No. 88-518
IN THE SUPREME COURT OF THE STATE OF MONTANA
1990
KITCHEN KRAFTERS, INC.,
Plaintiff and Respondent, -
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-VS- -. -- k.3
EASTSIDE BANK OF MONTANA, --i ,. z7
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Defendant, Counterclaimant ' _-,
and Appellant, !--7
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EASTSIDE BANK OF MONTANA,
Third Party Plaintiff, , C-J
-vs- ..
ROBERT W. SCHELL; MARY ANN CLARY, formerly, MARY ANN , . c7
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SCHELL, former wife of ROBERT W.SCHELL; STATE OF -,
MONTANA, EMPLOYMENT SECURITY DIVISION, DEPARTMENT OF
LABOR & INDUSTRY, et al.,
Third Party Defendants.
APPEAL FROM: District Court of the Eiqhth Judicial District,
In and for the County of Cascade,
The Honorable Thomas McKittrick, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Ward E. Taleff argued; Alexander, Baucus & Linnell,
Great Falls, Montana
For Respondent:
Maxon Davis argued; Cure, Borer & Davis, Great Falls,
Montana
Submitted: December 12, 1989
Decided: March 20, 1990
Filed:
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Clerk 1.
Justice R. C. McDonough delivered the Opinion of the Court.
Defendant, ~astsideBank of Montana (Bank) appeals from a jury
verdict rendered in the Eighth Judicial District, Cascade County
in favor of the plaintiff Kitchen Krafters, Inc. (Kitchen
Krafters). We reverse.
The issues on appeal are:
1) Whether itche en Kraftersl claims are barred by the
statutes of limitations.
21 Whether Kitchen Krafters claims are supported by
substantial evidence.
3) Whether the District Court erred in instructing the jury
on causation.
The facts of this case are complicated. In early 1973, Arnold
Wirtz (Wirtz) and Don Morris (Morris) of Kitchen Krafters contacted
Robert Schell (Schell) about purchasing commercial property in
Great Falls, Montana located on 25th Street North. At the initial
meeting, a price of $40,000 was settled upon. Approximately one
week later, Wirtz and Morris were contacted by Bruce ~ i l l e r
(Miller) of the Bank to review a draft of a proposed contract for
deed and escrow agreement naming the Bank as escrow on the
property. The contract for deed had been prepared by Schellls
attorney. Morris and Wirtz were unrepresented.
At the meeting, Wirtz and Morris learned that Schell and the
Bank had negotiated a separate transaction concerning the property.
The Bank loaned Schell $30,000 which was secured by a trust
indenture on the property. The escrow agreement specified that
1
payments made by Kitchen Krafters would be distributed to the Bank
as payments on Schelllsunderlying trust indenture with the balance
going to Schell. The exact wording is as follows:
Special instructions, if any, in addition to the
foresoins: In the event Buyers prepay an additional
$5,000.00 on or before July 1, 1973, upon such payment
there shall be credited against principal an additional
$2,000.00. to-wit: upon payment of additional $5,000.00
principal on or before July 1, 1973, Buyers shall be
credited with $7,000.00 payment; if said $5,000.00
payment made on or before July 1, 1973, this special
instruction becomes automatically void and cancelled.
3. Payments made hereunder are to be distributed as
follows:
Applied first to monthly payments under Trust Indenture
dated March 29, 1973, running to Eastside Bank of Montana
wherein Sellers are Grantors; balance of payments
remitted to Sellers.
4. Terms of prepayment privilege are as follows: (If no
such privilege, so state)
Full prepayment privileges, interest to cease on amounts
prepaid; but prepayment shall not excuse subsequent
monthly payments.
On July 9, 1973, Kitchen Krafters exercised this option and
made the prepayment. Although the payment was made beyond the July
1 deadline contained in the escrow agreement, the parties executed
a waiver and authorized the Bank to accept the payment which was
applied to the contract principal. The Bank did not apply this
payment to Schellts note secured by the trust indenture, however.
