author: MR. JUSTICE WEBER

text:
    TAYLOR, THON, THOMPSON & PETERSON, a Partnership, Plaintiffs and Respondents, v. DOUG CANNADAY and Shanne Cannaday, Defendants and Appellants.
    No. 87-54.
    Submitted on Briefs Nov. 6, 1987.
    Decided Jan. 18, 1988.
    749 P.2d 63.

      Doug W. Cannaday, pro se.
    Shanne L. Cannaday, pro se.
    M. Dean Jellison, Kalispell, for plaintiffs and respondents.
   MR. JUSTICE WEBER

delivered the Opinion of the Court.

Taylor, Thon, Thompson & Peterson (architects) brought suit against the Cannadays to recover fees for architectural services. After a trial to the judge, the District Court for the Eleventh Judicial District, Flathead County, entered judgment for the architects in the net amount of $90,989.28. Doug Cannaday appeals. We affirm the District Court.

We restate the issues as follows:

1. Did the court err by awarding interest to the architects?

2. Did the court err by refusing to vacate the second prejudgment attachment?

3. Did the court err by refusing to use the Architects’ Handbook of Professional Practice as controlling authority to establish the architects’ duties?

4. Are the court’s findings supported by substantial evidence?

5. Did the court err by failing to enter judgment and damages for the Cannadays pursuant to Section 8.6.412, ARM, and the Montana Consumer Protection Act?

6. Did the court err in its award of damages under the parties’ contract?

In the fall of 1981, the Cannadays contracted with the architects to design and oversee construction of a summer home on Flathead Lake. The Cannadays were Canadian citizens. Defendant Shanne Cannaday owned an existing home on Flathead Lake. Both Cannadays desired to build a second and larger home.

In April 1982, the Cannadays contracted with a general contractor for the amount of the low bid which was $1,226,000. The construction contract documents were signed by the parties. Construction was then started by the general contractor and continued until July 1982, when the contractor stopped work because of the Cannadays’ failure to make payments due under the contract. Construction was not resumed by the general contractor and the home was not completed.

In December 1982, the architects sued the Cannadays for services rendered plus interest. The Cannadays counterclaimed, alleging breach of contract, negligence, constructive fraud, and wrongful attachment. After a one-week trial, the District Judge entered extensive findings and conclusions. He awarded the architects their fee, with minor set-offs for the Cannadays. The judgment has been satisfied by a sheriff’s sale of the existing Flathead Lake home. Doug Cannaday, acting pro se, appeals. The architects moved to dismiss the appeal for mootness because the Cannadays have asserted that they have no interest in the existing Flathead Lake home. The Court has denied that motion.

I

Did the court err by awarding interest to the architects?

The lower court awarded interest to the architects in its finding 25 and in the judgment. The court did not state the basis for the award of interest. In his brief, Mr. Cannaday argues that this is not a proper case for an award of interest under Section 27-1-211, MCA.

The architects point out that they are entitled to interest on fees due and unpaid at the rate of twelve per cent per annum, under Article 14.6 of the Cannaday-architect contract. Section 27-1-213, MCA, provides for the award of interest which is stipulated in a contract. We conclude that interest was properly allowable to the architects in this case, under the terms of the contract.

II

Did the court err by refusing to vacate the second prejudgment attachment?

At the commencement of this action, the architects discovered that the Cannadays did not have enough interest in the land and completed portions of the new house to pay the architects’ fees. They obtained a writ of attachment against Shanne Cannaday’s existing home on Flathead Lake. The District Court later granted the Cannadays’ motion to strike the attachment, for three reasons. It found that the attachment was improperly issued by the clerk rather than the judge, that the notice was not posted, and that no notice of the right to a post-service hearing had been served upon Shanne Cannaday. At the same time, the court issued a second writ of attachment on the same property. That writ included the notice of the right to a post-service hearing and was posted pursuant to Section 27-18-701, MCA. Mr. Cannaday argues that this second writ should have been dismissed because it was not served personally upon him, Shanne Cannaday, or their attorney as required by the Montana Rules of Civil Procedure. However, in a situation such as this, where specific statutes provide for the method of service, those specifics govern over the general rules set out in the Montana Rules of Civil Procedure. Section 27-18-701, MCA, provides for service by posting on the property and in three public places in the county if the defendant cannot be found for personal service. The District Court concluded that the architects complied with that requirement. We affirm that ruling.

III

Did the court err by refusing to use the Architects’ Handbook of Professional Practice as controlling authority to establish the architects’ duties?

The court admitted in evidence a handbook published by the American Institute of Architects. The handbook describes the standard of practice for architects in the United States. Mr. Cannaday’s argument on appeal is, in effect, that any deviation from the standards set forth in that handbook should be deemed negligence per se.

While violation of a statute may be classed as negligence per se, violation of other regulations is not generally classed as negligence per se. Stepanek v. Kober Const. (Mont. 1981), [_ Mont. _,] 625 P.2d 51, 55-56, 38 St.Rep. 385, 391. More precisely on point, absent specific statutory incorporation, the provisions of a national code are only evidence of negligence, not conclusive proof thereof. Barmeyer v. Montana Power Co. (1983), 202 Mont. 185, 202, 657 P.2d 594, 602-03.

We affirm the holding of the lower court that the handbook standards were to be considered as evidence of a duty on the part of the architects. We refuse to accept the contention of the Cannadays that the violation of such standards constituted negligence per se on the part of the architects.

IV

Are the court’s findings supported by substantial evidence?

Mr. Cannaday challenges the court’s findings that the architects did not breach their contract when they 1) approved certain applications and certificates for payment submitted by the general contractor, 2) administered the contract with the concrete contractor, and 3) issued the Notice to Proceed. He also challenges finding No. 37 that Shanne Cannaday was bound by the acts of Doug Cannaday.

This Court’s standard of review of a lower court’s findings of fact is whether the findings are supported by substantial evidence. Where there is conflicting evidence, the trial court will not be overturned unless there is a clear preponderance of evidence against the findings. Phennicie v. Phennicie (1979), 185 Mont. 120, 125-26, 604 P.2d 787, 790. The record contains conflicting testimony on whether the architects’ actions were or were not proper and within the terms of the contract, in the first three areas challenged by Mr. Cannaday. After reviewing the record, we conclude that substantial evidence supports the court’s findings that the architects did not breach the contract.

Shanne Cannaday signed the first contract with the architects, but did not sign subsequent modifications to the contract. Doug Cannaday argues that because she did not sign the modifications, she is not bound by the contract. The District Court found that

“[i]t is general practice in construction of homes that there be one person designated acting on behalf of the owner with the architect as well as contractor during the course of construction, and that any acts by such person are binding on the owners.”

The court then ruled that any acts of Doug Cannaday were binding on Shanne Cannaday. The record demonstrates that the modifications to the architectural contract which Shanne Cannaday did not sign resulted in a reduction of the architects’ fee. That reduction was reflected in the computation by the court and was to the benefit of Shanne Cannaday. There is nothing in the record to suggest that the modifications had the effect of releasing Shanne Cannaday from her obligation.

We affirm the holding of the District Court that under the facts of the present case, defendant Shanne Cannaday was liable for the architects’ fees along with Doug Cannaday.

V

Did the court err by failing to enter judgment and damages for the Cannadays pursuant to Section 8.6.412, A.R.M., and the Montana Consumer Protection Act?

The lower court made offsets in the judgment for a spiral staircase removed from the property and proceeds from the sale of timber retained by the architects in violation of their duties to the Cannadays. The offsets were $500 for the spiral staircase and $859 for the timber, plus exemplary damages of $1,000 and $1,500. Mr. Cannaday contends that the retaining of these items by the architects violated Section 8.6.412, A.R.M., and the Consumer Protection Act, Section 30-14-101 through 1113, MCA.

Section 8.6.412, A.R.M., sets forth standards of professional conduct to be used by the Board of Architects. The section states that violation of those standards is grounds for disciplinary action. Section 8.6.414, ARM, describes the disciplinary action possible, in-eluding such penalties as revocation or suspension of the architect’s license by the Board. Judgment in district court is not listed as a penalty for violation of the standards. We conclude that the District Court did not err in failing to enter judgment under this section.

No authority has been cited which would require the District Court to apply or award damages under the Consumer Protection Act (Act). Application of the Act would have to be based on the general prohibition of “unfair or deceptive acts or practices in the conduct of any trade or commerce.” Section 30-14-103, MCA. No evidence was submitted demonstrating a violation of that prohibition. We conclude that the District Court did not err in failing to award damages under the Act.

VI

Did the court err in its award of damages under the parties’ contract?

Mr. Cannaday restates that the architects have breached their contract, as discussed above. He asserts that the damages resulting from those breaches are greater than the amount of fees to which the architects are entitled, so that the architects are not entitled to any contract fees. Since we have affirmed the District Court’s findings that the architects did not breach the contract, it follows that the court did not err in awarding damages under the contract.

