text:
    In the Matter of the ESTATE OF GEORGE ROBBIN, Deceased.
    No. 87-279.
    Submitted on Briefs Nov. 6, 1987.
    Decided Dec. 31, 1987.
    747 P.2d 869.
    Murphy, Robinson, Heckathorn & Phillips; Calvin S. Robinson, Kalispell, for appellant.
    M. Dean Jellison, Kalispell, for respondent.
   MR. JUSTICE HARRISON

delivered the Opinion of the Court.

This is an appeal from an order issued by the Eleventh Judicial District Court, County of Flathead. The order was issued June 25, 1987 and removes appellant, Sharon Herron, from the position of personal representative of the estate of George Robbin. We reverse and remand.

George Robbin died on January 23, 1975. His will appointed his daughter, appellant Sharon Herron (hereinafter, Sharon), as personal representative of the estate. With the exception of one dollar, the will directed that Sharon Herron receive one-half of the estate and that her former husband, respondent Paul Herron (hereinafter, Paul), receive the remaining one-half.

A decree of distribution for the estate of George Robbin was entered January 31, 1977. Before the estate was totally distributed, Sharon and Paul became involved in a marital dispute which resulted in dissolution. The dissolution matter has appeared before this Court on two prior occasions. In Re the Marriage of Herron (Mont. 1987), [226 Mont. 485,] 736 P.2d 487, 44 St.Rep. 823; and, In Re the Marriage of Herron (1980), 186 Mont. 396, 608 P.2d 97. The estate matters were held in abeyance pending the dissolution proceedings. Following the final resolution of the dissolution, Paul contended he was entitled to a distribution of $52,250 from the estate of George Robbin. After failing to receive the amount which was allegedly owed, Paul petitioned the District Court to remove Sharon as the personal representative of the estate on June 3,1987. Paul based his petition on the grounds that Sharon was not properly distributing the estate and that Sharon may have spent the remaining assets of the estate.

The District Court heard oral arguments on the petition June 18, 1987. Although the District Court took judicial notice of the court file containing the Herron dissolution proceeding, no evidence or testimony was received at the hearing. On June 25, 1987, the District Court entered an order removing Sharon from her position as personal representative. The District Court found:

“[T]hat a Decree of Distribution was entered in this proceeding more than ten years ago; that there is nothing in the Court file to indicate that such distribution has been accomplished; that there is no evidence before this Court that distribution has been made; that there is apparent conflict between the parties; that good cause exists for termination of the appointment of Sharon Herron as Personal Representative.”

The order provided that the District Court would choose a new personal representative if the parties could not agree to one within fifteen days.

The sole issue presented on appeal is whether it was appropriate for the District Court to remove Sharon as the personal representative of the estate of George Robbin.

In the Herron dissolution proceedings, the District Court divided the marital estate and a portion of the division received by Paul was an amount of $52,250 which represented one-half of the Robbin estate. The division of the marital estate was affirmed by this Court. In Re the Marriage of Herron (Mont. 1987), [226 Mont. 485,] 736 P.2d 487, 44 St.Rep. 823. It is this award of $52,250 which Paul is now contending Sharon should distribute from the estate of George Robbin. Sharon’s position is that Paul has already effectively received the distribution. Although it is not entirely clear how this distribution has allegedly occurred, Sharon contends that during the process of dissolution she traced the remaining estate assets of the Robbin estate “to either Paul, herself, or their present form.” Sharon states that when the District Court divided the marital estate it “took the method of disposal into account and held that she had transferred everything to Paul to which he was entitled.” There is some support for this position because the District Court, in response to a motion to amend the findings of fact and conclusions of law, issued an order September 4, 1986 which noted that both parties to the dissolution had received all of the assets to which they were entitled under the dissolution decree. Sharon alleges that the only thing remaining to be performed under the dissolution is that Paul is obligated to transfer certain real property to her.

Although this matter appears before us as an issue related to estates and probate, the real controversy is an extension of the Herron dissolution. It is tempting to end this matter and determine whether Paul is actually entitled to the distribution that he seeks to receive, but we will not do so. It would be difficult, if not impossible, to determine which calculations are correct without receiving the record of the dissolution. Although counsel has provided us with certain portions of the dissolution file, the entire record was not provided. Additionally, the sole question presented on appeal is whether Sharon was properly removed as personal representative. Therefore, we will focus our decision on this question only, despite the fact that further litigation will result in a case which probably should have concluded long ago.

Sharon contends that the District Court order is unsupported by any evidence or testimony. The District Court heard oral arguments from counsel on June 18, 1987 and took judicial notice of the dissolution file, but no evidence was received. Sharon states that despite the lack of evidence presented, the District Court erroneously concluded that there was no evidence that the proper distributions were made, that there was a conflict between the parties, and that good cause existed to terminate her position as personal representative. Sharon alleges there is no evidence to support the order, and that since she was appointed personal representative by her father’s will, the order runs contrary to the desire of the testator.

The statute governing the removal of a personal representative for cause is Section 72-3-526, MCA, which states in part:

“(1) A person interested in the estate may petition for removal of a personal representative for cause at any time. Upon filing of the petition, the court shall fix a time and place for hearing. Notice shall be given by the petitioner to the personal representative and to other persons as the court may order ...
“(2) Cause for removal exists:
“(a) when removal would be in the best interests of the estate; or
“(b) if it is shown that a personal representative or the person seeking his appointment intentionally misrepresented material facts in the proceedings leading to his appointment or that the personal representative has disregarded an order of the court, has become incapable of discharging the duties of his office, or has mismanaged the estate or failed to perform any duty pertaining to the office.

We have construed the above statute in regard to similar issues in several past decisions. We have held that a trial judge should be given broad discretion as to when a personal representative is to be removed “but the grounds must be valid and supported by the record.” Matter of Estate of Wooten (1982), 198 Mont. 132, 137, 643 P.2d 1196, 1199 (the removal of a personal representative was affirmed on the grounds that there were a number of expenditures of questionable legitimacy, including an expenditure to finance a defense for the personal representative on criminal charges). See also, Matter of Estate of Lehner (Mont. 1986), [220 Mont. 129,] 714 P.2d 130, 131, 43 St.Rep. 231, 233 (a district court order removing a personal representative was affirmed where the record demonstrated the personal representative was unwilling “to cooperate fully and to make full disclosure to the decedent’s heirs of all the facts involving the estate”). The District Court has broad discretion in probate matters, but the grounds for removing a personal representative are narrow. Matter of Estate of Counts (Mont. 1985), [217 Mont. 350,] 704 P.2d 1052, 1055, 42 St.Rep. 1243, 1246.

An underlying purpose and policy of Montana’s probate code is to “make effective the intent of a decedent in [the] distribution of his property.” Section 72-l-102(2)(b), MCA. George Robbin clearly intended that his daughter Sharon serve as personal representative. The appointment of a personal representative should not be annulled except under the most extreme circumstances. Matter of Estate of Stone (Mont. 1986), [223 Mont. 327,] 727 P.2d 508, 511-512, 43 St.Rep. 1760, 1764 (Justice Hunt dissenting).

Further, we have stated:

“An order of removal of (a personal representative) is harsh and severe; and irregularities not directly harmful in the management of the estate will be overlooked. If the court can readily remedy a matter of the complaint, no removal will be ordered.”

Matter of Estate of Tice (1962), 140 Mont. 28, 35, 367 P.2d 771, 774-775 (citing, 2 Bancroft’s Probate Practice, 2d Ed., Section 294, 1960 Pocket Supplements, p.22). Since Paul petitioned for Sharon’s removal, he assumed the burden of proving some valid grounds for removal pursuant to Section 72-3-526, MCA. See, In the Matter of the Estate of Deschamps (1922), 65 Mont. 207, 215, 212 P. 512, 514. However, Paul failed to set forth any substantive proof or evidence at the hearing. Indeed, no evidence was received at the hearing. It was improper to remove Sharon without evidence demonstrating grounds for removal under Section 72-3-526, MCA.

