No. 85-342
I N T H E SUPREME COURT O F T H E S T A T E O F MONTANA
1987
CRYSTAL S P R I N G S TROUT COMPANY,
a M o n t a n a c o r p o r a t i o n ; THOPAS
NYQUIST and V I R G I N I A NYQUIST,
husband and w i f e ; KENNETH N Y Q U I S T
and KATHLEEN N Y Q U I S T , husband and
w i f e ; RONALD P R E S T O N ; ROBERT MOORE
and PEGGY MOORE, husband a.nd w i f e ;
and E A R L BRADFORD and A L I C E BRADFORD,
husband and w i f e ,
P l a i n t i f f s and R e s p o n d e n t s ,
F I R S T S T A T E BANK O F F F O I D , a b a n k i n g
c o r p o r a t i o n , and J E R R Y R . WALLANDER,
D e f e n d a n t s and A p p e l l a n t s .
A P P E A L FROM: D i s t r i c t C o u r t of t h e F i r s t J u d i c i a l D i s t r i c t ,
I n a n d f o r t h e C o u n t y of B r o a d . w a t e r ,
T h e H o n o r a b l e G o r d o n R e n n e t t , Judge p r e s i d i n g .
COUNSEL O F RECORD:
For A p p e l l a n t :
G o e t z , Madden & Dunn; J a m e s H. G o e t z argued, B o z e m a n ,
Montana
For R e s p o n d e n t :
Gough, Shanahan, Johnson & Wa-terman; Ronald Waterman
argued, H e l e n a , M o n t a n a
Garrity, K e e g a n & Brown; Donald Garrity, Helena.,
Montana
Submitted: October 2 1 , 1986
Decided: January 15, 1987
I
i2kz 0
*
-
Clerk
Mr. Justice John C. Sheehy delivered the Opinion of the
Court.
The First State B a ~ k of Froid (Bank) appeals the
judgment of the District Court, First Judicial District,
County of Broadwater, awa.rding compensatory and punitive
damages to plaintiffs Crystal Springs Trout Company (CSTC)
and its shareholders for breach of an oral contract to loan
money and for negligent misrepresentation. Plaintiffs have
cross-appealed on two issues concerning the terms of the
final judgment. We affirm in part and. reverse in part.
The Bank raises eight issues:
1. Whether the District Court erred. when it found Froid
Bank liable for the tortious acts of its agent, Jerry B.
Wallander, but concluded that Wallander had. no personal
r
liability?
2. Whether the District Court's damage award was
erroneous because the District Court failed to determine that
plaintiffs' damages were proximately caused by any of Froid
Bank's acts?
3. Whether the District Court applied an incorrect
measure of damages when it awarded the individual
shareholders their entire initial investment plus interest
for Froid Bank's breach of commitment to provide financing to
CSTC?
4. Whether the District Court erred when it awarded
damages to the individual shareholders for losses suffered by
the corporation?
5. Whether the District Court. erred in refusing to
permit comparison of Jerry Wallander's misconduct with that
of the CSTC principals?
6. Whether Jerry F7alland.er's conduct was sufficiently
culpable to support punitive damages?
7. Whether the District Court erred in awarding
defendant Froid Bank all of plaintiffs' assets and
concomitant liabilities as an offset to damages awarded
against both CSTC and the individual plaintiffs where CSTC's
liabilities exceeded the value of its assets?
8. Whether the District Court erred in awarding the
individual shareholders interest on their loss of investment
at the rate of ten percent for periods prior to July 1, 1979?
The plaintiffs raise two issues on cross-appeal:
1. Whether Jerry B. Wallander is jointly liable for the
judgment against the Bank?
2. Whether the damage award received by CSTC and its
shareholders was inadequate?
FACTUAL BACKGROUND
Plaintiff CSTC is a Montana corporation, incorporated in
1977 for the purpose of raising trout for commercial sale.
It was initially capitalized through the sale of common stock
to Ron Preston, Tom Nyquist, and other members of the Nyquist
family .
The other plaintiffs in this case are the shareholders
of CSTC: 1) Tom and Virginia Nyquist; 2) Ken and Kathleen
Nyquist, Tom's father and mother; 3) Robert and Peggy
Moore, Tom's sister and brother-in-law; 4) Earl and Alice
Bradford, Tom's wife's parents; 5) Ron Preston, Tom's
business school friend and associate.
