NO. 88-441
Ib? THE SUPREME COURT OF THE STATE OF MONTANA
1989
R. H. GROVER, INC. !
a Montana corporation,
plaintiff, Respondent and
Cross-Appellant,
-VS-
FLYNN INSURANCE COMPANY,
a Montanz- corporation,
Defe~da.nt
and Appellant,
APPEAL FROM: ~istrictCourt of the Fourth Judicial ~istrict,
In and for the County of Missoula,
The Honorable James wheelis, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Jardine, Stephenson, Blewett & Weaver; ~ i l l i a mD.
Jacobsen argued, Great Falls, Montana
For Respondent:
Worden, Thane & Haines; arti in King argued, Missoula,
, . Montana
Submitted: July 20, 1989
~ecided: July 25, 1989
Mr. Chief Justice J. A. Turnage delivered the Opinion of the Court.
Defendant Flynn Insurance appeals a jury verdict and judgment
entered in favor of plaintiff in the Fourth Judicial District,
Missoula County. The jury returned a verdict March 22, 1988, in
the amount of $106,866, to which the district judge added
$54,194.28 in prejudgment interest. The District Court denied
Flynn's motions for summary judgment, directed verdicts on many
issues and for judgment N.O.V. Flynn appeals.
R. H. Grover, Inc. (Grover) cross-appeals the District Court ' s
denial of Grover's bill of costs. The District Court found that
Grover's bill of costs in the amount of $4,406.50 was not filed
timely under section 25-10-501, MCA.
We affirm.
This case went to the jury on a general verdict form, over the
objection of defense counsel, with instructions on the following
six separate causes of action:
1) negligent misrepresentation;
2) generalnegligence;
3) negligent failure to procure insurance;
4) contractual failure to procure insurance;
5) breach of third party beneficiary contract; and
6) promissory estoppel.
Defense counsel moved for directed verdicts, which were
denied, on each of the last five claims arguing that plaintiff I s
only proper claim was negligent misrepresentation and that it was
barred as a matter of law. Defendant continues to dispute the
applicability of the last five claims sent to the jury.
Thus, the issues on appeal as stated by defendant's counsel
are as follows:
Whether the District Court committed reversible error by:
1. Giving the case to the jury on a
general verdict form which contained
one or more inapplicable legal theo-
ries;
2. Refusing to grant Flynn judgment as
a matter of law on Grover's claim of
negligent misrepresentation;8
3. Giving Instruction #15 over objec-
tion of defense counsel regarding an
agent's liability;
4. Refusing Flynn's proposed Instruc-
tion #38 instructing that liability
could not exceed the policy limits;
and
5. Allowing Grover $54,194.28 in pre-
judgment interest.
The issue on cross-appeal is whether it was error to deny
Grover's bill of costs as untimely.
The following facts are not contested.
Grover is a mechanical and plumbing contractor. In 1978-1979
Grover became associated with Fire Protection Analysis, Inc. (Fire
Protection). Grover later subcontracted with Fire Protection for
the design of fire protection systems (ceiling sprinklers, etc.)
to be installed in four major construction projects around Montana.
Problems later arose with these projects. Grover did not pay
Fire Protection in full, asserting that it had incurred extensive
costs due to Fire Protection's errors and omissions. Fire Protec-
tion sued Grover for final payment. Grover counterclaimed for
damages due to negligence. As a result, Fire Protection allowed
a judgment to be entered in favor of Grover in the amount of
$106,866 as compensation for those problems.
Prior to design and construction, Fire Protection had procured
for Grover a certificate of professional liability insurance (E &
0 coverage) from its insurance agent, Flynn. The certificate was
dated August 21, 1979, and listed Grover as the certificate holder,
Fire Protection as the insured, policy limits of $400,000 and an
expiration date during September of 1980. The certificate specifi-
cally listed professional liability insurance issued by CNA
Insurance Company as Policy Number AEP 821 357 which covered Fire
Protection for its errors and omissions up to $400,000.
The certificate was prepared erroneously a by Flynn employee.
Fire Protection did not have professional liability insurance and
never had any such coverage or policy.
In exchange for not executing on the judgment against Fire
Protection, Grover was assigned all proceeds which may result from
Fire Protection's action against Flynn. Grover then proceeded
against Flynn directly.
The issues of legal liability, reliance, and damages were
disputed and litigated at trial. Grover later stipulated its
damages were $106,866 as evidenced by the judgment in the underly-
ing suit.
I. General Verdict Form
Flynn cites Martin v. N.P. Ry. Co. (1915), 51 Mont. 31, 149
P. 89, for the proposition that it is reversible error to let a
verdict rendered on a general verdict form stand if one or more of
the legal theories was improper.
In Martin, the plaintiff plead one cause of action (negli-
gence) in four separate counts. The court struck Count I11 as
being too indefinite to impose a duty and submitted the remaining
three counts of negligence on a general verdict to the jury which
returned a verdict for the plaintiff.
On appeal, this Court held that Counts I and IV likewise
should have been stricken for insufficient evidence. In reversing
the verdict based on the general verdict form, this Court stated:
We are unable to agree . . . that if the
complaint contains one good count . . . the
jurors . . . founded their verdict upon it,
rather than upon the counts which fail to
state facts sufficient to warrant recovery.
A fair and impartial trial comprehends a trial
upon issues properly submitted, and, when
different theories of the same case are placed
before a jury, it is impossible to know upon
which the general verdict is made to depend.
Martin, 149 P. at 91.
Flynn argues that this 1915 case is good law in Montana and
controls on this issue.
Grover maintains that requiring a general verdict form is
within the sound discretion of the trial court, pursuant to Rule
49 (a), M.R. Civ.P. ("a court mav require a jury to return a special
verdict") and that reversal requires proof of abuse of discretion.
In support of the argument that no abuse of discretion can be
shown, Grover argues, first, that all legal theories were properly
submitted because credible evidence supported each theory; and
second, that if a general verdict contains one viable theory on
which the entire verdict could stand, the verdict ought not be
reversed. Grover cites Dunlap v. GMC (Ariz. 1983), 666 P.2d 83
("General verdict will be upheld when several counts, issues, or
theories are submitted to the jury if the evidence on one count,
issue or theory is sufficient to sustain the verdictw1) and Jenkins
;
v. C. & E. Ry. (Ill. 1972), 284 N.E.2d 392 ("where several causes
of action have been alleged and a general verdict results, the
verdict will be sustained against a general motion for directed
verdict or a motion N.O.V. if there are one or more good causes of
action or counts to support itw). We do not agree.
We conclude that Martin is not controlling on this issue
because it was decided prior to the adoption of the new rules of
civil procedure in 1961. Therefore, the special verdicts known to
courts in 1915 may have been different than those now allowed under
Rule 49(a). However, we find the reasoning applied in Martin
persuasive and conclude that it was error to submit these six
issues to the jury on a general verdict form.
The trial court must allow only those claims supported by the
evidence to go to the jury. If there is a factual question as to
the applicability or validity of particular claims, the preferred
solution is to submit the claims to the jury on a special verdict
form as allowed under Rule 49 (a). Such procedure makes a record
more easily reviewable by this Court, thus protecting the rights
of both parties.
A motion for directed verdict is properly granted when there
is an absence of any evidence to warrant sending the case to the
jury. Britton v. Farmers Ins. Group (1986), 221 Mont. 67, 721 P.2d
303. Under this standard of review we conclude that it was error
to submit the last four claims to the jury.
As was argued vehemently by defense counsel during motions for
directed verdicts on the last four claims, the record is devoid of
the critical elements of a contract. Fundamentally lacking was
evidence of offer and acceptance, as well as exchange of considera-
tion between Flynn and Grover, or even between Flynn and Fire
Protection regarding the professional liability insurance policy.
The record is clear that in 1979 Fire Protection did not
request Flynn to procure professional liability insurance and did
not pay any premiums for such a policy. It is impossible to find
that Flynnlserroneous certificate created a l'contractllunder which
they were bound to procure insurance. Thus, the contractual
failure to procure insurance claim must fail as a matter of law.
We also conclude based on the foregoing analysis that it is
impossible to imply that Flynn had a "dutyw to procure insurance
under these facts. Issuing the certificate cannot create a lldutyll
to procure insurance at a later date. Rather, Montana law requires
a client's request to procure certain insurance, followed by an
agent's commitment to do the same to put the agent under a llduty"
to procure. Lee v. Andrews (1983), 204 Mont. 527, 667 P.2d 919.
The claim of negligent failure to procure insurance also fails for
want of proof. Absent a duty, there can be no negligent failure
to procure insurance.
The contractual claim for a third-party beneficiary contract
likewise fails for lack of evidence regarding the critical elements
of a contract under this analysis. The record is devoid of any
evidence regarding offer and acceptance, intent to create a
contract for Grover's benefit and consideration. This claim is not
supported by the evidence.
Grover also asserted a claim of promissory estoppel. Grover
claimed that Flynn's certificate was a promise that the insurance
policy existed. Once Flynn promised that, Grover argues, it
should be estopped from denying the same. We do not agree. The
certificate cannot be a contract or a promise. Flynn Insurance
has promised nothing by issuing the certificate. The promissory
estoppel claim likewise should have been dismissed under defen-
dant's motion for directed verdict for lack of evidence of a
I1promise.'I
Based on the foregoing discussion, we conclude at least these
four claims were submitted erroneously to the jury on the general
verdict form. This Court disapproves of counsel pleading and
urging the submission to juries of claims for which there is no
basis in admissible evidence. More certainly, this Court will find
error when a trial court allows juries to consider a claim when no
law or fact exists in support thereof.
