No. 8 5 - 4 1 9
IN THE SUPREME COURT OF THE STATE OF MONTANA
1986
NORTHWESTERPI NATIONAL BANK OF GREAT
FALLS, a National Banking association,
Plaintiff and Appellant,
WEAVER-MAXWELL, INC., a corporation,
et al. ,
Defendants and Respondents.
APPEAL FROM: District Court of the Eighth Judicial District,
In and for the County of Cascade,
The Honorable John McCarvel, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Church, Harris, Johnson & Williams; Milton Wordal
argued, Great Falls, Montana
For Respondent:
Graybill, Ostrem, Warner & Crotty; Turner C. Graybill
argued, Great Falls, Montana
Submitted: August 121 1986
Decided: November 13, 1986
Clerk
Mr. Justice Fred J. Weber delivered the Opinion of the Court.
Norwest Bank Great Falls, N.A. (the Bank) appeals a
$2,659,671 judgment entered against it in Cascade County
District Court after a jury trial. The Bank brought the
action as a foreclosure suit and to obtain a deficiency
judgment. Defendants prevailed on their counterclaims for
breach of contract, tortious interference with their fran-
chise agreement, fraud, negligent misrepresentation, and bad
faith in liquidation of the Weavers' collateral. The Court
also granted defendants equitable relief. We reverse and
remand for a new trial.
The dispositive issue is whether the District Court
erred in giving the jury a special verdict form which pre-
sented the issue of breach of contract in terms that adopted
the defendants' view of substantial disputed facts. For the
guidance of the court and counsel on remand, we will consider
briefly the other issues raised on appeal. They are:
2. Did the District Court err in the manner in which it
submitted the issue of tortious interference with contract to
the jury?
3. Did the District Court err in entering judgment upon
the special verdict:
a. by entering judgment on the jury's findings of
damages both for breach of contract and for tort; and
b. because the special verdict's award of punitive
damages conflicted with the jury's finding that the Bank had
acted in good faith?
4. Did the District Court err in its resolution of the
issues reserved for its decision by:
a. denying the Bank's claim for a deficiency judgment;
b. ordering the Bank to surrender to defendants the
proceeds of liquidation of collateral;
c. awarding prejudgment interest at a rate of 18%; and
d. basing an award of attorney fees to defendants on
their recovery on both their contract and torts claims?
Weaver-Maxwell, Inc. was an International Harvester (IH)
truck and farm equipment dealership. Its stockholders are
the other defendants in this action. Beginning in 1977, it
entered a series of transactions with the Bank. As of April
1980 Weaver-Maxwell owed the Bank slightly over $700,000 in
principal and accrued interest on two SBA guaranteed loans
and on its floor plan and accounts receivable lines of cred-
it. The banker in charge of the Weaver-Maxwell account was
Paul Hoffman.
As is typical of floor plan financing , Weaver-Maxwell ' s
floor plan arrangements with both IH and the Rank provided
that the lenders had a security interest in all items of
inventory financed and in the specific proceeds of sale of
each item. Weaver-Maxwell had agreed to hold the proceeds of
each sale, as well as the inventory, in trust for the respec-
tive lender, and it was required to remit a portion of these
proceeds to the lender promptly upon receiving them, without
demand or notice. When Weaver-Maxwell failed to account for
such proceeds, the sale was "out-of-trust."
In March 1980, for the second time within a year,
Weaver-Maxwell was in default of its payments on the two SBA
loans. Mr. Weaver approached Mr. Hoffman at the Bank seeking
another loan for Weaver-Maxwell. Mr. Hoffman refused to make
a loan to Weaver-Maxwell. However, the Bank did agree to
make a personal loan to Mr. and Mrs. Weaver in the amount of
$84,291.69. The loan was secured by personal assets of the
Weavers.
The terms of the loan were in dispute at trial. Mr.
Hoffman testified that the amount was precisely calculated
and all of its proceeds were earmarked for specific purposes.
He testified that the $84,291.69 was to be applied as fol-
lows: $22,000 was to cover two IH trucks sold out-of-trust;
$23,060 was to bring current delinquent payments to the Bank
on an SBA-guaranteed loan; $17,492 was to bring the other SBA
guaranteed Bank loan current; $21,669.04 was for the balance
due the Bank on a 1979 individual loan to E r Weaver; and
l.
$70.65 was for interest. Mr. Weaver, on the other hand,
testified that the loan was earmarked only to the extent
necessary to cover the $22,000 in out-of-trust IH sales, and
that the rest was to be used for Weaver-Maxwell's general
business needs. The loan was documented March 24, 1980, in a
promissory note from the Weavers to the Bank. There was
nothing in writing signed by the Weavers which mentioned any
specific purpose or purposes for the loan. The cash was not
immediately a.dvanced to the Weavers, pending filing of docu-
ments showing the Bank's security interest in Weaver assets.
On April 3, 1980, the Bank advanced $26,848.45 on the
March 24 note, to cover the $22,000 IH out-of-trust previous-
ly disclosed and another $4,848.45 out-of-trust which had not
been disclosed to the Bank previously and was not included in
Mr. Hoffman's calculation. The next day, (a Friday) Mr.
Weaver requested another $47,000, to cover yet another
out-of-trust amount owed to IH on a sale made several months
earlier. The Bank had not been informed of this out-of-trust
sale before this time. Mr. Weaver was to return to the Bank
on Monday, according to his testimony, to receive the $47,000
out of the sums available from the March 24 note. He testi-
fied that when he went to the Bank to pick up the $47,000 on
Monday morning, Mr. Hoffman told him, "We're not going to
advance you the money," and that Mr. Hoffman would not say
more than that. Mr. Hoffman's testimony was substantially
d.ifferent. He testified that the $47,000 was a new loan
request, and that he told Mr. Weaver a decision whether to
grant it would be made by Monday. Mr. Hoffman testified that
on Monday morning he concluded after talking with his super-
visor that the $47,000 loan request should be declined be-
cause "I had lost my confidence in our borrower."
IH immediately notified Mr. Weaver that it was terminat-
ing Weaver-Maxwell's dealership because of the out-of-trust
situation. To prevent IH from quickly repossessing
Weaver-Maxwell's assets, Mr. Weaver signed a document enti-
tled "Peaceful Possession of Collateral Property." The
document allowed the Bank to take possession of the assets.
The Bank viewed this as a means of protecting its security
interests. That evening, the Bank changed the locks on the
Weaver-Maxwell buildings. It thereafter excluded Mr. Weaver
from the property except during business hours, when he was
accompanied by bank representatives. After April 9, the Bank
also seized and opened all mail addressed to Weaver-Maxwell.
Defendants presented testimony that the Bank destroyed truck-
loads of Weaver-Maxwell records by hauling them to the Great
Falls dump. Approximately two months later, the Bank held an
auction of Weaver-Maxwell assets. The defendants argued that
the auction was not well-run. The proceeds of the auction
were applied to Weaver-Maxwell's debts to the Bank, but they
did not cover all the debts. The Bank also collected person-
al assets of the Weavers in which it had security interests.
The Bank commenced this action to collect sums remaining
due on its loans to Weaver-Maxwell and the Weavers. The
defendants asserted counterclaims based on their contention
that the Biink had breached its March 24, 1980 contract to
loan money to Mr. and Mrs. Weaver. They also raised claims
arising from the Bank's liquidation of their assets. The
case was tried to a jury over a three-week period. The jury
awarded damages to defendants of $300,000 for breach of
contract, $800,000 on tort theories, and $40,000 for bad
faith in the liquidation of the Weavers' personal assets. It
also awarded the defendants $140,000 in punitive damages.
The District Court entered judgment on both the breach of
contract and. tort damages. It denied the Bank's claim for a
deficiency judgment of $377,702.73. It ordered the Bank to
remit to defendants $729,073.74 from liquidation of the loan
collateral. It also a.warded defendants $266,597.26 in pre-
judgment interest and $384,000 in attorney fees, for a total
judgment of $2,659,671 plus interest.
