NO. 87-515
IN THE SUPREME COURT OF THE STATE OF MONTANA
1988
ROLAND AHMANN and NANCY AHMANN,
Plaintiff and Appellant,
-vs-
AMERICAN FEDERAL SAVINGS AND LOAN
ASSOCIATION,
Defendant and Respondent.
APPEAL FROM: District Court of the First Judicial District,
In and for the County of Lewis & Clark,
The Honorable Henry T,ohle, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Small, Hatch, Doubek & Pyfer; John C Doubek, Helena,
Montana
For Respondent:
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.- Gough, Shanahan, Johnson & Waterman; Michael S.
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- Lattier, Helena, Montana
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Submitted on Briefs: Sept. 15, 1988
Decided: December 16, 1988
Mr. Justice FJilliam E. Hunt, Sr., delivered the Opinion of
the Court.
The plaintiffs below, Roland and Nancy Ahmann, appeal a
jury verdict in favor of the defendant, American Federal
Savings and Loan Association, and an order of the District
Court of the First Judicial District, Lewis and Clark County,
denying their motions for mistrial, judgment notwithstanding
the verdict and new trial. American Federal cross appeals.
We affirm.
The Ahmanns raise the following issues on appeal:
1. Were there irregularities during the jury
deliberations that materially affected the substantial rights
of the pl-aintiffs such that they were denied a fair trial?
2. Did substantial evidence exist to support the jury
verdict?
3. Did the District Court err by instructing the jury
that American Federal's actions had to be "the" proximate
cause of the plaintiffs' injuries?
4. Did the District Court err by instructing the jury
that the plaintiffs' injuries must have been foreseeable from
American Federal's conduct?
5. Did the District Court err by submitting the
comparative negligence theory to the jury?
6. Did the District Court err by instructing the jury
that plaintiffs had not made any claim that American Federal
had breached its contract with them?
7. Did the District Court err by instructing the jury
that a party may waive the benefit of a contract when, in
another jury instruction, the trial court instructed that the
action was not based upon contract?
8. Did the District Court err by allowing testimony of
the plaintiffs' net worth?
American Federal, on cross appeal, raises the following
issues:
I. Did the District Court erroneously instruct the jurv
on the definition of bad faith?
2. Did the District Court err by refusing to instruct
the jury on comparative bad faith?
In 1985, Dave Bird, a Helena contractor, approached
Roland Ahmann about the possibility of constructing a house
for profit. Ahmann, a real estate broker and part owner of a
Helena real estate agency, agreed to employ Bird to build a
house on land he owned located along the south hill-s of
Helena. The Ahmanns planned to put both the new house and
the home they already owned on the market. Whichever house
did not sell would be kept as the family residence. Anv
profits from the sale of the south hills home would be split
with the contractor Bird.
Rird drew up specifications for the house and Ahmann
submitted them to American Federal Savings and Loan as part
of the application process for a home construction loan.
American Federal approved a $120,000 loan on September 5,
1985.
The construction loan was disbursed by the "direct pay"
method. Rills incurred in construction would be approved by
Ahmann . After approval, the bills would be submitted to
American Federal. American Federal would then draft checlcs
to cover the bills. The checks would he made out to either
Bird, Ahmann or the creditor. On occasion, Rird would bypass
Ahmann and take the bills directly to American Federal. In
those instances, American Federal would call Ahmann for his
approval.
Construction on the house commenced prior to the
approval of the loan by American Federal. On August 13,
1985, Ahmann wrote a draft on his American Federal checking
account to pay a $7,000 bill for concrete work completed
during this time. The check was made payable to Berrigan
Construction. Ahmann gave the check to Bird to deliver to
Berrigan. Instead, Bird forged Berrigan's endorsement and
cashed the check at American Federal. The forgery was not
discovered until late November or early December, 1985.
Unfortunately, the Berrigan forgery was not the only
instance of Bird's dishonesty. There were three other
occasions when construction loan disbursements did not reach
their intended creditors. These conversions took place about
the same time the Berrigan forgery was discovered.