Defendants are the First State Bank of Froid and Jerry
Wallander, former Bank president. Wallander succeeded his
father as Rank president in 1969, and held that position
until 1982 when he was asked to resign by the family. The
Froid Bank is essentially a family-owned Bank, with the
Wallanders owning over 90% of the stock in the Bank
corporation. Jerry Wallander and Ken Nyquist grew up
together in Froid, and Wallander was also Ken's lawyer and
business advisor.
CSTC was incorporated in May, 1977, and was the brain
child of Tom Nyquist and Ron Preston, two 1973 University of
Montana business school graduates. Its operations were
located at Big Springs, a series of natural springs
downstream from the dam at Toston, Montana. In the summer of
1977, Tom Nyquist began acquiring water and land leases for
the trout farm. By the fall of 1977, construction was
underway. Plaintiffs built a hatchery building and several
dirt raceways. They continued to expand through the winter
months, and by spring of 1978 had approximately 825,000 young
fish in the raceways and 200,000 fingerlings in the hatchery.
On May 20, 1978, an earthen ditch which carried water to
the project area breached. Approximately 700,000 fish in the
raceways were destroyed. Prior to this washout, plaintiffs
had planned to line the ditch with gunnite to strengthen it.
Rs there had been no previous record of a washout on this
ditch, they had planned to line the ditch after the upcoming
1978 season, financing the project with money from sales made
during 1978.
CSTC was initially capitalized at $167,283. In
February, 1978, Ken Nyquist bought $100,002 worth of stock
bringing total shareholders' equity to $267,285. In
addition, Tom Nyquist sought a Small Business Administration
(SBA) loan from the Montana Bank of Missoula in the fall of
1977. A loan guaranty of $260,000 was issued in March, 1978.
The loan package was then transferred to the Montana Rank of
Helena, but was never drawn upon due to the circumstances
surrounding the washout. The loan guaranty was then allowed
to lapse.
After the washout, the shareholders regrouped to
determine a course of action. They ultimately decided to
sell the project and simultaneously refinance it on a larger
scale. Refinancing was sought through the Farmers Home
Administration (FmHA) which had higher lending limits than
the SBA. The attempted sale of CSTC was abandoned after an
FmHA official reprimanded the principals for placing CSTC on
the market and representing that a $950,000 loan commitment
had been made by FmHA. (FmHA loans are contingent on the
applicant's ongoing commitment to the proposed business.)
CSTC sought a $900,000 loan from FmHA for long term
financing. Interim financing for construction and operating
capital had to be raised by the borrower. However, in order
to obtain interim financing, the borrower must obtain a
"conditional Commitment for Guarantee" from the FmHA, which
is issued only if certain FmHA requirements are met. Thus,
until the permanent loan guaranty is issued, the borrower and
his banker are liable for the entire investment. This means
the borrower's bank must. he willing and able to provide
interim money, risking that all will go well until the
conditional and finally the permanent loan guaranties issue.
Both plaintiffs and defendants were aware of these
requirements. By August, 1978, Froid Bank was identified as
the prospective lender for CSTC. Wallander, in his capacity
as Ken Nyquist's lawyer, had first been contacted by Ken in
February, 1978, when Ken asked his advice on buying stock in
CSTC. In May, 1978, Ron Preston wrote to Wallander urging
him to become involved with CSTC, saying the Bank's
i-nvolvement would be mutually beneficial to them both. In
August, 1978, Wallander became involved by reviewing the FmHA
application papers and indicating the Bank would act as the
interim financier.
The FmHA application was partially completed by the CSTC
principals and delivered to Wallander for completion and
signing on October 19, 1978. The application was kept by him
until after January 5, 1979, despite Wallander's claim to
CSTC that he had filed the application with the FmHA office
in Bozeman. On January 5, Wallander and the CSTC principals
met to discuss interim financing and the 1979 construction
season. At the meeting, Wallander stated that there would be
"no problem" in getting financing from another overlining
bank. The first cash advance was issued, secured by a
promissory note signed by CSTC, and co-signed by Ken, Tom and
Ron.
From January 5 through the summer of 1979, Wallander
continued to assure CSTC principals that there was "no
problem" with the interim financing. The Bank's customer
lending limit was $160,000. A total of $260,000 was advanced
by the Bank to CSTC between January 5 and June 23, 1979.
