No. 88-623
IN THE SUPREME COURT OF THE STATE OF MONTANA
1990
THE BILLINGS CLINIC, a partnership,
Plaintiff and Respondent,
-vs-
PEAT MARWICK MAIN & CO., a partnership,
and DONALD A. BLACKWELL,
Defendants and Appellants.
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:
John D. Stephenson, Jr. argued, Jardine, Stephenson,
Blewett & Weaver, Great Falls, Montana; Leonard P.
Novello, General Counsel, James F. Kennedy,
Associate General Counsel, Peat Marwick & Co., New
York, New York; Katheryn A. Oberly, Scott P.
Perlman, Mayer, Brown & Platt, Washington, D.C.
For Respondent:
Stuart Pack argued, Sherman & Howard, Denver,
Colorado; Gerald J. Neely, Billings, Montana
For Amicus Curiae:
Louis A. Craco, Deborah E. Cooper and Diana B.
Simon, Wilkie, Farr & Gallagher, One Citicorp
Center, New York, New York (American Institute of
A U G l 6 1990 CPA1s); Ward A. Shanahan, Gough, Shanahan, Johnson
& Waterman, Helena, Montana (Mt. Society of CPA1s)
Cd SmitL
,-,_ERK OF s U P R E ~ ~ COURT
E
G T A T E OF IYIQN'TANP Submitted: June 6, 1990
Decided :
Filed:
Justice John C. Sheehy delivered the Opinion of the Court.
The Billings Clinic, a partnership of medical doctors in
Billings, proposed in 1982 to liquidate a corporation under 5 331
of the Federal Internal Revenue Code, and contemporaneously to
build a larger office facility financed by the issuance of
industrial revenue bonds complying with federal tax laws. The
Clinic retained Peat Marwick Main and Company, a national firm of
accountants with offices in Billings, for "tax and accounting
consideration^^^ relating to the Cliniclsplans. The critical issue
here, among other important issues, is the outer extent of the
professional duty owed to the Clinic by the accountants under the
circumstances of this case. A jury in the Thirteenth Judicial
District, Yellowstone County, found that Peat Marwick had breached
its duty, and awarded damages in favor of the Clinic. Judgment was
entered thereon and this appeal resulted. On consideration, we
affirm.
FACTS
The principal business in 1982 and prior years of the
partnership of medical doctors known as the Billings Clinic was the
practice of medicine in Billings, Montana. It controlled two other
entities, however. The Yellowstone Company was a Montana
corporation, of which the shareholders were all of the medical
doctors of the Clinic, and this corporation owned the Clinic
building in Billings in which the doctors practiced medicine. The
Yellowstone Realty was a Montana partnership comprised of the same
2
medical doctors as the Clinic, and the chief asset of The
Yellowstone Realty was also realty other than the Clinic building.
In 1981-1982, the partners of the Billings Clinic had two
related problems. One was the high capital cost for admission of
new partners into the medical practice. To become a partner of the
Billings Clinic, an incoming doctor was required also to become a
partner in The Yellowstone Realty, and a shareholder in The
Yellowstone Company. The value of the properties owned by The
Yellowstone Realty and The Yellowstone Company had increased, so
that the amount which doctors newly admitted to the Billings Clinic
had to pay to "buy in1' their share of the related entities had
become expensive. This was described as the "buy-in/buy-out
problem.
A second problem confronting the Clinic was an immediate need
for additional space in which to conduct its medical practice.
The Clinic decided in 1981 to renovate its downtown building and
build a larger addition to its medical facility. The Clinic
intended to finance this construction project with industrial
revenue bonds.
The two problems were related because the Clinic's planned
expansion meant that newly-admitted physicians would be required
to buy "more buildingw at a higher cost.
To meet these problems, the ~xecutiveCommittee of the Clinic
formed two committees. The Alternative Buy-in Committee (ABC
Committee) was formed in 1981 to study the buy-in/buy-out problem.
It was chaired by Dr. Thomas P. Gormley and this Committee hired
the Los Angeles law firm of Pepper, Hamilton and Scheetz in 1982
to help solve the buy-in problem. In June 1982, the Pepper-
Hamilton firm sent the Clinic a draft report containing
recommendations. This report recommended that the Clinic
reorganize and simplify its operations by making The Yellowstone
Realty (the partnership) the sole property entity, and by
eliminating The Yellowstone Company (the corporation) entirely.
The report presented two ways to accomplish the reorganization:
(1) the doctors could contribute their stock in The Yellowstone
Company to The Yellowstone Realty partnership and then liquidate
The Yellowstone Company pursuant to 5 333 of the Internal Revenue
Code; or (2) the doctors could sell their shares of stock in the
Yellowstone Company to The Yellowstone Realty at fair market value
and then liquidate The Yellowstone Company pursuant to 5 331 of the
Internal Revenue Code.
In a parallel action, the Executive committee of the clinic
had established in 1981 a Building Committee, chaired by Dr.
Stephen Kramer . This Committee was responsible for the
construction and financing of a new addition to the Clinic
building. In January, 1982, this Committee hired the Seattle law
firm of Kieburtz and Simmonds as consultant for industrial revenue
bond financing. Earlier in March or April of 1981, the Clinic had
consulted Gareld Krieg of the Billings law firm of Crowley,
Haughey, Hanson, Toole, and Dietrich, seeking a legal opinion as
to the amount of capital expenditures the Clinic had available for
the new addition without exceeding the $10 million capital
expenditure ceiling in 5 103 of the Internal Revenue Code. In June
of 1982, Kreig was retained to prepare and file, on behalf of the
Clinic, an IRB application.
We must now inform the reader that the $10 million capital
expenditure limitation in 5 103 is the central factor upon which
this case is based. As the law then stood, purchasers of properly-
issued industrial revenue bonds obtained a favorable income tax
status for federal tax purposes on interest received from the
bonds. There was no limit as to the total amount of bonds to be
issued, but there was a limit to the total capital expenditures
made by the project owners within the same municipality within a
six-year period, three years before and three years following the
date of the issuance of the bonds. Based on figures supplied by
the Clinic, Gareld Krieg had written to the Clinic on April 13,
1981, that after deducting such capital expenditures the Clinic had
available to it $8.5 million in additional IRB financing authorized
under the law.
In early June 1982, Dr. Gormley personally delivered the
Pepper-Hamilton report to Ronald Haugan of the defendant Peat
Marwick at its office in Billings. What instructions were given
by Dr. Gormley to Haugan and Peat Marwick's view of what it was
required to review for Dr. Gormley are a point of high dispute and
will be discussed more fully under the issues hereafter. Mr.
Haugan referred the review of the Pepper-Hamilton report to Donald
A. Blackwell, one of the partners of Peat Marwick, for his
attention. His review resulted in three letters to Dr. Gormley,
one dated June 25, 1982, another dated July 20, 1982, and the
third, hand delivered, dated August 10, 1982. None of the letters
mentioned any adverse impact that the recommended reorganization
and liquidation of the corporation would have on the Clinic's
industrial revenue bond financing.
Peat Marwick recommended to the Clinic that the doctors
proceed with the reorganization by selling their shares of The
Yellowstone Company stock to The Yellowstone Realty partnership at
fair market value and then liquidating the corporation pursuant to
5 331 of the Internal Revenue Code. The doctors voted at their
August 10 meeting to adopt the recommendation and proceed with the
5 331 reorganization. The reorganization was implemented through
the Crowley firm on September 1, 1982, and became final on
September 30, 1982.
In the meantime, the Clinic's Building Committee had not been
idle. In September 1982, it let a construction contract for
enlargement of the Clinic's office building. The Yellowstone
Realty Partnership on September 23, 1982, accepted an offer of
Security Mortgage Company to purchase $7.5 million of industrial
revenue bonds for an interest rate of 75% of the prime rate subject
to certain conditions, one of which was that laws relating to the
bonds would be complied with. In turn, Security Mortgage hired the
Minneapolis firm of Dorsey and Whitney as bond counsel to determine
the legality of the bonds. William Johnstone, a partner in that
firm, began work on the bond transaction.
The bond closing was to take place in Billings on December 16,
1982. Prior to that date, Johnstone was unaware that a restructure
of the Clinic entities had taken place. While reviewing the
Clinic's certificate of actual and projected capital expenditures,
Johnstone noticed that no capital expenditures were projected for
The Yellowstone Company after 1982. He asked Peggy OILeary, the
Clinic's comptroller, why the capital expenditures for The
Yellowstone Company ceased in 1982. She explained that the
Yellowstone Company had gone out of existence in 1982 as a result
of the reorganization. Johnstone then raised the issue whether the
reorganization constituted a capital expenditure. Amid general
consternation among all concerned, it was finally determined that
the reorganization itself constituted a capital expenditure in the
contemplation of 5 103 of the Internal Revenue Code. In fact, it
constituted a capital expenditure of approximately $4.5 million.
When this capital expenditure was combined with the Clinic's $1.5
million of past and future capital expenditures and the $7.5
million bond issue, the Clinic was substantially over the $10
million capital expenditure limit. Therefore, neither Johnstone
nor any other bond counsel would give the necessary opinion that
interest on the bonds would be income-tax exempt. As a result, the
industrial revenue bond issue failed, in that such bonds were never
issued.
Because the construction of the building addition had already
been started and the Clinic did not want to reduce the size of the
project, the Clinic determined that it would seek a conventional
loan. The Clinic obtained a loan from Security Mortgage, with a
floating rate of prime plus 1 percent. New construction was
completed and the building occupied in October, 1983. In 1984,
fearing rising interest rates, the Clinic replaced the Security
Mortgage loan with a fixed rate loan from Travelers Insurance
Company which carried an interest rate of 13.25 percent and
included significant prepayment penalties. The Travelers loan was
replaced when interest rates later fell in 1987. The Clinic paid
Travelers a prepayment penalty of nearly $500,000, and entered into
a further loan with First Bank-Billings. This loan has a floating
rate of prime plus percent with a cap of 12 percent on the
interest rate.
On December 13, 1985, the Clinic brought this suit against the
Pepper-Hamilton law firm, the Peat Marwick Main & Co. defendants,
and the Crowley firm defendants (the Seattle consulting firm of
Kieburtz and Simmonds was dismissed by the Building Committee in
mid-summer of 1982). While litigation was pending, Pepper-
Hamilton settled with the Clinic for the sum of $1 million, and the
Crowley firm settled for $475,000. The cause went to trial before
a jury in the District Court and the jury returned a verdict in
favor of the Clinic in the sum of $4,775,000, against defendants
Peat Marwick Main & Co. and Donald A. Blackwell. In fixing
judgment, the District Court deducted the amount of the previously
paid settlements and entered judgment in favor of the Clinic
against Peat Marwick Main & Co. and Donald A. Blackwell in the sum
of $3,300,000 with costs and disbursements taxed at the sum of
$4,626.42. It is that judgment which is on appeal here.
ISSUES
The appellants raise the following issues:
1. The eligibility for tax-exempt municipal bond financing
is an issue that Peat Marwick defendants were never engaged to
examine and that they could not reasonably have been expected to
discover. (We rephrase as "the extent of professional duty.")
2. The Clinic's breach of contract claim should have been
dismissed because it sounds only in tort. The contract between the
Clinic and Peat Marwick did not cover tortious acts or omissions.
3. The Clinic's suit should have been dismissed as time-
barred.
4. Peat Marwick defendants are entitled to a new trial
because
(a) The District Court excluded rebuttal testimony from
defendants expert witness, John McCafferty;
(b) The District Court excluded evidence of substantial tax
benefits obtained by the Clinic as a result of the act or omissions
of which it complains, which would reduce the damages incurred;
(c) The damages award includes amounts incurred because of
the Clinic's failure to mitigate its damages;
(d) The damages award includes unsubstantiated and specu-
lative future damages and,
(e) The District Court allowed the jury to award the Clinic
prejudgment interest.
1. The Extent of Professional Duty.
On the professional duty of an accountant, the District Court
in this case instructed the jury as follows:
It is the duty of an accountant or a partnership of
accountants to employ that degree of learning, skill and
judgment ordinarily possessed by members of that
profession, and to perform any service undertaken as an
accountant in the manner a reasonably careful accountant
would do under the same or similar circumstances. The
failure to perform such duty constitutes negligence.
The foregoing instruction was offered to and given by the
District Court without objection. It properly states the law and
no issue is raised as to the instructions given by the ~istrict
Court in this case. The legal and factual issues raised by Peat
Marwick (a term we use to include both defendants) revolve around
the application and outer extent of the duty of the accountants
under the circumstances here.
