NO. 86-463
IN THE SUPREME COURT OF THE STATE OF MONTANA
1988
THOMAS A. WEINBERG and CAROLYN
WEINBERG, husband and wife,
Plaintiffs and Respondents,
-vs-
FARMERS STATE BANK OF WORDEN,
MONTANA,
Defendant and Appellant.
APPEAL FROM: District Court of the Thirteenth Judicial District,
In and for the County of Yellowstone,
The Honorable Robert Holmstrom, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
William Conklin argued, Conklin, Nybo & LeVeque,
Great Falls, Montana
Pierre L. Bacheller, Inc., Billings, Montana
For Respondent:
Michael J. Whalen argued, Whalen & Whalen, Billings,
Montana
For Amicus Curiae:
Moulton Law Firm; Sidney R. Thomas argued for First
Security Bank-Livingston, Billings, Montana
Submitted: January 12, 1988
Decided : March 2, 1988
Filed: MAR3 - 19881
zZi5.L *,-
Clerk
0
Mr; Justice John C. Sheehy delivered the Opinion of the
Court.
Farmers Stake. Bank of Worden appeals from a judgment
founded on a jury verdict in the District Court, Thirteenth
Judicial District, Yellowstone County, awarding in favor of
the Weinbergs compensatory damages in the amount of
$104,790.75 and punitive damages of $100,000.00.
The Weinbergs have cross-appealed from the decision of
the court awarding $12,500.00 in attorney fees, which the
Weinbergs claim is inadequate.
We affirm the judgment against the Bank, and also affirm
the award of attorney fees allowed by the District Court, but
remand for an award of further attorney fees on appeal.
Bank's Appeal
Bank's Issues (Restated)
I. The District Court's special verdict form:
a. Adopted plaintiffs' view of disputed factual issues;
b. Concentrated on contract damages, and conflicted
with instructions which related only to tort damages;
11. The evidence was insufficient to sustain the jury
findings:
a. That the Bank breached its loan agreement;
b. That the Weinbergs were entitled to $104,790.00 in
compensatory damages ;
c. That the Bank breached an implied contract of good
faith and fair dealing;
d. That any actual damages underlay the award of
punitive damages ;
e. That punitive damages were proper, and not the
result of passion and prejudice.
Facts
In reviewing a jury verdict, our function is to
determine whether substantial credible evidence in the record
supports the jury verdict. We must view the evidence in the
light most favorable to the prevailing party below, and if
the record presents conflicting evidence which has been
resolved by the jury, this Court is precluded from disturbing
the verdict. Anaconda Company v. Whittaker (1980), 188 Mont.
66, 610 P.2d 1177. When the evidence is in conflict, we can
only review testimony for the purpose of determining whether
there is any substantial evidence in the record to support
the verdict of the jury, and we must accept evidence there
found as true, unless the evidence is so inherently
impossible or improbable as not to be entitled to belief.
Strong v. Williams (1969), 154 Mont. 65, 460 P.2d 90.
The Weinbergs began their farming career in the Bighorn
River valley north of Hardin, Montana. Their operations were
financed by the Production Credit Association (PCA) on notes
that were endorsed by Weinberg's father. As their financial
condition improved, they moved to a larger farm in the
Yellowstone River valley, near Custer, Montana, in 1964.
There they leased, on a crop share basis, a 2,200 acre farm
consisting of 540 acres of irrigated land, 200 acres of
dryland farmland, and the rest grazing land. In 1968, the
Weinbergs began to finance with the Farmers Home
Administration (FmHA) where their notes were not required to
be co-endorsed. They operated on a direct farm operational
loan from the FmHA until the FmHA felt they had sufficient
collateral to obtain financing in the private market. At
that point they began financing with the defendant, Farmers
State Bank of Worden (Bank).
When the Weinbergs began doing business with the Bank,
they owed virtually no money. They had a small herd of
cattle and enough farm machinery to operate at the time.
In their farm operation near Custer, the Weinbergs
raised more feed than they could use on the farm with their
small herd of about 30 cows, a bull and a milk cow or two.
They had discussions with Bud Lawrence of the Bank, who
counseled them that they ought to expand their herd of cattle
to use up the extra feed. The expanded operation would
require an additional place in which to run the cattle.
Accordingly, the Weinbergs made arrangements to lease a place
near Bighorn for an expanded herd. On that basis, in 1974,
the Bank advanced enough additional monies to expand the herd
by 90 cows. The Bank had promised to advance the money
necessary for the herd expansion.
The expanded operation was decidedly more expensive.
The place that they rented for grass was 90 miles from the
Custer operation and required trucking of cattle back and
forth as the seasons demanded. There were veterinary bills,
additional taxes, and the necessity to hire part-time help
for the cattle. In the meantime, in 1974 and 1975, cattle
prices dropped drastically. In the fall of 1975, the
Weinbergs found themselves owing approximately $90,000.00.
In the fall of 1975, the Bank officers notified the
Weinbergs that the Bank could no longer provide operating
monies to the Weinbergs unless a guaranty of their debt from
the FmHA could be obtained.
Accordingly, application was made to the FmHA for a
Contract of Guarantee under the Emergency Livestock Credit
Act of 1974 as amended. As part of the application, the Bank
certified that it was unwilling to extend a line of credit to
Weinbergs without the guaranty and that it would not
refinance the existing loan balance without the guaranty.
The Weinbergs signed the application, certifying that the
statements of the Bank were true and also signed and
submitted a separate application for the loan guaranty
revealing their financial condition to show the necessity for
the loan guaranty. On December 23, 1975, the FmHA issued its
Contract of Guarantee to the Farmers State Bank of Worden,
which guaranteed a line of credit up to a ceiling of
$137,533.40 on loans made to Thomas A. Weinberg. The
guaranty was for 90 percent of the difference owed on the
total amount of principal and interest on any emergency
livestock loan advances made within the line of credit
ceiling and the value of any collateral or loan security at
the time of any foreclosure, unless sooner paid.
As part of the loan guaranty procedure, the Weinbergs
had each signed a promissory note which was submitted as a
part of the application. The note was dated November 14,
1975, due seven years later on November 14, 1982, for a face
amount of $137,533.40, with an annual interest rate of 9.5
percent. (There were some additional finance charges
unimportant here. )
It was the contention of the Weinbergs that by the
execution of the applications for the loan guaranty, the
November 14, 1975 note, and the issuance of the loan
guaranty, the Weinbergs and the Bank had agreed that for a
period of seven years the Bank would extend to the Weinbergs
loan advances on their cattle operation up to a ceiling limit
of the face amount of the note at an annual rate of 9.5
percent. Any amounts advanced by the Bank over and above the
face amount of the note would be subject to the prevailing
rates of interest charged by the Bank at the time the
additional loans were made.
The face amount of the November 14, 1975 note included
about $93,000.00 for the refinancing of the existing
indebtedness of the Weinbergs to the Bank, and a proposed
amount of approximately $44,000.00 to be used for operational
monies in the coming year. In connection with the loan, the
Bank set up an escrow savings account into which all the
monies received as income in 1976 from the farming operations
of the Weinbergs were deposited, there to gain interest at
approximately 5 percent per year. At the end of the year,
the monies from the escrow account would be taken and applied
on the indebtedness of the note.
In the fall of 1976, the Weinbergs had further
discussions with officers of the Bank. They were told that
the FmHA no longer required an escrow account to be kept and
that it would be to the advantage of the Weinbergs to drop
the escrow account, since thereafter, income received from
farm operations would be applied directly to reduce the face
amount of the loans outstanding. Thus, the monies, instead
of lying in an escrow account at 5 percent, would be used to
reduce the Weinberg indebtedness and so reduce the
indebtedness which accrued interest at 9.5 percent. The
Weinbergs were told, however, that in order to achieve this
result, it would be necessary for them to sign a new note, a
note they did sign on December 30, 1976, still in the face
amount of $137,533.40, with interest at the rate of 9.5
percent but payable in one year, December 30, 1977.
Thereafter, on each succeeding year, the Weinbergs signed
successive notes as advances were made by the Bank and income
was applied to the outstanding debt. However, in 1979 and
1980, interest rates had substantially increased and the
successive notes signed by the Weinbergs were at rates of
interest in excess of 9.5 percent, sometimes as high as 18
percent per year. The first interest rate increase occurred
on April 3, 1979, when the Weinbergs were charged 11 percent.
In the Contract of Guarantee, issued by the FmHA, there
is no specific date set for the expiration of the guaranty.
All parties, and the FmHA, agree that the guaranty expired in
the fall of 1982. The expiration date could only be gathered
from the original note of November 14, 1975, which provided
for a term of seven years. When the guaranty expired in the
fall of 1982, the Bank notified the Weinbergs that it was
unwilling to refinance the debt or to provide further
operational monies. FmHA had indicated it would extend the
guaranty for an additional ten years but on terms which were
apparently unacceptable to the Bank. The Bank, therefore,
required eventual liquidation of the collateral under the
notes, which resulted in the sale of the entire Weinberg
herd, some crops, and their farm machinery. More of the
facts relating to the post-liquidation situation will be
recited in connection with our discussion hereunder on the
sufficiency of evidence.
The above facts are stated from the viewpoint of the
Weinbergs, since the jury found in accordance with their
view. It should be noted that the Bank contends that it did
not counsel the Weinbergs to expand their cattle herd; that
the Weinbergs agreed to the execution of the second note in
December, 1976, which modified their agreement; and the
Weinbergs agreed to the payment of interest rates over and
above the 9.5 percent by signing subsequent notes.
The Special Verdict Form
Two issues are raised by the Bank relating to the
special verdict form submitted to the jury. The first is
that in paragraph A-1 of the special verdict form, the
District Court improperly decided disputed issues against the
Bank.
The record here shows that following the settlement of
instructions in the District Court, a form of special verdict
containing interrogatories for the jury to answer was
examined by counsel for the parties and agreed upon without
objection. Sometime after the cause had been submitted to
the jury (the court gave the case to the jury at 2:18 p.m.
and reconvened at chambers at 3:10 p.m.), the court sununoned
counsel and informed them that he had prepared a different
special verdict form from the one that had earlier been
agreed upon. The District Court asked if either counsel had
any objection to the new special verdict form. Both counsel
responded, "no objection, your honor."
The court recessed at 3:15 p.m. and the new special
verdict form was presumably delivered to the jury. The jury
returned its verdict at 8:17 p.m. that day. No record has
been preserved in this case of the original special verdict
form.
The first interrogatory to the jury contained in the
special verdict form, and the jury's response thereto
follows:
A-1. Was the November 14, 1975 contract between
the parties modified on December 30, 1976 so as to
relieve the Bank from the obligation of loaning One
Hundred Thirty Seven Thousand Five Hundred
Thirty-three and 40/100 Dollars ($137,533.40) to
the Weinbergs for seven (7) years with interest at
the rate of nine and one-half percent (9%%) per
annum payable semi-annually.
YES NO x
The Bank contends that the first issue it raised in the
pretrial order of the court was that the Bank had no
obligation to furnish the plaintiffs a line of credit in the
amount of $137,533.40 at an interest rate of 9.5 percent per
annum for a period of seven years. The Bank contends that
the wording of paragraph A-1 of the special verdict form took
that issue of fact away from the jury because the court
assumed there was in fact such an obligation.
Two great rules of appellate review militate against the
position of the Bank on this issue. First, no objection was
raised to the special verdict form before its submission to
the jury, and secondly, this Court will not review an issue
raised for the first time on appeal. Rozell Corp. v. Dept.
of Public Service Regulation, et al. (Mont. 1987), 735 P.2d
282, 44 St.Rep. 618; Bowman v. Prater (Mont. 1984), 692 P.2d
9, 41 St.Rep. 2236; Akhtar v. VanDeWetering (1982), 197 Mont.
205, 642 P.2d 149; Peters v. Newkirk (1981), 633 P.2d 1210,
38 St.Rep. 1526. Here the issue of propriety of the special
verdict was not raised by objection at the time of its
presentation to counsel, nor subsequently, in a motion for
new trial, after the verdict had been entered.
The Bank, however, argues that we should consider the
issue under the plain error doctrine citing State Bank of
Townsend v. Maryann's, Inc. (1983), 204 Mont. 21, 664 P.2d
295; and Halldorson v. Halldorson (1977), 175 Mont. 170, 573
P.2d 169. We will review the issue in this case, not because
a plain error occurred (that is, an error which was
fundamental, highly prejudicial and which affected the
substantial rights of the parties) but rather because the
contract issue is intertwined with the remaining issues in
the cause from which it cannot be separated.
The main thrust of the Bank's argument on this issue is
that the Contract of Guarantee was one exclusively between
the Bank and the FmHA in which the Weinbergs had no part, and
that the promissory note of November 14, 1975, executed
before the Contract of Guarantee, was not in itself an
obligation to extend a line of credit to the Weinbergs for a
period of seven years.
The contention of the Bank is oppugnant to what occurred
between the Bank and the Weinbergs following the Contract of
Guarantee. While it is true that the Contract of Guarantee
taken by its four corners, is simply an agreement to
guarantee 90 percent of a line of credit and imposes no
obligation on the Bank; and the promissory note was nearly
completely performed by the Bank in that between November 14,
1975 and November 9, 1976, it had provided refinancing and
advances in the sum of $137,288.00; it is also true that the
Bank continued to make advances for operational monies to the
Weinbergs (though the Bank contends it was under separate and
other arrangements). The Bank did look in 1982 to the FmHA
for the guaranty of the line of credit it had extended to the
Weinbergs through the ensuing years.
The Weinbergs, of course, contended that the contract
between them and the Bank was for a line of credit for
operational money advances to be made to them by the Bank for
the seven year period and that the Contract of Guarantee and
the note of November 14, 1975, were simply written
expressions of that agreement.
Moreover, the position of the Bank throughout the trial
was that an agreement existed between the parties beginning
November, 1975, which was modified a year later as evidenced
by the note of December 30, 1976. The Bank itself offered an
instruction which was given by the District Court to the jury
as follows:
Farmers State Bank contends that the only contract
between the Bank and the Weinbergs were the
promissory notes and security agreements executed
from time to time, and while the November 14, 1975,
note embodied the original terms of the agreement
between the Weinbergs and the Bank, that contract
was later modified on December 30, 1976. Farmers
State Bank contends that Thomas and Carolyn
Weinberg, on 12-30-76 signed a new promissory note
in favor of Farmers State Bank in the face amount
of $137,533.40, with interest at the rate of 94%
per annum and a maturity date of one year from the
date of making. Farmers State Bank contends that
this new contract governs the relationship with the
parties, and that there remains due and owing upon
the obligation evidenced by that 12-30-76 note, as
renewed annually by Thomas and Carolyn Weinberg,
the sum of $25,991.53.
In another instruction offered by the Bank and given to
the jury, it was stated:
In this case you are presented with the following
issues:
1. Did the Bank breach a contract under which the
Weinbergs were entitled to some benefit?
It is clear from the instructions offered by the Bank,
from the opening statement and final argument, that the
position of the Bank in this case during the trial was that
whatever agreement existed between the parties in 1975 was
modified in 1976 to a procedure where advances would be made
upon successive notes to be signed by the Weinbergs, all
subject to the Contract of Guarantee originally issued on the
first note of November 14, 1975.
Paragraph A-1 of the special verdict form submitted by
the District Court merely recited this position, and asked
the jury to determine whether a modification had occurred on
December 30, 1976.
Thus, in this case, our decisions in Northwestern
National Bank v. Weaver-Maxwell, Inc. (Mont. 1986), 729 P.2d
1258, 43 St.Rep. 1995; and Kinjerski v. Lamey (Mont. 1981),
635 P.2d 566, 38 St.Rep. 1703, are to be distinguished
because here paragraph A-1 of the special verdict was
designed for the jury to determine a factual issue essential
to judgment in this cause.
Conflict Between Special Verdict and the Instructions
In a second attack upon the special verdict form, the
Bank contends the form was inherently contradictory with the
instructions in allowing the jury to fix a verdict based on
breach of contract when the court had instructed the jury on
the tort measure of damages.
The full text of the special verdict form and the
responses of the jury are set forth under footnote 1, infra.
It will be seen from the responses that the jury determined
that the November 14, 1975 contract had not been modified by
the parties on December 30, 1976; and that the Bank had
breached the November 14, 1975 contract, which resulted in
damages of $104,709.75. The jury further found that the Bank
breached an implied covenant of good faith and fair dealing.
Because the jury awarded damages under the breach of contract
claim, the special verdict form directed the jury not to fix
damages for the breach of the implied covenant and directed
the jury's attention instead to whether punitive damages
should be awarded. The jury did fix punitive damages in the
amount of $100,000.00.
In Montana, the measure of damages for a breach of
contract is the compensatory amount for all the detriment
proximately caused by or likely to result therefrom in the
ordinary course of things. Damages for such breach must be
clearly ascertainable both in nature and origin. Section
27-1-311, MCA. The measure of damages for a tort in Montana
is the compensatory amount for all the detriment proximately
caused by the tort "whether it could have been anticipated or
not." Section 27-1-317, MCA. The Bank contends here that
the measure of damages for a breach of contract is
substantially narrower than the tort measure under the
statutory definitions and that the failure of the District
Court to instruct on the measure of damages for breach of
contract was a serious fundamental error.
The anomaly in the Bank's position is that it offered
instructions accepted by the District Court which instructed
the jury that in a breach of contract case the amount of
damages must be clearly ascertainable in nature and origin,
and in instruction no. 34, embodied the statutory definition
of the measure of damages for breach of contract. However,
these instructions were withdrawn by the Bank in the course
of settling the instructions.
The District Court did give the jury its instruction no.
21 which embodied the measure of damages for a tort. In its
instruction no. 25, however, it warned the jury that damages
for loss of profits should not be speculative. It further
told the jury that no damages were recoverable which were not
clearly ascertainable both in nature and origin and that only
profits which are reasonably certain could be awarded.
The jury award of $104,790.75 can be mathematically
determined from the transcript. The Weinbergs claimed the
payment of excess interest over 9.5 percent of $33,158.17;
loss of three years' cash crops $42,532.99; loss of 1985
barley crop $7,349.59; and loss of 3 years' hay production
$21,750.00. Whether regarded from the viewpoint of damages
for tort or for contract, the amount awarded by the jury
would have been the same based on the claims of the
Weinbergs. The District Court recognized this and arranged
the special verdict forms so as not to allow the jury to
bring in an award of double damages, one for breach of
contract, and one for breach of the implied covenant of good
faith and fair dealing. In any event, the damages would have
been the same.
For three reasons, therefore, (1) the instructions on
breach of contract damages were withdrawn by the Bank during
the settlement instructions, (2) the instructions given by
the court were substantially modified so as to include the
essential elements for breach of contract damages, and (3) no
harm was done because the damages would be the same in any
event, we find no merit in this issue raised by the Bank. 1
1 The full text of the special verdict form, with the jury
responses, was as follows:
It is your task at this time to determine whether the
Defendant, Farmers State Bank of Worden, is liable to
the Plaintiffs, Thomas A. Weinberg and Carolyn Weinberg,
husband and wife, and whether or not the Weinbergs are
liable to the bank. To assist you in reaching your
verdict, you must answer the following set of questions.
Unless you are otherwise instructed, you must answer
each of the following questions in accordance with the
instructions you have received, regardless of your
answer to the prior questions.
SECTION A.
A-1. Was the November 14, 1975, contract between the
parties modified on December 30, 1976, so as to relieve
the bank from the obligation of loaning One Hundred
Thirty-seven Thousand Five Hundred Thirty-three and
40/100ths Dollars ($137,533.40) to the Weinbergs for
seven (7) years with interest at the rate of nine and
one-half percent (9+%), payable semi-annually?
YES NO x
If your answer to question A-1 above is "yes", do not
answer the remaining questions in this Section A, but
proceed to Section B. If your answer is "no", proceed
to the next question.
A-2. Did the bank breach the November 14, 1975,
contract?
YES x NO
If your answer to question A-2 is "no", do not answer
any more questions in this Section but proceed to
Section B. If your answer to question A-2 is "yes", you
then must answer question A-3.
SUFFICIENCY OF EVIDENCE ISSUES
Breach - - -
of the Loan Agreement
Bank contends that the evidence is insufficient to
sustain the jury verdict that the Bank had breached a loan
agreement with the Weinbergs.
A-3. Did the Weinbergs sustain damages as a result of
the bank's breach of the November 14, 1975, contract?