The error committed under the facts of this case was not
reversible error.
Rule 61, M.R.Civ.P., provides:
Harmless error. No error in either the admis-
sion or the exclusion of evidence and no error
or defect in any ruling or order or in any-
thing done or omitted by the court or by any
of the parties is ground for granting a new
trial or for setting aside a verdict or for
vacating, modifying, or otherwise disturbing
a judgment or order, unless refusal to take
such action appears to the court inconsistent
with substantial justice. The court at every
stage of the proceeding must disregard any
error or defect in the proceeding which does
not affect the substantial rights of the
parties.
Our careful review of the record and analysis of the ap-
plicable law as stated above leads us to conclude that the trial
judge did not commit reversible error in any of the issues raised
by appellant. Therefore, we omit any discussion regarding the
contested jury instructions. We affirm the District Court's
judgment and order in its entirety based on the following analysis.
We hold that substantial injustice would occur by denying
Grover's jury verdict based on the remaining two claims: general
negligence and negligent misrepresentation. Specifically, we note
the record as it refers to general negligence.
Grover asserted that Flynn Insurance committed general
negligence which damaged Grover apart from and in addition to the
issuance of the faulty certificate. We agree. The record is
replete with such evidence: inadequate supervision of an employee
new to the job, failure to follow other established internal office
procedures which would have caught the error immediately and
failure to notify Grover.
The District Court gave the jury instruction No. 40, "You are
instructed that Flynn Insurance Agency was negligent." This
instruction was equivalent to a directed verdict on the issue of
the negligence of appellant Flynn. Having been directed as a
matter of law that they will find Flynn negligent in its issuance
of the certificate of professional liability insurance, the jury
had only left to decide if there was a causal connection between
Flynn's negligence and Grover's damages which were stipulated to
be $106,866. Based on these facts, we conclude that the jury
verdict is based on the law and substantial credible evidence.
Reversal of the verdict would constitute substantial injustice to
Grover. However, in the absence of a directed verdict on Flynn's
negligence, reversal would be mandated under this general verdict
form.
Thus, under the facts of this case, and under the standard set
forth in Rule 61, the errors committed by the trial judge regarding
the general verdict form were not reversible error.
At this juncture, we must discuss Flynntscontention that the
damage award must still be overturned as a matter of law.
Flynn argues that notwithstanding the directed verdict, Grover
is not entitled to any damages because its claims are barred as a
matter of law by the statute of limitations. The jury was
instructed on the various claims that the applicable limitations
were two years (negligent misrepresentation), three years (neglige-
nce), five years (oral contract) and eight years (actions founded
upon a written instrument). Flynn argues that these instructions
were reversible error because all claims should hinge on the two
year limitation, which had expired.
Based on our discussions in White v. Lobdell (1984), 208 Mont.
295, 678 P.2d 637, the parties below agreed that the statute of
limitations for negligent misrepresentation claims is two years.
See White, 678 P.2d at 642 and section 27-2-203, MCA. This
limitation begins to run when the plaintiff wdiscoversttthe
misrepresentation. Section 27-2-203, MCA. Under Mobley v. Hall
(1983), 202 Mont. 227, 657 P.2d 604, wdiscovery" occurs when the
plaintiff acquires such facts as would reasonably prompt inquiry
or action.
Grover argues that his March 19, 1984, complaint was filed
timely. Regarding the date of discovery, Grover testified to the
jury that he did not discover that the certificate was erroneous
until 1983, well within the two year limitation. Grover argues
that the jury must decide if a claim is time-barred when conflict-
ing evidence as to the date of accrual of the action is presented.
Hill v. Squibb (1979), 181 Mont. 199, 592 P.2d 1383. The jury
found in favor of Grover and he asserts that this verdict should
be upheld.
Flynn asserts that the verdict should be stricken as a matter
of law because "discovery1'occurred at least by January 1982 and
thus the claim was time-barred under the two year limitation.
Flynn introduced into evidence a letter dated in January 1982 which
was written to Grover by Fire Protection's attorney. The letter
generally sought a settlement rather than a trial of the dispute
between Fire Protection and Grover and stated 'I. . . assuming you
win, you will collect nothing since we have no insurance . . . l1
This letter was all that Flynn introduced regarding "disc~very.~~
From there it made only conclusory arguments that the letter
necessarily constituted discovery of such facts as would lead a
reasonable person to inquiry. (Regarding this letter, Grover
testified that he simply did not understand the letter to mean this
certificate which he held was inaccurate.)