To begin with, there is a deep division between the parties
as to whether the contract between the Clinic and the accountants
was express or implied. The District Court properly instructed
the jury that an express contract is one in which the terms are
stated in words, and that an implied contract is one the existence
and terms of which are manifested by conduct. Section 28-2-103,
MCA. The distinction is important. Peat Marwick contends that no
express contract existed in this case, but only an implied one,
and therefore the extent of professional duty must be determined
by conduct. The Clinic contends for an express contract, arguing
that the Peat Marwick letters and handwritten notes constitute an
express contract which defined professional duties.
The special verdict form returned by the jury found only that
the defendants did Ifbreach an obligation which they owed to the
plaintiff under a contract."
The issues raised by Peat Marwick on appeal as to whether it
breached the duty of accountants in this case follow their concept
that only an implied contract existed here and that the scope of
their duty to the Clinic is defined by their conduct toward it, and
the acceptance of their conduct by the Clinic.
Thus Peat Marwick reports in its brief that in October of 1980
its representatives met with the Clinic's executive committee to
discuss the buy-in/buy-out problem. The Clinic was dissatisfied
with the Peat Marwick contribution at the meeting and as a result
determined it would go elsewhere for advice on the problem. The
Clinic informed Peat Marwick that it was unhappy with the firm's
tax consulting services in general and that its tax consulting role
was probably in jeopardy.
Thereafter, the Clinic set up its Alternative Buy-in Committee
under Dr. Gormley. This committee retained the Los Angeles firm
of Pepper Hamilton and Scheetz to explore solutions. Peat Marwick
was not invited to compete for or to give advice with respect to
this consulting opportunity. The only contribution of Peat Marwick
to the eventual Pepper report was that its employee, Mac Stephens,
supplied earnings and profits figures to Pepper Hamilton in May
1982 for incorporation in their analysis.
The Pepper report came to the Clinic in June 1982. Peat
Marwick argues that Dr. Gormley and Bill Nicholson, the Clinic's
administrator, went to Peat Marwick and there asked Ronald Haugan
for guidance in determining which of the two methods of
reorganization contained in the Pepper report would be preferable.
They did not then ask Haugan to consider the impact of the proposed
reorganization on the issuance of an IRB. Rather, Peat Marwick
contends that at the initial meeting Gormley and Nicholson were
concerned with the impact of the report on the personal income
taxes of each doctor.
The Pepper report was outside of Hauganls expertise, and so
he referred the report to Don Blackwell, who is a tax partner of
Peat Marwick. Blackwelllsreview of the Pepper report resulted in
his letters to the Clinic dated June 25, July 2, and the hand-
delivered letter of August 10, all in 1982. These letters on their
face show the review by Peat Marwick only of the tax impact of the
proposed reorganization of the corporation upon the doctors
personally. The Peat Marwick letters were accepted by the Clinic
without objection and no contention is made as to their veracity.
Thus, it is argued that the conduct of the parties describes the
limits of the duty of Peat Marwick to the Clinic. Peat Marwick
contends that the evidence shows that the Clinic relied upon
persons other than the Peat Marwick defendants as experts on IRB
financing. Peat Marwick was given and performed only piecemeal
tasks with respect to the reorganization, and had virtually no
involvement at all with the bond issue. The major task of the
accountants was the review of the Pepper report, and they worked
only with the buy-in committee. In the meantime, the Clinic had
hired and relied on Pepper Hamilton, the Crowley law firm, the
Kieburtz firm, and its own employees, Bill Nicholson and Peggy
OILeary, to deal with the bond financing and particularly to
determine capital expenditures. Peat Marwick1s expert witness at
trial, Ward Junkermeier, testified that the Clinic was "crawling
with authorities on bond issuesu1 and that the Peat Marwick
defendants had no occasion to think that they had any
responsibility for advising the Clinic with respect to the impact
of the reorganization of the proposed IRB.
In addition to their limited sphere of duty in the matter,
Peat Marwick also contends that an accountant in Blackwell's
position has no duty to warn clients of hazards outside the scope
of his engagement, unless he knows the hazards exist. Neither
Blackwell nor the other Peat Marwick defendants could have been
expected to know that the 5 331 reorganization constituted a
I1capital expenditure," even if they had known of the $10 million
limit on capital expenditures under 5 103. In support, Peat
Marwick points out the Clinic's administrator, Bill Nicholson, who
is a CPA, and its comptroller, Peggy OgLeary, also a CPA, failed
to detect that there was any question that the reorganization was
a capital expenditure, nor did Gareld Kreig of the Crowley law
firm.
The arguments of the Clinic on this issue run quite the other
way. Dr. Gormley testified that he brought the Pepper report to
Haugan for I1inputwand that in effect he wanted "a second opinion.I1
The Clinic contends for an express contract between the parties,
pointing to the sentences in Peat Marwick's letter of June 25,
stating, "As requested we have reviewed the [Pepper report] for tax
and accounting consideration^^^ and "We will limit our comments
herein to those recommendations in which we see accounting or tax
implication^.^' The Clinic also points to a handwritten note from
Haugan to Blackwell, in referring to Blackwell the Pepper report,
wherein Haugan stated that Dr. Gormley wanted Peat Marwick's
winputln
later that month, and that the "goalsw of the review were
to provide the Clinic with a ''general reaction to the proposal1Iand
suggestions that Peat Marwick might have from the viewpoint of the
Billings Clinic, the individual doctors, and the professional
corporation standpoint. Again, the letter of Peat Marwick to the
Clinic on July 2, 1982, repeated that the accounting firm had
reviewed the Pepper report for 'Itax and accounting consideration^.^'
Based on the language in the June 25 and July 2 letters,
Haugan's note to Blackwell about the goals of the project, and the
broad range of topics covered by Blackwell in the June 25 letter,
and his handwritten notes, the Clinic's expert witness, Arthur
Shenkin, testified that Peat Marwick's duty called for a "complete
review of everything in the Pepper report that an accountant would
be expected to know;I1 that Peat Marwick was negligent in failing
to consider things which they should have considered; and that the
impact of the reorganization on the impending IRB was something
that the Peat Marwick firm should have investigated.
The Clinic further argued that the information was available
to Blackwell because Peat Marwick's expert in Washington, a Mr.
Wiesner, whom Blackwell called in December 1982 as to the effect
of the reorganization, was easily available for advice. Moreover
the Clinic produced in evidence an in-house Peat Marwick videotape
entitled **Action
Plan for the 1980s." The videotape called on the
tax generalists of the firm to identify clientsv problems and refer
them to the tax specialists of the firm, to provide those services
the clients identify and ask for, and to "anticipate and identify
problems that the client may not even be aware of yet." There was
no dispute from the experts of either side as to this standard of
care.
So, having listed the opposing contentions of the parties, we
turn now to determine the issue of the professionals* duty. The
factual issues have been decided by a jury. They found a breach
of duty by Peat Marwick under a contract existing between it and
the Clinic. When the evidence is conflicting, and there is
substantial credible evidence supporting the jury's findings, we
are precluded from disturbing the factual findings. Jacobsen v.
State (1989), 236 Mont. 91, 769 P.2d 694; Palmer by Diacon v.
Farmers Insurance Exchange (1988), 233 Mont. 515, 761 P.2d 401;
Walls v. Rue (1988), 233 Mont. 236, 759 P.2d 169; and Mountain West
Farm Bureau Mutual Insurance Company v. Girton (1985), 215 Mont.
408, 697 P.2d 1362.
Moreover, the factual determination by the jury here makes
somewhat ir'relevant the issue of whether the contract between the
parties was express or implied. The statements in Peat Marwick's
letters and notes that they were reviewing for '*taxand accounting
consideration^,*^ and that one of the goals was a "general reaction
to the proposalw could be considered as express words constituting
an express contract. Likewise the same language could be defined
as conduct defining their duty under an implied contract.
The American Institute of Certified Public Accountants has
filed an excellent brief in this case in support of Peat Marwick.
As amicus, they too contend that the Peat Marwick defendants here
were retained by the Clinic for a limited purpose, to advise as to
the tax and accounting considerations of the proposed
reorganization, without addressing general business or legal
considerations. There was no letter of engagement between the
clinic and Peat Marwick as to their professional responsibility,
and they were never asked specifically to evaluate the
reorganization in conjunction with the proposed IRB.
The Institute points to two decisions which it contends should
guide our decision here. In Aetna Finance Company v. Ball (1989),
237 Mont. 535, 774 P.2d 992, we had before us a legal malpractice
suit. Aetna, a finance company, appealed from a judgment of a
District Court in favor of an attorney where Aetna claimed that
the attorney had not fulfilled his duty to Aetna in connection with
Aetnals purchase of a security interest in a parcel of real
property. The defendant attorney had advised Aetna that it should
have two exceptions contained in the title insurance policy removed
before closing on an additional loan against the property. The
attorney, having been advised by the client that the removal had
been done, stated in a post-closing opinion that a valid security
interest sufficient to enable Aetna to obtain mortgage title
insurance existed. The attorney did not see the title insurance
policy issued the same day, which in fact retained the two
exceptions. Aetna sued the attorney claiming it had sustained a
loss attributable to a professional error of the attorney. The
trial court found that the attorney had assumed only limited
duties, which were fulfilled by advising the client how to proceed
to insure its interests in the property. The District Court also
found that the attorney had not undertaken the duty of guaranteeing
that the title company would issue appropriate coverage but that
this task was the responsibility of Aetna. The trial court found
no liability or negligence on the part of the attorney and on
appeal we affirmed. We held that the contract terms determining
the exact duties agreed to between the attorney and the client were
ambiguous, and so we held the trial court could ascertain the
intent of the parties from the examination of their conduct. Based
on the evidence, we upheld the District Court in that the attorney
could not be held liable for the exceptions that appeared in the
title insurance policy.
The Institute also relies on Gantt v. Boone, Wellford, Clark,
Langschmidt and Pemberton (M.D. La. 1983), 559 F.Supp. 1219, affrmd
742 F.2d 1451 (5th Cir. 1984). In that case the federal court
refused to impose liability on negligence or breach of contract
against an accountant hired by a corporation in connection with the
sale of corporate assets that resulted in substantial state capital
gains taxes. The court focused on the accountant's testimony as
to his understanding of his duty, the amount of his fee, and on
specific matters that he was not asked to consider. The court
concluded that the accountant had undertaken a limited engagement
and that he was not retained for the purpose of rendering tax
advice which had been left to the corporation's general counsel.
The Gantt court disregarded the testimony of the plaintiff's
expert, an accountant who testified that he would have done a
number of things differently from the defendant accountant. The
court held that any further actions by the accountant would simply
have duplicated the effort of the corporation's general counsel and
were not in the sphere of duty of the accountant in that case.
The Institute cites other cases of equal import, but we
distinguish the two principal cases and the other cases from the
case at bar. In the two cases cited, the trier of fact determined
the scope of the professional's duty; that is also true in the case
at bar. Moreover, in spite of the restricted view of the
accountants' duty that was taken by the Institute with respect to
Peat Manrick's participation in this case, Peat Marwick was not
completely isolated from the IRB financing project . The Pepper
report itself contained a reference to the fact that the Clinic
would probably build with IRB financing, and this report was fully
available to Peat Marwick. In addition, during the summer of 1982,
Peat Marwick performed audit work in connection with the
reorganization, and knew from the minutes of The Yellowstone
Realty, as well as the records of The Yellowstone Company that the
reorganization was on-going, and the construction was planned. The
audit was for the purpose of completing the reorganization.
We uphold the determination of the jury that Peat Marwick
breached its duty with respect to the Clinic.
2. Contract Claim Versus Tort Claim.
Peat Marwick presents this issue in two phases, (1) the
Clinic's contract claim sounds only in tort and should have been
dismissed, and (2) that given the conduct of the parties, the
implied contract between the Clinic and Peat Marwick defendants
cannot reasonably be interpreted as having required the Peat
Marwick defendants to consider the impact of the reorganization on
the proposed IRB financing.
Under the first phase of this issue, Peat Marwick contends
that the gravamen of the Clinic's claim is one in tort, a claim
that Peat Marwick did not perform with due care their obligation
to review the Pepper report. Peat Marwick states that the Clinic's
claim here is solely a tort action, and not a contract claim.
The principal citation for this position asserted by Peat
Marwick is Erickson v. Croft (1988), 233 Mont. 146, 760 P.2d 706.
In that case the purchaser of ranch property brought suit against
a real estate broker for fraud, negligence and breach of implied
contract, and against an attorney and law firm for malpractice.
In the District Court both defendants moved separately for summary
judgment based on the applicable statutes of limitation and the
District Court granted summary judgment against the plaintiff in
that the claims were timed-barred.
In granting summary judgment, the District Court in Erickson,
above, determined that the essence of the causes of action alleged
by Erickson was common law fraud and negligence, and that the claim
under a contract theory was merely a I1rehashingvof the fraud and
negligence claims. The statute of limitations had run on both the
fraud and negligence claims. Sections 27-2-203 and 27-2-204, MCA.
Erickson claimed that his claim was based on an implied contract
between him and the real estate broker. The District Court held
that regardless of the possibility of the existence of an implied
contract claim, under the nature of the claim asserted, the action
was based on fraud and negligence, so that the longer statute of
limitations applying to implied contracts, 5 27-2-202, MCA, did not
apply. This Court affirmed on appeal. Peat Marwick relies on this
case, contending that the Clinic's contract claim is "nothing more
than a relabeling of the Clinic's negligence claim." See Erickson,
760 P.2d at 710.
There is in truth sometimes a thin distinction drawn between
whether an action is grounded in tort or a contract. Generally,
the test of distinction seems to be that if the claim is based on
a breach of specific terms of the contract without any reference
to the legal duties implied by law upon the relationship created
thereby, the action is in contract; whereas, if there is a contract
for services which places the parties in such relation to each
other that in an attempt to perform the promised service, a duty
imposed by law as a result of the contractual relationship is
breached, then the gravamen of the action is the breach of the
legal duty rather than a breach of the contract, and so is a tort.
See Brueck v. Krings (a case in which Peat Marwick was involved)
(Kan. 1982), 638 P.2d 904, 907; Yeager v. Dunnaven (Wash. 1946),
174 P.2d 755; Sato v. Van Denburgh (Ariz. 1979), 599 P.2d 181, 183.
We also said in Erickson, above, distinguishing a holding in
Unruh v. Buffalo Building Company (Mont. 1981), 633 P.2d 617, 618,
that the Itgravamen of the claim and not the label attached
controlled the limitations period to be applied to that claim."
760 P.2d at 710.
In Thiel v. Taurus Drilling Ltd. (1985), 218 Mont. 201, 710
P.2d 33, we held that under certain circumstances, potential
liability in tort may coexist with liability in contract, when the
facts warrant either form of action. In this case, Peat Marwick
perceived it had duty, express or implied, to review the Pepper
report "for tax and accounting considerations." The jury found
that in failing to note the impact of the reorganization upon the
IRB financing, Peat Marwick had breached its express or implied
contract. By the same token, since a professional contract existed
between the parties, the law imposed upon Peat Marwick the duty of
employing that degree of learning, skill and judgment ordinarily
possessed by members of the accounting profession, in the manner
a reasonably careful accountant would do under the same or similar
circumstances. Thus, whether looked at from the viewpoint of
breach of contract, or from the breach of a duty imposed by law
upon the performance of the contract, the allegations of the claims
in this case can be stated either in tort or in contract. Such a
result seems not to be uncommon. Hawkins, in Professional
Neslisence Liability of Public Accountants, 12 Vand. Law Review 797
(1959), an authority relied on by Peat Marwick, said:
Like other professionals, the accountant usually gets
into the position where he must exercise his professional
skill as the result of a contract. The contract says
what he has undertaken to do, but the law says that he
must do it with reasonable care, by professional
standards. If he fails, he may be liable either for
breach of his contract or in tort, for breach of the
general duty to exercise due care arising out of the
contract relationship.
We cannot therefore agree with Peat Marwick that the Clinic
had only a single form of claim against the Peat Marwick
defendants. A scissors more sharp than we command is required to
pare away the contract implications from the tort claim here. The
claims exist mutually in contract and in tort. The District Court
was correct in refusing to dismiss the action on the grounds urged
by Peat Marwick.
Under the same issue, and almost in the same breath, Peat
Marwick argues that the implied contract between the Clinic and
Peat Marwick defendants could not reasonably be interpreted as
requiring the Peat Marwick defendants to consider the impact of the
reorganization on the IRB.
Again, Peat Marwick argues that since the Clinic and Peat
Marwick never actually negotiated or agreed to language defining
the scope of Peat Marwick's engagement, an express contract did
not exist. It argues that an implied contract can exist only where
the terms are manifested by conduct. In support, they point to the
sentence in the June 25, 1982 letter to the Clinic in which Peat
Marwick said "As some of Pepper, Hamilton, and Scheetz's
recommendations relate to general business and legal
considerations, we will limit our comments herein to those
recommendations in which we see accounting or tax implication^.^
This is but a repetition of the earlier argument, phrased in
another form. It all comes to one. Either under the contract,
express or implied, the duty to review for tax and accounting
considerations included a duty to recognize the impact of the
proposed reorganization upon the IRB financing; or from the tort
viewpoint, it became the duty of Peat Marwick in examining the tax
and accounting considerations, to exercise the due professional
care ordinarily required of members in that profession. Under the
circumstances here, the jury has decided those factual issues,
whether in contract or tort.
3. Statutes of Limitations.
Peat Marwick takes the position that the claims of the
Billings Clinic against Peat Marwick are time-barred.
The pertinent dates are these: The Clinic took steps to begin
its reorganization on September 1, 1982; the reorganization became
final on September 30, 1982; the industrial revenue bond issue was
abandoned as impossible on December 16, 1982; the Clinic filed its
complaint against Peat Marwick defendants (and the settling
defendants) on December 13, 1985.
Thus, if the two-year statute, 5 27-2-207, MCA, applies, the
Clinic's complaint was a year late in its filing; if the three-
year statute, § 27-2-204, MCA, applies, the Clinic's complaint was
days late if September 30, 1982, or an earlier day was the date
when the injury accrued; if the Clinic's action was founded upon
an implied contract, there was a five-year period of limitation,
and if an express contract, an eight-year period, 1 27-2-202, MCA.
Let us get immediately to the heart of this issue. We have
said in the foregoing that under the facts in this case the claims
of the Billings Clinic against Peat Marwick coexist mutually in
tort or contract. The shortest statute of limitations for
contracts is 1 27-2-202(2), MCA, prescribing a five-year period for
an action upon a contract, account or promise not founded under an
instrument of writing. The Billings Clinic lawsuit was filed well
within this period.
In Thiel v. Taurus Drilling Ltd. (1985), 218 Mont. 201, 710
P.2d 33, this Court stated that where there is a substantial
question as to which of two or more statutes of limitation should
apply, the general rule is that the doubt should be resolved in
favor of the statute containing the longest limitation. We
reaffirmed that rule in Weibel v. Ronan State Bank (1989), -
Mont. -, 776 P.2d 837, 838, saying:
... If the gravamen of the action is such that it may
rest in either a tort or contract, the injured party may
elect the theory he will pursue and the statute of
limitations governing the elected theory will apply.
