No. 81-422 INTHE SUPREME COURT OF THE STATE OF MONTANA

BOB EIILLER, Plaintiff and Appellant,

-VSBILL WATKINS and LAVONNE WATKINS, Defendants and Respondents.

Appeal from: District Court of the Fourteenth Judicial District, Ih and forthe County of Musselshell, The Honorable Nat Allen, Judge presiding.

Counsel of Record: For Appellant: Leaphart Law Firm; C. W. Leaphart, Jr., Helena, Montana

For Respondents: Susan Stearns, Lakewood, Colorado

-- Submitted on Briefs: July i5, 1982 Decided: September 30, 1982

Filed:

## Sip

## 30

## 1982Mr. Justice Fred J. Weber delivered the Opinion of the Court

# . Bob Miller, plaintifi and appellant, brought this action in the District Court of the Fourteentl? Judicial District, t4usselshell County, torecover damages for breach of contract. BillWatkins, defendant and respondent, pled the affirmative defense of accord and satisfaction for all counts of Miller's complaint. Watkins alsofileda counterclaim against Miller for damages for breach of contract, unjust enrichment, malicious prosecution, and defamation. The District Court sittingwithout a jury found in favor of Watkins denying 

### Miller relief on all counts except for a $1,500 payment due on one horse. The court awarded Watkins actual damages on the breach of contract for $23,000; actual damages in conjunction with the malicious prosecution of $30,000; actual damages for libel and slander inthe amount of $25,000; and punitive damages in the amount of $50,000. Miller appeals. We affirm. The following issueswillbe discussed: (1)Nas substantial credible evidence presented at trial to support the findings of fact and conclusions of law? (2)Were the elements necessary to prove a malicious prosecution actionpresent? (3) Was evidence presented to support the damage awards? Bill and LaVonne Watkins are husband and wife and jointly own and operate a public stable. Watkins handles allphases of thebusiness concerning the horses, including the breeding, training, raising, racing and buying andsePllng of the horses. He owns several quality stallions which he keeps as studs for breeding purposes and he is a member ingood standing of theAmerican Quarter Horse Association (AQHA). Miller owns and operatesa ranch near Jordan, Montana, in Garfield County, and is engaged in the business of raising horses. Prior to 1969, Miller owned many horses which were registered with the AQHA. However, in 1969, Mlller was suspended from the AQHA for life and lost the right tohave hishorses registered. In late 1968 or early 1969, prior tohis suspension, Miller transferred ownership of all of his registered quarter horses to two of his relatives, Dr. Purdom and Dr. Shreeves of California, and entered into a partnership agreement with them asa part of thetransfer

# . Jackie Oakes, a/k/a Jackie Fleming, a/k/a Jackie Miller, who is currently known as Jackie Kerrick (Jackie Oakes), is a member of the AQHA and has not been suspended from membership therein. In 1972, Jackie Oakes and Miller became acquainted through various horse deals and soon thereafter entered into a partnershiparrangement for buying and sellinghorses. In 1972, Milier was experiencing difficulties with Drs. Purdom and Shreeves. Heended hispartnershipwith the doctorsand had theregistrationof allof thehorses transferred toJackieOakes. Itwas atthistimethatMiller and Jackie Oakes entered into some type of a business arrangement regarding the ownership of the horses and their offspring, since Jackie Oakes could register horses with the AQHA. In 1971 or 1972, forty to fifty registered quarter

### horses were moved to Miller's ranch near Jordan. Prior to the year 1974,Jackie commenced residing with Miller, and the two parties held themselves out to the general public as man and wife, with each authorized to transact business for and on behalf of the other with regard to the horses. During the fall of 1974, Miller and Jackie took a trip to Watkins' ranch. Miller introduced Jackie as his wife and partner indicating that Jackie had full authority to transact business regarding the horses owned jointly by herself and Miller pursuant to her business relationship, as well as her personal relationship with Miller. During that meeting, Watkins entered into a contract with Miller and Jackie, by which Watkins would breed the Miller-Bakes mares with his stallions. The colts born of that arrangement would be registered quarter horses and would be split equally between Watkins and Miller-Oakes. The contract was renewed annually for three years and Miller-Oakes brought mares to the Watkins ranch in 1975, 1976, and 1977. On October 