As a result of Bird's forgeries and conversion of funds,
liens were placed on the new home, the Ahmanns were forced to
expend funds over and above the original cost estimate, and
the house was finally sold at a loss. In addition, Ahmann
was never repaid a $14,000 personal loan he made to Bird.
In April, 1986, Roland and Nancy Ahmann filed a
complaint against American Federal, alleging that the savings
and loan acted negligently and in bad faith in cashing the
Berrigan check. The Ahmanns claimed that, had American
Federal informed them of the Berrigan forgery, they would not
have proceeded with the loan application nor would they have
retained Bird as general contractor in the construction of
the south hills home. They also claimed that thev would not
have made the personal loan of $14,000 to Bird if they been
informed of the forgerv.
In addition, the Ahmanns alleged that American Federal
acted negligently and in bad faith in the handling of the
construction loan. They claimed that American Federal
breached its duty to them by failing to conduct inspections
of the building project, improperly distributing the loan
monies and failinq to ohtain lien waivers.
The Ahmanns also claimed that they were slandered by an
employee of American Federal. The District Court directed a
verdict in favor of American Federal on this issue.
A four-day trial was held from August 31 throuah
September 4, 1986. The 12-person jury found in favor of the
defendant, American Federal. The Ahmanns moved for a
mistrial, new trial and judgment notwithstanding the verdict.
The District Court denied the motions. The Ahmanns filed
this appeal. American Federal filed a cross-appeal.
The Ahmanns first contend that their motions for new
trial and mistrial. should have been granted in light of
alleged irregularities in the jury proceedings. To support
their motions in the District Court, the Ahmanns submitted an
affidavit of one of the jurors. In the affidavit, the juror
alleged that, during deliherations, the jury members were
confused about the issue of proximate cause. The juror also
testified that when she asked the bailiff whether the jurors
could talk to the judge about their questions, she was
informed that they could only communicate with the court in
writing. The juror further testified that the bailiff told
her that the judge probably would not consider the jury's
questions until the next day or after the trial was
completed.
To refute the alleged irregularities, American Federal
filed an affidavit of the bailiff. In her affidavit, the
bailiff denied that she told the juror that the judge would
not consider any questions until the next day or until the
end of the trial.
Montana law allows a new trial if an irregularity exists
in the proceedings of the court or jury that materially
affects the substantial rights of the aggrieved party.
Section 25-11-102 (1), MCA. The Ahmanns contend that the
alleged statements of the bailiff constitute an irregularity
in the proceedings which denied them a fair trial. They
argue that the bailiff's remarks misled the jury, preventing
clarification of the proximate cause issue.
It has long been the rule that juror affidavits that
delve into the thought processes of the jury are inadmissible
to support the granting of a new trial. Rule 606 (b),
M.R.Evid. ; State Bank of Townsend v. Maryann's, Inc. (1983),
204 Mont. 21, 29, 664 P.2d 295, 299. Thus, the affidavit
presented in this case was not properly submitted to show
jury confusion over the issue of proximate cause. Charlie v.
Foos (1972), 160 Mont. 403, 409, 503 P.2d 538, 541.
The question arises, however, whether the juror's
affidavit was admissible to show an irregularity in the jury
proceedings occasioned by the bailiff's alleged remark that
the judge would not immediately entertain questions. In
Rasmussen v. Sibert (1969), 153 Mont. 286, 293, 456 P.2d 835,
839, we held that juror affidavits were inadmissible to show
irregularities in the proceedings under subsection (1) of the
statute governing grounds for new trial, 5 25-11-102, MCA.
Rasmussen, however, may be distinguished from the
present case. In Rasmussen, affidavits were submitted to
support a motion for new trial based on alleged
irregularities in the court proceedings. The affidavits were
introduced to show that testimony regarding the defendant's
ownership of insurance was heard by the jury and affected the
outcome of the verdict. We stated that affidavits of
counsel, court personnel and potential witnesses on retrial
were permissible, hut that affidavits of iurors were not.
Rasmussen, 153 Mont. at 293, 456 P.2d at 839.
The instant case may he distinguished from Rasmussen in
two ways. First, in Rasmussen, the affidavits contained
references only to the thought processes of jurors. The
juror affidavit i n the present case, however, contains not
.
only statements regarding the inner workings of the minds of
the jurors, it also contains an allegation of an
inappropriate statement by the bailiff. The bailiff's
alleged remark may he considered an outside influence that
may have prevented the jurv from seeking clarification of
1-egal issues. Rule 606(b), M.R.Evid., allows evidence of
outside influence of the jury.
Second, in Rasmussen, the alleged irregularities
occurred in the courtroom in the presence of the judge, court
reporter and counsel. Juror affidavits were not needed to
show the fact of an irregularity in the proceedings. The
only purpose served by the introduction of the Rasmussen
affidavits was to show that the jury indeed heard the
testimony regarding defendant's insurance and that the jurors
considered that testimony during their deliberations.
In contrast, only the affiant juror and the bailiff were
privy to the alleged conversation in the instant case. Only
those two individuals have personal knowledge of what was
said. It would be irrational to hold, as American Federal
urges, that the bailiff's affidavit is admissible while the
juror's is not. To the contrary, we hold that juror
affidavits are admissible to show grounds upon which a new
trial may be granted when the juror has personal knowledge of
an alleged irregularity in the proceedings and the only other
individual who has personal knowledge of the facts
surrounding the irregularity is the individual who committed
the alleged infraction.
We emphasize that only the facts upon which the alleged
irregularities are based are admissible. Any allegations
regarding the inner workings of the jury deliberations are
inadmissible. We will not approve future attempts to combine
allegations of fact with allegations of juror thought
processes.
Although we find that portions of the juror affidavit
were admissible, we do not hold that the District Court erred
in its denial of the Ahmanns' motions for new trial or
mistrial. We will not disturb the District Court's failure
to grant a new trial or mistrial unless the evidence is clear
and convincing that the trial court erred. Easterday v.
Canty (Mont. 1-986), 7 1 2 P.2d 1305, 1307, 43 St.Rep. 60, 63;
Schmoyer 77. Bourdeau (1966), 148 Mont. 340, 343, 470 P.2d
316, 317-18.
The evidence is not clear and convincing that the
District Court erred in its decision to deny the Ahmanns'
motions. Even if the bailiff did tell the juror that the
judge would not consider questions until the next day or
after trial, a fact which the bailiff denies, the rights of
the plaintiffs were not substantially affected. The bailiff
did not prevent the jurors from asking questions of the
judge. She did not refuse to bring them back into court or
to deliver questions to the judge. Any influence the alleged
remark may have had on the jury did not affect the rights of
the Ahmanns. We affirm the District Court on this issue.
11.
Next, the Ahmanns contend that the evidence presented at
trial is insufficient to support the jury verdict in favor of
American Federal. We do not agree.
When examining a claim of insufficient evidence, this
Court will not reweigh the evidence. It is the province of
the jury to determine the weight and credi-bility of the proof
presented. Our job at the appellate level is simply to
determine, bv reviewing the facts in the light most favorable
to the party in the action below, whether the verdict is
supported by substantial credible evidence. Weinberg v.
Farmers State Bank of Worden (Mont. 1988), ?52 P.2d 719,
7'21-22, 730, 45 St.Rep. 391, 392, 404-05.
The Ahmanns' first cause of action charged that American
Federal acted negligently and in bad faith by cashing the
$7,000 check on which Dave Bird had forged the endorsement of
the payee, Berrigan Construction. The jury found that the
Rerrigan check had been paid in full by Rird and that neither
American Federal's actions in cashing the check nor its
checking account practices proximately caused any of the
additional damages claimed by the Ahmanns.
American Federal acknowledged that it improperly cashed
the Berrigan check. Montana law provides that a financial
institution that negligently handles a negotiable instrument
is liable for the face amount of the instrument. The
applicable statute reads as follows:
The measure of damages for failure to exercise
ordinary care in handling an item is the amount of
the item reduced by an amount which could not have
been realized by the use of ordinary care, and
where there is bad faith it includes other damages,
if any, suffered by the party as a proximate
consequence.
Section 30-4-103 (5), MCA.
American Federal would have been liable for the entire
$7,000 had it not been repaid by Dave Bird. Testimony
adduced at trial and exhibits introduced into evidence showed
that Bird did in fact repay the $7,000. Although American
Federal had negligently handled the draft, substantial
credible evidence exists by which the jury could determine
that the savings and loan was not liable for any of the
$7,000 because, due to Bird's repayment of the funds, the
Ahmanns did not suffer a loss.
In order to hold American Federal liable for any amount
beyond the face value of the check, the Ahmanns were required
to show that the savings and loan acted in bad faith and that
its actions proximately caused the damages claimed by the
Ahmanns. Section 30-4-103 ( 5 ) , MCA. The jury found that
American Federal's handling of the check did not proximately
cause the Ahmanns' damages. It did not reach the question of
bad faith. Therefore, we need only determine whether
substantial credible evidence exists to support the jury's
finding of lack of proximate cause.
The premise of the Ahmanns' claim appears to be that
American Federal's failure to discover and inform them of the
Berrigan forgery proximately caused economic, emotional and
physical damages. They arqued that, if they had known of the
forgery, they would not have continued to employ Bird as
their contractor, nor would they have made him a personal
loan of $14,000.
Substantial credible evidence exists by which the iurv
could reject these claims. The teller who cashed the check
testified that Bird presented her with the draft with Bill
Berrigan's endorsement. Bird explained that Berrigan had
asked him to cash the check in order to pay some of
Berrigan's creditors. The teller believed Bird's story and,
although she refused to give him cash, issued four cashier's
checks to the purported creditors. The cashier's checks
listed Rerrigan as remitter.
The teller did not suspect that the Berrigan endorsement
was a forgery, nor did anyone else at American Federal.
Therefore, an investigation of the endorsement by American
Federal did not take place. Three months later, the concrete
supplier who was to have been paid from the proceeds of the
Berrigan check contacted Roland Ahmann to demand payment.
When Ahmann asserted that he had already paid him, the
supplier took the cancelled check to Berrigan. Rerrigan
denied the endorsement was his.
Ahmann then checked with American Federal's customer
service department. He did not, however, indicate that he
believed that the check had been forged. He instead told
customer service that he wanted to trace the money. American
Federal researched the matter and informed Ahmann that the
check had been cashec? and four cashier's checks had been
issued. Ahmann said he would take care of the matter From
that point.
At no time did Ahmann inform American Federal's customer
service or loan departments that he suspected that the draft
had been forged. Furthermore, even after learning of the
forgery, Ahmann continued to do business with Bird and
continued to authorize Bird's requests. These facts
constitute substantial evidence upon which the jury could
have determined that American Federal was not responsible for
the damages incurred by the Ahmanns.
The record also indicates that American Federal's
failure to inform the Ahmanns of the forgery might not have
prevented the $14,000 personal loan. Bird's request for such
a loan should have alerted the Ahmanns that their
contractor's credit was not good. The Ahmanns made the loan
anyway. When the loan came due in November, 1985, Bird
attempted to repay it with a personal check on an account
with insufficient funds. Ahmann refused to take the check.
Bird assured him he would pay the money shortly. He never
did.
Although Bird did not repay the loan, Ahmann continued
to do business with him. He retained Bird's services as
general contractor. He continued to approve bills allegedly
incurred in the course of construction. Substantial evidence
exists to indicate that Ahmann himself, rather than American
Federal, proximately caused his own damages.
The Ahmanns' second cause of action charged that
American Federal acted negligently and in bad faith in
overseeing the construction loan. The Ahmanns claimed that
American Federal's acts and omissions proximately caused cost
overruns in the construction of the house, as well as liens
to be placed on the building, forcing them to sell the
uncompleted project at a loss. They further claimed that
American Federal's actions caused a disruption in Roland
Ahmann's business, resulting in a loss of income and profits.
In addition, the Ahmanns alleged that American Federal's
miscarriage of its duties in overseeing the loan caused the
Ahmanns considerable emotional and physical distress. The
jury, however, did not find in accordance with the Ahmanns'
claims. The 12-person panel found that American Federal's
supervision of the construction loan did not proximately
cause the alleged injuries.
Viewed in the light most favorable to American Federal,
substantial evidence exists to support the jury verdict.
While the record shows that American Federal's handling of
the loan did not proceed smoothly at all times, the Ahmanns
failed to show that American Federal's actions caused their
damages. Moreover, the record reveals that Ahmann himself
had a hand in the confusion surrounding the loan
disbursements by failing to inform the loan officer of the
Berrigan forgery and neglecting to reveal that Bird had
directly paid him $3,000 of the converted funds, money Ahmann
knew came from the construction loan.
Furthermore, substantial evidence supports American
Federal's theory that the real cause of the Ahmanns' damages
was the unrealistically low cost estimate for the building
project. Bird's estimate of the cost to complete the house
was $122,800, yet the appraisal completed in order to have a
construction loan approved indicated a construction cost of
$166,000. Ahmann took no other bids for the project. He
instead relied on Bird, believing that Bird could complete
the iob cheaply.
Unfortunately, the project ended up costing more than
the Ahmanns had anticipated. The Ahmanns, however, failed to
prove that American Federal caused these cost overruns or any
other damages. We hold that substantial evidence supported
the jury's verdict that American Federal's supervision of the
construction loan did not proximately cause the damages
suffered by the Ahmanns.
The Ahmanns raise several arguments regarding jury
instructions. They first maintain that the trial court erred
in submitting the following instruction to the jury:
Before you reach the issue of whether defendant's
conduct was negligent, you must determine and
decide first whether defendant's conduct was - the
proximate cause of any injuries which plaintiffs
may have suffered. If you find that defendant's
conduct was not the proximate cause of any injuries
suffered by p l a i m f f s , you may not find defendant
negligent. (Emphasis added.)
The Ahmanns argue that the presence of the article "the"
before the words "proximate cause" improperly required the
jurors to find that American Federal was the sole cause of
their injuries.
We need not consider the merits of the Ahmanns'
contention as their argument is raised for the first time on
appeal. During the settlement of instructions, the Ahmanns
did indeed object to the above instruction. Their objection,
however, was premised on the instruction's redundancy. There
was no objection made to the instruction's wording.
Rule 51, M.R.Civ.P., in pertinent part provides:
Objections made [to proposed instructions] shall
specify and state the particular grounds on which
the instruction is objected to and it shall not be
sufficient in stating the ground of such objection
to state generally the instruction does not state
the law or is aaainst the law. - - around of
2
but such > ~ - - - -
- - - - -
- -
objection shall specify particularly wherein the
instruction is insufficient - - - not state the
or does
law, - -
- or whatparticular -clause therein - objected
- is
to. (Emphasis added.)
-
We will not consider a challenge to an instruction based upon
a reason that was not raised in the court below. Reno v.
Erickstein (1984), 209 Mont. 36, 46, 679 P.2d 1204, 1209.
IV.
The Ahmanns' second claim of error in the jury
instructions centers on the instruction regarding
foreseeability. The Ahmanns argue on appeal that this
instruction was improper because 1) the words "proximate
cause" were once again preceded by the article "the;"
and 2) an instruction on foreseeabilitv in an action of
this kind is improper.
As with the preceding instruction, the Ahmanns' argument
regarding the presence of the article "the" is raised for the
first time on appeal. Hence, this argument is not properlv
before the Court and we need not examine it further.