Plaintiffs repeatedly questioned Wallander on the financing
arrangements and he repeatedly answered that financing was
"no problem. " On June 2, when the $160,000 limit was
reached, Wallander finally contacted First Bank Minneapolis,
the bank he had represented as the overlining bank. First
Kinneapolis contacted Ron Preston in mid-June for "pre-loan"
information, which confused Ron since he thought the
participation of First Minneapolis had already been arranged.
On June 25, E.on received a letter from First Minneapolis
rejecting the offer to participate as an overlining bank.
In response to this letter, Wallander assured the CSTC
principals he could line up several small banks to
participate in the financing. This never came to pass and on
August 3, 1979, Wallander indicated to Ron Preston that CSTC
would have to cease operations.
Throughout the next few months, Ron Preston and Tom
Nyquist tried to find other financiers for the project.
Wallander never followed up on the leads which they gave him.
CSTC's creditors began demanding payment and threatening
repossession of equipment. Wallander proposed that Ken
Nyquist borrow money on Ken's personal account to pay off the
debts on a Peterbilt truck and a mobile home. Wallander
would then transfer the titles of these items from CSTC to
Ken, and the items would be pledged as security for Ken's
loan. Ken signed a $8,000 note for the truck February 21,
1980, and a $9,640.11 note May 1, 1980 for the mobile home.
Wallander never transferred title, and the truck was seized
and so1.d by a CSTC creditor.
Wallander, Ken, Tom and Ron met one final time in the
winter of 1980 to review the potential for refinancing. They
agreed the situation was hopeless. Wallander assured them
the Bank would take no action on notes owed either by Ken or
CSTC. Communications between the parties ceased at this
point. CSTC filed its original complaint. against the Bank
and Kallander in April, 1981.
PERSONAL LIABILITY OF AN AGENT
The first issue raised by both the Bank and CSTC is
whether Jerry Wallander should be held liable on the judgment
assessed against the Bank. The District Court held, in its
conclusion of law no. I:
The conduct of defendant Jerry R . Wallander, acting
at all times as agent of the First State Bank of
Froid and with the acquiescence and tacit approval
of the directors of the bank, constituted willful
and wanton misconduct consisting of conscious
breach of trust and fiduciary duty, intentional
deception, flagrant breach of the ethical cannons
[sicl of both the legal and banking profession, a
studied and extended course of fraudulent
misrepresentation and knowing betrayal of a
lifetime friendship, all with reckless disregard
for the rights and interest of the plaintiffs
herein, unjustified by any circumstance and
"malicious" and "oppressive" within the meaning of
those terms as applied in the law of torts.
However, in its conclusion of law no. 11, the court held,
"Plaintiffs are not entitled to recover damages from
defendant Jerry B. Wallander."
By statute in Montana., an agent is jointly 'd
n severally
liable with his principal to third parties for wrongful acts
committed in the course of his agency. Section 28-10-702(3),
MCA; - - Greening v. Mutual Life Ins. of New York (D.
See also
Mont. 1983), 558 F.Supp. 988, 991. In order to hold a
corporate agent personally liable, the court must find that
the agent was personally negligent or that the agent's
actions were tortious in nature. The personal nature of the
agent's actions forms the narrow exception to the general
policy th.at officers and agents of a corporation must be
shielded from personal liability for acts taken on behalf of
the corporation. Little v. Grizzly Mfg. (Mont. 1981), 636
The strong language of the District Court's conclusion
of law no. 1 indicates Wallander's breach of fiduciary duty
and fraudulent misrepresentation was intentional and very
personal, given his longstanding relationship with the
Nyquist family. In light of this finding, we hold the
District Court's failure to hold Jerry Wallander jointly and
severally liable with the Bank was clearly erroneous, and we
reverse the court's decision on this point. - S
See
28-10-?02 (3), MCA.
PROXIMATE CAUSE, CORRECT MEASURE OF DAMAGES & INDIVIDUAL
SHAREHOLDER RECOVERY
The next issues raised by the Rank concern whether the
District Court's award to the CSTC shareholders of their
capital investments plus interest was erroneous. The Bank
argues that the loss of initial shareholder investment was
not proximately caused by the Bank's breach of commitment to
provide interim financing. The Bank claims the initial
shareholder equity capital was wiped out by the May, 1978,
washout and the expenditures of the 1978 summer construction
season. The Eank also claims its commitment to financing did
not occur until January 5, 1979, when the first cash advance
was issued from the Bank to CSTC and therefore the individual
shareholders are not entitled to recovery apart from the
corporation.