This is not to say that either party is correct in whether or not distributions still need to be made. As noted at the outset of this opinion, the determination of whether further distributions are required must be made from a more thorough review of the evidence. Instead, this opinion is limited to holding that it was improper to dismiss Sharon as personal representative under the facts presented.

For the foregoing reasons, we reverse and remand to the District Court for amendment of the order in accordance with this opinion.

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


source: Caselaw Access Project

license: Public Domain

text:
    From: The District Court of the Sixth Judicial District, County of Park,
    STATE OF MONTANA, Plaintiff vs. SEAN KELLY GRAVES, Defendant.
    No. 87-21
    DATED this 12th day of November, 1987.
   DECISION

The application of the above-named defendant for a review of the sentence for Count III, Burglary; Count IV, Burglary; Count V, Theft; 8 years on each count to run concurrently with 4 years suspended on each count; Swan River Recommended; $1,000 restitution, imposed on July 14, 1987, was fully heard and after a careful consideration of the entire matter it is decided that: the sentence shall remain the same as originally imposed.

We wish to thank Eileen Joyce of the Montana Defender Project for her assistance to the Defendant and to this Court.

SENTENCE REVIEW DIVISION

Frank M. Davis, Chairman, Thomas C. Honzel, Douglas Harkin, Judges.


text:
    From: The District Court of the Eighth Judicial District, County of Cascade,
    STATE OF MONTANA, Plaintiff vs. JAMES EDWARD KEOUGH, Defendant.
    No. BDC-87-031
   DECISION

DATED this 12th day of November, 1987.

The application of the above-named defendant for a review of the sentence of 100 years for Conspiracy to Deliberate Homicide imposed on July 27, 1987, was fully heard and after a careful consideration of the entire matter it is decided that: the sentence shall remain the same as originally imposed.

We wish to thank Brant Light, Deputy County Attorney from the Cascade County for appearing before the Sentence Review Board.

We wish to thank Gregg Smith of the Montana Defender Project for his assistance to the Defendant and to this Court.

SENTENCE REVIEW DIVISION

Frank M. Davis, Chairman, Thomas C. Honzel, Douglas Harkin, Judges.


text:
    From: The District Court of the Fourth Judicial District, County of Ravalli,
    STATE OF MONTANA, Plaintiff vs. RAYMOND LAWRENCE OLSEN, Defendant.
    No. DC-81-29
    DATED this 12th day of November, 1987.
   DECISION

The application of the above-named defendant for a review of the sentence for Count I, Aggravated Kidnaping, 10 years; Count II, Sexual Assault, 15 years; sentences to run consecutively; and a recommendation that prior to release, the Defendant be afforded the opportunity of receiving inpatient care at a sex offender program; DANGEROUS DESIGNATION, imposed on September 24, 1981, was fully heard and after a careful consideration of the entire matter it is decided that: the sentence shall remain the same as originally imposed.

This Court would strongly recommend that the administrative authorities at the Montana State Prison expedite enrollment in the Sex Offender Program at MSP.

We wish to thank Pat Wise of the Montana Defender Project for her assistance to the Defendant and to this Court.

SENTENCE REVIEW DIVISION

Frank M. Davis, Chairman, Thomas C. Honzel, Douglas Harkin, Judges.


text:
    From: The District Court of the Ninth Judicial District, County of Glacier,
    STATE OF MONTANA, Plaintiff vs. BURDELLA MARIE AHANAKEW, Defendant.
    No. DC-86-18
   DECISION

DATED this 12th day of November, 1987.

The application of the above-named defendant for a review of the sentence of 25 years with 10 years suspended for Mitigated Deliberate Homicide imposed on March 4, 1987, was fully heard and after a careful consideration of the entire matter it is decided that: the sentence shall remain the same as originally imposed.

We wish to thank John Johnston of the Montana Defender Project for his assistance to the Defendant and to this Court.

SENTENCE REVIEW DIVISION

Frank M. Davis, Chairman, Thomas C. Honzel, Douglas Harkin, Judges.


text:
    From: The District Court of the Third Judicial District, County of Deer Lodge,
    STATE OF MONTANA, Plaintiff vs. PAUL E. LEGUIN, JR., Defendant.
    No. DC-86-01
    DATED this 12th day of November, 1987.
   DECISION

The application of the above-named defendant for a review of the sentence of 10 years for Sexual Assault imposed on May 2, 1986, was fully heard and after a careful consideration of the entire matter it is decided that: the sentence shall be amended to ten years with five years suspended

The reasons for the amendment are:

(1) The sentencing judge should have given more consideration to the Defendant for sparing the victim from the trial ordeal;
(2) This board considered the fact that the Defendant cooperated and admitted his guilt in face of what the County Attorney admitted what was a very weak case; and
(3) The matter was further complicated by the fact that two judges were involved, one by taking the Plea, and one by imposing the Sentence.

We wish to thank Amy Guth of the Montana Defender Project for her assistance to the Defendant and to this Court.

SENTENCE REVIEW DIVISION

Frank M. Davis, Chairman, Thomas C. Honzel, Douglas Harkin, Judges.


text:
    From: The District Court of the Fourth Judicial District, County of Mineral,
    STATE OF MONTANA, Plaintiff vs. TERRY LEE BROWN, Defendant.
    No. DC-C-529
   DECISION

DATED this 12th day of November, 1987.

The application of the above-named defendant for a review of the sentence of 50 years for Deliberate Homicide; 10 years for Theft; to be served concurrently; DANGEROUS DESIGNATION, imposed on May 5, 1987, was fully heard and after a careful consideration of the entire matter it is decided that: the sentence shall remain the same as originally imposed.

We wish to thank Pat Wise of the Montana Defender Project for her assistance to the Defendant and to this Court.

SENTENCE REVIEW DIVISION

Frank M. Davis, Chairman, Thomas C. Honzel, Douglas Harkin, Judges.


text:
    From: The District Court of the Eleventh Judicial District, County of Flathead,
    STATE OF MONTANA, Plaintiff vs. JACOB H. WOODS, Defendant.
    No. DC-81-055
    DATED this 13th day of November, 1987.
   DECISION

The application of the above-named defendant for a review of the sentence for Two Counts of Deliberate Homicide; 50 years on each count to be served concurrently; plus the Defendant shall be designated as a Dangerous Offender imposed on October 23, 1981, was fully heard and after a careful consideration of the entire matter it is decided that: This matter is continued until the next scheduled session of the Court.

The Court finds that the record is insufficient for any meaningful review. To supplement the record, the Court requests the Flathead County Attorney to formally reply to the Defendant’s petition for review and include therein a copy of the Affidavit in support of his request to file an Information, and any other information he deems relevant.

The Secretary shall provide to the Flathead County Attorney a copy of the Defender Project’s petition for review.

We wish to thank Dale Robbins of the Montana Defender Project for his assistance to the Defendant and to this Court.

SENTENCE REVIEW DIVISION

Frank M. Davis, Chairman, Thomas C. Honzel, Douglas Harkin, Judges.


text:
    From: The District Court of the Eleventh Judicial District, County of Flathead,
    STATE OF MONTANA, Plaintiff vs. DENNIS GENE MATHES, Defendant.

      No. 87-060(A)
    DATED this 13th day of November, 1987.
   DECISION

The application of the above-named defendant for a review of the sentence of 20 years with 10 years suspended for Robbery plus 10 years with 7 years suspended for the use of a weapon; the sentences shall be served consecutively imposed on May 21, 1987, was fully heard and after a careful consideration of the entire matter it is decided that: the sentence shall remain the same as originally imposed.

We wish to thank Marvin Knapstad of the Montana Defender Project for his assistance to the Defendant and to this Court.