### 8, 1974, the Cloverleaf brand, which was owned by Miller or by the Cloverleaf Land and Livestock Company, a Montana corporation, of which Miller was either the sole or majority shareholder, was transferred to Jackie Oakes and recorded in the Montana Brand Office. After the brand had been transferred to Jackie Oakes, various colts and yearlings were branded with the Cloverleaf brand. In the spring of 1975,pursuant to the breeding agreement, twenty-one head of Miller-Oakes mares were delivered 

### to Watkins' ranch for the purpose of breeding. Several Miller-Oakes colts were either by the side of the mares atthe time they were delivered or born at Watkins' ranch. Uuring the summer of 1975, allof the mares and allof the colts, wlth the exception of one which died at Watkins' ranch, were returned toMiller and/or JackieOakes. In the spring of 1976, a total of fourteen MillerOakes mares

### were delivered toWatkins' ranch for thepurpose oibreeding. Some of themares had coltsby their side and

some of themares foaled during the summer of 1976. Allof these colts were the result of the breeding of the 1975

season and were "partnership colts" pursuant to the agreement of the parties. Fifteen Breeder's Certificates were issued by Watkins indicating that a total of fifteen colts had been born asa result of the 1975breeding season. All of the Miller-Oakes mares and allof thepartnershipcoltswere returned toMiller and/or Jackie Oakes, with the exception of two of the partnership colts which were retained by Watkins as a distribution. One of these colts which was retained was theWicked Felitacolt. In the spring of 1977, a total of thirtyMiller-Oakes

mares were delivered to Watkins' ranch for breeding purposes. 3nce again, some of the mares had colts at their slde and others foaled atWatkins' ranch during thebreeding

season. During the summer of 1977, after having been bred, all of the mares with their colts (allcolts being partnershipcolts)were returned toMiller's ranch inJordan. The Miller-Oakes mares were not delivered toWatkins' ranch during the spring of 1978, as Watkins refused to continue breeding the mares for two reasons. First, he was dissatisfied with the failure to divide the colt crops pursuant to the agreement, and secondly, Miller and Oakeshad failed to take the necessary steps to register the colts, thereby breaching their portion of the contract and rendering the colts 

### less valuable. Further, by 1978, the Miller-Oakes partnership had disintegrated. Jackie was no longer residing with Miller and evidently was not a part of hisbusiness arrangements. Once Jackiewas no longer a part of Miller's business, it was very doubtful that colts born from thebreeding arrangementscould ever be registeredwith the AQHA sinceMiller was suspended from thatorganization. Aside from the disputeover the splittingof thepartnership colts, Miller also claimed that Watkins had purchased severalhorses fromMiller-Oakes, and thatMiller had

never been compensated for thehorses. Watkins on theother hand alleged accord and satisfactionby reasonof payment in fullinhisanswer with respect toeach of these horses. In June 1978, Miller approached two brand inspectors alleging thatWatkins had stolenthesehorses. The brand inspectors, together with Miller, approached the county attorneys in Musselshell and Fergus Counties, resulting in the filing of three criminal actions against Watkins for horse theft. Each of thecriminal actionswas dismissed withprejudice. As a result of Miller's complaint, Watkins counterciairned for malicious prosection, libel and slander, requesting actual and punitive damages. In addition, vdatkins claimed actual damages for failure to receive his share of thepartnership colts, aswellasfor hisexpenses and actualdamages incare, feeding and breeding of Miller's horses. I Was substantial credible evidence presented at trialtosupport the findingsof factand conclusions of law? Miller bases his argument on his contention that he and Watkins "are really two old horse thieves" and that neither can really be believed and that the thirdprincipal witness, Jackie Oakes, has an extremely unreliable memory and admits lying to the county attorney of Musselshell County. There was also testimony that some of the billsof salewere prepared aslateas 1978ina motel room. "ThisCourt willnot substitute itsjudgment for that of the trier of fact. We will consider only whether substantial credible evidence supports the findings and conclusions. Findings will not be overturned unless there is a clear preponderance of evidence against them, recognizing that evidence may be weak or conflicting, yet still support the findings. [Citation omitted.] The judgment of the trial court is presumed correct, and thisCourtwilldraweverylegitimate inference to support that presumption." Jensenv. Jensen (1981), Mont

# . I 629 P.2d 765, 768, 38

## st.= 927, 930. In addition, evidence will be viewed in the light most favorable tothe prevailingparty: "When this Court reviews evidence, it will be viewed in the light most favorable to the party who prevailed in the District Court, and the credibility of witnesses and the weight assigned to their testimony is for theDistrict Court Ina nonjury trial." Parkhillv. Fuselier (1981)t Mont

# . , 632 P.2d 1132, 1135, 38=.~ep. 1424,1427. Rule 52(a),Fi.H.Civ.P., provides inpart: "Findings of fact shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge the credibility of witnesses." Although there was conflicting testimony, we have reviewed the record and hold that there was sufficient credible evidence to support the findings of the DistrictCourt both indismissing the plaintiff's claim and inruling in favor of the defendant's counterclaim. 11 Were the elements necessary to prove a malicious prosecution actionpresent? Watkins' counterclaim requested actual and punitive damages from Miller for themaliciousprosection of criminal actions against him. To prove a malicious prosecution action againstMiller, Watkins had theburden toshow that: 1. A criminal proceeding was instituted

### or continued by Miller againstWatkins; 2. The criminal proceedings were terminated in favor of Watkins; 3. There was an absence of probable cause for the criminal proceedings; and 4. There 

### was malice or a primary purpose other than that of bringing a criminal to justice on the part of Miller. Orser v. State (19781, 178Mont. 126, 135, 582 P.2d 1227, 1232-1233; W. Prosser, The Law of Torts, S 119 at835 (4thed. 1971). Criminal complaints filed against Watkins were as ~ollows: 1. Musselshell County--three counts ot theft (criminal action 1065)

a. MurriettaGrey b. Wicked Felitacolt

c. Black Deckette 2. Musselshell County--one count of theft (criminal action 1077)

a. Bean's mare3. FeryusCounty--four countsof theft:

a. Twig Deck gelding (soldby Watkins toBrad Hamlett) b. PistolBar gelding (soldby Watkins toBrad Hamlett)

c. One gelding soldby Watkins toOscar Walter d. One gelding soldby Watkins toOscar Walter Criminal proceedings instituted or continued 

### by Miller 

### ----------- 

### ------- againstWatkins. Miller contends thathe did not institute or continue proceedings against Watkins but that he merely gave brand inspectors information in an effort to cooperate with the authorities relative to the investigation and identified animals in possession of third parties which carried his brand. During the trial, Miller admitted going to the Musselshell County attorney and informing him that Watkins had stolen his horses and expecting that batkins would be chargedwith theft. Miller alsocontactedJack Sedgwick, an investigator for the Montana Department of Livestock, and informed him and theMusselshell County sheriff thatWatkins had hismare. We hold that Miller did institute and continue the criminal charges againstWatkins. Termination inWatkins' favor. The next element in a malicious prosection action is termination of the proceedings in favor of the plaintiff. The lJlusselshel1 County and Fergus County complaints wers dismissed withprejudice for lack of a speedy trial. Miller contends that thistype of dismissal is not in favor of Watkins because itdoesnotreflect hisinnocence.In Lachner 

### v. LaCroix (1980), 159 Cal.Rptr. 693, 695, 602 P.2d 393, 395, the California Court stated: "It is not essential tomaintenance of an action formalicious prosecution that the prior proceeding was favorably terminated following trial on the merits. However, terminationmust reflect on the

### merits of the underlying action. 

# . . A dismissal for failure toprosecute

# .. . does 

### reflect on the merits of the action

# ... The reflection arises from that natural assumption that one does not simply abandon a meritorious action once instituted." (Underscoring added.) We agree with the California Court that a dismissal for lack of speedy trial does reflect on the merits of the

case and can be considered as a termination in favor of Watkins. Probable Cause Probable cause has been defined as "a reasonable ground of suspicion, supported by circumstances sufficient towarrant an ordinaryprudentman inbelieving theparty is guilty of the offense. It includes an honest belief in the guilt of the accused, since the reasonable man will not prosecute another whom he does not believe to be guilty." Prosser, § 119 at841. During the trial Niller admitted that he sold the Bean's mare and the Twig Deck gelding outright toWatkins. Miller knew that there was no basis for the Fergus County criminal complaint regarding the Twig Deck or for one count of criminal action 1077 regarding Bean's mare inMusselshell cou*ty. The other three geldings which comprise the Fergus County criminal actionwere sold toWatkins by JackieOakes. Watkins paid Jackie Oakes $750 for these threegeldings and evidencepresented attrial indicatesthatMiller knew about thistransaction. Thus, therewas no basis for the criminal

IactioninFergus County. With regard to criminal action 1065 in Musselshell County, one count concerned Black Deckette, which Jackie Oakes traded to Watkins, and Miller knew of the trade. Another count in action 1065 concerned the Wicked Felita coltwhich Watkins took as a partial distribution of a colt crop and Miller received a colt from Toi Twist out of the

same transaction. This divisionwas made by JackieOakes. The final count of criminal action 1065 concerned Murrietta Grey. The evidence presented at trial indicated that Bob Miller knew and approved of the trade involving Murrietta Grey. From the testimony presented attrial, the District Court was justified in determining that there was

no probable cause for Miller to institute these actions against Watkins, and further, no honest belief by Miller of theguiltof Watkins. Maiice asa Prerequisite The fourth element necessary in a malicious prosecution action is malice or a primary purpose other than that of bringing an offender tojustice. In thiscase, therewas

a clear lack of probable cause for criminal proceedings as pointed out in the prior section. Malice can be inferred from want of probable cause. McGuire v. Armitage (1979), Mont. 

## ,603P.2d 253, 255, 36 St.Rep. 2142, 2145. In - - addition, Miller's testimony indicated that he was aware that one horse had been traded by JackieOakes, yethe told the county attorneyof Musselshell County thatthehorsewas stolen, fully expecting Watkins to be charged with theft. Sufficient evidence was presented to show malice and to conclude that Pliller's intent was not to bring an offendertojustice.

Was evidencepresented tosupport thedamage awards? The judgment of the DistrictCourtprovides inpart: "That the Court further finding the plaintiff liabletothedefendants inthe amount of Twenty-three Thousand and no/100 Dollars ($23,000.00) for actual damages for contract on twenty-three colts, Thirty Thousand and no/100 Dollars ($30,000.00) for actual damages 

### as a result of the malicious prosecution, Twenty-five Thousand and no/100 Dollars ($25,000.00) actual damages for libeland slander, and Fifty Thousand and no/100 Dollars ($50,000.00) punitive damages for intentional utterances; and "That the defendants having incurred necessary costs in the prosecution of this lawsuit intheamount of SixHundred Twenty-seven and 14/100 Dollars ($627.14); and "That the defendants being entitled to tenpercent (10%)interestper annum upon the total amount of this Judgment, such interest to commence with the date of filing this Judgment, and good cause appearing. "NOW, THEREFORE, IT IS HEREBY ORDERED, ADJUDGED AND DECREED that Judgment be entered for the defendants and against the plaintiff for the sum of One Hundred Twenty-eight Thousand SixHundred Twentyseven and 14/100 Dollars ($128,627.14), as set forth above, 

### less $1500.00 that Defendants owe Plaintiff, making the total judgment One Hundred Twenty-seven 'rhousand, One Hundred Twenty-seven and 14/100 Dollars ($127,127.14)." Section 27-1-303, MCA, provides: "NO person can

recover a greater amount for the breach of an obligation than he could have gained by full performance thereof on both sides

# . . ." Fifteen colts were born as a result of the 1975breeding asevidenced by theBreeder's Certificates for thatparticular year introduced into evidence. Finding of FactNo. 22provided:"That there was no documentary evidence introduced into evidence by either side astothe exact number of the colts born as a result of the 1976 or the 1977 breeding. It was evidenced that a ninety-two percent (92%)colt crop would be expected, however, in light of poor range conditions at the Miller ranch, together with improper care of the animals, an eighty percent (80%)colt crop should be the minimum expected. That utilizing the eighty percent (80%) figure, there should have been 

### a totalof eleven (11)colts for the 1976 breeding and a totalof twenty-four (24)coltsfor the 1977 breeding. Thus, the sum total of colts for the three-year breeding would be in the number of fifty (50), of which each side would be entitled to a totalof twenty-five (25)coltseach." The District Court also found thatWatkins had received two of the colts and that the fair market value of a colt registered with theAQHA during the

### time of thecontractwas Slp00. We find the award for actual damages on the contract tobe proper. Watkins was awarded $627.14 as necessary costs in prosecution of this lawsuit. Watkins was not specifically awarded attorney fees in either his defense in the civil or criminal actions. Watkins submitted a memorandum of his costswhich provided: l. Clerk of Court, filingof Motion toDismiss 2. Judgment 3. Deposition 4. Stenographer's Fee 5. Witness fees: A. Brad Hamlet 88.00 Two days--$20.00 Mileage from Sun River, Montana--$68.00 B. Marge Taylor 61.14 Two days--$20.00 Mileage fromJordan, Montana--$41.14

### TOTAL COSTS

### AND DISBURSEMENTS $627.14 Section 25-10-201, MCA, provides that a party to whom costs

are allowed are entitled to include as costs: "(1) the legal fees of witnesses, including mileage, or referees and other officers; "(2) the expenses of taking depositions;



### "(4)the legal fees paid for filing and recording papers and certified copies thereof necessarily used in the action or on the trial;" The costs awarded are allowed under section 25-10-201, MCA, and are proper. Watkins was awarded $30,000 on his counterclaim for malicious prosecution and $25,000 as a result of libelous and defamatory statements. Conclusion of Law 17 awards $55,000 general damages to Watkins for loss of business and damage to reputation. Watkins testified that his business

was damaged, that he incurred considerable attorney fees as a result of the criminal proceedings, and that he suffered humiliation and embarrassment as a result of the unfounded criminal prosecutions. Watkins was arrested and required to spend a night in jail. Watkins' son testified as to his father's reputation and questions asked of him by others involved in the horse breeding and trading business after the criminal charges were filed. In Keller v. Safeway Stores, Inc. (1940), 111 Mont. 28, 

### 41, 108 P.2d 605, 612-613, this Court stated that it would rarely revise damage awards for defamation. "Unless the damages are so unconscionable as to impress the court with its injustice and thereby induce the court to believe that the jury was actuated by passion, prejudice orpartiality, it rarely interferes with the verdict. The question of excessiveness of the verdict is primarily addressed tothediscretion of the trialcourt." While this is not a jury 

### case, the question of the damage award for defamation is a matter of thediscretion of the trialcourt. We do find substantial evidence tosustain theconclusion of the trial court and will therefore not interfere with the decision of the lower court. Watkins was awarded $50,000 punitive damages for intentional utterances. Punitive or exemplary damages are allowed where the defendant has been guilty of oppression, fraud, or malice, actual or presumed, for the sake of example and by way of punishing the defendant. Section 27-1-221, MCA. Exemplary damages shall be used when the defendant clearly shows thathe isdeserving of such special treatment and punishment. In Smith v. Krutar (1969), 153 Mont. 325, 457 P.2d 459, this Court indicates that wnere acts are done willfully and the result amounts to fraud or oppression, punitive damages may be awarded under the statute. Bill and LaVonne Watkins have been victims of false accusations. The maker of these accusations, Miller, knew each and every one of the accusations to be false at the time he made them. Each and every one of the allegations

was made maliciously and viciously. Watkins has been accused of criminal conduct. The allegations made are serious and directly affecthis business reputation. These allegations were repeated over a period of three years and continued at the 

### time of trial. The award of punitive damages 

### is meant tomake an example and punish a person sothathe willcease thistypeof conduct inthefuture. We find that the facts of this case allow for the awarding of punitivedamages. Weaffirm.

Jus ic 

# \

We concur: 

# 4&4 Chief Justice