*1 STORY, Construction, MARK Mark Plaintiff d/b/a BOZEMAN, Respondent, Mann, CITY OF Neil v. Appellants. Defendants No. 88-504. 17, 1989.
Submitted Oct. 3,May Decided P.2d 767. *3 Becker, Herndon, Harper E. argued, Bruce Donald R. Herndon Bozeman, Munro, appellants. and for defendants and Bozeman, Gregory Morgan argued, plaintiff respondent. O. for Opinion CHIEF JUSTICE TURNAGE delivered the Court. appeals jury against Bozeman verdict suit The it plaintiff for breach of construction The contract. awarded $360,000 Story tort for covenant of $13,236 dealing damages. cross- appeals. We reverse and for remand retrial. appellant interrelated, dispositive
The raises two issues. The first is whether the grant issue District Court in refusing erred defend- trial ants’ motion new because the verdict form was inadequate. The second is whether breach of the covenant of gives and fair rise to tort in a con- breach of tract action. Story successfully November bid construct two water (City).
mains for the of Bozeman The one-week evidence at the City’s trial showed that there an error schedule form bid gave engineer’s it where bedding estimate of the amount pipe material needed for one of the two mains. bid schedule water (cubic feet) price on pipe bedding asked for a “C.F.” material. (The needed, provided if that more material were the suc- extra.) paid bidder would The evidence at trial indicated cessful “C.Y.,” yards, that the bid schedule should have read for cubic project that the other contractors bid who on the assumed cubic *4 yards. Story assumption testified that a he bid under that pipe bedding 120 cubic feet of material were estimated as main, needed on the as indicated the bid This on schedule. affected by of his bid on that item a factor un- amount and was doubtedly City’s reason he low The one had bid on the contract. Story typo- position along was that knew that the “C.F.” was a all appropriate graphical that he bid a rate which would be error and paid yards holding out .to at a cubic foot for cubic but that he was Story City correspondence bargaining chip. and the had rate as a matter, they never it. and about this but resolved discussions began working Story’s company on the water mains construction City requests ex- Story several to the for time March of 1986. made City The immedi- job, due to bad weather. did not tensions on the disapprove requests. at trial ately approve these It maintained year in and normál for that time of that the weather was Bozeman Story requests justified. not at trial that most of the were contended that, contrary private engineering firm on this to the advice of city holding requests Neil Mann project, engineer was defendant accept City’s Story leverage time to force extensions of as eventually position pipe bedding City approved on the material. The disapproved some of the extensions of time but most. shoddy presented Story’s company City did
The evidence that dug up at pipeline on a which had to be and redone and that work Story equipment during project, moved his crew and one time Manhattan, Montana, project. Story to work on another testified City provided appropriate marks had him bench that the not with on the pipe and it was wet to work whére the was mislaid too project at time he Manhattan. The in Bozeman did work City presented Story’s alienated land- also evidence that workers by trespassing damaging adjacent building site on and owners City’s property. Story easement was not wide their testified that Story’s surety his job. May, enough for this Mann wrote bond, mains were performance expressing concern that the water June, completed Story’s bonding was off. In being on time. cut Story the contract. terminated 1986, Story complaint his in District Court
In December of filed complaint January complaint. The al- filed an amended they Story, that their contract with leged that defendants breached faith, Neil Mann and that the letter written acted bad City’s Story’s company defamatory. was answer denied bonding affirmatively in the alleged typographical error wrongdoing all against for reformation and contract. The counterclaimed breach of contract. by Story modified
Using proposed form verdict court, and Mann breached found that both the dealing. no defamation good faith and fair It found covenant of surety. Story’s It that there found the letter from Mann to *5 contract, mistake in mutual and that contract should be re- acquiesced Story formed to correct that mistake. It also found that against City judgment in the The court mistake. entered $373,236 plus costs. post-trial party. filed each The
Several motions were court de- motions, nied all such this appeal followed. VERDICT
SPECIAL JURY FORM refusing grant Did the District err in Court defendants’ mo tion for a new the special inadequate? trial because verdict form was
The comply verdict form did not with this Court’s decisions implied good covenant of dealing. and fair actions allegations which good of breach of a covenant of faith and fair deal ing upon are based relationship contractual parties, between the recently required finding this Court has of breach of contract as a precedent condition of of consideration breach of covenant dealing. faith and E.g. Ralph fair Montana Bank Circle v. of Son, (Mont. Meyers 1989), & 236,] 1208, Inc. Mont. 769 P.2d [236 St.Rep. 331; Nordlund v. School Dist. No. 14 402, 406, 227 Mont. 738 P.2d
However, case, issue, defamation, this the main other than was whether contract was breached and whom. This issue would any pretrial have be decided damages. before award of In the or- der, Story City both and the listed whether been had contract litigated breached as an issue to be at trial.
The record reveals redrafting special that the discussion and of trial, place verdict long day lasting form took after a from 7:30 City’s form, a.m. p.m. proposed special until after 10:00 The verdict clarity, while interrogatory not a model did include at numbers 6 questions, City and 8 the “Did Bozeman breach its contract Story?” and, with “Did Mark his with Mark contract City spe- specifically City’s of Bozeman?” rejected The court used, cial verdict form. special The verdict form which was modified by the by Story, court from the any form offered does not include question at all as to whether the It not breached. does ask explicit whether the breach an arose from a violation of term or whether the from a of an cov- breach arose violation dealing. City objected enant faith and ver- fair The that the logically jury. dict form was organized confusing and was not, however, specific object grounds that the on the did special the issue breach of contract. verdict omitted reader, with reprint verdict we For benefit jury’s answers: VERDICT “SPECIAL duly questions jury, impaneled, answer the submitted “We the Special Verdict as follows: us obliga-
“QUESTION NO. 1: Did the of Bozeman breach the *6 dealing with arising out the Contract good faith and fair tion of Story? Mark Yes
“ANSWER: JX_ No_ obligation 2: “QUESTION Did Neil Mann breach the NO. Story? with arising out of Contract Mark and fair No “ANSWER: Yes _X_ __ 13th, May to
“QUESTION 1986 letter from Mann NO. 3: Is the (Exhibit 130-A) defamatory? false No. Balboa XNo “ANSWER: Yes_ question. your ‘yes’ If your
“If is then move on to next answer skip Question then to No. 6. answer ‘no’ May 4: to Bal- “QUESTION NO. 1986 letter from Mann Is (Exhibit 130-A) privileged? boa No.
“ANSWER: Yes_No_ 2,1, any Questions 3 is
“QUESTION your or NO. 5: If answer to any, Story damages, if Mark incurred ‘yes’ write in then below ‘nó’, may you your 4 is If to 3 or as a result of these actions. answer consider for defamation. not 360,000.00
“$ II, “QUESTION on Schedule NO. 6: Was there mutual mistake in the Contract? No. Bid Item Yes “ANSWER: _jX_No_ skip 11. your Question No.
“If answer is ‘no’ then to acquiesce in the “QUESTION City NO. 7: Did of Bozeman mistake? X
“ANSWER: Yes_No ‘estopped’ claim- City from “QUESTION 8: of Bozeman NO. Is the ing mistake? X
“ANSWER: Yes_No right to “QUESTION ‘waived’its NO. 9: Bozeman Has mistake? claim
“ANSWER: X Yes_No
“QUESTION NO. 10: be reformed Should to read so Contract your that Item No. 1 II If on Schedule C.Y. instead of C.F.? reads Question 7, ‘yes’ may either 9 is answer to then Contract reformed. “ANSWER: Yes No_ _X_
“QUESTION Story acquiesce NO. 11: Did Mark mistake? “ANSWER: Yes _X_ No_ your
“If ‘yes’ skip Question answer is then No. “QUESTION Story ‘estopped’ claiming NO. 12: from Is Con- Mark damages? tract
“ANSWER: Yes_No_ your
“If ‘yes’ answer is Question skip to No. 14. then “QUESTION Story NO. Has 13: his Mark ‘waived’ claim for Con- damages? tract
“ANSWER: Yes_No_ your
“If ‘yes’ skip Question answer is then No. 14. “QUESTION 14(A): you NO. If find that there was mutual mis- you take and if find that the answers No’s and 13 are ‘No’ Question then answer No. 15.
“QUESTION you 14: If found mis- NO. that there a mutual you take and if find that the 11 or 12 No’s or 13 are ‘Yes’ answers Story then Mark Type for II Bedding. cannot recover “However, if contract was breached re- other you spects, may damages Mark consider for other contract breaches.
“QUESTION any, NO. 15: damages, What if are due Story? Mark “ $13,236.00
“QUESTION Story’s performance NO. Has Mark 16: further the by contract been excused the Defendants? conduct of the
“ANSWER: X Yes_No
“QUESTION much, any, City NO. 17: How if should the of Boze- against man recover on Story? its Counter-claim Mark “ $nothing “The judgment Court upon will the above the based proper enter answers. day March,
“DATED this 23 Ivey E.
“Bruce “Foreperson” was, very question special first on form “Did the the verdict City obligation fair breach the of Bozeman Story?” This sounds tort arising out of the Contract with Mark clearly jury ask to whether adequately and the decide and does not by a breach of the covenant of or not the contract was breached jury dealing. Next the was whether de- good faith and fair asked the covenant and then several Neil Mann had breached fendant Story. Then in questions defendants had defamed about whether No, 5, Question jury the amount of suffered the was asked by Story. Question jury the found that there was In answer to No. pipe bedding material. There- a mistake as to the amount of mutual fore, by to jury of contract the as the the found no breach questions pipe bedding As one of final amount of material. form, jury asked the amount of contract special verdict Story, being asked whether the had without to $13,236 jury contract. The awarded breached the answered, question, damages. response jury next incon- In Story’s performance of had sistently, further the contract that by been excused the conduct of defendants. M.R.Civ.P., 49(a), by
Special governed Rule which verdicts are states as follows: may require jury return a
“Special verdicts. The court to special finding upon special in the written each verdict form of may jury submit to the written issue of fact. event the court that may susceptible or questions categorical or other brief answer special findings might which submit written forms of the several evidence; may it pleadings or use properly be made under requiring writ- submitting issues such other method of appropriate. The court findings ten thereon as it most shall deems concerning jury explanation and instruction give to the such necessary jury may to thus as to enable matter submitted any doing findings upon its each issue. If so court omits make evidence, by the pleadings or each issue of fact raised jury so unless right his of the issue omitted waives to trial jury. As he demands its submission before the retires may make a find- demand the court an issue omitted without such so, finding it deemed to have made a ing; if fails do shall be it special verdict.” judgment with on the accord we this rule. ignore The dissent claims that 49(a) must a find- verdict contain Rule first states that order, pretrial in the ing upon As demonstrated each issue fact. had whether the contract recognized this case *8 important special been breached was an issue of fact. Yet the inter- rogatories completely ques- drafted at the eleventh hour leave this tion out. 49(a) stating requires
The is that dissent correct Rule also party predicated wishing that claim a error on the omission of an jury jury must issue demand the issue’s submission before that, At Appeals retires. least one United States Court of has held 49(a) taken, under the federal rule from which our Rule is a may preserve objection by proposing special its a verdict form in cluding rejected by objecting proposed spe which is a issue Services, interrogatory. cial See Stewart & Stevenson v. Pick Inc. (11th 1984), ard Cir. purpose F.2d 641. The of either method is to direct the court’s attention to the omitted issue. We adopt case, holding. the Eleventh proposed Circuit’s this special form verdict which included the issue of breach of contract. City’s proposed The special rejected. form verdict The also objected special grounds to the court’s verdict form on that organization questions logical of was not confusing and would be jury. special internally inconsistent,
The verdict form was confusing, misleading jury. We hold District Court erred in refusing defendants’ motion for new of inadequacy trial because verdict form.
GOOD FAITH AND FAIR DEALING The appropriate contest the role covenant of good dealing faith and fair in breach of contract action. Their ar- guments, form, jury damages verdict and the awarded jury exhibit some confusion over that role. The awarded $13,236 in damages an unspecified breach of the con- $360,000 City’s tract tort for the the obli- gation dealing. great disparity and fair This between symptomatic problem contract and tort is of a common litigation; the use of bad faith tort in contract the “tort tail” has begun to wag dog.” the “contract Because of this and other problems, appropriate we believe an time to review the cur- rent state of the law and to make mid-course corrections. concept history has a venerable appears the law of It Ro- commercial contracts. first classical century prin- man law and eighteenth was a well established imbuing relationships with ciple English contract law commercial *9 religious principles moral of time. E. Farns common the worth, Faith Reasonableness Good Commercial Performance 666, Code, Commercial U. Chi. L. under 30 Rev. 669-70 Uniform (1962-63). America, early century implied In twentieth courts first which, imprecision the covenant commercial contracts due environment, required that some term left to the of the business implied prevented parties. one discretion of one of covenant deprive taking advantage from of that discretion to the other v. e.g. See Loudenback Fertilizer Co. of the benefit of contract. (6th 1903), 298, (holding Phosphate Cir. 121 F. Tennessee Co. 303 interpret “requirements” to could not that manufacturer supplier price when ex purchase the contract the market from price). “gap as fil the contract Courts used covenant ceeded interpret agreements anticipated to situations ler” to cover Armstrong v. Co. writing. e.g. La Shelle Co. Paul See Kirke (1933), 79, 163, 168 (holding 263 N.E. that a con N.Y. 188 under “talkies,” prior rights play to to a tract entered the advent screen picture). Use of rights included motion the covenant became common that it was codified the Uniform Commercial Code. so (3rd Anderson, Code, ed. 1 R. Commercial 1-201:82 See § Uniform 1981). same; cases, remedy covenant all implied term of the was breach contract. Later, imply duty began faith and fair deal courts liability ing in contracts when insureds sue their insurers insurance practices. The relied the new for abusive claims settlement courts policies gave in tort version of bad faith because the insurance precluding discretion in suits for breach surer absolute settlement Compare e.g. Paper Fidelity v. & Cas contract. Falls Co. Rumsford (1899), 574, 503, (no ualty ex Co. 92 Me. 43 A. 506 breach of the terms); Ins. Co. pressed Hilker v. Western Automobile (breach (1931), 1, 413, implied 204 235 414 of the cove Wis. N.W. nant). recently, jurisdictions in em More some the covenant employees wrongful from dis ployment protect at-will contracts contract, and, express tort charge in the of an allowed absence (1977), recovery. Register Fortune Cash Co. 373 See v. National 96, 1251, remedy has al N.E.2d 1256. The tort also been Mass. 364 e.g. Commer special relationship. See lowed when the had a (1985), 511, Cal.App.3d 209 Cal. cial Cotton Co. v. United Bank 163 551, Cal.Rptr. good faith and fair interpretation of the covenant of
Montana’s
447 paralleled jurisdictions, except dealing has that of other that its trend recent cases has been to treat the breach of the covenant as statutory recognizes tort. an Montana insurer’s duties create a duty sounding running in tort and third-party Britton v. both insured claimants. Farmers Ins. 72, (1986), 67, 303, 306; Group 221 v. Mont. 721 P.2d Fode Farmers Exchange (1986), 282, 285, 414, 416; Ins. 221 719 P.2d Mont. Klaudt (1983), 247, 252, 1065, 1067; v. Flink 202 Mont. 658 P.2d Se First (1979), curity 407, 420, Bank Bozeman v. Goddard 181 Mont. 1040, P.2d Wrongful Discharge to enactment of the 1047. Prior 1987, Employment From Act in Montana followed other states upholding discharge. common-law tort actions for bad faith Dare v. (1984), Marketing 282, Montana Petroleum Co. Mont. 1015, 1020; P.2d Gates v. Mont. Ins. Co. 205 Mont. Life of 307, 668 P.2d recognized 215. Montana has also bad in special relationships faith tort stronger party when the abuses its *10 superior position. Tribby v. Northwestern Bank Great Falls of (1985), 196, 211-12, (bank’s 409, 217 Mont. 704 P.2d 419 reckless disregard depositor’s of rights); Espeland (1985), Morse v. 215 148, 152, 428, Mont. (attorney’s agreement); 696 P.2d 430-31 fee Libby Twombly (1984), 73, First 66, Nat’l. Bank in v. 213 Mont. 689 (bank’s 1226, note). improper recovery P.2d 1230 on promissory Montana, however, has used the also bad faith tort in a manner uniformly rejected by jurisdictions. all recog other Montana has nized the tort typical arms-length of bad faith in the contracts. See Baskin-Robbins, (1986), 447, 455, v. Inc. 221 Mont. 720 P.2d Dunfee 1148, (franchise agreement); (1986), McGregor 1153 v. Mommer 220 98, 108, business). 536, (sale Mont. 714 P.2d 543 of Co., In the of v. seminal case Nicholson Ins. United we Pacific adopted remedy setting tort in the commercial to deal with a particular type problem. parties The in that case entered a lease agreement provided plaintiff which that the would remodel He lena, Montana, During office to the defendant’s satisfaction. the re modeling forego defendant decided to new office. Instead efficiently breaching plaintiff agreement paying the lease damages, attempted plaintiff the defendant to force the by repeatedly denying remodeling. with the satisfaction (1985) Insurance, 32, 34-35, Nicholson v. United 219 Mont. Pacific 1342, 710 damages against P.2d 1344. This tort Court affirmed noting party justifiable defendant that each ex contract has a pectation per- that the other will act in manner a reasonable 448 a contract. When used its
formance or efficient breach of
one
unreasonably
arbitrarily, capriciously
deprive
discretion
contract,
expectations
party of the benefit of the
those
were
other
Nicholson,
41-42,
Actions, Comment, Commercial Bad 11.02 and 11.03 §§ Faith; Recovery Implied Ordinary Tort Breach Covenant (au (1987) Contracts, L. Commercial 48 Mont. Rev. 369-73 by Tremper). Primarily, specter damages Glenn E. of tort thored traditionally upsets concept efficient breach. Parties have pay when been free to breach their contract and economically relatively performance efficient. The sim ever was not ple profitable a contract calculation of whether it is more to breach pay perform complicated rather than to is now possibility damages. tort It is true that efficient of more indefinite efficient; rarely winning party pay the cost of must breach is Diamond, damages. Tort Bad Faith: recovering contract T. When, All, Beyond It Be Extended Insurance Trans At Should If (1981). actions?, problem, Marq. This how L. Rev. 439-43 contracts, damages. In support tort written ever does not inequity providing in the contract for an award of can avoid this 28-3-704, attorney’s prevailing party. See costs and fees § *11 MCA. involving be- damages, the evidence in cases contracts
As with liti- speculative Contract when tort actions are allowed. comes more accompanied by tort claims routinely bad faith gation cases are now beyond con- the traditional opening litigation to evidence far such as of- concentrating pertinent issues tract Instead of issues. breach, mistake, fer, jury is faced with evidence acceptance, and — may that punitive damages evidence wrongdoing and of moral litigation. inflammatory in misleading and 1979, Security First recognizing the cause of action Since first
449
(1979),
420,
407,
Bank Bozeman v. Goddard
181 Mont.
593 P.2d
1040, 1047,
twenty
has
this Court
decided more than
bad faith cases.
contexts,
prevalent
more
in all
As the tort became
inter
Court’s
pretations
wrongful
In
discharge
have evolved to limit its over-use.
cases,
only
employer’s
we
that the
held
covenant arises
when the
objective
give
employee
manifestations
a reasonable belief that
job security.
Marketing
Dare v.
he or she has
Montana Petroleum
283,
(1984),
274,
1015,
Co.
212
In
Mont.
687 P.2d
Nicholson
1020.
we
dealing
stated
covenant
does not
contract,
every
depends
expecta
justified
arise
but instead
on the
particular
tion
created
their
contractual relation
arose,
ship.
Even
it
when
covenant
was breached
an ar
bitrary, capricious
expectations.
unreasonable violation
those
Nicholson,
41-42,
219
at
Mont.
torts. it restricted Discharge Act, 641, Employment 1764, from ch. 1987 Mont. Laws punitive 27, Approved 1987, 627, 2, damages, April Act ch. § contract, arising 1987 Mont. Laws 1722. In legisla- actions out of punitive 27, 1987, damages, Approved April ture also banned Act ch. 627, 1, 1722, distress, 1987 Mont. Laws § emotional 15, 1987, 488, Approved April Act ch. 1987 Mont. Laws 1195. § may provisions apply While the separate latter tort bad faith, they always appropriate do indicate that such are not MCA, importantly, 28-1-211, contract actions. Most the 1987 § Legislature defined the standard of conduct under cove- honesty nant as in fact and the observance of commercial reasonable — applied standards the same standard to merchants under the 20, 1987, Approved April Uniform Commercial Code. Act ch. § persuaded 1987 Mont. Laws 1431. We are that it time reas- provide sess covenant of faith and more fair guidelines workable for the future.
450 reasoning typical
In contract case the Nicholson is still sound, remedy but the Nicholson tort is excessive. The Uniform provides a more workable model for most con Commercial Code states, by specific statutory provisions. tracts not covered The Code imposes obligation “Every duty within this code an contract 30-1-203, performance good faith its or enforcement.” Section “ honesty a MCA. ‘Good faith’ in the case of merchant means fact fair and observance of reasonable commercial standards of deal 30-2-103(1)(b), ing party A who in the trade.” Section MCA. may benefit of relevant Code breaches the covenant be denied the may 1 provision or the breach be deemed a breach the contract. (3rd Anderson, Code, ed. & R. 1-203:14 Uniform Commercial § Supp.). This believes that the Uniform Commercial Court extended to all contracts and that Code model should be cover only when the have a bad faith tort should be used relationship. contract, every regardless type, an
We hold that contains good A implied dealing. breach of the cov covenant of Thus, express con enant is a breach of the contract. breach an implied prerequisite term is not a covenant. tractual statutory every by specific provi For contract covered more 28-1-211, sion, compliance is standard of that contained § MCA: implied required covenant of faith and
“The conduct honesty dealing is in fact of reasonable com- fair observance dealing in the mercial standards of fair trade.” applied as under the Uni- This standard to merchants is same justified has ex- party Each to a contract form Commercial Code. per- pectation the other will a reasonable manner its act party When uses discretion formance or efficient breach. one dishonestly ac- or to act outside of conferred the contract act practices deprive cepted the other of the bene- commercial contract, is breached. fit of the the contract contracts, ordinary great majority a breach of only is a breach of the contract covenant are due. contract, arising measure of obligation from
“For breach of an code, expressly provided by this except damages, when otherwise compensate party aggrieved for all will the amount which ordinary thereby or in the proximately caused detriment which was Damages likely therefrom. which things to result course of would clearly origin are not ascertainable in both their nature and cannot be recovered for a breach of contract.” 27-1-311, actions, tort-type Section In common MCA. dam- ages are not available for breach of the covenant of They are, however, dealing. fair faith and available for traditional fraud, inducement, contract-related torts such as fraudulent tortious interference with a contract. *13 may apply exceptional
The tort of bad faith cir still in discourage oppression cumstances. It serves to in contracts which necessarily give party superior position. one legislature has applications. Wrongful codified the tort’s most common Dis See Act, charge Employment -914, MCA; from through 39-2-901 Un §§ (Insurance) -1005, fair Trade Practices Act through 33-18-101 §§ remedy MCA. The may tort in involving also available contracts special relationships which are not specific otherwise controlled statutory provisions. special To relationships delineate those we adopt following the essential elements from California case law.