I
Did the District Court err in giving the jury a special
verdict form which presented the issue of breach of contract
in terms that adopted defendants' view of substantial disput-
ed facts?
The evidence on whether Mr. Weaver's request for $47,000
should have been considered as part of the $84,291.69 loan
was lengthy and conflicting. Both sides presented expert and
lay opinion testimony on whether the Bank wa.s obligated to
advance the $47,000. The testimony of Mr. Weaver and of Mr.
Hoffman also directly conflicted on whether Mr. Weaver re-
quested the $47,000 as a disbursement of part of the
$84,291.69 Loan or as a new loan. This testimony was admit-
ted into evidence without objection.
The jury was not asked whether Mr. Weaver was entitled
to $47,000 cash out of the note for this application. In-
stead, the District Court adopted the defendants' proposed
special interrogatory as jury instruction number 1:
1. A. On April 4 or 7, 1980, did Art Weaver
request Northwestern National Bank to advance
approximately $47,000 on the Weavers' note of March
24, 1980, in order to pay a debt of Weaver-Maxwell,
Inc. to International Harvester?
Answer : (yes or no)
B. If your answer to question No. 1 is "yes,"
please state the total amount of damages which the
Bank's breach of contract proximately caused each
of the defendants to suffer when the Bank refused
to advance such funds?
Answer: Weaver-Maxwell, Inc. $
Art & Grace Weaver $
Darlow & Ruth Maxwell $
In substance, this required the jury to determine whether Mr.
Weaver asked the Bank to advance $47,000 on the March 24
note. If they answered "yes" then the next determination was
the amount of damages which the breach caused the defendants.
"While it is within the trial court's discretion to
structure the form and frame the questions of a special
verdict, the interrogatories must be adequate to enable the
jury to determine the factual issues essential to judgment."
Kinjerski v. Lamey (Mont. 1981), 635 P.2d 566, 567, 38
St.Rep. 1703, 1705, citing Glick v. Knoll (1959), 136 Mont.
176, 346 P.2d 987; Coburn Cattle Co. v. Small (1907), 35
Mont. 288, 88 P. 953. We conclude that the special verdict
submitted on this record was inadequate. In fact, the Bank
agrees that Mr. Weaver was still entitled to $47,000 out of
the $84,291.69 loan. However, it was the province of the
jury to decide if Mr. Weaver was entitled to apply $47,000 on
the new out-of-trust obligation to IH. That central issue
was not submitted to the jury. Under this record, it was
essential that the judge leave the factual determination of
the nature of the agreement to the jury. Instead, the Dis-
trict Court reached the conclusion that the Bank was obligat-
ed to loan the $84,291.69 for any purpose Mr. Weaver desired
and therefore only left the jury to determine whether Mr.
Weaver asked for the $47,000. This totally disregarded the
conflict in the evidence.
The dissent suggests that the note and mortgage are
facially clear and that no par01 evidence should have been
admitted which would contradict the instruments. As previ-
ously pointed out, no objections were made to the admission
of the Bank's evidence in this regard. Further, the note and
mortgage on their faces do not prove an obligation on the
part of the Bank to deliver cash in any amount to Mr. Weaver.
As an exampl-el they would be appropriate as evidence of a
debt already owed and past due. Clearly, it is necessary to
go outside the terms of the instruments to determine what
amount, if any, Mr. Weaver was entitled to apply on the
$47,000 out-of-trust obligation to IH.
We hold that special interrogatory #1 was fatally defi-
cient, and we remand for a new trial. For the guidance of
court and counsel on remand, we will briefly consider the
other issues raised on appeal.
I1
Did the District Court err in the manner in which it
submitted the issue of tortious interference with contract to
the jury?
Over t h e Bank's o b j e c t i o n , t h e c o u r t i n s t r u c t e d t h e j u r y
that:
The e l e m e n t s of i n t e r f e r e n c e w i t h c o n t r a c t a r e t h a t
(1) t h e r e be a v a l i d b u s i n e s s r e l a t i o n s h i p o r
r e a s o n a b l e e x p e c t a t i o n o f economic a d v a n t a g e , ( 2 )
knowledge o f t h e r e l a t i o n s h i p on t h e p a r t o f t h e
party interfering, (3) intentional interference
inducing o r causing a breach o r termination of t h e
r e l a t i o n s h i p o r e x p e c t a n c y , ( 4 ) r e s u l t a n t damage.
The Bank c o n t e n d s t h a t t h i s i n s t r u c t i o n o m i t s t h e e l e m e n t o f
unjustifiability or impropriety of the alleged tortious
actions.
I n Bolz v . Myers (Mont. 1 9 8 2 ) , 651 P.2d 606, 611, 39
St.?.ep. 1747, 1752, this Court set f o r t h t h e elements of
i n t e r f e r e n c e with contract:
I n o r d e r t o e s t a b l i s h a prima f a c i e c a s e o f i n t e r -
f e r e n c e w i t h c o n t r a c t u a l o r b u s i n e s s r e l a t i o n s , it
must b e shown t h a t t h e a c t s (1) were i n t e n t i o n a l
and w i l l f u l , ( 2 ) were c a l c u l a t e d t o c a u s e damage t o
t h e p l a i n t i f f i n h i s o r h e r b u s i n e s s , ( 3 ) were done
w i t h t h e u n l a w f u l purpose o f c a u s i n g damage o r
l o s s , w i t h o u t r i g h t o r j u s t i f i a b l e c a u s e on t h e
p a r t o f t h e a c t o r , and ( 4 ) t h a t a c t u a l damage and
loss resulted. Bermil Corp. v . Sawyer (Fla.App.
3rd C i r . 1 9 7 7 ) , 353 So.2d 579.
The i n s t r u c t i o n g i v e n t o t h e j u r y o m i t s t h e r e q u i r e m e n t t h a t
t h e a c t i s done " w i t h o u t r i g h t o r j u s t i f i a b l e c a u s e on t h e
p a r t of the actor." The i n s t r u c t i o n g i v e n i g n o r e s t h e Bank's
p o s i t i o n t h a t i t s r e f u s a l o f t h e $47,000 l o a n , which l e d t o
t h e t e r m i n a t i o n o f t h e I H f r a n c h i s e , was n o t t o r t i o u s b e c a u s e
t h e r e f u s a l was j u s t i f i e d and w i t h i n t h e Bank's r i g h t s . We
c o n c l u d e t h a t an i n s t r u c t i o n on i n t e r f e r e n c e w i t h c o n t r a c t
must p r o v i d e t h a t t h e a c t i s " w i t h o u t r i g h t o r j u s t i f i a b l e
c a u s e on t h e p a r t o f t h e a c t o r . "
111 a.
Did the District Court err in entering judgment upon the
special verdict by entering judgment on the jury's findings
of damages both for breach of contract and for tort?
In addition to the special interrogatory mentioned in
Issue I, the jury considered special interrogatories on
several tort and statutory claims. The jury found that the
Rank did not breach a duty of good faith and fair dealing to
the defendants when it refused to advance $47,000. It found
that the Bank did intentionally and wrongfully interfere with
the franchise contract between Weaver-Maxwell and IH; that
the Bank committed fraud, deceit, or constructive fraud
causing Weaver-Maxwell loss of the I H franchise; that the
Bank made negligent misrepresentations causing the loss of
the franchise; and that the Bank liquidated Weaver assets in
bad faith. The jury set the amount of damages to
Weaver-Maxwell for the tort causes of action at $800,000.
Under the contract theory, the jury found that damages to
Weaver-Maxwell were $300,000. The Bank's position is that
$800,000 should be awarded as the larger of the alternative
damage findings. However, the District Court found that the
contract and tort damages were cumulative.
We conclude that the jury's verdict on the tort claims
is unclear because the special interrogatories do not state
which acts of the Bank were considered under each theory.
The instructions should be revised on remand to show which
acts of the Bank should be considered under each theory.
Then it can be determined which tort damages are cumulative
to contract damages and which are alternative.
I11 b.
Did the District Court err in entering judgment upon the
special verdict because the special verdict's award of puni-
tive damages conflicted with the jury's finding that the Bank
had acted in good faith?
The jury found that the Bank did not breach its duty to
act in good faith and deal fairly when it refused to advance
$47,000 to the Weavers, but it did find that the Bank commit-
ted other torts - interference with contract, fraud, negli-
gent misrepresentation, and bad faith in liquidating the
Weavers' collateral. Punitive damages could have been award-
ed un.der any of the tort theories presented, if the Bank was
found guilty of oppression, fraud, or malice, actua.1 or
presumed. Section 27-1-221 (1), MCA. The jury instructions
should be revised on retrial so that the jury can state under
which tort theory or theories it awards punitive damages.
IV a.
Did the District Court err in its resolution of the
issues reserved for its decision, by denying the Bank's claim
for a deficiency judgment?
The Bank's suit was for sums remaining due on unpaid
notes after sale of the collateral, together with costs of
preparing and liquidating the collateral. The District Court
concluded that the Bank's "liquidation of the assets and
collateral . . . was not commercially reasonable and that the
Bank is not entitled to any deficiency judgment." It con-
cluded that the Bank was not entitled to declare a default in
the indebtedness of Weaver-Maxwell because the Bank had
breached its loan agreement and destroyed Weaver-Maxwell's
franchise. It also concluded that because of its tortious
acts toward the defendants, the Bank had no right to recover
the principal amounts of its loans outstanding to
Weaver-Maxwell. The court concluded that the rights of the
Bank to any claim for a deficiency were extinguished.
The Bank argues that neither the amount remaining owing
on the loans nor the fact that it had not been paid was
disputed. It asserts that it was entitled as a matter of law
to a judgment for the $377,702.73 remaining due.
We conclude there is nothing in the record to justify
denial of a deficiency judgment to the Bank. The court's
conclusion that the liquidation of collateral was not commer-
cially reasonable contradicts the jury's finding in special
interrogatory #4b that the liquidation of the assets was
commercially reasonable. Whether the Bank breached the
underlying loan agreements was never an issue before the
court. No cases or statutes have been cited which lead
reasonably to the conclusion that the Bank's tortious conduct
prohibited it from collecting on the underlying loans. In
the absence of facts or legal theory beyond those in the
present record, it would appear that the Bank is entitled to
a deficiency judgment. 3
--IV*b. , , .
.
Did the District Court err in its resolution d,f the
issues reserved for its decision by ordering the Bank to
surrender to defendants the proceeds of liquidation of
collateral?
The District Court concluded that these proceeds should
be surrendered on equitable grounds. No issue was raised by
the defendants and no evidence was presented on a theory that
the Bank should be required to surrender the proceeds of
liquidation of collateral. We conclude that the jury's
verdict was intended to fully compensate the defendants for
tortious actions of the Bank. The record demonstrates no
basis to require that the Bank surrender the proceeds.
Did the District Court err in its resolutions of the
issues reserved for its decision by awarding prejudgment
interest at a rate of 18%?
The District Court awarded prejudgment interest on the
$300,000 dama.ges for breach of contract at a rate of 18%, the
rate of interest on Weaver-Maxwell's loans. The Bank argues
that no prejudgment interest should have been allowed because
the amount of contract damages was not subject to calculation
prior to judgment.
Section 27-1-211, MCA, provides:
Right to interest. Every person who is entitled to
recover damages certain or capable of being made
certain by calculation and the right to recover
which is vested in him upon a particular day is
entitled also to recover interest thereon from that
day except during such time as the debtor is pre-
vented by law or by the act of the creditor from
paying the debt.
The defendants argue that the amount of contract damages is
reasonably certain of calculation. They assert that the
amount the jury awarded represents the amount of working
capital of Weaver-Maxwell. In their counterclaim, the defen-
dants claimed contract damages of $2,000,000. At trial, they
asked for $3,000,000. The jury awarded $300,000 in contract
damages. We conclude these were not the type of damages
which are "certain or capable of being made certain by calcu-
lation," and that therefore prejudgment interest is not
available. - Swenson
See v. Buffalo Bldg. Co. (Mont. 1981) ,
635 P.2d 978, 985, 38 St.Rep. 1588, 1597.
IV d.
Did the District Court err in its resolutions of the
issues reserved for its decision by basing an award of attor-
ney fees to defendants on their recovery on both their con-
tra.ct and tort claims?
The parties' loan contracts provided for reasonable
attorney fees in actions for their enforcement. Section
28-3-704, MCA, makes the right to attorney fees reciprocal.
The District Court awarded defendants attorney fees of
$384,000, or 30% of the total amount awarded by the jury.
Attorney fees are awardable only where statute or con-
tract provides for their recovery. Sliters v. Lee (1982),
197 Mont. 182, 641 P.2d 475. In a lawsuit involving multiple
claims or multiple theories, an award of attorney fees must
be based on the time spent by the prevailing party's attorney
on the claim or theory under which attorney fees are allow-
able. Kadillak ~ 7 . Montana Dept. of State Lands (1982), 198
Mont. 70, 74, 643 P.2d 1178, 1181. We conclude that in this
case, attorney fees are awardable only on the contract claim.
Reversed and remanded.
We Concur:
Chief Justice
Justices
Mr. Justice Frank B. Morrison dissents as follows:
It seems to me the majority opinion incorrectly decides
all of the jury issues in this case.
The jury in this case was submitted special
interrogatories with respect to various damage issues
presented by way of counter-claim on the part of defendants.
Plaintiff's foreclosure issues were reserved by the parties
for decision through bench determination.
Assuming arguendo that the District Court erred in
instructing the jury on the brea.ch of contract action, then
that special interrogatory to the jury should he set aside.
However, such a finding does not infiltrate the tort case.
Compensatory damages and punitive damages awarded by the jury
should be affirmed and entry of judgment directed on those
amounts totalling $980,000.
In any event, the majority incorrectly decides the
breach of contract issue and. that too should be affirmed.
The crux of majority's position relies upon an assumption
that bank officials could create a breach of contract issue
by testifying the loan was for specific purposes. These
purposes were from parol evidence in the form of scratch pad
notations and verbal testimony. This evidence should have
been excluded from the jury as it violated the parol evidence
rule.
Section 28-2-904, MCA, provides as follows:
Effective written contract on oral agreements. The
execution of a contract in writing, whether the law
requires it to be written or not, supersedes all
the oral negotiations or stipulations concerning
its matter which preceded or accompanied the
execution of the instrument.
The note and mortgage here at issue appear to be
facially clear. The only exceptions, under these
circumstances, to the parol evidence rule are stated in
S 28-2-905(1), MCA, which provides:
When extrisic evidence concerning a written
agreement may be considered.
(1) Whenever the terms of an agreement have been
reduced to writing by the parties, it is to be
considered as containing all those terms.
Therefore, there can be between the parties and
their representatives or successors in interest no
evidence of the terms of the agreement other than
the contents of the writing except in the following
cases:
(a) when a mistake or imperfection of the
writing is put in issue by the pleadings;
(b) when the validity of the agreement is the
fact in dispute.
Neither of the two conditions set forth in
S 28-2-905 (I), MCA, is present in this case. Even if there
were an ambiguity in the instruments, the Bank, having
drafted the same, could not raise the ambiguity to allow for
the introduction of parol evidence. Section 28-3-206, MCA,
provides :
Uncertainty to be resolved against party causing
it. In cases of uncertainty not removed by parts 1
through 5 of this chapter, language of a contract
should be interpreted most strongly against the
party who caused the uncertainly to exist. The
promissor is presumed to be such party, except that
in the case of a contract between a public officer
or body, as such, and a private party, it is
presumed that all uncertainty was caused by the
private party.
