No. 91-400
IN THE SUPREME COURT OF THE STATE OF MONTANA
1992
LARRY MARSHALL,
Plaintiff and Appellant,
THE STATE OF MONTANA; THE DEPARTMENT OF NATURAL
RESOURCES AND CONSERVATION; and THE DEPARTMENT OF
ADMINISTRATION,
Defendants and Respondents.
APPEAL FROM: District Court of the First Judicial District,
In and for the County of Lewis & Clark,
The Honorable Dorothy McCarter, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
John Bobinski, Attorney at Law, Helena, Montana.
For Respondent:
Hon. Marc Racicot, Attorney General, Helena, Montana
James M. Scheier, Assistant Attorney General,
Helena, Montana.
Submitted on Briefs: January 16, 1992
Justice R. C. McDonough delivered the Opinion of the Court.
Larry Marshall appeals from an order of the First Judicial
District Court, Lewis and Clark County, granting the State's motion
to dismiss and denying Marshall's motion to amend his complaint.
We reverse.
The sole issue on appeal is whether the District Court erred
in determining Marshall's complaint failed to state a claim upon
which relief can be granted.
On January 6, 1987, the personnel officer for the State of
Montana Department of Natural Resources (DNRC) requested a new
position description for Marshall's position. Marshall was
employed by DNRC as a Program Officer 11, grade 15. On April 21,
1987, Marshall submitted a new position description to the Water
Resources Division, recommending his position be reclassified at
grade 16. However, the position was reclassified to Civil
Engineering Specialist IV, grade 15 by the Department of
Administration (DOA) effective December 5, 1987. Marshall
disagreed with the reclassification, contending that his position
should be reclassified to Civil Engineering Specialist V, grade 16.
Marshall initiated the formal appeals process on January 14, 1988.
He received his requested upgrade on July 24, 1989.
Marshall contends that prior to formal appeal, DNRC told him
that it was neither supporting or opposing his request, and DNRC
led him to believe it would be objective and would not actively
oppose his request. Instead, DNRC took steps with the DOA in
secret to ensure that the requested upgrade would be denied.
Marshall further argues the DNRC intentionally provided him with
misleading information concerning certain job classification
factors.
Marshall's complaint alleged tortious breach of the implied
covenant of good faith and fair dealing. Marshall's amended
complaint alleged contractual breach of the implied covenant of
good faith and fair dealing. Marshall pled contract damages in the
form of attorney fees in prosecuting his classification appeal and
loss of back pay due to the delay in filing the appeal. Marshall
contends that the filing delay was caused by the State's bad faith
during the informal process. (Section 2-18-203 (3), MCA,
specifically limits the amount of back pay to 30 days prior to the
date the classification appeal was filed.)
In considering a Rule 12(b)(6) motion to dismiss, the
allegations must be viewed in the light most favorable to the
plaintiff, admitting and accepting as true all facts well-pleaded.
Devoe v. Missoula County (l987), 226 Mont. 372, 374, 735 P.2d 1115;
United States Natll Bank of Red Lodge v. DOR (1977), 175 Mont. 205,
207, 573 P.2d 188, 190. Further, a court should not dismiss a
complaint for failing to state a claim unless it appears beyond
doubt that the plaintiff can prove no set of facts in support of
his claim which would entitle him to relief. Proto v. Missoula
County (l988), 230 Mont. 351, 353, 749 P.2d 1094, 1095, quoting
Conley v. Gibson (1957), 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2
L.Ed. 2d 80, 84. Therefore, we must determine whether under any set
of facts, Marshall has a claim under the covenant of good faith and
fair dealing.
We said in storv that dishonesty in fact is one required
element for a breach of the implied covenant of good faith and fair
dealing, which results in a breach of contract:
Each party to a contract has a justified expectation that
the other will act in a reasonable manner in its
performance or efficient breach. When one party uses
discretion conferred by the contract to act dishonestly
or to act outside of accepted commercial practices to
deprive the other party of the benefit of the contract,
the contract is breached.
Story v. City of Bozeman (1990), 242 Mont. 436, 450, 791 P.2d 767,
775-76. Good faith under the Uniform Commercial Code means honesty
in fact in the conduct or transaction concerned, 5 30-1-201 (19),
MCA, and the observance of reasonable commercial standards of fair
dealing in the trade. Section 30-2-103(1)(b), MCA.
