No. 88-55
IN THE SUPREME COURT OF THE STATE OF MONTANA
LEVIN DAVIS AND SARA DAVIS,
Plaintiffs and Appellants,
-vs-
COURT V. SHERIFF, MARDI M. SHERIFF
and THE COMMERCIAL UNION INSURANCE
COMPANY, a Massachusetts corporation,
Defendants and Respondents.
APPEAL FROM: District Court of the First Judicial District,
In and for the County of Lewis & Clark,
The Honorable Henry Loble, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Mark P. Yeshe; Harrison, Yeshe & Murphy, Helena,
Montana
For Respondent :
Paul Meismer; Garlington, Lohn & Robinson, Missoula,
Montana
James L. Jones; Dorsey & Whitney, Billings, Montana
Submitted on Briefs: Aug. 18, 1988
Decided: September 26, 1988
Filed: SEp 2 6 1988
&A n,
Clerk
Mr. Chief Justice J. A. Turnage delivered the Opinion of the
Court.
Plaintiffs Levin and Sara Davis (the Davises) brought a
malicious prosecution action against Court and Mardi Sheriff
(the Sheriffs) and against Commercial Union Insurance Compa-
nies (Commercial). The Davises also filed first-party and
third-party insurance bad faith claims against Commercial
Union.
The District Court of the First Judicial District,
Honorable Henry Loble presiding, directed verdicts for defen-
dants on the malicious prosecution claims and on Mr. Davis's
first-party bad faith claim. Trial was had on the remaining
issue of third-party insurance bad faith. The jury returned
a verdict in favor of the plaintiff Davises but awarded them
only one dollar compensatory damages and one dollar punitive
damages. The Davises' motion for a new trial on the issue of
damages was denied December 16, 1987, and this appeal
followed.
We affirm.
The Davises present the following issues on appeal:
Did the District Court abuse its discretion by
(1) directing verdicts on the malicious prosecution
claims in favor of Sheriffs and Commercial;
(2) directing the verdict for Commercial on the first-
party insurance bad faith claim;
(3) refusing to grant a new trial as to compensatory
damages ;
(4) refusing to grant a new trial as to punitive
damages; and
(5) refusing to admit plaintiffs' proposed exhibit
number 45 on damages.
This malicious prosecution suit arises out of a series
of events beginning with a fire in 1977. As of March 22,
1977, the Davises were managing/leasing the Yacht Basin Bar
and Restaurant from the Sheriffs until a fire on October 1,
1977, destroyed the premises, including property of the
Davises. The Davises asserted that the cause of the fire was
a leaky roof which caused a short in the electrical system.
The Davises lost roughly $10,000 due to the fire. They
attempted to recover this sum from Commercial Union who
insured the premises for the Sheriffs. Commercial Union
refused to pay, saying that the cause of the fire was either
arson or negligence on the part of the Davises. It was
determined that a burner had been left on either by the
Davises or one of their employees. This, however, was dis-
puted as the cause of the fire since at least one expert
testified that the fire could not have started in the kitch-
en. However, Commercial Union then counterclaimed in the
amount of $150,000 in damages for the building, which amount
was later reduced to $75,000. Eventually, that claim was
dropped all together. It was that counterclaim that forms
the basis for this action.
Trial was had on those issues which resulted in a
verdict for the Davises for their loss of $10,000. (Levin
and Sara Davis v. Court V. and Mardi M. Sheriff, Cause No.
44240). However, it cost the Davises $5,000 to recover that
money due to them under the insurance policy because of
Commercial Union's refusal to pay the claim, their counter-
claim and their insistence on litigating the matter. Thus,
the Davises suffered an out-of-pocket loss of $5,000, and
this claim of malicious prosecution against the Sheriffs and
their insurance company resulted.
The Davises also claimed that they were listed as
insured on the policy and they filed a first-party as well as
a third-party insurance bad faith claim against Commercial
Union. The first-party claims were dropped by the District
Court on a motion for directed verdict. Likewise, verdicts
on the malicious prosecution claims were directed in favor of
both defendants. Davises assign those directed verdicts as
abuse of discretion by the District Court. We disagree.
I. Standard of Review
The standard for reviewing a trial court's judgment was
set forth by this Court recently in Marriage of Watson (Mont.
1987), 739 P.2d 951, 44 St.Rep. 1167. There, we stated that
a District Court's judgment, when based on substantial credi-
ble evidence, will not be altered unless a clear abuse of
discretion is shown. Watson, 739 P.2d at 954, 44 St.Rep. at
1170. In In re Marriage of Stewart (Mont. 1988), 757 P.2d
765, 45 St.Rep. 850, this Court specifically condemned previ-
ous language regarding the standard of review. Determina-
tions of whether the district judge acted arbitrarily,
without the employment of conscientious judgment or exceeded
the bounds of reason were specifically rejected by this
Court. We have defined substantial evidence as "such rele-
vant evidence as a reasonable mind might accept as adequate
to support a conclusion. " State v. Lamb (1982), 198 Mont.