In its appellate brief, Flynn further argued that since all
of Grover's claims were based upon Flynn's erroneous representa-
tion, all claims are barred by the same two year statute of
limitations which expired in January of 1982, two months prior to
Grover's complaint being filed.
We do not agree. However, we do not find Grover's version of
the events persuasive either.
The liability of Flynn could be characterized properly as
founded on an instrument in writing (thus bearing an eight year
limitation on the action), however it need not necessarily be
characterized so. The action for general negligence (the record
is replete with evidence of Flynn's negligence) is controlled by
the three year limitation found in section 27-2-204, MCA. The jury
was instructed properly on that limitation. Further, as discussed
above, the trial judge directed a verdict on the issue of general
or ordinary negligence. We conclude under this analysis that
Grover's action is not barred as a matter of law and that the jury
verdict was lawful. We reject Flynnts plea to overturn the
, '. ' . '.
verdict.
11. Prejudgment Interest
Prejudgment interest can be awarded by the trial judge
pursuant to section 27-1-211, MCA, when the following three
criteria are met: (1) there is an underlying monetary obligation;
(2) the amount of recovery is certain or capable of being made
certain by calculation; and (3) the right to recovery vests on a
particular day.
Flynn asserts that there is no monetary obligation until the
jury determines liability. Palmer v. Farmers Insurance Exchange
(Mont. 1988), 761 P.2d 401, 45 St.Rep. 1694 ("when liability is
contested ... the conditions [of section 27-1-2111 fail since no
monetary obligation exists until the day the jury determines the
degrees of comparative negligence. The right to recover does not
vest until the jury returns its verdict.")
Flynn also asserts that Grover contested the amount of damages
as being above and beyond the $106,866 judgment. Flynn contends
that Grover is trying to have its cake and eat it too with regard
to whether or not these damages are a fixed amount.
Grover distinguishes Palmer in that there are no issues of
comparative negligence in the case at bar (thus there would be no
later reduction in the damages) and asserts that the fixed amount
of the previous judgment on a particular day satisfies this entire
statute. The trial court agreed with Grover.
We conclude there is no error in the trial court's analysis
of this issue. The parties stipulated during trial as to the
amount of Grover's damages on the underlying suit (those damages
attributable to Fire Protection's negligence regarding the sprink-
ler system designs). That amount was reflected in the $106,866
default judgment against Fire Protection. That judgment was
rendered December 31, 1982. These facts certainly fulfill all
three requirements of section 27-1-211, MCA.
Prejudgment interest was awarded properly.
CROSS-APPEAL
Bill of Costs
Section 25-10-501, MCA, reads in pertinent part:
The party in whose favor judgment is rendered
and who claims his costs must deliver to the
clerk and serve upon the adverse party, within
5 days after the verdict or notice of the
decision of the court or referee or, if the
entry of the judgment on the verdict or deci-
sion be stayed, then before such entry is
made, a memorandum of the items of his costs
and necessary disbursements in the action or
proceeding, which memorandum must be verified
by the oath of the party, his attorney or
agent, or the clerk of his attorney . ..
Verdict was rendered March 22, 1988, and judgment was entered
upon it on March 30, 1988. Grover received the judgment on April
4, 1988, and filed its bill of costs on April 5, 1988.
The District Court struck Grover's bill as untimely because
it was not filed within five days after the verdict. We agree.
Grover relied on Funk v. Robbin (1984), 212 Mont. 437, 689
P.2d 1215, wherein this Court allowed costs under section 25-10-
501, MCA, the bill for which was filed long after the decision of
the court was rendered. That case quoted Poeppel v. Fisher (1977),
175 Mont. 136, 572 P.2d 912, as follows:
This Court has held that the five-day period
allowed for filing of a memorandum of costs
and disbursements is computed from the day the
court enters judgment, not from the day the
court orally announces its decision.
Poeppel, 572 P.2d at 1221.
Funk and Poemel are not controlling on this issue because
they involved bench trials. The statute and the case at bar both
deal with jury verdicts. By taking matters under advisement, the
trial judge has more latitude than a jury as to when it will render
its decision. Thus, the announcement of a decision by the bench
is not comparable to the jury rendering its decision. Lastly, we
note that even in Funk and Poeppel, the bill for costs was filed
prior to entry of the judgment.
Grover's bill was properly stricken.
In summary, we conclude the errors committed by the trial
court regarding the general verdict form are not reversible error
and therefore, affirm the District Court's judgment based on the
jury verdict. We find no error in the District Court's other
evidentiary rulings. Likewise, the trial court's rulings awarding
prejudgment interest and denying Grover s bill of costs were
correct. The District Courtls judgment is affirmed in its
entirety.
ief ~ustice
We concur:
/ Justices
z