The District Court found actions of the Bank in failing
to provide interim financing proximately caused damage to
CSTC and its shareholders. The court also found that while
CSTC was in serious financial straits after the 1978 washout,
the company had been infused. with an additional $260,000, a
great deal of work and planning, and was a 'Vifferent"
business which collapsed for failure of credit one year
later. From the evidence here, CSTC's failure in the fall of
1979 was directly caused by the lack of the promised
financing.
There is sufficient evidence to support a finding that
the plaintiff shareholders would not have refinanced CSTC
unless they ha.d guaranteed financial backing. The CTSC
principals repeatedly sought assurances from Wallander as to
whether the interim financing arrangements were in place.
Wallander repeatedly assured them that financing was "no
problem," and CSTC continued to receive cash advances upon
request. The CSTC shareholders entered into the rebuilding
and refinancing of the corporation in reliance on the Rank's
misrepresentations that financing was available, and these
misrepresentations were the direct and proximate cause of the
failure of CSTC in August, 1979, and the loss of investment
of the shareholders. The District Court properly found that
a causal connection existed between the Bank ' s
misrepresentations and the shareholders' reliance on those
misrepresentations in embarking on a plan of refinancing.
It is clear that the District Court found, beyond
breaching a contract, that the Bank had committed a tort.
That the Bank's tort had proximately caused d-amages to the
plaintiffs is inescapable. The District Court wrestled
mightily with the problems of damages here.
The District Court assessed the "battle of the experts"
in connection with the trout industry.
The Bank had produced a trout industry expert ("a
captain of the trout industry," said the District Court) who
appraised the project at CSTC and gave his opinion that it
had no chance of success. The plaintiffs produced another
expert, though less formidable on the subject than the Rank's
expert, who prognosticated a modest chance of success. The
District Court also heard from experts in accounting, and it
weighed the business experience of the plaintiffs, the market
research that had been done, and the technical expertise that
was necessary. The District Court concluded that it could
not determine that the enterprise would undoubtedly succeed,
nor that it would certainly fail.
When the fact of damages is established in the evidence,
leeway is given to the trier of fact to determine the amount
of the damages.
Courts indicate that there is a distinction between
the quality of proof necessary to establish the
fact that the plaintiff has sustained some damage
and the measure of proof necessary to enable the
jury to fix the amount. Although formerly the
tendency was to restrict the recovery to such
matters as were susceptible of having attached to
them an exact pecuniary value, it is now generally
held that the uncertainty which prevents a recovery
is uncertainty as to the fact of the damage and not
as to its amount and that where it is reasonably
certain that damage has resulted, mere uncertainty
as to the amount will not preclude the right of
recovery or prevent a jury decision awarding
damages. This view has been sustained where, from
the nature of the case, the extent of the injury
and the amount of damage are not capable of exact
and accurate proof. Under such circumstances, all
that can be required is that the evidence-with such
certainty as the nature of the particular case may
permit-lay a foundation which wil.1 enable the trier
of facts to make a fair and reasonable estimate of
the amount of damage. The plaintiff will not be
denied a substantial recovery if he has produced
the best evidence available and it is sufficient to
afford a reasonable basis for estimating his loss.
22 Am.Jur.2d Damages,
The statutory limitations which circumscribe the tri.er
of fact in determining damages are that they must in all
cases be reasonable, S 27-1.-302, MCA, and in cases of breach
of contract, be no greater than the other party could. have
gained by full performance unless a greater recovery is
specified by statute. Section 27-1-303, MCA. The measure of
damages for the commission of a tort is the amount which will
compensate the other party for all the detriment proximately
caused thereby, whether it could have been anticipated or
not. Section 27-1-317, MCA.
The statute on the measure of damages for breach of
contract, 27-1-311, MCA, includes the limitation that such
damages "which are not clearly ascertainable in both their
nature and origin cannot be recovered." No such limitation
appears in the statute on the measure of damages for tort.
