by the defendant’s wrongful act. Section 27-1-317, MCA. The Schlemmers argue that Mr. McPherson has received full compensation for his damages by the award of the fair market value of his breeder cows. Mr. McPherson contends that he was unable to replace the cows immediately and that the award of funds to replace them after trial nearly four years later does not compensate him for lost sales of calves and embryos in the meantime. His offer of proof alleged that each cow would produce one calf per year and a yearly average of twelve embryos which would result in live births. He offered to prove lost profits of between $215,791 and $443,371 from April 1983 to December 1985, plus additional lost profits to date of trial.

Fair market value generally includes a component for present valuation of future profits. However, it does not follow that in every situation an award of the fair market value of an animal compensates its owner for all lost profits from the use of the animal. In Snyder v. Bio-lab, Inc. (1978), 405 N.Y.S.2d 596, the court was faced with a claim similar to that raised by Mr. McPherson. In that case, plaintiff’s dairy cows were injured and had to be destroyed after use of defendant’s defective teat dip. The court reasoned that ordinarily, fair market value at the time of loss will be the measure of damages applied. It then demonstrated circumstances under which an additional amount should be awarded. The court stated:

“As with personal property generally, the measure of damages for injury to, or destruction of, an animal is the amount which will compensate the owner for the loss and thus return him, monetarily, to the status he was in before the loss. Where the animal has a market value, the market value at the time of the loss, or the difference in market value before and after injury will generally be the measure applied. Any special value, particular qualities, or capabilities are generally considered as factors making up market value. For example, when an owner has received the market value of an animal, he will have been compensated for any use he might have made of the animal for breeding purposes. The market value may be enhanced because the animal is carrying unborn young, but the young have no value apart from the mother. Also, the loss of produce of an animal is an item of consideration in determining market value, rather than a separate item of damage. The high production rate of a slaughtered cow is to be considered as a particular quality along with breed, age, condition and other factors in computing the animal’s market value.
“In addition, plaintiffs are entitled to recover the loss of profit for the time period required to replace the slaughtered cows with cows of equal quality.
“The fair market value of the slaughtered cows does not adequately compensate the plaintiffs for their loss. They are entitled to the profit that the 39 cows, the best milk producers in the herd, would have generated until replacement cows of equal quality were available. Proof establishes that replacement cows of comparable quality were available in the market 3 months subsequent to the accident ...”

Snyder, 405 N.Y.S.2d at 597-98. Although that court stated that the value of produce of an animal is a component of the animal’s market value, the court also allowed as damages profits which would have been earned from the sale of milk in the time between the accident and the reasonable date of replacement of the animals.

In a similar case, the Supreme Court of Missouri ruled that “the limiting circumstance is that there may be no recovery for future milk and calf production of a cow which has been disposed of, after a replacement of comparable capacity has been or could have been acquired.” Missouri Farmers Ass’n. v. Kempker (Mo. banc 1987), 726 S.W.2d 723, 726. In a case in which laying chickens had to be destroyed after using defendant’s self-feeding system, the Supreme Court of Utah held that plaintiff’s damages included both the market value of the chickens destroyed and the lost profits “for the period in which there was a loss of use before the replacements could prudently be obtained . . . .” Park v. Moorman Mfg. Co. (1952), 121 Utah 339, 241 P.2d 914, 921-22. See also Kintner v. Claveraek Rural Elec. Co-op., Inc. (1984), 329 Pa.Super. 417, 478 A.2d 858.

In contrast to the foregoing cases, the lower court held, based on Covey v. Western Tank Lines (1950), 36 Wash.2d 381, 218 P.2d 322, that to allow damages for lost profits in addition to the fair market value of the animals which were destroyed would permit double recovery of damages. We do not choose to affirm the lower court and the theory set forth by the Washington Court in Covey.

We adopt the theory of damages set forth in Snyder. We conclude that the award to Mr. McPherson of the fair market value of his cows did not compensate him for profits lost between the date the cows were killed and the date they reasonably could have been replaced, which would be the date replacement cows of comparable quality were available in the marketplace. We hold that in addition to the fair market value of the cows, Mr. McPherson is entitled to his lost profits for that period of time.