In its findings of fact the District Court concluded there was a balance owing to the architects of $77,004.68 for architect fees. The judgment as subsequently entered awarded $72,604.68 for architect fees. Mr. Cannaday does not take issue with that change in computation. The architects concede that the District Judge reduced their fees by about $5,000 because he concluded the construction was not completed to the level contended by the architects. The architects have agreed to the reduction of fees as contained in the judgment. As a result, the apparent conflict is for the benefit of the Cannadays and properly may be disregarded.

The judgment of the District Court is affirmed.

MR. JUSTICES SHEEHY, GULBRANDSON, HUNT and Mc-DONOUGH concur.


source: Caselaw Access Project

author: MR. JUSTICE McDONOUGH

license: Public Domain

text:
    EUGENE MOORE and Jeannine Moore, Plaintiffs and Respondents, v. BERNARD E. HARDY, Defendant and Appellant.
    No. 86-363.
    Submitted on Briefs Sept. 30, 1987.
    Decided Jan. 19, 1988.
    748 P.2d 477.

      Donald A. Ranstrom, Chinook, for defendant and appellant.
    Jardine, Stephenson, Blewett & Weaver, K. Dale Schwanke, Great Falls, for plaintiffs and respondents.
   MR. JUSTICE McDONOUGH

delivered the Opinion of the Court.

Defendant Hardy appeals the Twelfth Judicial District Court’s ruling in favor of plaintiffs. We affirm.

On April 1, 1976, appellant Bernard E. Hardy entered into an agreement with Jack Lang to purchase a farm, crops and a lease known as the McKee lease. Hardy also received the right to harvest the 1976 winterwheat crop planted by Lang. Hardy later obtained a renewal of the McKee lease until 1983.

In the spring of 1978 Hardy entered into two agreements with Paul Jackson where Hardy traded his equity in the Lang farm and some Florida property for other property in Florida. Under this exchange, Jackson was entitled to all of Hardy’s rights, including the right to the McKee lease. The then growing crop and its expenses were Jackson’s. Hardy was to continue to farm for Jackson.

In September 1978, Paul Jackson negotiated an exchange of the Lang farm with Dr. Eugene and Mrs. Jeannine Moore. The Moores understood that the McKee lease would be assigned if they bought the farm. They were to receive a growing crop when they bought the farm. Several agreements were executed to facilitate the exchange of properties. One of the agreements provided that the farm would be leased back by Jackson under a five-year lease. Jackson was to pay a yearly cash rental each February of $107,000. The lease provided that Hardy was to farm and operate the farm in a good and farmer-like manner and consistent with custom and practice prevailing in the area. All parties understood that Hardy was to continue farming the place. The lease was silent as to entitlement to crops in the event of default or termination of the lease.

Hardy and Jackson entered into an agreement and cash lease of which the Moores were not advised. Under this arrangement Hardy was to custom farm the Lang farm for Jackson through December 31, 1979. Jackson was to pay Hardy and Hardy had a lien on the 1979 crop that the Moores bought.

On February 1, 1979, Jackson paid the Lang farm payment to Moores. After harvesting the 1979 crop Hardy made the 1980 payment directly to the escrow. Hardy again made the 1981 payment directly to the escrow after harvesting the 1980 crop. In 1981 he harvested the crop but did not make the 1982 payment to anyone. Jackson did not make the Moore payment either and filed for bankruptcy on February 26, 1982. The Moore’s gave notice in April 1982 to both Jackson and Hardy of default and that the lease was terminated.

The Moores then retained a person to farm the farm for them. In August 1982 Hardy attempted to harvest the 1982 winterwheat crop planted in Fall 1981. The Moores secured an order restraining Hardy from any further harvesting. The restraining order was set aside and Hardy was allowed to harvest the crop as long as he accounted for it. Hardy delivered the grain to an elevator for storage rather than store the grain on the farm. The crop proceeds were put into a trust held by his attorney.

The Moore’s initiated suit claiming they were entitled to the crop proceeds, compensation for the value of the McKee lease, storage costs and punitive damages. A bench trial was held and the District Court found in favor of the Moores. After judgment was entered, Hardy voluntarily paid over to the Moores the share of the 1982 crop proceeds his attorney held.

Hardy is now appealing the District Court’s judgment and raises these issues on appeal.

1) Whether the District Court erred in adopting plaintiff Moores’ proposed findings and conclusions virtually verbatim?

2) (By Respondents) Whether issues #3 and #4 are moot?

3) Whether the District Court erred in failing to consider the doctrine of waygoing crops?

4) Whether the District Court improperly permitted introduction of evidence as to custom and usage to determine entitlement to crop proceeds?

5) Whether damages were properly assessed?

6) Whether punitive damages were proper?

7) Whether storage charges were properly assessed?

ISSUE I

Appellant contends that the District Court’s Findings of Fact and Conclusions of Law are an identical reproduction of the proposed findings and conclusions submitted by respondents. Appellants in particular point to findings number 13, 14 and 23 as erroneous and unsupported by evidence.

The standard by which findings of fact and conclusions of law are measured was enunciated by this Court in In Re Marriage of Jensen (Mont. 1981), [_ Mont. _,] 631 P.2d 700, 703, 38 St.Rep. 1109, 1113. “Our ultimate test for adequacy of findings of fact is whether they are sufficiently comprehensive and pertinent to the issues to provide a basis for decision, and whether they are supported by the evidence presented.” The District Court’s reliance on counsel’s proposed findings of fact and conclusions of law does not automatically result in reversal. In In Re the Marriage of Alt (Mont. 1985), [218 Mont. 327,] 708 P.2d 258, 260, 42 St.Rep. 1621, 1623, this Court held “where, as here, findings and conclusions are sufficiently comprehensive and pertinent to the issues to provide a basis for decision, and are supported by the evidence, they will not be overturned simply because the court relied upon proposed findings and conclusions submitted by counsel.” Quoting Kowis v. Kowis (1983), 202 Mont. 371, 379, 658 P.2d 1084, 1088. The record contains sufficient evidence upon which the District Court could base its findings. We uphold the District Court.

ISSUE II

Respondent contends that appellant’s issues 3 and 4 are moot. These issues concern the ownership of the 1982 crop. Issue 3 is whether the District Court erred in failing to consider the doctrine of waygoing crops? Issue 4 is whether the District Court improperly permitted introduction of evidence as to custom and usage to determine entitlement to crop proceeds.

After judgment Hardy voluntarily paid to the Moores the share of the 1982 crop proceeds and interest that his attorney was holding. This was a partial satisfaction of the judgment. Hardy did not place any restrictions on the use of the funds or stay execution of the lower court’s judgment. The Moores used the proceeds to pay the balance of the Lang farm contract and pay income tax on the proceeds.

The unsuccessful party must seek to stay execution pending appeal. In Gallatin Trust and Savings Bank v. Henke (1969), 154 Mont. 170, 177, 461 P.2d 448, 451, this Court held that failure to preserve rights may result in mootness “the rule is well established that a supersedeas bond to preserve the rights of the unsuccessful party may be required and failure to post it makes the rights of the parties subject to execution, subsequent satisfaction of the judgment and possible mootness so far as appeals are concerned.”

Voluntary payment of a money judgment does not automatically render a cause moot. Montana National Bank of Roundup v. State Department of Revenue (1975), 167 Mont. 429, 432-33, 539 P.2d 722, 724, sets the standard “A defeated party’s compliance with the judgment renders his appeal moot only where the compliance makes the granting of effective relief by the appellate court impossible.” This is not the case here, partial payment of the money judgment does not render effective relief impossible. Issues 3 and 4 are not moot and we will address them.

ISSUE III

The District Court’s conclusion of law that the 1982 crop reverted to the Moores and they became entitled to all proceeds upon termination of the Jackson-Moore lease rests on two pivotal facts. The Jackson-Hardy lease which was subject to the fixed term Jackson-Moore lease was for a fixed term and Hardy did not pay rent in 1982.

The District Court was correct in not applying the doctrine of wayward crops. Section 70-26-206, MCA, provides statutory guidance concerning entitlement to crops. The statute provides “. . . a tenant at will or for an indefinite term may cultivate and harvest the crops growing at the end of his tenancy.” Hardy was neither a tenant at will or for an indefinite term.

Hardy’s tenancy came to an end due to a default before the lease was up. In 1982 neither Hardy nor Jackson paid rent. Both the fact that the tenancy ended because of a default and the fact that Hardy did not pay rent prevent Hardy from claiming the 1982 crop. “Thus, where a tenant before the expiration of his term surrenders to the landlord, or through some default forfeits his lease and the landlord re-enters, the latter is entitled to the growing crops upon the land and no right or title therein remains in the tenant.” 51 C.J.S. Landlord and Tenant Section 349 at 886.

ISSUE IV

In determining who was entitled to crop proceeds the District Court considered evidence of custom and usage and on the basis of custom and usage held that the Moores were entitled to the crop proceeds. Appellant contends this was error because no contract existed between the Moores and Hardy and thus evidence of custom and usage is inappropriate. Hardy, however, did not object to the introduction of this evidence at trial. By failing to object to admission of this evidence at trial, Hardy has waived his right to claim error on appeal. In re Schueren’s Estate (1973), 162 Mont. 417, 512 P.2d 1283.