“(1) inherently the must be such that the in are unequal (2) bargaining positions; the entering motivation for [and] non-profit motivation, i.e., the contract peace must.be to secure mind, security, (3) protection; ordinary future contract dam- [and] ages adequate (a) they are not require party because do in the superior actions, (b) position they to account for its and do not ‘whole’; (4) party make the inferior party especially one is vul- [and] type may necessity nerable because of the of harm it suffer and of places (5) party trust in perform; the other and is other vulnerability.” aware of this Superior
Wallis v. Cal.App.3d Rptr. Court Cal. 123, 129. special
If relationship undisputed the facts are as to special relationship, question whether is there it is a of law for the presented court to If supporting decide. substantial is evidence each all of the above essential elements and such is contro evidence part, appropriate questions verted whole there arises of ma terial fact to jury. be submitted to the If is not substantial evidence presented support elements, all each and of the essential court special relationship. shall direct there is no contracts, special relationship the standard of conduct — is honesty the same as that for other contracts in fact obser vance dealing of reasonable in the commercial standards of fair 28-1-211, special trade. Section involving MCA. In re- contracts delineated, supra, lationships if the standard that we have of con- required implied good dealing covenant of faith and fair duct 28-1-211, MCA, violated, duty is as defined § recovering damages dealing is breached. In addition to and fair contract, party may aggrieved also recover tort breach of damages. form, jury pre
A verdict such as that used case, present jury logically with a or sent must consistent analysis. reflecting progression dered of issues the above When con alleged, jury direct the tract the form must first if express if was breached or determine an term of If implied was breached. covenant may affirmatively, damages. it If jury answers then consider contract be, court, may upon proper questions, or the as the case has par special relationship contracting exists between the found that a breached, ties, jury has found the covenant was and the damages. jury may tort then consider
FEE AGREEMENT cross-appeal, we has raised several issues on none of which grant a new trial. The has also need discuss because of our *14 we will address is a raised several other issues. The one which Story’s question statutory The is whether of construction. issue timely agreement” in a manner under counsel filed his “notice of fee 2-9-314, entry judgment. MCA. He filed it after § 2-9-314(1), MCA, provides:
Section attorney represents “When an or acts on behalf of a claimant or political any against state or a subdi- other on a tort claim thereof, copy attorney with the claim a of the vision shall file employment showing specifically terms the fee ar- contract of attorney rangement and the claimant.” between says nothing copy of the contract of The about when the statute it. employment merely tells where to file We hold must be filed. It preclude Court’s nothing in the statute to the District that there is timely agreement was filed. decision that the fee Reversed remanded. BARZ, HARRISON, and WEBER McDONOUGH
JUSTICES concur. SHEEHY, dissenting:
JUSTICE
I. majority opinion example The scurrying through is an the rec- pick ord to find a bone which to base The excuse reversal. flimsy, putting possible reversal is and that is the best it. face on special The theme of the is reversal verdict form did not require jury first pre- find breach of contract as a condition finding cedent to good a breach of the covenant of faith and fair ignores specific dealing. That theme instructions the District jury, Court to the the submission defendants of the same form of verdict, special provisions 49(a), M.R.Civ.P., and the of Rule which provisions ignores they particularly the reversal where apply. special
When district court submits a verdict on an issue of fact xpust jury, be decided the District Court give an instruc- telling jury tion employ how to verdict. State Bank Maryann’s, 21, Townsend v. Inc. 204 Mont. 664 P.2d precisely 301. The District Court followed that rule in this case. question The first jury submitted was: “QUESTION No. 1: Did obliga- of Bozeman breach the tion dealing arising out of the Contract with Story? Mark
“ANSWER: YES NO_” In instructing subject, on this the court utilized instruc- proposed by tions that were Court District ac- defendants. cepted gave proposed defendant’s instructions No. 18 and respectively which became court’s instructions No. 33 and 34. Those instructions were as follows:
“INSTRUCTION NO. 33 dealing implied “There a covenant of fair faith and into the plaintiff contract between the of Bozeman and the which is *15 by justifiable expectations parties. measured the of the The cove- good nant dealing justifiable of faith and if fair is violated the ex- pectations party by arbitrary, of capricious, one or un- exceeded by party. reasonable conduct the other
“INSTRUCTION NO. 34 party the must that the breached “You first find before good deal- you can consider whether the covenant and faith fair you the be ing implied and that covenant should should if find you the the implied, may then consider whether breached added.) (Emphasis implied covenant.” directing jury foregoing In addition to the instructions the first breach of the it could find a breach of find a contract before good carefully in- obligation dealing, and fair the court faith jury to what a “breach” of contract was: structed as NO.
“INSTRUCTION you are instructed that determine nature and terms “You must promises de- in the contract between the and further promises in whether contained the contract have termine or not fully performed by them. been failure, excuse, legal perform any promise which
“The without part of a is called ‘breach’ of forms whole or contract.” have where Montana
Thus we a situation the defendant’s view of applying dealing was law covenants of given in accepted jury the instructions. court to the jury that it find that court instructed the must first the defendant’s jury the contract before the could consider whether breached implied, it and fair and whether covenant jury was further told what constituted a breach was breached. The contract. discover, time, I able This case marks the first far as am as properly a district court has been held error Court employ answer a instructing jury jury how the should as to interrogatory. Court told In No. District instruction as you all jury this case “. . . are to consider the instructions whole, The order regard light and to of all others. each significance their given no as to which the instructions are has importance.” relative question jury as to answer No. instructing so how to 49(a), requirement Rule faithfully
District Court followed M.R.Civ.P., part as follows: explanation instruc- give
“. . . The such court shall
455 concerning may necessary tion the matter thus submitted as be to jury findings upon enable the to make its each issue ...” The by second reason for this dissent is that the format followed question submitting precisely the in District Court No. is the for- suggested by mat that in special was defendants their submitted verdict form. as copy Attached this dissent an exhibit is a of the special by verdict form submitted the defendants. It will be seen questions that proposed by form that the first two the defendants pipe bedding related to material involved in the contract between Question Story. 3, however, the of Bozeman and Mark No. inis question language almost the same of No. which the court used. Thus, whether the District Court by utilized the submitted form the the by plaintiff, submitted the in each defendants form event, jury the immediately Question would have been led to the of the dealing. covenant and majority The of of faith fair on this Court hold exactly the District Court error following for the for interrogatories by format submitted the defendants. majority opinion
The stating mistaken that redrafting of special place day trial, verdict form long took after a lasting of from p.m. 7:30 a.m. until after majority 10:00 That is not true. The accurately. have not read happen the record What did was that the jury, evidence, at close all the was excused in the afternoon of Tuesday, 22, March 1988. The court met with counsel chambers jury after p.m. from p.m. excused 3:00 until 7:00 of March 22, 1988, they at which time considered the instructions and the special time, only verdict form which had been offered. At that special verdict form offered for the court’s consideration was that supplied by plaintiff. judge The District Court examined the special suggested verdict on March modifications. The court adjourned p.m. and counsel at evening. morning 7:00 The next a.m., again court and counsel met in chambers at 7:30 and made rulings instructions, a record as to the District of the Court special and on at verdict. It was this time that the defend- presented any special ants form of verdict. after the Sometime set- (the hour), tlement of instructions record does not disclose the jury argued. District Court read the instructions to and counsel jury evening The retired to find verdict and in the in the course questions by their deliberations sent out three for answer the court. Court, conference, telephone District with counsel discussed questions, three none of which related covenant dealing, fair and revised the verdict form p.m. evening in the accordingly. did occur at 10:05 This revision Question Thereafter, pertain it did-not No. March but special interrogatories. its verdict in the form jury returned trial, gave new the District Court ruling on the motion for a objections denying of the defendants to the further reason form, saying: jury verdict
“(2) confusing, Special verdict forms submitted were liability unnecessarily complex, jury to theories caused the consider order, unduly emphasized plaintiff’s theories of an incorrect recovery. objection, points that the Court re- On that the Court out quested interrogatories and after thor- submitted counsel day the instructions were settled on the 22nd ough deliberation *17 March, 1988, p.m. p.m. approximately 3:00 until 7:00 The from March, day 1988, again Court convened 7:30 a.m. the 23rd at purposes settling it not until that for the instructions and was special proposed brought a form of ver- time that the Defendants by special The the verdict form submitted the dict. Court examined day requested before and certain modifications. After Plaintiff the verdict, special the considering both forms of the Court elected to by rejected prepared that prepared the Plaintiffs and use that form filing by of the of the same. Defendants because of the untimeliness Additionally, logical. The Court found the Plaintiff’s form more the alleged upon for a New Trial based the Court denies the Motion special of the verdict form.” deficiencies upon imposition the District Court hold it unjustifiable is an to It unjustifiable thus It is more error in the circumstances described. only special proposed form followed when the defendants’ verdict by plaintiff. already proposed the the format of the form important to this Court and to the decision It should be but is not specifically the District the this case never told that defendants ground objections special on the that Court their to the verdict form first. question have been submitted the of breach of should verdict, Court, formulating special at the District the When the 1988, 23, finally form morning settled on the on the of March session used, objection: to made be defendant Court, essen- show that the “MR. HERNDON: Let the record spe- tially counsel, plaintiff’s version plaintiff’s have redrafted being confusing, objected as. verdict to which the defendants cial prejudice toward plaintiff and a clear bias toward with clear defendants, application jury proper it as to the and misleads of the instructions.” general foregoing nothing objection, is than more worthless particularity it does not state er-
because with where court is in apply spe- This same to ought objections ror. Court test to a instructions, interrogatory applied cial that is as set in Rule out 51, M.R.Civ.P.: Objections specify particular
“. . . made shall and state the objected grounds on is which the instruction to and it shall be in stating ground objection generally sufficient such to state law, against that the instruction does not state the law or is but ground objection specify particularly such shall in- wherein the law, particular is struction insufficient or does not state the or what clause to . objected therein . .”
See Ahmann v. American Fed. &Sav. Loan Ass’n.
Mont. 766 P.2d 49(a), M.R.Civ.P., construed, properly requires Rule specific objection provides part: be made to the Court. It
“. jury . . The give explanation court shall such and instruc- concerning tion may matter thus submitted necessary as jury enable the findings upon to make its doing each issue. If in so any by court pleadings omits issue fact raised or evidence, right each jury waives his ato trial of the issue so omitted unless retires he demands its submission before jury. As to an issue omitted without such demand the court may finding so, make a it to do it shall be deemed to have fails if finding made a judgment in accord special with the on the verdict.”
