No. 92-023
IN THE SUPREME COURT OF THE STATE OF MONTANA
1992
KELLY DANIELS, individually
and d/b/a A. ABLE TRADING
COMPANY,
JOHN DEAN, STEVE BOLINGER,
HAROLD LAKE and MARY LAKE,
Defendants and Appellants.
APPEAL FROM: District Court of the Fourth Judicial District,
In and for the County of Missoula,
The Honorable Jack L. Green, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
John C. Schulte, Attorney at Law, Missoula, Montana
For Respondent:
T. K. Botsford, Attorney at Law, Missoula, Montana
Submitted on Briefs: ~ p r i l30, 1992
Filed:
Justice R. C. McDonough delivered the Opinion of the Court.
This is an appeal from a judgment of the Fourth Judicial
District, Missoula County. The District Court awarded Kelly
Daniels (Daniels), $45,765.65 in compensatory and punitive damages
and attorney fees for defendants' breach of Daniels' commercial
lease; for malicious and intentional defamation of Daniels; and for
tortious and intentional interference with Daniels' commercial
lease. Judgment was entered jointly and severally against all
defendants. Defendant John Dean (Dean) filed an appeal which was
dismissed upon his own motion. Defendants Harold Lake and Mary
Lake (Lakes) filed this separate appeal. We affirm in part and
reverse in part.
The Lakes raise four issues for our review which shall be
addressed as follows:
I. Did the District Court err by allowing the initial show
cause hearing to be treated as a full and final trial on the
issues?
11. Did the District Court err by finding Harold Lake and
Mary Lake jointly and severally liable?
111. Did the District Court err by imposing punitive damages
for defamation of Daniels and for the tortious interference with
Daniels' rights under the commercial lease?
IV. Did the District Court err by awarding Daniels free rent
through September, 1993?
Kelly Daniels operates a second hand store in premises he
leased from Ben Bernatz. A written lease for the premises extended
2
through September, 1993. I n January, 1991, Steve Bolinger, John
Dean and Harold Lake met with Bernatz and ~anielsto discuss the
purchase of the property and Danielst lease. Bolinger, Lake and
Dean expressed their desire that Daniels leave his leased premises
so that the building could be used to open a service area for a
used car business operated by Dean and Bolinger. Negotiations to
have Daniels vacate his lease failed.
John Dean, Steve Bolinger, Harold Lake, and Mary Lake,
purchased the property from Bernatz, as tenants in common, on
January 11, 1991. The contract for deed specifically provides that
purchase of the property is subject to Danielst existing commercial
lease. A copy of the lease and an addendum to the lease were
attached to the contract for deed. Harold Lake read the contract
for deed prior to closing and agreed to all that it contained.
Dean was authorized to manage the property and the lease with
Daniels and presented himself to Daniels as representing the owners
of the property.
Contrary to the existing lease agreement, on January 11, 1991,
Dean delivered a thirty day eviction notice to Daniels ordering him
off the premises without cause. Daniels refused to vacate.
Thereafter, despite available parking elsewhere on the premises,
Dean's son and an employee of Dean began to park vehicles
immediately in front of Danielst store obstructing entrance to the
store and utilizing parking otherwise available to Danielst
customers. There is evidence that Dean's son and an employee
repeatedly threw gravel from their car tires against the storefront
window where Daniels customarily displayed antique furniture
outside.
Danielst February rent check was returned to Daniels with a
note demanding that he vacate the property by February 11, 1991.
Dean advised Daniels that he would never accept any rent payment
from him. On or about February 12, 1991, Harold Lake was on the
property making measurements and pointing to the spot where a
garage door was to be cut into the wall of Danielst store. Harold
Lake had knowledge of both the intention to cut the hole in the
wall and the refusal of Danielst rent. Lake testified that he
would not have entered the deal had he known Daniels would remain.
Further, he testified he was unwilling to tolerate Daniels having
the right to remain on the property.
About February 15, 1991, there was a confrontation in the
parking lot. Danielst testified that Dean and others swore at him
and threatened to kill him if he refused to vacate. There is
evidence that Dean's son, employees of Dean and others continually
gathered near the front of Daniels' store to threaten, frighten and
harass Daniels and his patrons.
Following the parking lot confrontation, Dean removed the
thermostat from Danielst store and Daniels' heat was cut off. When
the owners refused to provide heat, Daniels attempted to heat his
store with electric space heaters. Dean filed a complaint with the
Missoula Fire Department alleging that Danielst use of the heaters
was hazardous and that he was attempting to burn down the building.
