Hallenberg v. General Mills Operations, Inc.

No.05-110

IN THE SUPREME COURT OF THE STATE OF MONTANA

2006 MT 191

GARY HALLENBERG,

Plaintiff and Appellant,

v.

GENERAL MILLS OPERATIONS, INC.,

Defendant, Respondent and Cross-Appellant.

APPEAL FROM: The District Court of the Ninth Judicial District,
In and For the County of Glacier, Cause DV-2001-62,
Honorable Marc G. Buyske, Presiding Judge

COUNSEL OF RECORD:

For Appellant:

Gary S. Deschenes, Deschenes & Sullivan, Great Falls, Montana

For Respondent:

K. Dale Schwanke, Jardine, Stephenson, Blewett & Weaver,
Great Falls, Montana

Submitted on Briefs: January 11, 2006

Decided: August 16, 2006

Filed:

__________________________________________
Clerk
Justice Jim Rice delivered the Opinion of the Court.

¶1 Gary Hallenberg (Hallenberg) appeals the findings of fact, conclusions of law, and

order entered in the Ninth Judicial District Court, Glacier County, ruling that General

Mills Operations, Inc. (General Mills), was not liable for certain compensatory and

punitive damages relating to Hallenberg’s wheat farming operations. General Mills

cross-appeals the determination of the compensatory damages that were awarded. We

affirm in part, reverse in part, and remand for further proceedings.

¶2 We consider the following issues raised by Hallenberg:

¶3 Did the District Court err by failing to find General Mills guilty of actual fraud

required for punitive damages?

¶4 Did the District Court err by failing to find General Mills guilty of actual malice

required for punitive damages?

¶5 Did the District Court err by failing to award further compensatory damages?

¶6 We also consider several issues General Mills raises on cross-appeal:

¶7 Did the District Court err by concluding that Hallenberg suffered a sixteen bushel

per acre loss in 1999?

¶8 Did the District Court err by allowing Hallenberg to present evidence after he had

rested his case-in-chief?

¶9 Did the District Court err by finding the per bushel value of the lost production to

be $3.60?

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¶10 Did the District Court abuse its discretion by qualifying Richter as an expert or by

awarding prejudgment interest?

BACKGROUND

¶11 Hallenberg operates a grain farm in Toole and Glacier Counties. On May 17,

1999, Hallenberg made arrangements with General Mills to clean and treat a load of

wheat seed. Hallenberg parked his truck loaded with the seed at General Mills’ facility,

but instead of cleaning and treating the seed, General Mills inadvertently dumped it into a

waste bin. General Mills personnel replaced the discarded seed with a variety of wheat

seed called Fortuna, unaware that the dumped seed was a different variety, Westbread

936 (“936”). Though the two varieties are not readily distinguishable by the naked eye,

the 936 seed produces a plant with a shorter stalk, earlier maturity date, greater resistance

to shatter (loss of grain kernel due to wind or disturbance), and higher water usage rate

than Fortuna. General Mills did not inform Hallenberg of the mishap or of the substituted

seed, but it did bill him for the cleaning and treatment.

¶12 Hallenberg picked up his truckload of seed from General Mills, took it back to his

farm, and placed the Fortuna seed in his seeder—which contained a partial load of 936—

and proceeded to plant it. Three months later, Hallenberg noticed two different varieties

of wheat were growing. Hallenberg contacted General Mills about the problem and for

the first time learned of the dumping error and substitution of seed.

¶13 On May 3, 2001, Hallenberg filed a complaint in the District Court seeking

compensatory and punitive damages for General Mills’ actions. Following a bench trial,

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the District Court issued findings of fact, conclusions of law, and an order on September

14, 2004, awarding Hallenberg $18,432 plus interest and costs to compensate for his

1999 crop losses caused by General Mills’ negligent misrepresentation that the seed

returned to Hallenberg was the same he had delivered. More specifically, the District

Court found that Hallenberg planted the mixed seed on 320 acres and yielded only twenty

bushels per acre from this land. The District Court also found Hallenberg’s crop from

nearby land seeded solely with 936 yielded thirty-six bushels per acre in 1999 and that

difference in per acre yields between the two parcels was due to the mishap at General

Mills. To arrive at the $18,432 figure, the District Court took the difference in yields per

acre (sixteen bushes) between the two sections of land, multiplied it by 320 acres, and

multiplied the product by a per bushel value of $3.60.

¶14 In addition, the District Court concluded that Hallenberg had failed to plead that

General Mills acted with actual malice and that even if Hallenberg had pled actual

malice, Hallenberg failed to meet the clear and convincing burden of proof. The District

Court further concluded that because General Mills had committed negligent

misrepresentation it could not have committed actual fraud, as the two torts are mutually

exclusive. Accordingly, the District Court ruled that there was no basis for awarding

punitive damages.

¶15 The District Court acknowledged that Hallenberg put on evidence purporting to

show that planting the mixed seed caused a reduced yield in subsequent years resulting in

lower government crop insurance payments to Hallenberg. However, the District Court

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concluded that the evidence at trial was insufficient to quantify whatever loss of crop

insurance proceeds Hallenberg may have experienced, and it awarded no damages for

such loss.

STANDARD OF REVIEW

¶16 In Hidden Hollow Ranch v. Fields, 2004 MT 153, ¶ 21, 321 Mont. 505, ¶ 21, 92

P.3d 1185, ¶ 21, we explained the standard of review for findings of fact and conclusions

of law:

We review a district court’s findings of fact to ascertain whether
they are clearly erroneous. Habel v. James, 2003 MT 99, ¶ 12, 315 Mont.
249, ¶ 12, 68 P.3d 743, ¶ 12. A finding is clearly erroneous if it is not
supported by substantial evidence, if the trial court misapprehended the
effect of the evidence, or if our review of the record convinces us that a
mistake has been committed. Habel, ¶ 12. Our standard of review of a
district court’s conclusion of law is whether the court’s interpretation of the
law is correct. Habel, ¶ 12.

¶17 “[W]e review a district court’s evidentiary rulings to determine whether the court

abused its discretion.” Travelers Indem. Co. v. Andersen, 1999 MT 201, ¶ 32, 295 Mont.

438, ¶ 32, 983 P.2d 999, ¶ 32.

¶18 Whether the District Court properly awarded prejudgment interest is a question of

law that we review to determine if the court’s interpretation of the law is correct. Ramsey

v. Yellowstone Neurosurgical Assocs., P.C., 2005 MT 317, ¶ 18, 329 Mont. 489, ¶ 18,

125 P.3d 1091, ¶ 18.

DISCUSSION

¶19 Did the District Court err by failing to find General Mills guilty of actual

fraud required for punitive damages?
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¶20 Sections 27-1-220 and -221, MCA, permit a trier of fact to impose punitive

damages on a defendant in addition to compensatory damages. In considering whether to

assess punitive damages for actual fraud, the District Court reasoned:

A reading of the entirety of Section 27-1-221, MCA, leads to the
conclusion the “actual fraud” required by that statute as a condition
precedent to a punitive damage determination, anticipates proof of intent to
harm by the false representation or concealment of material fact.

The District Court also cited H-D Irrigating, Inc. v. Kimble Props., Inc., 2000 MT 212,

301 Mont. 34, 8 P.3d 95, and concluded that “the tort of negligent misrepresentation

precludes a finding and conclusion actual fraud was committed.” Hallenberg points out

that H-D Irrigating in turn relied on State ex rel. State Compensation Mut. Ins. Fund v.