The first time that the defendants notified the District Court that they objected *18 to the verdict form because it did re- not first quire finding of breach of was in their Motion for New 1, April Trial filed proper
A regarding objections special rule to set in verdicts is out (R.I. H. Orgonics, 1989), 196, 201, J. Baker and v. Bro. Inc. 554 A.2d party objecting special which held that a to a verdict must have sub- Court, interrogatory mitted an jury object for the and must to requested interrogatory to the Court’s to include the failure before jury. the Court submits its own version to the given by question Under the instructions the Court as to No. absolutely defendants, prejudice no to occurred because in order to “yes” question jury, instructions, answer No. had under first given by to find a majority breach contract. The reason reversal, is, again, flimsy. on this record 458 context, opinion states that the award of majority
In another $13,236 jury’s is inconsistent with the in contract Story’s per- further question No. 16 that Mark finding in answer to by not been excused the conduct under the contract had formance breach, finding damages for how- of contract of the defendants. ever, given to the completely in accord with instruction No. jury, which stated:
“Instruction No. by performance further “A is excused from to a contract party only performance other when that of failure or of the objects A breach great to defeat the of the contract. breach is so as purpose and subordinate to the main which is incidental justify may compensated in does not ter- contract and be. part perform his injured party is still bound to mination and the added.) (Emphasis agreement.” contract, Thus, plaintiff awarding, damages in for breach of excusing performance, the acted consist- his further without ently law. instructions and accordance with with the
II.
opinion,
light
portion
majority
the second
When we read
The ma
the reversal on this thin record.
dawns as to the reason for
beyond
appeal in this case: the
higher agenda, one
jority have a
Ins. Co.
Nicholson v. United
implied reversal of
Pacific
case,
weak as
They
the vehicle of this
There is no issue raised this case deal- implied concept of the covenant as to the subject Dis- applying used The law ing contracts. application supplied by the That was that trict Court defendants. briefs the law of the case. Without has become the District Court majority issues, general, to the Bar and without notice following opinion accomplishes the results: dealing attends and fair implied “1. The covenant every contract. “spe- arises covenant
“2. The tort of breach of lationships.” cial exists, only available dam- relationship
“3. Where no *19 ages damages, regardless are egregious contract of how the conduct wrongdoing party regardless of the of the tort involved.” It implied is inconsistent of course to hold that the covenant contract, every attends and then to limit implied damages for a breach of the covenant to contract damages, a “special relationship” unless contracting par- exists between the implied depend ties. The upon contract does not for its existence express underlying terms The implied contract. covenant upon being justice comes into considerations of and fairness im- by law, posed implied and the covenant exists whether or not the contract, assented it. its Thus breach is not a breach of tort, always McGregor but is a and has been so defined. v. Mommer 108, (1986), 536, 543, (“a 220 Mont. 714 P.2d breach of im- this plied covenant which in damages give results can thus rise an tort”); Baskin-Robbins, action in v. Inc. 221 Mont. Dunfee 1148, 1153, (“In 720 P.2d setting, commercial we now have held party that where the unreasonably conduct of one justifiable expectations breaches the party, of the other an action results”). Applying tort contract to the tort of breach implied perversion covenant is a of the historical difference the always perceived damages arising law has from breach of contract arising and those from tort. justices presently
Five unanimously on this agreed Court to Nich- Co., case, olson supra. v. United Pac. Ins. In that this Court stated: “While we decline to extend the of implied breach all covenant to law, done, contract breaches as a matter of as California has we agree Quigley, supra, with the statement in resulting tort from depends impermissible this activity. on some The Mon- tana cases discussed breaching above focus on the of the action covenant, relationship to find implied a breach of the just the existence of a breach of contract. point
“At
helpful
distinction should be
an
noted between
by self-interest, giving
intentional breach or one motivated
rise
damages,
give
and the action which would
rise
ato
covenant,
breach of
resulting
damages.
in tort
Histori-
cally, party
generally
right
pay
to a
had the
to breach
perform.
non-breaching
rather
party,
than
theoreti-
cally,
damages paid following
is ‘made whole’
from
the breach
agreement.
thus still receives the benefits from the
“
part
assumption
‘Contract law is
based
that certain in-
encouraged.' Permitting parties
tentional breaches are to be
promotes
economy,
breach their contracts
an efficient
at least when
expected pecuniary injuries
gains
for the breach exceed the
promisee.’
*20
“Diamond,
When,
The Tort
Faith
Bad
Breach
Contract:
of
of
If
All,
Beyond
Transactions,
Be
At
Should It
Extended
Insurance
64
(1981).
Review, 425,
Marquette
performing
But
Law
453
whether
or
breaching,
party
justifiable expectation
a
that the
each
has
other
Neal v.
person.
will act as a reasonable
Farmers Insurance Ex
change (1978),
Rptr. 389,
21
P.2d
Cal.3d
148 Cal.
980. The
implied
good
nature
extent of an
covenant of
and
particular
justifiable expec
measured
the
party
arbitrarily, capriciously,
parties.
acts
tations of the
Where one
unreasonably,
justifiable expectations
the
that conduct exceeds
of
party.
party
compensated
the
should
second
second
then be
for
damages resulting
culpable
from the other’s
conduct.”
41-42,
What a far from the is the today majority decision the of of Court. example provides us the effect of
Nicholson with a of the ma- jority opinion building was a this case. Nicholson owner down- lease with agreement town Helena who had entered into a United (UPI) space. agreement Pacific The lease con- Insurance for office provisions tained that Nicholson confer with UPI about renova- building plans space, and that final tion of the office renova- subject approval. tion were mutual increasingly progressed,
As Nicholson found it difficult to the work get approval continuously He project. from UPI his renovation of architects, finally plans, sent with lost communi- conferred their and company with sent a final altogether cation officers. Nicholson days and later received a plan revised of renovation to UPI three agreement. rescinding letter the lease Nicholson filed a from UPI UPI, during discovery, complaint against of after notice default UPI force had made recommendations learned that a “secret” task company, which would be to reorganizing about effect of City, argued Nicholson transfer Helena officeto Salt Lake Utah. this, intransigent and threw ob- that when UPI realized it became agreement. hoping stacles to cause him to breach lease Based on facts, UPI the lease these Nicholson contended that had rescinded $98,000 spent in excess of justification. Nicholson sums without suit, verdict in his Upon returned a remodeling. Nicholson’s $211,105 compensatory damages exemplary favor for dam- $225,000. ages of opinion
If this case had been in effect when Nicholson came Court, completely before this then should lost Nicholson have majority opinion, applicable, breach Under the if covenant. no UPI, “special relationship” existed between Nicholson and his be, any, majority if damages would limited what describe as say, an “efficient breach.” Needless to for whom such a breach would “efficient” was be UPI. 20) opinion (slip opinion, the majority p.
The sentence in express prerequisite “breach an contractual term is reversal, interesting breach of the covenant” is an without so, (Mont. saying Meyers of Montana Bank Circle v. & Son 1989), 1208, 1214, 236,] Mont. 769 P.2d and Nordlund v. [236 402, 406, School District No. 227 Mont. 738 P.2d longer require 1302. No does this Court underlying express obligation may contract terms before jury. considered majority Thus the abandon the reason for *21 place they which in the forepart first reverse this case. In the of the Opinion, their majority see evil in the form verdict be- required cause the was first find underlying to an breach of Now, express terms of the finding contract. such a is needless. It again grounds demonstrates the flimsiness of the for in reversal this case. majority any
What the abrogate have in done this case is to rem- edy arbitrary, capricious by egregious or contracting conduct party, upon issues not in raised this file nor on the and record with- out general. notice to the Bar in The reversal of the ver- hard-won by Story joke. dict obtained Mark in this case is a Under the limita- majority opinion, tions again justly will he never compensated any by jury. register my strong
Please in dissent to the uncalled-for result this case. HUNT, dissenting:
JUSTICE I in Sheehy. concur the foregoing dissent Justice
EXHIBIT A C. SHEEHY: dissent JUSTICE JOHN (Special morning verdict form submitted defendants-on the case jury.) was submitted to the
462 VERDICT
SPECIAL cause, We, an- jury, duly impaneled try the above entitled Special as questions to us Verdict follows: submitted swer QUESTION NO. 1: City Story fail Mark of Bozeman
Did the contract between respect with to the units of the true intention of to state material, Pipe 1 II-of Type Bedding place 2 Item of Schedule fraud, Group Project mistake of one Watermain reason suspected the time or that the written party while other knew at truly express parties? did not intention ANSWER:
(write “no”) “yes” you Question go No. “yes” If answer Question you go If answer No. 3. “no” QUESTION NO. 2: that the unit
Did the of Bozeman Mark intend meaning Type Pipe Bedding place to be cu- quantity of “C.F.” meaning II of yards “C.Y.” cubic in item of Schedule bic feet or Project IV in the Group Watermain contract between parties? “C.F.” intended
ANSWER: “no”)
(write “yes” or intended “C.Y. was
(write “no”) “yes” or NO, QUESTION 3: good faith covenant of
Did the breach the Bozeman Story? and fair in its contract with Mark ANSWER:
(write “no”) “yes” or QUESTION NO. 4: May 13, 1986, Mann to Insurance
Does the letter from Neil Balboa (Exhibit A) defamatory Company statements contain false *22 Story? concerning Mark
ANSWER:_ “no”)
(write “yes” or Question go Question No. 6. skip If 5 and the answer “no” No. QUESTION NO. 5: 13, 1986, May Insurance from Neil Mann to Balboa
Is letter (Exhibit A) Company privileged? 130
ANSWER:
(write “no”) “yes” or QUESTION NO. 6: City
Did Story? of breach with Bozeman its contract Mark ANSWER:
(write “no”) “yes” or QUESTION 7: NO. Story any
Is compensation Mark entitled additional or work the materials done furnished under the of terms the con- City tract with the of Bozeman?
ANSWER:
(write “no”) “yes” or QUESTION 8: NO. Story
Did City Mark his contract with the of Bozeman? ANSWER:
(write “no”) “yes” or QUESTION NO. 9: ' City Is the of liquidated Bozeman entitled recover Story from Mark under their contract dated November 1985? ANSWER:__ (write “no”) “yes” or QUESTION 10: NO. City
Is the entitled to for the Bozeman recover cost repairs Valley Story View Golf Course necessitated Mark trespassing outside of working provided easement con- his tract with Bozeman?
ANSWER:____ (write “no”) “yes” QUESTION NO. 11:
Did acquiesce Mark concerning error in quantity Type Pipe Bedding place whether the unit was “C.F.”, meaning meaning yard? cubic or “C.Y.” feet cubic
ANSWER:____
(write “no”) “yes” or QUESTION NO. 12:
Did acquiesce Bozeman the error in the con- cerning quantity Type Pipe Bedding place whether unit meaning yards? “C.F.” meaning cubic or “C.Y.” cubic feet
ANSWER:
(write “no”) “yes” or *23 QUESTION NO. 13: Story “estopped” claiming damages?
Is contract Mark from ANSWER:__/_ (write “no”) “yes” or QUESTION 14: NO. “estopped” claiming City
Is the from Bozeman damages?
ANSWER:__ “no”) (write “yes” or NO, QUESTION 15: Story damages? for
Has Mark “waived” his claim contract ANSWER:_______ (write “no”) “yes” or QUESTION NO. 16: damages? City
Has its “waived” claim Bozeman ANSWER: __
(write “no”) “yes” or QUESTION NO. 17: any? Story mitigate damages, if
Has failed to his Mark ANSWER:_ (write “no”) “yes” or QUESTION NO. 18: any? damages, if City mitigate its
Has the of Bozeman failed to ANSWER:__ “no”) (write “yes” or QUESTION 19: NO. Story, Mark recoverable Mark
State total d/b/a/ Story Bozeman. Construction from $ ANSWER:
QUESTION 20: NO. from of Bozeman
State the total recoverable Story, Mark Mark Construction. d/b/a ANSWER: $____ March, this_day
DATED OF JURY
FOREPERSON THE