Mannix v. Butte Water Company

No. 91-621

IN THE SUPREME COURT OF THE STATE OF MONTANA
1993

GARY W. MANNIX,
Plaintiff and Appellant,

THE BUTTE WATER COMPANY,
a New Jersey Corporation,
and DENNIS WASHINGTON,
Defendants and Respondents.

APPEAL FROM: District Court of the Second Judicial District,
In and for the County of Silver Bow,
The Honorable James E. Purcell, Judge presiding.

COUNSEL OF RECORD:
For Appellant:
Frank B. Morrison, Jr., (argued) John M. Morrison
and David Ness (argued), Morrison Law Offices,
Helena, Montana
For Respondent:
Ronald B. MacDonald (argued) and Darla J. Keck;
Datsopoulos, MacDonald & Lind, Missoula, Montana

Submitted: January 21, 1993
Decided: June 11, 1993
Filed:
Justice John Conway Harrison delivered the Opinion of the Court.

Appellant Gary Mannix (Mannix) appeals from a judgment entered
pursuant to a special jury verdict in the Second Judicial District,
Silver Bow County, and from the denial of his request for a new
trial. The present case stems from the same set of facts and
circumstances as our opinion in Mannix v. Butte Water Co. (1991),
249 Mont. 372, 816 P.2d 441. For clarity, we will refer to the
Butte Water Company (BWC) and Dennis Washington (Washington)
collectively as respondents. We affirm.
The following issues are raised an appeal:
1. Whether the ~istrict Court erred in sustaining
respondents1 hearsay objections;
2. Whether the ~ i s t r i c t Court abused its discretion in
granting respondents8 motion for change of venue;
3. Whether the District Court erred in sustaining
respondentsv objection to lay witness opinion testimony;
4. Whether the District Court erred in granting respondentsr
motion in limine;
5. Whether the District Court abused its discretion in not
allowing Mannixrs expert witness to testify;
6. Whether the ~istrictCourt erred in dismissing all claims
based on breach of the implied covenant of good faith and fair
dealing;
7. Whether the ~istrict Court abused its discretion in
instructing the jury.
Mannix began working for BWC as a laborer in 1973. He was
2
eventually promoted to engineer, then to superintendent, then to
vice-president and operations manager and member of the board of
directors. When the general manager retired in 1983, Mannix was
promoted to president and general manager, the position he occupied
at the time this action arose.
Before this action arose, Atlantic Richfield Company (ARCO)
owned a majority of BWC's outstanding shares. In September 1985,
while negotiating a deal to buy ARCO1s mining properties in Butte,
Montana, Washington learned that BWC was also for sale. Washington
and ARCO eventually entered a letter agreement whereby Washington
would purchase ARCO1sButte mining properties, approximately 35,000
acres of property around Georgetown Lake, and BWC. At that time,
BWC carried a $4.5 million note payable to ARCO. The agreement
originally called for the full amount of the debt to be forgiven.
However, from what he learned in meeting with Mannix and what he
learned about the Public Service Commission's rate making process,
Dorn Parkinson, who was the president of Washington Corporations,
determined that it would be beneficial for BWC to retain some debt.
Washington and ARCO agreed to modify the original agreement to
retain a $2 million debt in BWC. Washington arranged a $2 million,
six-month loan with a Minnesota savings and loan association where
he had a substantial personal line of credit. Washington
personally guaranteed payment of the loan. The $2 million from the
loan was to be paid directly to ARCO for its stock in BWC, and the
purchase price for the properties was to be reduced by $2 million.
The result was that Washington would receive the BWC stock free of
debt to ARCO, while BWC would have a six-month note payable to the
savings and loan association for $2 million. ARC0 did not inform

Mannix of the details of this arrangement.
On December 12, 1985, Mannix received a call from John
Thiebes, counsel for Washington Corporations. Mannix had left the
office, so he returned the call the next day. Mannix claims
Thiebes requested he travel to Missoula to sign some resolutions,
the $2 million note, and some other papers. Mannix refused to do
so because he wanted to check with ARCOrs legal counsel. He called
Gene Tidball, an attorney for ARCO, who informed him that he could
sign the note and other papers.
Mannix discussed the matter with Mike Patterson and Bill
Mufich, members of BWCtsboard of directors, and with Skip Dunfee,
BWCts secretary-comptroller. According to Mannix, they determined
that it was not in BWC1s best interest to obligate it to a $2
million note, the terms and circumstances of which they knew little
or nothing about. Eventually, however, Mannix, Patterson, and John
OIBrien, another board member, signed a resolution authorizing
board member Frank Gardner to sign t h e note.
Washington testified that while in Denver, Colorado, during
the final negotiations, he overheard a telephone conversation
between Tidball and Mannix. Washington described this as a "big
argumenttt which Tidball said, "This is complete insubordination.
in
And this is grounds for termination. Although Washington admitted
that he might have fired Mannix had Mannix been as insubordinate to
him as Mannix was to ARCO, Washington also made it clear that he
admired Mannix for standing up to ARCO and held no prejudice
against him for having done so, He felt Mannix Ifhad a lot of

guts.I'
~ashingtonand ARCO closed the deal in Denver on December 18,
1985. Through ~hiebes,~ashingtonrequested the resignation of all
BWC board members that day. As sole shareholder, Washington
elected himself, Parkinson, and Thiebes to the new board of
directors. At a board meeting held the day after closing, either
on the plane trip from Denver or when they landed in Missoula, the
newly elected board authorized Parkinson to meet with an nix to
determine whether he should remain as president of BWC. parkinson
testified that the new board wanted him to meet with Mannix because
the events surrounding the closing of the deal and Mannix's
unfavorable reaction to the deal Itbasically raised a flag in our
mind as to--is there some kind of fundamental problem here . . . . H