Instead the $5,000 was given to Schell who never applied the money
to his debt. Kitchen Krafters was never advised that this payment
was not applied to Schellts note.
As a result of the prepayment, the Bank sent Kitchen Krafters
a revised amortization schedule which shortened the number of
monthly payments from 180 to 125. The amount due monthly remained
the same. Schellls repayment schedule under his trust indenture
remained the same. As a result, Kitchen Krafters was amortizing
its contract for deed at a much faster rate than Schellls debt on
his trust indenture.
Finally, in either 1980 or 1981, the president of the Bank
called Kitchen Krafters and notified them that because the
prepayment had not been applied to Schellls trust indenture, the
property would not be fully released until that underlying
obligation was paid. Kitchen Krafters then contacted Schell who
confirmed that he had not applied the prepayment to the Bank's
note. He also stated that he was financially unable to meet the
obligation. In 1982 Schell filed a petition in bankruptcy that was
subsequently dismissed by the bankruptcy court.
Subsequently, Kitchen Krafters, experienced a number of
setbacks. In September of 1981 Wirtz, who managed the sales and
business end of itche en Krafters, quit and went into direct
competition. Kitchen Krafters continued to meet its obligations
under the contract for deed. On December 23, 1982, Kitchen
Krafters attempted to pay the Bank, as escrow, the balance due on
the contract. This final payment was contingent upon a demand made
by Kitchen Krafters that the trust indenture be released. Under
this condition the Bank refused to accept the payment and the trust
indenture was not released.
r
Kitchen Krafters filed suit against the Bank on February 8,
1983 seeking damages for breach of the covenant of good faith and
fair dealing, constructive fraud, failure to disclose and negligent
misrepresentation. Both parties amended their pleadings on March
18, 1985. On April 4, 1985, the Bank filed a revised amended
answer, counterclaim and a third-party complaint seeking to
foreclose the trust indenture.
Trial commenced on June 20, 1988. The Bank's motion for
summary judgment, based upon the statute of limitations defense,
was denied as was its motion for a directed verdict. On June 28,
1988, the jury returned a verdict in favor of Kitchen Krafters for
$285,000. The District Court entered judgment accordingly and this
appeal followed.
I
The Bank maintains that each of Kitchen Krafters claims are
barred by the statute of limitations. As stated earlier, Kitchen
Krafters brought its lawsuit, which is based in tort, alleging four
causes of action -- breach of the covenant of good faith and fair
dealing, constructive fraud, negligent misrepresentation and breach
of a duty to disclose. We hold that there is not substantial
evidence to support the allegation of constructive fraud and
negligent misrepresentation. This holding will be discussed in
greater detail later in this opinion. However, as a result of this
conclusion we will only analyze the statute of limitations issue
in regard to the remaining two causes.
Each side presents differing theories on how the statute of
limitations should be applied. The Bank relies upon the discovery
doctrine to argue that itche en Kraftersl claims are barred.
According to this theory, the applicable statute of limitations
begins to run once the plaintiff knew or should have known that a
cause of action exists. ~ccordingto the Bank, a dispute exists
as to when Kitchen Krafters discovered the discrepancy between the
amortization on the trust indenture and the contract for deed.
The Bank maintains that it notified Kitchen Krafters of the
discrepancy in January of 1980. Kitchen Krafters, on the other
hand, maintains that it was notified a year later, in January of
1981.
The dispute, it is argued, should have been submitted to the
jury. If the 1980 date is determined to be the date of discovery
then all of Kitchen Krafterst claims would be time barred. The
allegations of breach of the implied covenant of good faith and
fair dealing and the duty of disclosure are both general tort
claims which are subject to a three year limitation. See 5 27-2-
204 (I), MCA; Tynes v. Bankers Life Co. (1986), 224 Mont. 350, 730
P.2d 1115. Therefore, using the Bank's analysis, because Kitchen
Kraftersl claims were not brought until February of 1983, each of
its claims would be barred if the 1980 date of discovery is
accepted.