Furthermore, the intention of the parties with respect
to the note and mortgage must be ascertained only from the
instruments themselves unless such intention is impossible to
ascertain by reference to the agreements. Section 28-3-303,
MCA. The majority opinion reverses court's Instruction No. 1
by simply stating that there was a conflict in the evidence.
There was in fact no conflict. Although plaintiff did not
object to introduction of the parol evidence the trial court
was perfectly justified, after hearing all evidence, to rule
that such evidence could create no fact issue on the contract
obligation to pay the $84,291.69.
The majority seems to feel the note and security
agreement are not a complete contract and the parole evidence
rule has no application. There is abundant authority that
the parol evidence rule applies to negotiable instruments.
In Perez-Lizano v. Ayers (Mont. 1985), 695 P.2d 467, 4 2
St.Rep. 208, a similar issue was before the court. Ayers
contended on appeal that his note to Perez-Lizano was
conditioned by oral agreement. This Court held such
representations violated the parol evidence rule. Lest there
be any doubt that the rule applies to notes, this Court said:
Section 28-2-905, MCA, provides that when the terms
of an agreement have been reduced to writing by the
parties, it is to be considered as containing all
the terms, and there can be no evidence of the
terms of the agreement other than the contents of
the writing except when a mistake or an
imperfection of the writing, is at issue, or when
the validity of the agreement is the fact in
dispute.
Summary judgment in this case was proper. Ayers'
assertion that there is a material question of fact
about the fraudulent purpose of the contract is
immaterial because even if his assertions are true,
the extrinsic evidence would be inadmissible under
the parol evidence rule.
Numerous cases hold that a negotiable instrument which is
clear on its face cannot be altered by parol agreements or
representations. See Evenson v. Hlebechuk (N.D. 1981), 305
N.W.2d 13; Daniel1 Motor Co. Inc. v. Northwest Bank (Tex.App.
Instruction No. 1, given by the trial court, was proper
because the instruments at issue were clear on their face.
Upon demand by defendants, the Bank had an affirmative duty
to pay that which they were obligated to pay. When the Bank
refused, it breached its contract to defendants.
The balance of the majority's position with respect to
the jury verdict appears to be a cumulation of afterthoughts
which would not have required reversal of the damage portion
of the case. However, the majority is wrong on all counts.
The instruction on intentional interference is a correct
one. The record supports separate damages for breach of
contract and for tort. There is no indication that these
damages duplicate or overlap. There is no legal requirement
for the jury to be instructed that punitive damages relate to
the contract or tort portion of the case. They were properly
instructed that punitive damages are awarded for oppression,
fraud or malice. Having found compensatory damages in tort,
the jury was entitled to award punitive damages. The
majority simply fails to adequately address or understand the
issues in this case.
Next, the majority addresses whether the court erred in
entering a judgment for defendants denying the Bank a
deficiency judgment. The majority finds fault with the trial
court's determination that liquidation was not commercially
reasonable by boldly stating there was nothing in the record
to justify such a finding and that, in any event, it
contradicts the special finding of the jury.
Obviously the jury was entitled to choose from
alternative theories and chose fraud instead of other
theories given to them. This is perfectly permissible and is
so well established a citation of authority is unnecessary.
Foreclosure issues were, by stipulation, reserved for
the court. The court specifically found that the method of
liquidation was commercially unreasonable. This fact was
properly decided by the court in its portion of the case.
The trial court found that Weaver-Maxwell, was not in
default on the loans at issue on A.pril 7, 1980. Only after
the Bank's tortious conduct caused Weaver-Maxwell to lose its
franchises did the Bank seize upon these same losses to deem
itself insecure. Consequently, in the foreclosure action,
the court found the Bank's reason for accelerating the loans
to be commercially unreasonable. Abundant evidence in the
record supported this finding.
Even if there had been a default on the part of
Weaver-Maxwell, the trial court was justified in finding that
liquidation was not commercially reasonable. As a part of
its burden, the secured party must establish that it realized
the full value of its collateral by means of a commercially
reasonable disposition. Hubbard v. Farmers Bank Union Point
(Ga.App. 1980), 272 S.E.2d 510, aff'd 276 S.E.2d 622 (1980).
To do this, the secured party must prove the value of the
collateral at the time of repossession as well as a
reasonable method of sale. Wood v. First National Bank of
Commerce (Ga.App. 1983), 305 S.E.2d 852. When a secured
party fails to prove the value of the collateral liquidated,
the law presumes the value of the collateral equaled the
value of the underlying debt plus all expenses. Savoy v.
Beneficial Consumer Discount Co., (Pa. 1983) , 468 A. 2d 465;
Lincoln First Bank v. Salvaterra (1980), 431 N.Y.S.2d 302,
106 Misc.2d 51, aff'd 437 N.Y.S.2d 611, 108 Misc.2d 453
(1980); First National Bank of Denver v. Cillessen (Col.App.
The issue of "commercially reasonable" was for the trial
court. In the absence of evidence proving that liquidation
was commercially reasonable the Bank should suffer by not
being permitted a deficiency judgment.
At the the time it took possession of Weaver-Maxwell's
assets, the Bank took no inventory of what it received. Nor
did the Bank make any appraisals of the most valuable
equipment or inventory. The Bank did not even keep a
meaningful list of what it sold.
Based upon the evidence before it the trial court found:
The Bank's failure to maintain an inventory of what
was sold or to make any appraisals of the more
valuable pieces of collateral precludes this court
from determining ...
the amount of any value lost
as a result of the Bank's negligence.
Finding of Fact, No. 15.
At the time of trial the Bank had collected $729,000 in
liquidation proceeds against a total debt of $726,000.
Actually the Rank owes defendants $3,000. All of the
essential facts and applicable law are omitted in the
majority's discussion.
In my opinion the trial court did err in cancelling the
indebtedness and ordering return of the liquidation proceeds
to defendants. This action by the court goes beyond the
equitable remedies available to the judge here and may well
duplicate the damages awarded by the jury. I also disagree
with the trial court's determination allowing interest
because the amount was not liquidated. Attorneys' fees are
allowable on the contract action but not the tort action and
in this respect I agree with the majority opinion.
The banking industry in Montana has complained to
everyone within ear shot about obligations imposed upon the
banks by this Court. At least in theory we have created
obligations designed to assure bank customers fair treatment
when they deal with the banking industry in this state.
The facts of this case illustrate the kind of banking
practices which Court-imposed obligations were designed to
correct. Weavers' wished to borrow $84,291.69. The Bank
wanted more security on the Weaver-Maxwell corporate debt.
The Bank agreed to lend Weavers the money but demanded that
Art Weaver personally collateralize the loan with a
substantial portion of his family's personal assets. The
Bank did not inform the Weavers that the Bank had arranged
for the security on this personal note to cross-collateralize
the debt of Weaver-Maxwell, Inc. After obtaining the
additional security on the corporate debt, the Bank
breached its contract to Weavers and failed to advance the
$84,291. Instead the Bank foreclosed and liquidated the
security.
There are many fine bankers and banking institutions in
the State of Montana. I can personally attest to that from
having done business with them. However, the kind of
practice which was engaged by the Norwest Bank of Great Falls
in this case should not be countenanced. It is exactly the
kind of business practice which the new legal duties seek to
stop.
This case represents a blatant attempt by the majority
of this Court to bail the Bank out where the Bank has caused
serious and irreparable damage to a Montana business and its
owners. This kind of banking practice creates an unfavorable
business climate in Montana and should not be shielded by the
majority's result orientated judicial fiats.
There is no error in the jury trial and judgment should
be entered on the jury verdict. The judgment entered by the
trial court on the equity issues should be amended to reflect
the views herein expressed.
Mr. Justice John C. Sheehy and Mr. Justice William E. Hunt,
Sr. :
We join in the dissent of Mr. Justice Morrison.