Parkinson testified that he had any option available in dealing
with Mannix's employment after that meeting.
Parkinson went to Butte the next day, December 20, and met
with Mannix. The parties dispute what happened at that meeting.
Parkinson testified that Mannix described the manner in which the
sale was transacted as immoral and unethical and that Mannix
characterized Washington as immoral; that Mannix said he would do
the same thing again (apparently referring to his refusal to sign
the note) ; that Mannix said he would always do what he thought was
in B W C 1 s best interest; and that Mannix did not offer to put the
past behind them and get on to the future. Mannix testified that
although he felt the events surrounding the sale had created a
severe problem, he said to Parkinson that he thought their only
option was "to roll up our sleeves and go on from here." Mannix
testified that he did not tell Parkinson that he could not go on as
president of BWC; that he did not say anything to Parkinson that
would lead Parkinson to believe that he did not want to continue as
president; and that he did not resign or express any reluctance to
continue as president.
Parkinson fired Mannix as a result of that meeting. Mannix
maintains that he was fired in retaliation for his refusal to sign
the $2 million note and that the decision to fire him actually was
made at the board meeting held on December 19.
Mannix told his fellow employees and the press that he had
been fired because of a "fundamental difference in business
philosophy." Both men agree that Parkinson suggested this phrase
as an explanation. On his rlCLAIMANTrS
DISCHARGE STATEMENT" filed
in pursuit of unemployment compensation benefits, Mannix stated
under oath that this was the reason for his termination. When
asked if the reason was true, he checked the box marked "YES."
Both Mannix and his wife admitted during trial that Mannix and the
new board had a difference in business philosophy.
Mannix originally filed suit against ARCO, The Anaconda
Minerals Company, BWC, Washington Corporations, and Dennis
Washington. The complaint sought damages for wrongful termination,
breach of the implied covenant of good faith and fair dealing, and
punitive damages. ARCO, Anaconda Minerals, and Washington
corporations were later dismissed. In February 1991, the District
Court granted partial summary judgment in favor of washington on

all claims except one based on a theory of piercing the corporate
veil. Mannix appealed and we affirmed. Mannix v. Butte Water Co.
(1991), 249 Mont. 372, 816 P.2d 441.
In August 1991, the District Court granted the respondents'
motion for change of venue, moving the trial from Silver Bow to
Flathead County. The case was then tried before a jury. At the
close of Mannix1s case in chief, the District Court granted a
directed verdict in favor of respondents on the claims of breach of
the implied covenant of good faith and fair dealing, wrongful
discharge, and punitive damages. The jury subsequently returned a
special verdict in favor of respondents finding that the board of
directors had a basis to conclude that it was no longer in B W C 1 s
best interest to retain Mannix as president. Mannix appeals from
the judgment entered on that verdict and from the denial of his
motion for a new trial.
I
Did the District Court err in sustaining the respondentsr
hearsay objections?
an nix claims the ~istrictCourt erred in refusing to allow
him to relay the contents of conversations he had with LeRoy
Wilkes, an ARC0 employee, and with Ron Woods, a rate analyst for
the Public Service Commission. Respondentsv counsel objected on
the grounds that the testimony contained impermissible hearsay.
Mannix argues on appeal that the only purpose for the testimony was
to show that he had no information concerning the $2 million note
and that other people agreed that under the circumstances the note
should not be signed. Mannix argues that the testimony helped
explain his actions and describe his state of mind, and therefore
was permissible under this Court's holding in Moats Trucking Co.,
Inc. v. Gallatin Dairies, Inc. (1988), 231 Mont. 474, 753 P.2d 883.
Rule 801 (c), M.R.Evid., defines hearsay as "a statement, other
than one made by the declarant while testifying at the trial or
hearing, offered in evidence to prove the truth of the matter
asserted." Under Rule 802, M.R.Evid., "Hearsay is not admissible
except as otherwise provided by statute, these rules, or other
rules applicable in the courts of this state."
In Moats, the defendant wanted to introduce testimony of a
conversation between its general manager and one of its employees.
We held that because the testimony was not offered to prove the
truth of the matter asserted, but for the purpose of showing that
the statement was made and the resulting effect on the general
manager's state of mind, it was permissible. Moats, 753 P.2d at
886. The present case is distinguishable from Moats. In his
brief, Mannix's own argument indicates that the testimony was in
fact offered for its truth. He argues that the purpose of the
testimony was to "show that ARCO personnel would not provide
information on the note and that those surrounding Mannix agreed
with his conclusion that signing the note was imprudent."
Unlike the testimony in Moats, the testimony here was offered
to prove: 1) ARCO personnel would not provide information; and 2)
those surrounding Mannix agreed with him. Furthermore, the
evidence Mannix sought to present was admitted through other
testimony. The transcript is replete with testimony that ARC0 had
not provided Mannix any information on the note and that Ron Woods,
Mike Patterson, Bill Mufich, and John OIBrien agreed that the note
should not be signed. We have previously held that where no
prejudice arises and the substantial rights of a party are not
adversely affected because the evidence sought to be introduced is
admitted through other testimony, no reversible error occurs. See
Niemen V. Howell (1988), 234 Mont. 471, 764 P.2d 854. We conclude
that the District Court did not err in excluding the proffered
testimony.
I1