In the case before us, Marshall contends that DNRC acted in
secret to ensure his upgrade would be denied after leading him to
believe otherwise, and that they gave him misinformation. He also
contends that the State's bad faith caused him to delay filing his
formal appeal resulting in loss of back pay. Accepting these
contentions to be true, he has properly pled a cause of action for
a contract breach of the implied covenant of good faith and fair
dealing in his proposed amended complaint. However, the tort of
bad faith requires a special relationship and breach of the same
honesty and reasonable commercial standards. Wise v. Sebena
(1991), 248 Mont 32, 38, 808 P.2d 494, 498. In Storv we set forth
five requirements which must be met in order to meet such special
relationship. The requirements are as follows:
(1) the contract must be such that the parties are
in inherently unequal bargaining positions; [and] (2) the
motivation for entering the contract must be a non-profit
motivation, i.e., to secure peace of mind, security,
future protection; [and] (3) ordinary contract damages
are not adequate because (a) they do not require the
party in the superior position to account for its
actions, and (b) they do not make the inferior party
'whole'; [and] (4) one party is especially vulnerable
because of the type of harm it may suffer and of
necessity places trust in the other party to perform; and
(5) the other party is aware of this vulnerability.
Story at 451, 791 P.2d at 776.
Here, under undisputed facts, the parties are not in
inherently unequal bargaining positions because by statute, an
appeals process was provided Marshall which resulted in his
position with DNRC being upgraded. See 5 2-18-203, MCA (1991).
Further, ordinary contract damages are adequate because Marshall
received his requested upgrade and prevailed against DNRC and DOA
in the appeal. Therefore the first and third requirements are not
met.
In both the initial complaint and the amended complaint,
Marshall pled attorney fees and loss of back pay as his damage.
Attorney fees are not allowed as damages in contract unless they
are provided for in the contract or by statute. Neither provision
is present here. As we said in Ehly, "It is a well-settled rule
that absent contractual or statutory grant, attorney fees are not
allowable as costs or as an element of damages." Ehly v. Cady
(1984), 212 Mont. 82, 100, 687 P.2d 687, 696. However, the alleged
loss of back pay can be contract damages.
For the reasons set forth above, we reverse the District
Court, and remand for proceedings not inconsistent with this
opinion.
We Concur:
Justice Terry N. Trieweiler specially concurring in part and
dissenting in part.
I concur in the majority's conclusion that the District Court
erred when it dismissed that part of plaintiff's complaint which
sought contract damages for breach of the covenant of good faith
and fair dealing.
I dissent from that part of the majority's opinion which
concludes that, based upon Story v. C t ofBozeman (1990), 242 Mont. 436,
iy
791 P.2d 767, plaintiff has not satisfied all the elements
necessary to recover tort damages for a breach of the covenant of
good faith and fair dealing. Under the Story decision, it is
virtually impossible to satisfy all five elements which are
necessary to recover tort damages. For all practical purposes, the
Story decision, without benefit of briefing or arguments by the
parties, eliminated tort damages for bad faith conduct in Montana.
For these reasons, as more specifically set forth in my
dissent in McNeil v. Cum'e (Mont. 1992), 49 St .Rep. -S I would
reverse the Story decision and remand this case to the District Court
for consideration of plaintiff's claim for tort damages based on
defendants' alleged breach of the covenant of good faith and fair
dealing.
I concur in the foregoing concurrence and dissent of Justice
Trieweiler.
April 15, 1992
CERTIFICATE OF SERVICE
I hereby certify that the following order was sent by United States mail, prepaid, to the following
named:
JOHN BOBINSKI
Attorney at Law
P.O. Box 5117
Helena. MT 59624-5117
James M. Scheier
Agency Legal Services Bureau
Department of Justice
Justice Building
215 N. Sanders
Helena. MT 59620-1402
HON. MARC RACICOT, Attorney General
, Assistant
Justice Building
Helena, MT 59620
Donald D. MacIntyre, Chief Legal Counsel
Department of Natural Resources and Conservation
1520 E. Sixth
Helena, MT 59620
Legal Division
Department of Administration
Room 155, Mitchell Building
Helena, MT 59620
ED SMITH
CLERK OF THE SUPREME COURT
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STATE OF MONTANA
BY: