author: JUSTICE SHEEHY JUSTICE McDONOUGH,

text:
    The TRUSTEES OF THE WASHINGTON — IDAHO — MONTANA CARPENTERS — EMPLOYERS RETIREMENT TRUST FUND and the Trustees of the Laborers —A.G.C. Pension Trust of Montana, Plaintiffs/ Respondents and Appellants, v. GALLERIA PARTNERSHIP, et al., Marble Moving, Storage & Transfer, et al., Defendants/Appellants and Respondents. GALLERIA PARTNERSHIP, et al., Third-Party Plaintiffs and Appellants, v. The TRUSTEES OF THE WASHINGTON — IDAHO — MONTANA CARPENTERS — EMPLOYERS RETIREMENT TRUST FUND, et al., Third-Party Defendants and Respondents.
    No. 89-29.
    Submitted on Briefs June 1, 1989.
    Decided Sept. 20, 1989.
    Rehearing Denied Oct. 31, 1989.
    780 P.2d 608.

      William K. Van Canagan and Christopher B. Swartley, Datsopoulos, MacDonald & Lind, Missoula, for plaintiffs/appellants Trustees.
    Jardine, Stephenson, Blewett & Weaver; K. Dale Schwanke, Great Falls for Galleria.
    Cure, Borer & Davis, Gregory J. Hatley, Great Falls, for Estate of Tice.
    Gough, Shanahan, Johnson & Waterman, Jock O. Anderson, Helena for Compass Group, etc.
    Linnell, Newhall & Martin, Great Falls for Dees.
    Howard Strause, Great Falls for Marbles.
    Graybill, Ostrem, Warner & Crotty, Great Falls, for Patterson.
    Elizabeth Best, Great Falls, Mary Van Buskirk, Bosch, Kuhr, et al., Havre, for Estate of Lund.
   JUSTICE SHEEHY

delivered the Opinion of the Court.

Galleria Partnership and the individual members of the partnership appeal from a final judgment entered against them in the District Court, Eighth Judicial District, Cascade County, and in favor of the Trustees of the Washington — Idaho — Montana Carpenters — Employers Retirement Trust Fund and the Trustees of the Laborers AGC Pension Trust of Montana (hereafter Trustees). The judgment is for $1,505,368.35 of which the sum of $1,308,193.35 is for deficiency judgment after mortgage foreclosure, with the rest being recoverable costs and attorneys fees.

The Trustees appeal from a final summary judgment entered against them in the same court and in favor of the Estate of Gordon P. Tice.

It appears that other issues remain for decision by the District Court arising out of the original action, but this Court has jurisdiction by reason of direct appeal and a proper rule 54(b) certification from the District Court.

I.

In this portion of the opinion we uphold the judgment of the District Court that the Trustees are entitled to deficiency judgment against Galleria Partnership, and costs and attorneys fees, but remand the amount of the deficiency judgment to the District Court for reexamination on the issue of the fair market value of the property given as security for the indebtedness at the time of the foreclosure sale.

A. Propriety of a Deficiency Judgment

On March 17, 1982, in Great Falls, Montana, 16 individuals made, executed and delivered a promissory note for $1,200,000.00 payable to the Trustees on terms set out in the written note. The note was signed by the individuals not as partners of the Galleria Partnership, but in their individual capacity, except that three of the individuals also signed as partners in Great Falls Investors. Under the terms of the promissory note, the individuals undertook jointly and severally to pay the principal sum of the note and the interest accruing thereon.

At or about the same time, but effective March 17, 1982, Galleria Partnership, composed of 10 of the individuals who signed the promissory note, and three additional persons comprising the Great Falls Investors made, executed and delivered to Safeco Title Insurance Company as trustee, a trust indenture and security agreement, wherein the trustees were named as beneficiaries, to secure the principal sum of $1,200,000.00 with interest thereon according to the terms of the promissory note above referred to.

The real property which was the subject of the trust indenture was the location of a warehouse which had been remodeled for the purpose of leasing to various business tenants. The building had been purchased and remodeled beginning in 1982 by a prior partnership, Galleria Associates, managed by one Dan Cook.

Cook had obtained a $1,950,000.00 appraisal of the building in its remodeled state so he could get a long-term loan to pay off Galleria Associate’s interim construction loan. For this purpose Cook approached third party defendant, Compass, which specializes in handling loans of union pension trust funds and then servicing those loans. Compass is a wholly owned organization of third party defendant, Old National Bancorporation. Cook was advised by Compass that Galleria Associates could not borrow from the Trustees because Cook was disqualified under the provisions of the Federal Employee Retirement Income Security Act (ERISA) statutes. 29 U.S.C. §§ 1001 et seq. Thereupon, Cook set about the formation of Galleria Partnership, to which Galleria Associates would eventually sell the building, and the Galleria Partnership would qualify as a borrower under ERISA. Cook developed a prospectus on the project, and lined up the 13 individuals and Great Falls Investors that eventually signed the trust agreement. The individuals who became partners in the Galleria Partnership held varying fractions of interest in the partnership. Compass knew that Cook was procuring such interest; the agents of Compass had no idea what representations Cook was making to the prospective of investors in Galleria, Partnership, and did not ask.

It seems clear that Cook, himself, or through others that were acting on his information, represented to each of the persons who ultimately signed the loan documents that the loan was to be nonrecourse. At least three lawyers were among the investors, each of whom was of the view that a deficiency judgment could not be recovered on the foreclosure of a trust indenture.

Cook hand-carried the loan documents, including a commitment from Compass as to the terms of the loan, which stated that security for repayment was to be a first lien on the building and thus he secured the signatures of the borrowers. Each of the borrowers was told that the loan was nonrecourse. Only one attorney read the note or trust indenture, and he found nothing in them that was contrary to his view that the loan was nonrecourse.

In capsule, then, after the loan was closed, it turned out that the bulk of the tenants in the Galleria building were businesses Cook had an interest in, which had been known to Compass when the loan commitment was made. Cook’s economic situation deteriorated, which ultimately resulted in the failure of various tenants to pay their rents in a timely basis. The Galleria Partners were using those rents to cover operation expenses and to make the monthly loan payments which were $14,916.00 each. As the tenants’ rents fell into arrears, the monthly payments on the loan were made progressively later. Compass was aware of the reason for the late payments from the partnership and continued to accept the payments together with late charges.

The November, 1984 loan payment had not been paid by early December of that year. There is a dispute in the evidence as to whether Compass advised appellant Bloomgren, a CPA, who was keeping the Partnership books and paying its bills, that Compass required both the November and December payments to be made together. Bloomgren denies any contact from Compass at the time. Nevertheless, on December 11, 1984, Compass sent a default notice to Bloomgren, accelerating the entire loan balance of $1,225,668.81 and demanding its payment in nine days. The default notice crossed in the mail the November, 1984 payment which Bloomgren had forwarded to Compass. When the November payment was received, Compass returned it with a letter reiterating the demand for the entire balance.

Thereafter there were proposals for settlement which never reached fruition. In that period of time, Compass had the building appraised in the summer of 1985 and the appraisal came in at $1,100,000.00. The Trustees were unwilling to accept that sum as an appraisal and no settlement for deficiency was arrived at by the parties.

On April 12, 1985, the Trustees filed an action in the District Court for the purpose of foreclosing on the trust indenture. After lengthy discovery and complex proceedings, the District Court on October 29, 1987, determined in a summary judgment that the trust indenture constituted a first lien upon the real property of Galleria Partnership, and issued its order for decree of foreclosure. The order directed the Sheriff of Cascade County, Montana, to sell the real estate in one parcel at public auction under the laws governing the sale of real estate under execution upon proper notice being given; and to deliver a deed to the purchaser. The order of foreclosure reserves specifically the question of any deficiency judgment.

No return of the sale by the Sheriff under the foreclosure sale can be found in the District Court file which has been forwarded to us. Under the mortgage foreclosure statutes, “if it appears from the sheriff’s return that the proceeds are insufficient and a balance still remains due, judgment can then be docketed for such balance against” the defendants liable for the debt. No party before us raises any contentions as to the lack of sheriff’s return in the District Court file, and in view of our decision relating to the deficiency judgment it is unimportant here. It is reflected in the order of the District Court, dated October 7, 1988, when the deficiency judgment was rendered against the Galleria Partnership, that the Sheriff’s sale took place on December 8, 1987, and that the bid price obtained there at was $565,000.00. The briefs of all parties assume that the sole bid at the Sheriff’s sale was that of the Trustees.

So much for the background leading up to the deficiency judgment. The Galleria Partnership raised several issues contesting the validity of the deficiency judgment which we will now take up.

1. The Chunkapura decision.

The partners contend that under First State Bank of Forsyth v. Chunkapura (1987), 226 Mont. 54, 734 P.2d 1203, because the case before us involves a trust indenture, a deficiency judgment is improper.

In Chunkapura, this Court faced for the first time the question whether a deficiency judgment could be obtained on a trust indenture where the lender chose to foreclose the indebtedness under the mortgage foreclosure statutes rather than by trustee’s sale under the Small Tract Financing Act.

In Chunkapura, we pointed out that prior to 1963, there was but one statutory provision for the foreclosure of mortgages, and that those statutes permitted the debtor a right of possession during the period of redemption while the debtor personally occupied the land as a home for himself and his family (§ 71-1-229, MCA), and further permitted all execution debtors a right of redemption in the same manner as permitted to debtors under execution sales (§ 71-1-228, MCA). The Small Tract Financing Act of 1963 (§§ 71-1-301, -321, inclusive, MCA) permits the use of deeds of trust or trust indentures to secure the performance of obligations; provides that upon default and foreclosure, the obligee’s right of occupation of the real property does not extend beyond ten days from the date of the sale (§ 71-1-319, MCA); makes no provision for any right of redemption; and further provides that deficiency judgments are not allowed when a trust indenture is foreclosed by advertisement and sale (§ 71-1-317, MCA). In Chunkapura, we noted that the Small Tract Financing Act was enacted at the instance of the banking and lending industry. They contended that the “one action rule” of mortgage foreclosure, and the attendant right of redemption and right of possession rules, hampered the financing of improvements on small tracts in Montana because banks and investors were unwilling to invest in mortgages when on default their funds would be tied up during the period of redemption. This Court noted a quid pro quo relating to the new legislation, that the lenders would give up their deficiency judgment rights on default, if the borrowers would give up their rights of possession and redemption. Chunkapura, 734 P.2d at 1205.

The problem in Chunkapura arose because § 71-1-304(3), MCA, provides that a trust indenture executed in conformity with the Small Tract Financing Act may be foreclosed “by advertisement and sale ... or, at the option of the beneficiary [lender], by judicial procedure as provided by law for the foreclosure of mortgages on real property.” In Chunkapura, the bank opted to foreclose under the mortgage provisions of the law and insisted that it was entitled to a deficiency judgment as there authorized.

Our decision in Chunkapura was to the effect that a deficiency judgment would not be allowed when trust indentures are executed in conformity with the Small Tract Financing Act because to allow a deficiency judgment would be inconsistent with the provisions of that Act. On rehearing, we modified that holding so that Chunkapura “is to be considered as precedent only for trust deeds related to occupied, single family residential property.” 734 P.2d at 1211.

Although we noted in Chunkapura that the ambiguity existing between the Small Tract Financing Act and the standard provisions for mortgage foreclosure created legal problems, and we recommended the attention of the legislature to the same, the legislature has met twice in regular session since Chunkapura and has undertaken no action regarding the subject.

The contention of the Partners here before us on appeal is that the Chunkapura modification is too limited, has no statutory source and should be expanded by us to prevent a deficiency judgment in this case, since the Galleria development was a “business expansion,” one of the reasons for the enactment of the Small Tract Financing Act. (Section 71-1-302, MCA).

We can understand the difficulty the Galleria Partnership has in accepting the Chunkapura decision as modified on rehearing. The trust indenture which they executed is in conformance with the Small Tract Financing Act and that Act provides that on foreclosure there should be no deficiency judgment. Foreclosure proceedings under mortgage laws are permitted deficiency judgments. When a lender holding a trust indenture as security chooses to foreclose under the mortgage laws, Chunkapura as modified holds that except for occupied single family residential property, lenders can obtain a deficiency judgment even on trust indentures. This result became necessary because of the penchant of the lending industry, after the passage of the Small Tract Financing Act, to use deeds of trust almost exclusively. In fact, the original Act which once was limited to tracts of three acres, was amended to 15 acres, and in 1989 to 30 acres.

In Chunkapura, we could easily have held in resolving the ambiguity between the two modes of foreclosure that a foreclosure of a trust indenture under the mortgage laws was nevertheless a foreclosure “by advertisement and sale” and therefore deficiency judgments were barred under § 71-1-317, MCA. This result however would have created havoc in the loan industry. The majority in Chunkapura decided instead to limit the prohibition against deficiency judgments to trust deeds used as security for the financing of single dwelling, occupied homes (the type of financing for which the Small Tract Financing Act was argued to the legislature). The whole problem of course deserves legislative attention, but until the legislature does act, we will limit the preclusion of deficiency judgments on deeds of trust used as security instruments in accordance with Chunkapura. That, of course, excludes the Galleria Partners, who without question, executed instruments relating to a commercial loan.

In First Federal Savings and Loan Association of Missoula v. Anderson (1989) [238 Mont. 296,] 777 P.2d 1281, 46 St.Rep. 1280, we upheld Chunkapura so far as it relates to single family, occupied residential property. Galleria Partnership does not qualify for the preclusion of a deficiency judgment under Chunkapura since Galleria Partnership involves a purely commercial loan.

2. The Remedy of a Deficiency Judgment and the Language of the Operative Documents.

Under this contention, Galleria Partnership argue that under the trust indenture, there is no mention of á possible deficiency judgment, and when a trust indenture is foreclosed, the lender is entitled only to recover its costs and expenses incident to the foreclosure and a reasonable attorneys fee.

Section 7.2 of the Trust Indenture in this case provides in part:

“. . . upon the occurrence of any default hereunder, Beneficiary shall have the option to declare all sums secured hereby immediately due and payable and foreclose this Trust Indenture in the manner provided by law for the foreclosure of mortgages on real property, and Beneficiary shall be entitled to recover in such proceedings all costs and expenses incident thereto, including a reasonable attorney’s fees in such amount as shall be fixed by the court

We do not find that the foregoing language is a limitation upon the damages that may be recovered in a mortgage foreclosure conducted under § 71-1-222, MCA, which specifically provides for deficiency judgments if the sheriff’s return shows that the proceeds are insufficient to pay the balance then due. We find no merit in the Partnership’s contention in this point.

It is true that no reference is made in the body of the Trust Indenture in this case of the possibility of a deficiency judgment on foreclosure, as would be the case if a regular mortgage form had been used. The lack of a mention of deficiency judgment in the instruments is immaterial. As long ago as 1895, this Court in First National Bank of Butte v. Pardee, held that a deficiency judgment may properly be entered against the grantor in a deed of trust given to secure the payment of a promissory note, though there was nothing in the terms of the deed itself to warn of the possibility of a judgment for a deficiency. First National Bank of Butte v. Pardee (1895), 16 Mont. 390, 393, 41 P. 77, 78.

3. Did the Trustees Waive Their Right to Accelerate the Balance Due or Were They Estopped From Doing So?

Galleria Partnership contends that from the time of the execution of the note in 1982 until the notice of default in December 11, 1984, when the Trustees sent notice of default and accelerated the balance due, Galleria Partnership customarily was late in making the monthly payments. Galleria Partnership contends that the customary acceptance by the lender of late payments, and payments by Galleria of late charges in connection with its late payments, had the effect of lulling the Partnership into a sense of false security and because thereof the Trustees either waived their right to accelerate the remaining balance due without notice or they were estopped from doing so.

This Court has held that waiver is the “voluntary and intentional relinquishment of a known right, or claim or privilege,” Thiel v. Johnson (1985), 219 Mont. 271, 274, 711 P.2d 829, 831. We also held in Thiel that “waiver may be proved by expressed declarations or by a course of action and conduct so as to induce the belief that the intention and purpose was to waive.” Thiel, 711 P.2d at 832.

Again we turn to the trust indenture and find in paragraph § 6.5 thereof that any delay or omission by the beneficiary in the exercise of any right, power, or remedy arising out of the trust indenture shall not impair any such right power or remedy, or the right of the beneficiary to resort thereto at a later date. Further such delay shall not be construed to be a waiver of any default or event of default under the indenture.

Galleria Partnership relies especially, on Soltis v. Liles (1976), 275 Or. 537, 551 P.2d 1297, 1300, which held that such nonwaiver provisions as are found in the trust indenture here do not prevent the promissor from waiving the conditions of the contract by his conduct. Galleria Partnership claims that the sudden notice sent by the Trustees in this case, after the long acceptance of the late payments, was in itself a breach of the contract, and the trustees, as a breaching party, cannot now call upon the other party to perform, relying on Western Media Inc. v. Merrick (Mont. 1988), [232 Mont. 480,] 757 P.2d 1308, 1311.

The Partnership contends that this point is one of the first impression in Montana. While we can conceive of cases in which the non-waiver provisions of a contract should not be applied, the facts here do not warrant such a result. Not only must the evidence show a course of conduct by which one party waived the contractual obligations of the other party, but additionally, it seems to us, the evidence should show that the same party also waived any right to rely on the nonwaiver provisions of his contract. In other words, in this instance, since waiver is a known and voluntary relinquishment of a known right, those elements of waiver at least have to appear from the evidence before it can be held that the contractual right of non-waiver has been waived.

4. Is Deficiency Judgment Barred Because this is a Purchase Money Mortgage?

Under the mortgage foreclosure laws of this State, a deficiency judgment is not allowed on the foreclosure of a purchase price mortgage. Section 71-1-232, MCA. Galleria Partnership contends in this case that because the Trustees lent the money, knowing that the proceeds of the loan would be used by the Partnership to pay off Galleria Associates, the prior partnership, for the purchase of the real property, that the arrangement in effect was that of a purchase price mortgage and so a deficiency judgment was barred under the statute.

The language of the statute itself defeats the contention. It provides:

“Upon the foreclosure of any mortgage, executed to any vendor or real property or to his heirs, executors, administrators, or assigns for the balance of the purchase price of such real property, the mortgagee shall not be entitled to a deficiency judgment on account of such mortgage or note or obligation secured by the same.”

Plainly, the Trustees are not the vendor in this case, nor are they the assignee of any vendor. The language simply does not fit the Trustees so as to prevent their obtaining a deficiency judgment.

Where the lender is not the vendor, nor standing in the vendor’s shoes, the statute does not prevent a deficiency judgment. Aetna Life Insurance Co. v. Slack (Mont. 1988), 232 Mont. 250, 756 P.2d 1140, 1144.

5. Was the Loan Illegal?

The Partnership contends that under the federal ERISA laws it is illegal to utilize labor pension funds for the benefit directly or indirectly of a “party in interest.” 29 U.S.C., Section 1106.

The reason the prior partnership, Galleria Associates, was disqualified from borrowing pension trust funds was that both Dan Cook and Robert Patterson, another partner in Galleria Associates, were “parties in interest” because they were employers covered by “a plan subject to the Retirement Income Security Act.” 29 U.S.C. § 1002(14)(c).

Galleria contends that the loan here indirectly benefited both Patterson and Cook, because as partners of the prior partnership they probably received proceeds from the loan, since the proceeds were used to purchase the interest of Galleria Associates in the building. The District Court in disposing of this issue in summary judgment, did not set forth findings of fact, and Galleria Partnership contends the court erred by failing to provide any rationale for its ruling on this issue.

The Partnership contends therefore, that the loan from the pension trust funds through Compass was illegal in the first instance, and a court of equity will not enforce between the parties an illegal contract.

The simple answer to this issue is that made by Trustees in response. This was not a “disqualified transaction” because the borrower in this case was the Partnership and the Galleria Associates. We find no merit in this contention.

6. Did the Terms of the Loan Commitment from the Lender Bar a Deficiency Judgment?

When the loan in this case was in making, Compass provided a letter dated December 17, 1981, addressed to the Galleria Partners, which contained terms relating to the making of the loan. This letter of commitment was used by Cook in obtaining signatures from the Partners. Among the special conditions for the loan was the requirement that the loan was to be secured by a deed of trust. The Partners contends that the use of the commitment letter, along with the alleged representations by Cook, that there would be no personal liability for the Partnership, created a reasonable belief in the minds of the potential partners that they would not be liable personally for deficiency judgment. The District Court disposed of the issue on the theory of misrepresentation, saying that if a misrepresentation was made, the other party nevertheless has a duty to use diligence with respect to any such representation made, and here, the borrowers, for the most part, did not read the loan documents; and if they had read the note they would have seen that the payments required by them were phrased in terms of personal liability.

The Partnership appears to concede the duty of diligence on the part of the borrowers, but contends that the District Court missed the issue of lack of consideration. The Partnership contends that no deficiency judgment was bargained for, and because in the minds of the borrowers a deed of trust secured a nonrecourse loan, there is no consideration to which the court could point for a deficiency judgment. Again the Partnership contends that the trust indenture itself specifically limited recovery in the event of default to the Trustees’ attorneys fees, costs, and expenses incident to the foreclosure.

Of course, all representations made by Cook were superseded by the written instruments, the promissory note, and the deed of trust. Section 28-2-904 MCA. The validity of neither the promissory note nor the trust indenture is in dispute, and there is no claim here of a mistake in those instruments or an imperfection in their writings, so extrinsic evidence may not be considered to vary the terms of those written instruments. Section 28-2-905, MCA.

We do no find in this case the specifications in the loan commitment to- be different in essence from the promissory note and the trust indenture which eventually were executed. This court held in Warner v. Johns (1949), 122 Mont. 283, 288, 201 P.2d 986, 988, that where the consideration expressed in the written instrument is contractual in its nature, oral evidence is inadmissible to show a different consideration because then it changes the legal effect of the instrument. That rule applies here, although the question is not one of evidence but rather a contractual interpretation. The fact that deficiency judgment was not expressly mentioned does not change the legal effect of the instruments when executed.

7. Did the Representation by Cook that the Loan Would be Nonrecourse Bar a Deficiency Judgment?

On this issue, the Partnership seeks to impute to the Trustees on agency grounds responsibility for the alleged misrepresentations made by Cook in securing the signatures of the borrowers to the promissory note and the trust indenture.

The Partnership cites numerous cases involving principals and agents to the effect that the principals are bound by the acts or representation of the agents. None of those cases is applicable here. The District Curt rejected this contention saying there was no evidence of any kind that would make Cook either an actual or an ostensible agent of Compass or the Trustees in procuring the signatures. Since any evidence that Cook was representing either Compass or the Trustees in procuring the signatures is totally lacking, no imputations can be made by any court that either Compass or the Trustees were responsible for the alleged misrepresentations made by Cook. A deficiency judgment cannot be barred on this contention.

8. Disposition

As the foregoing discussion shows, there is no question that the Partnership members are jointly and severally liable on the promissory note which they signed individually, and that, after foreclosure of the real property given to the security obligation, the individual Partners are also liable for deficiency judgment. The size of the deficiency judgment in relation to the original note is however a matter of concern.

It is uncontroverted in the evidence here that in 1981, when Dan Cook was first arranging for a loan, he obtained an appraisal of the property as remodeled at $1,950,000.00. In 1982, that appraisal had sufficient validity to justify the Trustees in extending a loan of $1,200,000.00 to the Galleria Partnership.

In 1985, after the default notice had been served by the Trustees, they obtained an appraisal of the property which they did not accept, but which apparently valued the remodeled property at $1,100,000.00.

At the sheriff’s sale, in 1987, the Trustees, as beneficiary under the trust indenture, submitted a bid on the real property as remodeled for $565,000.00. The District Court found that the principal amount of the obligation due on November 1, 1984, was $1,185,655.49. Accrued interest, attorneys fees and recoverable costs brought the eventual deficiency judgment to $1,500,368.35. The fact that the real property was bid in at the sheriff’s sale for a sum at approximately 30% of is original appraised value is the basis for what must be a catastrophic deficiency judgment for the Partners.

Montana’s statutes have no direct provisions under the mortgage foreclosure procedures to determine the fair market value at the time of the forced sale of the property subject to foreclosure. We pointed out in Chunkapura that several of the states surrounding us have statutory provisions which serve to protect judgment debtors when foreclosure of their property is made to satisfy the judgments. Our examination of the statutes of surrounding states, and of the interpretations of their respective courts concerning those statutes show that predominantly, a deficiency judgment is limited to the difference between the fair market value of the secured property at the time of the foreclosure sale, regardless of a lesser amount realized at the sale, and the outstanding debt for which the property was secured. We set forth in Chunkapura expressly that California, Washington, Arizona, Utah, Idaho, and Oregon, are states with such protective provisions, with Alaska being the sole exception. Chunkapura, 734 P.2d at 1207-1208.

In connection with this case, we have looked at the provisions of additional states. In South Dakota, the amount realized at sheriff’s sale must be the “fair market value” of the property. S.D. Codified Laws Ann. § 21-47-16 (1989). In North Dakota, there is a fair market value provision which if contested must be submitted to a jury. N.D. Cent. Code § 32-19-06 (1987). Colorado has no statutory restrictions on deficiency judgments, as far as we can determine, but its laws provide that trust indentures are to be foreclosed by a public trustee (not private) and that all others must be foreclosed as a mortgage. In Wyoming, a mortgage is construed as a covenant for the payment of the sum secured, and unless there is specific covenant in the mortgage, on foreclosure the remedies are limited to the lands mentioned in the mortgage. Wyo. Stat. § 34-1-136 (1989).

In U.S. v. MacKenzie (9th Cir. 1975), 510 F.2d 39, 41, it was noted that the purpose of the Nevada and Arizona statutes relating to deficiency judgments is to prevent the injustice that occurs when a debtor’s property is sold on foreclosure sale for a price significantly less than its fair market value.

Some states surrounding us also have other provisions relating to the protection of the judgment debtor. Thus in Wyoming, the mortgagee or party to whom the debt is owed may bid in at the sheriff’s sale, but his bid must be made “fairly and in good faith.” Wyo. Stat. § 34-4-108 (1989).

As we said, the Montana statutes are silent, both as to the right of the mortgagor to bid in to the sheriff’s sale, and as to the duty of a court to determine if the sheriffs sale reflects the fair market value of the property. A mortgage foreclosure proceedings, however, is in the equity jurisdiction of the courts. This Court is enjoined by statute, in equity cases and in matters or proceedings of an equitable nature, to review all questions of fact arising on the evidence presented in the record, and to determine the same. Section 3-2-204(5), MCA. Courts sitting in equity are empowered to determine all the questions involved in the case and to do complete justice; this includes the power to fashion an equitable result. Maddox v. Norman (1983), 206 Mont. 1, 14, 669 P.2d 230, 237. An equity court whose jurisdiction has been invoked for an equitable purpose, will proceed to determine any other equities existing between the parties connected with the main subject of the suit, and grant all relief necessary to the entire adjustment of the subject. Tiffany v. Uhde (1950), 123 Mont. 507, 512-513, 216 P.2d 375, 378.

Had the sole bid at the sheriffs sale for the property here been for $100 or $1,000, undoubtedly we would be moved by equity to inquire as to its fairness. The actual bid of $565,000.00 is only a matter of degree. In the exercise of our equity jurisdiction therefore, we deem it proper to remand to the District Court to determine the fair market value of the property at the time of the sheriff’s sale. The “fair market” is the intrinsic value of the real property with its improvements at the time of sale under judicial foreclosure, without consideration of the impact of the foreclosure proceedings on the fair market value. Chunkapura, 734 P.2d at 1207.

The method of determining fair market value we will leave to the District Court, though it seems appropriate that each opposing party should be allowed to present the opinion of appraisers selected by them respectively.

When the fair market value of the property is determined by the District Court, that figure would be the basis for the determination of a deficiency judgment if any.

II.

The Trustees appeal from a summary judgment entered by the District Court in this cause holding that the estate of Gordon P. Tice is not liable to the Trustees for a deficiency judgment arising out of the instruments above described.

Gordon Tice executed the promissory note and the trust indenture which is the subject of this litigation effective March 17, 1982. He died on July 16, 1984. His spouse, Mary C. Tice, was appointed personal representative of the estate on January 9,1985. Notice to creditors is published first on January 17, 1985, with final publication occurring on January 31, 1985.

The Trustees’ complaint naming Gordon P. Tice as a party defendant was filed April 12,1985. The District Court found that service of the summons and complaint was made on May 31, 1985, which is more than four months after the publication of the first notice of creditors on January 17, 1985. Under the facts, the District Court granted the personal representative a summary judgment precluding the Trustees from any deficiency claim against the estate of Gordon P. Tice.

The Trustees’ complaint however was filed on April 12, 1985, within the four month period. Section 72-3-804(1), MCA, provides that a claim against an estate is deemed presented on the first to occur of a receipt of the written statement of claim by the personal representative or by the filing of a claim of the court. Section 72-3-804, MCA, also provides that a claimant may commence a proceeding against a 'personal representative to obtain payment of claim against the estate, but the commencement of the proceeding must occur within the time limit for presenting -the claim. The Trustees contend that the term “commencement of the proceeding” is met by the filing of the complaint, and not by the service of the summons of complaint upon the party defendant.

It also appears from the record that on April 10, 1985, a copy of the Trustees’ complaint was forwarded to counsel for Mary Tice, the personal representative, but said counsel also represented all of the other Partnership defendants. On April 19, 1985, that attorney wrote the attorney for the Trustees, suggesting that an acknowledgment of service of blank form be sent to cover all the Partnership defendants. This was done by counsel for the Trustees on April 24, 1985. It was not, however, until May 31, 1985, two weeks after the nonclaim statutory period had expired that Mary Tice, as personal representative, of the estate of Gordon P. Tice, signed the acknowledgment of service.

It appears from an examination of the statutes relating to creditors’ claims against an estate that the claim of the Trustees was not properly presented. Section 72-3-803(l)(a), MCA, provides that claims, including those founded on contract or other legal basis, if not barred by other statutes of limitations, are barred against the estate unless presented within four months after the date of the first publication of notice to creditors if that notice is properly given. The manner of the presentation of claims is covered in § 72-3-804, MCA, as follows:

“(1) The claimant shall mail to the personal representative return receipt requested a written statement of the claim indicating its basis, the name and address of the claimant, and the amount claimed or may file a written statement of the claim, in the form prescribed by rule, with a clerk of the court. The claim is deemed presented on the first to occur of receipt of the written statement of claimed by the personal representative or the filing of the claim of the court

Thus it appears, that a claim founded on contract, as in this case, must be presented either to the personal representative, or by filing the same with the court. The filing of a suit outside the probate proceedings, even though within the four month period, does not suffice to properly submit a claim against an estate. Hence, the claim of the Trustees against the Gordon P. Tice estate is time-barred.

Even so, the Trustees argue that there are due process implications which have not been met in the matter of notice that was followed in the Tice estate. The Trustees rely on Tulsa Professional Collection Services, Inc. v. Pope Executrix of the Estate of H. Everett Pope, Jr. (1988), 485 U.S. 478, 108 S.Ct. 1340, 99 L.Ed.2d 565. This case involved a provision of Oklahoma’s probate laws requiring claims arising upon a contract to be presented to the executor of the estate within two months of the publication of notice to creditors or else be barred. The creditor, a hospital, had rendered medical services to the decedent Pope for about five months. Upon his death, the hospital, through its assignee, Tulsa Professional Collection Services, Inc., had not presented a claim to the executor of the estate within the two months period. Tulsa, relied instead on an Oklahoma statute which provided that the executrix must pay the expenses of the last illness. The Oklahoma trial court ruled that the failure to present the claim within the two month period required a denial of the claim. This result was affirmed in the Oklahoma Court of Appeals and by the Supreme Court of Oklahoma. The latter Court reasoned that the purpose of notice in probate proceedings is not to make a creditor a party to the proceedings, but rather to notify him that he may become one if he wishes.

The United States Supreme Court in Tulsa reversed on due process grounds. The Supreme Court determined that the unpaid medical bill was a property interest protected by the Fourteenth Amendment and that under the Fourteenth Amendment the due process clause applied if state action were involved. The Supreme Court further found that the probate proceedings did involve state action, especially since the probate court appointed the executor, and ordered notice to be given to creditors, required that proof of publication be filed with the court, and that claims also be filed with the court within the time period.

In such a case, the United States Supreme Court held that a duty of providing actual notice of the probate proceedings and of the necessity to present claims to known creditors, or reasonably ascertainable creditors, was required to satisfy due process.

The decision of the United States Supreme in Tulsa is a step-out from earlier cases, Mullane v. Central Hanover Bank and Trust Co. (1950), 339 U.S. 306, 70 S.Ct. 652, 94 L.Ed.2d 865 and Mennonite Board of Missions v. Adams (1983), 462 U.S. 791, 103 S.Ct. 2706, 77 L.Ed.2d 180. In Baker National Bank v. Henderson (1968), 151 Mont. 526, 529, 445 P.2d 574, 576, this Court held that the Mullane doctrine was ilot applicable to probate proceedings.

The provisions of our probate statutes relating to notice by publication to creditors against an estate may under Tulsa have due process implications as far as known creditors or reasonably ascertainable creditors are concerned, but that issue cannot be determined in this case. When the cause was before the District Court here, the issue was decided purely on the statutory provisions which were applicable under the probate code. The issue of due process was not preserved for appeal and is therefore not before us at this time.

The contention of the estate of Gordon P. Tice that the Trustees’ appeal in this case was untimely taken is without foundation. Galleria Partnership having filed a timely notice of appeal in this case on November 8, 1988, the filing of the Trustees’ notice of appeal on November 18, 1988, was timely filed. Rule 5(a)(3), M.R.App.P.

III.

Conclusion

1. The judgment of the District Court granting deficiency judgment to the Trustees is by the Court affirmed. The cause is remanded for a determination by the District Court of the proper amount of deficiency judgment, depending upon the fair market value of the foreclosed property at the time of the sheriffs sale. Neither Galleria Partnership nor the Trustees shall recover attorneys fees or other costs with respect to this appeal. If on remand, the fair market value is determined to be a sum more than $565,000.00 the District Court, in calculating a deficiency judgment if any, shall not allow interest from the date of the sheriffs sale to the date the new judgment is entered. The Trustees are entitled to attorneys fees and costs in the proceedings relating to the establishment of fair market value, except that each party shall pay the cost of its own appraisers.

2. With respect to the appeal of the Trustees from the judgment favoring the estate of Gordon P. Tice, that judgment is affirmed. The estate is entitled to recoverable costs on appeal and to attorneys fees under the reciprocal statute.

3. This cause is remanded to the District Court for further proceedings of the court in accordance with this opinion.

CHIEF JUSTICE TURNAGE and JUSTICES HARRISON and HUNT concur.

JUSTICE WEBER did not participate.

JUSTICE McDONOUGH,

concurring and dissenting:

I dissent to the remand to the District Court to determine the fair market value of the property at the time of the sheriffs sale, and the use of that value for the determination of a deficiency judgment. I concur with the balance of the majority opinion.

Section 71-1-222, MCA (1987), governs as to such proceedings in foreclosure suits. The section is as follows:

“(1) There is but one action for the recovery of debt or the enforcement of any right secured by mortgage upon real estate, which action must be in accordance with the provisions of this part. In such action the court may, by its judgment, direct:
“(a) a sale of the encumbered property (or so much thereof as may be necessary);
“(b) the application of the proceeds of the sale; and “(c) the payment of the costs of the court, the expenses of the sale, and the amount due the plaintiff.
“(2) If it appears from the sheriff’s return that the proceeds are insufficient and a balance still remains due, judgment can then be docketed for such balance against the defendant or defendants personally liable for the debt, and it becomes a lien upon the real estate of such judgment debtor, as in other cases on which execution may be issued.
“(3) No person holding a conveyance from or under the mortgagor of the property mortgaged or having a lien thereon, which conveyance or lien does not appear of record in the proper office at the time of the commencement of the action, need be made a party to such action. The judgment therein rendered and the proceedings therein had are as conclusive against the party holding such unrecorded conveyance or lien as if he had been made a party to the action.”

It is noted in Subsection (1) that the court directs the sale of the encumbered property, applies the proceeds, and directs payment of the costs. This section does not prescribe the details of the sale itself, notice thereof, etc.; these details are to be set forth in the decree or judgment of foreclosure and are governed by rules of equity. Montana has no statutory requirement of an appraisement of the property to be sold, either before or after the sale.

However, in Subsection (2) of said section, it does provide for a deficiency judgment in specific terms. If the proceeds of the sale are insufficient to pay the debt due, and a balance still remains, judgment can then be docketed for such balance against the defendants personally. The statute does not provide for the calculation of a deficiency judgment by applying a fair market value, as determined by the court, to the amount due. Rather, it directs that a deficiency judgment should be calculated by applying the proceeds of the sale to the amount due. This statute clearly sets forth how a deficiency is to be calculated. The statute prevails over any common law, see § 1-1-108, MCA, and § 1-2-103, MCA (1987).

Even if the statute did not cover the calculation of the deficiency, it would be inequitable to require such a determination on the state of this record. The defendants have never raised the issue in the lower court or in this Court, although they could have done so. They were represented by competent counsel at all stages of the suit, three of the defendants are attorneys at law, and all appear to be knowledgeable investors. If the defendants were dissatisfied with the proceeds of the sheriff’s sale they could have petitioned the District Court to set aside the sale on grounds of unfairness and inadequacy, and asked to have it appraised for guidance of the court in determining whether or not to set aside the sale and order a new sheriff’s sale. Other equitable options might have been available. The defendants chose not to avail themselves of any of these options. I would affirm in toto.

JUSTICE GULBRANDSON concurs in the foregoing dissent.


source: Caselaw Access Project

author: JUSTICE McDONOUGH

license: Public Domain

text:
    ZEKE’S DISTRIBUTING COMPANY, Plaintiff and Appellant, v. BROWN-FORMAN CORPORATION, Defendant and Respondent.
    No. 88-532.
    Submitted on Briefs Aug. 3, 1989.
    Decided Sept. 21, 1989.
    779 P.2d 908.

      Charles A. Smith, Robert T. Cummins, Helena, for plaintiff and appellant.
    Stuart L. Kellner, Hughes, Kellner, Sullivan & Alke, Helena, for defendant and respondent.
   JUSTICE McDONOUGH

delivered the Opinion of the Court.