ISSUE V

Hardy also claims that the District Court erred in assessing damages for the failure to assign the McKee lease to the Moores. He asserts that findings of fact 6 and 11 are not supported by evidence and that the court failed to apply Section 27-1-314, MCA, the proper statutory measure of damages.

Rule 52(a), M.R.Civ.P., provides “Findings of fact shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge of the credibility of the witnesses.” Substantial evidence is needed to support the lower court’s findings. Miller v. Watkins (1982), 200 Mont. 455, 461, 653 P.2d 126, 129. Testimony was presented, especially the testimony of Hardy himself, that supports the lower court’s findings that Hardy had an obligation to assign the McKee lease to the Moores. There certainly was enough “ ‘relevant evidence as a reasonable mind might accept as adequate to support a conclusion.’ ” Bushnell v. Cook (Mont. 1986), [221 Mont. 296,] 718 P.2d 665, 668, 43 St.Rep. 825, 828 (quoting State v. Plouffe (1982), 198 Mont. 379, 389, 646 P.2d 533, 539.)

Hardy’s assertion that the District Court failed to apply Section 27-1-314, MCA, the proper measure of damages is incorrect. Section 27-1-314, MCA, provides:

“Breach of agreement to convey real property. The detriment caused by the breach of an agreement to convey an estate in real property is considered to be the price paid and the expenses properly incurred in examining the title and preparing the necessary papers, with interest thereon. If the breach was in bad faith and the agreed price was less than the value of the estate, the detriment is also considered to include the difference between the agreed price and the value of the estate at the time of the breach and the expenses properly incurred in preparing to enter upon the land.”

The statute applies, a lease is an estate in real property and the amount of damages arrived at by the District Court is in accordance with Section 27-1-314, MCA. The assignments between Hardy, Jackson and the Moores effected an assignment of the McKee leasehold to the Moores. Hardy had an obligation to transfer the lease to the Moores. The lease was never transferred to the Moores. Fred Schafer testified that the value of the McKee lease was $100 an acre. It was within the District Court’s discretion to adopt the value of the lease as the amount of damages. The McKee lease was included in the assignment of the Lang farm and its value equals its portion of the total purchase price.

ISSUE VI

Hardy argues that punitive damages were improperly assessed against him for the failure to assign the McKee lease. There is substantial evidence in the record to support the District Court’s imposition of punitive damages. Section 27-1-221, MCA, governs the imposition of punitive damages. In this case the District Court found that “In failing to make the assignment over of the McKee Lease, Hardy breached the duty he had to do so and his actions in this regard were motivated purely by his desire to save the lease for himself after the Jackson bankruptcy, no matter what damage was done to the Moores by doing so. Hardy further attempted to avoid the duty to assign he had by interposing in bad faith and without justifiable cause, various defenses to the assignment of the lease.” (Conclusion of Law No. 4) The court’s conclusion which is based upon its findings of fact, is supported by evidence in the record and is in accordance with the requirements of Section 27-1-221, MCA.

ISSUE VII

Included in the damage award to the Moores was the sum of $4,645.69 for storage costs incurred at grain elevators because Hardy did not store the grain at the farm. Hardy claims that he was ordered by Judge Coder to take the crops to an elevator. Judge Coder’s order does not include a requirement to store the grain in an elevator. The storage costs constitute an allowable item of compensatory damages. Section 27-1-202, MCA. The record reveals substantial evidence in support of the damage award. Testimony was presented that ample storage existed on the farm and there was testimony on the storage charges incurred by Hardy. Affirmed.

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


author: MR. JUSTICE GULBRANDSON MR. JUSTICE SHEEHY,

text:
    DRILCON, INC., Plaintiff and Respondent, v. ROIL ENERGY CORPORATION, INC., Clinton J. White, Shirley J. White, and Josephine R. White, Defendants and Appellants.
    No. 87-169.
    Submitted Oct. 28, 1987.
    Decided Jan. 19, 1988.
    Rehearing Denied March 1, 1988.
    749 P.2d 1058.

      Murray, Kaufman, Vidal & Gordon, Daniel W. Hileman, Kalispell, Leaphart Law Firm, W. William Leaphart argued, Helena, for defendants and appellants.
    Scott & Tokerud, Keith Tokerud argued, Great Falls, for plaintiff and respondent.
   MR. JUSTICE GULBRANDSON

delivered the Opinion of the Court.

Roil Energy Corporation and Clinton J. White, appeal from a Flathead County District Court jury verdict awarding Drilcon, Inc., $1,577,595.20 in damages for breach of contract, negligence, and constructive fraud. All three causes of action arise out of a contract entered into by Drilcon and Roil for the purpose of drilling an oil well. The jury found that Roil breached its contract with Drilcon and held Clinton J. White, as President and alter ego of Roil Energy Corporation, personally liable for $809,023.20 in contractual damages by piercing Rod’s corporate veil. The jury found White additionally liable for his negligence and constructive fraud in the amount of $768,595. Defendants Roil and White appeal the jury verdict. We affirm.

Val Holms incorporated Roil Energy Corporation in Montana in April of 1979. Roil did no business and was not capitalized at that time. Holms sold Roil to Clinton White in June of 1981 to cancel a $3,000 loan. Holms was unable to repay the loan and suggested that White “purchase” Roil for $3,000.

White’s previous business experience includes involvement in several real estate developments and management of two credit bureaus. White testified that he bought the corporation to recoup his $3,000 loan to Holms and to protect himself from personal liability while he experimented with oil industry investments. White appointed himself president of Roil and designated his mother and wife as the other officers and directors. Holms held himself out as an assistant vice-president to potential investors. Roil was never capitalized.

In June of 1981, White negotiated and signed a “farm-out” agreement with Pennzoil Corporation whereby Roil was to drill an oil well on a Montana leasehold provided by Pennzoil. Roil was to bear all risk, cost, and expense of drilling the well in exchange for royalties in the event the well actually produced.

Holms then contacted Drilcon, a Texas corporation, and negotiated a day-work drilling contract. Under the terms of the contract, Roil was to pay Drilcon $6,500 per day to drill an oil well. Section 7 of the contract provided that a third party, Protea Capital Corporation of Dallas, Texas, would establish an escrow account in the amount of $459,553 and would pay Drilcon on a biweekly basis. The escrow was requested by Drilcon to guarantee payment because Drilcon was unfamiliar with Roil Energy Corporation.

On August 31, 1981, Drilcon forwarded the contract to White for his signature, but before White could sign, Protea backed out. Holms then secured another investor and arranged to have Sun Escrow of Palm Springs, California, replace Protea. Holms and an officer of Sun Escrow telephoned Drilcon with assurances that the escrow had been set up in a sufficient amount to cover Drilcon’s estimated expenses for drilling the well. Sun gave written confirmation of the same in a telegram to Drilcon.

After receiving similar assurances from Holms and Sun, White, in his capacity as president of Roil, signed the original drilling contract on August 17, 1981. Neither party attempted to amend the contract to reflect the substitution of Sun Escrow for Protea Capital Corporation.

Drilcon began drilling on August 28, 1981, and submitted invoices to Sun on a timely basis. However, Sun made no payments on the first two invoices so Drilcon contacted Holms about the delay in payment. Holms professed no knowledge of the problem and promised to investigate. On September 21, 1981, Drilcon received notification that Sun Escrow could not pay because there were no funds in the escrow account. Drilcon again called Holms and received assurances that he would check the situation out and get back to them. After two days with no response from Holms, Drilcon ceased drilling at a depth of approximately 7,700 feet with expenses of approximately $204,000.

Holms again solicited the help of numerous potential outside investors and represented to Drilcon that funding was inevitable. Drilcon interviewed a number of these potential investors and believed that the funding would soon be forthcoming. In the meantime, Drilcon requested a written guaranty and a promissory note from Holms before it would resume drilling. Holms complied by sending Drilcon a telegram personally guaranteeing the cost of drilling on behalf of himself and Clinton White.

Holms immediately sent a copy of the telegram guaranty to White. White consulted his attorney about the telegram and was advised that Holms could not bind White with the guaranty. Shortly thereafter, White informed Drilcon that Holms’ guaranty was unauthorized. Holms also gave Drilcon a security interest in certain oil properties and a financial statement listing his net worth at over $2.6 million. In fact, as Drilcon was to learn much later in preparing for litigation, Holms had a negative net worth at the time he gave his personal guaranty and he no longer had an interest in the oil properties.

At trial, the parties disagreed as to what Holms’ relationship was with Roil. Holms represented to Drilcon and others that he was an assistant vice-president and testified to the same at trial. White disputes that Holms ever had authority to act in any official capacity for Roil. White specifically denied at trial that Holms ever had authority to guarantee anything on White’s or Rod’s behalf. However, White admits that he did not inform Drilcon that Holms was not a vice-president of Roil Energy.

Based on Holms’ guaranty and representations, Drilcon resumed drilling in late September 1981 and eventually reached the 12,500 foot depth called for in the contract on December 2, 1981. White allowed Drilcon to resume drilling despite his knowledge that the escrow was not funded, that Holms’ guarantee was worthless, and despite his own inability to guarantee costs. Tests indicated that the well would not produce. Shortly thereafter, Roil defaulted on its obligations to Pennzoil. Pennzoil had the well plugged on December 19, 1981.