As additional guidance on remand, the District Court should refer to Graham v. Clarks Fork Nat. Bank (Mont. 1981), [_ Mont. _,] 631 P.2d 718, 38 St.Rep. 1140, aff’d after remand, [204 Mont. 141,] 663 P.2d 320 (1983). In that case, plaintiff’s planned artificial insemination program was interrupted by “lowbrow” bulls. The Court allowed damages for one generation of future purebred calves. Citing prior caselaw, the Court stated that “future damages need only be reasonably certain, and not absolutely certain.” Graham, 631 P.2d at 721. As also discussed in Baden v. Curtiss Breeding Service (D.Mont. 1974), 380 F.Supp. 243, when the many variables in projecting future “crops” of animals make the damages too uncertain, they cannot be recovered. While these cases are not directly on point with the present case, they do point out a second limitation on future damages.

We remand this matter to the District Court to give Mr. McPherson the opportunity to present his evidence on the theory that the cows were not immediately replaceable. If the evidence shows that the cows could not reasonably be replaced immediately, then Mr. McPherson must be allowed to present to a finder of fact his evidence of reasonably certain lost profits from sale of embryos and calves between the time the cows were killed and the time they could reasonably have been replaced.

II

Did the District Court err by denying Mr. McPherson’s motion to amend the judgment to include prejudgment interest?

The three criteria for prejudgment interest, as set out in Safeco Ins. Co. v. Lovely Agency (Mont. 1985), [215 Mont. 420,] 697 P.2d 1354, 1356, 42 St.Rep. 509, 511-12, are that 1) there is an underlying monetary obligation, 2) the amount of damages is certain or capable of being made certain by calculation, and 3) the plaintiff’s right to recover damages vests on a particular day. Mr. McPherson argues that his right to prejudgment interest is not defeated by the fact that liability was contested or by the fact that negligence was apportioned by the jury. He says it would be inequitable to compound his loss by denying prejudgment interest.

We conclude that the three-part standard for prejudgment interest is not met. Since liability was contested, no monetary obligation existed until the jury determined the degree of comparative negligence. If the jury had found Mr. McPherson 50% negligent or more, there would have been no monetary obligation on the part of the Schlemmers. The uncertainty of the amount of damages is shown by the differences between what Mr. McPherson claimed in his complaint, what he claimed at trial, and what the jury awarded. Finally, the right to recover vested only on the date of the jury verdict, not on an earlier date certain. We affirm the District Court’s refusal to award prejudgment interest.

Reversed and remanded for further proceedings on the issue of lost profits.

MR. CHIEF JUSTICE TURNAGE and MR. JUSTICES HARRISON, SHEEHY, HUNT and McDONOUGH concur.

MR. JUSTICE GULBRANDSON,

concurring and dissenting.

I concur with the affirmance of the District Court’s refusal to award prejudgment interest but I disagree with the remand for determination of lost profits from the plaintiff’s embryo production business.

The trial judge issued the following order prior to trial:

“The Court will admit proof of the fair market value of the Plaintiff’s Salers Cattle for breeding purposes and such incidental damage as occurred. The Court will not admit proof of loss of use, lost profits or loss of production of embryos and calves because to do so would permit double recovery of damages. The Plaintiff will be permitted proof of the special attributes of the Salers Cattle for breeding purposes, which is what makes them worth far more than the average cow. But to then permit stacking of calf crop after calf crop would unjustly double damages and would be based upon speculation. Covey v. Western Tank Line, (Wash) [36 Wash.2d 381,] 218 P.2d 322; State v. Morison, (Colo) [148 Colo. 79,] 365 P.2d 266. There are apparently no Montana cases defining the measure of damage for the outright killing of breeding stock.”

In compliance with that order, the plaintiff was allowed to present expert testimony as to the embryo production and implantation process, although plaintiff was prevented from introducing testimony as to monetary lost profits. The jury, in returning a market value of $101,500 for the two Salers cows, must have considered their special attributes for breeding purposes. The judgment in the amount of $71,050, computed on the basis of plaintiff’s 30 percent negligence, has been satisfied and is not the subject of this appeal. To now remand this case to a different jury on the issue of lost profits from the date of accident to the date of availability of replacement cows seems to be a subversion of the jury process. It appears to me that, if this Court is determined to adopt the factory theory of embryo production, this matter should be remanded for trial on all issues, so that there can be no duplication of damages by two separate juries.