This appeal involves a motion for new trial in an action for breach of contract and the implied covenant of good faith and fair dealing. Plaintiff Zeke’s Distributing Company (Zeke’s) appeals the ruling of the District Court of the First Judicial District, Lewis and Clark County, granting defendant Brown-Forman Corporation’s (BrownForman) motion for new trial. The District Court granted the motion on the grounds that the court erred in receiving over BrownForman’s proper objection certain exhibits and testimony prejudicial to Brown-Forman’s case. We affirm,

Plaintiff Zeke’s frames two issues for determination on appeal. First, did the District Court abuse its discretion in setting aside a jury verdict and ordering a new trial because of alleged prejudicial error committed in allowing certain evidence to be admitted. And alternatively, if this Court upholds the District Court’s Order Granting New Trial, did the District Court err in refusing to allow Zeke’s to present evidence of projected lost profits as part of the tort element of damages. Defendant Brown-Forman also, raises an issue for appeal: Did the District Court err in denying Brown-Forman’s motions for directed verdicts and judgment notwithstanding the verdict with respect to the issues of its breach of the implied covenant of good faith and its liability for punitive damages?

Zeke’s, a Montana corporation, is a beer and wine distributor licensed by the State of Montana to sell and distribute beer and wine to retail outlets in the Helena area. Brown-Forman is a national distributor of alcohol and distilled spirits doing business in the State of Montana. Pursuant to a written agreement entered April 20, 1984, and assigned to Brown-Forman by a California corporation called “California Cooler,” Zeke’s was granted an exclusive distributorship of California Cooler beverages throughout Lewis and Clark, Broad-water, the southeast half of Powell, and the northern half of Jefferson Counties. The agreement was terminable by either party with or without cause on thirty days’ written notice.

Brown-Forman terminated the agreement by letter on February 13,1987. Zeke’s protested the termination in a letter dated February 17, 1987, setting forth the difficulties that would be caused by the termination and stating that the matter would be turned over to Zeke’s attorney. By letter of February 26, 1987, Leon R. Timmons, Brown-Forman’s assistant secretary and senior attorney, requested Zeke’s to direct all future correspondence concerning the distributorship to him. No other response was ever made to Zeke’s initial protest letter. On March 27, 1987, Timmons wrote a letter instructing Zeke’s to “disregard” the termination letter and advising Zeke’s the termination would be effective on October 1, 1987. This advise was given at a time when Timmons believed that 1) Zeke’s did not have a written contract of distributorship, 2) the verbal contract was non-exclusive, and 3) Montana law required reasonable notice before termination of a non-written contract for distributorship. Timmons’ belief was incorrect as to the first two factual premises. Zeke’s did not inquire further into its status after the letter of March 27 and Brown-Forman supplied no further information on the matter.

On February 12, 1987, four days before receipt of the original notice of termination by Zeke’s, Brown-Forman wrote Clausen’s Distributing Company of Helena (Clausen’s) a letter making continuation of Clausen’s distributorship of Brown-Forman’s other products contingent on its acceptance of a California Cooler distributorship. Between March and October of 1987, Brown-Forman supplied California Cooler to both Zeke’s and Clausen’s on a non-exclusive basis. During this time Brown-Forman ceased supplying Zeke’s with the sales “backup” it previously had supplied while supplying Clausen’s with this backup. After April 16, 1987, Zeke’s made no further orders for California Cooler from Brown-Forman.

Zeke’s filed suit against Brown-Forman and Clausen’s in the District Court of the First Judicial District on June 30, 1987. The District Court dismissed Clausen’s as a defendant and Zeke’s subsequently amended its complaint to allege three causes of action against Brown-Forman: 1) breach of contract, 2) breach of the implied covenant of good faith and fair dealing, and 3) a cause of action for punitive damages based on willful breach, fraud, malice, and oppression. During trial and over Brown-Forman’s objection Zeke’s introduced plaintiff’s exhibit #21, the letter to Clausen’s requiring Clausen’s to distribute California Cooler or possibly lose its distributorship of other Brown-Forman products. Brown-Forman also objected to the admissibility of testimony elicited from its agent Timmons on cross-examination concerning other lawsuits arising from Brown-Forman’s efforts to consolidate its distributorships. After trial, a jury awarded Zeke’s $8,623.70 in compensatory damages and $143,000 in punitive damages. Brown-Forman moved the District Court for a new trial. The District Court granted Brown-Forman’s motion and Zeke’s now appeals that order.

Zeke’s first contention on appeal is that the District Court abused its discretion by granting Brown-Forman a new trial on the grounds that the admission of exhibit #21 and the testimony of Timmons concerning other lawsuits were irrelevant and prejudicial to Brown-Forman’s case. Relevant evidence is evidence having any tendency to make the existence of any fact of consequence to the determination of the action more probable or less probable than it would be without the evidence. Rule 410, M.R.Evid. Evidence which is not relevant is not admissible. Rule 402, M.R.Evid. The court ruled and the jury was properly instructed (Instruction 9) that Brown-Forman properly terminated the written distributor agreement upon 30 days notice. The only contract existing between the parties was an implied contract based on the letter. Thus, there were no issues to be determined arising out of the termination of the written agreement or any implied obligation attendant to it. (Instruction 9.) The only contract existing between the parties was an implied contract based on Timmons’ letter of March 27, 1987, instructing Zeke’s to disregard the termination notice given earlier and extending Zeke’s distributorship until October 1, 1987. Exhibit #21 only relates to the existence of a contractual relationship between Clausen’s and Brown-Forman, it did not tend to make more or less probable the existence of an implied contract between Zeke’s and Brown-Forman. Nor does evidence of other lawsuits against BrownForman tend to make the existence of an implied contract between the parties more or less probable.

Further, there were factual issues at trial as to whether the implied contract between the parties gave Zeke’s an exclusive or non-exclusive distributorship, and based on this determination, whether Brown-Forman breached the implied contract. It is clear that evidence of other lawsuits is not relevant toward these issues. Exhibit #21, the February 12 letter to Clausen’s, was written prior to Timmons’ “disregard” letter of March 27, at a time when BrownForman was in the process of lawfully terminating the written agreement. At the time, the implied contract on which Zeke’s case is based did not exist. If the letter is relevant toward breach of this contract, it tends to establish that Brown-Forman intended that the implied contract with Zeke’s be non-exclusive, because Brown-For-man was already employing Clausen’s as a distributor. More importantly, the letter also tends to show the aggressive or “heavy-handed” tactics Brown-Forman used in consolidating its distributorships. However, the nature of these tactics is not only irrelevant toward breach of the implied contract between Zeke’s and Brown-For-man, it is also highly prejudicial to Brown-Forman’s case. Thus, while the letter may have been relevant regarding non-exclusivity and materially favorable to Brown-Forman, introduction of the letter by Zeke’s clearly prejudiced Brown-Forman. Relevant evidence may be excluded if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury. Rule 403, M.R.Evid. This determination of admissibility is within the discretion of the trial judge and will not be disturbed unless there is manifest abuse of discretion. Welnel v. Hall (1985), 215 Mont. 78, 694 P.2d 1346, Kimes v. Herrin (1985), 217 Mont. 330, 705 P.2d 108, Dahlin v. Holmquist, (Mont. 1988), [235 Mont. 17,] 766 P.2d 239, 46 StRep. 2127. The trial judge did not abuse its discretion by granting a new trial on the grounds that admission of this evidence prejudiced Brown-Forman.

Zeke’s also argues that the evidence is relevant toward the issue of good faith and fair dealing. Prior to the introduction of evidence concerning other lawsuits involving Brown-Forman on cross-examination of Timmons, the court had properly sustained objections by Brown-Forman that this evidence was irrelevant toward the issue of good faith and fair dealing. The court correctly noted that while the testimony tended to establish Brown-Forman’s policy of consolidating distribution of its products, the testimony did not establish whether the other terminations were made in good faith or bad faith and thus were not relevant to that issue. The court should have sustained a similar objection to this testimony when it was elicited from Timmons on cross-examination.

Zeke’s also argues that exhibit #21 is relevant toward the issue of good faith and fair dealing because its effect was to coerce Clausen’s into accepting a California Cooler distributorship at a time when Brown-Forman had an exclusive agreement with Zeke’s. There is no other evidence in the record which tends to demonstrate bad faith on the part of Brown-Forman. Moreover, the exhibit tends to establish possible misbehavior by Brown-Forman toward Clausen’s rather than demonstrating such misbehavior toward Zeke’s. Even if exhibit #21 has some attenuated relevance toward breach of the implied covenant of good faith and fair dealing, the letter should have been excluded because it was prejudicial to Brown-Forman’s case. Zeke’s argues that admission of this evidence constituted harmless error and thus granting a new trial based on its admission was an abuse of discretion. For error to be the basis for a new trial, it must be so significant as to materially affect the substantial rights of the complaining party. Rule 61, M.R.Civ.P., Giles v. Flint Valley Forest Products (1979), 179 Mont. 382, 588 P.2d 535. Considering the result arrived at by the jury in this case, the error cannot be characterized as harmless; admitting the evidence clearly was prejudicial and misleading and materially affected the substantial rights of Brown-Forman to a fair trial.

The decision to grant a new trial is within the sound discretion of the trial court, and will not be overturned absent a showing of manifest abuse of discretion. Tope v. Taylor (Mont. 1988) [235 Mont. 124] 768 P.2d 845, 45 St.Rep. 2242; Walter v. Evans Products Co. (1983), 207 Mont. 26, 672 P.2d 613; Giles, 588 P.2d 535. Upon Brown-Forman’s motion for new trial, it was within the District Court’s discretion to determine if the probative value of the evidence was outweighed by the prejudice to Brown-Forman. We find no abuse of discretion.