Did the District Court abuse its discretion in granting
respondents' motion for change of venue?
On January 25, 1991, respondents filed a motion for change of
venue based on their belief that an impartial trial could not be
held in Silver Bow County and that the ends of justice would be
promoted by a change of venue. Respondents requested that the
motion "be a continuing motion up until the time of trial as the
elements which [gave] these Defendants reason to believe that an
impartial trial [could] not be had in the present venue, [were]
continuing in nature and these elements exist[ed] as a result of
the cumulative impact of a series of events and media attention
associated therewith." After briefing and oral argument by both
parties, Judge Purcell, who was then presiding over this case,
granted the motion.
In support of their claim that they could not get a fair trial
in Silver Bow County, the respondents specifically cited the
following: 1) the residents of silver Bow County had a potential
interest in the outcome of this case, and as ratepayers of BWC they
were potentially plaintiffs in a class-action suit pending in
silver Bow County in which BWC and Washington were named
defendants; 2) hostile public opinion had been aroused in Silver
Bow County due to extensive media reports and editorials so that
prejudice existed in the minds of potential jurors; 3) Judge
Sullivan, who was presiding over the case when the motion was
filed, had been the subject of articles and editorials in The
Montana Standard suggesting that he exercised favoritism; 4)
counsel for the plaintiffs in the class-action suit had been widely
quoted in The Montana Standard as saying that BWC was the "alter
egortof Washington and that Washington could be held personally
liable for its actions.
The respondents provided an extensive accumulation of
newspaper articles and editorials in support of their motion. They
cited an article dated January 15, 1991, entitled glWashington
'pocketed' $1 million, Goetz says," and an editorial criticizing
Judge Sulfivanlssupport of legislation regarding non-disclosure of
judiciary disciplinary actions. That article mentioned Judge
Sullivanlsremoval from a case involving Washington because it was
alleged by one of the parties in that case that Judge Sullivan's
personal and family relationship with Washington was too close.
 In granting the respondents1 motion, Judge Purcell stated:
Because of what has t r a n s p i r e d in t h i s thing over t h e
last -- over a long period of t.ime, . . .
there are pros
and cons both ways in this thing, as to whether Mr.
Mannix has a lawsuit. There is that rumor on the street.
I can say that. A lot of people say that he does not
have a case here. And a lot of people say that he is
entitled to get all kinds of remuneration. So the Court
is taking -- I have studied this thing, basically, since
the Motions were before me, and T am going to grant the
Motion for a Change of Venue i:2 this case.

And I think that it is in the best interest of all the
parties. I want both parties here to get as fair a trial
as possible. There was an article that appeared in the
Montana Standard around the 4th of July here, that came
out of nowhere, I mean, there was nothing going on, in
my opinion that -- That it was not fair, as far as I can
see, to either side.
Section 25-2-201, MCA, the statute governing change of venue
provides in pertinent part:
When change of venue required. The court or judge must,
on motion, change the place of trial in the following
cases :

(2) when there is reason to believe that an impartial
trial cannot be had therein;
(3) when the convenience of witnesses and the ends of
justice would be promoted by the change.
A movant is entitled to a chan~'e venue upon a showing that
of
there are reasonable grounds to believe that prejudice actually
exists which creates a reasonable apprehension that a fair and
impartial trial cannot be held in the current venue. State v.
Pease (l987), 227 Mont. 424, 432, 740 P.2d 659, 664; relying on
State v. Holmes (l983), 207 Mont. 3.76, 181, 674 P.2d 1071, 1073.

Absent an abuse of discretion, the district court's ruling on a
motion for change of venue will not be disturbed. When pre-trial
publicity is the grounds upon which prejudice is based, the
publicity vlmust be inflammatory and create a reasonable
apprehension that a fair trial .. .Ivcannot be had in the current
venue. Pease, 740 P.2d at 664 (quoting Holrnes).
Mannix argues that the respondents' reliance on the fact that
the potential jurors might be members of a class action suit in
which the respondents were the defendants, and on the fact that the
jurors, as ratepayers, had an interest in the case, is misplaced.
Mannix cites School District No. 1 v. Globe and Republic Ins. Co.
(1963), 142 Mont. 220, 383 P.2d 482 (any interest potential jurors
had as taxpayers was not sufficient to justify change of venue) ;
and Carter County v. Cambrian Corp. (1963), 143 Mont. 193, 387 P.2d
904 (jurors not disqualified where statute specifically provided

that jurors were not disqualified for being taxpayers of a county
that is party to the suit), to support his argument. However, this
was not the only basis on which respondents relied or on which the
District Court granted the motion.
Mannix also argues that under the twenty-day requirement of
Rule 12(b) (iii), M.R.Civ.P., the respondents were only entitled to
rely on the two newspaper articles cited above as they were the
only "eventsvvthat occurred within twenty days of filing of the
motion. He argues that any prejudice created based on these two
articles alone does not rise to the level required to grant a
change of venue.
Rule 12(b)(iii), M.R.Civ.P., sets forth the time limitations
for bringing a motion for change of venue under subsections (2) and
(3) of 1 25-2-201, MCA.
(iii) Any request for change in place of trial for
grounds 2 and 3 of section 25-2-201, Montana Code
Annotated, must be presented by motion within 20 days
after the answer to the complaint, or to the cross-claim
where a cross-claim is filed, or the reply to any answer,
in those cases in which a reply is authorized, has been
filed; except that whenever at some time more than 20
days after the last pleading has been filed an event
occurs which thereafter affords good cause to believe
that an impartial trial cannot be had under ground 2 of
said section 25-2-201, and competent proof is submitted
to the court that such cause of impartiality did not
exist within the 20-day period after the last pleading
was filed, then the court may entertain a motion to
change the place of trial under ground 2 of section 25-2-
201 within 20 days after that later event occurs.
The respondents' motion was a continuing one to cover future
articles and editorials regarding the respondents. Judge Purcell
even noted the publicity as late as July 1991. The "event" was a
barrage of articles and editorials regarding BWC and Washington.
In such a situation, strict application of the twenty-day rule is
impractical. This Court previously has considered a series of
newspaper articles that occurred over more than a twenty-day
period. In Pease, we considered a series of nineteen newspaper
articles that had been published over the course of the defendant's
case. Rule 12(b)(iii) contained the same twenty-day limitation
then as it does now. In Pease, however, we specifically noted that
the articles were news articles and not editorials. Here, the
articles included numerous editorials concerning the respondents.
As noted above, Judge Purcell expressed valid concerns about
each party's ability to receive a fair trial in Silver Bow County.
We conclude that he did not abuse his discretion in granting
respondents' motion for change of venue.

Did the District Court err in sustaining respondentst
objection to lay witness opinion testimony?
During his case in chief, Mannix called Bill Mufich, a board
member at the time BWC was sold to Washington. The following
exchange took place.

Q. And did you think that it was in the best interest of
the Butte Water Company to terminate Gary Mannix?
MR. MACDONALD [respondents' counsel]: To which I will
object, Your Honor. This invades the province of the
jury.
THE COURT: Sustained.

Q. Do you have an opinion, based upon your experience as
a director, as to whether or not, it was in the best
interest of the Butte Water Company to retain Gary Mannix
as its president?
MR. MACDONALD: Same objection. It calls for--
THE COURT: He is only asking him, does he have an
opinion. Proceed.
Q. You may answer.
A. Yes.
Q. And what is that opinion?
MR. MACDONALD: Same objection.
The court sustained the objection. Mannix argues on appeal that
"Mufichts long relationship with ARC0 and the Butte Water Company
provided a basis for him to testify on his perceptions concerning
the corporation's best interests." Mannix was seeking lay witness
opinion testimony from Mufich. Under Rule 701, M.R.Evid., the
testimony must have been rationally based on Mufich's perceptions
and helpful to a clear understanding of his testimony or the
determination of a fact in issue. Mannix does not argue that the
opinion testimony was offered because it helped the jury understand
Mufich9s testimony; therefore, in order to be admissible it must
have been helpful in determining a fact in issue. We hold that
Mufichts proffered testimony failed the second part of this test.
The special verdict form given to the jury was based on 5 35-

1-411, MCA (1985). That statute read:

Removal of officers. Any officer or agent may be removed
by the board of directors whenever in its iudqment the
best interests of the corporation will be served thereby,
but such removal shall be without prejudice to the
contract rights, if any, of the person so removed.
~lection appointment of an officer or agent shall not
or
of itself create contract rights. (Emphasis added.]
On its face the statute clear that the determination
terminate an officer is a subjective one for the board of directors
to make.
The special verdict form asked the following question:
Did the Board of Directors of The Butte Water Company in
their iudment have a basis to conclude on December 23,
1985, that it was no longer in the best interests of The
Butte Water Company, as is defined in these instructions,
to retain the Plaintiff as its President? [Emphasis
added. ]
The question here was not whether in Mufichlsopinion it was in the

best interests of the corporation. As he was not a member of the
board that made the decision, his opinion was irrelevant and
inadmissible; it did not go to the determination of a fact in
issue. Although the District Court excluded this testimony on the
grounds that it invaded the province of the jury, because we
conclude under Rule 701, M.R.Evid., that its ultimate determination
to exclude the evidence was correct, it will be upheld. See
District No. 55 v. Musselshell County (1990), 245 Mont. 525, 802
P.2d 1252; Jerome v. Pardis ( 1 9 8 9 ) , 240 Mont. 187, 783 P,2d 919.
IV

Did the District Court err in the manner in which it applied
its order granting respondents1 motion in lirnine?
On September 20, 1991, the District Court granted respondents1
motion in limine which sought to exclude evidence regarding the
authority of the newly elected board of directors to act. In its
memorandum, the court stated that 'I[tJhe motion is granted as
stated but it shall be narrowly construed to exclude evidence
regarding the legal authority of the board to act but not evidence
regarding the nature and character of those actions and their
propriety." During trial, Mannix1s counsel conceded the legality
of the board's meetings. However, Mannix claims that the District
Court erred in the manner in which it applied this order. Mannix
claims that the District Court committed prejudicial error by
preventing him from introducing evidence of the following: 1) the
newly elected board did not include anyone from BWC in its meeting;
2) the board did not include Skip Dunfee, B W C t s secretary, in its
meetings; 3) the board did not seek opinions from BWC personnel
before it decided do terminate Mannix.
Our reading of the record, however, reveals that Mannix was

allowed to introduce the evidence he claims was excluded. The
record reveals the following testimony was given by Skip Dunfee on
direct examination:
Q. And what was your position in December 1985, sir?
A. I was comptroller/secretary.

Q. And what are the differences in job responsibilities
between those that you had in December 1985 and now?
A. As a secretary, I was in charge of the minutes of the
quarterly meetings; of the annual meeting. I am
responsible for keeping track of those records. I had
the seal of the Butte Water Company which was used on all
legal documents et cetera. . . .
Q. And that would have been prior to the time, then,
that Washington became the owner of the Butte Water
Company, on December 18, 1985.
A. That is correct.

Q. Mr. Dunfee, there has been received here in evidence
an exhibit that has been marked as Plaintiff's Exhibit
No. 3. The exhibit contains the minutes of two Board
meetings with the Butte Water Company. One is dated
December 19, 1985; and the other is dated December 23,
1985. I will just ask you to examine the exhibit and I
will give you a few minutes to do so, because you may not
have seen it before.
A. Okay.

Q. Have you had a chance to look at the minutes of both
meetings?
A. Yes, I have.

Q. Did you receive notice of either of those two
meetings?
A. No, sir.
Q. Did you attend either of those two meetings of the
Butte Water Company?
A. No, sir.
Q. What was your position with the company at the time
of the meetings?
Q- Okay- When did you become comptroller/secretary for
the Butte Water Company?
A. In the latter part of 1967.
Q. What are the duties--Strike that. Are there by-laws
of the Butte Water Company that regulate or describe,
rather, the duties of the secretary/comptroller?
A. Yes.

Q. Can you describe for the jury what it was that a
comptroller/secretary was called upon to do for the
company.
A. As I mentioned earlier, the secretary kept the
minutes of all t h e quarterly meetings.

Q. In Plaintiff's Exhibit No. 3, which purports to be
minutes of a special meeting of the Board of Directors of
the Butte Water Company, and it was shown as the
secretary by John ~hiebes. The first meeting on December
19, 1985, shows Mr. Thiebes signing t h a t as secretary.
What was your position on December 19, 1985?
A. I thought that I was secretary.

Q. Were t h e r e two secretaries?
A. There could have been,

Q. Mr. Dunfee, you were referring to Plaintiff I s Exhibit
3 which referenced a Board meeting on December 19, 1985,
and a Board meeting on December 23, 1 9 8 5 .
A. Okay.
Q. I will ask you if you received notice of either of
those meetings?
A. No, sir, I did not.
Q. Did you attend either of those meetings, Mr. Dunfee?
 A. No, sir.

Q. And during the time that Gary Mannix was the
president of the Butte Water Company, did you attend all
the Board of Directors' meetings?
A. To my knowledge, I would say 95 percent of them.

Q. And at the time that we are talking about, who were
the members of the Board of Directors for the Butte Water
Company?
A. Mr. Mannix, Mr. Patterson, Mr. Gardner, Mr. OIBrien
and Mr. Mufich.
Q. So in this discussion, there was Mike Patterson, who
was a member of the Board of ~irectors, right?
A. Yes.

Q Mr. Mannix, who was chairman of the Board of
Directors.
A. Yes.
Q. And, yourself, who attended the Board meetings and
took the minutes as the secretary of the company.
A. That is correct.

Q. . . . After Washington became owner on
December 18,
1985, did you --
were you ever noticed of anymore Board
meetings during your tenure with the Butte Water Company?
MR. MACDONALD: To which we will object, Your Honor.
That is irrelevant.
THE COURT: He may answer.
Q. Go ahead.
A. No, sir.
During cross-examination of Dorn Parkinson, Mannix's counsel
elicited the following testimony:
 Q. A11 right. In making this decision, to terminate Mr.
Mannix, did you contact Bill Mufich who had served as a
Board member of the Butte Water Co. immediately prior to
your acquisition and ask Mr. Mufich whether Mr. Mannix
had ever "buckedN policy of the Board of Directors?
A. No I did not.
Q. Did you ever contact Mr. Patterson, a Board member,
to ask him whether or not Mr. Mannix had ever "bucked"
policy of the Board of Directors?
A. No, I did not.
Q. Did you make any attempt to contact Mr. Dunfee, the
secretary who took all the minutes at Board of Directors1
meetings, to determine if Mr. Mannix had ever gone
against the wishes of the Board of Directors of the Water
CO.?
A. No, I did not.
Q. Did you make any attempt, whatever, to ascertain what
kind of a record Mr. Mannix had had in the past with the
Water Co., with respect to his relationship with the
Board of Directors?
A. I instigated no investigation.

Q. To your knowledge, did Mr. Washington instigate any
investigation?
A. Did not, to my knowledge.
Q. To your knowledge, did Mr. Thiebes initiate any
investigation?
A. Didnot.
Because Mannix was allowed to present the testimony he claimed
was excluded, we conclude the District Court did not err in the
manner in which it applied its order.

Did the District Court abuse its discretion in refusing to
allow Mannix's expert witness to testify?
Mannix retained Alan Brown to testify about proper employment
and termination practices in effect at the time he was terminated
and how the covenant of good faith and fair dealing applied in
those situations. Mr. Brown had worked as a labor relations
manager and personnel representative from 1967 to 1984 with the
Anaconda Company and Champion International. Since 1984 he had
worked as a labor relations consultant. The respondents moved to
exclude Mr. Brown's testimony on the ground that he was not
qualified to testify regarding the relationship between corporate
officers and boards of directors or the termination of a corporate
officer. The District Court granted the motion based on what it
learned from Mr. Brown's deposition. In his deposition, Mr. Brown
admitted: 1) he had never been involved in the termination of a