Kitchen Krafters, for its part, argues that the discovery
doctrine is inapplicable to the case. Instead, theymaintain that
their cause of action was brought as soon as they could validly
assert their claim. According to their argument, they could not
bring a lawsuit until their cause of action fully accrued. In
order for the cause of action to accrue, they must have sustained
an injury. They did not sustain an injury until Eastside refused
to release the trust indenture. This refusal occurred in December
of 1982, and Kitchen Krafters filed its lawsuit in February of
1983. Therefore, they filed their cause of action well within the
statute of limitations.
We agree with Kitchen Krafters' argument insofar as it is
applied to the claim of breach of the duty to disclose. However,
we disagree with this argument as applied to the bad faith claim.
Section 27-2-102, MCA, states:
(1) For purposes of statues relating to the time within
which an action must be commenced:
(a) a claim or cause of action accrues when all
elements of the claim or cause exist or have occurred,
the right to maintain an action on the claim or cause is
complete and a court or other agency is authorized to
accept jurisdiction of the action.
(2) Unless otherwise provided by statute, the period of
limitation begins when the claim or cause of action accrues.
Lack of knowledge of the claim of cause of action, or its
accrual, by the party to whom it has accrued does not
postpone the beginning of the period of limitation.
As the language of this statute makes clear, the statute of
limitations does not begin to run until all elements of a cause of
action are in existence. For example, in a negligence action the
plaintiff must prove four elements:
1) Existence of a duty
2) Breach of the duty
3) Causation
4) Damages.
Thornock v. State, 229 Mont. 67, 745 P.2d 324 (1987). If these
elements are not in existence, the plaintiff could not successfully
bring a cause of action based upon negligence. Therefore, although
one may be able to establish the existence and breach of a duty,
he cannot successfully assert his cause of action until he has
sustained an injury, Heckaman v. Northern Pacific Railroad (1933),
93 Mont. 363, 20 P.2d 258.
Kitchen Krafters' claim based upon breach of the duty to
disclose is based upon the fiduciary relationship between it and
the Bank created by the escrow agreement. As an escrow agent, the
Bank owed a fiduciary duty to Kitchen Krafters. 3 C.J.S. Agency
5 271. This relationship conferred upon Eastside the duty to make
full disclosure of all material facts relevant to the agency. 3
Am.Jur.2dI Agency 5 211. Kitchen Krafters maintains that under
this duty the Bank should have notified them of the problems
surrounding the financial arrangement.
Successful assertion of a cause based upon a breach of a
fiduciary duty, like a negligence action requires the plaintiff to
prove that he has suffered an injury. 3 Am.Jur.2d, Agency 5 337.
No injury occurred until the Bank refused to release the trust
indenture. Therefore, Kitchen Kraftersl cause of action based upon
nondisclosure did not accrue until that time. Kitchen Krafters'
claim was filed less than three months following this refusal. It
was filed within the applicable statute of limitations.
Kitchen Krafters argues that the cause of action alleging the
tort of breach of the implied covenant of good faith and fair
dealing is not barred. Similar to the cause of action described
above, it bases this argument on the fact that it did not sustain
an injury until Eastside refused to release the trust indenture.
Assuming there is a cause of action, we disagree with this
argument. Kitchen Krafters theorizes that the breach of the
implied covenant occurred when the Bank failed to properly apply
the $5,000 prepayment to Schellgs trust and when it subsequently
failed to disclose this misapplication. Using this theory, it is
apparent that the claim of bad faith flowed directly from the
Bank's purported breach of contract. Therefore it is necessary to
determine when Kitchen Krafters had a right to maintain an action
for breach of the escrow agreement.
A breach of contract is a legal wrong independent of actual
damage. A failure to show actual damages and the resulting
inference that none were sustained does not defeat the cause of
action. Sutherland on Damages Vol. I B 11 (3rd Edition 1903). An
action for breach of contract, then does not require that the
plaintiff sustain any damages. Jacobs Sultan Co. v. Union
Mercantile Co. (1895), 17 Mont. 61, 42 P. 109. In light of these
principles, it has long been recognized that the statute of
limitations runs from the time of the breach and not from the time
of injury, or in the absence of fraudulent concealment, from the
time of discovery. Williston on Contracts at B 2025C.