323, 646 P.2d 516.
Thus, for each issue raised by the Davises, this Court
should defer to the discretion of the trial court unless this
Court finds that the District Court's ruling was not based on
substantial credible evidence and was an abuse of discretion.
11. Directed Verdicts
We defined the standard for a directed verdict as
follows:
The test commonly employed to determine
if the evidence is legally sufficient to
withdraw cases and issues from the jury
is whether reasonable men could draw
different conclusions from the evidence.
[Citations omitted.] If only one con-
clusion is reasonably proper, then the
directed verdict is proper.
Semenze v. Leitzke (Mont. 1988), 754 P.2d 509, 511, 45
St.Rep. 829, 831.
Thus, in this case the District Court granted the
directed verdicts because it held there was insufficient
evidence to support the claims of malicious prosecution and
first-party insurance bad faith. We agree.
111. Malicious Prosecution
The burden on plaintiffs asserting malicious prosecu-
tion is heavy. They may only recover damages when each of
the six essential elements of the claim are fully "complied
with." Orser v. State (1978), 178 Mont. 126, 582 P.2d 1227.
It is well settled that those six elements are as follows:
(1) a judicial proceeding commenced and prose-
cuted against the plaintiff;
(2) the defendant's responsibility for litigating,
prosecuting, or continuing the proceeding;
(3) lack of probable cause for the defendant's
acts;
(4) that the defendant was actuated by malice;
(5) that the proceeding terminated in favor of
the plaintiff; and
(6) that the plaintiff suffered damages.
See, Vehrs v. Piquette (1984), 210 Mont. 386, 390, 684 ~ . 2 d
476, 478; Reece v. Pierce Flooring (Mont. 1981), 634 P.2d
640, 642, 38 St.Rep. 1655, 1657-1658.
If one of these elements is not proved, verdict may be
directed for the defendant. Orser, 582 P.2d at 1232; St.
Paul Mercury Insurance Co. v. Jeep Corp. (1977), 175 Mont.
69, 71, 572 P.2d 204, 205.
It is clear from the evidence in the case at bar that
plaintiffs' case lacks evidence against both defendants on
the issues of lack of probable cause and malicious intent.
Evidence of the remaining elements is also weak. Because
plaintiffs are not able to prove a prima facie case of mali-
cious prosecution, their claim must fail as a matter of law
and verdict was properly directed.
The first issue is that of probable cause on which to
base the. defendants' counterclaim. The record is clear that
defense counsel acting for Sheriffs had probable cause before
instituting the counterclaim. Because the damages sought in
the counterclaim arose out of the same transaction and same
set of facts as the plaintiffs' suit, defense counsel proper-
ly viewed his claim as a compulsory or mandatory counterclaim
under Rule 13 (a), M.R.Civ.P., and knew he must assert his
clients' claim or it would be barred. That would be no
excuse for negligent factual investigation, but this fact
coupled with the interviews conducted by counsel Drake de-
feats the claim of lack of probable cause.
Most noteworthy in Drake's factual investigation is the
following. Ed Herzog, the insurance adjuster, filed a report
that listed the cause of fire as arson. Drake reviewed this
report and interviewed Herzog personally as to that report
prior to filing his counterclaim. Drake also interviewed Dan
Schulte, a prospective buyer of the Yacht Basin Bar and
Restaurant. One week before the fire, Schulte had hired
Deputy State Fire Marshall Matt Kunnary to inspect the elec-
trical and wiring system on the premises. Drake confirmed
with Schulte that Kunnary's report showed the electrical
system to he "in good working order."
Thus, there was a real dispute among the experts as to
the cause of the fire and plaintiffs' claim of faulty elec-
trical wiring was discounted on at least two occasions. From
the foregoing, one could reasonably find probable cause to
assert the Sheriffs' counterclaim and plaintiffs' prima facie
case of malicious prosecution fails. The verdict was proper-
ly directed in favor of defendants.
Because Davises fail on this element and their case
against the Sheriffs fails, we will not discuss the other
areas revealed by the record of insufficient evidence for
this claim.
The Davises next allege malicious prosecution against
Commercial Union under the same facts. However, probable
cause existed for the insurance company just as for the
Sheriffs, as discussed above, and plaintiffs' case fails.
We find no reason to discuss the other issues on which
plaintiffs' case against Commercial also fails. Verdict was
properly directed in favor of Commercial Union on the mali-
cious prosecution claim.
IV. First-Party Insurance Bad Faith Claim
Plaintiff Mr. Davis next assigns error to the directed
verdict on his claim of first-party insurance bad faith. Mr.
Davis asserts that since he was listed on the policy as an
insured, he should be afforded a status such that the statu-
tory duty Commercial Union owed to the Sheriffs was likewise
owed to Mr. Davis.
However, plaintiff's case fails both in evidence and by
his conduct. Plaintiff failed to bring forth evidence of any
specific statutory violations by Commercial and even failed
to present evidence of general business practice.
Additionally, Davis's conduct complicates his case.
The only possible "duty" owed by Commercial to Davis would
have been to provide a legal defense to Davis for the coun-
terclaim and then indemnify if necessary in that suit. But
the record clearly shows Davis retained his own counsel and
at no time requested Commercial to defend. Thus, even though
Commercial had knowledge of the suit pending, bad faith
cannot be found for not providing what has not been request-
ed. Likewise, we will not stretch the contractual fiduciary
duty of an insurer to cover this situation where Davis made
no claimant contact with Commercial, no request for defense,
and no request for indemnity. The status argument has been
treated by Davis as an afterthought.
From the foregoing want of evidence to support any
existing theory of bad faith, verdict was properly directed.
V. New Trials
Davises also appeal from denial of their request for a
new trial on the issues of compensatory and punitive damages.
Davises assert that both damages awards are inadequate, that
they are contrary to the law as given to the jury, and con-
trary to the weight of the evidence. Davises argue that
since the evidence of their damages was uncontroverted, they
are somehow entitled to the amount alleged as a matter of
right. We disagree.
Although appeals as to damages usually occur because
the amount awarded is alleged to be excessive rather than
inadequate, the law in Montana as to damages is well-settled.
The amount of damages is committed first to the discretion of
the jury and next to the discretion of the trial judge who,
in passing on the motion for a new trial, may set aside the
verdict if it is not just. Dahlin v. Rice Truck Lines
(1960), 137 Mont. 430, 352 P.2d 801. "This Court will not
substitute its judgment for that of the jury, especially
where, as here, the trial court has approved the verdict by
denying the motion for a new trial." Dahlin, 137 Mont. at
438, 352 P.2d at 805, quoting McNair v. Berger (1932), 92
Mont. 441, 15 P.2d 834. Accord: Sullivan v. City of Butte
(1930), 87 Mont. 98, 285 P. 184; Teesdale v. Anschutz Drill-
ing Co. (1960), 138 Mont. 427, 357 P.2d 4; Wyant v. Dunn
(1962), 140 Mont. 181, 368 P.2d 917; Hurly v. Star Transfer
Co. (1962), 141 Mont. 176, 376 P.2d 504; Vogel v. Fetter
Livestock Co. (1964), 144 Mont. 127, 394 P.2d 766.
Thus, the standard of review is not whether the nominal
damages are inadequate, but rather, whether the trial court
abused its discretion in refusing to grant a new trial. It
is fundamental to our system of trial by jury that the
factfinder who hears the evidence possesses the right to
judge the credibility of the witnesses and may accept or
reject the evidence offered. In the case at bar, after a
week of testimony and lengthy explanation of the underlying
years of litigation and previous damage awards made to the
Davises, the jury determined the appropriate award for the
Davises in this case was two dollars.
The trial judge, relying on the same evidence and the
knowledge that damage awards are left first to the sound
discretion of the jury, properly refused to upset that jury
determination.
It should be further noted that no plaintiff is ever
entitled to exemplary damages as a matter of right, regard-
less of the situation or the sufficiency of the facts.
Spackman v. Ralph M. Parsons Co. (1966), 147 Mont. 500, 414
P.2d 918.
Based on the law and the record in this case, Davises
fail to convince this Court that the trial court abused its
discretion.
VI. Proposed Exhibit 45
Plaintiffs next assign as error the refusal of their
proposed exhibit number 45. Exhibit 45 was a written summary
which purported to show the financial arrangement between
Davises and their counsel and the disposition of funds recov-
ered from the underlying tort action as evidence of Davises'
damages.
The District Court properly refused to admit Exhibit 45
because it was a writing containing hearsay. This writing
did not fit into any hearsay exception under Rule 801,
M.R.Evid. Further, it was not the exclusive evidence on this
issue. The record reveals that the trial judge invited
counsel to present oral testimony in lieu of Exhibit 45 to
reach the same result, but counsel totally discontinued his
line of questioning when Exhibit 45 was refused.
A District Court's ruling on the admissibility of
certain evidence will not be disturbed absent a showing of an
abuse of discretipn. Cooper v. Rosston (Mont. 1988), 756
P.2d 1125, 45 St-Rep. 978. Under these facts, Davises fail
to prove that the trial court abused its discretion by refus-
ing to admit Exhibit 45, especially when the trial judge
encouraged the evidence to come in through other means.
Finding no abuse of discretion by the trial judge on
any of the five issues raised by Davises, judgment is hereby
affirmed.
/
A *Justice
Chief
We c o n c u r :