In the District Court, the Ahmanns objected to the
proposed instruction on the grounds that foreseeability was
not an element of their cause of action. After the
objection, the court modified the instruction. The Ahmanns,
however, did not renew their objection. By failing to object
to the modified instruction, the Ahmanns did not properly
preserve their objection for appeal. Therefore, we need not
discuss the merits of their claim.
v.
The Ahmanns also contend that the District Court erred
in submitting an instruction on comparative negligence to the
jury. They argue that comparative negligence is irrelevant
when one party stands as a fiduciary to another.
The Ahmanns confuse legal theories. In their complaint.
and pre-trial order, they alleged that American Federal
negligently, recklessly and in bad faith breached its
obligations to them. They did not claim any breach of
fiduciary duty. At trial, they made some attempt to show the
existence of a fiduciary relationship. However, no
instructions regarding fiduciaries were submitted to the
jury, nor did the special interrogatories in the jury verdict
refer to a fiduciary duty. The Ahmanns do not appeal the
omission of such instructions or interrogatories.
Under the circumstances, we cannot find that the breach
of a fiduciary duty was a claim in the present case.
Therefore, we need not discuss whether the issue of
comparative negligence may properly be submitted to the jurv
when a plaintiff bases his claims both on negligence and
breach of fiduciary duty.
.
VI
The Ahmanns next maintain that the District Court erred
in instructing the jury that the plaintiffs had not made any
claim that American Federal breached its contract with them.
The instruction of which the Ahmanns complain reads as
follows:
Plaintiffs have not made any claim that defendant
breached its contract with them. Plaintiffs have
based their case against defendant on the legal
theories of negligence, gross negligence, and bad
faith. Therefore, you may not award any damages
for breach of contract in this action.
The Ahmanns argue that the instruction improperly misled the
jury into believing that it could not refer to the parties'
construction contract to determine whether there was a basis
upon which tort liability could he imposed.
We do not agree with the Ahmanns' contention. The
instruction at issue was submitted in an attempt to clarify
the fact that, because the Ahmanns based their claims solely
on tort theories, damages could not be awarded for breach of
contract. The instruction in no way prevented the jury from
considering whether American Federal's deviations from the
written contract, if any, constituted negligence or bad
faith. The District Court did not err in issuing this
instruction to the jury.
VII.
In their final argument regarding jury instructions, the
Ahmanns contend that the District Court's instruction
regarding waiver of contract henefits served only to confuse
the jury. They argue that, in light of the instruction on
breach of contract, an instruction regarding waiver of
contract benefits was improper.
Once again, we will not examine the merits of the
Ahmanns' arguments. During the settlement of jury
instructions the Ahmanns objected to the proffered
instruction, contending that there was no evidence of waiver.
They did not argue that the instruction was confusing.
Because their objection on appeal differs from their
objection in the court below, we will not consider this issue
further. Rule 51, M.R.Civ.P.
VIII.
The Ahmanns argue that the introduction of evidence of
their net worth was impermissible. They assert that the
highly preiudicial nature of this information outweighed its
probative value, and, therefore, should not have been allowed
into evidence in accordance with Rule 403, M.R.Evid.
The ~~~~~~~~~~~~ty of evidence is largely within the
discretion of the district court. We will review a question
of admissibility only in a case of manifest abuse. Cech v.
State 11979), 184 Mont. 522, 531-32, 604 P.2d 97, 102.
In the instant case, the Ahmanns sought considerable
damages for emotional distress. They claimed that the
actions of American Federal caused them financial hardship,
leading to the deterioration of Roland Ahmann's well being.
The introduction of evidence regarding net worth was admitted
to show the effect of the financial loss on Roland Ahmann's
state of mind. The trial court did not abuse its discretion
in allowing this evidence.
IX.
On cross appeal, American Federal raises issues
regarding jury instructions on bad faith. Because we affirm
the jury verdict in the District Court, there is no need to
discuss American Federal ' s contentions.
Affirmed.
We concur:
Justices
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