SENTENCE REVIEW DIVISION

Frank M. Davis, Chairman, Thomas C. Honzel, Douglas Harkin, Judges.


text:
    From: The District Court of the Eighth Judicial District, County of Cascade,
    STATE OF MONTANA, Plaintiff vs. EUGENE F. BABCOCK, Defendant.
    No. BDC-87-094
    DATED this 13th day of November, 1987.
   DECISION

The application of the above-named defendant for a review of the sentence of 10 years with 5 years suspended for Forgery plus restitution of $1,532 within 2 years + conditions imposed on June 5, 1987, was fully heard and after a careful consideration of the entire matter it is decided that: the sentence shall remain the same as originally imposed.

We wish to thank Brant Light, Deputy County Attorney from Cascade County for appearing before the Sentence Review Board.

We wish to thank Robert Anderson of the Montana Defender Project for his assistance to the Defendant and to this Court.

SENTENCE REVIEW DIVISION

Frank M. Davis, Chairman, Thomas C. Honzel, Douglas Harkin, Judges.


text:
    From: The District Court of the First Judicial District, County of Lewis & Clark,
    STATE OF MONTANA, Plaintiff vs. ROBERT WARREN RAYMOND, Defendant.
    No. ADC-87-043
   DECISION

DATED this 13th day of November, 1987.

The application of the above-named defendant for a review of the sentence for Count I, Issuing Bad Checks, 10 years; Count II, Theft, 6 months; Count III, Forgery, 6 months; Count IV, Theft, 6 months; all to be served concurrently; plus restitution and conditions imposed on June 16, 1987, was fully heard and after a careful consideration of the entire matter it is decided that: the sentence shall be amended to Count I, Issuing Bad Checks, 10 years with 3 years suspended; Count II, Theft, 6 months; Count III, Forgery, 6 months; Count IV, Theft, 6 months; all to be served concurrently; plus restitution and conditions as set forth in the original judgment.

Reasons for the amendment:

(1) In the original sentence, the provision for restitution is contrary to Mont. Code Ann. Sec. 46-18-201(1), therefore the sentence was amended; and
(2) Because of the defendant’s poor health and age.

We wish to thank Charles Jordan of the Montana Defender Project for his assistance to the Defendant and to this Court.

SENTENCE REVIEW DIVISION

Frank M. Davis, Chairman, Douglas Harkin, Robert Boyd


author: MR. JUSTICE McDONOUGH

text:
    ACCOUNTS MANAGEMENT CORP., a corporation, Plaintiff and Respondent, v. LYMAN RANCH, a corporation, and Howard F. Lyman, Defendants and Appellants.
    No. 87-291.
    Submitted on Briefs Oct. 16, 1987.
    Decided Dec. 31, 1987.
    748 P.2d 919.

      J. Daniel Hoven, Browning, Kaleczyc, Berry & Hoven, Helena, for defendants and appellants.
    J. Vaughan Barron, Great Falls, for plaintiff and respondent.
   MR. JUSTICE McDONOUGH

delivered the Opinion of the Court.

Howard Lyman appeals the judgment of the District Court of the Eighth Judicial District dated April 7, 1987. We affirm.

The lower court’s judgment concerns a debt incurred by Lyman Ranch Corporation (Lyman Ranch). Howard Lyman owned the majority of stock in Lyman Ranch, and acted as Lyman Ranch’s representative. The suit, originally brought by Farmers Union Oil of Great Falls (Farmers Union), named Howard Lyman and Lyman Ranch Corporation as defendants.

The debt springs from a charge account. For several years Lyman Ranch had charged ranch operating expenses at Farmers Union. In the fall of each year Lyman Ranch utilized funds from a loan obtained from the Production Credit Association (PCA) to pay the Farmers Union debt. In 1981, however, the PCA denied Lyman Ranch’s loan application and reapplication, and the Farmers Union debt went unpaid.

In December of 1981 Howard Lyman met with Farmers Union representative John Boysun to discuss the debt. Lyman told Boysun that he would personally guarantee that everything that could be done would be done to pay off the account, and that there was a possibility that the ranch would have to be sold to satisfy its obligations to creditors. Lyman also assured Boysun that the value of the ranch exceeded its liabilities.

Boysun wanted to document Lyman’s acknowledgment of the debt and his guarantee for payment. To that end, Boysun’s associate, James McDonald, drafted the following document entitled “CHECK-NOTE”:

A week after the conversation which lead to the drafting of the “CHECK-NOTE”, Boysun presented it to Lyman, and both individuals signed the document. Their signatures appear together midway down the document following the recording of the amount owed on the open account and the terms for payment of the account. Lyman’s signature also appears at the end of the document following an unconditional promise to pay $121,077.49, on or before June 1, 1982.

Lyman’s first signature shows that he signed in his capacity as a corporate representative. The type written word “By” precedes the signature, the signature appears beneath the heading of “Lyman Ranch”, and following the signature Lyman penned the word “Sec.” to signify his office as secretary of the corporation. The second signature by Lyman, however, appears without any reference to Lyman Ranch or the signatory’s capacity.

On June 1, 1982, the debt went unpaid, and on April 12, 1984, Farmer’s Union brought suit to collect the debt. The defendants answered the complaint on June 11, 1984. Lyman Ranch admitted it owed the amount specified in the complaint, but Howard Lyman denied personal responsibility for the debt. The issue of Howard Lyman’s personal responsibility on the debt went to trial on September 25, 1986. Prior to trial Farmers Union assigned its rights against the defendants to Accounts Management.

The lower court entered the judgment at issue on April 7, 1987. The judgment was based on the court’s conclusion that Howard Lyman undertook a promise to pay the debt in an individual capacity rather than a corporate capacity. The lower court supported this conclusion by finding that the promise to pay in the bottom of the “CHECK-NOTE” constituted a promissory note which unambiguously showed that Lyman acted in a personal capacity. The lower court also found from trial testimony that Boysun and Lyman were sophisticated businessmen, and that in return for Farmers Union’s forbearance from collection efforts, Lyman agreed to assume personal liability for the debt. Lyman contended in the lower court that Farmers Union wanted the “CHECK-NOTE” as collateral to finance its own debt. At trial testimony showed that Farmers Union employed similar documents for debt security in its borrowing from the Bank of Cooperatives.

Lyman raises the following issues on appeal of the judgment: (1) Did the District Court err as a matter of law in its construction of the check-note? (2) Is the District Court’s construction of the check-note supported by substantial evidence? (3) Is the District Court’s conclusion that the check-note was unambiguous supported by substantial evidence? (4) Should this Court reverse the judgment of the District Court and institute a proper judgment that Howard Lyman is not personally responsible for the debt of Lyman Ranch Corporation?

We will not consider the issues in order. First we will consider the law and evidence surrounding construction of the “CHECK-NOTE” as framed by Issues 1 and 3. The following and final section of this opinion considers Issue 2 and moots Issue 4.

Issues 1 and 3, Construction of the “CHECKNOTE”: Lyman argues that the District Court’s characterization of his promise to pay as a promissory note violates rules of contract construction. According to Lyman, when viewed as an integrated part of the whole document, the promise to pay does not unambiguously show a personal undertaking to pay the debt. We agree with the District Court’s conclusion that the promise to pay constitutes a promissory note. The bottom half of the “CHECK-NOTE” containing Lyman’s unconditional promise to pay a sum certain at a definite time constitutes an instrument under Section 30-3-104, MCA, and the fact that the inventory of the debt is attached above the promise does not affect the nature of the promise.

However, by statute, as between the immediate parties, the document creates an ambiguity in regard to the second signature. See Section 30-3-403, MCA. In particular, Section 30-3-403(2), MCA, provides:

“An authorized representative who signs his own name to an instrument:
“(a) is personally obligated if the instrument neither names the person represented nor shows that the representative signed in representative capacity;
“(b) except as otherwise established between the immediate parties, is personally obligated if the instrument names the person represented but does not show that the representative signed in a representative capacity, or if the instrument does not name the person represented but does show that the representative signed in a representative capacity.” (Emphasis added.)