Zeke’s second contention is that the trial court erred in refusing to allow evidence of lost profits as part of the tort element of damages. As part of its damages claimed for Brown-Forman’s alleged breach of the implied covenant of good faith and fair dealing, Zeke’s offered to prove damages for lost profits beyond the period ending September 30, 1987, the extension date of the contract. Pursuant to Brown-Forman’s motion in limine, granted prior to trial, the District Court excluded this evidence and gave the jury the usual instruction for tort damage, limiting Zeke’s lost profits to the extension period of the contract. Zeke’s relies on this Court’s decision in State Bank of Townsend v. Maryann’s, Inc. (1983), 204 Mont. 21, 664 P.2d 295. In that case Maryann’s claimed that the bank’s negligent misrepresentation with respect to a loan made to Maryann’s prevented it from continuing to operate a store it reasonably could have expected to operate into the future. This Court held that the trial court had not erred in admitting evidence of future lost profits. However, the present case is distinguishable on its facts. Under the implied contract arising out of the March 27 letter, Zeke’s distribution of California Cooler was expressly limited to the period ending September 30, 1987. This limitation not only applied to Zeke’s compensatory damages for breach of contract, it also applied to compensatory damages for breach of the implied covenant of good faith and fair dealing. Thiel v. Johnson (1985), 219 Mont. 271, 711 P.2d 829. Zeke’s could not reasonably expect to distribute California Cooler beyond the extension date, thus the District Court did not err in limiting Zeke’s proof of future lost profits based on breach of the implied covenant to the extension period of the contract.

Finally, we address the issue raised by Brown-Forman in its appeal: Did the District Court err in denying Brown-Forman’s motions for directed verdicts and judgment notwithstanding the verdict with respect to the issues of its breach of the implied covenant of good faith and fair dealing and its liability for punitive damages? The implied covenant of good faith and fair dealing is based on the “reasonable expectations” of the parties that the other will not act “arbitrarily, capriciously, or unreasonably.” Nicholson v. United Pacific Ins. Co. (1985), 219 Mont. 32, 710 P.2d 1342. Under the statute applicable when this cause of action arose, punitive damages can be awarded in a tort action for breach of the implied covenant of good faith and fair dealing only if the breach amounts to oppression, malice, or fraud. Section 27-1-221, MCA (1985). Brown-Forman argues that there was not enough evidence of malice to submit the issue of punitive damages for breach of the implied covenant to the jury, thus the District Court erred by denying its motions for directed verdict and judgment notwithstanding the verdict on this issue. We need not determine the sufficiency of the evidence to support the jury’s verdict in this case. A grant of a new trial by the trial court is a re-examination of issues of fact, § 25-11-101 MCA; it must be commenced fresh or anew. Town Pump v. Dist. Ct. (1979), 180 Mont. 358, 590 P.2d 1126; Waite v. Waite (1964), 143 Mont. 248, 389 P.2d 181. In as much as the case will be retried de novo, Brown-Forman will have an opportunity to raise the issue of the sufficiency of the evidence supporting punitive damages at the appropriate time.

We affirm the District Court.

CHIEF JUSTICE TURNAGE and JUSTICES HARRISON, SHEEHY, WEBER, HUNT and GULBRANDSON concur.


text:
    KIMBERLY A. MARTINEZ, Claimant and Respondent, v. MONTANA POWER COMPANY, Employer/Defendant and Appellant.
    No. 89-50.
    Submitted on Briefs Aug. 17, 1989.
    Decided Sept. 21, 1989.
    779 P.2d 917.

      Robert T. O’Leary and Patrick Fleming, Power Co., Butte, for employer/defendant and appellant.
    Tom L. Lewis and John Seidlitz, Jr., Great Falls, for claimant and respondent.
   JUSTICE McDONOUGH

delivered the Opinion of the Court.

This appeal involves an award of attorney’s fees in a workers’ compensation case. Defendant Montana Power Company (MPC) appeals the judgment of the Workers’ Compensation court awarding claimant Kimberly R. Martinez attorneys’ fees for the wrongful termination of her temporary total disability benefits and conversion to permanent partial disability benefits. MPC failed to make a timely objection or rehearing request, and after filing a motion to reconsider the award still pending before the Workers’ Compensation Court, now appeals the judgment to this Court. We affirm.

Appellant MPC raises a sole issue on appeal: Did Workers’ Compensation Court err in awarding attorneys’ fees computed on the basis of 114.71 weeks of temporary total disability when MPC had paid permanent partial disability benefits during the disputed period?

Respondent Martinez raises a separate issue on appeal: Did MPC waive its right to appeal the order awarding attorneys’ fees by failing to request an evidentiary hearing on attorneys’ fees before the Workers’ Compensation Court.

Claimant Martinez was injured March 25, 1985 in the course and scope of her employment with MPC. As a result of her injury, Martinez receive temporary total disability benefits paid biweekly by MPC, a Plan I self-insurer. On August 20, 1986, MPC unilaterally determined that Martinez was capable of less strenuous employment and unilaterally reduced her temporary total benefits of $286 per week to permanent partial disability benefits of $143 per week. MPC reduced these benefits without giving Martinez the benefit of proper written notice as required by § 39-71-609, MCA, and with no medical evidence that Martinez had reached maximum healing or was capable of gainful employment. Martinez filed a petition for hearing with the Workers’ Compensation Court on June 10, 1987, alleging MPC had wrongfully terminated her biweekly temporary total disability benefits. The case was tried on October 15, 1988, and the Workers’ Compensation Court entered its Findings of Fact, Conclusions of law, and judgment on October 31, 1988. The court found that the' claimant had not reached maximum healing and was entitled to receive temporary total disability benefits retroactive to August 20, 1986, to continue for so long as she remained temporarily totally disabled. The court also ordered MPC to pay Martinez all contested medical, hospital, and related expenses incurred due to her injury and assessed MPC with a twenty percent (20%) penalty, in addition to reasonable costs and attorneys’ fees pursuant to § 39-71-611 MCA.

The judgment ordered Martinez’ counsel to submit within twenty (20) days a proposed order and supporting documentation specifying the amount of attorneys’ fees claimed. The court’s judgment provided MPC with thirty (30) days to request an evidentiary hearing if MPC contested the reasonableness of the proposed attorneys’ fees, such motion was to be accompanied by an affidavit and a statement of the grounds by which MPC asserted that the award was unreasonable. Martinez’ attorney submitted the proposed order and supporting statement on November 18, 1988, serving copies of both on MPC. The statement of attorneys’ fees noted that the attorneys’ fee agreement between claimant and counsel provided for a contingent fee of thirty-three percent (33%) of the amount of compensation payments claimant received by order of the Workers’ Compensation Court.

The temporary total disability benefits Martinez was awarded were computed by multiplying Martinez’ temporary total disability rate of $286 by 114.71 weeks, the period of retroactive temporary total disability, for a total of $32,807.06 retroactive benefits. A twenty percent (20%) penalty was assessed to this sum resulting in a total award of $39,368.47. The attorneys’ fee awarded was calculated by multiplying this total by the contingent fee percentage of thirty-three percent (33%), resulting in an attorneys’ fees award of $12,991.60. The court’s judgment of October 31, did not specifically provide MPC with a credit for the permanent partial disability benefits of $143 per week MPC paid biweekly during the 114.71 weeks in question. Likewise, the statement of attorneys’ fees disregarded these payments made by MPC.

MPC did not request an evidentiary hearing to contest the attorneys’ fee award within the thirty (30) day period as provided for in the court’s judgment of October 31, 1988. Nor did MPC object at any time to the amount of the retroactive benefits awarded, the penalty assessed, or the proposed order awarding attorneys’ fees and costs. The Workers’ Compensation Court awarded Martinez attorneys’ fees of $12,991.60 on January 3, 1989 in accordance with the Proposed Order. On January 24, 1989, fifty-five (55) days after the deadline to request an evidentiary hearing and twenty-two (22) days after entry of the Order awarding attorneys’ fees, MPC filed a request for Reconsideration of the Order awarding attorneys’ fees and costs. No affidavit was filed stating the grounds on which MPC contested the award and no evidentiary hearing was requested as required by the courts October 31 judgment. Because the time for appeal was nearly exhausted, MPC filed its Notice of Appeal on January 31, 1989, before a hearing was held on its Request for Reconsideration. MPC has made a cash payment to Martinez of $16,403.53, the equivalent of $143 per week multiplied by 114.71 weeks, apparently crediting itself for the permanent partial disability benefits already paid during the period in question. The time for appeal of the compensation award having expired, MPC has not appealed the calculation of the underlying compensation award nor the penalty assessed to it. Only the issue of the attorney’s fee computation is now before this Court.

First, we acknowledge that counsel for MPC presents a strong argument that the amount of attorneys’ fees awarded was calculated improperly. MPC’s argument also indicates that there may be some error in the underlying compensation award, however, that issue is not before this Court as MPC did not appeal the original judgment, the thirty day limit to file a Notice of Appeal having expired with respect to that judgment. Second, although MPC makes a strong argument that the attorneys’ fees award is incorrect, we note that MPC failed to request an evidentiary hearing as specified or raise a timely objection to the proposed award at any time during the course of the proceedings below.

It is a long established principle that only the issues properly raised and protected at the trial court level will be reviewed on appeal. Greger v. United Prestress, Inc. (1979), 180 Mont. 348, 590 P.2d 1121. Furthermore, this court has held the issues not raised at the trial level before the Workers’ Compensation Court will not be reviewed on appeal. McDanold v. B.N. Transport, Inc. (Mont. 1981), 634 P.2d 175, 38 St.Rep. 1466. We will not hold a lower court in error for a procedure in which the appellant acquiesced at trial and to which he had not timely objected. In Re Marriage of West (Mont. 1988), [233 Mont. 47,] 758 P.2d 282, 45 St.Rep. 1281. Because MPC failed to either timely object or request an evidentiary hearing contesting the Proposed Order awarding attorneys’ fees, we are precluded from reviewing the correctness of the computation of that award.

MPC contends that they are not barred from appeal because the Workers’ Compensation Court abused its discretion in awarding the attorneys’ fees without crediting MPC for payments already made. MPC relies on two cases, Simkins-Hallin Lumber Co. v. Simonson (1984), 214 Mont. 36, 692 P.2d 424, and Wagner v. Empire Development Corp. (Mont. 1987) [228 Mont. 370,] 743 P.2d 586, 44 St.Rep. 1606, in contending that this Court may always review an award of attorneys’ fees by the lower court to determine whether or not there has been an abuse of discretion. This an incorrect statement of law. This Court will use the abuse of discretion standard when reviewing award of attorneys’ fees. Simkins-Hallin, 692 P.2d at 427, Wagner, 743 P.2d at 587, provided that the usual requirements of preserving the issue at the trial court level are met before the issue of attorneys’ fees is raised on appeal.

MPC also contends that this Court may review the award of attorneys’ fees regardless of their failure to object under the “plain error” doctrine. Under this doctrine, a trial or appellate court may take notice of plain errors affecting substantial rights although they were not brought to the Court’s attention. Halldorson v. Halldorson (1977), 175 Mont. 170, 573 P.2d 169. The doctrine is used most frequently in criminal cases, where the fundamental right of life and liberty are often at stake. It is used in civil litigation only in exceptional cases. Zimmerman v. Bozeman Products Assoc. (Mont. 1988), [233 Mont. 156,] 759 P.2d 166, 45 St.Rep. 1387, Reno v. Erickstein (1984), 209 Mont. 36, 679 P.2d 1204. Furthermore, the plain error exception will not be applied where failure or refusal to raise an issue in trial court is conscious and intentional on the part of trial counsel. Halldorson, 175 Mont. at 174, 573 P.2d at 172. In its request for reconsideration, MPC’s counsel stated:

“Attempts to resolve this particular issue (attorney fees) informally with Claimant’s counsel have been unsuccessful. It is, therefore, necessary to request a reconsideration of the Claimant’s attorney fee issue . . .”

If MPC did attempt to settle the fee dispute with Martinez’ counsel then MPC was aware of the alleged error and consciously chose to resolve the matter informally instead of preserving the issue with a formal objection. The “plain error” doctrine is clearly inapplicable in this case.

This case presents a conflict between the concepts of substantial justice and the requirement of timeliness. While the requirements of timeliness may act to the detriment of one party, they are necessary so that substantial justice may be afforded the other. MPC has presented a credible argument that the award of attorneys’ fees was incorrect, yet MPC’s failure to properly preserve the issue for appeal precludes us from disturbing the award. We cannot randomly except certain litigants from the requirements necessary for appeal when, through their own fault, they have failed to meet them.

We affirm the Workers’ Compensation Court.

CHIEF JUSTICE TURNAGE and JUSTICES HARRISON, SHEEHY, WEBER, HUNT and GULBRANDSON concur,.


author: JUSTICE WEBER

text:
    CHAMPION INTERNATIONAL CORPORATION, Petitioner and Respondent, v. H.L. McCHESNEY, Respondent and Appellant.
    No. 89-91.
    Submitted on Briefs Aug. 10, 1989.
    Decided Sept. 21, 1989.
    779 P.2d 527.

      H.L. McChesney, McChesney, Grenfell & Ogg, Missoula, for respondent and appellant.
    Bradley J. Luck, Garlington, Lohn & Robinson, Missoula, for petitioner and respondent.
   JUSTICE WEBER

delivered the Opinion of the Court.

Mr. McChesney appeals from an order of the Workers’ Compensation Court, ordering him to reimburse Champion International Corporation (Champion) for an overpayment of attorney fees. Mr. McChesney appeals this order. We affirm.

The issue presented for our review is restated as follows:

Did the Workers’ Compensation Court err in ordering repayment of attorney fees to the insurer where claimant received an overpayment of benefits, and attorney fees were based on an percentage of benefits received by the claimant?

Mr. McChesney undertook legal representation of a workers’ compensation claimant, Mr. Keith Eastman, on October 6, 1982. Mr. Eastman had suffered an injury to his knee on March 20, 1981, while working for Champion International Corporation, a self-insured employer under Plan 1 of the Workers’ Compensation Act. Mr. McChesney and Mr. Eastman signed a fee arrangement whereby Mr. McChesney would receive 33% of benefits in the event the case necessitated a hearing before the Workers’ Compensation Court.

At the time of the injury, Champion, the insurer, began payment of temporary total benefits and medical benefits. In March 1982 claimant’s temporary total benefits were reduced to permanent partial. This reduction was based partly on claimant’s refusal to have surgery on his knee. Claimant disputed the reduction and a hearing resulted in a judgment in claimant’s favor on May 7, 1984. This judgment allowed Mr. McChesney to obtain attorney fees pursuant to sec. 39-71-611, MCA, which, according to the fee arrangement, was a net award of 33% of the benefits. Mr. McChesney was awarded a lump sum amount of attorney fees for the back-payments of temporary total benefits. From the date of the order forward, Mr. McChesney received one-third the amount of each biweekly check sent to Mr. Eastman.

At the hearing on May 7, 1984, the medical evidence indicated that the claimant should have knee surgery; however, claimant had previously refused to have the surgery. The judgment of May 7 specifically ordered claimant to submit to a physical examination to determine whether knee surgery should be performed and to notify the court whether he was willing to have surgery performed.

At a hearing in July 1984 regarding new medical evidence, claimant agreed to have the knee surgery performed and to schedule it immediately. The Workers’ Compensation Court ordered payment of total disability benefits until after the surgery and after consideration of claimant’s post-surgery condition. The order further noted that if claimant did not have the surgery the insurer was entitled to a credit for benefits paid after maximum healing.

On August 9, 1984, claimant refused to have knee surgery. A year and a half later the case was reopened by the insurer. At the hearing on the petition the court found that claimant had reached maximum healing in January of 1984, but that his entitlement to total disability benefits ended on August 9, 1984, the date that he refused to have surgery. In an order dated April 1, 1987, Mr. Eastman was granted 200 weeks of partial disability payments, offset against the total disability payments he had received after August 9, 1984. The net result of this order was that the claimant had been overpaid $7446.00. Mr. Eastman was ordered to repay this amount to the insurer, Champion.

On October 27, 1988, Champion filed a petition with the Workers’ Compensation Court, seeking to recover the attorney fees paid to Mr. McChesney, which had been based on the overpayment to Mr. Eastman of $7446.00. Mr. McChesney had received checks totaling one-third of this amount, or $2,479.51. The Workers’ Compensation Court ordered Mr. McChesney to repay this amount to Champion.

Mr. McChesney argues that res judicata bars the Workers’ Compensation Court from ordering repayment at this point. He contends that the order of April 1, 1987, directing the claimant to repay benefits, did not mention a repayment of attorney fees. He contends that the employer should have asserted the issue of reimbursement of attorney fees at that point, rather than a year and a half later.

Initially, we conclude that the present action is not barred by res judicata in that the elements of the defense are not satisfied. In Phelan v. Lee Blaine Enterprises (1986), 220 Mont. 296, 299, 716 P.2d 601, 603, we set out the elements of res judicata as follows:

“(1) the parties or their privies must be the same; (2) the subject-matter of the action must be the same; (3) the issue must be the same, and must relate to the same subject-matter;and (4) the capacities of the persons must be the same in reference to the subject-matter and to the issue between them.”

We conclude that the Workers’ Compensation Court was correct in holding that the action is not barred by res judicata. The subject matter and the issues in the two actions are not the same. The first suit involved the entitlement to disability benefits and the amount of such benefits. The second suit involved the entitlement to attorney fees. Different theories and considerations apply to each. In Phelan, we stated:

“[Unjless it clearly appears that the precise question involved in the second case was raised and determined in the former, the judgment is not bar to the second action.”

Phelan, 716 P.2d 603. We conclude that the April 1, 1987 order is not a bar to the present action.

We further conclude that the Workers’ Compensation Court was correct in ordering the repayment of attorney fees. Mr. McChesney’s fees were based solely on a percentage of benefits paid to his client. On May 7, 1984 temporary total benefits were awarded to Mr. Eastman contingent upon his agreement to have surgery on his knee. It was specifically stated in the order that the insurer would be credited any overpayment if claimant failed to comply. Although Mr. Eastman represented to the court in July of 1984 that he would undergo surgery, he never did have the knee surgery performed. Clearly the insurer was entitled to a credit. Logically it follows that the attorney fees which were based on the overpayment must also be returned. While it is unfortunate that claimant did not meet the conditions for his total disability award, the attorney was aware of the conditions attached to the benefits, and the possibility that some benefits might have to be reimbursed to the insurer.

The facts of the present case are analogous to Transamerica Ins. Group v. Adams (1983), 62 Or.App. 419, 661 P.2d 937. In that case a workers’ compensation claimant settled with the insurer. The attorney was entitled to 25% of the settlement, which he received. The settlement however, was subject to administrative review, and the attorney was aware of this condition. When the Workers’ Compensation Board invalidated the settlement, both the claimant and the attorney were required to return the amounts each had received. Similarly, in the present case, Mr. McChesney was aware that the insurer was due a credit in the event that certain conditions were not met. His fees, based as they were, on benefits received by the claimant, must be reimbursed. We conclude that the Workers’ Compensation Court did not err in ordering a repayment of attorney fees. We affirm the holding of the Workers’ Compensation Court.

CHIEF JUSTICE TURNAGE and JUSTICES SHEEHY, Mc-DONOUGH and HUNT concur.


author: CHIEF JUSTICE TURNAGE

text:
    E. NEVEN ZUGG and Scott Syme, Plaintiffs and Appellants, v. JOHN RAMAGE, M. Rodney Young, et al., Defendants, Cross-Appellants and Respondents.
    No. 89-137.
    Submitted on Briefs June 30, 1989.
    Decided Sept. 21, 1989.
    779 P.2d 913.

      Channing J. Hartelius, Hartelius, Ferguson & Baker, Great Falls, William A. Douglas, Douglas & Sprinkle, Libby, for plaintiffs and appellants.
    Kenneth E. O’Brien, Hash, O’Brien & Bartlett, Kalispell, Paul C. Meismer, Garlington, Lohn & Robinson, Missoula, for defendants, cross-appellants and respondents.
   CHIEF JUSTICE TURNAGE

delivered the Opinion of the Court.

This suit arose out of a sale of commercial real estate in Lincoln County, Montana. In a trial in the District Court of the Nineteenth Judicial District, the jury returned a verdict against defendant John Ramage for $400,000 in compensatory damages and $300,000 in punitive damages. The court entered a directed verdict for defendant M. Rodney Young. Plaintiffs appeal from the directed verdict and denial of their motion for a new trial as to defendant Young. Ramage appeals from the judgment against him. We affirm the judgment as to defendant Ramage and reverse and remand as to defendant Young.

The issues raised by plaintiffs are:

1. Did the trial court err in denying the motion for a new trial and granting a directed verdict as to defendant Young?

2. Did the trial court err in granting defendant Young’s motion in limine to exclude all evidence of his resume, financial statement, bankruptcy petition and character?

Defendant Ramage raises the following issues:

3. Did the trial court err in denying Ramage’s motion for a directed verdict and for a judgment notwithstanding the verdict?

4. Did the trial court err in permitting plaintiff Zugg to testify as to the 1983 value of the property?

5. Did the trial court err in permitting Jacqueline Tisher to testify concerning the 1983 value of the resort improvements and lease?

6. Did the trial court err in instructing the jury on the claim of emotional distress?

7. Is the award of punitive damages so excessive as to give rise to a presumption that they were awarded as a result of passion or prejudice?

On May 4, 1984, Neven Zugg and Scott Syme entered into an agreement to purchase the Koocanusa Resort in Lincoln County, Montana, for $660,000. On December 6, 1985, they filed their complaint in this suit, alleging that in selling them the resort, the defendants had misrepresented its income and condition. Defendant John Ramage was the seller of the resort. Defendant M. Rodney Young was the realtor who made the sale.

At trial, plaintiffs presented evidence that they had been misled verbally by both Ramage and Young and in a brochure prepared by Ramage to believe that the resort had grossed $150,000 in income in 1983. In contrast, Ramage’s 1983 income tax return reported gross income on the resort of only $94,762.03. The Forest Service leased land to the resort and required annual income reports on the resort. Ramage’s 1983 report to the Forest Service showed gross income of only $59,847.51. The plaintiffs testified that they had originally asked to see the books of the resort for the previous year, but they signed an agreement waiving production of the books after Ramage told them that the books could not be found. Plaintiffs testified that Ramage guaranteed them that the resort would do $150,000 worth of business in 1984, but Zugg testified that it only did $96,000 worth of business that year, despite plaintiffs’ best efforts.

Plaintiff Zugg also testified at trial that his purchase of the resort was only possible if he first sold a sports complex and motel he owned in Plentywood, Montana. He testified that he was induced to enter the contract to buy the resort by defendant Young’s purchase of the sports complex and motel. Young later defaulted on that contract, and the sports complex and motel were returned to Zugg.

I

Did the trial court err in denying the motion for a new trial and granting a directed verdict as to defendant Young?

Plaintiffs argue that entry of a directed verdict as to defendant Young was improper. They cite the standard that a directed verdict should only be granted when, viewing the evidence in the light most favorable to the nonmoving party, reasonable persons could not differ as to the conclusions to be drawn from the evidence. They assert that they presented evidence that Young negligently failed to conduct a proper investigation as to certain facts about the resort, negligently misrepresented material facts, and committed constructive fraud.

Zugg and Syme both testified that they relied upon Young’s representations about the resort because he held himself out as an experienced and able investment analyst. It was undisputed that Young made no efforts to confirm Ramage’s representations about the income of the resort. Yet plaintiffs testified that he repeatedly told them that the income figures in the brochure prepared by Ramage could be relied upon. Plaintiffs had a real estate broker testify that Young should have checked out Ramage’s representations about the resort’s income as part of his duty to prospective buyers. Zugg testified that Young provided them with a financial statement about himself as he prepared to purchase Zugg’s Plentywood property, but that he did not disclose that he was borrowing money from Ramage to fund the purchase.

We conclude that the plaintiffs presented sufficient evidence of Young’s negligence and constructive fraud that these issues should have been presented to the jury. We therefore remand this case to the District Court for retrial as to defendant Young.

II

Did the trial court err in granting defendant Young’s motion in limine to exclude all evidence of his resume, financial statement, bankruptcy petition and character?

Defendant Ramage raises the following issues:

Plaintiffs maintain that the charge of fraud brings Young’s character directly in issue. They argue that they should have been able to inquire into Young’s character by presenting evidence of his financial condition and contrasting that with his representations to them about his financial capabilities. They therefore assert that granting Young’s motion in limine to exclude such evidence was error.

Questions of the admissibility of evidence are left largely to the discretion of the trial court, which will be overturned only in cases of manifest abuse of that discretion. Britton v. Farmer’s Ins. Group (1986), 221 Mont. 67, 86, 721 P.2d 303, 315. We refuse to disturb the District Court’s ruling on this issue. We do note that counsel may wish to try to introduce some or all of this evidence on retrial.

III

Did the trial court err in denying Ramage’s motion for a directed verdict and for a judgment notwithstanding the verdict?

Ramage argues that plaintiffs did not prove the following elements necessary to establish a claim of fraud: reliance, right to rely, and damages. Ramage asserts that plaintiffs’ lack of reliance on his representations about the income of the resort was demonstrated by Zugg’s request that his accountant be allowed to analyze the books. Ramage also notes that plaintiffs successfully bargained for Ramage’s guarantee that if there was not at least a $150,000 gross income for 1984, he would grant a $14,000 refund of the purchase price. Ramage claims that the absence of a right to rely was shown by the “red flag” of the missing books, which he says Young should have recognized. Also, he brings up the plaintiffs’ failure to get financial information on the resort from the Forest Service. Finally, Ramage asserts that plaintiffs failed to submit evidence of the fair market value of the property, which was necessary to calculate damages.

Both Zugg and Syme testified at length about their reliance on Ramage’s representations and assurances of the income of the resort property. They both testified that Ramage strongly discouraged them from asking questions directly of Forest Service persons and told them that any questions directed to the Forest Service should go through him. The question of plaintiffs’ right to rely on the representations of a seller of real property about the property is, we believe, peculiarly in the province of a jury. Zugg testified as to the value of the property. This testimony is discussed below under Issue IV. After reviewing the record, we conclude that there was sufficient evidence to support submitting the issue of fraud to the jury and to support the jury’s verdict.

IV

Did the trial court err in permitting plaintiff Zugg to testify as to the 1983 value of the property?

Over Ramage’s objection, Zugg was allowed to give his estimate of the value of the resort. Ramage maintains that although an owner may testify as to the market value of his property, Zugg’s testimony was not reasonable and should not have been allowed.

This Court has recognized the right of a landowner to testify as to the value of his property. State Highway Commission v. Marsh (1974), 165 Mont. 198, 202-03, 527 P.2d 573, 575. The record indicates that Zugg based his valuation of the resort on cash flow during the time he and Syme owned it. The District Court accepted this as reasonable. Ramage was allowed to present his own testimony of the value of the resort, so that the jurors were not left with Zugg’s opinion alone. We find no cause to disturb the court’s ruling in permitting Zugg to testify about the resort’s value.

V

Did the trial court err in permitting Jacqueline Tisher to testify concerning the 1983 value of the resort improvements and lease?

Jacqueline Tisher, the Lincoln County appraiser, testified for plaintiffs, giving her valuation of the resort for the year 1983. Ramage argues that because her valuation was based upon 1978 and 1972 figures, it was inaccurate and should not have been allowed into evidence. Also, Ramage asserts that it was not established that Tisher was qualified to testify as an expert about the resort’s value.

The determination of whether a witness is qualified as an expert is within the discretion of the trial court. State v. Berg (1985), 215 Mont. 431, 433, 697 P.2d 1365, 1366-67. Jacqueline Tisher testified that she had been the appraiser for the county since 1974. Her testimony indicated that she did numerous property appraisals in Lincoln County each year. Although she testified that she used a 1978 value and a 1972 market, Tisher’s estimate of market value was then calculated to reflect what the property was worth in 1983. We hold that the District Court did not err in permitting Tisher to testify.

VI

Did the trial court err in instructing the jury on the claim of emotional distress?

Ramage argues that there was insufficient evidence to support an award of damages for emotional distress. Specifically, he claims that there was no evidence that plaintiffs’ emotional distress was severe and that there was no showing of a substantial invasion of a legally-protected interest, as required to support damages. See Johnson v. Supersave Markets, Inc. (1984), 211 Mont. 465, 686 P.2d 209.

Zugg testified that he had to go to the doctor for chest pains as a result of his experience with the resort. He also testified that he had worries because of no longer being financially stable and that he had suffered a lot of sleepless nights. Syme testified that he had been forced to borrow money from his grandfather and had not been able to pay it back, transforming a “real good” relationship into a shaky one. He also testified that he had become cranky a lot and had lost sleep over the situation. Although the amount of evidence of emotional distress is close to the line in this case, we conclude that this testimony was sufficient to support submission of the issue of emotional distress to the jury.

VII

Is the award of punitive damages so excessive as to give rise to a presumption that they were awarded as a result of passion or prejudice?

Ramage claims that the $300,000 in punitive damages awarded by the jury is so excessive in relation to his negative net worth, of which the jury was aware, as to shock one’s conscience. However, defendant’s net worth is only one of the factors to be considered in reviewing an award of punitive damages. Section 27-1-221, MCA. In light of all the evidence presented, including that on the extent to which plaintiffs were damaged and the manner in which they were defrauded, we do not find the award of punitive damages excessive.

Affirmed in part and reversed and remanded as to defendant Young.

JUSTICES HARRISON, GULBRANDSON, HUNT and McDON-OUGH concur.