NO. 89-104
IN THE SUPREME COURT OF THE STATE OF MONTANA
1990
GEORGE MADDUX, d/b/a MOM'S OLD FASHIONED
GRAVY,
Plaintiff, Appellant and Cross-
Respondent,
-vs-
LYNN BUNCH, FBS INSURANCE MONTANA HOINESS
LaBAR, INC., and UNITED STATES FIDELITY AND
GUARANTEE COMPANY,
Defendants, Respondents and Cross-.
Appellants.
APPEAL FROM: ~istrictCourt of the Thirteenth ~udicial~ist.rict.
In and for the County of Yellowstone,
The Honorable G. Todd Raugh, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
James C. Capser, ~illings,Montana
For Respondent:
Neil S. Keefer; Keefer, Roybal, Hanson, Stacey & Walen,
~illings, Montana
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- * ) , . submitted on ~riefs: Oct. 20, 1989
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Decidpd: January 10, 1990
Justice John C. Sheehy delivered the opinion of the Court.
Plaintiff George Maddux filed suit in the District
Court, ~hirteenth Judicial ~istrict, Yellowstone County,
charging united States ~idelity and Guaranty Company
(hereinafter USF & G) with breach of contract of insurance
and unfair claim settlement practices. The jury found that a
contract of insurance existed at the time of plaintiff's
loss, defendant breached the contract, and owed plaintiff
$23,378.95 in damages. On post-trial motion, the judgment
was reduced to $7,792.98. From that judgment, both parties
appeal. We affirm.
The issues raised by Maddux are:
1. Whether the District Court erred in granting USF &
GIs motion for directed verdict on the issue of punitive
damages.
2. Whether the District Court erred in refusing to
amend the jury's damage award to include lost profits.
3. Whether the District Court erred in red.ucing the
award to $7,792.98.
4. Whether the District Court erred in denying
pre-j-udgment interest on the award.
The issues raised on cross-appeal by USF & G are:
1. Whether the District Court erred in not granting USF
& G's motion for a directed verdict.
2. Whether the court erred. in not reducing the award to
zero.
Appellant George Madd-ux conceived the idea of a
commercial gravy manufacturing and sales business in October
of 1985. is preparations for business included the purchase
of a new building, ordering various pieces of equipment,
including a freezer, and the electrical work necessary to
make the operation ready for business. In addition, Maddux
contacted his insurance agent, Lynn Bunch, of Hoiness LaRar
Agency, regarding insurance for the new operation.
It is uncontested by the parties that due to problems
with the refrigeration system, 2,748 cases of gravy product
ultimately spoiled and had to be disposed of. Maddux was
paid $39,078.08 by the insurance carrier of the electrical
contractor for faulty wiring, $25,000 by the insurance
carrier of the refrigeration supplier Brodie-Dohrman, for
improper installation and defective product, and $5,000 by
Hoiness LaBar, Inc. and Lynn Bunch. Maddux proceeded to
trial against USF & G, the insurance carrier for the Maddux
policy.
Strongly contested at trial was whether coverage existed
to insure against product spoilage and whether USF & G's
refusal to pay constituted breach of contract and bad faith.
The jury found that a contract existed, that USF & G breached
the contract, and that the refusal to pay constituted bad
faith. The jury awarded Maddux $23,378.95 for his losses,
but declined to award Madd.ux anything for emotional distress,
despite the determination of its existence.
USF & G made post-trial motions to reduce the jury
verdict pro tanto to zero, and to tax costs. The court in
its order stated:
Now that the jury has rendered its verdict we have
the hindsight to perceive the whole situation as it
should have been. We now know that there was an
insurance contract and that defendant should have
provided coverage for plaintiff Is damages for his
loss of gravy in the amount of $23,378.95.
We have known all along that when the insurance
company declined coverage that plaintiff went out
and did what his insurance company should have, to
wit: recovered his damages for his gravy loss.
Apparently plaintiff also recovered other damages
unrelated to the insurance coverage, but it cannot
be seriously contested that plaintiff was [not]
paid for his gravy loss. Accordingly, the jury
verdict must be reduced (sic).
However, it is not proper to reduce the verdict to
zero as requested by defendant because plaintiff
incurred attorney fees in doing what we now know
the insurance company should have done. Those fees
are apparently a one-third contingency and the
verdict should be reduced to one-third or $7,792.98
in order that plaintiff recover his attorney fees
on the amount we now know he was damaged.