Section 27-I--317, MCA. Tort damages specifically are
allowable for proximately caused damages, "whether they could
be anticipated. or not. I
' This Court, nevertheless, has
recognized and adopted the proposition that in a contract
action once a plaintiff establishes a right to damages, the
defendant is liable for damages calculated in a reasonable
way. We said in Laas v. Montana Highway Comm'n (1971), 157
Mont. 130-131, 483 P.2d 699, 704:
5 Corbin on Contracts, 1029, provides as an
alternative measure of damages where the profits
presented are too uncertain:
"Where it is clear that the defendant's breach of
contract has prevented the plaintiff from making
profits the amount of which cannot be proved with
reasonable certainty, it should be remembered that
this situation has been brought about by the
wrongful conduct of the defendant. Fe should not
he allowed to escape by merely paying nominal
damages if there is any reasonable way in which the
amount that he should pay as damages can be
determined. There are a few alternative rules for
determining this amount. Their purpose is to make
compensation for the profits prevented and losses
caused, measuring the amount by a method that is
reasonably definite, and that is not likely to give
compensation in excess of the profits that would
have been made, and the losses that have been
suffered. Thus, where the breach by the defendant
has prevented the use and operation of property by
the plaintiff from which use profits would probably
have been made, the damages to be recovered may be
measured by the rental value of the property, or by
interest on the reasonable value of the property as
an investment."
There appears no reason why the liberal view as to
damages for contract breach expressed in Laas, should not
also apply to tort actions. We a.re not, as Laas suggests, in
tort actions required to turn to the reasonable rental value
of the property, nor to the interest it would have gained as
an investment, because the action of the Bank's agent here
d.estroyed those values.
As we indicated in the foregoing statement of facts,
before the plaintiffs got involved with the Bank in this
case, but after the ditch washout of May 20, 1978, the
shareholders nevertheless had a project of value which they
could sell. In fact they had placed the project on the
market a.t the same time as they were seeking refinancing
through the FmHA and were required to desist from attempting
to sell the project because of FmHA regulations.
Irrespective of the washout, it was the investment of the
sha.reholders in the corporation that have brought about
whatever value the project had after the wa-shout. Any
attempt by the District Court to fix a value on the project
after the washout would have of course been speculation. The
District Court therefore, recognizing that d-amages had
occurred, and that the plaintiffs were entitled to damages,
resorted to the known figures that the evidence presented,
that is the investment that had been made by the original
shareholders. In the situation that presented itself to the
District Court--the lack of any other certain way to fix the
plaintiffs' damages--the District Court in this case acted
properly and reasonably in determining that the damages
suffered by the plaintiffs was the amount of their
investments in the project at the time the Bank entered the
picture. Through its subsequent tortious acts the Bank
brought about the demise of the project as a financial
venture. We find that the District Court acted properly in
this rega.rd.
COMPARATIVE FAULT
The Bank argues that the District Court erred in failing
to compare Wallander's conduct with that of the CSTC
principals. It contends the depiction of the trout farm's
commercial success as represented to Wallander in the
feasibility study prepared by Tom Nyquist and Ron Preston was
an equally misleading attempt to deceive Wallander and the
Bank into financing the enterprise.
However, the District Court found FJallander's conduct
"malici-ous" and "oppressive," such that it precluded any
comparative negligence on the plaintiffs1 part. The court
noted plaintiffs' inexperience in the business of trout
farming, but did not find this inexperience rose to the level
of Wallander's fraudulent misrepresentations.
blontanals comparative negligence statute does not
contemplate a comparison between ordinary negligence and
willful or wanton misconduct. Derenberger v. Lutey (Mont.
1983), 674 P.2d 485, 487, 40 St.Rep. 902, 904. In this case,
there was no finding of negligence on the plaintiffs1 part a-t
all. The District Court noted in detail the CSTC principal's
1-ack of sophisticated technical and business expertise, but
also noted that despite the b1ea.k testimony of the Bank's
trout farm expert, the potential of establishing a successful
trout farm was not beyond their reach. The principals of
CSTC did hire an accountant, an appraiser and. an engineer to
assist them in making their business decisions. While taking
on the responsibility of a new high-risk business such as
trout farming by inexperienced entrepreneurs may have been
imprudent, such an action did not rise to the level of
negligence. On the other hand, the actions of Jerry
Wallander added up to much more than ordinary negligence:
1. Misrepresenting to a borrower a bank's lending
ability as that ability may be enhanced by the
overlining of another bank.
2. Representing there would be "no problem" in
obtaining overline support from another bank without
having inquired of that bank.
3. Failing to advise a prospective overline bank of the
existence of a FmHA conditional commitment for permanent
financing when seeking construction or interim funds for
a borrower in excess of the lender's lending limit.
4. Lying to a borrower about negotiations or
commitments for interim financing, or about securing
those commitments.
5. Withdrawing an assured line of credit without cause
on the part of the borrower.
We find no legal error in the District Court's precluding
consideration of comparative negligence on the part of the
pla.intiffs, where there is insufficient evidence in the
record to indicate any negligent action on the part of the
plaintiffs.
PUNITIVE DAMAGES
In this case, Wallander and the Bank not only owed CSTC
and its shareholders the duty to fulfill its obligation to
advance interim financing money, but also the d.uty to
truthfully apprise the investors of the status of the
financing. Investors have a right to rely on a lending
institution's representations as to the availability of
funds. F?here in addition the institution fraudulently or
maliciously represents that funds are available and will be
advanced, and begins a series of cash advancements to finance
a project, investors may recover punitive damages for their
good faith reliance on the fraudulent misrepresenta.tion.s.
The District Court found that Wallander, as the Bank's
agent, engaged in "a studied and extended course of
fraudulent misrepresentation . . . unjustified by any
circumstance and 'malicious' and 'oppressive' within the
meaning of those terms as applied in the law of torts."
Punitive damages are properly awarded where there is a
sufficient showing of fraud and misrepresentation. Castillo
v. Franks (Mont. 19841, 690 P.2d 425, 430, 41 St.Rep. 2071,
2077. We uphold the District Court's award of punitive
damages.
AWAR.D OF CSTC'S LIAEILITIES
After awarding damages to CSTC and its shareholders, the
District Court awarded to the Bank all of CSTC1s property
except for a mobile home, as an offset to the damages awarded
to the plaintiffs. The property included equipment,
buildings, ditches, and leases to water and state land. The
leases were subject to lease payments, reclamation costs and
property taxes. The Bank contends this award of assets not
listed as collateral in the Eank's security agreement
violates its secured creditor rights under the Uniform
Commercial Code. The Bank argues that under S S 30-9-501
through -511, MCA, it is entitled to a variety of options in
enforcing its security interest, and it may not be forced to
satisfy its claim by taking possession of the property.
In its final judgment of June 18, 1985, the District
Court cancelled a.11 of the promissory notes from CSTC to the
Bank. These six notes were ones which were given by CSTC and
co-signed by the CSTC principals in reliance on Wallander's
misrepresentations as to the availability of interim
financing. By cancelling the promissory notes, the court
erased the Bank's specific security interests.
Under S 30-1-103, MCA, the Uniform Commercial Code may
be suppl-emented by principles of law and equity, including
the law relative to fraud and misrepresentation. Rased on
Wallander's misrepresentations and the plaintiffs' reliance
thereon, we find the court did not abuse its discretion in
cancelling the promissory notes.
Having cancelled the notes, the court, sitting in
equity, had a great deal of leeway in fashioning a remedy.
Link v. State, Dept. of Fish and Game (1979), 180 Mont. 469,
483, 591 P.2d 214, 222. The District Court properly selected
a damage award which gave the Bank certain benefits and
options which would otherwise have been unavailable if the
award against the Bank merely had been for money damages,
without allowing for an offset. The remedy chosen by the
court allowed the Bank to mitigate its losses. We find no
error in the court's choice of remedy.
THE AWARD OF INTEREST
The Bank argues that the District Court awarded interest
on the CSTC shareholders' investments from the date of thejr
initial investments. This is a misstatement of the District
Court's final judgment. While the District Court first
awarded interest to shareholders from the date of their
initial investments, this award was modified in the final
judgment of June 18, 1985.
The District Court has awarded interest on each
shareholders' investment from January 28, 1985--the date the
findings of fact and conclusions of law were entered. This
is the date the court fixed the amount of damages, and
interest is recoverable when the amount of damages is made
certain by the trial court. Section 27-1-211, MCA; Castillo
v. Franks (Mont. 1984), 690 P.2d 425, 431, 41 St.Rep. 2071,
2078; Carriger v. Ballenger (Mont. 1981), 628 P.2d 1106,
1110, - St.Rep. -. Therefore, arguments by the Bank and
plaintiffs as to the propriety of prejudgment interest are
moot.