A Drilcon representative testified his company believed that Roil, with the help of outside investors, would pay the costs of drilling or, alternatively, that Holms and White would pay. On December 31, 1981, Clinton White’s attorney wrote to Drilcon and stated that Roil would be “unable to make the required payments for the drilling expenses incurred ... by virtue of the contract.”

Drilcon sued Roil Energy in Texas on January 8, 1982, and obtained a default judgment for contract damages. The validity of the Texas judgment is questionable due to improper service of process. Drilcon also obtained judgments against Val Holms and Sun Escrow thereby prompting both to file bankruptcy. To date, Drilcon has not recovered from Holms, but has collected a $170,000 settlement from Sun Escrow, said amount being deducted from the Montana district court judgment. Drilcon filed this suit on August 13, 1982. The jury found in favor of Drilcon and awarded damages. Roil and White appeal and raise numerous convoluted issues. We identify the following issues for review:

1. Must there be a fiduciary relationship as a prerequisite to a finding of constructive fraud?

2. Did the District Court commit reversible error when it allowed the jury to compare Holms’ and Sun Escrow’s fraud with the alleged negligence of Clinton White and Roil Energy?

3. Did the fraud of Sun Escrow and Holms supersede any negligence by Roil Energy and/or Clinton White?

4. Did the trial court correctly instruct the jury on the elements of piercing the corporate veil?

5. Is constructive fraud sufficient to pierce the corporate veil?

6. Is there substantial evidence in the record to support the jury’s piercing Rod’s corporate veil?

7. Is there substantial evidence in the record that Roil Energy breached its contract with Drilcon?

In their first issue, appellants assert that the District Court committed reversible error when it gave the following instruction to the jury:

“The plaintiff Drilcon, Inc., has alleged that the defendants are liable to it on the basis of constructive fraud.. Constructive fraud means any breach of duty which, without fraudulent intent, gains an advantage to the person in fault by misleading another to its prejudice. There need be no fiduciary duty or confidential relationship between parties to justify a finding of constructive fraud. Where a party, by his words or conduct creates a false impression concerning serious impairments or other important matters and subsequently fails to disclose relevant factors, constructive fraud may be found.” (Emphasis added.)

The second sentence of the above jury instruction is taken from Section 28-2-406, MCA. Defense counsel objected to the third sentence of the instruction at trial on the grounds that a fiduciary relationship is required before constructive fraud can be found. Appellants contend the instruction was prejudicial because the special verdict form required the jury to decide whether defendant Clinton White committed constructive fraud.

Three Montana cases appear to support appellants’ argument that there must be a breach of a fiduciary relationship in an action for constructive fraud. Rowland v. Klies (Mont. 1986), [223 Mont. 360,] 726 P.2d 310, 43 St.Rep. 1788; Morse v. Espeland (Mont. 1985), [215 Mont. 148,] 696 P.2d 428, 42 St.Rep. 251, 253; Ryckman v. Wildwood, Inc. (1982), 197 Mont. 154, 641 P.2d 467. The latest of these cases, Rowland, states:

“Constructive fraud is a breach of fiduciary duty. (Citation omitted.) If there is no fiduciary duty in the first place, constructive fraud will not lie.”

Rowland, 726 P.2d at 316. There are, however, several Montana cases that recognize an exception to the rule as stated in the above cases. McGregor v. Mommer (Mont. 1986) [220 Mont. 98,] 714 P.2d 536, 43 St.Rep. 206; Mends v. Dykstra (1981), 195 Mont. 440, 637 P.2d 502; Poulson v. Treasure State Industries (Mont. 1981), [_ Mont. _,] 626 P.2d 822, 38 St.Rep. 218; Hardin v. Hill (1967), 149 Mont. 68, 423 P.2d 309. These cases stand for the proposition that, under certain “special circumstances”, neither a confidential relationship nor a fiduciary relationship is needed to find constructive fraud.

The last sentence of the jury instruction in question embodies the “special circumstances” necessary for the jury to find constructive fraud in this case:

“Where a party, by his words or conduct creates a false impression concerning serious impairments or other important matters and subsequently fails to disclose relevant factors, constructive fraud may be found.”

It is evident from the record that White’s words and conduct created a false impression that either Roil, its officers, or its shareholders would cover the costs of drilling the oil-well. It is also evident that White subsequently failed to disclose relevant information concerning Holms’, Roil Energy’s, and his own ability to fulfill the obligations imposed by the drilling contract.

“Special circumstances” exist in this case which support the jury’s finding of constructive fraud. First, White used an improperly perfected corporate entity to shield himself from personal liability and he failed to disclose these corporate imperfections to his creditors. White also failed to come forward with the truth about Holms’ financial affairs when White knew that Drilcon was relying on Holms’ personal guarantee. Finally, White failed to inform Drilcon that Holms was not a corporate officer. The facts of this case provided substantial credible evidence of “special circumstances” for the jury to find White liable on a theory of constructive fraud. Accordingly, the District Court did not err in instructing the jury that no fiduciary or confidential relationship was needed for a finding of constructive fraud under the particular facts presented by this case.

Appellants, in their second issue, argue that any alleged negligence of Clinton White cannot be compared with the fraudulent acts of Val Holms and Sun Escrow. The special verdict form required the jury to apportion negligence between Drilcon, Val Holms, Sun Escrow, Clinton White, and “others.” The jury found Clinton White 95% negligent and Drilcon 5% negligent. Defense counsel objected to this portion of the special jury verdict form on the grounds that the fraud of Holms and Sun Escrow intervene and supersede any liability on White’s part. Appellants contend that the special verdict form confused the jury, is contrary to Montana law, and constitutes reversible error.

Appellants’ argument on this issue must fail for two reasons. First, Section 27-1-703, MCA, requires that the negligence of all persons proximately causing damage to the plaintiff is to be compared in a comparative negligence case. White alleged contributory negligence and therefore forced the court to consider comparative fault. Second, and more importantly, the jury reached the right result by apportioning negligence only between White and Drilcon.

It is evident from the jury’s apportionment of negligence that appellants were not prejudiced by the special verdict form. The jury did not apportion any negligence to either Holms or Sun Escrow. On the contrary, one-hundred percent of the negligence was apportioned between White and Drilcon. There is no cause for reversal in the absence of prejudice to the party claiming error in the jury instruction. State v. Hay (1948), 120 Mont. 573, 194 P.2d 232. We need not decide whether the special verdict form was erroneous because appellants were not prejudiced.

In their third issue, appellants expand the above argument further by contending that the fraud of Sun Escrow and Holms are intervening causes that supersede appellants’ alleged negligence. Notably, appellants did not plead intervening cause or superseding cause in their answer/pre-trial order nor did they offer jury instructions as to this issue. On the contrary, appellants specifically plead contributory negligence in the pretrial order and requested an apportionment of comparative fault. Appellants’ failure to offer an instruction regarding superseding/intervening cause renders any alleged error harmless. Kleinsasser v. Superior Derrick Services, Inc. (Mont. 1985), [218 Mont. 371,] 708 P.2d 568, 571, 42 St.Rep. 1662, 1666.

We also note with regard to appellants’ third issue that the jury was instructed as to several legal theories (i.e., respondeat superior, actual and ostensible agency, negligent misrepresentation, etc.) which could be used to hold White liable for Holms’ acts. The jury was also instructed as follows:

“Instruction No. 8: More than one person may be responsible for causing injury. If you find that one of the defendants was negligent and that his negligence proximately caused injuries to the plaintiff it is not a defense that some third person may also have been negligent.” (Emphasis added.)

Under the instructions as given in this case, it would be difficult, if not impossible, for the jury to formulate a superseding cause theory on their own initiative. The facts as applied to the jury instructions overwhelmingly support a finding of White’s negligence in this case.

Appellants’ next issue questions the sufficiency of the jury instructions regarding piercing the corporate veil. The jury was instructed as follows on piercing the corporate veil:

“Roil Energy is a corporation organized under the laws of Montana. As a general rule the shareholders of a corporation are not subject to personal liability for corporate obligations. However, a corporation’s separate identity may be disregarded when such corporation is under the control of an individual, and acted as that individual’s agent as to the particular transaction, or, when the corporation’s identity is so identified with the individual sought to be held liable as to make the corporation and the individual one.
“If a shareholder is not the ‘alter ego’ of the corporation pursuant to the stated elements, he cannot be found personally liable for the debts of Roil Energy. If you find Clinton White is the ‘alter ego’ he can be found personally liable only if there is a further showing the corporation was utilized as a subterfuge to defeat public convenience, to justify wrong or to perpetrate fraud.” “ (Emphasis added.)

The special verdict form asked the following question relevant to this issue:

“B. Was Roil utilized as a subterfuge to defeat public convenience to justify wrong or to perpetrate fraud? (Emphasis added.)
“Answer ‘Yes’ or ‘No.’ ”

The jury answered “Yes” and held White personally liable for Rod’s breach of contract. Both the jury instruction and the special verdict form were drafted by the District Court on the basis of a law review article entitled Piercing the Corporate Veil in Montana, 44 Mont.L.Rev. 91 (1983).

Defense counsel objected to the “public convenience” language in the two instructions on the basis that these references confused the jury. Drilcon made a similar objection at trial and counsel for both sides expressed confusion about the meaning of “public convenience.” Even the District Court admitted confusion as to the meaning of the term “public convenience.” Appellants argue in their fourth issue that the words “public convenience” were irrelevant and that the language “caused [the jury] serious confusion.”

This Court has repeatedly approved of the “public convenience” language as used in the above instructions. Meridian Minerals Co. v. Nicor Minerals, Inc., et al. (Mont. 1987), [228 Mont. 274,] 742 P.2d 456, 462, 44 St.Rep. 1516, 1526; Flemmer v. Ming (Mont. 1980), 621 P.2d 1038, 1042, 37 St.Rep. 1916, 1919; State ex rel. Monarch Fire Ins. Co. v. Holms (1942), 113 Mont. 303, 124 P.2d 994. Flemmer quotes with approval a jury instruction using the same language as used in this case. Appellants have presented no evidence that the jury was confused by the words “public convenience” that would justify reversal of this case.

“Public convenience” refers to something fitting or suited to the public need. Black’s Law Dictionary 1105 (5th ed. 1979). There is no evidence that Roil Energy was used as a subterfuge to defeat public convenience, but appellants can claim no reversible error because there were sufficient alternative grounds to pierce the corporate veil. The jury was presented with substantial evidence of “fraud” and “justifying wrongs” to pierce the corporate veil under the alternate theories stated in the instruction. The trial court did not err in giving the “public convenience” instruction as one of three alternative grounds for piercing the corporate veil.

Appellants argue in their fifth issue that there is no evidence of actual fraud with which to pierce the corporate veil in this case. Appellants point out that the special verdict form and jury instructions list “fraud” as a basis for piercing the corporate veil. Although the jury specifically found Clinton White guilty of constructive fraud, appellants contend that constructive fraud is insufficient to pierce the corporate veil.

There are two prongs to piercing the corporate veil. The jury must first find that White was the “alter ego” of Roil. White does not contest the sufficiency of the evidence in this regard. Secondly, there must be a showing that the corporate entity was used as a subterfuge to defeat public convenience, justify wrong, or perpetrate fraud. This Court has held that something less than a positive showing of fraud is needed to pierce the corporate veil. E.C.A. Environmental Management Services, Inc. v. Toeynes (Mont. 1984), [208 Mont. 336,] 679 P.2d 213, 219, 41 St.Rep. 388, 394. Other jurisdictions have held that constructive fraud is sufficient to pierce the corporate veil. White v. Jorgenson (Minn. 1982), 322 N.W.2d 607; Sprecher v. Weston’s Bar, Inc. (Wis. 1977), 78 Wis.2d 26, 253 N.W.2d 493; Lewis Trucking Corp v. Commonwealth (1966), 207 Va. 23, 147 S.E.2d 747. We hold that evidence of either actual fraud or constructive fraud may be sufficient to pierce the corporate veil in a given case.

We also note that the law as instructed in this case does not distinguish between the acts of an alleged corporate agent (Holms) as opposed to the acts of the party sought to be held liable (White). There was fraud in this case. The jury may have used Holms’ fraud as an agent of Roil to conclude that “the corporation was utilized as a subterfuge to . . . perpetrate fraud.” The instruction does not require that the party sought to be held liable act fraudulently. The instruction only requires that the corporation be used “as a subterfuge to perpetrate fraud.”

In their sixth issue, appellants question the sufficiency of the evidence to support any of the three alternative grounds for piercing the corporate veil (i.e., public convenience, justify wrong, and fraud). This Court will not reverse the verdict unless there is no substantial evidence to support the findings of the jury. Poulson v. Treasure State Industries, Inc. (Mont. 1981), [_ Mont. _,] 626 P.2d 822, 825, 38 St.Rep. 218, 221. There is substantial credible evidence to support two of the three alternative grounds for piercing the corporate veil in this case.

We first find that there was substantial credible evidence that White was the alter ego of Roil. Roil was not capitalized. White was the majority shareholder and was an officer and director of Roil. White took all actions for the corporation without consulting the other named officers and directors. There was evidence that corporate formalities were not adhered to and that White used his personal funds to pay corporate debts.

Although there is no evidence that White used Roil to defeat “public convenience,” we find that there was also substantial credible evidence of actual fraud, constructive fraud, and of White’s using the corporate entity to justify wrong. Holms acted as Rod’s agent when he committed fraud against Drilcon. White failed to disclose his superior knowledge about Holms’ financial condition and telegram of personal guaranty. White admits using the corporate entity to shield himself from liability. He did nothing to manage or supervise Holms yet hoped to gain when and if the oil well was successful. The well was dry and White now hopes to avoid the cost of drilling with an uncapitalized corporation. The jury was entitled to conclude that it would be inequitable or unjust for Drilcon to bear the loss in this case.

Appellants moved for summary judgment prior to trial asking that the trial court rule as a matter of law that Drilcon waived the payment provisions of the contract when it proceeded to drill without a properly funded escrow. The trial court denied the motion. In their final issue, appellants claim that it was error for the trial court to submit the breach of contract issue to the jury and that the motion for summary judgment should have been granted.

Appellants contend that the drilling contract specifically required a third party, an escrow company, to make the required payments to Drilcon. They assert that the escrow provision and the provision in the drilling contract requiring the “operator,” Roil, to pay daily drilling costs creates an ambiguity. This alleged ambiguity, appellants argue, should be interpreted against Drilcon because Drilcon drafted the contract.

Appellants also argue that Drilcon waived any right to be paid under the drilling contract when it elected to drill with no money in escrow. White cites Van Ettinger v. Pappin (1978), 180 Mont. 1, 588 P.2d 988, for support. In Van Ettinger, this Court held that the purchasers of a home waived the right to enforce the provisions of a buy-sell agreement when they closed the transaction with knowledge that sellers were in possible breach. Appellants analogize Van Ettinger to argue that Drilcon waived the payment provision of an ex-ecutory contract when it elected to drill after learning that there was no money in escrow.

Drilcon points to the contract provisions and the intent of the parties to argue that Roil is ultimately liable under the contract. We find that the contract is not ambiguous as to the duties of Drilcon and Roil. The contract does not state that Rod’s payment is conditioned on an escrow being set up. Neither the investors nor the escrow company were parties to the contract and it was Rod’s duty to fund the escrow.

Even if the escrow provision of the contract is a condition precedent waived by Drilcon, such waiver does not release Roil of its obligation to pay Drilcon. Appellants’ reliance on Van Ettinger is misplaced because the contract in the instant case was not wholly executory. Drilcon drilled for a month before it learned of the lack of money in escrow thereby making the contract no longer wholly executory.

White admits that the facts concerning this issue are undisputed. The trial court believed the legal issue of waiver was for the jury to decide. The jury was instructed as to conditions precedent, waiver, ostensible agency, and ostensible authority. The jury found for Drilcon. The question for this Court is whether there is substantial evidence to support the jury’s finding that Roil breached its contract with Drilcon.

The contract required the operator (Roil) to pay the contractor’s (Drilcon) daily expenses. The contract also required that an escrow be established to ensure payment to Drilcon. The contract is silent as to who was required to secure funding for the escrow. The trial court allowed parol evidence without objection as to the intent of the parties concerning the escrow. Drilcon testified that it was Rod’s responsibility to find investors and fund the escrow. White testified that it was Holms’ responsibility and that Holms was not an agent of Roil. No one disputes that Drilcon was never paid.

Though some of the evidence presented at trial may appear contradictory, it was the jury’s prerogative to choose to believe the testimony of one party to the exclusion of the other. Tompkins v. Northwestern Union Trust Co. of Helena (1983), 198 Mont. 170, 181, 645 P.2d 402, 408. We will not assume the role of jury in this case, but will only review the record to search for sufficient evidence to support the jury’s conclusions. Griffel v. Faust (Mont. 1983), 205 Mont. 372, 668 P.2d 247, 249, 40 St.Rep. 1370, 1372. There is substantial evidence to support the jury’s decision.

We hold that a fiduciary relationship is not needed for a finding of constructive fraud under the “special circumstances” of this case. We also hold that there is substantial credible evidence that White committed constructive fraud against Drilcon. The jury was not instructed as to superseding or intervening cause and White did not offer any jury instructions as to this theory. The jury was instructed as to several other legal theories with which they could hold appellants liable for Holms’ acts. There was sufficient evidence to support any of these theories.

The jury was properly instructed as to the elements of piercing the corporate veil. Although the parties were unsure as to the meaning of “public convenience,” there is no evidence that the jury was similarly confused to appellants’ prejudice. In addition, the jury was presented with alternative theories with which to pierce the corporate veil, i.e., justifying wrong and fraud. There was sufficient evidence to support both of these alternative theories. The corporate veil was properly pierced in this case.

Finally, the drilling contract is not ambiguous. Roil was to insure that Drilcon was paid either by funding an escrow or by making the payments itself. Roil waived the escrow provision when it failed to deposit adequate funds in the escrow. The remaining provision in the contract specifically states that Roil was to then pay Drilcon. There is sufficient evidence that Roil breached the contract by not paying Drilcon. Accordingly we affirm the District Court jury verdict on all issues presented by this appeal.

Affirmed.

MR. JUSTICES HARRISON, HUNT and McDONOUGH, and HON. G. TODD BAUGH, District Judge, sitting in place of MR. CHIEF JUSTICE TURNAGE, concur.

MR. JUSTICE SHEEHY,

dissenting:

I dissent from the foregoing opinion for several reasons.

First, Clinton J. White should be relieved of any liability for the first $217,000 of drilling expenses charged by Drilcon. It is clear that before Drilcon began drilling the well on August 28, 1981, it had been assured by an escrow officer of Sun Escrow of Palm Springs, California, that the escrow company had funds on deposit of $459,000 out of which to pay Drilcon’s expenses. Drilcon placed no reliance on Clinton J. White or Roil Energy Corporation through any statement or representation before it began drilling. It relied exclusively upon the fraudulent representation of Sun Escrow Company, that the funds were in place to pay its drilling costs. On September 21, 1981, after Drilcon had drilled down 7,700 feet and earned approximately $217,000 in expenses, Sun Escrow Company wrote Drilcon that there was no money in the escrow.

Clinton White was as much a victim of the fraudulent actions of Sun Escrow as was Drilcon. Up to that point, Drilcon placed no reliance on either Clinton White or Roil Energy, and gave evidence of that nonreliance by refusing to proceed at all until an escrow had been established to Drilcon’s satisfaction. Any liability at all of Clinton White, therefore, should exclude the first $217,000 of expenses because that expense was not incurred by Drilcon through any fault, representation, constructive fraud, negligence, or other legal theory obligating Clinton White.

Drilcon recommenced drilling when it received from Holms his fraudulent asset statement and a telegram which Holms sent, purportedly binding Clinton White personally to the drilling cost. Drilcon began drilling again in spite of drilling again having been told by White that he was not going to guarantee the cost of drilling personally and that Holms had no authority to make Clinton White personally liable. Mr. Ed White, the vice-president of Drilcon testified:

“Q. Did Mr. Clinton White ever tell you he would not give his personal guarantee? A. I don’t recall him ever saying that. The only thing I ever remember him saying was that Val Holms was not authorized to speak on his behalf.
“Q. Did you have any understanding after talking to Clinton White whether he would give his personal guarantee. A. I don’t have a feeling that he would or wouldn’t. He didn’t deny that he wouldn’t, and he didn’t say that he would.”

As to whether Holms was vice-president of Roil Energy Corporation, the court itself wanted the evidence to be clear and questioned the witness:

“(BY THE COURT) Q. It has been pointed out that Clinton White never denied, that Val Holms was vice-president. I guess I would reverse the question. Did Clinton White ever tell you that Val Holms was the vice-president of Roil? A. No.”

Drilcon, therefore had no basis upon which to rely on any personal guaranty of Clinton White or any representation that Holms had authority to bind Clinton White for drilling expenses.

Because Drilcon was specifically warned that White was not personally liable and that Holms had no authority to bind him, the discussions in the majority opinion about constructive fraud and piercing the corporate veil are irrelevant. Drilcon proceeded at its peril to complete the drilling of the well.

Nonetheless, some remarks about the majority discussion of constructive fraud and piercing the corporate veil are necessary.

We make fuzzy the liability theory of constructive fraud when we outside the confidential or fiduciary relationships and find that “special circumstances” can give rise to liability under the theory of constructive fraud. The statutory bases for constructive fraud are a breach of duty or an act or omission especially declared to be fraudulent by the law, each without respect to actual fraud. Section 28-2-406, MCA. Unless we have an act especially declared fraudulent by the law (not present here), we should confine constructive fraud to those cases involving a breach of duty and ordinarily that breach of duty arises either through a confidential or a fiduciary relationship. We have confused the liability theory of constructive fraud (mea culpa) by including in the constructive fraud theory “special circumstances” in cases which really involve negligent misrepresentations of fact. In cases of negligent misrepresentation, the liability is founded not on a breach of a legal duty arising out of constructive or fiduciary relationships, but rather out of a duty to speak in the circumstances, and where fraudulent intent is not an element. To use an example first posed by the late, great Cardozo, it we think of the fields of liability for constructive fraud and misrepresentation as concentric circles with a common center and differing radii, where the liability under each theory is based on misrepresented facts, the breach of a legal duty will create liability whereas a negligent breach may not; the first because the liability is imposed by law, whereas the liability for a negligent breach is based upon ordinary care, and comparative negligence may be considered. See Ultramares Corporation v. Touche (N.Y. 1931), 255 N.Y. 170, 174 N.E. 441.

It is because we confused these two fields of liability that the district judge in this case submitted to the jury, as a comparative negligence issue, the determination of comparative negligence of Drilcon, Roil, Sun Escrow, Clinton White and Holms. The jury found Clinton White 95% negligent, and Drilcon 5% negligent. A finding of comparative negligence is completely inconsistent with liability on the theory of constructive fraud, where there is no comparison to be made (undoubtedly the court was thinking of mitigation of damages, and submitted it in the form of comparative negligence). Moreover, because the actions of Holms and of Sun Escrow Company were fraudulent, those actions were not be compared with the negligence, if any, of White.

The issues in this case were hopelessly confused, and I would reverse and remand for a new trial. It goes without saying that if constructive fraud is not sustainable in this case, there could be no piercing of the corporate veil.


author: MR. JUSTICE HUNT

text:
    RUSSELL A. LAMB, Claimant and Appellant, v. MISSOULA IMPORTS, INC., Employer, and Universal Insurance Co., Defendant and Respondent.
    No. 87-207.
    Submitted on Briefs Nov. 13, 1987.
    Decided Jan. 19, 1988.
    748 P.2d 965.

      Williams Law Firm, Shelton C. Williams, Missoula, for claimant and appellant.
    Garlington, Lohn & Robinson, Robert E. Sheridan, Jr., Missoula, for defendant and respondent.
   MR. JUSTICE HUNT

delivered the Opinion of the Court.

Claimant appeals from the judgment of the Workers’ Compensation Court which denied him an award of attorney’s fees after adjudging that he was entitled to permanent partial disability benefits. Because of a lack of the introduction of relevant wage figures, the judge was unable to determine the exact amount claimant should receive for permanent partial disability benefits. Claimant appeals on the issue of attorney’s fees. We reverse and remand.

The specific issues raised for our review are as follows:

1. Whether claimant is entitled to attorney’s fees pursuant to a prior ruling on the same case which awarded fees under Section 39-71-611, MCA.

2. Whether claimant is entitled to attorney’s fees under Section 39-71-612, MCA, after going to a hearing which resulted in an increase in benefits.

In 1978, Russell Lamb worked for Missoula Imports as a janitor. On September 11, 1978, he slipped and fell, hitting his head on the cement floor. He was diagnosed as having sustained a concussion. In February, 1979, Lamb was further diagnosed as suffering from epilepsy. Even with medication, Lamb had occasional seizures.

On March 9, 1982, while driving down a busy street, Lamb had a seizure. He drove off the road, and hit his car head on with a tree, causing serious head injuries and permanent brain damage. This Court in Lamb v. Missoula Imports, Inc. (Mont. 1984), [211 Mont. 360,] 684 P.2d 498, 41 St.Rep. 1414, (Hereinafter Lamb I), affirmed the Workers’ Compensation Court in holding that Lamb’s epileptic seizures were a direct cause of his 1978 slip and fall injury while working for Missoula Imports. Lamb was awarded temporary total disability benefits, retroactive to the date of the auto accident. In Lamb I, claimant received attorney’s fees pursuant to Section 39-71-611, MCA.

In January, 1987, Lamb again went to hearing to determine whether he was entitled to increased permanent partial disability benefits and domiciliary care payments. Defendant denied liability for domiciliary care payments, and disputed the proper amount of permanent partial disability benefits.

The Workers’ Compensation Court found that Lamb was entitled to receive payment for both domiciliary care as well as permanent partial disability benefits. However, claimant failed to introduce evidence of what the pay would be at the time of the hearing for someone working as a janitor in the same capacity as Lamb was at the time of his injury in 1978. Consequently, the court was unable to determine the correct amount which Lamb should receive for permanent partial disability benefits, but did provide a general formula from which to calculate the correct amount. In its order, the court encouraged the parties to resolve their dispute using the guidance the judge provided. The Workers’ Compensation Court summarized the issue of a benefits increase in the form of permanent partial disability benefits by stating: “There is no question of whether claimant is disabled, the only question is how much to pay.”

In the Lamb II judgment (present case), the Workers’ Compensation Court awarded attorney’s fees to claimant on all issues brought upon which he prevailed. Immediately following the entry of the court’s order, the parties agreed on an increase of benefits from $52.38 per week to $94.00 per week. In a memorandum subsequent to the Lamb II judgment, the court clarified the award of attorney’s fees. The judge ordered defendant to pay as attorney’s fees, 25 percent of claimant’s future benefits for domiciliary care and a lump sum of 25 percent of those benefits already received. As to the fees pertaining to the issues of permanent partial disability benefits, the court denied Lamb’s claim on the grounds that he did not meet his burden of proof regarding the applicable rate.

We will first address the issue of whether claimant is entitled to fees pursuant to Section 39-71-611, MCA, or pursuant to the ruling and award of fees in Lamb I.

Claimant was forced to hire an attorney and litigate his claim in order to receive temporary total disability benefits for his 1978 head injury and subsequent injuries sustained in 1982. The insurer denied liability which was later adjudged compensable by both the Workers’ Compensation Court and the Montana Supreme Court. In Lamb I the claimant was properly awarded attorney’s fees pursuant to Section 39-71-611, MCA.

Following that decision, defendant paid claimant $52.38 per week for approximately 5 years. When claimant reached maximum healing and requested permanent partial benefits calculated at a rate which would increase his weekly benefits to $120.50 per week, the insurer disputed the amount to be paid and denied liability for any amount greater than $52.38 per week.

This new round of litigation cannot be construed as falling under Section 39-71-611, MCA. The insurer was not denying liability, but was disputing the amount of compensation owed. The facts fall squarely within the language of Section 39-71-612, MCA (1983), which was in effect on the date of Lamb’s injury. The standards for computations of benefits for the claimant are fixed by the statutes in effect as of the date of injury. Buckman v. Montana Deaconess Hospital (Mont. 1986), [224 Mont. 318,] 730 P.2d 380, 382, 43 St.Rep. 2216, 2218, citing Trusty v. Consolidated Freightways (Mont. 1984), [210 Mont. 148,] 681 P.2d 1085, 41 St.Rep. 973.

Section 39-71-612, MCA (1983) states:

“(1) If an employer or insurer pays or tenders payment of compensation under chapter 71 or 72 of this title but controversy relates to the amount of compensation due and the settlement or award is greater than the amount paid or tendered by the employer or insurer, a reasonable attorney’s fee as established by the division or the workers’ compensation judge if the case has gone to hearing, based solely upon the difference between the amount settled for or awarded and the amount tendered or paid, may be awarded in addition to the amount of compensation.”

We hold that neither Section 39-71-611, MCA, nor the Workers’ Compensation Court ruling in Lamb I, which awarded fees pursuant to that statute, apply to the facts of Lamb II as it is now before this Court. The applicable statute is Section 39-71-612, MCA (1983).

Defendant next requests this Court to rule that Section 39-71-612, MCA, does not mandate an award of attorney’s fees either. We disagree.

Defendant asserts that claimant did not prevail on the issue of permanent partial disability benefits and therefore does not merit an award of attorney’s fees. Defendant relies on the fact that claimant was demanding benefits of $120 per week rather than the $52.38 per week being paid. Further, the order from the Workers’ Compensation Court did not specify any correct amount owed to claimant.

Although it is true that the court ultimately held that claimant did not prevail on his claim for permanent partial disability benefits, the language of the opinion and resulting increase in benefits would indicate otherwise. The specific language used by the Workers’ Compensation judge is as follows:

“In order to calculate a diminution in earning capacity, one must first determine the wages earned at date of injury and then compare those wages with what claimant’s capacity to earn is with his disability. Claimant has demonstrated that he has no normal job market. (Finding of Fact No. 12.) However, as the Montana Supreme Court has held in McDanold v. B.N. Transport, Inc., [208] Mont. [470], 679 P.2d 1188, 41 St.Rep. 472 (1984), earning capacity must be measured by comparing pre-injury earning capacity with post-injury earning capacity in the same time frame. So, in order to properly calculate claimant’s permanent partial disability rate, we would need to know what the job claimant held in September of 1978 would pay today. No evidence was presented as to that pay rate. No determination of permanent partial disability can be made by this Court.
“The Court would hope that, given the findings and guidance herein, the parties should be able to resolve this dispute. There is no question of whether claimant is disabled, the only question is how much to pay.”

Following this judgment, defendant promptly agreed to a $41.62 per week increase in benefits to $94.00 per week.

It is also true that claimant agreed to reduce his demand of $120.50, but that does not negate the fact that his benefits were ultimately increased as a result of the hearing.

Section 39-71-612, MCA (1983), clearly states that claimant is entitled to attorney’s fees if “the settlement or award is greater than the amount paid by the employer or insurer.” (Emphasis added.) In this case, the employer settled with claimant for more than the amount that was being paid before the hearing. If a dispute in amount owed is resolved in favor of claimant, this Court inevitably finds that an award of attorney’s fees is appropriate. Polich v. Whalen’s O.K. Tire Warehouse (1983), 203 Mont. 280, 661 P.2d 38; Walker v. H.F. Johnson, Inc. (1978), 180 Mont. 405, 591 P.2d 181; Catteyson v. Falls Mobile Home Center (1979), 183 Mont. 284, 599 P.2d 341.

Although the discretionary word “may” is found in Section 39-71-612, MCA, it does not leave an award of attorney’s fees totally up to the Workers’ Compensation Court’s discretion.

“It is a general principle in statutory construction that, where the word ‘may’ is used in conferring power upon an officer, court, or tribunal, and the public or a third person has an interest in the exercise of power, then the exercise of the power becomes imperative.” (Citations omitted.)

Adoption of Bascon (1952), 126 Mont. 129, 136, 246 P.2d 223, 226.

The Workers’ Compensation Court found that Lamb was entitled to permanent partial disability benefits. Obviously, the amount of $52.38 being paid by defendant was not considered adequate or the court would not have expended the time and energy in providing the parties with a formula to be used in calculating the correct amount. If the judge’s formula was meant to lower Lamb’s weekly benefits, it is inconceivable that defendant so readily agreed to an increase of $41.62 per week to $94.00 per week in benefits.

In light of the foregoing discussion, we conclude with the most compelling reason to find that this claimant, under these facts, is deserving of an award of attorney’s fees pursuant to Section 39-71-612, MCA. As this Court has said:

“If therefore, the social purpose of Workers’ Compensation Acts is to provide for the injured worker a fund which replaces his lost earnings or his lost earning capacity, the reasonable cost of effectuating such social purpose where litigation is necessary ought also be the burden of the industry. Any erosion of the workers’ right of recovery by imposing upon the worker the cost of procuring his rights erodes to that extent the social purpose.
“It is clear to us that it is the objective of the statutes allowing attorneys fees in compensation cases to preserve intact the eventual award recovered by the claimant for his impairment, by assessing in addition his attorneys fees and costs against the insurer or employer. It is a further purpose of the statutes to allow the Workers’ Compensation Court or Division to regulate attorneys fees for successful claimants.”

Wight v. Hughes Livestock Co., Inc. (Mont. 1983), 204 Mont. 98, 664 P.2d 303, 40 St.Rep. 696, 702.

“While the workers’ compensation judge may determine which attorney’s fees are reasonable, the clear meaning of [Section 39-71-612] is to provide attorney fees above and beyond the compensation awarded to a successful claimant.”

Holton v. F.H. Stoltze Land and Lumber Co. (1981), 195 Mont. 263, 270, 637 P.2d 10, 14.

We hold that claimant is entitled to an award of reasonable attorney’s fees on the issue of his permanent partial disability benefit rate. The amount is to be based solely upon the difference between the amount settled for ($94.00) and the amount paid ($52.38). Section 39-71-612. MCA (1983).

Reversed and remanded to the Workers’ Compensation Court for a determination of reasonable attorney’s fees.

MR. JUSTICES HARRISON, SHEEHY, WEBER and McDON-OUGH concur.


author: MR. JUSTICE GULBRANDSON

text:
    ELMER O. SAMPSON, Plaintiff and Respondent, v. RALPH G. GROOMS and Gertrude Grooms, Defendants and Appellants.
    No. 87-219.
    Submitted on Briefs Sept. 10, 1987.
    Decided Jan. 19, 1988.
    748 P.2d 960.

      Thomas J. Stusek, Billings, for defendants and appellants.
    Anderson, Brown, Gerbase, Cebull, Fulton, Harman & Ross, John Russell, Billings, for plaintiff and respondent.
   MR. JUSTICE GULBRANDSON

delivered the Opinion of the Court.

This is an appeal of a Yellowstone County District Court order enjoining the Grooms from preventing or interfering with Sampson’s right to use an easement for access to his property and for parking vehicles. We affirm in part, reverse in part, and remand with instructions to enter a permanent injunction consistent with this opinion.

Sampson and the Grooms are neighbors. The deed to Sampson’s land (tract “A”) includes an easement for a twelve-foot wide “private road” over property now owned by the Grooms (tract “B”). In 1979, Sampson erected a fence around his property that effectively blocked-off his then existing driveway. He then began to use the easement (on land owned by the Grooms’ predecessor in interest) for ingress and egress to his property, parking, and storage of various vehicles and camper shells. The Grooms have lived on tract “C” since 1957 and they purchased tract “B” adjoining Sampson’s property in 1982. Shortly thereafter, the Grooms erected a fence around tract “B” and barricaded the easement. The easement remained blocked from July to November of 1982.

Sampson filed a complaint for injunctive relief and damages on October 20, 1982. The Grooms answered with counterclaims that (1) they own the land underlying the easement in fee simple and (2) that the allowed use of the easement does not extend to include a parking lot and vehicle storage area. On November 23, 1982, the District Court issued a preliminary injunction that ordered the Grooms “to immediately remove any blockades or other devices blocking or interfering in any way with travel over and use of said easement.” The District Court subsequently ordered that the issues be resolved in a motion for summary judgment. Sampson moved for summary judgment and the matter was fully briefed by both parties.

On June 27, 1985, the District Court ruled that an easement exists on tract “B” in favor of tract “A”. On July 11, 1985, the Grooms moved to alter or amend the June 27th judgment on the grounds that the District Court had not resolved the question of whether Sampson’s use of the easement for parking and storage was permissible. The District Court, in a memorandum and order of September 12, 1985, denied the Grooms’ motion and stated that “[the Grooms] can determine to institute another action to have adjudicated whether the use made by [Sampson] of the easement involved is an improper or excessive use ...”

Approximately one year later, and after a substitution of judges and of counsel for the Grooms, the Grooms moved for a preliminary injunction based on their remaining counterclaim; i.e., that Sampson’s parking and storage of vehicles exceeded the permissible use of the easement in question. The Grooms subsequently moved for summary judgment and the matter was submitted on briefs. After several interim temporary orders, the District Court ordered the following on April 9, 1987:

“IT IS ORDERED that Defendants [Grooms] be, and hereby are enjoined from preventing or interfering in any way with Plaintiffs [Sampson] use and enjoyment of the easement as a driveway customarily is used and enjoyed, including but not limited to the parking of vehicles for continuous reasonable periods of time and the short term storage of vehicles.
“IT IS FURTHER ORDERED that Plaintiff [Sampson] be, and hereby is, enjoined from preventing Defendants’ [Grooms] use of the easement, upon reasonable advance request if Plaintiff’s vehicles must be moved, for such vehicular access to their [the Grooms] backyard as is necessary to accomplish purposes which would have been valid and reasonable at the time of the institution of this cause in 1982.
“This order applies not only to the parties but also to members of their families, their employees, servants or agents, their business and social invitees, and any other persons acting for or on their behalf, or under their direction and control. (Additions ours.)”

The District Court continued the damage issue pending this appeal. The Grooms appeal the April 9th order and raise eight issues:

(1) Is the subject easement specific in its terms? If so, then parking is not permitted upon such an easement under any set of circumstances.

(2) Assuming, arguendo, that the easement is not specific then the court must look to the surrounding circumstances, the “extent of the easement” (terms, intent) and the “situation of the property” (nature of the parking) to construe the reasonable scope of usage of the easement.

(3) What are the surrounding circumstances regarding the terms of grant of the subject easement and the intent of the original grantor thereof?

(4) What are the surrounding circumstances as relate to the “situation of the property” and the nature of vehicle parking and storage being conducted thereon?

(5) In light of these specific facts, whether or not such parking, or any parking, by respondent is an interference with the appellants’ (owners of the property upon which the private road is located) reasonable use of the easement?

(6) Does either party have exclusive easement rights in this case?

(7) Have any prescriptive rights as to the subject easement been obtained?

(8) Inasmuch as injunctive relief is an equitable remedy, is respondent equitably entitled to the injunctive relief awarded him per the District Court’s order of April 9, 1987?

Our review on this appeal is limited to the question of whether the District Court abused its discretion in granting the injunction. Madison Fork Ranch v. L & B Lodge Pole Timber Products (1980), 189 Mont. 292, 615 P.2d 900. Neither party questions the necessity of an injunction in this case. The animosity between the parties is readily apparent to this Court as it surely was to the District Court. The District Court was presented with feuding neighbors and imminent violence. An injunction against both parties was proper under the circumstances.

This Court must also review the scope of the injunction in this case to determine whether the District Court abused its discretion. The extent of the easement in question is governed by Section 70-17-106, MCA, which states:

“The extent of a servitude is determined by the terms of the grant or the nature of the enjoyment by which it was acquired.”

The subject easement over tract “B” was created on August 31, 1956, in favor of a parcel (tract “G”) located behind lots now owned by Sampson (tract “A”) and the Grooms (tract “C”). It appears that at the time of the grant, there was no other entrance to tract “G” and that later subdivisions provided alternate access to tract “G”. The easement, however, was treated as an appurtenance to tract “A” in subsequent deeds. Be that as it may, the existence of an easement in favor of tract “A” is not contested.

The 1956 grant described the servitude as “[a]n easement for a private road . . .” Although the grant is specific in its terms, we must determine whether the words “private road” are to be construed to allow parking and storage of vehicles in this case. We begin with the proposition that “[n]o use may be made of the right of way, different from that established at the time of its creation, so as to burden the servient estate to a greater extent than was contemplated at the time of the grant.” Titeca v. State of Montana (Mont. 1981), 634 P.2d 1156, 1159, 38 St.Rep. 1533, 1537, (citing 25 Am.Jur.2d Easements and Licenses, Section 77 at 483).

The evidence before the District Court established that the easement was used by the owners of tracts “A” and “C” for ingress and egress to their respective properties. In addition, Sampson submitted affidavits from present and former residents in the area which tended to show that the easement was used as a “driveway” for tract “A” from 1956 to 1982. The District Court concluded that historical continued use of the easement for parking and storage of vehicles indicates intent that such use “is reasonable . . .”

Sampson argues that his parking and storage of vehicles is reasonable in this case. The District Court recognized, however, that the easement is not wide enough to permit simultaneous parking and storage of vehicles by both Sampson and the Grooms. The District Court ordered exclusive easement rights of parking and storage to Sampson on land owned by the Grooms. Continuous parking and storage of vehicles by Sampson renders the easement unavailable for immediate use by anyone else for other purposes such as ingress and egress to and from the Grooms’ property (tract “C”). The District Court attempted to address this problem with an order that Sampson move his vehicles from the easement “upon reasonable advance request” from the Grooms.

We recognize that such an exclusive right to park and store vehicles “would amount almost to a conveyance of the fee.” Titeca, 634 P.2d at 1159. In Titeca, we noted that “[t]he mere use of the words ‘private road’ is not a clear indication of an intent to create an ‘exclusive’ easement.” Titeca at 1159. Nor can permissive use of a private road for parking and storage justify the District Court’s conclusion that such use of the easement was intended. Such an expanded use of the easement in question could only be obtained by prescription under the circumstances of this case and only then to the extent of the “nature of the enjoyment by which it was acquired.” Section 70-17-106, MCA.

Sampson did not use the easement to the exclusion of the Grooms. Ralph Grooms, when deposed, stated that he used tract “B” on occasion to park his vehicles. Grooms also used the easement for access to his backyard. To establish a prescriptive right to park and store vehicles on the easement, Sampson would have to prove “open, notorious, exclusive, adverse, continuous, and unmolested use of the servient tenement” for five years. Garrett v. Jackson (1979), 183 Mont. 505, 508, 600 P.2d 1177, 1179. Sampson’s use under these facts was clearly permissive and nonexclusive.

At the time of the original grant, Sampson’s predecessors in interest purchased both tract “A” and tract “G” with the accompanying easement. It appears that the intent of the grant was for tracts “A” and “G” to share equal rights of ingress and egress over a twelve-foot wide section of tract “B”. The District Court’s April 9, 1987, order allows Sampson to use the easement in a manner not contemplated at the time of the easement’s creation. Vehicles and other items parked and stored for protracted periods of time render the private road impassable. Requiring the servient tenement, the Grooms, to request Sampson to clear the easement upon reasonable advance notice “burdens” the servient estate to a greater extent than was contemplated at the time of the grant.” Titeca, at 1159. Accordingly, parking and storage of vehicles is an unreasonable burden upon the servient estate under the circumstances of this case.

We hold that the District Court abused its discretion by allowing Sampson to park and store vehicles on the easement and by requiring the Grooms to request removal of those vehicles for access to their backyard. In so holding, we are not unmindful of the dilemma this case presented to the District Court. The law requires that Sampson’s use of the easement not unreasonably burden the servient tenement. The law also requires that the Grooms “make use of the land in any lawful manner that [they choose], which use is not inconsistent with and does not interfere with the use and right reserved to the dominant tenement or estate.” City of Missoula v. Mix (1950), 123 Mont. 365, 372, 214 P.2d 212, 216.

We affirm the District Court’s injunctions against both parties. The scope of the injunctions, however, requires reversal. The subject easement must be used only for purposes that do not unreasonably burden the servient tenement and which do not interfere with the use and right reserved to the dominant tenement. Accordingly, the case is remanded to the District Court with directions to enter the following permanent injunction as against both parties:

“IT IS ORDERED that both the Plaintiff and Defendants be, and hereby are, permanently enjoined from use and enjoyment of the easement for long term parking and storage of vehicles or any other use as would unreasonably interfere with the use and enjoyment of the easement as a private road for ingress and egress to tracts “A” and “C”, provided, however, that both parties may use the easement for reasonable and necessary short term parking of vehicles to load and unload cargo or passengers.”

Affirmed in part, reversed in part, and remanded with instructions.

MR. JUSTICES HARRISON, SHEEHY, McDONOUGH and WEBER concur.