Berg (1996), 279 Mont. 161, 927 P.2d 975, and he crafts his argument based upon this

Court’s analysis of fraud and constructive fraud in those two cases. However, the H-D

Irrigating and Berg decisions addressed claims of fraud and constructive fraud as defined

in Title 28, Chapter 2, Montana Code Annotated. Section 27-1-221(4), MCA, governing

punitive damages, provides that the “contract definitions of fraud expressed in Title 28,

Chapter 2, do not apply to proof of actual fraud under this section.” At issue here is the

distinctive definition of “actual fraud” under § 27-1-221(3), MCA, which applies only to

the consideration of punitive damages and does not define—or affect the definition of—

the underlying tort. 1

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Section 27-1-221(3), MCA, provides as follows:
A defendant is guilty of actual fraud if the defendant:
(a) makes a representation with knowledge of its falsity; or
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¶21 Due to the confusion exhibited by the District Court and Hallenberg regarding the

differing definitions of “actual fraud,” Hallenberg’s argument plausibly could be

construed such that he is contending that the District Court erred by not awarding him

compensatory damages for actual fraud as defined in Title 28, Chapter 2, Montana Code

Annotated. However, Hallenberg requests specific relief from this Court: “[I]t is

respectfully requested that the Court reverse the trial Court’s determination there was no

actual fraud and direct the trial Court to determine punitive damages.” This request

indicates that Hallenberg’s argument is directed to actual fraud as defined in Title 27, not

Title 28, and we so construe it.

¶22 It is clear from the District Court’s analysis that its interpretation and application

of § 27-1-221, MCA, was erroneously influenced by case law relevant to the definitions

of fraud and constructive fraud for claims brought under Title 28. Therefore, we remand

to the District Court for reconsideration of Hallenberg’s punitive damage claim based on

actual fraud as defined in § 27-1-221, MCA.

¶23 Did the District Court err by failing to find General Mills guilty of actual

malice required for punitive damages?

¶24 Section 27-1-221(2), MCA, defines “actual malice”:

(b) conceals a material fact with the purpose of depriving the
plaintiff of property or legal rights or otherwise causing injury.
“Actual fraud exists only when the plaintiff has a right to rely upon the representation of
the defendant and suffers injury as a result of that reliance.” Section 27-1-221(4), MCA.
The above elements must be proven by clear and convincing evidence. Section 27-1-
221(5), MCA.
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 A defendant is guilty of actual malice if the defendant 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.

¶25 Hallenberg contends that the District Court erred by concluding that he failed to

plead actual malice. Additionally, Hallenberg argues that the District Court erred by

concluding that “even if actual malice could be considered” the claim still fails.

¶26 In a pretrial order issued pursuant to Rule 16, M.R.Civ.P., Hallenberg’s

contentions included the following:

[D]ue to General Mills’ malicious acts in purposely deceiving Hallenberg
regarding the grain and then insisting that he pay for cleaning and treating
grain that was not his, General Mills is liable to Hallenberg for an
additional $500,000.00.

In addition, the pretrial order listed as “ISSUES OF FACT” the following: “Whether

General Mills’ actions constitute actual fraud or actual malice,” and “What punitive

damages should be awarded Hallenberg.” Taken together, these portions of the pretrial

order are sufficient to operate as a pleading of actual malice. See Nentwig v. United

Indus. (1992), 256 Mont. 134, 138-40, 845 P.2d 99, 102-03 (pretrial orders should be

liberally construed, and district court decisions in this context are reviewed for abuse of

discretion).

¶27 However, our conclusion that Hallenberg pled actual malice is not fatal to the

District Court’s ultimate conclusion that Hallenberg failed to prove actual malice. The

District Court found that “General Mills’ personnel assumed Hallenberg was planting
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Fortuna, as Fortuna was a commonly planted variety of spring wheat in the Toole and

Glacier counties area,” and this finding is supported by substantial credible evidence.

Thus, General Mills acted under the presumption that no injury would result in its

misrepresentation to Hallenberg that the seed he was going to plant was in fact the same

seed he had delivered. Accordingly, we conclude that General Mills neither had

knowledge of facts nor intentionally disregarded facts that created a high probability of

injury to Hallenberg. The District Court did not err by failing to find General Mills guilty

of actual malice.