corporate president or other officer; 2) he had never been involved
in the termination of a board member; 3) he had never attended any
special seminars directed toward termination policies regarding
officers or directors; 4) he did not consider himself an expert on
corporate law; 5) he had never been involved in a case involving
the termination of an officer or director; and 6) he did not hold
himself out as an expert on the relationship between officers and
directors or the interpretation of by-laws regarding that
relationship.
A witness qualified as an expert may testify where specialized
knowledge will assist the trier of fact to understand the evidence
or determine a fact. Rule 702, M.R.Evid. The existence and breach
of the covenant of good faith and fair dealing is a proper subject
for expert testimony. See Niles v. Big Sky Eyewear (1989), 236
Mont. 455, 771 P.2d 114; Crenshaw v. Bozeman Deaconess Hospital
(1984), 213 Mont. 488, 693 P.2d 487. "Questions of the
admissibility of evidence are left largely to the discretion of the
trial court, which will be overturned only in cases of manifest
abuse of that discretion." Zugg v. Ramage (1989), 239 Mont. 292,
296, 779 P.2d 913, 916. The district court's determination on the
qualification and competency of an expert witness to testify will
only be disturbed when there is a showing that the district court
abused its discretion. Foreman v. Minnie (1984), 211 Mont. 441,
445, 689 P.2d 1210, 1212; w , P.2d
779 at 917.
In the present case, the jury may have needed assistance in
understanding the relationship between the officers and directors
of a corporation and the interplay of the covenant of good faith
and fair dealing in that relationship. However, the District Court
determined that Mr. Brown, by his own admissions, was not qualified
to testify on this matter. We conclude that the District Court did
not abuse its discretion by excluding Mr. Brown's testimony.
VI
Did the District Court err in dismissing all claims based on
breach of the implied covenant of good faith and fair dealing?
At the close of Mannix's case in chief, the District Court
granted a directed verdict in favor of respondents on all claims
based on breach of the implied covenant of good faith and fair
dealing. Mannix claims that he was forced to go along with this
ruling because, as a result of the exclusion of Alan Brown's
testimony, he had not been able to present evidence on the
existence of the covenant. As discussed above, the District Court
properly excluded Mr. Brown's testimony.

In determining whether the District Court properly withdrew
the issue from the jury, we look to "whether reasonable men could
draw different conclusions from the evidence. If only one
conclusion is reasonably proper, then the directed verdict is
proper.ll Sernenza v. Leitzke (l988), 232 Mont. 15, 18, 754 P.2d
509, 511 (citation omitted).

It is Mannix's position that the controlling law on the
termination of a corporate officer was the 1i3estInterest Testtf
found in 5 35-1-411, MCA (1985), as supplemented by our decisions
in Gates v . Life of Montana Ins. Co. (1982), 196 Mont. 178, 638
P.2d 1063 (Gates I) , and progeny. Section 35-1-411, MCA (1985),
stated:
Removal of o f f i c e r s . Any officer or agent may be removed
by the board of directors whenever in its judgment the
best interests of the corporation will be served thereby,
but such removal shall be without prejudice to the
contract rights, if any, of the person so removed.
Election or appointment of an officer or agent shall not
of itself create contract rights.
In Gates I we held that the covenant of good f a i t h and fair
dealing was implied in the employment contract of the plaintiff/
employee. 638 P.2d at 1067. In Gates v. Life of Montana Ins. Co.
(l983), 205 Mont. 304, 307, 668 P.2d 213, 214-215 (Gates 11) , we
stated that the duty created by the covenant arises out of the
employment relationship and is imposed by operation of law, For
purposes of our discussion here we will assume, without deciding,
that the covenant supplements the statute.
 However, whether the covenant "is implied in a particular case
depends upon objective manifestations by the employer giving rise
to the employee's reasonable belief that he or she has job security
and will be treated fairly." Dare v. Montana Petroleum Mktg. Co.
(1984), 212 Mont. 274, 282, 687 P.2d 1015, 1020. The objective
manifestations must come from the employer. Karell v. American
Cancer Society (1989), 239 Mont. 168, 175, 779 P.2d 506, 510. We
went on in Karell to expound on the importance of the employer's
role in determining whether the covenant was implied.
The employer's position is pivotal in the employment
relationship. The employer has the exclusive right to
hire and fire. The employer is responsible for the
employee's performance and is in the best position to
evaluate it. The employer has the power to rebuke or
reward the employee and is the only one with the power to
create job security.
Karell, 779 P.2d at 510.
Mannix argues that his twelve years of service, his raises,
and the praise he received from peers and supervisors gave rise to
the covenant. However, Mannix admitted that he realized he served
at the discretion of the board of directors and was aware of that
when he became president.
Because Mannix presented no evidence of objective manifesta-
tions, the District Court properly granted the directed verdict.
VI I

Did the District Court err in instructing the jury?
Lastly, Mannix argues that the District Court erred in
instructing the jury. The District Court has discretion in
deciding how to instruct the jury, taking into account the theories
of contending parties, and we will not overturn that decision
except for abuse of discretion. Cline v. Durden (1990), 246 Mont.
154, 164, 803 P.2d 1077, 1083. "[I]nstructions must be considered
in their entirety, and to determine whether instructions were
properly given or refused this Court will read them in connection
with other instructions given and consider them in the light of the
evidence introduced." Brown v. North Am. Mfg. Co. (l978), 176
Mont. 98, 114, 576 P.2d 711, 721 (citation omitted).
Mannix offered instructions based on both the "best interest"
statute and this Court's decision in Buck v. Billings Montana
Chevrolet, Inc. (1991), 248 Mont. 276, 811 P.2d 537. Instructions
numbered 13 and 15A, which were given by the court read:
INSTRUCTION NO. 13. The law of the State of Montana,
pursuant to Montana Code Annotated 5 35-1-411, is that
any officer may be removed by the board of directors
whenever in its judgment the best interests of the
corporation will be served thereby.
INSTRUCTION NO. 15A. You are instructed that a
legitimate business reason is a reason that is neither
false, whimsical, arbitrary or capricious, and it has
some logical relationship to the needs of the business.
In applying this definition, one must take into account
the right of an employer to exercise discretion over who
it will employ and keep in employment.
Instruction 15A comes from Buck where this Court defined the term
"legitimate business reason" in the context of the Wrongful
Discharge from Employment Act, § 39-2-901 et seq.
Mannix's proposed instruction number 22, which was refused,
read :
A determination made by the board of directors to
terminate a corporate officer must be rationally related
to a legitimate business interest.
Mannix argues that these instructions, when taken together, helped
define and limit the scope of the directors' judgement. The
refused instruction served to link the best interest instruction
(#13) to the instruction defining legitimate business interest

(#15A). Without it, Mannix argues, instruction #15A made no sense.