Plaintiff's motions for prejudgment interest and to
amend the jury verdict were denied. This appeal and
cross-appeal followed.
Did the District Court err by granting USF & G's motion
for a directed verdict as to punitive damages?
Maddux's claim for punitive damages is based on failure
to conduct reasonable investigation of the claim.
Madd.ux maintains that USF & G intentionally avoided
learning facts pertaining to coverage, such as what coverage
Maddux believed he had acquired. In conference, co.unsel,
prior to jury deliberation, conceded that USF & G did not
seek out this information. However, the court states that
this lack of fact-finding did not create a high degree of
risk of harm to the substantial interests of Madd.ux, as
required by § 27-1-221(2), MCA.
The court went on to state:
... plaintiff notes that the Court should let
punitive damages go to the jury not only beca.use
plaintiff thinks that is right but also because if
it is wrong it would be a simple matter for the
Supreme Court to subtract out any punitive damages.
. .. [I]n the long run considering all the many
cases these days in which punitive damages are
sought this avenue is deceptive, misleading and
inefficient. ~eviewing courts are loathe to
overturn juries and defendants should not have to
run the risk that a jury will award punitive
damages and reviewing court (sic) will not overturn
a jury in cases where punitive damages should not
have been considered by the jury in the first
place. Judicial economy demands that the trial
court not pass the buck. Judicial economy demands
a trial court not present to a jury those issues
for which insufficient evidence exists.
It is evident from the record that the testimony of
Maddux and Agent Lynn Bunch was hopelessly conflicting.
Section 27-1-221(5), MCA, states that "all elements of the
claim for punitive damages must be proved by clear and
convincing evidence." Here, the district judge, after
hearing the evidence and observing the witnesses, was in the
best position to make a determination whether the
requirements of proof of punitive damages had been met..
Tague v. John Caplice Co. (1903), 28 Mont. 51, 72 P. 297.
Maddux next contends that the District Court erred in
refusing to amend the jury findings to conform to evidence
presented on amount of loss. At issue is simply whether
Maddux was entitled to a 40 percent markup from the value of
the gravy. A breakdown of the figures is helpful.
2,748 cases at $12.96 per case
Less 40%
Plus: cleanup costs
lost bar code
Jury computation total
From the testimony and evidence, it is reasonably clear
that Maddux had neither sold nor contracted to sell any of
his product when the loss occurred. With that in mind and
instr-uctions on damages, the jury made its determination.
Instruction no. 26 reads:
Damages must be reasonable. If you should find
that plaintiff is entitled to a verdict, y0.u may
award him only such damages as will reasonably
compensate for such injury and damages as you find
from a preponderance of the evidence in the case,
that he has sustained as a proximate result of the
incident.
You are not permitted to award speculative damages.
So you are not to include in any verdict
compensation for any prospective loss, which
although possible, 1s not reasonably certain to
occur in the fut-ure.
An award of lost profits on a product with no proof of
marketability might certainly be construed as speculative
damage. From evidence and testimony presented, the jury
determined what it thought to be reasonable damages. The
District Court, presented with Madduxls motion to amend the
jury's findings, did not see fit to substitute its judgment
for that of the jury. Due to the speculative nature of lost
profits, it was not error for the court to leave the jury
verdict undisturbed. section 27-1-311, MCA. Swanson v. St.
John's Lutheran ~ospital (1980), 189 Mont. 259, 615 P.2d 883.
Maddux's next contention is that the District Court
erred in reducing the jury damages to $7,792.98.
Maddux argues that subrogation is not proper in this
case, as the insurance policy states that USF & G will be
subrogated to the insured's right of recovery "in the event
of payment under this policy" and no payment under the policy
has taken place. Further, Maddux contends that subrogation
is simply an acquisition of rights of the insured against
other parties, and those parties were released, all after USF
& G refused payment. As further argument against
subrogation, Madd.ux cites Western ~ e d i a , Inc. v. ~errick
(1988), 757 P.2d 1308, 1311, 1312, 45 St.Rep. 1212, 1216,
which stated:
It is the position of this Court that once a
contract has been breached, its terms may not be
unilaterally resumed. A non-breaching party has no
duty to perform the terms of the contract once it
has been breached.
It is a maxim of jurisprudence that "no one can
take advantage of his own wrong." § 1-3-208, MCA.
A party who breaches a contract cannot take
advantage of his own act or omission to escape
liability thereon. (Cites omitted. ) ~errick's
breach may not have been willful or intentional.
However, the breach occurred and the contract was
severed.
Maddux arg-ues that the breach of the contract of
insurance by USF & G severed the contract, and USF & G no
longer has standing to assert any rights arising from the
breached contract.
Maddux's claim against USF & G was unquestionably based
on insurance coverage for spoilage of gravy product. The
damages awarded by the jury were directly related to damages
for spoilage. There is testimony and evidence that the
pretrial settlements amounting to $69,078.08 compensated
Maddux for his gravy loss. Maddux released those tortfeasors
upon settlement, and then proceeded against USF C G for
damages, including payment for gravy loss. The judge
instructed the jury not to consider the settlements, that
they should determine damages as if no settlements had
occ.urred, and that the court would "make all adjustments to
the award of damages as may be required by law.. . ."
Those pretrial settlements prevented contribution or
indemnity claims by USF & G. In State ex rel. Deere & Co. v.
~ i s t r i c t Court (1986), 224 Mont. 384, 730 P.2d 396, this
Court determined that a joint or concurrent tortfeasor who
settles with a claimant before judgment on the claim is
entered in District Court is not subject to claims for
contrib.ution or indemnity from nonsettling joint or
concurrent tortfeasors against whom judgment may be rendered.
With no possibility of indemnity, Maddux would stand to be
paid for his gravy loss twice.
It has been the standard practice in Montana that a
plaintiff's recovery is diminished pro tanto, that is, given
a dollar credit based on the consideration paid by the
settling tortfeasor. This encourages compromise, lends
finality to such compromises, and provides a single
satisfaction for a single injury. Deere, supra; Azure v.
City of Billings (1979), 182 Mont. 234, 596 P.2d 460; Black
v. arti in (1930), 88 Mont. 256, 292 P. 577. We hold that the
precepts of Deere, et al. were correctly found by the lower
court to apply in this case. Maddux is entitled to but a
single recovery for his gravy loss, which he received in his
earlier settlements. The lower court's reduction of the
award to $7,792.98 was proper. The $7,792.98 adequately and
fairly compensates Maddux for his attorney fees and costs in
pursuing the settlements and this claim.
Maddux's final claim is that the District Court erred in
refusing prejudgment interest under S 27-1-211, MCA. Section
27-1-211, MCA, provides as follows:
~ight to interest. Every person who is entitled to
recover damages certain or capable of being made
certain by calculation and the right to recover
which is vested in him upon a particular day is
entitled also to recover interest thereon from that
day except during such times as the debtor is
prevented by law or by the act of the creditor from
paying the debt.
Maddux claimed a loss of $35,614.08. The jury awarded
$23,378.95. Clearly, Maddux did not show damages capable of
being made certain by calculation as required by S 27-1-211,
MCA. As the amount of damages due upon breach was not
clearly ascertainable until determined by the trial court,
prejudgment interest was not appropriate. Swenson v. Buffalo
Bldg. Co. (1981), - Mont . - 635 P.2d 978; Carriger v.
,
Ballenger (1981), - Mont. , 628 P.2d 1106.
11.
Issues on cross-appeal:
USF & G's first contention is that the ~istrict Court
erred in not reducing the jury verdict to zero. USF & G
maintains that, under Deere, Maddux had been fully credited
for his gravy loss prior to trial. As such, the verdict
should have been adjusted to zero. USF & G is correct in
asserting that Maddux was compensated for his loss of gravy
product. However, the $7,792.98 does not represent a portion
of that loss. Rather, it is the court's determination of
reasonable costs in the form of attorney fees. As the
~ i s t r i c t Court noted, those costs are proper "because
plaintiff incurred attorney fees in doing what we now know
the insurance company should have done," i.e. investigate and
pay the claim. As such, it was not error for the ~ i s t r i c t
Court to retain $7,792.98 in damages as reasonable attorney
costs.
The second contention is that the ~ i s t r i c tCourt erred
in not granting USF & G's motion for a directed verdict. A
motion for a directed verdict is properly granted only in the
complete absence of any evidence to warrant submission to the
jury. Britton v. Farmers Ins. Group (1986), 221 Mont. 6 7 ,
721 P.2d 303. The court must view the motion in a light most
favorable to the non-moving party. Dieruf v. Gollaher
(1971), 156 Mont. 440, 481 P.2d 322. Clearly, there was
evidence in this case of the existence of an insurance
contract covering the loss, and subsequent breach by the
insurer. As such, a directed verdict is not proper.
Affirmed.
We Concur:
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Chief Justice
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