Subsection (b) of Section 30-3-403(2), MCA, applies to the signature at issue in this case. Accounts Management should be treated as an immediate party under Section 30-3-403(2), MCA. See Moore v. White (Okla. 1979), 603 P.2d 1119. Moore concerned the issue of whether a guarantor to a note was an immediate party under Oklahoma’s adoption of Section 3-403, U.C.C. The Court in Moore held that the guarantor stepped into the shoes of the creditor, and thus in a suit between the guarantor and the maker of the note, the guarantor was an immediate party under the statute. Accounts Management stepped into the shoes of Farmers Union when the case was postured for trial, and its rights derived not from negotiation of the note at issue, but from a separate agreement with Farmers Union. Under these circumstances, Accounts Management cannot claim greater rights than Farmers Union, and is subject to Lyman’s defenses against Farmers Union. See also Guaranty National Bank v. Beaver (Okla. 1987), 738 P.2d 1336.

Subsection (2)(b)’s additional prerequisites are also met in this case. The instrument’s upper portion names Lyman Ranch, but the signature on the lower portion does not show that Lyman signed in a representative capacity. In this situation, the issue of who is obligated by the note becomes a question of fact for the trial court. See Clarks Fork National Bank v. Papp (Mont. 1985), [215 Mont. 494,] 698 P.2d 851, 853, 42 St.Rep. 577, 580. And in resolving this issue, Subsection (2) (b) “admits parol evidence in litigation between the immediate parties to prove signature by the agent in his representative capacity”. Uniform Commercial Code (U.L.A.) Section 3-403 official comment (1977). Thus, the lower court incorrectly concluded that Lyman’s signature unambiguously imparted personal liability.

However, the lower court also heard evidence and made findings concerning the parties’ intentions. That is all that Section 30-3-403(2)(b), MCA, mandates under these circumstances, and we will affirm on the basis of these findings if they are supported by substantial evidence.

ISSUES 2 and 4: Howard Lyman testified that when he personally guaranteed that everything that could be done would be done to satisfy the debt, his statements referred to efforts in a corporate capacity, not to a desire to become personally liable on the debt. Boysun testified that he relied on Lyman’s personal guarantee for ordering the preparation of the “CHECK-NOTE”, and according to Boysun and the “CHECK-NOTE” ’s drafter, McDonald, the parties intended to impart personal liability to Lyman.

The lower court’s finding that the parties intended to make Lyman personally liable must be supported by substantial evidence. Miller v. Watkins (1982), 200 Mont. 455, 461, 653 P.2d 126, 129. Substantial evidence “ ‘is such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.’ ” Bushnell v. Cook (Mont. 1986), [221 Mont. 296,] 718 P.2d 665, 668, 43 St.Rep. 825, 828 (quoting State v. Plouffe (1982), 198 Mont. 379, 389, 646 P.2d 533, 538). And this Court must give due regard “to the opportunity of the trial court to judge of the credibility of witnesses.” Rule 52(a), M.R.Civ.P. Boysun’s testimony, and the fact that Lyman added “Sec.” after his first signature, and omitted any reference to his capacity in the second signature, provide substantial evidence to support the lower court’s findings and conclusions on the intentions of the parties. Thus we affirm.

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


text:
    From: The District Court of the Sixteenth Judicial District, County of Custer,
    STATE OF MONTANA, Plaintiff vs. GEORGE WESLEY BUMGARDNER, Defendant.
    No. 3146
    DATED this 13th day of November, 1987.
   DECISION

The application of the above-named defendant for a review of the sentence for Two Counts of Incest; 10 years on each count to run concurrently; undergo a sexual offender and alcoholic program; restitution to the victim until she reaches the age of majority for mental health counseling imposed on January 26, 1987, was fully heard and after a careful consideration of the entire matter it is decided that: the sentence shall remain the same as originally imposed.

We wish to thank Marvin Knapstad of the Montana Defender Project for his assistance to the Defendant and to this Court.

SENTENCE REVIEW DIVISION

Frank M. Davis, Chairman, Thomas C. Honzel, Douglas Harkin, Judges.


text:
    From: The District Court of the Eighth Judicial District, County of Cascade,
    STATE OF MONTANA, Plaintiff vs. JOHN EDWARD WARD, JR., Defendant.

      No. CDC-85-093
    DATED this 13th day of November, 1987.
   DECISION

The application of the above-named defendant for a review of the sentence of 6 years for Intimidation imposed on February 18, 1987, was fully heard and after a careful consideration of the entire matter it is decided that: the sentence shall remain the same as originally imposed.

We wish to thank Robert Anderson of the Montana Defender Project for his assistance to the Defendant and to this Court.

SENTENCE REVIEW DIVISION

Frank M. Davis, Chairman, Thomas C. Honzel, Douglas Harkin, Judges.


text:
    From: The District Court of the Eighth Judicial District, County of Cascade,
    STATE OF MONTANA, Plaintiff vs. LYLE EUGENE HERMAN, Defendant.
    No. BDC-86-013
    DATED this 13th day of November, 1987.
   DECISION

The application of the above-named defendant for a review of the sentence for Count III, Burglary; Count IV, Theft; Count V, Criminal Mischief; 10 years with 3 years suspended on each count; all sentences shall run consecutively imposed on January 13, 1987, was fully heard and after a careful consideration of the entire matter it is decided that: the sentence shall remain the same as originally imposed.

This Board strongly recommends that the Department of Institutions arrange for an alcohol treatment program while this individual is incarcerated at MSP.

We wish to thank Steve Hudspeth, Deputy County Attorney from Cascade County for appearing before the Sentence Review Board.

We wish to thank Melody Brown of the Montana Defender Project for her assistance to the Defendant and to this Court.

SENTENCE REVIEW DIVISION

Frank M. Davis, Chairman, Thomas C. Honzel, Douglas Harkin, Judges.


text:
    From: The District Court of the Eighth Judicial District, County of Cascade,
    STATE OF MONTANA, Plaintiff vs. JAMES MICHAEL DUTCHER, Defendant.

      No. ADC-85-106
    DATED this 13th day of November, 1987.
   DECISION

The application of the above-named defendant for a review of the sentence for Count II, theft, 10 years with 5 years suspended plus same conditions imposed for Bail Jumping (BDC-86-128) said sentences to run consecutively; $3,000 restitution, imposed on December 11, 1986, was fully heard and after a careful consideration of the entire matter it is decided that: the sentence shall remain the same as originally imposed.

We wish to thank Steve Hudspeth, Deputy County Attorney from Cascade County for appearing before the Sentence Review Board.

We wish to thank Debbie Waltari of the Montana Defender Project for her assistance to the Defendant and to this Court.

SENTENCE REVIEW DIVISION

Frank M. Davis, Chairman, Thomas C. Honzel, Douglas Harkin, Judges.


text:
    From: The District Court of the Seventh Judicial District, County of Richland,
    STATE OF MONTANA, Plaintiff vs. EDWARD GOETTL, Defendant.
    No. 1926
    DATED this 13th day of November, 1987.
   DECISION

The application of the above-named defendant for a review of the sentence for Count I, Theft, 9 years; Count II, Theft, 9 years; Count III, Criminal Mischief, 6 months in Richland County Jail; Sentences to run concurrently; Swan River Recommended, imposed on February 2, 1987, was fully heard and after a careful consideration of the entire matter it is decided that: the sentence shall remain the same as originally imposed.

We wish to thank Charles Jordan of the Montana Defender Project for his assistance to the Defendant and to this Court.

SENTENCE REVIEW DIVISION

Frank M. Davis, Chairman, Thomas C. Honzel, Douglas Harkin, Judges.


text:
    From: The District Court of the Seventeenth Judicial District, County of Phillips,
    STATE OF MONTANA, Plaintiff vs. WILLIAM LEE “RANDY” CLARK, Defendant.

      No. 892
    DATED this 13th day of November, 1987.
   DECISION

The application of the above-named defendant for a review of the sentence for 8 Counts of Sexual Intercourse Without Consent; 30 years on each count, all to run concurrently; Plus Court Costs in the sum of $6,260 and a fine of $2,240, payments to be made in $500 monthly installments; DANGEROUS OFFENDER STATUS, imposed on September 20, 1982, was fully heard and after a careful consideration of the entire matter it is decided that: the sentence shall remain the same as originally imposed, however, the portion imposing the fine and court costs shall be stricken.

There was no authority permitting imposition of a fine or court costs at the time the crime was committed.

We wish to thank Jeff Payne of the Montana Defender Project for his assistance to the Defendant and to this Court.

SENTENCE REVIEW DIVISION

Frank M. Davis, Chairman, Thomas C. Honzel, Douglas Harkin, Judges.


author: MR. JUSTICE WEBER MR. JUSTICE HUNT,

text:
    JOHN GURNSEY and Quentin Mang, Plaintiffs and Respondents, v. CONKLIN COMPANY, INC., Clyde Iverson, and Robert Place, Defendants and Appellants.
    No. 87-70.
    Submitted Nov. 5, 1987.
    Decided Jan. 6, 1988.
    As corrected on Denial of Rehearing, March 31, 1988.
    751 P.2d 151.

      Ugrin, Alexander, Zadick & Slovak; Gary M. Zadick argued and John Alexander argued, Great Falls, for defendants and appellants.
    Erik B. Thueson argued, Helena, Dennis P. Connor, Great Falls, for plaintiffs and respondents.
   MR. JUSTICE WEBER

delivered the Opinion of the Court.

The plaintiffs brought this multi-count action to recover damages for a partial crop loss. The action was tried by jury in the District Court for the Eighth Judicial District, Cascade County. Plaintiffs obtained a judgment including $132,500 in compensatory damages and $1,000,200 in punitive damages. We reverse and remand for retrial.

Defendant Conklin Company, Inc. (Conklin) has raised thirteen issues on appeal. We restate them as follows:

1. Did the District Court err by not granting a mistrial as a result of the prejudicial testimony of John Gurnsey concerning the death of his wife?

2. Did the District Court err by allowing the introduction of evidence concerning insurance?

3. Did the District Court err by allowing the introduction of testimony and exhibits concerning post-transaction activity in violation of the order granting severance?

4. Did the District Court err in allowing testimony which contained hearsay statements attributed to non-party independent distributors?

5. Did the District Court err by giving a special verdict form which 1) omitted the requirement that the jury find “legal cause”; 2) did not require the jury to make a finding of gross negligence, recklessness, or malice as a prerequisite to an award of punitive damages; 3) did not allow separate consideration of the theories of actual fraud and constructive fraud and failed to instruct the jury properly as to constructive fraud?

6. Did the District Court err by not allowing the jury to compare like conduct?

7. Did the District Court err in its instructions on emotional distress?

8. Did the District Court err in its instructions on liability for the negligent selection of an independent contractor?

9. Did the plaintiff's fail in their burden of proof of punitive damages, and was the punitive damage award the result of passion, prejudice, or other error?

10. Did the District Court err by excluding evidence offered by Conklin?

The plaintiffs are Montana grain farmers. Quentin Mang is John Gurnsey’s father-in-law. At the time this action arose, the plaintiffs both farmed small tracts west of Great Falls, Montana.

The plaintiffs brought a five-count complaint against defendants for partial failure of their 1983 wheat and barley crops. Plaintiffs’ complaint states that defendants Clyde Iverson and Robert Place, acting as agents for defendant Conklin, sold them liquid fertilizer (FEAST), misrepresenting it as a “complete” fertilizer which would greatly increase crop yields. The complaint alleges that the plaintiffs were unlawfully induced to join the FEAST distribution scheme and were wrongly instructed on how to use and apply FEAST. Plaintiffs claim they suffered crop loss and other monetary damages as the result of defendants’ breach of contract of sale, breach of implied warranties of fitness and merchantability, and breach of express warranties. Counts two and three of the complaint allege that in selling FEAST, the distributors made fraudulent and negligent misrepresentations. Count four alleges that defendants violated their duty of good faith and fair dealing, and count five alleges that defendants negligently instructed plaintiffs how to use and apply FEAST.

The court severed the bad faith claim from the other claims. At the two-and-one-half week jury trial on the remaining claims, the parties presented conflicting evidence on the contested facts. The defense was based on plaintiffs’ failure to read or follow written and laboratory instructions on use of the fertilizer. Also, Conklin’s position is that its distributors are independent contractors, so that it is not liable for their wrongs. The jury returned a verdict in favor of plaintiffs. They found Quentin Mang 38% negligent and awarded him compensatory damages of $82,500 and punitive damages of $500,100. They found John Gurnsey 30% negligent and awarded him compensatory damages of $50,000 and punitive damages of $500,100.

I

Did the District Court err by not granting a mistrial as a result of the prejudicial testimony of John Gurnsey concerning the death of his wife?

John Gurnsey’s wife died during preparation of this matter for trial. There is no claim that her death was caused in any way by the defendants.

The offending testimony came while plaintiff John Gurnsey was on the stand. He had testified that he was 49 years of age and had daughters ages 7 and 10. He had then testified at length about the events of 1982-83 during his purchase and use of FEAST. His attorney then asked:

“Q When you lose a year’s crop, does it just affect you, John?
“A It affected me, yes.
“Q Does it affect the people that rely on you?
“A It certainly has. I lost my wife.”

The defense objected on the basis of relevance and prejudice and the court admonished the jury to disregard the statement. Apparently to allow Mr. Gurnsey time to compose himself, the court then recessed early for lunch. Conklin’s motion for a mistrial, made in chambers, was denied.

Conklin argues that this episode was highly prejudicial and that, considering the amount of punitive damages awarded, its prejudicial effect cannot be ruled out. We agree. Although the trial court has a great deal of discretion in ruling on a motion for mistrial, it may be reversed if there is a showing of abuse of discretion. Morehouse v. Ylvisaker (1968), 152 Mont. 57, 446 P.2d 432. The emotionally-charged nature of this exchange can be sensed even in the transcript. We hold that the District Court erred in failing to grant a mistrial.

II

Did the District Court err by allowing the introduction of evidence concerning insurance?

As part of count one, plaintiffs’ complaint alleged that defendants misrepresented that they carried “hundreds of thousands of dollars in insurance” which would protect plaintiffs from losses if FEAST did not perform as represented. Defendant Conklin moved to strike the reference to insurance prior to trial, but the court ruled that the issue of insurance was relevant to the material issue of defendants’ misrepresentations to plaintiffs. At the time of that ruling, the claim that Conklin breached its contract was still alive. Quentin Mang testified at trial that Clyde Iverson made the statement about insurance during their first meeting in order to induce him to purchase FEAST.

While jury instructions were being settled, plaintiffs’ counsel informed the court they would no longer proceed under the breach of contract theory. Conklin argues that this was a calculated course embarked upon by plaintiffs to wrongfully get into evidence the statement that Conklin was insured. Conklin points out there has been no allegation that the statement was untrue and contends that the statement is not admissible. Plaintiffs argue that the statement was part of a fraudulent scheme to get them to buy FEAST, and is therefore relevant.

Rule 403, M.R.Evid. provides:

“Although 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, or by considerations of undue delay, waste of time, or needless presentation of cumulative evidence.”

Evidence of a party’s insured status is generally inadmissible in Montana tort actions because of the prejudicial potential of such evidence. See, e.g., Avery v. City of Anaconda (1967), 149 Mont. 495, 428 P.2d 465. While insurance coverage for participants in business transactions is increasingly common, the prejudicial potential of the mention of insurance is still present.

After reviewing the record, we conclude that the statement with regard to insurance was a minor part, at most, of the claim of fraud or misrepresentation. Only one statement was alleged, and that was made during the initial sales talk. We hold that the danger of unfair prejudice substantially outweighed the probative value of the statement of insurance under Rule 403, M.R.Evid. We direct that such evidence shall be excluded on retrial.

Ill

Did the District Court err by allowing the introduction of testimony and exhibits concerning post-transaction activity in violation of the order granting severance?

Conklin alleges that the court erred by allowing into evidence various letters written by the plaintiffs subsequent in time to the crop loss. Conklin argues these letters have no place in the present trial and are admissible only in the bad faith cause of action. As previously mentioned, prior to trial the court severed the bad faith claim for separate trial. The plaintiffs contend the letters were admissible as evidence of the “pain, frustration, and anger” suffered by Mr. Gurnsey and Mr. Mang. They also contend the letters address the punitive damages prerequisites of maliciousness, recklessness, and conscious effort to commit a fraud.

After carefully reviewing the' transcript, we conclude that the letters written subsequent to the loss of crops, including those written shortly prior to trial, should not be admitted as evidence in this action. They do not directly relate to the fraud theory or negligence theory. They do not support the claim for emotional distress except in an indirect manner. The use of the letters as evidence should be postponed to the trial of the bad faith claim. On retrial the letters should not be admitted as evidence.

IV

Did the District Court err in allowing testimony which contained hearsay statements attributed to non-party independent distributors?

Before the trial commenced Conklin sought to restrict the use of the depositions of certain farmers residing in Oklahoma. Those depositions contained statements allegedly constituting misrepresentation by independent distributors of FEAST in Oklahoma. Portions of the depositions of the Oklahoma farmers were read to the jury, including statements attributed to these independent distributors that FEAST could be used as a full program without the need of a supplement. Plaintiffs contend that the statements are not hearsay because they were not offered for the truth of the statements, but as evidence of Conklin’s fraudulent marketing scheme.

Although the plaintiffs may be technically correct on the hearsay question because the statements were not offered for their truth, we point out for purposes of retrial that we have a real question about the relevance of the statements. Rule 401 M.R.Evid., provides that evidence is relevant if it has “any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence. “Absent proof of agency, we fail to see how the statements by the distributor in Oklahoma to the Oklahoma farmers are relevant to this claim against Conklin and the Montana distributors.

The independent distributors referred to in the depositions were subject to the same type of a contract as were the defendants Iverson and Place. These contracts provided that they were independent contractors. No evidence was submitted with regard to the character of the relationship between these distributors and Conklin.

The commission comment under Rule 801, M.R.Evid., makes the following statement with regard to proof of an agency relationship:

“It should first be pointed out that the statute plainly requires a foundation to be laid showing the existence of a partnership or agency before an agent’s admissions will be allowed in evidence . . . under (D) the terminology ‘agent or servant’ and ‘scope of agency or employment’ indicates that this must be shown before this type of statement would be admitted.”

In the absence of some proof of an agency relationship, the statements attributed to the non-party independent distributors constitute hearsay. We hold that it was error to admit this deposition testimony.

V

Did the District Court err by giving a special verdict form which 1) omitted the requirement that the jury find “legal cause”; 2) did not require the jury to make a finding of gross negligence, recklessness, or malice as a prerequisite to an award of punitive damages; 3) did not allow separate consideration of the theories of actual fraud and constructive fraud and failed to instruct the jury properly as to constructive fraud?

Conklin argues that any one of these errors, standing alone, constitutes reversible error. The special verdict form was six pages long. Issue one asked whether Conklin committed “actual or constructive fraud” which caused damages to Quentin Mang, to which the jury answered “yes”. Issue two asked whether Conklin negligently caused damages to Quentin Mang, to which the jury answered “yes”. Issues three and four asked whether defendant Iverson committed “actual or constructive fraud” and negligently caused damages to Quentin Mang, to which the jury answered “yes”. Issues five and six asked the same two questions about the actions of defendant Place, to which the jury answered “no”.

The verdict form then read:

“If you have answered ‘yes’ to any of the six issues above and therefore, have found that one or more of the defendants has wrongfully caused damages to Quentin Mang, you should proceed to Issue No. 7.
“If, on the other hand, you have answered ‘no’ to all of the six issues above and therefore, have found that none of the defendants have wrongfully caused damages to Quentin Mang, then your verdict is for the defendants and against Quentin Mang. You should proceed to issues related to John Gurnsey commencing at Issue No. 12.
“ISSUE NO. 7: What is the total amount of damages caused to Quentin Mang? (Do not consider comparative negligence of Quentin Mang, if any, in making this calculation).
$_82,500_
Please proceed to Issue No. 8.
ISSUE NO. 8: What amount of punitive or exemplary damages, if any, do you assess against each of the defendants?
Defendant Conklin Co.: $ 500,000.00_
Defendant Clyde Iverson: $ 100,00_
Defendant Robert Place: $_
If you have assessed punitive damages against all three defendants, then proceed to Issue No. 11.
If you have not, then proceed to Issue No. 9.
ISSUE NO. 9: Was Quentin Mang negligent and did this negligence contribute to his damages?
Answer “yes” or “no”.
ANSWER: yes
If you answer “yes”, please proceed to Issue No. 10. If you answer “no”, please proceed to Issue No. 11.
ISSUE NO. 10: Assuming that 100% represents the combined negligence of the plaintiff and of the defendants whose negligence contributed as a cause to plaintiff’s damages, what proportion of such combined negligence is attributable to the plaintiff on the one hand and what proportion is attributable to the defendants on the other hand?
ANSWER: Defendant Conklin Company: 61%
Defendant Robert Place: 0%
Defendant Clyde Iverson: 1%
Plaintiff Quentin Mang: 38%
Total: 100%

The verdict form then relisted all of the above issues, but as to the claim of John Gurnsey. The jury again answered that both Conklin and Mr. Iverson had committed “actual or constructive fraud” and negligence. It again answered the questions “no” as to Mr. Place. It found that John Gurnsey suffered $50,000 in damages and assessed an additional $500,000 in punitives against Conklin and $100 in punitives against Mr. Iverson. It found Conklin 69% negligent, Mr. Iverson 1% negligent, and John Gurnsey 30% negligent.

The court has used a three-part standard to determine the adequacy of a special verdict form. Kinjerski v. Lamey (Mont. 1981), [_ Mont. _,] 635 P.2d 566, 38 St.Rep. 1703. The instructions must, 1) when read as a whole and in conjunction with the general charge; adequately present the contested issues to the jury; 2) fairly submit the issues to the jury; and 3) clearly submit to the jury the ultimate questions of fact. Kinjerski, 635 P.2d at 568. We conclude that the special verdict form used in this case has failed to meet the standard in several respects.

Issues numbered 1, 2, 11, and 12 of the special verdict form asked the jury whether Conklin “caused” damages to the plaintiffs. One of the objections of Conklin to the special verdict form is the omission of any requirement that the jury find that the defendants’ activities were the legal cause of the damages. We conclude that the questions should have been modified so that the jury could assess damages based upon the conduct of the defendants which was the legal cause of injury to the plaintiff's.

Special interrogatory Issue 8, punitive damages, was reached after the jury answered “yes” to any of issues 1 through 6. The verdict form does not specify that punitive damages can be awarded only under certain circumstances. Those circumstances are set out separately at Instruction No. 39. The necessary circumstances should have been incorporated into the special verdict form either by reference to Instruction No. 39 or by use of a statement of Issue No. 8 such as:

“If you find that the conduct of the defendant was grossly negligent, reckless, or malicious, what amount of punitive or exemplary damages, if any, do you assess against that defendant?”

From the verdict form we are unable to determine whether the jury found constructive fraud, actual fraud, or both. On retrial, the verdict form should be revised to clarify this. The jury was instructed on the elements of constructive fraud in instructions No. 20, 21, 22, 23, and 24. Conklin asserts that all the elements must be set out in one instruction so that it is clear to the jury that all elements must be present in order for constructive fraud to be found. On remand, the instructions should clearly state that all the necessary elements of constructive fraud must be present before constructive fraud may be found.

VI

Did the District Court err by not allowing the jury to compare like conduct?