An additional ground for my disagreement is that the appellant has, in effect, conceded that comparable cows were available immediately, but is contending that because of financial circumstances he could not replace them until after the judgment in this case was satisfied.

The following is a quote from appellant’s brief, pages 16 and 17:

“McPherson is a businessman. He purchased assets and placed them in production, expecting revenues from embryo sales to repay him the purchase price and yield a profit. When the Schlemmers caused the loss of his assets, they incurred liability for the fair market value of those assets. If they had paid McPherson immediately, he could have replaced them without interrupting production, and been fully compensated for all the detriment he suffered. However, the Schlemmers did not pay McPherson until required to do so by the jury’s verdict. That delay prevented McPherson from producing embryos, and thereby caused him to lose profits he should have received from his investment in the cows.” (Emphasis added.)

Instead of adopting the New York trial court opinion of Snyder, supra, as authority, I would affirm the District Court’s reliance on Covey, supra.

In my opinion the District Court did not manifestly abuse its discretion and I would affirm the order denying a new trial on the issue of lost profits and the order denying prejudgment interest.


author: MR. JUSTICE McDONOUGH

text:
    In re the MARRIAGE OF CHARLES R. ANDERSON, Petitioner and Respondent, and LINDA L. ANDERSON, Respondent and Appellant.
    No. 87-132.
    Submitted on Briefs Sept. 25, 1987.
    Decided Jan. 8, 1988.
    Rehearing Denied Feb. 4, 1988.
    748 P.2d 469.

      Mulroney, Delaney & Scott, P. Mars Scott, Missoula, for respondent and appellant.
    Mark A. Vucurovich, Butte, for petitioner and respondent.
   MR. JUSTICE McDONOUGH

delivered the Opinion of the Court.

This case concerns a marriage dissolution. The issues on appeal concern the distribution of the marital estate, maintenance, and child support. We affirm issues 1, 3 and 4 and reverse issue 2.

The District Court of the Second Judicial District entered its final decree on February 13, 1987. The wife, Linda L. Anderson, received property valued at $120,222.00, the husband, Charles R. Anderson (Rick), received property worth $108,724.00. Rick was given responsibility for $83,146.00 of the marital debts, Linda was given responsibility for $30,000. Rick was ordered to pay $350 a month per child for child support. In addition, he is primarily responsible for medical and dental services for the children and must keep them as beneficiaries of existing life insurance policies.

Linda presents these issues for review:

(1) Did the District Court err by refusing to award rehabilitative maintenance to the wife?

(2) Did the District Court err in setting child support payments at $700.00 a month rather than $900.00 as requested by the wife?

(3) Did the District Court err in inventorying, valuing and distributing the marital estate in the following particulars:

(a) the valuation of the clothing store “Linda’s” and ordering Linda to be solely responsible for its debts?

(b) failing to identify the cash value of life insurance policies in the division of marital property?

(c) not ordering the Georgetown Lake property sold and the proceeds split between the parties?

(d) valuing the Bayard Street property?

(4) Did the District Court err in refusing to award attorney fees and costs to Linda?

ISSUE I

The parties were married on September 13, 1969. Two children were born of the marriage, both are minors. The son is 16 years old and the daughter is 15 years of age. The parties have stipulated to joint custody of the children, with Linda as the primary custodian. Rick received a law degree from the University of Montana. He is currently a partner in a law firm. His earnings in 1986 were $117,000, including bonuses. Linda has a high school education and is currently living in Seattle where she is employed by Nordstroms part time as a salesclerk earning $7,824.00 annually.

During the marriage and while Rick was in school both parties were employed outside the home in various positions. At one point Linda was the owner and operator of two retail clothing stores, “Linda’s” and “Matty’s Kids”. The parties still own “Linda’s”.

Linda contends that the District Court erred when it refused to award her $2,000.00 a month for five years as rehabilitative maintenance in order to offset Rick’s greater future earning capacity, compensate Linda for the high standard of living achieved by the couple and prevent unjust enrichment to Rick.

The decision to award maintenance is governed by Section 40-4-203, MCA, which provides:

“(1) In a proceeding for dissolution of marriage or legal separation or a proceeding for maintenance following dissolution of the marriage by a court which lacked personal jurisdiction over the absent spouse, the court may grant a maintenance order for either spouse only if it finds that the spouse seeking maintenance:
“(a) lacks sufficient property to provide for his reasonable needs; and
“(b) is unable to support himself through appropriate employment or is the custodian of a child whose condition or circumstances make it appropriate that the custodian not be required to seek employment outside the home.
“(2) The maintenance order shall be in such amounts and for such periods of time as the court deems just, without regard to marital misconduct, and after considering all relevant facts including:
“(a) the financial resources of the party seeking maintenance, including marital property apportioned to him and his ability to meet his needs independently, including the extent to which a provision for support of a child living with the party includes a sum for that party as custodian;
“(b) the time necessary to acquire sufficient education or training to enable the party seeking maintenance to find appropriate employment;
“(c) the standard of living established during the marriage;
“(d) the duration of the marriage;
“(e) the age and the physical and emotional condition of the spouse seeking maintenance; and
“(f) the ability of the spouse from whom maintenance is sought to meet his needs while meeting those of the spouse seeking maintenance.”

The standard of review for awarding maintenance was articulated in In re the Marriage of Aanenson (1979), 183 Mont. 229, 235, 598 P.2d 1120, 1123. “The District Court has wide discretion in the determination of maintenance awards, and that discretion is not to be disturbed unless clearly erroneous.” Linda’s claim for maintenance fails to meet the statutory requirements. Linda has received a substantial portion of the marital estate, including income producing property and her business, “Linda’s”. The District Court also found that Linda was able to support herself through appropriate employment. Thus, the District Court did not abuse its discretion when it refused to award maintenance.

ISSUE II

Linda has contended that the court erred in setting the amount of child support. The District Court awarded Linda $700 a month instead of $900 a month as she requested. The award made by the District Court will not be disturbed unless there is clear abuse of discretion resulting in substantial injustice. In re Marriage of Alt, (Mont. 1985), [218 Mont. 327,] 708 P.2d 258, 42 St.Rep. 1621. Section 40-4-204(1), MCA, provides the statutory guidelines for setting appropriate child support obligations:

“(1) In a proceeding for dissolution of marriage, legal separation, maintenance, or child support, the court may order either or both parents owing a duty of support to a child to pay an amount reasonable or necessary for his support, without regard to marital misconduct, after considering all relevant factors including:
“(a) the financial resources of the child;
“(b) the financial resources of the custodial parent;
“(c) the standard of living the child would have enjoyed had the marriage not been dissolved;
“(d) the physical and emotional condition of the child and his educational needs;
“(e) the financial resources and needs of the noncustodial parent; and
“(f) for the purposes of determining a minimum amount for support, the amount received by children under the AFDC program, as defined in 53-2-702.”

Here the amount arrived at by the District Court disregards two important statutory factors, the standard of living the children would have enjoyed had the marriage not been dissolved and the financial resources and needs of the noncustodial parent. The sum awarded by the District Court is not commensurate with Rick’s financial resources nor with the standard of living enjoyed by the children prior to dissolution. Upholding the District Court’s award would result in substantial injustice to the children who are entitled to share in the high standard of living achieved by their father. Linda documented the children’s monthly needs and requested $900.00 a month, which is less than would be required to pay under the Carlson formula calculations. In re Marriage of Carlson (Mont. 1984), [214 Mont. 209,] 693 P.2d 496, 500, 41 St.Rep. 2419, 2423. We reverse on this issue and remand to the District Court with instructions to grant $900.00 a month for child support.