However, the court also gave the following instructions:
INSTRUCTION NO. 15: The employer is entitled to serve
its own legitimate business interests; an employer must
have wide latitude in deciding whom it will employ in the
face of the uncertainties of the business world and the
employer needs flexibility in the face of changing
circumstances.
INSTRUCTION NO. 22: If you find that the Plaintiff's
discharge was not, in the judgment of the Board of
Directors, in the best interest of the Butte Water
Company as defined by these instructions, then you must
also determine whether the Defendant's actions
proximately caused any loss incurred by Plaintiff.
[Emphasis added.]
...
The special verdict form also included the phrase "in the best
interest of the Butte Water Company as defined in these
instructions." We note that Instruction 15A was the only
instruction containing a definition. Also, Mannixtscounsel argued
to the jury during closing that it was "to determine whether or not
the reasons that they [the board of directors] pursued were false,
whimsical, arbitrary or capricious. And whether they had a logical
relationship to the needs of this business."
When read as a whole, the instructions sufficiently instructed
the jury as to the scope of the board's judgment. Therefore, the
District Court did not abuse its discretion.
 Affirmed.

We concur: / I
Justice Terry N. Trieweiler dissenting in part and concurring in
part.
I dissent from those parts of the majority opinion which
affirmed the District Courtts exclusion of opinion testimony from

Bill ~ufich,and the District Court's refusal to affirmatively
instruct the jury on the defendants1 duty to plaintiff.
As submitted to the jury, plaintiff q sclaim against defendants
was based solely on his contention that he was terminated from
employment with the Butte Water Company in violation of 5 35-1-411,
MCA (1985). That statute permitted his removal only when it was in
the best interests of the corporation.
Prior to Dennis washingtonts purchase of the Butte Water
Company, Mufich served as a director and was familiar with both the
companyqs needs and Mannix1s ability to serve those needs as
president. Therefore, he had knowledge based on his personal
observations which was directly relevant to the issue of whether
Mannix1sremoval would serve the best interests of the corporation,
His opinion was admissible pursuant to Rule 701, M.R.Evid., which
provides :
If the witness is not testifying as an expert, his
testimony in the form of opinions or inferences is
limited to those opinions or inferences which are
(a) rationally based on the perception of the witness and
(b) helpful to a clear understanding of the witness'
testimony or the determination of a fact in issue.
The majority disposes of Mufichgsproffered testimony on the
basis that he was not a member of the board at the time that Mannix
was terminated, and therefore, was not in a position to state
whether "in their judgment" it was in the corporation's best
interest to terminate Mannix. That conclusion misses the point.
No one other than the directors who worked for Washington can
testify regarding their judgment. Obviously, these people who
worked for and owed their livelihood to Washington would never
admit that they acted for reasons other than the best interests of
the Butte Water Company. Does that mean that Mannix should be
precluded from offering objective evidence from which the jury
could infer that Washington's agents acted for reasons other than
those they stated? Obviously not.
Mufich was a member of the Butte Water Company's board of
directors the day before it was purchased by Washington. The
nature of the water company's operation, and therefore, its best
interests, did not change one day later because its stock was
purchased and new directors were appointed by the purchaser.
Mufich was as qualified to express an opinion about the
corporation's best interests the day after Washington's purchase as
he was the day before the purchase took place. To hold otherwise
leaves the proof of the crucial issue in this case within the
exclusive control of the people accused of ignoring the company's
best interest to serve the retaliatory interest of its purchaser.
That seems to me like an odd way to arrive at the truth in this
case.
Presumably, the best interests of the Butte Water Company did
not change overnight because of a change in the personnel who
served as its directors. Mufich had relevant information based on
his personal observations and experiences regarding the best
interests of the corporation. The jury should have been allowed to
hear his opinion and then infer whether, in the judgment of the new
directors, Mannix's termination was in the best interest of the
Butte Water Company, or simply served Washington's interest in
retaliation.
The ruling ofthe District Court excluding Mufich's testimony,
and the decision of the majority to affirm that ruling, are
especially unfair and confusing in light ofthe following testimony
which was solicited from and given by Washington's current
director, Dorn Parkinson:
Q. [by attorney MacDonald] Mr. Parkinson, you have
testified that Mr. Mannix confirmed that he thought the
transaction was [an] immoral and unethical transaction.
Based upon that confirmation, did you have an opinion as
to whether or not, it was in the best interest of the
Butte Water Company to retain him as president?
Mr. Morrison: Objection. It calls for a conclusion of
the witness, invades the province of the jury.
The Court: I think he has already answered the question.
It is repetitious. I think you have already asked that
type of question Mr. MacDonald.
Mr. MacDonald: (continuing) Might I, I don't have a
specific recollection of every question that I have
asked. So, I try this, and you may have the same
objection. With regard to the fact that you and Mr.
Mannix had the conversation where you characterized what
had happened as a fundamental difference in business
philosophies. Did you have an opinion as to whether or
not it would be appropriate to retain a president that
had such differences or, at least, seemed to acknowledge
that such differences existed as the president of the
Butte Water Company?
A. No, in my opinion it would not be appropriate. If
in fact you had a situation where you have a difference
of opinion of how, and what kind of relationship you
 should have between the president and the directors that
you have an unacceptable situation and correction needs
to be taken.
Q. What was your judgment as the person, authorized by
the Board of Directors with regard to retaining Mr.
Mannix at the conclusion of the meeting on the 20th?
A. It was my opinion that it was not in the best
interest of the Water Co. to retain Mr. Mannix. And as
I testified earlier there were several things where I
questioned his judgment, butthose were not fatal flaws,
I think those were situations that we could probably work
with him in the future. Better educate him, develop a
better relationship with the Board. So we wouldn't run
into some of those difficulties. But I saw no way that
we could that day, tomorrow or the next day or a year
from there be able to change his fundamental belief that
this transaction itself was immoral and therefore the
people who participated in it, were probably immoral and
he in his sole discretion was going to determine what was
right. He just seemed to have this feeling that he was
the only one, and the best one, to make those kinds of
determinations for the Butte Water Co. I didn't see how
you could sit down and work with somebody and retrain or
re-educate or change suchbasic fundamental philosophies.
Because Mufich's testimony was excluded and Parkinson's
testimony was admitted, Mannix was denied any opportunity to prove
through anyone familiar with the corporation that his termination
was not in the company's best interest, while defendants were
allowed to prove through people who owed their livelihood to
Washington that Mannix's termination was in the corporation's best
interests.
For these reasons, I conclude that Mufich's opinion testimony
was admissible under Rule 701, the District Court erred by
excluding it, and that error affected substantial rights of Mannix.
I conclude that it was also error for the District Court to
reject Mannix's proposed Jury Instruction No. 22. As submitted to
the jury, Mannix's claim was based solely upon his employer's
obligation to act in the company's best interests. However,
nowhere in the entire set of jury instructions that were submitted
to the jury, did those instructions affirmatively state a duty on
the part of the board to act in the corporation's best interest
when it terminated Mannix.
The District Court gave five separate instructions emphasizing
the broad discretion given to directors of corporations when
deciding personnel matters. They were as follows:
INSTRUCTION NO. 13

