No. 93-349
IN THE SUPREME COURT OF THE STATE OF MONTANA
1994
DeTIENNE ASSOCIATES LIMITED PARTNERSHIP
and PARK PLAZA HOTEL, INC.,
Plaintiffs and Respondents,
v.
MONTANA RAIL LINK, INC.,
Defendant and Appellant.
APPEAL FROM: District Court of the First Judicial District,
In and for the County of Lewis and Clark,
The Honorable Thomas C. Honzel, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Edward A. Murphy, Datsopoulos, MacDonald
& Lind, Missoula, Montana
For Respondents:
Patrick E Melby, Luxan & Murfitt,
.
Helena, Montana
Submitted on Briefs: November 10, 1993
Decided: February 17, 1994
Justice William E. Hunt, Sr., delivered the opinion of the Court.
Appellant, Montana Rail Link, Inc., appeals from that portion
of a judgment of the First Judicial District Court, Lewis and Clark
County, awarding damages to respondents, DeTienne Associates and
Park Plaza Hotel, Inc., for business interruption losses in excess
of reimbursed insurance proceeds which were caused by a prolonged
power outage after an explosion caused by a collision between
Montana Rail Link trains.
Af firmed .
The issues are as follows:
1. Did the District Court err when it disregarded several of
Montana Rail Link's proposed exhibits in determining Park Plaza's
business interruption losses?
2. Was the District Court s finding that Park Plaza suffered
$405,000 in business interruption losses clearly erroneous?
Respondent, DeTienne Associates (DeTienne), is a Montana
limited partnership with its principal place of business in Helena.
Respondent, Park Plaza Hotel, Inc. (Park Plaza), is a Montana
corporation also with its principal place of business and hotel in
Helena. DeTienne owns the hotel and Park Plaza operates it.
Farmers Union Mutual Insurance Company (FWMI) is a Montana
insurance company operating out of Great Falls, which insured Park
Plaza under a special multi-peril policy of insurance. Montana
Rail Link, Inc. (MRL), operates a railroad with tracks and a rail
yard in Helena.
On February 2, 1989, MRL's rail cars, stopped on a mountain
grade west of Helena, became uncoupled from the engine and rolled
back toward Helena, colliding with MRL's yard engines. An
explosion resulted which caused an extensive power outage in the
Helena area. The power outage lasted four or more hours during
extremely cold weather. During the power outage, Park Plaza's hot
water heating system and reheat coils froze and broke. After heat
was restored, water leaked from the broken pipes causing
considerable damage to the hotel's ceilings, carpet, drywall,
paneling, and a domestic hot water heater and tank.
In November 1989, Park Plaza started a remodeling project on
some previously planned additions which delayed the demolition and
reconstruction processes of some of the hotel's damaged areas.
On November 19, 1990, FUMI brought suit against MRL in Cascade
County. On February 2, 1991, Park Plaza brought suit in Lewis and
Clark County to recover damages. On May 31, 1991, FUMI intervened
to assert its right of subrogation against MRL, and on October 22,
1991, its suit against MRL was transferred to Lewis and Clark
County. On November 7, 1991, the First Judicial District Court
consolidated the two suits and dismissed FUMI's separate complaint
in intervention. On August 11, 1992, the parties stipulated that
the issue of negligence would not be tried and that trial would be
limited to the issue of proximate cause and damages. On August 27,
1992, the court granted partial summary judgment against MRL and in
favor of Park Plaza and FUMI for damages caused by the power
outage.
Park Plaza and FUMI could not agree on the amount of the
personal property and business interruption losses. Therefore,
Park Plaza invoked the appraisal clause contained in its insurance
policy with FUMI to determine the losses. Pursuant to the
appraisal clause under the insurance policy, each party selected an
appraiser, and those appraisers selected a third appraiser to serve
as an umpire in the evaluation of claims at settlement
negotiations. The appraisers found that Park Plaza's personal
property loss was $24,006. But because the business interruption
losses exceeded the $300,000 policy limit, FUMI1sappraiser did not
calculate the loss because FUMI was not obligated to pay Park Plaza
any excess. FUMI's appraiser determined a reasonable indemnity
period to be February 2, 1989, through September 18, 1989.
By order on October 15, 1992, the court granted Park Plaza and
FUMI1s motion to exclude MRL from calling any witnesses at the
trial on October 19 and 20, 1992. At trial, Park Plaza sought
$491,11lin business interruption losses forthe period February 2,
1989, through December 31, 1989. Park Plaza based this claim on
1989 operating losses of $89,060, 1989 extraordinary income losses
of $59,002, 1989 projected lost profits of $329,866, and 1990 bus
tour losses of $13,183.
On March 26, 1993, the court found that Park Plaza's total
business interruption losses reasonably related to the power outage
were $405,000, and awarded $105,000 to Park Plaza and $300,000 to
FUMI. The court also found that the time period for purposes of
determining the business interruption losses was February 2, 1989,
through November 1, 1989.
At trial, the court did not rule on the admissibility of the
MRL's proposed Exhibits H and I at issue on appeal. However, the
court effectively denied their admission when, in its conclusions
of law, it stated that it had not used the exhibits in determining
the amount of Park Plaza's business interruption losses.
On April 23, 1993, MRL filed motions for a new trial or
alternatively to amend the court's findings of fact. The court
denied the motions. On July 2, 1993, MRL filed this appeal of the
judgment for both Park Plaza and FUMI.
Subsequently, Park Plaza and FUMI each filed cross-appeals
against MRL asserting that the record supported a much higher award
of damages for the loss of business than that found by the District
Court. However, after MRL satisfied FUMI s judgment, both MRL and
FUMI dismissed appeals against each other on August 16, 1993.
Similarly, on appeal, after Park Plaza considered this Court's
applicable standard of review, it withdrew its cross-appeal against
MRL. Of the total damages of $533,596.49 found by the District
Court, MRL appeals that part of the award related to business
interruption losses, $405,000, and specifically that portion Park
Plaza claims to be in excess of the insurance reimbursement,
$lO5,OOO.
ISSUE 1
Did the District Court err when it disregarded several of
Montana Rail Link's proposed exhibits in determining Park Plaza's
business interruption losses?
During cross-examination of FUMI's appraiser, MRL attemptedto
introduce two exhibits over the objections of Park Plaza and FUMI.
MRL's proposed Exhibits H and I were a spreadsheet and an attached
cover letter which had been prepared by Park Plaza's appointed
appraiser and sent to FUMI1s appointed appraiser during their
settlement negotiations. The spreadsheet purported to show FUMI1s
subrogation claim against MRL from the period February through
December, 1989. The cover letter revised that claim figure and
also indicated that it was part of settlement negotiations in
resolving the claim between Park Plaza and FUMI. FUMI's appraiser
testified that he had not relied on either document when he
determined Park Plaza's business interruption losses. Park Plaza
and FUMI objected to admission of both exhibits on three grounds:
(1) that FUMIvs appraiser did not rely on the documents when he
determined Park Plaza's business interruption losses; (2) that they
were inadmissible as hearsay under Rule 802 of the Montana Rules of
Evidence; and (3) that they were inadmissible as part of attempts
to negotiate a compromise under Rule 408, M.R.Evid.
MRL asserts that the exhibits support its analysis of Park
Plaza's business interruption losses. FUMI's expert put the letter
and spreadsheet into his report submitted to MRL's attorney in an
attempt to generate some settlement discussions with MRL and to
give the attorney an overview of the case's history. However,
FUMI's expert testified that he did not rely on the exhibits to
make his assessment of Park Plaza's business interruption losses.
Thus, the evidence was not relevant to the issue of damages because
it was not the basis upon which the expert formed his opinion.
Rules 402 and 703, M.R.Evid.
The rules of evidence define 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." Rule 801(c), M.R.Evid. Hearsay is not admissible
unless it falls under an exception in another of the rules of
evidence. Rule 802, M.R.Evid. The cover letter and spreadsheet
were prepared by Park Plaza's appraiser, the declarant who did not
testify at trial. Under Rules 801(c) and 802, M.R.Evid., these
proposed exhibits were hearsay and properly excluded.
In the cover letter, Park Plaza's appraiser stated: '1 hope we
'
can make some progress on resolving this claim. ... After you
have had an opportunity to review this [attached spreadsheet],
please give me a call so we can make settlement on this claim.8*
MRL asserts that although Rule 408, M.R.Evid., excludes
conduct or statements made in compromise negotiations, it does not
exclude evidence otherwise discoverable. MRL argues that the
appraiser's spreadsheet report and cover letter were a statement
against interest of a party opponent under Rule 801(d) (2)(A)
and (D), M.R.Evid., and thus discoverable.
The rules of evidence specifically allow a trial court to
exclude evidence of accepting or offering or promising to accept,
a valuable consideration in compromising or attempting to
compromise a claim which was disputed as to its amount. Rule 408,
M.R.Evid. That rule reads in pertinent part:
Evidence of ...accepting or offering or promising
to accept, a valuable consideration in compromising or
attempting to compromise a claim which was disputed as to
either validity or amount is not admissible to prove
liability for or invalidity of the claim or its amount.
Evidence of conduct or statements made in compromise
negotiations is likewise not admissible. [Emphasis
added].
The record indicates that although the early results of Park
Plaza and FUMIVs negotiations concerning the amount of business
interruption losses may otherwise have qualified as statements
against their own interest, they were not made as independent
statements of fact, but instead were made as offers for an amicable
compromise between those parties. Lenahan v. Casey (1912), 46
Mont. 367, 379, 128 P. 601; Gamble-Skogmo, Inc. v. McNair (1951),
98 F. Supp. 440, 442; A E. Korpela, Annotation, &lmissibilitv of
.
Admissions Made in Connection With Offers or Discussions of
Com~romise,15 A.L.R.3d 29-30 (1967). Evidence of attempts to
compromise a settlement are properly excluded based on the
privilege grounded in public policy to encourage compromises and
settlements. The court properly excluded the letter and
spreadsheet as part of settlement negotiations under Rule 408,
M.R.Evid.
The standard of review for discretionary trial court rulings
is whether the trial court abused its discretion. Steer, Inc. v.
Department of Revenue (1990), 245 Mont. 470, 475, 803 P.2d 601,
604.
We hold that the evidence is not admissible, and the District
Court did not abuse its discretion. We affirm the District Court
on this issue.
ISSUE 2
Was the District Court's finding that Park Plaza suffered
$405,000 in business interruption losses clearly erroneous?
We will affirm the findings of a trial court sitting without
a jury if the findings of fact are not clearly erroneous.
Interstate Prod. Credit Ass'n v. DeSaye (1991), 250 Mont. 320, 322,
820 P.2d 1285, 1287. However, we will substitute our judgment for
that of the District Court if we find that it is not supported by
substantial credible evidence, misapprehends the effect of the
evidence, and leaves us with the definite and firm conviction that
a mistake has been committed. Interstate Prod., 820 P.2d at 1287.
As stated, at trial the court reserved ruling on the
objections to MRL's proposed Exhibits H and I, and allowed FUMI's
appraiser to testify about their contents. However, the court did
not rely on the exhibits when it evaluated Park Plaza's business
interruption losses, and so stated in conclusion of law number
nine.
MRL asserts that the record contained no evidence to support
the court's award of $405,000, and that with evidence contained in
Exhibits H and I, MRL could have established that Park Plaza's
business losses were only $321,279.
The record shows substantial credible evidence with which the
court could support an award of $405,000 in business interruption
losses to Park Plaza. Park Plaza's expert accounting witness on
damages testified that for the period of February 2, 1989, through
December 31, 1989, business interruption losses were at least
$490,491. This expert testified from a schedule which he had
prepared for his damage claim summary. That schedule actually put
those losses at $491,111. In addition, DeTienne's general manager
testified that the total business losses were $512,623 for the same
period. Park Plaza's and FUMI's expert witnesses testified that
DeTiennews general manager had made reasonable assumptions in
determining the business interruption losses. DeTiennens general
manager also testified that in November 1989, Park Plaza started a
previously planned remodeling project. On these facts, the court
had sufficient evidence with which to support its award for
business interruption losses to Park Plaza in excess of MRL's claim
of only $321,279.
The court also determined that the business interruption
losses award should cover the period from February 2, 1989, through
November 1, 1989, instead of through December 31, 1989. The court
also had sufficient evidence with which to make this determination
because of Park Plaza's self-imposed business interruption losses
attributable to delay caused by its November 1989 remodeling
project. From the foregoing, it is clear that the first part of
the three-part test in Interstate Prod. is satisfied because there
is substantial credible evidence to support the court's findings.
The second and third parts are satisfied because we hold that the
District Court did not misapprehend the effect of the evidence, and
we are not left with a firm and definite conviction that a mistake
had been committed.
We hold that the District Court's finding that Park Plaza
suffered $405,000 in business interruption losses was not clearly
erroneous and we affirm the District Court on this issue.
Af firmed.
Justice
We concur:
February 17, 1994
CERTIFICATE OF SERVICE
I hereby certify that the following order was sent by United States mail, prepaid, to the
following named:
Edward A. Murphy
DATSOPOLOUS, MacDONALD & LIND, PC.
201 West Main, Suite 201
Missoula, MT 59802
Robert F. James
JAMES, GRAY & McCAFFERTY
P.O. Box 2885
Great Falls, MT 59403
Patrick E. Melby
LUXAN & MURFITT
P.O. Box 1144
Helena, MT 59624-1144
ED SMITH
CLERK OF THE SUPREME COURT
STATE P F MONTANA ,#7
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