ADEQUACY OF THE AWARD TO CSTC
On cross-appeal, plaintiffs argue the District Court's
judgment should be increased to include three more elements
of damages. They are:
1. Damages done to CSTC, destroying its economic
life and solvency;
2. Salaries earned and owing to Ron Preston and
Ken Nyquist from August, 1979, to April, 1981;
3. General damages for the disruption of cred.it,
loss of job opportunities, general humiliation and
embarrassment, and the overall mental pain and
anguish suffered by Ken Nyquist, Tom Nyquist and
Ron Preston.
Plaintiffs argue the District Court failed to add.ress
the value of the corporation, despite Ken Nyquist's and Ron
Preston's testimony that CSTC had a value of $3,000,000 to
$6,000,000. They argue that an owner may properly express
his opinion as to the value of his property. They also
contend loss of salaries and the general damages listed above
were foreseeable results of the Bank's failure to provide
funding for CSTC, and as such, the District Court should have
awarded these damages to plaintiffs.
In order to recover consequential damages for breach of
contract, the nature and origin of the damages must be
est.ablished with reasonable certainty. Ehly v. Cady (Mont.
19841, 687 P.2d 687, 695, 41 St.Rep. 1611, 1619; Stensvad v.
Miners & Merchants Bank (1982), 196 Mont. 193, 206, 640 P.2d
1303, 1310. The District Court found that an estimation of
CSTC's future financial success or failure called for "an
impermissibly large measure of pure speculation." The court
heard testimony from expert witnesses on both sides, and was
presented with "a veritable blizzard of facts, figures and
exhibits" intended t o demonstrate the nonviability of the
trout farming enterprise. Neither side succeeded in
c o n v i n c i n g t h e c o u r t t h a t CSTC was e i t h e r doomed t o f a j - l u r e
o r bound f o r unqualified success. Under t h e s e f a c t s , the
court properly rejected the p l a i n t i f f s ' r e q u e s t f o r damages
to CSTC's economic life, where evidence of CSTC's future
s u c c e s s was t e n u o u s a t b e s t .
For similar reasons, the court's rejection of
p l a i n t i f f s ' c l a i m f o r l o s t s a l a r i e s f o r t h e p e r i o d of August,
1979, t o A p r i l , 1981, was a l s o p r o p e r . Since t h e p l a i n t i f f s
failed to establish the future p r o f i t a b i l i t y of CSTC, an
award o f f u t u r e s a l a r i e s would a l s o be o v e r l y s p e c u l a t i v e .
W e also find insufficient e v i d e n c e on which t o r e v e r s e t h e
D i s t r i c t Court's d e n i a l of g e n e r a l damages t o Ken N y q u i s t ,
Ron P r e s t o n and Tom Nyquist. P l a i n t i f f s have n o t e s t a b l i s h e d
to the satisfaction of the Court a clearly ascertainable
s t a n d a r d by which t o measure t h e s e a l l e g e d l o s s e s .
The judgment of the District Court is reversed and
remanded f o r t h e D i s t r i c t Court t o e n t e r t h e same judgment
a g a i n s t J e r r y B. W a l l a n d e r , and i s a f f i r m e d a s t o t h e award
o f damages.
W e Concur:
Chief J u s t i c e
h
Mr. Justice Frank B. Morrison, Jr. dissents as follows:
I respectfully dissent from the majority opinion on the
damage issue.
The trial court was faced with a difficult decision
respecting an award of dams-ges in this case. The proper
measure of damages required the District Court to evaluate
the value of this business after the "wash out" and compare
that value to a value for the business had the funds been
advanced. The difference in values should be the measure of
damage. The investment of the individual plainti-ffs is not
the correct measure of damages.
The trial court faced the difficult task of determining
damages in the absence of proof relating to the proper
measure. Since the plaintiffs were represented by able and
experienced trial counsel I can only assume that it was
virtually impossible to establish the appropriate values with
expert testimony. Nevertheless, the burden of proof on
damages resides with the plaintiff and if there is a failure
the plaintiff's case must fall.
I would reverse and remand this case for a new trial on
damages requiring the plaintiff to go forward with proof
relating to the change in value caused by the bank's failure
to advance funds.
Mr. Justice Fred J. Weber and Mr. Justice L. C. Gulbrandson:
We concur in the foregoing dissent of Mr. Justice Morrison.