The law of the State of Montana, pursuant to Montana
Code Annotated § 3 5 - 1 - 4 1 1 , is that any officer may be
removed by the board of directors whenever in its
judgment the best interests of the corporation will be
served thereby.
INSTRUCTION NO. 14

The employer of an employee who occupies a sensitive
managerial or confidential position has an interest in
protecting its investment and running its business as it
sees fit and thus has a greater ability to terminate such
employee as compared to the termination of an employee
whose duties do not require the exercise of broad
discretion.
INSTRUCTION NO. 15

The employer is entitled to serve its own legitimate
business interests; an employer must have wide latitude
in deciding whom it will employ in the face of the
uncertainties of the business world and the employer
needs flexibility in the face of changing circumstances.
INSTRUCTION NO. 15A

You are instructedthat a legitimate business reason
is a reason that is neither false, whimsical, arbitrary
or capricious, and it has some logical relationship to
the needs of the business. In applying this definition,
one must take into account the right of an employer to
 exercise discretion over who it will employ and keep in
employment.
INSTRUCTION NO. 16
When as a matter of policy, a corporate employer in
filling a sensitive managerial or confidential position,
prefers to retain an employee in whom it holds great
trust, to manage its investment, it should be allowed the
placement of a person who conceivably holds the same
business values and philosophies as the board of
directors in a newly acquired business.
However, there was not one single instruction given by the
District Court which affirmatively stated any duty on the part of
defendants to act in accordance with 5 35-1-411, MCA (1985). The
jury was left to speculate about what set of facts would entitle
Mannix to prevail. The majority opinion attempts to fill that void
by referring to the court's Instruction No. 22. However,
Instruction No. 22 did not set forth any affirmative duty on the
part of defendants. It was simply another cautionary instruction
advising the jury that before damages could be awarded it had to
find that defendantsv conduct caused damages.
The District Courtvs instructions gave the jury no basis for
finding liability on the part of defendants. They gave only
repeated examples of why defendants' conduct could be excused. The
instructions, when considered as a whole, did not fairly frame the
issues to be resolved by the jury.
Mannix was entitled to an instruction clearly setting forth
whatever duty he was owed by defendants and which formed the basis
of his claim. I conclude that the District Court erred by not
giving one.
 I concur with the majority's disposition of issues numbered I,
11, IV, V, and VI. However, for the reasons set forth above, I
would reverse the judgment of the District Court and remand for a
trial in which the jury is allowed to consider all of the relevant
opinion testimony and not just the opinions proffered by
defendants. At the conclusion of that retrial, I would order that
the jury be somehow instructed on the affirmative duty of
defendants to act in accordance with the best interests of the
corporation, not simply its new owner.

Justice Hunt joins in the foregoing dissent and concurrence.

Justice
 June 11, 1993

CERTIFWATE OF SERVICE

I hereby certify that the following order was sent by United States mail, prepaid, to the following
named:

Frank B. Morrison, Jr. and John M. Morrison
David Ness
Morrison Law Offices
80 So. Warren
Helena, MT 59601

Ronald B. MacDonald and Darla J. Keck
Datsopoulos, MacDonald & L i d
201 W. Main, Central Square Bldg.
Missoula, MT 59802

ED SMITH
CLERK OF THE SUPREME COURT
STATE OF MONTANA

BY
Depu