(Citing authority.) If doubt exists as to the gravamen
of the action, the longer statute of limitations will
apply. (Citing Thiel.)
In this case, the District Court applied the three-year
statute of limitations for tort actions, 1 27-2-204, MCA, and found
that the cause of action had accrued on December 16, 1982. This
brought the filing of the complaint by Billings Clinic within the
three-year period. On appeal, Peat Marwick claims error, on the
grounds that the cause of injury accrued on September 1, 1982, when
the reorganization commenced, or, alternatively, on September 30,
1982, when it became irrevocable. There is no need for us to
discuss that issue, nor to discuss the claim of Peat Marwick that
this cause constituted an injury to property and therefore that a
two-year statute, S 27-2-207 applied, because in our view the five-
year statute of limitations was equally applicable under the facts
of this case. Section 27-2-202(2), MCA.
4 (a). The Exclusion of Rebuttal Testimony From Expert John
McCafferty.
John T. McCafferty is a Dallas, Texas, attorney with an
extensive background in municipal bond financing both as a Treasury
Department employee for several years and as a practicing lawyer
in Dallas and in Washington, D.C. He testified in the trial before
the District Court, without objection, to his opinion, based upon
his professional experience with accountants, that Don Blackwell
should "absolutely notw have recognized the potential IRB problem
under 1 103. Further on in his testimony, the District Court
sustained an objection to his proffered testimony that because of
the passage of the 1986 Tax Reform Act by the Congress, it was
likely that the holder of the proposed IRB bonds for the Clinic
would call them in 1992. (The offer from Security Mortgage Company
to the Clinic had specified that the IRB bonds would be callable,
at the option of the holders, in 1992.) The Clinic's expert,
Arthur Shenkin, and others, had testified that such bonds would not
have been called. The District Court sustained an objection to Mr.
McCaffertyls testimony as an expert on this point on the grounds
that this part of his expert testimony had not been revealed to the
Clinic in pre-trial discovery.
The question of McCafferty1s proposed testimony as to whether
the IRB bonds would be called up in 1992 arose in an unorthodox
way. On cross-examination of henk kin by counsel for Peat Marwick,
he was asked whether he had considered the implications of 5 265
of the Tax Reform Act of 1986 and other implications of that Act.
Shenkin testified that he did not consider them because they were
not relevant. Peat Marwick contended that the testimony of
McCafferty would show that such considerations were relevant. In
effect Peat Marwick sought to rebut its own cross-examination on
a matter of expertise through an expert that had not been
designated. The court posed the issue in this fashion:
THE COURT: It is just a question of whether it is
rebuttal or not rebuttal. So it gets down to a technical
question as to whether you can raise the matter by cross
examination, then, depending on the answer from the
witness which you believe is an incorrect answer, that
you can then, under this circumstance we are dealing
with, bring forth rebuttal testimony or attempt to
establish that it would have made a difference. That's
really where we are here?
The court then went on to sustain the objection.
On appeal Peat Marwick contends that the proffered testimony
by McCafferty was only rebuttal to specific testimony that Shenkin
gave during the trial and that it tended to counteract new matters
offered by the adverse party. McGee v. Great Northern Inc. (1977),
174 Mont. 466, 480, 571 P.2d 784, 792.
Before the trial, on April 24, 1987, the District Court had
entered an order requiring disclosure of expert witness testimony
by January 15, 1988, and establishing a discovery cutoff date of
May 1, 1988. The Peat Marwick defendants designated Mr. McCafferty
as an expert witness on time, supplemented his designation on June
17, 1988, but did not in that designation mention the proposed 1986
Tax Reform Act testimony. The ruling of the District Court on this
part of McCafferty8s testimony is proper.
Under Rule 26 (b)(4), M.R. Civ. P., a party may be required to
state the subject matter on which a proffered expert is expected
to testify, the substance of the facts and opinions to which the
expert is expected to testify, and a summary of the grounds for
each opinion. Peat Marwick had not identified the Tax Reform Act
of 1986 as a subject for Mr. McCaffertyls testimony. Moreover his
proffered testimony could not be considered rebuttal because
rebuttal testimony is confined to that evidence which tends to
counteract new matter offered by the adverse party. Massman v.
City of Helena (1989), 237 Mont. 234, 773 P.2d 1206; Mountain West
Farm Bureau Mutual Insurance Company v. Girton (1985), 215 Mont.
408, 697 P.2d 1362. Here the "new matteru was brought out by Peat
Marwick. We uphold the District Court's ruling.
Peat Marwick also claims here when the District Court refused
further testimony by Mr. McCafferty that a pamphlet written by
Shenkin in 1973, "Transfers to Partnerships," contained an outline
of a transaction similar to the reorganization of the Billings
Clinic, but Shenkin did not warn the reader that such a transaction
would constitute a capital expenditure under 5 103. The Clinic
objected to the proposed testimony of Mr. McCafferty again because
the Peat Marwick defendants had not designated the testimony prior
to trial and because the evidence did not rebut new matters raised
by the Clinic but rather constituted undisclosed expert evidence
presented in their own case-in-chief. The trial court sustained
the objection.
The pamphlet itself was not offered as an exhibit by Peat
Marwick. On his cross-examination, Shenkin had admitted that it
did not warn readers of the potential implications of 1 103 in IRB
financing. henk kin also stated that he was not sure if there was
a capital expenditure limitation for IRBs in effect in 1973 when
he wrote his pamphlet. It is clear from Shenkinls testimony on
direct examination and on cross-examination that the pamphlet he
had authored was directed to the tax implications of transfers to
partnerships, a subject which had no relation, for the purpose of
his pamphlet, to the parallel subject of IRB financing under 1 103.
The District Court was clearly correct in refusing McCaffertyls
testimony on this subject also.
4(b). Whether the Clinic Inflated its Damages.
Under the offer for the proposed IRB from Security Mortgage
Company, the Clinic would have been committed to make regular
monthly interest payments to the bond holders during the time the
bonds were outstanding. When the bond issue failed, the Clinic
obtained a private loan from Security Mortgage which also required
such monthly payments. It appears, however, that the Clinic did
not make regular monthly payments for the first two years, but
instead allowed the amount of accruing interest to be added to the
principal balance of its loan. This had the result of increasing
its loan balance, and increasing the damages claimed by the Clinic.
The amount of the financed interest was $957,775, which was added
to the loan balance carried over to the Travelers loan. The Clinic
claimed damages for the additional balance and for the increased
interest attributable to it in the approximate sum of $500,000.
Peat Marwick claims that by so handling its loan payments,
the Clinic inflated the damages when it had a duty to mitigate
damages, relying on Brown v. First Federal Savings & Loan
Association (1969), 154 Mont. 79, 460 P.2d 97, where this Court
held that there could be no recovery for damages which might have
been prevented by the reasonable efforts of the claimants.
The Clinic counters that under the evidence, the Clinic did
not Ilele~t~~ to make regular monthly interest payments.
not It
points to the testimony given by Peat Marwick1s damages expert,
David Johnson, that whether the IRB financing had been completed
or the actual Security Mortgage loan were in effect, in each case
there would have been a two-year period in which the loan proceeds
would have been used to pay interest expense. If an IRB had been
used, the interest earned on the bond proceeds during the
construction period would be used to pay both construction costs
and the accruing interest expense owed to the bond holder. The
Security Mortgage loan on the other hand was a construction loan
in which the lender provided the Clinic with a line of credit out
of which construction costs, including interest expense, as they
were incurred, were to be paid. Because the Clinic did not receive
the full $7.5 million at the outset from Security Mortgage as it
would have received under the bond financing plan, the Clinic did
not receive interest income on the loan proceeds during the
construction. It was immediately obligated to pay interest on the
1oa:n on amounts as received up to $7.5 million. Moreover the
difference in interest rates under the two procedures (prime plus
1 p'ercentversus 75 percent of prime) entered into the equation.
That the Security Mortgage loan was reasonable, and the best
loan available at the time, as were the Travelers and First Bank
replacement loans, was testified to by the experts presented by
the Clinic. No evidence in the record shows that substitute
conventional loans other than IRBs would have provided the Clinic
with funds where interest could have been earned during the
construction, or that the terms of the Security Mortgage loan
permitting the l@financinglg interest expense by the Clinic were
of
improper or unreasonable.
Mitigation of damages is an affirmative defense for which the
burden of proof falls on the party opposing the damages. A. T.
Klemens and Son v. Reber Plumbing and Heating Company (1961), 139
Mont. 115, 360 P.2d 1005, 1010. The question was one for
determination by the jury which awarded the damages. The District
Court upheld the jury in denying Peat Marwick's motion for a new
trial. We find no basis on which to reverse or modify the judgment
on this item.
4(c). Offsetting Tax Benefits.
Peat Marwick contends that since the jury found it liable for
the damages caused to the Clinic by the loss of the IRB, Peat
Marwick is entitled to an offset of the tax benefits that the
individual doctors received by proceeding with the reorganization.
These benefits had a present value in 1982 of approximately
$311,000. The District Court refused to permit this testimony from
defendant Don Blackwell.
Peat Marwick contends that a damages award for a tort or a
breach of contract may be offset by the benefits received by the
plaintiff from the complained-of transaction. ECA Environmental
Management v. Toenyes (1984), 208 Mont. 336, 348, 679 P.2d 213,
219, and Restatement (Second) of Torts, 920, (1979) (stating that
when defendant's tortious conduct confers a special benefit on the
individual or plaintiff that was harmed, the value of the benefit
may be considered a mitigation of damages when equity requires).
Peat Marwick also contends that virtually all of the doctors were
in the 50 percent marginal income tax bracket in 1982 for federal
income tax purposes, and that the maximum tax rates are now 28
percent. Peat Marwick argues that the doctors have realized a
permanent tax benefit consisting of the difference between those
two rates. The District Court refused to allow Peat Marwick to
present any evidence of the tax benefits thereby conferred on the
individual doctors.
Peat Marwick is not entitled to such an offset. The objective
of compensatory damages is to restore to the injured or damaged
party the position or state the party would have attained had the
tort or the breach of contract not occurred. In this case, as the
jury found, if Peat Marwick had properly done its job, the Clinic
would have had the benefit both of the tax benefits arising from
the reorganization through stepped-up depreciation allowances, and
also the lower cost of the favorable tax-exempt status of IRB
financing. (Testimony showed that if the Clinic had been alerted
to the ramifications of IRB financing under 5 103, the
reorganization would have been delayed a period of three years to
eliminate the capital expenditure problem, but the IRB financing
would have proceeded immediately.) Without doubt, the failure of
the IRB financing resulted in a higher interest cost for the loans
required for the construction of the addition to the Clinic. To
reduce that higher cost by the tax benefits to which the Clinic was
otherwise by law entitled would do no equity. The two items are
not related so that one benefit is the result of the other. The
Clinic has cited Randall v. Loftsgaarden (1986), 478 U.S. 647, 106
S.Ct. 3143, 92 L.Ed.2d 525, for the rule that a plaintiff's
recovery for rescissionary damages under the Securities Act of 1933
should not be reduced by the amount of tax benefits obtained by the
plaintiff as a result of the fraudulently-induced investment.
While Randall is applicable in a fashion, it is based on the public
policy of the federal government to award damages to deter fraud
in securities cases. In the ordinary course of things however, tax
benefits come to individuals by force of federal or state
governmental laws and not through the beneficence of
nongovernmental third parties. This Court has refused to
acknowledge tax benefits as offsets in Anderson v. Burlington
Northern Inc. (1985), 218 Mont. 456, 464, 709 P.2d 641, 648,
cert.denied 106 S.Ct. 2902 (1986); and Tribby v. Northwestern Bank
of Great Falls (1985), 217 Mont. 196, 209, 704 P.2d 409, 417. In
Ehly v. Cady (1984), 212 Mont. 82, 97, 687 P.2d 687, 694, this
Court allowed a plaintiff to recover lost investment tax credits
that were supposed to be a major benefit of his bargain. The
damages suffered by the Clinic in this case were the loss of the
IRB financing, and the accompanying result of lower interest costs
to the Clinic. That loss was real, and quite separate from any
gained realized by the Clinic (and passed through to the doctors)
from the reorganization.
The foregoing position also prevents any consideration by us
or by the District Court that the income tax rates in 1986 were
reduced from a 50 percent top to a 28 percent maximum, as contended
by Peat Marwick. Evidence of the tax benefits to the individual
doctors would be speculative in the extreme, assuming without
agreeing that it would be proper to look to the partners
individually, instead of the partnership entity known as the
Clinic. This Court prophetically stated in Bracy v. Great Northern
Railway Company (1959), 136 Mont. 65, 74, 343 P.2d 848, 853, @@The
tax liability of today is no criterion of what it may be tomorrow.
It has a faculty of constantly increasing in the face of vocal
threats of reduction usually made on the evening of an election."
The rule that damages must be reasonably certain in their nature
and origin applies with equal force to claimed offsets to damages.
We find no merit in these issues.
.
4 (d) Future Damages.
Arthur Shenkin projected damages to be sustained by the Clinic
in the future to December 2002 based upon the supposition that the
IRB would not have been called in 1992. Shenkin also calculated
however that if the bonds were called on December 1, 1992, and
replaced by conventional financing, the Clinic's damages would have
been $4,316,545.
In determining whether the IRBs would not have been called in
1992, Shenkin testified that he relied on the expertise of Jerry
LaSeur of Security Mortgage for this purpose.
LaSeur had testified that an IRB is "calledu if the existing
bond holder no longer wants the bond and if a purchaser cannot be
found to replace the existing bond holder. If the bond is
purchased by a new bond holder, the bond has not been llcalled,vl
and
its tax-exempt status continues. LaSeur testified that because of
the credit quality of the Clinic and the earnings situation of the
proposed bond holder, First Interstate Bank of Arizona, that a call
of the bond by First Interstate would be remote. LaSeur testified
that almost with no doubt he could replace the bond with a buyer
in need of tax-exempt income if First Interstate decided to shed
itself of the bonds.
Peat Marwick objected to Shenkinls testimony for relying on
LaSeur, because LaSeur's testimony was speculative, as to what
might occur in the future, and because whether the bonds would be
called by First Interstate was not within the expertise of LaSeur.
If the trial court had sustained the objection, the damages under
Shenkin's testimony might have been reduced by approximately
$500,000. The District Court, however, overruled the objection.
In arriving at the year 2002 damages in the amount of
$4,827,945, Shenkin assumed that the bonds would not be called in
1992, based on LaSeurls opinion.
The jury verdict on damages was the sum of $4,475,000, between
the high and low figures given by Shenkin.
By law, damages must in all cases be reasonable, 5 27-1-302,
MCA, and damages which are not clearly ascertainable both in their
nature and origin cannot be recovered for a breach of contract, 5
27-1-311, MCA. The amount of damages however need not be proven
with mathematical precision, Jarussi v. Board of Trustees of School
District Number 28 (1983), 204 Mont. 131, 664 P.2d 316. The amount
of future damages rests in the sound discretion of the trier of
fact and need only be reasonably certain under the evidence.
Frisnegger v. Gibson (1979), 183 Mont. 57, 598 P.2d 574. The
question presented on this issue is whether the approximately
$500,000 of additional damages testified to by Shenkin that would
be incurred if the bonds were not called in 1992 was established
with reasonable certainty. The testimony indicated that the
present loan with First Bank-Billings will stay in effect because
the loan is a good earning asset for the Bank and the Clinic is a
desirable customer. Moreover the Clinic is not likely to obtain
a lower rate than prime plus k percent. LaSeur testified that the
tax-exempt status of the IRB bonds would most likely have continued
until 2002. The evidence made it reasonably certain for the jury
to assume that the bonds would not be called in 1992, and that the
damages incurred by the Clinic would therefore continue until the
payoff of the First Bank loan in 2002. The amount of future
damages were discounted to present value under Shenkin's testimony.
We find no reason to disturb the jury's finding on this
portion of the damages.
4(e). Moratory Interest Versus Pre-Judgment Interest.
Shenkin's testimony indicated that the Clinic had been forced
to make $834,533 in higher interest payments from January, 1983 to
August, 1988. He increased this amount to $976,609, by adding in
the 'lpresent" value as of August 1, 1988 (the date of trial), of
the past interest payments. The l@presentUvalue calculation was
$142,076.
The Peat Marwick defendants contend that this item is pre-
judgment interest, for which there is no statutory authority. They
state that under 5 27-1-210, MCA, and 5 27-1-211, MCA, pre-judgment
interest is available only if the damages are ''capable of being
made certain by cal~ulation.~~
Peat Marwick contends that this
Court interprets that language narrowly, Carriger v. Ballenger
(Mont. 1981), 628 P.2d 1106, 1110, and that pre-judgment interest
is routinely denied when there is conflicting evidence on the
amount of damages, Castillo v. Franks (1984), 213 Mont. 232, 244,
690 P.2d 425, 431; Swenson v. Buffalo Building Company (Mont.
1981), 635 P.2d 978, 985; and Callihan v. Burlington Northern Inc.
(1982), 201 Mont. 350, 359, 654 P.2d 972, 977. On the basis that
the future interest damages were not a sum certain or capable of
being made certain by calculation, but required expert testimony,
Peat Marwick asserts that the award of $142,076 as a present value
calculation for additional future interest was unwarranted.
In reply, the clinic states that the Peat Marwick argument
misconstrues the item of damages. The Clinic contends that the
jury award was moratory rather than pre-judgment interest. In
support, the Clinic cites the testimony of Shenkin that the Clinic
actually paid $834,533 more in interest between January 1983 and
July 1988 than it would have paid if the IRB had been issued.
Because the Clinic had to make higher periodic payments, Shenkin
testified that the Clinic lost the opportunity to use those funds
for other purposes, to increase its cash flow, or to invest those
funds. Thus in addition to the actual loss of the dollars, the
lost use of those moneys "cost the doctors something.@@ Shenkin
calculated the additional amount that each of the monthly payments
would have gained up to the date of trial if invested in an
investment at a rate of return equal to the fifteen-year average
of the one-year Treasury Bond Index. In effect, the item claimed
was for the loss of use by the Clinic of the increased costs it had
already paid because of the failure of the IRB bonds.
When viewed from the prospect of the loss of use of the
increased interest expense which the Clinic had to pay, the amount
claimed as moratory interest does not exceed the limitation of
damages for the breach of an obligation set forth in 1 27-1-303,
MCA, that no person can recover a greater amount of damages for the
breach of an obligation than he or she could have gained by the
full performance thereof on both sides. Again, the increased
interest already incurred at the time of trial appears to be
reasonably certain, and is capable of reasonable calculation.
Accordingly, we find no error on this item.
CONCLUSION
Having considered in full the issues raised by Peat Marwick
defendants on appeal and finding no error therein, we affirm the
judgment of the District Court.
( J & , & Q . ~
Justice
We concur:
Chief Justice /
/ /
Justice L. C. Gulbrandson:
I concur in the result but not in
C
Hon.. L/c. Gulbrandson, ~etired
~ u s t p 'sitting in place of
,
Just'ce Diane G. Barz