YES x NO
If your answer to question A-3 is "no", do not answer
any more questions in this Section but proceed to
Section B. If your answer to question A-3 is "yes", you
must then determine the amount of the damages sustained
by the Weinbergs as a result of the bank's breach of the
November 14, 1975 contract and insert the amount in the
following blank. Damages for breach of November 14,
1975, contract - $104,79Or75.
SECTION B.
B-1. Did the bank breach the implied covenant of good
faith and fair dealing in its dealings with the
Weinbergs?
YES x NO
If your answer to question B-1 is "no", answer no more
questions in this Section but go to Section C. If your
answer to question B-1 is "yes" and if you have awarded
damages as part of your answer to question A-3, proceed
to question B-2. If you have not awarded any damages in
your answer to question A-3, then you must determine the
amount of damages, if any, sustained by the Weinbergs as
a result of the bank's breach of the implied covenant of
good faith and fair dealing and insert the amount in the
following blank. Damages for breach of the implied
covenant of good faith and fair dealing - $
B-2. Was the conduct of the bank in breaching the
implied covenant of good faith and fair dealing
fraudulent, malicious or oppressive?
Under this contention, Bank argues that the Contract of
Guarantee was one between the Bank and the FmHA, and created
no obligation on the part of the Bank to loan monies to the
Weinbergs. The Bank points to cases holding that there is no
privity, mutuality, or joint liability between the principal
debtor and the guarantor, and again to cases holding
liability to the guaranteed party is not subject to the
defenses that may exist between the creditor and the debtor,
and that the terms of the guaranty measure the liability of
the guarantor, but do not constitute a contract between the
YES x NO
If your answer to question B-2 is "no", do not answer
any more questions in this Section but go to Section C.
If your answer to question B-2 is "yes", you must then
determine the amount, if any, of the punitive damages to
which the Weinbergs are entitled to recover from the
bank and insert said amount in the blank provided.
Punitive damages - $100,000.00.
Section C.
C-1. Are the Plaintiffs, Thomas A. Weinberg and Carolyn
Weinberg, indebted to the Defendant, Farmers State Bank
of Worden, upon the promissory note?
YES NO x
If your answer to question C-1 above is "no", do not
answer any further questions in this Section. If your
answer is "yes", you must then determine the amount owed
by the Weinbergs to the bank and insert said amount in
the blank provided. Amount of indebtedness to the bank
- $
The answers stated above are the verdict of the jury
impaneled in this case.
Dated this - day of March, 1986.
13
/s/ Jesse Valdez
Foreman
debtor and the creditor. It cites General Finance Company v.
Powell (1943), 114 Mont. 473, 138 P.2d 255; Butte Machinery
Co. v. Carbonate Hill Mining Company (1926), 75 Mont. 167,
242 P. 956; Baroch v. Greater Montana Oil Company (1924), 70
Mont. 93, 225 P. 800. In addition, the Bank contends that
the Weinbergs may not base their claim of breach upon the
promissory note executed November 14, 1975, because that note
was validly replaced by a renewal note and subsequent renewal
notes carrying maturity dates of one year or less.
Again, the Bank argues that the promissory note of
November 14, 1975, does not create an obligation on the part
of the Bank to do anything. Relying on the par01 evidence
rule, S 28-2-905, MCA, the Bank states that the writing on
the note merely allows the plaintiffs to pay back the
principal advances under the note over a period of seven
years at 9.5 percent payable semi-annually.
Finally, the Bank contends that the promissory note of
November 14, 1975, was replaced by the agreement of the
parties with a promissory note of December 30, 1976; that the
original note was stamped "paid" with the execution of the
second note although the original note was kept in the Bank
file and not returned to the borrowers. The Bank officers
testified that the Weinbergs executed the replacement note
and subsequent notes freely and voluntarily without coercion.
It is the Bank's position, therefore, that the Contract
of Guarantee was between the Bank and FmHA, that the
Weinbergs had no privity or mutuality in the Contract of
Guarantee, and that the original note was modified a year
later by and with the consent of the Weinbergs. The terms of
the writings determined the agreement between the parties and
any other agreement is subject to the parol evidence rule.
At the close of Weinbergs case in chief, the Bank moved
for a directed verdict on the ground that the Weinbergs had
failed to carry their burden of proof which the court denied,
saying:
The court views the evidence at this point to be
sufficient to support a jury verdict, here that
there was a breach by the Bank of the agreement
which the parties entered into wherein the Bank
agreed to provide $137,533.40 for 7 years at 94%.
That there is sufficient evidence upon which the
jury can find, in breaching that, the Bank acted
with malice, actual or constructive ...
The Weinbergs respond to these contentions of the Bank,
saying that they represent a change of position from that
taken by the Bank at trial. The Weinbergs state that in the
District Court, the Bank recognized it had an obligation to
the Weinbergs to extend a line of credit subject to the
Contract of Guarantee for the sums stated for a period of
seven years at 9.5 percent. The Bank's further position at
trial was that the obligation to extend such line of credit
had been changed by the execution of the new note by the
Weinbergs on December 30, 1976, together with an accompanying
security agreement. The Bank's position of modification was
evidenced, say the Weinbergs, by its contentions set forth in
the pretrial order which include the following paragraph:
That the November 14, 1975 note was paid by the
Weinbergs, by their voluntary renewal of the same,
in order to obtain the benefit of a modification of
the manner in which the Farmers Home Administration
Emergency Livestock loans, of which this was one,
were administered by banks.
This is not a case for the application of the parol
evidence rule. Weinbergs are not trying to vary the terms of
the promissory note of November 14, 1975. They are
contending instead that the note itself, in all its terms, is
evidence of an agreement between the Bank and the Weinbergs
that a line of credit would be extended to them for seven
years at an interest rate of 9.5 percent. The original
promissory note is consonant with that contention. The par01
evidence statute, 5 28-2-905, MCA, includes in its provisions
that "other evidence of the circumstances under which the
agreement was made or to which it relates" is admissible.
Section 28-3-402, MCA, provides that a contract may be
explained by reference to the circumstances under which it
was made and the matter to which it relates. Here, the
execution of the promissory note of November 14, 1975, and
the procurement by the Bank of the Contract of Guarantee, all
point to and confirm an agreement between the Weinbergs and
the Bank for a line of credit on the terms contended for by
the Weinbergs. When the conduct of the parties demonstrates
the existence of an agreement between them, evidence of that
conduct is admissible to establish the agreement. Veterans
Rehabilitation Center, Inc. v. Birrer (1976), 170 Mont. 182,
551 P.2d 1001. The conduct of the Bank seven years later, in
looking to the FnlHA for performance of its Contract of
Guarantee is indeed evidence of the agreement as argued for
by the Weinbergs. We hold that there is sufficient evidence
to establish a contract in existence between the Bank and
Weinbergs for a line of credit, especially since this was the
position of the Bank throughout the District Court trial.
Sufficiency - - Evidence - Sustain Compensatory Damages
of the to
The Bank contends that the compensatory damage award of
$104,790.75 is not supported by sufficient credible evidence.
The attack on the compensatory award is two-pronged: 1)
that the amount included for excessive interest paid by the
Weinbergs is wrong on its face, and 2) that the amounts
awarded for crop loss and other expenses are speculative.
Although the compensatory award by the jury is in the
nature of general damages and is not broken down as to the
items used by the jury to compute the award, it seems clear
from the record that the compensatory award was based upon
the amounts claimed by the plaintiff as items of damage,
which the jury awarded to the Weinbergs in full.
The Weinbergs claimed an item of $33,158.17 as the
amount of excess interest over and above 9.5 percent that
they paid to the Bank on loans up to the credit line amount
of $137,533.40.
The Weinbergs produced as part of their case the
testimony of Donovan Kelley, a Billings CPA, who on the
behalf of Weinbergs examined the Bank's loan liability ledger
for the Weinberg loan and computed the amount of interest
over and above 9.5 percent during the seven year period of
the relationship on a credit line of $137,533.40. Kelley
produced Exhibit 15 which showed that the total interest
charged on the liability ledger amounted to $126,249.86, and
that the total interest that should have been paid at the
rate of 9.5 percent amounted to $93,091.69. On those
figures, Exhibit 15 shows an excess of interest charged on
the liability ledger of $33,158.17.
The Bank contends that Exhibit 15 shows that on May 27,
1983, there was a negative balance under Kelley's
computations in favor of the Weinbergs of $7,916.67 and that
this is the amount of interest overcharged to which the
Weinbergs are entitled, and not the $33,158.17.
The Bank contends the figure of $33,158.17 includes the
approximate $25,000.00 which the Weinbergs owed to the Bank,
and which the Weinbergs never paid. They therefore contend
the interest figures should be reduced by at least the amount
of the unpaid indebtedness.
There are several difficulties with the Bank's argument
on this item. First, in oral testimony, Kelley testified
that the $33,158.17 figure was the amount of excess interest
paid by the Weinbergs. The Weinbergs themselves testified
that in their calculations they had paid at least $25,000.00
in excess interest. Secondly, the Bank's argument equates
the negative balance on the principal of the debt to the
overcharge of interest. Exhibit 15 demonstrates on its face
that the negative balance is arrived at after the application
to the principal indebtedness of the amounts recovered in
liquidation of the Weinberg assets. In addition, on Exhibit
15, Kelley added to the balance due on November 14, 1982, the
expiration date of the FmHA guaranty, and the accrued
interest as part of the principal of the loan. Thirdly, the
testimony of Kelley that the amount of excess interest was
$33,158.17 was not controverted during the trial either by
cross-examination or other testimony except a minor reference
to the negative balance.
The second prong of the Bank's attack on the
compensatory damage award relates to amounts apparently
included within the general award: loss of three years' calf
crops, $42,532.99; loss of 1983 barley crop, $7,349.00; and,
loss of three years' hay production, $21,750.00. The Bank
contends that the evidence is insufficient to justify such
awards and that they are at best speculative.
The basis of these awards to the Weinbergs apparently
stems from their testimony which was accepted by the jury.
They testify that they were induced by the Bank to enter the
original loan agreement, on representations by the Bank
officers that they would be extended a line of credit up to
the credit ceiling amount at an interest rate of 9.5 percent
over the seven year life of the agreement. The next year
they were told by the Bank that they had to sign a new note
each year in order to remove the escrow requirement first
imposed. Although the Bank officers testified that at that
time the Weinbergs had a choice, in reality their choice was
either to sign the new notes or to lose the financing on
their farming operation entirely. Thereafter, they signed
new notes, sometimes in blank, which were filled in by the
Bank. Evidence shows that the Bank breached its agreement,
and its implied duty of good faith by failing to extend a
line of credit in accordance with the Contract of Guarantee,
charging interest in excess of the agreed upon rate which
eventually amounted to an excess interest payment of
$33,158.17. They testified that the Bank's conduct inflated
their indebtedness, requiring them to liquidate their
holdings as required by the Bank. In 1983, they were still
eligible for an extension of refinancing through the FmHA,
but they were informed in writing by FmHA that their
eligibility for that loan was subject to "your guaranteed
loan with Farmers State Bank of Worden being settled." Other
lenders also refused Weinbergs financing unless they had
settled with the Bank. Because the Bank required
liquidation, they were forced to sell off their entire cattle
herd, their farm machinery and equipment, they were unable to
buy fertilizer, and properly take care of the crops in those
three years. Without detailing the same in this Opinion,
their evidence calculated for the jury, the value of the calf
crops that they would otherwise have raised, and the crops
they could have raised and sold. Although the Bank contends
that the calf crop amounts were gross amounts and not net
amounts, the evidence of these losses appears to be
reasonably computed.
Montana law regarding the review of the sufficiency of
the evidence has been oft repeated. When examining the
sufficiency of the evidence to support a verdict, we review
the evidence in a light most favorable to the prevailing
party. Kukuchka v. Ziemet (Mont. 19851, 710 P.2d 1361, 42
St.Rep. 1916; Anderson v. Jacqueth (Mont. 19831, 668 P.2d
1063, 40 St.Rep. 1451; Gunnels v. Hoyt (Mont. 1981), 633 P.2d
1187, 38 St.Rep. 1492; Rock Springs Corp. v. Pierre (1980),
189 Mont. 137, 615 P.2d 206; Groundwater v. right (1979),
180 Mont. 27, 588 P.2d 1003; In Matter of Estate of Holm
(1979), 179 Mont. 375, 588 P.2d 531. "The Jury is in the
best position to weigh the evidence and consider the
credibility of witnesses." Rock Springs Corp., supra.
Questions of fact are for the jury to resolve and should not
be taken from the jury when reasonable men might draw
different conclusions from the evidence. Heen v. Tiddy
(1968), 151 Mont. 265, 269, 442 P. 2d 434, 436; 5 26-1-202,
MCA. Rock Springs Corp., supra. When there is conflicting
evidence, the credibility and weight given to the evidence is
the province of the jury and not this Court. Mountain West
Farm Bureau Mutual Insurance Co. v. Girton (Mont. 1985) , 697
P.2d 1362, 42 St.Rep. 500; Gunnels v. Hoyt, supra; Holm,
supra; In Re Carrols' Estate (1921), 59 Mont. 403, 196 P.
996.
This Court has repeatedly stated that it will not
disturb the jury's verdict if the evidence provides
reasonable grounds for different conclusions. Gunnels v.
Hoyt, supra; Payne v. Sorenson (1979), 183 Mont. 323, 599
P.2d 362; Adami v. Murphy (1945), 118 Mont. 172, 164 ~ . 2 d
150. If there is substantial credible evidence supporting a
jury verdict it cannot be overturned on the basis of
insufficiency. Anderson v. Jacqueth, supra; Brogan v.
Blanchard (1982), 200 Mont. 399, 650 P. 2d 1390; Gunnels v.
Hoyt, supra.
In Nicholson v. United Pacific Ins. Co. (Mont. 1985),
710 P.2d 1342, 1348-9, 42 St.Rep. 1822, 1830, we held,
"substantial evidence is relevant evidence which a reasonable
person could accept as adequate to support a conclusion."
Further, "Evidence may be inherently weak and still be deemed
substantial, and substantial evidence may conflict with other
evidence." Anderson v. Jacqueth, supra, citing Gunnels v.
Hoyt, supra; In Matter of Estate of Holm, supra. Section
26-1-301, MCA, provides that the testimony of one credible
witness is sufficient to prove any fact.
Accordingly, we affirm the compensatory award in this
case.
Implied Covenant Of Good Faith And Fair Dealing
The Bank contends that the evidence is insufficient to
support a breach of an implied contract of good faith and
fair dealing by the Bank as found by the jury.
The controlling case in this issue is that of Nicholson
v. United Pacific Insurance Company (Mont. 1985) , 710 P. 2d
1342, 42 St.Rep. 1822. In Nicholson, this Court engaged in
an exhaustive examination of the tort of breach of implied
covenant of good faith and fair dealing in Montana. Although
Nicholson did not involve a bank, the principles set forth
are applicable to cases involving bank contracts and bank
relationships with its customers. In Nicholson, we held:
The nature and extent of an implied covenant of
good faith and fair dealing is measured in a
particular contract by justifiable expectations of
the parties. Where one party acts arbitrarily,
capriciously or unreasonably, that conduct exceeds
the justifiable expectations of the second party.
The second party should then be compensated for
damages resulting from the other s culpable
conduct.
We have also held that the legal obligation of good
faith and fair dealing has been extended to Bank's dealing
with customers. Nicholson, supra; Tribby v. Northwestern
Bank of Great Falls (Mont. 1985), 704 P.2d 409, 42 St.Rep.
1133; First National Bank of Libby v. Twon~bly (Mont. 1984),
689 P.2d 1226, 41 St.Rep. 1948. In Deist v. Wachholz (Mont.
1984), 678 P.2d 188, 41 St.Rep. 286, this Court recognized
that there is a fiduciary obligation owed by a bank to its
customer where a customer and officer of the Bank have
entered into a confidential relationship. This is especially
true when the Bank plays the role of advisor.
"The covenant of good faith and fair dealing has been
implied in situations where there is no specific statutory
duty, but where similar indicia of adhesion or inequality is
present." Nicholson, supra; Weber v. Blue Cross of Montana
(1982), 196 Mont. 454, 464, 643 P.2d 198, 203.
The Weinbergs testified that they were encouraged and
advised by Lawrence of the Farmers State Bank of Worden to
expand their cattle operation. The Weinbergs further
testified that the Bank participated in and encouraged the
changes to be made regarding the Weinbergs farming operation
and that, coupled with the fact that the Bank controls the
finances, created a fiduciary obligation to the plaintiffs on
the part of the Bank. In the inunediate case, there is
sufficient indication of inequality in bargaining positions
between the Bank and the Weinbergs. The Bank held the means
to allow the Weinbergs to continue to farm and if the Bank
failed to advance the loan money, the Weinbergs would be
forced out of their farming operations. As the bank officer
testified, the Weinbergs "had a choice," but one of the
choices would wipe them out financially.
The court's instructions on the implied covenant of good
faith and fair dealing between parties adequately covered our
law on the subject and principles set out in Nicholson:
When parties, as here, are involved in contractual
relationships, there sometimes arises, separate and
apart from the contract, an implied covenant of
good faith and fair dealing, which is that each
party has a justifiable expectation that the other
will act as a reasonable person. The nature and
extent of an implied covenant of good faith and
fair dealing is measured in a particular contract
by the justifiable expectations of the parties. If
in this case, you find from the evidence that the
defendant, Farmers State Bank of Worden, acted
arbitrarily, capriciously or unreasonably, such
conduct exceeding the justifiable expections of the
plaintiffs, Weinbergs, then such conduct is
culpable and plaintiffs should be compensated for
damages arising therefrom.
A mere breach of contract, without a showing of
some special kind of impermissible activity, such
as arbitrary, capricious or unreasonable acts
exceeding the justifiable expectations of Thomas
and Carolyn Weinberg, is not a breach of the
implied duty of good faith and fair dealing.
A party is not required to totally disregard its
own interest to show good faith.
A party against whom liability under a contract is
asserted does not breach the implied covenant of
good faith and fair dealing by disputing its
liability under that contract so long as disputing
liability, the party so disputing does not act
arbitrarily, capriciously or unreasonably.
If you find from the evidence that the defendant
Farmers State Bank has breached an implied covenant
of good faith and fair dealing, by finding that
Farmers State Bank of Worden has acted arbitrarily,
capriciously or unreasonably, in excess of the
justifiable expectations of the parties, then you
must, in order to consider an award of punitive
damages, find that, in addition, Farmers State Bank
of Worden has been guilty of oppression, fraud or
malice, actual or presumed. Breach of the implied
covenant of good faith and fair dealing without
more, entitles a party to compensatory, and not
punitive damages.
... Thomas and Carolyn Weinberg further contend
that Farmers State Bank breached the implied
covenant of good faith and fair dealing in raising
the interest rate, in that an increase in the
interest rate exceeded the justifiable expectation
of the parties, and was done arbitrarily,
capriciously and unreasonably.
... Farmers State Bank further contends that it
has not breached the implied covenant of good faith
and fair dealing in that its actions in raising the
interest rate were within the justifiable
expectations of the parties and were not arbitrary
or capricious or unreasonable.
Farmers State Bank contends further that its
actions were neither fraudulent nor malicious nor
were they oppressive.
Under the instructions and the evidence, we determine
that the finding of a breach of an implied covenant of good
faith and fair dealing is supported. In such a case, we are
controlled by the long-held standard of review:
When, as in this case, on appeal a judgment is
challenged on the basis of insufficiency of the
evidence to support it, there is no middle ground
for the appellate court. We must find that the
party appealing is entitled to judgment as a matter
of law based on the evidence and if we do not so
find, the judgment in favor of the other party must
be affirmed.
Gunlock v. Western Equipment Company (Mont. 1985) , 710 P. 2d
No Actual Damages Underlay The Award Of Punitive Damages
In this case, the jury fixed an award of punitive
damages in the sum of $100,000.00. On appeal, the Bank
contends that there is no showing of actual damages
underlying such an award.
In a special verdict, the jury found the defendants had
breached the implied covenant of good faith and fair dealing
against the Weinbergs and that such breach was fraudulent,
malicious and oppressive.
This Court has previously held that punitive damages may
be awarded where the plaintiffs were granted only nominal
damages. The same is true even in cases where no monetary
value has been assigned to the actual damages suffered.
Laun~an v. Lee (Mont. 1981), 626 ~ . 2 d830, 38 St.Rep. 499;
Butcher v. Petranek (1979), 181 Mont. 358, 593 P.2d 743.
In Gilmore v. Mulvihill (1940), 109 Mont. 601, 607, 98
P.2d 335, 338, this Court stated:
A verdict is not to be technically construed, but
is to be given such a reasonable construction as
will carry out the obvious intention of the jury.
In arriving at this intention, reference may be had
to the issues made by the pleadings, the
instructions submitted by the court, and the
evidence introduced at the trial; and if by a fair
and readable construction of it, in the view of the
whole record, the intention of the jury is
manifest, it should be allowed to stand.
Sufficiency - - Evidence for Punitive Damages
of the
Here, Bank contends that the award of punitive damages
was improper and must have been the result of passion and
prejudice. What was said by this Court in Gilmore v.
Mulvihill, supra, is equally applicable to the jury award of
punitive damages. As we have indicated above, the jury was
given proper instructions to determine the breach had
occurred. The jury was likewise instructed as to what it
must find with respect to punitive damages. The Bank does
not contend that those instructions were inadequate and
indeed they seem to contain the necessary elements to
properly instruct the jury on this item. The jury having
been properly instructed, once again, we are left to the
familiar appellate rules which are recited above respecting
the sufficiency of the evidence. The jury found a breach of
an implied covenant, and it found that the breach was
oppressive, malicious and arbitrary. Once having made that
determination, the jury determines the amount of damages.
Cross Appeal
Each of the Bank's promissory notes signed by the
Weinbergs, and at least one of the security agreements
provided that the Bank was entitled to reasonable attorney
fees and costs if an action were brought in court to enforce
the collection of the notes or the security agreement.
Under 28-3-704, MCA, the right to attorney fees is
reciprocal to all parties to the contract in any action based
on the contract, when the contract provides for attorney fees
to any of the parties. See, for example, Compton v. Alcorn
(1976), 171 Mont. 230, 557 P.2d 292. Thus, the Weinbergs
having successfully defended against the Bank's claim on its
promissory notes are entitled in this case to reasonable
attorney fees and costs.
Here the jury verdict was rendered in the Weinbergs
favor on March 13, 1986. A hearing was held on the question
of attorney fees and interest on April 17, 1986. Following
the conclusion of that hearing, the court requested counsel
for the Weinbergs to review his time records and report to
the court by way of affidavit the amount of time spent
defending against the Bank's counterclaim to recover on a
promissory note and the amount of time spent on prosecuting
the plaintiffs' claims for affirmative relief against the
Bank. Thereafter plaintiffs ' counsel submitted an affidavit
showing a total of 223 hours spent in connection with the
Weinberg claim, of which he attributed 135.875 hours to
defending the relief sought by the Bank.
The promissory note on which the Bank claimed
nonpayment, that of April 26, 1982, included the following
provisions:
The makers, endorsers, and guarantors severally
agree to pay a reasonable attorney fee if this
notice is placed in the hands of an attorney for
collection after maturity, and waive demand,
protest, notice of protest, and notice of dishonor.
The Bank claimed that the Weinbergs were indebted to it
in the sum of $25,991.53, plus interest on the promissory
note. On August 23, 1983, its attorney wrote to Thomas A.
Weinberg demanding the sum of $25,991.53 plus interest at the
rate of 18 percent from May 27, 1983. The claim, plus
interest to March 13, 1986 amounted, according to
calculations of plaintiffs' counsel, to $39,036.80.
The District Court held a further hearing on attorney
fees on June 17, 1986, and thereafter entered an order
awarding the Weinbergs attorney fees to be recovered from the
Bank in the amount of $12,500.00.
On appeal the Weinbergs claim that the District Court
abused its discretion in fixing the attorneys fees for two
reasons: (1) the District Court failed to take into account
that plaintiffs' counsel undertook the risk of no payment if
he were unsuccessful; and, (2) the District Court
disregarded testimony from plaintiff's witness respecting the
reasonable value of attorneys services in this case.
Although the Weinbergs brought the action in the first
instance against the Bank in this case, the Weinbergs contend
that the action was nonetheless defensive in nature. The
letter from the Bank's attorney of August 23, 1983 informed
the Weinbergs that unless payment was made within 5 days of
the Rank's claim including interest, a duly authorized agent
of the Bank would enter the Weinbergs' premises and take
possession of the collateral appearing in the security
agreement. The Weinbergs filed their action against the Bank
on August 29, 1983, contending the action was necessary to
save the machinery and to continue farming, although they
denied any obligation of the Bank. They sought a temporary
restraining order and subsequent injunction to prevent the
Bank from taking their farm machinery from them. Later they
defended a claim and delivery action commenced by the Bank,
again to repel the Bank' s attempt to take possession of the
collateral pending litigation. Thus Weinbergs' contend they
were not simply defending against the counterclaim for the
sum of $25,991.53, plus interest. Their action was against
the Bank, but they were also defending against the repeated
efforts of the Bank to take the Weinbergs' farm machinery and
put them out of business.
The testimony at the attorney fees hearing featured John
J. Cavan, a Billings attorney, who testified that a
reasonable hourly charge in this case for services other than
trial time would be $100 per hour, and for trial time $150
per hour, for compensation which in any event was reasonably
certain to occur. He further testified that if the
compensation was risky or uncertain, a reasonable hourly
charge would be $200 per hour for nontrial services and $300
an hour for trial services.
The court's memorandum in connection with its finding of
attorney fees states: "There was no evidence to suggest the
compensation was not reasonably certain in this case. Having
these facts in mind, the court concluded that $12,500.00 is
an appropriate attorney's fee."
Complicating our consideration in this matter is a
contingent fee agreement entered into between the Weinbergs
and their attorneys' firm. On August 29, 1983, the Weinbergs
paid their attorneys $4,623.97 as a partial payment upon fees
for services in connection with the firm's representation of
the Weinbergs. The Weinbergs further agreed in writing to
pay their attorneys one-third of all recovery made on their
behalf in excess of $15,000.00 after the conm~encement of
action based upon said claims, and 40 percent of all recovery
in excess of $15,000.00 after the commencement of any trial
based upon the claims. The contingent fee was further to be
based upon any success with respect to the outstanding
balance as claimed by Farmers State Bank. Without our
setting forth here in detail the computations, we note that
the contingent fee based on the judgment recovered and the
defeat of the counterclaim less the deductible would. amount
to $91,531.02.
On cross-appeal, the Weinbergs claim that if the amount
of their contingent fee is not awarded to them, they should
at least be awarded the sum of $48,600.00 for services
rendered based upon the testimony of counsel and the
affidavit of hours submitted, and that the award of
$12,500.00 by the District Court was an abuse of discretion.
Of course, in fixing an attorney fee in a proper case,
the District Court is not bound a contingent fee agreement.
This was established in Engelbretson v. Putnam (1977), 174
Mont. 409, 416, 571 P.2d 368, 372. Instead, Engelbretson
directed that attorney fees be fixed in accordance with the
standards first set out in Forrester & McGuinniss v. B & M
Company (1904), 29 Mont. 397, 409, 74 P. 1088, 1093, and
repeated in Crncevich v. Georgetown Recreation Corporation
(1975), 168 Mont. 113, 119, 541 P.2d 56, 59:
The circumstances to be considered in determining
the compensation to be recovered are the amount and
character of the services rendered; the labor,
time, and trouble involved, the character and
importance of litigation in which the services were
rendered, the amount of money or the value of
property to be affected, the professional skill and
experience called for, the character and standing
in the profession of the attorneys;. .. the result
secured by the services of the attorneys may be
considered as an important element in determining
their value.
It is clear from the memorandum and findings that each
of the foregoing factors was considered by the District Court
in this case. In addition, the District Court noted that if
the contingent fee contract had been applied to the amount in
controversy between the Bank and the Weinbergs based upon the
promissory note, the fee would not result in more than
$15,500.00.
There are two purposes in a statutory or contractual
provision providing for attorney fees to a successful party.
One is the hoped-for elimination of frivolous claims or
defenses to claims; and the other is the intent of statute or
the contract to make the party having to resort to court
action whole if he or she is successful. It is incumbent
upon us therefore to point out the reasons why, when parties
such as Weinbergs here are faced with attorney fees amounting
to $91,531.53, their recovery of attorney fees in the amount
of $12,500.00 should be approved.
The result comes from the principles of contract, and
the purposes of statutes or contractual provisions which
provide for attorney fees. This court has in the past and
does now continue to support the advocacy and necessity of
reasonable retainer contracts based on a contingent fee where
reasonably arrived at between parties competent to contract.
To hold otherwise might prevent needy but worthy litigants
from reaching the courthouse door.
On the other hand statutory or contractual provisions
for attorney fees to the successful party are not based upon
contingency of collection, but rather upon the expectation
that the losing party will in fact pay the attorney fees
awarded. In a contingent fee arrangement, there is a factor
of risk undertaken by the attorney that he may receive
nothing for his labor. It is that factor of risk which
prompts courts to approve contingent fees which might
otherwise seem unnecessarily large. The risk of no return is
a component or factor tending to support a larger fee. Such
a risk is not contemplated in those cases involving statutory
or contractual provisions for attorney fees. The
contemplation then is that regardless of the result, the
attorney will be paid for his labor. Because of that
distinction, the holding of Compton v. Alcorn, supra, is
correct, that a contingent fee contract does not bind a
district court in determining a proper amount of attorney
fees to be awarded under a statute or contract provision.
Since one of the purposes for a statutory or contractual
provision for attorney fees is to make the successful party
whole, it should be clear that the attorney fees when finally
fixed by the court belongs to the party and is not subject to
the contingent fee agreement. This point was demonstrated in
Smith v. Howery (Mont. 1985), 701 P.2d 1381, 42 St.Rep. 995.
There the Howerys recovered from the State $243,475.00 for
total damages, $42,958.33 for interest on those damages, and
$28,850.70 for costs and attorney fees. In that case,
counsel for the plaintiffs, working on a 40 percent
contingent fee contract, requested of the court $129,866.34
as and for their attorney fees. The computation of attorney
fees did not include the amount awarded for costs and
attorney fees by the District Court. We approved that
approach taken in the Smith v. Howery case, and in that case
upheld summary judgment based on that kind of computation.
We approve the fee awarded here by the District Court,
though we are aware that where experienced counsel are
involved, an attorney is entitled to compensation for the
knowledge of a lifetime. One factor leading to our approval
is that with the affirmance of the judgment in favor of the
Weinbergs, the fees charged them under the contingent fee
arrangement are in accordance with their contract for that
portion of the judgment. The defeat of the Bank's claim
against the Weinbergs will subject them to a fee of 40
percent of the Bank's claim, which the District Court pointed
out would have amounted to $15,500.00. The award of
$12,500.00 by the District Court does not appear out of
proportion, since the District Court found that payment was
reasonably certain.
We find no abuse of discretion with respect to the award
of attorney fees in this case. However, Weinbergs in this
case are entitled to further attorney fees on appeal. The
judgment of the District Court is therefore affirmed both on
the appeal and cross appeal, and the cause is remanded for
further proceedings with respect to costs and attorney fees
on appeal.
We Concur:
Mr. Justice Fred J. Weber dissents as follows:
The majority opinion concludes that the plaintiffs were
entitled to a $33,158.17 award of excess interest charged by
the Bank. The majority points out the oral testimony to
that effect and also refers to the exhibits. I conclude that
the majority has misconstrued the figures contained in the
exhibits and as a result has erroneously allowed the award of
$33,158.17.
Exhibit 13 is the written exhibit prepared by Mr. Kelly,
accountant for the Weinbergs, and presented as a part of the
plaintiffs ' case. The exhibit demonstrated Mr. Kelly's
figures as he recomputed interest and principal on the entire
history of the loan. In that exhibit Mr. Kelly computed
interest at 9.5% which the plaintiffs contend is the correct
interest rate, rather than the varying interest rates which
the Bank used in the course of its computations of the bal-
ances owing by the Weinbergs. The computations are shown
clearly by Mr. Kelly, demonstrating the application of pay-
ments to both interest and principal. This recomputation of
interest and principal concludes with a showing that on May
27, 1983, there was a negative balance of $7,916.67. In
other words, the exhibit clearly demonstrates that for the
first time on May 2, 1983, the payments made by the Weinbergs
exceeded the balance owing of both principal and interest.
On May 2, 1983, Mr. Kelly computed the excess in payments
made by the Weinbergs at $4,287.29. By May 9, 1983, that
amount had increased to $7,440.09. Last, on May 27, 1983,
the Weinbergs paid $476.58 resulting in a total overpayment
of $7,916.67. The computations demonstrate that the
Weinbergs were only trying to prove they had overpaid the
Bank $7,916.67. In connection with that overpayment, Mr.
Kelly noted that he had not computed interest on the negative
balance due to the Weinbergs.
At the bottom of plaintiffs' Exhibit 13 he pointed out
that the total interest charged by the Bank on the liability
ledger was $126,249.86. The exhibit then sets forth the
following calculation by accountant Kelly:
Total interest charged
on the liability ledger
Total interest all pages
(which is the total of the
interest calculated by Mr.
Kelly at 9.5%)
Excess interest charged
on the liability ledger $ 33,158.17
The foregoing analysis is consistent with plaintiffs' Exhibit
13 which again demonstrated the total of the excess interest
charged by the lender. Unfortunately, when the damages were
argued to the jury, the attorney for the plaintiffs argued
that excess interest of $33,158.17 was collected and there-
fore should be paid back to the Weinbergs. That was incor-
rect mathematically, based upon the evidence submitted by the
plaintiffs. The only excess interest collected by the Bank
as proved by the plaintiffs was $7,916.67. I would therefore
modify the judgment as follows:
Amount of interest awarded
by the jury to the Weinbergs $ 33,158.17
Less amount of interest
actually payable to Weinbergs 7,916.67
Amount by which the judgment
should be reduced $ 25,241.50
Justice L. C. Gulbrandson jo
dissent.
/