¶28 Did the District Court err by failing to award further compensatory

damages?

¶29 Hallenberg argues that he sustained damages beyond loss of crop production in

1999. Hallenberg contends that he should have been awarded damages for the following

categories of losses incurred by General Mills’ negligence: crop loss in 2000, including

the loss from land that was fallow and allegedly became contaminated by the shelling of

the Fortuna seed; the cost of additional seed in 2000; additional loans and interest

incurred in 1999, 2000, 2001, and 2002; and tilling, spraying, and labor costs associated

with cleaning up the 1999 damage.

¶30 Hallenberg correctly points out that the District Court’s order simply did not

address these claims to damages. Accordingly, we remand the cause for further

proceedings on these matters.

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¶31 Hallenberg also argues that the District Court erred by finding the evidence at trial

to be insufficient to permit an award of damages for losses related to decreased crop

insurance payments.

¶32 “Recovery of damages will not be denied, even if the mathematical precision of

the figure is challenged, provided the evidence is sufficient to afford a reasonable basis

for determining the specific amount awarded.” Cremer v. Cremer Rodeo Land &

Livestock Co. (1981), 192 Mont. 208, 214, 627 P.2d 1199, 1202. However,

“[s]peculative damages not clearly ascertainable are not recoverable.” Albers v. Bar ZF

Ranch (1987), 229 Mont. 396, 404, 747 P.2d 1347, 1352.

¶33 Here, a review of the record reveals that there was evidence disputing the accuracy

of Hallenberg’s claims to losses of crop insurance payments. For example, General Mills

put on evidence that tended to show that Hallenberg’s crop insurance reports in years

subsequent to 1999 contained errors. Because we “will not reweigh conflicting evidence

or second guess the District Court’s assessment of the credibility of the evidence,” In re

M.T., 2002 MT 174, ¶ 30, 310 Mont. 506, ¶ 30, 51 P.3d 1141, ¶ 30, we conclude that the

District Court did not err by refusing to award damages for lost crop insurance payments.

See In re Marriage of Mease, 2004 MT 59, ¶ 42, 320 Mont. 229, ¶ 42, 92 P.3d 1148, ¶ 42

(district court properly denied request for damages because plaintiff failed to provide the

court with proper proof).

¶34 Did the District Court err by concluding that Hallenberg suffered a sixteen

bushel per acre loss in 1999?

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¶35 General Mills makes alternative arguments regarding the bushel per acre loss

Hallenberg suffered in 1999. First, General Mills argues that the evidence showed that

the mixed seed was planted on roughly seventy-seven to one hundred acres, not 320

acres. Alternatively, General Mills argues that the yield from the unmixed acreage was

lower than what the District Court concluded. General Mills asserts that Hallenberg’s

expert witness, Gary Richter (Richter), provided the only evidence properly admitted at

trial (see ¶¶ 38-39 below) that could lead the District Court to calculate a thirty-six bushel

per acre yield from the unmixed acreage. However, General Mills contends that its

expert witness, Dan Roddy (Roddy), wholly discredited Richter’s analysis. According to

General Mills, either argument leads to the conclusion that the finding of a sixteen bushel

per acre loss was not supported by substantial credible evidence.

¶36 There was conflicting testimony regarding the acreage planted and the yield from

the mixed and unmixed areas. Hallenberg testified during his case-in-chief that he

planted the mixed seed on 320 acres, and he estimated—again during his case-in-chief—

that, based on the size of the tanks in his combine, he was harvesting approximately

twenty-two bushels per acre from the mixed seed area and thirty-six bushels per acre on

the unmixed area. Richter testified that the unmixed acres should have yielded

approximately forty bushels per acre. However, Roddy’s testimony brought Hallenberg’s

and Richter’s numbers into question.

¶37 “We will not second guess the district court’s determination regarding the strength

and weight of conflicting testimony.” Double AA Corp. v. Newland & Co. (1995), 273

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Mont. 486, 494, 905 P.2d 138, 142; see also In re M.T., ¶ 30. Therefore, we cannot

conclude that the District Court’s findings that the mixed seed was planted on 320 acres

and that Hallenberg suffered a sixteen bushel per acre loss on that land in 1999 were not

based on substantial credible evidence. See Moore v. Beye, 2005 MT 266, ¶ 8, 329 Mont.

109, ¶ 8, 122 P.3d 1212, ¶ 8 (“Even inherently weak and conflicted evidence may still be

considered substantial.”).

¶38 Did the District Court err by allowing Hallenberg to present evidence after he

had rested his case-in-chief?

¶39 General Mills devotes a substantial portion of its briefing to its argument that the

District Court improperly admitted certain exhibits, numbered 39 and 40, as rebuttal

evidence. General Mills implies that, absent this rebuttal evidence, the District Court’s

findings regarding the per bushel loss Hallenberg suffered are not supported by

substantial credible evidence. We need not address this issue, however, because, as we

describe in ¶¶ 34-37 above, Hallenberg’s case-in-chief evidence was sufficient to support

the District Court’s conclusions.

¶40 Did the District Court err by finding the per bushel value of the lost

production to be $3.60?

¶41 General Mills asserts with minimal citation to the record that Hallenberg provided

no basis for the District Court to conclude that the per bushel value for the lost yield was

$3.60. However, in testimony at trial, Hallenberg’s expert, Richter, explained how he

arrived at that value.

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¶42 Without further articulation from General Mills regarding how and why

Hallenberg’s asserted value for the lost production fails, we cannot conclude that the

District Court erred in its finding. Therefore, we affirm the District Court’s ruling on the

per bushel value of the lost wheat.

¶43 Did the District Court abuse its discretion by qualifying Richter as an expert

or by awarding prejudgment interest?

¶44 General Mills makes cursory arguments contending that Richter was not qualified

to testify regarding “antagonism or competition” between Fortuna and 936 and that

Hallenberg’s belated introduction of evidence showing more production than previously

asserted demonstrates that he was not entitled to prejudgment interest. These conclusory

assertions are presented without cognizable legal analysis.

¶45 “Under Rule 23, M.R.App.P., it is not this Court’s obligation to conduct legal

research on appellant’s behalf, to guess as to his precise position, or to develop legal

analysis that may lend support to his position.” In re Estate of Bayers, 1999 MT 154,

¶ 19, 295 Mont. 89, ¶ 19, 983 P.2d 339, ¶ 19. In the absence of understandable and

cogent analysis that supports General Mills’ position on these issues, we cannot conclude

that the District Court erred with respect to either of them. Therefore, we affirm the

District Court’s order on these issues.

CONCLUSION

¶46 The District Court erred by failing to enter a judgment with respect to

Hallenberg’s crop losses in 2000, including the loss from land that was fallow and

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allegedly became contaminated by the shelling of the Fortuna seed; the cost of additional

seed in 2000; additional loans and interest incurred in 1999, 2000, 2001, and 2002; and

tilling, spraying, and labor costs associated with cleaning up the 1999 damage.

Therefore, we remand the cause for determination of the damages due, if any, on these

matters. In addition, we remand for reconsideration of Hallenberg’s punitive damage

claim based on actual fraud as defined in § 27-1-221, MCA.

¶47 The District Court correctly concluded that General Mills did not commit actual

malice.

¶48 The District Court did not err in its findings regarding the per acre loss and the

value per bushel of the lost production. Likewise, the District Court did not err by

qualifying Richter as an expert or by awarding prejudgment interest.

¶49 Affirmed in part, reversed in part, and remanded for further proceedings.

/S/ JIM RICE

We concur:

/S/ KARLA M. GRAY
/S/ JAMES C. NELSON
/S/ PATRICIA COTTER
/S/ BRIAN MORRIS

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