No. 94-026
IN THE SUPREME COURT OF THE STATE OF MONTANA
ROBERT KING,
Plaintiff and Respondent,
ROBERT ZIMMERMAN and CONNIE ZIMMERMAN
and BIG Z, INC., a Montana corporation,
Defendants and Appellants.
APPEAL FROM: District Court of the Thirteenth Judicial
District, In and for the County of Yellowstone,
The Honorable Maurice R. Colberg, Jr.,
Judge presiding.
COUNSEL OF RECORD:
For Appellants:
Michael G. Majerus, Attorney at Law,
Billings, Montana
For Respondent:
Brad L. Arndorfer, Attorney at Law,
Billings, Montana
Submitted on Briefs: June 9, 1994
F~
Decided: August 1, 1994
Filed:
Justice Terry N. Trieweiler delivered the opinion of the Court.
Robert King filed an action in the District Court for the
Thirteenth Judicial District in Yellowstone County in which he
alleged breach of contract, breach of the implied covenant of good
faith and fair dealing, and conversion of property by defendants
Robert and Connie Zimmerman and Big Z, Inc. Following a five-day
jury trial, a verdict was returned for King and judgment was
entered against Big Z and Connie Zimmerman. King was awarded
compensatory damages for breach of contract and conversion in the
amount of $9,654 -24. He was awarded punitive damages in the amount
of $1.00 against Big Z, and $35,000 against Connie Zimmerman, on
the basis that they had acted with actual malice when they
wrongfully converted King's property. Big Z and Connie Zimmerman
appeal.
We affirm.
The following issues are raised on appeal:
1. Did the District Court err when it refused to grant the
defendants' motion for a directed verdict on the issue of
conversion?
2. Did the District Court err when it refused to grant the
defendants' motion for a directed verdict on the issue of whether
Connie Zimmerman was personally liable for conversion of property?
3. Did the District Court err when it affirmed the jury's
award and assessed punitive damages against Big Z and Connie
Zimmerman?
4. Did the District Court abuse its discretion when it
allowed into evidence an audio taped deposition of a witness for
the plaintiff?
5. Did the District Court abuse its discretion when it
allowed King to introduce evidence in support of claims which the
defendants contend were not raised in the pretrial order?
This litigation involves a lease agreement between Robert King
and a trucking firm known as Big Z , Inc., owned by Robert and
Connie Zimmerman. Robert Zimmerman, as president of Big Z, owned
1899 of the 1900 shares of stock of the corporation. Connie
Zimmerman, the corporation's secretary, owned the remaining one
share of stock.
On May 10, 1991, King and Big Z entered into an agreement
whereby King leased to Big Z a truck that he owned, and Big Z
agreed to dispatch commercial loads to be hauled across the country
by King or King's drivers. King was to receive 85 percent of the
gross revenue from each haul, minus certain adjustments, and the
remaining 15 percent of the gross revenue was to go to Big Z.
The agreement stated that King would provide the necessary
permits, licenses, and insurance to haul commercial loads. King
testified that Big Z initially purchased the required permits in
the name of Big Z and King, and that he was reimbursing Big Z for
these costs out of his monthly receipts. The agreement further
provided that King, as lessor, could terminate the lease agreement
30 days after providing written notice, and that Big Z, as lessee,
could terminate the lease "in a 24 hour period with extreme cause,
such as failure to perform."
The dispute leading to this lawsuit began with a load of
cherries which were to be transported from the west coast to the
east coast by Greg Ramey. The load was delivered late and resulted
in substantial losses to Big Z. Ramey remained on the east coast
with King's truck, and King eventually flew to the east coast in
order to retrieve his truck. In connection with his return to
Montana, King agreed to deliver a load of gambling "pull tabs1'to
the west coast. The specific events which occurred are in dispute,
but King apparently returned to Montana with the load of pull tabs
and then declined to deliver the load to Washington state.
In response, the Zimmermans terminatedthe lease agreement and
immediately attempted to retrieve the license plates and other
permits from King's truck which were in Big Z Is name. Unable to do
so, Connie Zimmerman contacted the Yellowstone County Sheriff's
office on July 27, 1991, and reported that the semi-tractor had
been stolen from their business. The sheriff's office refused to
impound the truck, but did retrieve the license plates and permits,
as requested by Connie Zimmerman.
On May 5, 1992, King filed a complaint against Big Z and
Robert Zimmerman in which he alleged breach of contract, breach of
the implied covenant of good faith and fair dealing, and conversion
of property. King claimed that Robert Zimmerman and Big Z breached
the lease by "willfully and intentionally refusing to dispatch
plaintiff and making false reports of theft to the Yellowstone
County Sheriff's Department" and that they had converted King's
property when they caused the sheriff's office to confiscate "tags,
insurance and permits . . . in the name of Big Z for which the
plaintiff had paid." Finally, the complaint alleged that
"defendants are further liable for punitive damages for their
intentional and malicious act of making false police reports in
order to convert them [the property seized] from the plaintiff's
use to their own." On June 15, 1993, the complaint was amended to
include Connie Zimmerman as a defendant.
A jury trial was held on August 23-27, 1993. The jury found
a breach of contract or the obligation of good faith and fair
dealing, and assessed damages against Big Z in the amount of
$8,288.33 as compensatory damages, plus interest and costs. The
jury also found conversion by Big Z and Connie Zimmerman, and
awarded compensatory damages of $1,117.23. Furthermore, the jury
found that Big Z and Connie Zimmerman had acted maliciously with
respect to the conversion, and returned exemplary damages against
Big Z in the amount of $1.00 and against Connie Zimmerman in the
amount of $35,000. No damages were assessed against Robert
Zimmerman personally.
The court entered findings of fact and conclusions of law
related to the amount of punitive damages on September 8, 1993, and
awarded punitive damages to King in the amounts assessed by the
jury. From the judgment entered on September 16, 1993, Big Z and
Connie Zimmerman appeal.
ISSUE 1
Did the District Court err when it refused to grant the
defendants' motion for a directed verdict on the issue of
conversion?
Big Z and Connie Zimmerman contend that the court should have
granted their motion for a directed verdict on the issue of
conversion because the items that Connie Zimmerman requested the
sheriff's department to return were license plates and permits
which were owned by Big Z. They assert that King could not
demonstrate that he owned the property or had a right of
possession, and therefore, could not prove conversion or wrongful
possession of this property by Big Z or Connie Zimmerman.
A court may grant a directed verdict only when it appears as
a matter of law that the nonmoving party could not recover upon any
view of the evidence, including the legitimate inferences to be
drawn from the evidence. Keanzey v KXLF (Mont. 1994), 869 P.2d 772,
.
777, 51 St. Rep. 119, 123. A directed verdict for the defendant is
not proper if reasonable persons could differ regarding the
conclusions which could be drawn from the evidence, and a directed
verdict is proper only in the complete absence of any evidence to
warrant submission to the jury . Dees v. American National Fire Insurance
(1993), 260 Mont. 431, 442, 861 P.2d 141, 148; Moralliv. Lake County
(1992), 255 Mont. 23, 27, 839 P.2d 1287, 1289.
The standard we use in reviewing denials of motions for
directed verdicts only requires substantial evidence in the record
to support the finding of the jury. Laize v. Dunkle (1988), 231 Mont.
365, 369, 753 P.2d 321, 323. We review the evidence in a light
most favorable to the prevailing party, and will reverse only where
there is a lack of substantial evidence to support the judgment.
Lane, 753 P.2d at 323. Substantial evidence is evidence which a
reasonable mind might accept as adequate to support a conclusion,
even if it is weak or conflicting. Amoldv. BoiseCascade (1993), 259
Mont. 259, 265, 856 P.2d 217, 220.
Conversion requires property ownership, the owner's right of
possession, and the unauthorized control over the property by
another resulting in damages. Lane, 753 P.2d at 323. However, in
an action for conversion, "property ownership" does not mean that
the plaintiff must have absolute or unqualified title to the
property in question, but rather that he or she must have an
interest in the property and the right to possess the property at
the time of the alleged conversion. Kinsman v. Stanhope (1914), 50
Mont. 41, 144 P. 1083; 18 Am. Jur. 2d Conversion 5 75 (1985).
Ordinarily, an immediate right to possession at the time of
conversion is all that is required to enable a plaintiff to
maintain an action. 18 Am. Jur. 2d Coltversion 5 76 (1985).