Following investigation, no charges were brought. Dean also filed
a complaint with the Missoula City building inspector.
After another parking lot confrontation Dean filed a criminal
complaint against Daniels alleging that he was armed and
threatening Dean. A Missoula County sheriff's deputy responded and
frisked Daniels in his store in front of his customers. After
further investigation the officer apologized to Daniels and left
taking no further action. Following another confrontation with
Dean, Daniels was notified by the United States Post Office that he
was accused of stealing Dean's mail.
On February 20, 1991, Dean filed an action in justice court
seeking to evict Daniels. Despite Dean's refusal to accept rent,
default notices were sent to Daniels for failure to pay March and
April rent. On March 12, 1991, Daniels filed this action in
District Court. Dean dismissed the justice court action so that
all matters could be adjudicated in the District Court suit. On May
9 and 14, 1991, an evidentiary hearing was held on Daniels1
application for an order to show cause. At the conclusion of the
hearing, upon the court's inquiry, counsel stipulated that the
hearing be considered the trial on the merits and be submitted to
the court for final adjudication.
The Lakes contend that it was error for the District Court to
suggest the submission of the matter for final adjudication at such
an early stage of the lawsuit. They further suggest that the
District Court improperly urged counsel to so stipulate. It is the
Lakes1 contention that they should not be bound by the stipulation
of their attorney because they were not informed and as a result
have lost 'substantial and fundamental rights' such as a right to
discovery and to trial by jury.
The record provides the following discourse relevant to this
issue:
The Court: Could I see counsel at the bench, please?
(Whereupon, a discussion took place at the bench)
The Court: Very well. For the record, will counsel
stipulate that this matter may be considered a trial on
the merits? I think we have covered everything that it
would be possible to bring out in a trial, and I can't
see anything that we have missed that would add to this
case one way or the other. But it's up to you gentlemen
if we -- if you want to have a further hearing on it, we
may do so. And what is your desire?
Mr. Botsford (counsel for Daniels) : Your Honor, I can so
stipulate for the Plaintiff, and we've represented what
our damages are, if that's acceptable to the Court.
The Court: Very well. And Mr. Modine?
Mr. Modine (counsel for Dean and Lake): I would
stipulate to the determination of this as an evidence for
the trial as well.
Section 37-61-401, MCA, provides in part:
Authority of Attorney. (1) An attorney and counselor has
authority to:
(a) bind his client in any steps of an action or
proceeding by his agreement filed with the clerk or
entered upon the minutes of the court and not otherwise;
We have held that a party is bound to stipulations made by
counsel entered in open court. Counts v. Chapman (1979), 180 Mont.
102, 589 P.2d 151. We further note the stipulation here is entered
upon the minutes of the court. In Counts, we rejected appellant's
contention that she should not be bound to a stipulated waiver of
rights because she did not have the opportunity to discuss it with
her attorney beforehand.
We conclude that when the stipulation was entered by Lakes1
attorney, the Lakes voluntarily waived any right to discovery, jury
trial or any other rights they claim to have lost. We further
conclude there is no proof the court improperly "urged" the parties
to stipulate to submission of the matter for final adjudication.
The District Court is affirmed.
The District Court in conclusion of law number XIV held:
Defendants are jointly and severally liable for the
respective actions of their fellow Defendants
(Defendants, John Dean, Steve Bolinger, and Harold Lake)
and are jointly and severally liable as principals of an
agency relationship created by the Defendants, or as
subsequently ratified with respect to the actions and
conduct set forth in Conclusions No. XI1 above.
Conclusion No. XI1 delineates the previously described acts
colnmitted by the defendants against Daniels. The Lakes argue there
is no substantial evidence that either of them had knowledge of,
planned or personally took any action towards Daniels.
Section 28-10-602, MCA, provides:
Principalrs responsibility for agent's negligence,
omissions, and wrongs. (1) Unless required by or under
the authority of law to employ that particular agent, a
principal is responsible to third persons for the
negligence of his agent in the transaction of the
business ofthe agency, including wrongful acts committed
by such agent in and as a part of the transaction of such
business, and for his willful omission to fulfill the
obligations of the principal.
(2) A principal is responsible for no other wrongs
committed by his agent than those mentioned in subsection
(1) unless he has authorized or ratified them, even
though they are committed while the agent is engaged in
his service.