Conklin offered a jury instruction which instructed the jury to compare “like conduct”. It was refused. Conklin argues that this was error and that the jury should have had the opportunity to consider whether the plaintiffs acted in a reckless disregard of their own interests.

In Simonson v. White (Mont. 1986), [220 Mont. 14,] 713 P.2d 983, 988, 43 St.Rep. 133, 139, this Court held that willful or wanton conduct may be compared with like conduct for the purpose of ascertaining damages. In this case, Conklin elicited testimony that Mr. Mang wrote out two checks for almost $6,000 for FEAST fertilizer after having met for two hours with Mr. Place and Mr. Iverson, then strangers to him; that neither plaintiff professed to have read the literature available to them on the FEAST program; that plaintiffs professed to being in the practice of signing contracts and letters without reading them. We conclude that Conklin presented a factual issue of whether plaintiffs engaged in willful and wanton conduct proximately causing their damages. For that reason, we hold that the lower court was in error in refusing the offered jury instruction on comparing like conduct.

VII

Did the District Court err in its instructions on emotional distress?

Conklin asserts that the lower court erred in failing to instruct the jury that emotional damages should be awarded only if the jury concluded there was a substantial invasion of a legally protected interest which caused a significant impact upon the person of the plaintiff. In Johnson v. Supersave Markets, Inc. (Mont. 1984), [211 Mont. 465,] 686 P.2d 209, 213, 41 St.Rep. 1495, 1500, we concluded that such an instruction is required where there has been no proof of physical or mental injury to the plaintiff.

Here Mr. Gurnsey claimed aggravation of his heart condition and Mr. Mang claimed aggravation of his stomach and digestive condition. They do not contend that these conditions were the result of any direct physical or mental injury which resulted from the conduct of the defendants. Essentially their claims are that they suffered emotional injury, as a part of which there were aggravations of previously existing physical conditions. Under these circumstances we hold that the instruction described in Johnson should have been given. In the present case an award for emotional injury is proper only if the jury concludes that the defendants’ conduct resulted in a substantial invasion of a legally protected interest, causing a significant impact upon either or both plaintiffs.

VIII

Did the District Court err in its instructions on liability for the negligent selection of an independent contractor?

The court instructed the jury on agency principles and on the difference between agents and independent contractors. In Instruction No. 48, it further instructed the jury that, even if they found that the Conklin distributors were independent agents, Conklin could be held liable for the distributors’ actions. Instruction No. 48 states in part:

“Defendant Conklin should be held responsible if it negligently failed to select competent or qualified contractors to do the work and that said failure caused the Plaintiffs’ losses. Under this exception, the Defendant Conklin should be held responsible for damages if it negligently failed to ascertain whether or not its independent contractors were competent or qualified to sell FEAST fertilizer or negligently failed to select contractors who possessed the measure of skill necessary to properly sell FEAST fertilizer.
“In determining whether or not the Conklin Company has been negligent in the selection of people to perform the work in question you may consider evidence of whether said persons had the measure of skills necessary or experience necessary to do the work required. You can also consider the nature of the work to be performed and the risk of harm to others if it is not performed properly.”

Conklin argues that this exception to the general rule on independent agents is inapplicable to fertilizer salesmen. The plaintiffs argue that this instruction is appropriate under Restatement (Second) of Torts Section 411 (1986). That section states

“Section 411. Negligence in Selection of Contractor
“An employer is subject to liability for physical harm to third per-. sons caused by his failure to exercise reasonable care to employ a competent and careful contractor
“(a) to do work which will involve a risk of physical harm unless it is skillfully and carefully done, or
“(b) to perform any duty which the employer owes to third persons.”

We adopt the limitation of Section 411 which provides that liability is limited to physical harm. The jury instruction here did not contain such a limitation. We conclude that the giving of this instruction was error.

IX

Did the plaintiffs fail in their burden of proof of punitive damages, and was the punitive damage award the result of passion, prejudice, or other error?

Plaintiffs did not submit any evidence to the jury on Conklin’s net worth. Instead, they presented evidence of Conklin’s dollar sales of FEAST fertilizer over a period of several years. Conklin says that the plaintiffs have failed to address one of the factors listed in Court’s Instruction No. 40 for determining the amount of punitive damages: “the wealth and pecuniary ability of the Defendants.”

Conklin has cited as authority for its position Safeco Ins. Co. v. Ellinghouse (Mont. 1986), [223 Mont. 239,] 725 P.2d 217, 43 St.Rep. 1689. In that opinion, this Court listed as a factor in determining the amount of punitive damages “the relative wealth of the defendant.” Although this would logically appear to include net worth, it does not require proof of net worth. Therefore, in a case such as the present case, in which the defendants’ net worth does not support an award of punitive damages in the amount the plaintiffs seek, we conclude that it is up to the defendant to bring in the evidence if the plaintiff does not do so.

Conklin also argues that in light of its net worth of $2.9 million the award of $1 million in punitive damages is reversible because it is so excessive as to “shock one’s conscience.” See Safeco, 725 P.2d at 227. In light of the reversal of this judgment on other grounds, it is not necessary that we discuss this issue.

X

Did the District Court err by excluding evidence offered by Conklin?

This refers to a 1984 videotaped presentation on FEAST to a group of farmers in Great Falls. The videotape includes a statement by the presenter that FEAST is only a starter system, not a complete fertilization program. Plaintiffs successfully argued to the lower court that the presenter, who testified at trial, could testify that this disclaimer was part of his presentation, and that the tape was unreliable and was made in contemplation of trial. Conklin argues that the tape should have been admitted as a response to plaintiffs’ claims that Conklin and its distributors continued to misrepresent FEAST up to the day of trial. We affirm the trial court’s ruling that the tape was not admissible at trial, because it was cumulative and because it was too likely to have been made in contemplation of trial.

The judgment is reversed and this case is remanded to the trial court for further proceedings consistent with this opinion.

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

MR. JUSTICE HUNT,

dissenting:

Of the ten issues discussed in the majority opinion, I disagree with conclusions reached in eight. I will address each in the same order as the majority opinion.

The District Court refused to grant a mistrial regardless of testimony at trial concerning the death of John Gurnsey’s wife. I believe that the lower court judge is in a much better position than this reviewing court to determine the impact of statements made during trial. The District Court judge did not deem the comment critical or prejudicial enough to warrant a mistrial. I would not overrule the District Court’s judgment on this issue. Also, the jury verdict does not reflect that the jury was swayed by Gurnsey’s comment about his wife. The award for compensatory damages was barely above Gurnsey’s actual crop loss.

I would also affirm the District Court on the introduction of evidence concerning insurance carried by Conklin Co. The evidence was not admitted to show the existence of insurance or to prove negligence or liability of the party. The evidence was critical only to the issue of fraudulent and deceitful sales tactics on the part of Conklin’s salesmen. As such, it was relevant and admissible.

The gran ting, of a severance of trials for the purpose of establishing liability versus bad faith placed appellants in an awkward situation at trial. Much of the evidence relevant to proving bad faith was also relevant to proving liability. The admission of a letter written by Mang to the Department of Agriculture is such a piece of evidence. The letter was properly admitted at the trial to establish Conklin’s liability, even though it may also be relevant as to the issue of bad faith at a later trial. Mang’s solicitation of help from the Department of Agriculture goes toward proving Conklin’s business practices and the resulting damages to appellants.

Admission of the deposition testimony of other farmers who had used FEAST was not reversible error. The testimony was not offered to prove FEAST’s capabilities or lack thereof. It was offered as evidence of Conklin's fraudulent representations to farmers depicting FEAST as a full fertilizer program. The testimony does not fall under hearsay, Rule 801, M.R.Evid., and was properly admitted.

I acquiesce in the holding that the special verdict form could have been better written. However, as presented to the jury, it was not inaccurate or misleading enough to justify a retrial. The special verdict form, read together with all jury instructions, adequately informed the jury of the applicable laws, definitions and criteria which must be met before finding Conklin liable and awarding damages.

In my opinion, the issue concerning the giving of an instruction comparing “like conduct” should also be affirmed. There is nothing in the record which suggests that either Mang or Gurnsey acted in a willfully reckless manner. If anything, appellants are guilty of being ignorant as to the capabilities of FEAST. Conklin agents knew, or should have known, enough about the product which they were selling to correctly inform the farmers. Because of this expertise as sales representatives, Conklin’s employees should be held to a higher standard of conduct than purchasers of FEAST. There is no need to compare like conduct. To do so inaccurately raises appellants’ standard of care and required degree of knowledge to that of respondents.

Given the facts of this case, the instruction given concerning emotional distress was not in error. Both Mang and Gurnsey had physical problems which were complicated and exaggerated by the conduct of Conklin’s employees. The “substantial invasion of a legally protected interest” language would be appropriate where there was no manifestation of physical harm caused by emotional distress.

As with the preceding issues, the majority would also reverse because of an alleged error by the District Court in giving an instruction on independent contractors. As with the preceding issues, I disagree with the majority.

It seems obvious from the facts that Conklin’s salesmen were much more than independent contractors, excusing Conklin from any liability for their actions except in the case of negligent hiring which caused physical harm to third parties. Giving instruction No. 48, as quoted by the majority, was not an inaccurate statement of the law under the facts of this case.

I do agree with the majority opinion that where “defendants’ net worth does not support an award of punitive damages in the amount plaintiffs seek, . . . it is up to the defendant to bring in evidence if the plaintiff does not do so.” Likewise, I agree that the videotape offered as evidence by Conklin was properly refused Gurnsey, admission by the District Court.

In careful consideration of the complete record and evidence submitted to the jury, I would affirm the verdict of the jury on all issues.

MR. JUSTICE SHEEHY concurs in the foregoing dissent.


author: MR. JUSTICE WEBER

text:
    JOHN J. D’AGOSTINO and Joann M. D’Agostino, husband and wife, Third-Party Plaintiffs and Appellants, v. ROBERT L. SCHAAP and Vivian J. Schaap, husband and wife, Third-Party Defendants and Respondents.
    No. 87-398.
    Submitted on Briefs Oct. 29, 1987.
    Decided Jan. 7, 1988.
    Rehearing Denied Feb. 4, 1988.
    748 P.2d 466.

      Morrow, Sedivy & Bennett, Edmund P. Sedivy, Jr., Bozeman, for third-party plaintiffs and appellants.
    Moore, Rice, O’Connell & Refling, Perry J. Moore, Bozeman, for third-party defendants and respondents.
   MR. JUSTICE WEBER

delivered the Opinion of the Court.

This is a claim for breach of a contract for sale of real property. The. District Court for the Eighteenth Judicial District, Gallatin County, denied the motion of the D’Agostinos for summary judgment and granted summary judgment to the Schaaps. We affirm in part and reverse in part.

The issue is whether the trial court erred in failing to grant the D’Agostinos’ motion for summary judgment and in granting the Schaaps’ motion for summary judgment.

In 1977, the Schaaps sold the D’Agostinos property in West Yellowstone, Montana, consisting of Lots 3, 4, 5, and 6 in Block 26 of the original townsite of West Yellowstone. The Westwood Motel occupied most of the property. Prior to the sale, the Schaaps had moved some cabins which were part of the motel. The Schaaps originally believed they had moved the cabins to a spot entirely on Lot 4 but surveyors have later determined that the cabins are partially on Lot 3 and partially on Lot 4. There is a dispute as to whether the D’Agostinos knew of this when they bought the property, but the Schaap-D’Agostino contract contemplated the separate sale by the D’Agostinos of Lot 3. The D’Agostinos later sold Lot 3 as a vacant lot to Mr. Swanson and Lots 4, 5, and 6, including the motel, to the Markovs. Some time later, Mr. Swanson demanded that the cabins which were partially on his property be moved. The Markovs brought an action for fraud and misrepresentation against the D’Agostinos, who filed a third-party complaint against the Schaaps. They claim that the Schaaps breached the warranty that Lot 3 was free and clear of all encumbrances in the contract for sale of the property. The matter was bifurcated for purposes of trial, and a $53,050 judgment has been rendered against the D’Agostinos in the original action. That amount represents the cost of moving the cabins so that they no longer encroach upon Lot 3.

Both parties moved for summary judgment as to the D’Agostinos complaint against the Schaaps. The District Court granted the Schaaps’ motion for summary judgment, explaining,

“I am convinced D’Agostinos had knowledge of the cabin encroachment for considerably more time than is necessary for the statute of limitation to be invoked .... This involved litigation and endless chain of additional parties being joined who were former owners of the realty must cease, and D’Agostinos should settle up on the reasonable and fair jury verdict against them and cease trying to pass the buck to someone else.”

The court certified its order for consideration by this Court.

Did the trial court err in failing to grant the D’Agostinos’ motion for summary judgment and in granting the Schaaps’ motion for summary judgment?

Rule 56(c), M.R.Civ.P., provides that summary judgment shall be granted

“if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.”

The party moving for summary judgment has the burden of showing the complete absence of any genuine issue of material fact. Once that is done, the burden shifts to the party opposing the motion to come forward with substantial evidence raising a factual issue. Rumph v. Dale Edwards Inc. (1979), 183 Mont. 359, 365-66, 600 P.2d 163, 167.

The D’Agostinos moved for summary judgment on the basis that the Schaaps had breached the warranty that Lot 3 was free and clear of all encumbrances, in that the encroachment of the cabins onto Lot 3 is an encumbrance. In support of their motion, the D’Agostinos submitted an affidavit, copies of documents, and a portion of the transcript of the Markov-D’Agostino trial. In opposing this motion for summary judgment, the Schaaps submitted the affidavit of another former owner of the property, who stated that she told Mr. D’Agostino in 1979 that the cabins encroached onto Lot 3. The Schaaps argue that this knowledge on the part of Mr. D’Agostino constitutes a waiver of the warranty against encumbrances. We conclude that the District Court correctly denied the D’Agostinos’ motion for summary judgment because of this material issue of fact. We affirm the denial of the D’Agostinos’ motion for summary judgment.

On the day of the hearing on the D’Agostinos’ motion, the Schaaps moved for summary judgment. The court considered both motions at the hearing. Although they filed no affidavits or other documents with their motion, the Schaaps referred to the pleadings and to the facts which the D’Agostinos had marshaled in support of their motion for summary judgment. In their brief before this Court, the Schaaps argue that as a matter of law the encroachment of the cabins does not constitute an encumbrance so that, as a matter of law, no breach of contract has been alleged.

The District Court stated in granting summary judgment to the Schaaps that it was convinced the D’Agostinos knew of the encroachment of the cabins onto Lot 3 “for considerably more time than is necessary for the statute of limitation to be invoked.” It appears that the court’s statement is based on the evidence heard at the Markov-D’Agostino trial. Neither party argues or presents authority on whether evidence from that bifurcated trial may properly be considered in deciding these motions for summary judgment, and we are doubtful that such evidence may properly be considered here.

An encumbrance is “any right in a third party which diminishes the value or limits the use of the land granted.” 3 American Law of Property Section 12.128 (A.J. Casner ed. 1952). An encroachment may or may not be an encumbrance.

“[I]f the encroachment is of an improvement located on adjoining land which extends across the line onto the land conveyed, there may be a breach of either the covenant of seizin or of the covenant against encumbrances, depending upon whether title to that part of the land purchased has been lost by adverse possession, or has become encumbered by an easement.”

Casner, at Section 12.128. We hold that the above rule of law governs in this case.

Neither party has submitted proof as to whether the cabins have a legal right to encroach upon Lot 3. Under the above rule of law, this fact question is material to the outcome. We therefore conclude that summary judgment is not appropriate, and reverse the lower court’s grant of summary judgment to the Schaaps.

Affirmed in part and reversed in part.

MR. JUSTICES HARRISON, HUNT, SHEEHY and GULBRANDSON concur.