This statement of the law of conversion was properly reflected
in the following instruction which was given to the jury:
Conversion is the unauthorized assumption and exercise of
the right of ownership over goods or personal chattels
belonging to another, to the alteration of their
condition or the exclusion of the owner's rights. To
entitle the plaintiff to recover, the jury must believe,
from the evidence, that the plaintiff was the owner of
the prouertv in question, or that he had some special
interest therein, which entitled him to possession of the
propertv at the time of the alleqed conversion.
[Emphasis added].
Although the defendants consistently maintained that no
conversion had occurred, the trial transcript reveals that the
defendants specifically consented tothis instruction regarding the
law of conversion. However, on appeal, Zimmerman and Big Z contend
that King cannot maintain a conversion action because he cannot
prove that Big Z had actually transferred title or ownership of the
items in question to King. The crux of their argument is that
Big Z had title to the items seized, as was required by state and
federal regulations pertaining to the trucking business, and King
had no ownership interest in this property.
We disagree. Under the law of conversion, as properly stated
in Jury Instruction No. 15, the jury did not have to find that King
had absolute ownership of or title to the property in question, but
rather that he had an interest in the property which entitled him
to possession at the time Connie Zimmerman requested the sheriff to
intervene. In this regard, the jury heard extensive testimony
concerning the terms of the lease agreement which required King to
provide the necessary permits, licenses, and insurance to haul
commercial loads; the fact that federal and state regulations
required these items to be obtained in Big 2's name, even though
the lease required King to purchase them; King's right to possess
these items until the lease was properly terminated, at which time
the cost of these items would be prorated and he would be paid back
for the unexpired use of these items; the notice required prior to
terminating the lease; and the fact that, in accordance with the
terms of the lease agreement, King was reimbursing Big Z for these
items out of his monthly receipts.
After considering this evidence in the light most favorable to
King, including the legitimate inferences which could be drawn from
this evidence, we conclude the jury could find that King had an
ownership interest in the property in question. Although the
evidence was conflicting, there was substantial evidence warranting
submission of the issue of conversion to the jury and upon which a
jury could base its verdict. Therefore, we conclude that Big Z and
Connie Zimmerman were not entitled to a directed verdict on the
issue of conversion.
ISSUE 2
Did the District Court err when it refused to grant the
defendants1 motion for a directed verdict on the issue of whether
Connie Zimmerman was personally liable for conversion of property?
The defendants contend that the court should have granted
Connie Zinnermanls notion for a directed verdict on the issue of
whether she can be held personally liable for conversion of King's
property. Zimmerman and Big Z assert that under the corporate
shield doctrine the shareholders of a corporation are immune from
liability unless special circumstances exist which justify
I1piercing the corporate veil" in order to reach the shareholders
individually. They maintain that Connie Zimmerman acted on behalf
of the corporation, in furtherance of corporate goals, and that
there is no evidence to justify bringing Zimmerman within the
exceptions to the corporate shield doctrine.
King counters by noting that this case did not involve an
attempt to pierce the corporate veil in order to get at the assets
of the shareholders for payment of a corporate debt. What was pled
and tried in this case was whether Connie Zimmerman wrongfully
converted King's property and whether there was a basis to hold her
personally liable for her actions. In fact, the jury found that
both Big Z and Connie Zimmerman were individually liable for
conversion of King's property. King contends that at no time was
the issue whether Connie Zimmerman should be held liable for the
corporation's actions as one of its shareholders. We agree.
The jury was instructed as follows on the issue of personal
liability on the part of Connie Zimmerman:
Corporate officers or directors are privileged to
interfere with or induce breach of the corporation's
contracts or business relations with others as long as
their actions are in good faith and for the best
interests of the corporation. Where an officer or
director acts asainst the best interests of the
corporation, acts for his own pecuniarv benefit. or with
intent to harm the plaintiff, he is personallv liable.
[Emphasis added].
This jury instruction correctly states the law regarding personal
liability of a corporate officer or director as set forth by this
Court in Phillips v. Molztana Education Association (1980), 187 Mont . 419, 610
P.2d 154. Seeaho,Mannixv.ButteWaterCompany (1991), 249 Mont. 372,
816 p.2d 441; Bottrellv.AmericanBank (1989), 237 Mont. 1, 773 p.2d 694.
In this instance, the jury heard testimony that Connie.