The alleged breach of contract, in this case, occurred in
1973, when the Bank purportedly misapplied the $5,000 prepayment.
The statute of limitations began to run at this time. Since the
tort of bad faith arose (for the purpose of this discussion we are
assuming that the establishment of the tort of the implied covenant
of good faith and fair dealing is retroactive to this time period)
directly from the terms of the escrow contract, the statute
applicable to it began running at the same time the alleged breach
of the escrow agreement occurred. We base this conclusion on
reasoning of the Supreme Court of Illinois which has held that when
a tort arises directly out of a contractual relationship, the
statute of limitations commences to run at the time the contract
is breached. Stevens v. Obryant (Ill. 1979), 392 N.E.2d 935; West
American Ins. Co. v. Sal E. Lobiance & Son Co. Inc. (Ill. 1977),
370 N.E.2d 804. Two reasons are given for this rule:
First, the breach itself is actionable and it encourages
the party to act within [the period of limitations] of
an actionable breach rather than to delay until damages
increase. The rule also recognizes that plaintiff has
chosen to deal with the defendant and that a contract may
be stated in terms to minimize losses from defective
performance .
Aetna Life and Casualty Co. v. Sal E. Lobiance & Son Co. Inc. (Ill.
1976), 357 N.E.2d 621, 624. This rule is in keeping with the
general principles of contract law and the theories behind the
covenant of good faith and fair dealing, which is an implied
provision contained within certain contracts. If the statute of
limitations begins to run at the time of breach of an express
contractual term, then for the sake of consistency, we hold that
this same general rule should apply equally to implied covenants.
The tort of bad faith is subject to a three year statute.
9
Tynes v. Bankers Life Co. (1986), 224 Mont. 350, 730 P.2d 1115.
As stated earlier, Kitchen Krafters did not file its case until
1983. The cause of action alleging bad faith is, therefore,
barred.
We must next determine whether Kitchen Krafters' claims are
supported by substantial evidence. We will not reverse the
findings of a jury unless they are not supported by substantial
evidence. Green v. Wolff (1962), 372 P.2d 140, 427 Mont. 413.
Substantial evidence is defined as that evidence that a reasonable
mind might accept as adequate to support a conclusion. Although
it may be based upon weak and conflicting evidence, in order to
rise to the level of substantial evidence it must be greater than
trifling or frivolous. Christensen v. Britton (Mont. 1989), -
P.2d -, 46 St.Rep. 2223. In short, where a verdict is based upon
substantial evidence which from any point of view could have been
accepted by the jury as credible, it is binding upon this Court
although it may appear inherently weak. Batchoff v. Craney (1946),
119 Mont. 157, 172 P.2d 308.
Four theories of recovery were submitted to the jury--breach
of the covenant of good faith and fair dealing, constructive fraud,
negligent misrepresentation, and breach of the duty to disclose.
We have found that the bad faith claim is barred by the statute of
limitations. Therefore, we need only consider the remaining three
theories relative to substantial evidence. We begin our analysis
with the constructive fraud claim.
In order to sustain a claim of constructive fraud, Kitchen
Krafters must present substantial evidence to prove that the Bank
committed a "breach of duty which without fraudulent intent gains
an advantage to the person in fault or anyone claiming under him
by misleading another to his prejudice or to the prejudice of
anyone claiming under him." Section 28-2-406, MCA.
There is no evidence presented by Kitchen Krafters supporting
the conclusion that the Bank's actions resulted in any advantage
to "it or anyone claiming under it." The claims against the Bank
are based upon the allegation that it wrongfully gave Kitchen
Krafter $5,000 prepayment to Schell rather than applying it to the
trust indenture. The Bank incurred no advantage through this act.
Any benefit was gained by Schell, who was merely a party to the
escrow. He could not be regarded as one I1claimingunder" the Bank.
We therefore hold that the jurylsdetermination that Eastside was
liable for constructive fraud is not supported by substantial
evidence, there being no evidence of an essential element.
The third theory submitted to the jury was negligent
misrepresentation. Kitchen Krafters argues that the Bank was
negligent when it led them to believe that all payments made into
escrow would be applied to the underlying trust indenture. We
disagree.
In State Bank of Townsend v. Maryannls Inc. (1983), 204 Mont.
21, 664 P.2d 295, we adopted the definition of negligent misrepre-
sentation as provided in Restatement (Second) of Torts 5 552.
Proof of negligent misrepresentation requires the plaintiff
establish that:
a) the defendant made a representation as to a past or
existinq material fact;
b) the representation must have been untrue;
c) regardless of its actual belief, the defendant must have
made the representations without any reasonable ground for
believing it to be true;
d) the representation must have been made with the intent to
induce the plaintiff to rely on it;
e) the plaintiff must have been unaware of the falsity of the
representation; it must have acted in reliance upon the truth of
the representation and it must have been justified in relying upon
the representation;
f) the plaintiff, as a result of its reliance, must sustain
damage.
As the first element indicates, the false representation must
relate to a fact already in existence. This did not occur in this
case. The evidence indicated that the Bank told Kitchen Krafters
that all of its payments would dovetail with those due on the trust
indenture. This evidence does not indicate that the Bank
misrepresented any existing facts. This statement only became in
possible error when the Bank later allegedly failed to properly
apply the $5,000 prepayment. Kitchen Krafters cannot, therefore,
successfully assert a cause of action based upon negligent
misrepresentation because it fails to establish the first element.
Accordingly, the jury's findings on this issue are not supported
by substantial evidence.
The final issue submitted to the jury required it to determine
whether the Bank breached a special duty of disclosure. For
guidance on this issue, we refer to 9 551 of the Restatement
(Second) of Torts which states:
9 551. Liability for Nondisclosure
(1) One who fails to disclose to another a fact that he
knows may justifiably induce the other to act or refrain
from acting in a business transaction is subject to the
same liability to the other as though he had represented
the nonexistence of the matter that he has failed to
disclose, if, but only if, he is under a duty to the
other to exercise reasonable care to disclose the matter
in question.
The elements contained in this section are met by the facts
of this case. As an escrow, the Bank was an agent who owed a
fiduciary duty to both Kitchen Krafters and Schell in all matters
affecting the escrow relationship. First Fidelity Bank v. Matthews
(1984), 214 Mont. 323, 692 P.2d 1255. Furthermore in its capacity
as an agent, the Bank had a duty to make full disclosure to its
principals of all material facts relevant to the agency. 3
Am.Jur.2d Agency 5 211. The evidence submitted supports the
contention that this duty was breached.
The Bank possessed the amortization schedules for the contract
for deed and the trust indenture. The jury could find that based
upon this knowledge and its fiduciary duty, it should have
disclosed the payment discrepancy to Kitchen Krafters in a timely
matter. Also a finding could be had that through the Bank's
failure to disclose this information, Kitchen Krafters was induced
to rely upon the representation that the trust indenture was being
amortized at the same rate as the contract for deed. By the time
the Bank finally disclosed this payment discrepancy, it was too
late for Kitchen Krafters to do anything to remedy the situation
because Schell was insolvent and had filed for bankruptcy. We hold
there is substantial evidence to support a verdict rendered against
the Bank in this cause.
I11
The Bank argues that the District Court erred in its
instructions to the jury on causation. The Bank is contending the
lower court erred by instructing on the substantial factor test and
failed to instruct on proximate cause. We agree that the lower
court erred in failing to instruct on proximate cause.
The legal principles surrounding the element of causation have
been set forth in Young v. Flathead County (Mont. 1988), 757 P.2d
772, 45 St.Rep. 1047. This case succinctly sets forth the law on
this subject as it has been developed in Montana. Therefore, we
review the legal principles set forth in Younq.
In determining whether a defendant's breach of duty caused a
plaintiff's injury, one must conduct a two-tiered analysis. First,
one must determine whether the defendant's actions were the cause-
in-fact of the plaintiff's damages. Causation in fact can be
established in one of two ways. Normally, the l'but-forll
test is
used. Under the "but-for" test, causation in fact is established
simply by proving that the plaintiff's injury .would not have
occurred Itbut for" the defendant's illegal conduct. Young, 757
P.2d at 777. Stated differently, the defendant's conduct is a
cause of an event if the event would not have occurred but for that
conduct; conversely, the defendant's conduct is not a cause of the
event if the event would have occurred without it. Prosser and
Keeton on Torts (5th Edition) 3 41.
The "but foru rule serves to explain the great majority of
cases. However, there is one type of situation in which it fails.
If two causes concur to bring about an event, and either one of
them, alone, would have been sufficient to cause the identical
result, some other test is needed. In response to this problem,
the courts have developed the "substantial factor test." Younq,
757 P.2d at 777.
The substantial factor test originated in the Minnesota case
of Anderson v. Minneapolis, St. Paul & Sault Ste. Marie Ry. Co.
(Minn. 1920), 179 N.W. 45. In this case, the defendant negligently
started a fire which combined with other fires of unknown origin
and destroyed the plaintiff Is property. Each of the fires, by
itself, had the ability to destroy the property.
In this type of situation, the "but for1'test was impossible
to satisfy because, as previously stated, any of the fires, acting
alone, could have destroyed the plaintiff's property. The court,
however, refused to absolve the defendant of liability on the
ground that the identical harm would have occurred without his
negligent act. Such a result would prevent the plaintiff from
realizing any recovery. Therefore, the courts have uniformly held
that a defendant's conduct is a cause of an event if it was a
material element and a substantial factor in bringing it about.
Prosser and Keeton on Torts (5th Edition) 4 In short, this
rule dictates that a defendant will not be absolved from liability
simply because the conduct of one or more others would have been
sufficient to produce the same result. If his actions are a
substantial factor in causing the plaintiff 's injury, the defendant
will be held liable.
As the above discussion demonstrates, cause-in-fact is
determined in one of two ways--either through the "but forn test
or the "substantial factor1'test. Once either one of these tests
is satisfied, the plaintiff has established that the defendant's
conduct was the cause in fact of his injury. It is now incumbent
upon him to move to the second tier of the causation analysis and
prove that the defendant's conduct proximately caused his damages.
The laws of physics and Sir Isaac Newton tell us that there
are causes and effects which continue into eternity. Therefore,
in both a philosophical and a real sense, the consequences of a
wrongful act can extend in time for years--perhaps beyond the
defendant's lifetime. For this reason, the courts have found that
sole reliance upon cause-in-fact analysis is undesirable. At some
point within the chain of causation, the law must intervene and
absolve the defendant from liability. Thelen v. City of Billings
(Mont. 1989), 776 P.2d 520, 46 St.Rep. 1108. It was this policy
consideration which led to the development of llproximatell
or
"legal11
cause.
Proximate cause is normally analyzed in terms of
foreseeability. Simply stated, one is only liable for consequences
which are considered to be reasonably foreseeable. Prosser and
Keeton at 5 43. If the consequences of one's wrongful act are not
reasonably foreseeable, then it follows that it was not proximately
caused by that act. Using this analysis, one must look forward
through the chain of causation in order to determine whether the
events which occurred were foreseeable. If they were, the element
of proximate cause is satisfied and liability will attach. Prosser
and Keeton, at § 43.
We must now apply this causation analysis to this case in
order to determine whether the District Courtls instructions to the
jury were proper. The jury was instructed on causation as follows:
Instruction No. 13.
A legal cause of the damage is a cause which is a
substantial factor in bringing it about.
Instruction No. 14.
The defendant's conduct is a cause of the damage if
it helped produce it and if the damage would not have
occurred without it.
Instruction No. 13, although improperly worded, was correctly
given. It is improperly worded due to the fact that the adjective
I1legall1 used before the word llcause.ll
is Legal cause is synonymous
with proximate cause. Young v. Flathead County (Mont. 1988), 757
P.2d 772, 45 St.Rep. 1047. This instruction is an instruction on
the substantial factor test which is part of causation-in-fact, not
proximate cause. Therefore, the word legal should be removed in
order to prevent confusion between proximate cause and cause-in-
fact.