ISSUE III

Linda also maintains that the District Court erred in valuing several items of property. The standard for reviewing a District Court’s division of marital property was articulated in In re the Marriage of Hall (Mont. 1987), [228 Mont. 36,] 740 P.2d 684, 686, 44 St.Rep. 1321, 1323:

“We have concluded that in a property distribution review in marriage dissolution, this court will reverse a district court only upon a showing that the district court has acted arbitrarily or has committed a clear abuse of discretion, resulting in either instance in substantial injustice.”

(a) The first item of property, “Linda’s”, was valued at $28,642 with an accompanying debt of $30,000. Linda was awarded the store and was made responsible for it’s debts. As the District Court stated “the value of ‘Linda’s’ was troublesome.” Though the valuation was difficult and conflicting evidence was presented, the figures arrived at by the District Court are supported by evidence. The accountant valued the business at $73,000 in 1985. In 1986 the store suffered financially. Jolene Norton’s testimony about insufficient inventory provided some evidence that Linda was responsible for the store’s present condition. There is no clear abuse of discretion resulting in substantial injustice, thus, we will uphold the District Court.

(b) The second items are insurance policies. Linda claims that the District Court erred when it failed to account for the cash value of the life insurance policies in the property distribution. The District Court did make a finding concerning the policies: “He shall also keep the children as beneficiaries on the existing life insurance policies.” (Finding of Fact No. 3). As we held in In re the Marriage of Larson, (1982), 200 Mont. 134, 139, 649 P.2d 1351, 1354, “Item-by-item findings are not required in property division cases, but findings nevertheless must be sufficiently adequate to ensure that this Court need not succumb to speculation while assessing the conscientiousness or reasonableness of the District Court’s judgment.” Here, we are able to assess the reasonableness of the District Court’s judgment. The District Court provided for disposition of the life insurance policies and did so within its discretion.

(c) Linda also contests the valuation of the Georgetown Lake property. The District Court valued the property at $25,000 based upon recent sales of similar property as testified to by Rick. The figure arrived at by the District Court is supported by the evidence. There is no abuse of discretion.

(d) Finally, Linda asserts that the District Court erred in valuing the Bayard Street property. Once again, the figure arrived at by the District Court was supported by evidence. Rick testified as to his equity in the Bayard property. Linda never presented any evidence to contradict this testimony. The District Court did not exceed its discretion in adopting this value.

ISSUE IV

The final issue on appeal concerns the District Court’s refusal to grant Linda attorney fees. Section 40-4-110, MCA, governs awards of attorney fees in dissolution actions. This Court has held that the award of fees is permissive under this statute. In re Marriage of Obergfell, (Mont. 1985), [218 Mont. 83,] 708 P.2d 561, 42 St.Rep. 1414. The standard of review is whether the District Court abused its discretion in refusing to award such fees. In re Marriage of Gallinger (Mont. 1986), [221 Mont. 463,] 719 P.2d 777, 43 St.Rep. 976. The District Court did not exceed its discretion when it refused to grant Linda attorney fees on the grounds that she received more than half the marital estate including income producing property and that she is capable of supporting herself through appropriate employment.

We affirm on all issues except issue 2 which we reverse and remand to the District Court for entry of a decree in conformance with this opinion.

MR. CHIEF JUSTICE TURNAGE and MR. JUSTICES HARRISON, SHEEHY and GULBRANDSON concur.


author: MR. JUSTICE HUNT

text:
    MURLAND W. SEARIGHT and Virginia Searight, Plaintiff and Appellants, v. MICHAEL CIMINO, Defendant and Respondent.
    No. 87-321.
    Submitted on Briefs Nov. 6, 1987.
    Decided Jan. 12, 1988.
    Rehearing Denied Feb. 4, 1988.
    748 P.2d 948.

      Patrick M. Springer, Kalispell, for plaintiffs and appellants.

      James C. Bartlett, Kalispell, for defendant and respondent.
   MR. JUSTICE HUNT

delivered the Opinion of the Court.

Appellants appeal from a judgment and order of the District Court, Eleventh Judicial District, Flathead County, denying appellants’ prayer for Rule 11 sanctions against respondent and imposing sanctions in favor of respondent. We affirm.

Appellants raise five issues on appeal.

1. Did the District Court deprive appellants of property without due process in violation of the United States and Montana Constitutions?

2. Did the District Court otherwise err by ruling that appellants were required to prepare and convey an easement to respondent?

3. Did the District Court abuse its discretion by adopting verbatim respondent’s proposed findings of fact and conclusions of law?

4. Did the court err by failing to impose sanctions on respondent and his counsel as required by Rule 11, M.R.Civ.P.?

5. Did the court abuse its discretion when it imposed Rule 11 sanctions on appellants?

Respondent raised two issues of his own.

1. Was appellants’ motion to alter or amend the judgment timely filed, and was the notice of appeal timely filed?

2. Should sanctions be imposed against appellants pursuant to Rule 32, M.R.App.P., for bringing this appeal?

This dispute initially arose during litigation between the parties concerning respondent Cimino’s liability for half the costs of the construction of an airstrip on property owned by appellants, the Searights, and adjacent to property the Searights had sold to Cimino. On May 14, 1985, judgment was entered in favor of the Searights. The contract for deed contained a provision that allowed Cimino the right to use the airstrip and obligated the Searights to secure that right in the event they sold their property. On June 5, 1986, Cimino’s attorney mailed the Searights’ attorney a check in satisfaction of the judgment and a document for the Searights’ signatures giving Cimino an easement for the use of the airstrip. Shortly thereafter, Murland Searight sent his attorney a letter in which he complained that the easement went outside the scope of the contract for deed and that he would not sign it. Cimino’s attorney received a copy of the letter and was also told by the Searights’ attorney that no easement would be forthcoming.

On July 29,1986, respondent Cimino filed a motion to cause appellants to execute an airport easement. Murland Searight fired his attorney on August 6, 1986. On August 12, the Searights’ new attorney filed a motion to dismiss or in the alternative for a date certain and a request for sanctions pursuant to Rule 11, of the Montana Rules of Civil Procedure. A hearing was held August 13 on respondent’s motion for easement. An easement agreeable to both parties was eventually prepared, signed, and recorded. On December 5, 1986, Searights again requested sanctions against Cimino for bringing the motion for easement. A hearing on this motion was held February 20, 1987. Both parties presented testimony. An order in favor of the respondent was entered on March 12, 1987, levying sanctions of $100 against the Searights on the Court’s own motion. The Searights then made a motion to alter or amend the judgment and a motion for stay of execution which were denied. They appeal from the March 12 order and from denial of their subsequent motions.

Before addressing the merits of the case we will turn our attention to respondent’s claim that appellants’ motion to alter or amend and notice of appeal were untimely.

The Searights made a motion to alter and amend judgment pursuant to Rule 59(g), M.R.Civ.P. This rule gives a party 10 days after the service of the notice of the entry of the judgment to serve this motion. When notice is served by mail the period for taking an action increases by three days. Rule 6(e), M.R.Civ.P. The notice of the entry of the judgment was mailed on May 4. This gave appellants until May 18 to file the motion. (May 17 fell on a Sunday so the period was extended to Monday. Rule 6(a), M.R.Civ.P.) Appellants mailed their motion on May 15. Service by mail is completed upon mailing. Rule 5(b), M.R.Civ.P. Therefore appellants’ motion was served well within the statutory period.

Appellants’ motion was denied June 17,1987. Appellant filed a notice of appeal July 14, 1987 again within the 30 day statutory period. Rule 5, M.R.App.P. Notice of appeal was timely filed.

We now address the merits and combine appellants’ issues Nos. 1 and 2 as follows:

Did the District Court deprive appellants of property in violation of the due process clause in the Montana and United States Constitutions or otherwise err when it ordered the appellants to prepare and convey an easement to the respondent?

Respondent argues that this issue is not properly before the court because it is a matter which was not raised or objected to at trial, and cannot be heard for the first time on appeal. Appellants argue that because it involves a fundamental constitutional right it may be heard.

This Court held in City of Missoula v. Mix (1950), 123 Mont. 365, 214 P.2d 212, that an easement is a property right protected by the constitutional guarantee against the taking of private property without just compensation. In cases of fundamental rights this Court will hear constitutional issues on appeal for the first time. Montana Power Co. v. Fondren (1987), [226 Mont. 500,] 737 P.2d 1138, 1144-45, 44 St.Rep. 850, 858.

Appellants’ main claim is that they were denied a hearing in a meaningful manner. Unfortunately for their claim, no record was made of the hearing on respondent’s motion for an easement. There is evidence on the record, however, that shows the appellants made no objection whatsoever to the court’s suggestion that an easement be drawn. Apparently, no order was made and the motion was continued with the intent that the matter be settled by counsel. This was done to the satisfaction of both parties. The appellant, Murland, testified at the sanctions hearing that he had been willing to grant Cimino an easement all along for some 7 or 8 years. It was appellants’ attorney who drafted the easement. They can hardly claim that they have been unconstitutionally deprived of their property.

Appellants ask that we find the District Court erred in ordering Searight to convey an easement to Cimino. There is some confusion as to whether an order was actually issued or whether the parties were simply told to work it out amongst themselves. In any event, no record of the relevant hearing was made. This Court cannot base its review on thin air. For a question to be reviewable, the error complained of must be founded on or be borne out by the record, which should be in such form as to enable the reviewing court to determine what the error is. Francis v. Heidel (1937), 104 Mont. 580, 586, 68 P.2d 583, 585, quoting 4 C.J.S. Appeal and Error, Section 1154 (1937). It is the duty of counsel to preserve the record for appellate review. Scofield v. Estate of Wood (Mont. 1984), [211 Mont. 59,] 683 P.2d 1300, 1302, 41 St.Rep. 1212, 1215. Because there is no record of their efforts, we will not disturb the actions of the parties in putting the easement on the record.

Appellants’ next dispute the District Court’s findings of fact and conclusions of law resulting from the hearing on sanctions. Appellant finds fault with all eleven of the court’s findings of fact and argues that the court uncritically adopted the respondent’s proposed findings of fact. This Court is not compelled when confronted with the verbatim adoption of proposed findings and conclusions to find such inherent fault therein that the prevailing party must be reversed. Sawyer-Adecor Intern., Inc. v. Anglin (1982), 198 Mont. 440, 447, 646 P.2d 1194, 1198. The standard for review of the findings and conclusions is the same. City of Billings v. Public Service Com’n. (Mont. 1981), [_ Mont _,] 631 P.2d 1295, 1301, 38 St.Rep. 1162, 1165. The District Court’s findings will not be rejected if they are supported by the evidence. 631 P.2d at 1301.

After close review of the record, this Court finds only two instances where the findings are not supported by substantial credible evidence. Finding of fact No. 11 contains the following statement:

“. . . and since this Court had previously found that an easement was warranted the Motion for Sanctions under Rule 11 should never have been brought.”

Appellants argue that this ignores the fact that a motion for Rule 11 sanctions was contained in their August 12, 1986 motion to dismiss respondent’s motion for an easement. The hearing on respondent’s motion was held the next day on August 13. Apparently, the District Court focused only on the appellants’ second motion for sanctions which was filed on December 5, 1986. The District Court also misstated a fact in its conclusion of law No. 6. In it, the court finds that the correspondence between Murland Searight and his attorney refusing Cimino’s easement was only produced at the request of Cimino’s counsel. This is not correct. A copy of this letter had been sent to respondent’s counsel at the time it was written and attached to respondent’s motion for easement. We hold, however, that both misstatements constitute harmless error because neither are necessary to support the District Court’s decision.

Appellant’s fourth issue alleges the District Court committed error in failing to impose Rule 11 sanctions against the respondent. Rule 11 states in pertinent part:

“Every pleading, motion, or other paper of a party represented by an attorney shall be signed by at least one attorney of record in his individual name, whose address shall be stated. A party who is not represented by an attorney shall sign his pleading, motion, or other paper and state his address. Except when otherwise specifically provided by rule or statute, pleadings need not be verified or accompanied by affidavit. The signature of an attorney or party constitutes a certificate by him that he has read the pleading, motion, or other paper; that to the best of his knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law, and that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation

Rule 11, M.R.Civ.P.

Appellants argue that respondent’s motion to cause appellants to execute an easement was not grounded in fact or warranted by existing law. They argue that the motion was based on Rule 70, M.R.Civ.P. which calls for the enforcement of a judgment and no such judgment had been made. They also argue that the easement proposed was needless and inflammatory and that the motion was calculated to frustrate appellants.

The current Rule 11, M.R.Civ.P. is virtually identical to the federal rule. Sanctions under this rule have been rarely imposed in Montana resulting in little case law. Federal authority indicates that the duty of the lawyer is to investigate both as to law and fact before filing a motion. The standard is that of reasonableness under the circumstances. Golden Eagle Distributing Corp. v. Burroughs Corp. (9th Cir. 1986), 801 F.2d 1531, 1536. Because the rule mandates sanctions if violated, the duty of an appellate court is to review de novo the legal question of whether the specific conduct in question violated the rule. Golden Eagle Distributing Corp., 801 F.2d at 1538; Zaldivar v. City of Los Angeles (9th Cir. 1986), 780 F.2d 823, 828; Eastway Const. Corp. v. City of New York (2d Cir. 1985), 762 F.2d 243, 254 n. 7.

Appellants are correct in their position that Rule 70, M.R.Civ.P. cannot be used as the basis for respondent’s motion for an easement. Rule 70 is a civil contempt statute that provides:

“If a judgment directs a party to execute a conveyance of land or to deliver deeds or other documents or to perform any other specific act and the party fails to comply within the time specified, the court may direct the act to be done at the cost of the disobedient party by some other person appointed by the court and the act when so done has like eifect as if done by the party.”

This Court can find no judgment that directs appellants to convey an easement to respondent, and respondent does not argue that there is one. This does not, however, defeat respondent’s motion. There is substantial evidence on the record that the appellants agreed, at least superficially, to give respondent an easement. Cimino requested one several times over a period of 7 or 8 years and each time had been told he could have one. Yet when Cimino’s attorney finally presented one, appellant responded to his own attorney in a letter which reads in pertinent part:

“In fact, the agreement does not contemplate the granting of any easement at all. If he is not content with the rights assured in the contract for deed, I am willing to execute a separate irrevocable license embodying the language of the Contract for Deed. I will not grant him additional privileges or rights beyond those already agreed.”

This put Cimino’s attorney in a difficult spot. Searights’ attorney told Cimino’s no easement would be forthcoming. Cimino’s attorney could not contact Searight directly as he was still represented by counsel. It was reasonable to assume that the Searights were reversing their position as to the granting of an easement. He could either do nothing or attempt to secure his client’s position by taking action through the court. He chose the latter. Although Cimino’s attorney took action using an inappropriate rule, it was not unreasonable under the circumstances. We affirm the District Court.

The appellants lastly appeal the District Court’s imposition of Rule 11 sanctions in the amount of $100. Using the same analysis discussed above, we hold that the court did not err. The purpose of Rule 11 is to reduce frivolous claims and motions. Appellants first raised the issue of sanctions in a motion to dismiss respondent’s motion for easement. An easement agreeable to all was prepared by appellants’ attorney and executed. Since appellant Murland testified he had been willing to grant an easement all along and this one was agreeable to him, that should have ended the matter. Yet on December 5, 1986, the appellants again filed a request for Rule 11 sanctions citing respondent’s motion for an easement as its basis. The District Court found that the appellants had made contradictory statements concerning their willingness to grant an easement. Throughout this litigation the appellants have acted in a contradictory and inconsistent manner with regard to the easement. Once an easement that was agreeable to Searights, one that the Searights claim they were willing to give all along, was executed there was no basis for further action. We affirm the District Court’s imposition of Rule 11 sanctions on appellants.

Respondent has requested that we impose sanctions for a frivolous appeal under Rule 32, M.R.App.P. We decline. Where a reasonable ground for appeal exists no sanctions under Rule 32 will be imposed. Erdman v. C & C Sales, Inc. (1978), 176 Mont. 177, 184, 577 P.2d 55, 59. There was reasonable doubt as to the sufficiency of the findings of fact.

Affirmed.

MR. CHIEF JUSTICE TURNAGE and MR. JUSTICES HARRISON, WEBER and SHEEHY concur.