The Lakes do not dispute the courtfs conclusion that there existed
a principal and agent relationship between the named defendants.
Instead, they contend that the evidence fails to prove that they
were personally responsible, authorized, or ratified any of the
wrongful conduct alleged in Daniels' complaint.
Whether or not the Lakes were personally responsible for any
of the wrongful acts towards ~aniels, whether they authorized or
or
ratified Dean's actions is a question of fact. Findings of fact
will not be set aside unless clearly erroneous, and due regard will
be given the opportunity of the trial court to judge of the
credibility of the witnesses. Rule 52(a), M.R.Civ.P. A finding is
clearly erroneous if it is not supported by substantial evidence,
if the court misapprehended the effect of the evidence or if after
review of the record the Court is left with a firm conviction that
a mistake has been committed. Interstate Production Credit v.
DeSaye (1991), 820 P.2d 1285, 48 St.Rep. 986.
After careful review of the record, we conclude the finding
that Mary Lake is jointly and severally liable is not supported by
substantial evidence. The only evidence in regard to Mary Lake is
that she signed papers that were put before her and Daniels1
testimony that she never communicated, harassed or interfered with
Daniels in any manner. We conclude the District Court erred in
holding Mary Lake liable and reverse on this point.
In regards to Harold Lake, there is a lack of evidence that he
was personally responsible or directly authorized Dean's actions;
however, there is substantial evidence that he did ratify the
wrongful acts. Ratification of an agent's actions requires the
occurrence of three elements: (1) acceptance by the principal of
the benefits of the agent's acts, (2) with full knowledge of the
facts and (3) circumstances or an affirmative election indicating
an intention to adopt the unauthorized arrangement. Moore v.
Adolph (lggo), 242 Mont. 221, 223, 789 P.2d 1239, 1241; Safeco
Ins. Co. v. Lovely Agency (l982), 200 Mont. 447, 453, 652 P.2d
1160, 1163.
Harold Lake testified that it was important to him that
Daniels vacate his lease, that he was unwilling to tolerate Daniels
remaining on the property and that he would not have entered the
deal had he thought Daniels would remain. Harold Lake clearly
accepts the benefits of Deanf attempts to induce Daniels to v a c a t e
s
the lease satisfying the first element of ratification.
There is substantial evidence that Harold Lake was on notice
that Danielsr l e a s e did not expire until September, 1993 and that
Daniels did not intend to leave early. Furthermore, there is
substantial evidence that Harold lake expected that Daniels could
and would be induced to vacate his leasehold. We conclude Harold
Lake had full knowledge of the facts such that the second element
of ratification is met.
The third element requires that Harold Lake was aware of the
circumstances surrounding Danielsf lease. The record demonstrates
that he was aware of the fact that Dean would and did refuse to
accept rent from Daniels. It f u r t h e r shows that he was aware that
the thirty day eviction notice was sent despite the lease
agreement, Furthermore Harold Lake was aware of and testified to
the importance that was attached to getting Daniels to vacate.
We conclude that the three elements of ratification are
present in the instant case. The District Court's conclusion that
Harold Lake is jointly and severally liable is affirmed.
The District Court concluded that Daniels was defamed by the
false claims made to the Missoula County heri if f s o f f ice, the
Missoula Fire Department, the Missoula City building inspector, and
the United States Post Office and that such defamation was
slanderous per se. The court further concluded that the defamation
was done with malice and intent to harm and awarded Daniels $10,000
in punitive damages. An additional $25,000 in punitive damages was
awarded for btrnaliciousand intentional actions in tortiously
interfering with Plaintiff's valid lease and addendum".
The Lakes argue that there is a distinction between
compensatory and punitive damages such that one may be jointly and
severally liable for the acts of his agent leading to compensatory
damages but that in order to extend liability for punitive damages
there must be clear and convincing evidence that each separate
defendant acted with actual malice. Authority is cited from other
jurisdictions for the proposition that principals should not be
vicariously liable for punitive damages due to the intentional
misconduct of an agent unless there is proof of fault on part of
the principal.
As discussed above, we conclude that Harold Lake ratified
Dean's wrongful attempts to induce Daniels to vacate and under S
28-10-602, MCA, is liable for damages. We find no authority to
support Lakes' contention that in the absence of a showing of
actual malice on the part of the principal, 5 28-10-602, MCA,
applies exclusively to compensatory damages. Section 28-10-602,
MCA, by its own language holds a principal liable for the wrongs of
an a g e n t which have been ratified. The statute does n o t l i m i t
liability to wrongs other than intentional and malicious acts
resulting in an award of punitive damages.
Next, the Lakes argue that the award of punitive damages is
erroneous under the law as defined by this Court in Story v. City
of Bozeman (1990), 242 Mont. 436, 791 P.2d 767. In Story, we held
generally that in the great majority of contracts, breach of the
implied covenant of good faith and fair dealing is a breach of
contract where only contract damages are due. Tort type damages may
only be available in contracts where a 'special relationshipt
exists or for traditional contract related torts such as fraud,
fraudulent inducement, and tortious interference with a contract.
We agree with the Lakes that under the Story criterion, a special
relationship does not exist that would entitle Daniels to punitive
damages for breach of the implied covenant of good faith and fair
dealing.
However, the District Court did not award punitive damages
for breach of the implied covenant. Punitive damages were awarded
for the separate and independent torts of defamation and tortious
interference with Danielst lease. The Lakes argue and Daniels
concurs that generally interference can give rise to tort liability
only when one interferes with a contract to which one is a
stranger. Phillips v. Montana ducati ion ~ssociation (1980), 187
Mont. 419, 610 P.2d 154.
In Bolz v. Meyers (l982), 200 Mont. 286, 651 P.2d 606, we
addressed a similar circumstance wherein we concluded that a person
could be liable for breach of a contract to which they were a party
and also be liable for the tort of intentional interference. We
noted a distinction between the defendants1 actions which not only
breached the contract but also separately and distinctly by their
outrageous nature tortiously interfered with the business relations
between the plaintiff and his customers. Bolz v. Meyers (1982),
200 Mant. 286, 651 P.2d 606; Mouser v. c i t y of Redmond (1978), 91
Wash. 2d 36, 586 P.2d 482, 485. We have also affirmed an award of
punitive damages against a defendant for breach of a duty to assign
a lease, separate and distinct from the subject matter and issue of
breach of the lease itself. Moore v. Hardy (1988), 230 Mont. 158,
748 P.2d 477.
A prima facie case of interference with contractual or
business relations requires: (1) intentional and willful acts, (2)
calculated to cause damage to the plaintiff in his or her business,
(3) done with the unlawful purpose of causing damage or loss,
without justifiable cause on the part of the actor, and (4) actual
damages and loss must result. Bolz, 200 Mont. at 295, citing
B e m i l Corp. v. Sawyer (Fla.App.3rd Cir. l977), 353 So.2d 579. The
proven facts of this case establish that the defendants not only
breached the implied covenant of good faith and fair dealing,
thereby breaching the contract and entitling Daniels to contract
damages; but also went further and tortiously interfered with
Daniels' business relationships with his customers entitling him to
punitive damages.
The District Court's conclusion that intentional and malicious
interference had occurred was correct and it is immaterial what
reasons the court gave for the conclusion. Bolz, 200 Mont. at 295,
296, citing Fergus County v. Osweiler (19381, 107 Mont. 466, 86
P.2d 410; 120 A.L.R. 1457; Johnstone v. Sanborn (19601, 138 Mont.
467, 358 P.2d 399. The District Court award of punitive damages is
affirmed.
IV.
The District Court awarded Daniels free rent for the remainder
of his lease term- The conclusion was based on the theory that the
defendants were estopped from claiming any rent from Daniels
because of their previous refusal of rent. The measure for damages
for breach of a contract is the compensatory amount for all of the
detriment proximately caused by or likely to result therefrom in
the ordinary course of things. Weinberg v. Farmer State Bank of
Worden (l988), 231 Mont. 10, 752 P.2d 719. There is no legal basis
for the court's award of free rent as an element of compensatory
damages. There is no change in position of the parties regarding
future rents entitling Daniels to such relief. The District Court
is reversed on this point.
Affirmed, reversed and remanded to the District Court far
entry of judgment in conformance w i - t h this opinion.
Justice
W e Concur:
June 16, 1992
CERTIFICATE OF SERVICE
I hereby certify that the following order was sent by United States mail, prepaid, to the
following named:
John C. Schulte, Esq.
Attorney at Law
111 N. Higgins Ave., Ste. 502
Missoula, MT 59802
T. K. Botsford
Attorney at Law
P.O. Box 8213
Missoula, MT 59807
ED SMITH
CLERK OF THE SUPREME COURT
STATEPF MONTANAA