The facts of this case require that the court instruct the
jury on whether the Bank's conduct was a substantial factor in
bringing about Kitchen Krafters' damages. Kitchen Krafters alleged
that the Bank's failure to properly apply the $5,000 payment caused
it to sustain monetary damages through the loss of its business.
The Bank, in reply, has argued that this misapplication did not
cause Kitchen Krafters damages. It argues that Kitchen Krafters'
loss of business was caused instead by outside factors such as a
poor economy.
Kitchen Krafters acknowledges that the poor economy may have
contributed to its demise. However, it steadfastly maintains that
the Bank's conduct combined with these outside influences and as
a result was a substantial factor in bringing about its injuries.
On remand the jury should be presented with a substantial factor
instruction in order to determine whether the results of the Bank's
conduct concurred with other events to cause Kitchen Krafters'
collapse.
Instruction No. 14 is nothing more than a recitation of the
"but forvt
test. The jury had already been instructed on causation-
in-fact through the substantial factor instruction. Therefore,
Instruction No. 14 was superfluous. Moreover, this instruction
cannot take the place of an instruction on proximate cause. In
order to be properly instructed on proximate cause, the jury must
be directed to look forward, through the chain of causation, and
to determine whether events which occurred subsequent to Eastside's
wrongful act were foreseeable. A proper instruction on proximate
cause should be worded as follows:
In order for the defendants negligence (failure to
disclose) to be the proximate cause of the plaintiff's
injury, it must appear from the facts and circumstances
surrounding the accident [the nondisclosure] that the
defendant as an ordinarily prudent person, could have
foreseen that the plaintiff Is injury would be the natural
and probable consequence of the wrongful act.
Kitchen Krafters maintains that the Bank's actions caused the
break up of the corporation. According to their argument, Wirtz
left the corporation as a direct result of Eastside's failure to
release the Schell trust indenture. This may be true. However,
this occurrence may or may not have been a reasonably foreseeable
consequence of the Bank's actions. If this event was foreseeable,
the Bank could be liable for the damages sustained as a result of
his departure. If it was not foreseeable, then this consequence
should be regarded as a superseding intervening event which breaks
the chain of causation as to any damages as a result of his
leaving. In this circumstance the Bank cannot be held liable for
damages resulting from Wirtz's departure.
Due to the failure to instruct the jury on causation, this
case is reversed and remanded for a new trial. Kitchen Krafters
is entitled to assert, as a cause of action, breach of the duty to
disclose. Reversed and remanded with instructions to conduct
proceedings consistent with this opinion.
We Concur:
'
"~hidfJustice
, I, Justices
~ i g t r i c t~ u d s e h o m a sA. Olson
~
sitting for Justice Fred J. Weber
No. 88-518
KITCHEN KRAFTERS, INC.,
Plaintiff and Respondent,
EASTSIDE BANK OF MONTANA,
Defendant, Counterclaimant -d
and ~ ~ ~ e l i a n t , 1 r.l. P
C-',O
,
, PD
0
E R
1 C w
EASTSIDE BANK OF MONTANA,
Third Part Plaintiff,
ROBERT W. SCHELL; MARY ANN CLARY, formerly
MARY ANN SCHELL, former wife of ROBERT W.
SCHELL; STATE OF MONTANA, EMPLOYMENT SECURITY
DIVISION, DEPARTMENT OF LABOR & INDUSTRY, et al.,
Third Party Defendants.
IT IS ORDERED that the last sentence of the second complete '
paragraph on page 8 of our opinion, dated March 20, 1990 be revised
to read as follows:
In light of these principles, it has long been recognized
that the statute of limitations runs from the time of the
breach and not from the time of injury, or in the case
of fraudulent concealment, from the time of discovery.
IT IS FURTHER ORDERED that the petition for rehearing is
denied.
DATED this 24' day of April, 1990.
Justices