Zimmerman, as secretary of Big Z, had intentionally made a false
report to the sheriff's office when she reported that the
semi-tractor had been stolen in order to "teach him [King] a
lesson." Furthermore, the jury considered evidence regarding the
termination of the lease without warning, and Connie Zimmermanls
actions prior to calling the sheriff's office. Although this
testimony was disputed, the jury resolved the conflicting evidence
in favor of King. When such conflicting evidence exists, we do not
retry a case because the jury chose to believe one party over
.
another. Simchuk v Angel Island CommunityAssociation ( 1 992 ) , 2 53 Mont 2 2 1,
.
833 P.2d 158.
Using the same standard of review set forth in the previous
section, we conclude that there was substantial evidence to warrant
submitting the issue of personal liability to the jury. After
drawing reasonable inferences in favor of King from the evidence
presented, we conclude that a jury could logically infer that
Connie Zimmerman's motives were not in the best interests of the
corporation or that she had acted with the intent to harm King. We
conclude the District Court did not err when it denied Connie
Zimmermanls motion for a directed verdict on the issue of her
personal liability.
ISSUE 3
Did the District Court err when it affirmed the jury's award
and assessed punitive damages against Big Z and Connie Zimmerman?
Connie Zimmerman and Big Z contend that punitive damages were
improperly assessed against Zimmerman because there was no clear
and convincing evidence of malice on her part. Furthermore, the
defendants claim the District Court erred when it instructed the
jury to consider the nine factors set forth in § 27-1-221(7) (b),
MCA, with respect to this issue. They maintain that the court
should have given the instruction they offered on punitive damages
which was based on the Montana Pattern Jury Instructions,
number 25.65.
The jury found that both Big Z and Connie Zimmerman converted
King's property and had acted with actual malice. After the
verdict, the court reviewed the award pursuant to 5 27-1-221(7) (c),
MCA. The court issued findings of fact and conclusions of law
related to the amount of punitive damages, and adopted the amount
of the jury's award.
Under 27-1-221, MCA, reasonable punitive damages may be
awarded when a defendant has been found guilty of actual malice.
Section 27-1-221(2), MCA, provides:
A defendant is guilty of actual malice if he has
knowledge of facts or intentionally disregards facts that
create a high probability of injury to the plaintiff and:
(a) deliberately proceeds to act in conscious or
intentional disregard of the high probability of injury
to the plaintiff; or
(b) deliberately proceeds to act with indifference
to the high probability of injury to the plaintiff.
"All elements of the claim for punitive damages must be proved by
clear and convincing evidence . . . [which] is more than a
preponderance of evidence but less than beyond a reasonable doubt. "
Section 27-1-221(5), MCA.
A jury award of punitive damages must be reviewed by the
district court judge. Section 27-1-221(7) (c), MCA. A district
court judge, having heard the evidence and observed the witnesses,
is in the best position to determine whether the requirements of
proof of punitive damages have been met. Dees, 861 P.2d at 150.
Here, Judge Colberg reviewed the award and concluded the jury
correctly assessed punitive damages against Big Z and Connie
Zimmerman, based on clear and convincing evidence that "Connie
Zimmerman apparently intended to teach plaintiff [King] a lesson"
and "[tlhe behavior was intentional." Furthermore, after
considering each of the relevant factors in 5 27-1-221(7)(b), MCA,
the court found that the jury had assessed an appropriate amount of
damages against each defendant. In his findings, Judge Colberg
carefully articulated how the evidence supported each of the
statutorily required considerations for an award of punitive
damages. Although the record is replete with conflicting
testimony, there is substantial, credible evidence upon which a
jury could base a determination that Connie Zimmerman and Big Z
acted with malice toward King when a false report of a stolen truck
was filed and King's property was converted.
In addition to rejecting the Zimmermans' contention that there
was not clear and convincing evidence to support the jury's
verdict, we find no merit in the argument that the judge improperly
instructed the jury on the issue of punitive damages. For all
13
practical purposes, the differences between the proposed
instruction and the given instruction, which was based on
§ 27-1-221, MCA, are negligible.
When we review a district court's refusal to give an offered
jury instruction, the following rules apply:
It is not reversible error for a trial court to
refuse an offered instruction unless such refusal affects
the substantial rights of the party proposing the
instruction, thereby prejudicing him.
A party in not prejudiced by a refusal of his
proposed instructions where the subject matter of the
instruction is not applicable to the pleadings and facts,
or not supported by the evidence introduced at trial, or
the subject matter is adequately covered by other
instructions submitted to the jury. [Citations omitted].
Cotlrellv. Burlington Northenz (1993), 261 Mont. 296, 306, 863 P.2d 381,
In this case, the instruction given to the jury was
substantially the same as that offered by the defendants. We
cannot conclude that the defendantsf rights were affected by the
court's decision to instruct the jury as it did.
We conclude the court did not err when it adopted the jury's
verdict and assessed punitive damages against Big Z and Connie
ISSUE 4
Did the District Court abuse its discretion when it allowed
into evidence an audio taped deposition of a witness for the
plaintiff?
At trial, over the defendantsf objection, the District Court
allowed an audio taped deposition of plaintiff's witness, Greg
Ramey. The basis for the objection was that the Montana rules
regarding taped depositions had not been followed and that the
deposition had been taken after the discovery cutoff deadline had
passed. Rule 30(h)(4), M.R.Civ.P., sets forth the rules for video
taped or audio taped depositions, and the defendants contend these
rules were not complied with because the operator's name and
business address were not stated on the taped part of the
deposition; the tape was not indexed by a time generator or other
adequate indexing device; and the original audio tape was not filed
with the clerk of court. The defendants maintain these rules are
mandatory and because they were not followed, the tape should not
have been allowed.
The determination of the admissibility of evidence is within
the broad discretion of the trial court, and we will not disturb
the court's ruling absent a manifest abuse of this discretion.
Jacobsen v State (1989), 236 Mont. 91, 94, 769 P.2d 694, 695.
.
In this instance, the court allowed admission of the audio
taped deposition despite the fact that certain requirements set
forth in Rule 3O(h), M.R.Civ.P., were not fully complied with.
After reviewing the record, however, we conclude that there was no
prejudice to the defendants resulting from the defects alleged. On
this basis, we find no grounds to hold that the tape was
inadmissible.
The procedural requirements of Rule 30(h), M.R.Civ.P., insure
the accuracy and proper identification of a taped deposition.
Here, however, the accuracy of the taped deposition was never
15
challenged. The objections raised during the trial went to
substantive issues which were discussed by Ramey, and the
defendants were afforded adequate opportunities during the trial to
object and excise specific portions of Ramey's testimony. These
portions of the tape were never heard by the jury. Furthermore,
the objection that the tape did not technically comply with the
rule was not raised until the day of trial, even though the
deposition had been taken and was transcribed prior to this time.
If the accuracy of the tape was genuinely questioned, this problem
could have been brought to the court's attention prior to the day
of trial.
We conclude that the District Court did not abuse its
discretion when it allowed into evidence the audio taped deposition
of Ramey.
ISSUE 5
Did the District Court abuse its discretion when it allowed
King to introduce evidence in support of claims which the
defendants contend were not raised in the pretrial order?
The defendants finally contend that the District Court erred
when it allowed plaintiff to present evidence at trial regarding
issues of fact and law not set forth in the pretrial order.
Specifically, they contend that breach of contract, breach of the
covenant of good faith, conversion, and malice were not listed as
issues. Also, punitive damages were not listed in the legal issues
to be addressed. The defendants rely on Zimmerman v. Robenson (1993),
259 Mont. 105, 854 P.2d 338, for the proposition that testimony
16
regarding issues that are not contained in the pretrial order is
irrelevant and inadmissible.
The purpose of pretrial orders is to prevent surprise,
simplify the issues, and permit counsel to prepare their case for
trial on the basis of the pretrial order. Zimmerman, 854 P.2d at
342. In Zimmerman, under the unique facts present in that case, we
held that permitting the introduction of a new factual matter which
had never been raised in any of the pleadings, but rather was first
raised during trial, would undermine the purposes pretrial orders
are intended to serve. Here, however, after reviewing the pretrial
order, we find the defendants' arguments without merit. The
pretrial order adequately sets forth all of King's contentions as
contained in the initial pleadings. Furthermore, no theories were
advanced at trial which had not already been well established in
the pleadings. There is no basis for the defendants to claim that
they were "surprised" by the issues raised and had not been able to
prepare for trial.
The District Court did not abuse its discretion in this
regard.
The judgment of the District Court is affirmed.
W e concur: