No. 91-373 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1992 

- 

UNITED FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION, 

an Idaho corporation, 

Plaintiff, Respondent and Cross-Appellant, 

-vsWHITE-STEVENS, LTD., and THOMAS STEVENS, 

Defendants, Appellants, and Cross-Respondents. 

APPEAL FROM: District Court of the Fourth Judicial District, 

In and for the County of Missoula, 

The Honorable C:. B. McNeil, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Harold V. Dve A an istine L. Foc 

Dale & Dye, Missoula, Montana. 

For Respondent: 

Sam E. Haddon and Dean A. Stensland; Boone, Karlberq 

& Haddon, Missoula, Montana 

Submitted on Briefs: March 12, 1992 

Decided: June 4, 1992 

Files.:! '<, ..ZT .!l, 

CL~,~ cr ~iii'!:::.~,~ cook, Cr ti.. . ;q,<:y,- . ,I ANA 
Justice R. C. MCDOnough delivered the Opinion of the Court. 

White-Stevens, Ltd., and Thomas Stevens appeal from a judgment 

of the Fourth Judicial District Court, Missoula County, in favor of 

United First Federal Savings and Loan Association. We reverse. We 

frame the following issues for appeal: 

1. Whether the District Court erred in admitting expert 

testimony; and 

2. Whether the District Court erred in awarding United First 

Federal contractual damages. 

Thomas Stevens, a professional appraiser and member of the 

American Institute of Real Estate Appraisers, prepared two 

appraisal reports on two properties in Missoula, Montana. The 

appraisals were prepared at the request of the Curran family 

(herein Curran). The first report was submitted on November 3, 

1983, for a building located at 800 Kensington. According to the 

report, the value of the property in 1983, was $1,600,000. The 

second report was submitted on February 8, 1984, for an unimproved 

6 acre tract located at the corner of Russell and 34th Street. 

According to the report the value of the property was $960,000. At 

the time of the appraisals, Stevens was a partner in White-Stevens, 

Ltd. 

The prospective lender, United First Federal (UFF) reviewed 

the reports, and relied on the accuracy of the reports in making 

its decision to grant loans to Curran, secured by the appraised 

properties. On April 17, 1984, UFF loaned Curran approximately 

$600,000, secured by a trust indenture on the 6 acre tract. On 
August 31, 1984, UFF loaned Curran $975,000, secured by a trust 

indenture on the Kensington property. The loan amounts were 61-62% 

of the appraised market values and were well below the industry 

average loan to value ratio of 70-75%. 

Curran defaulted on both loans before the end of 1984. UFF 

judicially foreclosed each obligation and security as a mortgage. 

On December 10, 1985 the District Court entered a foreclosure 

decree. A default judgment was entered against the Currans which 

included interest, costs, and attorney fees. At the sheriff's 

sale, UFF bid $850,000 for the Kensington property, and $200,000 

for the 6 acre tract. As a result of the sheriff's sale, a 

deficiency judgment of February 5, 1986, in the amount of $848,067, 

was entered against the Currans. UFF has exhausted every 

alternative in attempting to collect the debt. Curran did not 

redeem either property. UFF later sold the Kensington property for 

$775,000. UFF has not been able to sell the 6 acre tract. 

UFF brought an action against White-Stevens, Ltd. and Thomas 

Stevens for damages arising from negligent misrepresentations of 

the appraisals of real property. A bench trial commenced on 

December 21, 1990. The District Court entered judgment on April 

17, 1991, awarding UFF $848,067. This appeal followed. The 

standards of review are set out below as we discuss each issue. 

I 

Whether the District Court erred in admitting expert 

testimony. 

Questions of evidence are discretionary with the trial court. 

The scope of review of discretionary acts by the trial court is 

3 
whether or not the trial court's determination was a misuse or 

abuse of discretion. Steer, I~c. v. Dept. of Revenue (1990), 245 

Mont. 470, 803 P.2d 601. 

Stevens argues the District Court improperly allowed expert 

testimony at trial, in violation of the Montana Rules of Civil 

Procedure. During discovery, Stevens' counsel propounded 

interrogatories to UFF requesting UFF identify the names of persons 

they expected to call as experts at trial. UFF responded, stating 

they would be calling Steven Alan Hall as an expert. UFF did not 

supplement its original answer to interrogatories. It is clear 

that under Rule 26(b) (4) (A) (i) , M.R.Civ.P., UFF was required to 

disclose the names of experts it intended to call at trial. 

Rule 26(b) (4) (A) (i), M.R.Civ.P., provides: 

A party may through interrogatories require any 

other party to identify each person whom the other party 

expects to call a an expert witness at trial, to state 

the subject matter on which the expert is expected to 

testify, and to state the substance of the facts and 

opinions to which the expert is expected to testify and 

a summary of the grounds for each opinion. (Emphasis 

added. ) 

Rule 702, M.R.Evid, which governs expert testimony provides: 

If scientific, technical, or other specialized 

knowledge will assist the trier of fact to understand the 

evidence or to determine a fact in issue, a witness 

qualified as an expert by knowledge, skill, experience, 

training or education may testify thereto in the form of 

opinion or otherwise. 

The Commissioner's Comments to Rule 702, discuss two standards in 

determining when testimony is expert in nature. The standard 

involved under the facts here is concerned with whether or not the 

subject matter requires expert testimony. Former 5 93-401-27(9), 

RCM (1947) (superceded), admitted expert opinion when a case 
involved questions of 8vscience, art, or trade, when he is skilled 

therein". This section has been interpreted to include matters not 

within the range of ordinary training or intelligence. The modern 

rule admits expert testimony to aid the trier of fact to understand 

facts and draw correct conclusions. The Commissioner8s Comments 

note that the modern rule intends to encompass both statements of 

the rule. 

Nicholas Kaufman, Ken Staninger, and James Benn (whose 

testimony in part presented opinion evidence of Barney Olson, an 

appraiser hired by UFF) were called to testify at trial on behalf 

of UFF. UFF argues that neither Kaufman nor Staninger nor Olson, 

were identified as experts because they were not expected to 

testify as experts nor did they testify as such. We treat each 

witness separately. 

Kaufman 

Nicholas P. Kaufman, a land use consultant with the 

engineering firm of Sorenson and Co., was subpoenaed by UFF and 

testified on their behalf. UFF hired Sorenson and Co. to study the 

flood proofing problems on the 6 acre tract in an effort to market 

the property. During direct examination, counsel for UFF stated: 

I have the intention of inquiring of you and asking 

you about what was available to you or to anyone who 

would have looked at the public record as of that date 

that related to flood-proofing or flood control issues on 

this property. 

Stevens' counsel objected on the grounds that Kaufman was an 

undisclosed expert. UFF counter-argued that Kaufman would be 

testifying to historical facts and would not be giving his opinion. 

The objection was overruled. 
Counsel for UFF then asked Kaufman, 

Based on your review of the records. . . what did your 

analysis and investigation of the records show to you or 

tell you about this property. 

Counsel for Stevens repeated his objection. UFF argued it was 

really a summary of facts in the public record. Stevens' counsel 

counter-argued that without an expert to interpret the record, best 

evidence of public records are certified copies, and that 

interpreting public records is expert testimony. The objection was 

overruled. 

Kaufman went on to present an analysis of the appropriate city 

council minutes, flood insurance rate maps, flood plain maps, and 

several sections of the flood plain ordinance. 

Next, counsel for UFF asked Kaufman: 

Did Sorenson and Co. . . . come up with the calculations 

and a determination of what would need to be done? (to 

flood proof the property) 

An objection was made and sustained as to the expert testimony. 

Kaufman went on to testify about the work he did relative to 

floodproofing the property. 

Counsel for UFF then asked: 

What did you determine about the necessity of a 

joint effort, multi-many owner effort to consider or deal 

with the flood-proofing issues on this property? 

Stevens' counsel objected on the grounds that the question called 

for an expert opinion. The objection was sustained as to the 

technical matters, but not as to the floodproofing. Kaufman 

testified that the property needed to be raised to prevent 

flooding, but was not allowed to testify as to how to fill the 

property for floodproofing purposes. Kaufman was allowed over 
objection to discuss five different options for floodproofing. 

Kaufman is a land use consultant with a Bachelor's degree in 

economics, a Master's in planning, and two years of education in 

engineering. Kaufman has been working in the area of flood 

permitting since 1978. Kaufman's area of specialty is not within 

the range of ordinary training and intelligence. Further, his 

testimony as such served to aid the trier of fact in drawing its 

conclusions. Therefore, we conclude that the District Court abused 

its discretion in allowing Kaufman to testify in violation of Rule 

26, M.R.Civ.P. 

Staninaer 

Ken Staninger, a real estate broker in Missoula with 19 years 

experience, was involved in the sale of the Kensington property and 

received a commission. He acted as a co-broker working for the 

sellers. Since 1989 he has been the exclusive listing broker on 

the 6 acre tract. He was not listed as an expert by UFF. During 

Staningerls testimony, a letter was admitted over objection, 

containing his opinions as to the value of the property. Staninger 

estimated what it would cost to sell the property with the water 

problems. Stevens' counsel renewed his objection. The objection 

was overruled and Staninger went on to explain the marketing 

problems with the property. 

Olson (Bennl 

Mr. Benn, the attorney who handled the foreclosure proceeding, 

was allowed to essentially testify over objection as to the value 

of the property at the foreclosure sale. The value was provided in 

a letter from Barney Olson, an appraiser hired by UFF. Barney 

7 
Olson was not named as an expert by UFF. 

Ken Staninger, and Barney Olson, (through Benn's testimony) 

both knowlegable and experienced in the area of real estate, 

testified as to the value of the 6 acre tract. Montana has often 

allowed lay opinion testimony regarding the value of land. 

However, these cases involve the testimony of the verified owner of 

the land as to its value. See State v. Marsh (1978), 175 Mont. 

460, 464, 575 P.2d 38, 42; Zugg v. Rampage (1989), 239 Mont. 292, 

297, 779 P.2d 913, 916. The case before us concerns commercial 

property with significant flooding problems. The exact dispute in 

issue is the value of the land in question. The market value of 

the 6 acre tract required testimony beyond the scope of ordinary 

training and intelligence, and required expert testimonyto aid the 

trier of fact in determining facts in issue. Kaufman, Staninger 

and Olson should have been named as experts upon the interrogatory 

request by Stevens. The days of disclosure are here. We conclude 

that the District Court abused its discretion in allowing such 

testimony as it was in violation of Rule 26, M.R.Civ.P. 

I1 

Whether the District Court erred in awarding United First 

Federal contractual interest. 

In reviewing questions of law we will determine if the trial 

court's determination as to the law is correct. Our review will be 

plenary. Steer, Inc. v. Dept. of Revenue (1990), 245 Mont. 470, 

803 P.2d 601. See also Hudson v. City of Butte (1940), 111 Mont. 

210, 107 P.2d 882. 

As stated above, the District Court awarded $848,067 in 

8 
damages to UFF. Stevens contends that $241,333.02 was awarded 

erroneously because it represents contractual interest from the 

note between Curran and UFF. UFF argues that it is entitled to the 

$241,333.02, and in addition, $620,572 in lost earnings on the 

deficiency at a rate of 15% interest from February 5, 1986 (the 

date of deficiency) 

The foreclosure judgment summarized the items of contractual 

damages which included a 15% interest rate per annum from October 

1, 1984 to December 6, 1985. The interest totaled $241,333.02. 

Nothing in the record supports the notion that $241,333.02 was 

anything but the contractual interest in the Curran-UFF note at a 

contractual default rate of 15%. 

The case before us rests on the legal theory of negligent 

misrepresntation. Both parties cite § 552B of the Restatement 

(Second) of Torts. It provides: 

(1) The damages recoverable for a negligent misrepresentation 

are those necessary to compensate the plaintiff for the pecuniary 

loss to him of which the misrepresentation is a legal cause, 

including 

(a) the difference between the value of what he has received 

in the transaction and its purchase price or other value given for 

it; and 

(b) pecuniary loss suffered otherwise as a consequence of the 

plaintiff's reliance on the misrepresentaion. 

(2) The damages recoverable for a negligent misrepresentaion 

do not include the benefit of the plaintiff's contract with the 

defendant. 

Under the Restatement, UFF is entitled to out of pocket 

expenses which accrued as a result of Stevens' negligent 

misrepresentaion. UFF is entitled to the difference between what 

they loaned to Curran (due to Stevens' misrepresentation) and what 

they received. This does not include lost earnings, or opportunity 
cost between the deficiency and the date of judgment. 

We conclude that the ~istrict Court erred in including 

$241,333.02 in the damage award against Stevens. The interest on 

the deficiency as of December 10, 1985, the date of the foreclosure 

action, has accrued at a rate of $348.44 per day between February 

5, 1986 (date of foreclosure) and December 21, 1990 (date of trial) 

in the amount of $620,572. The District Court awarded UFF damages 

in the amount of $848,067 based on what the court deemed actual 

pecuniary loss to UFF. The District Court declined to award UFF 

its claim for the $620,572 in interest as a basis for lost 

earnings. We affirm the District Court in its denial of awarding 

UFF $620,572 in lost earnings. 

The issue of whether the District Court's findings of fact and 

conclusions of law were supported by substantial credible evidence 

will not be discussed due to the fact we are reversing the judgment 

and remanding for a new trial. 

Reversed and remanded for a new trial. 

We Concur: &cud Justice 

Chief Justice 
Justice Karla M. Gray, concurring in part and dissenting in part. 

I concur in the opinion of the majority on issue two. I 

respectfully dissent from the majority's conclusion that the 

testimony of Nicholas Kaufman, Ken Staninger and James Benn which 

was admitted over "expert testimony" objection constituted expert 

testimony requiring disclosure under Rule 26, M.R.Civ.P. Given the 

content of the testimony at issue and the abuse of discretion 

standard of review, I would affirm the District Court on issue one. 

Nicholas Kaufman' s testimony is summarized by the majority. 

It contained two discrete parts: first, Kaufman testified as to 

flood plain regulations and other matters of public record 

regarding those regulations as they relate to the two property 

parcels at issue; he then testified generally on five alternatives 

for flood-proofing the parcels. Stevens' counsel objected that 

Kaufman's testimony was undisclosed expert testimony. The District 

Court overruled the objection to testimony on the flood plain 

regulations and related matters. The court specifically sustained 

objections to portions of Kaufman's testimony addressed to the 

engineering aspects of the various flood-proofing alternatives but 

allowed Kaufman to testify generally on the alternatives "until we 

get in any technical matters." 

The majority states that Kaufman's area of specialty and, 

assumedly, his testimony are not within the range of ordinary 

training and intelligence, in direct derogation of the District 

Court's conclusion that it was not. It is my view that Kaufman's 

testimony was, indeed, a "close call." However, I cannot ascribe 

11 
an abuse of discretion to the District Court in light of the clear 

and understandable nature of the testimony and the fact that, as 

the trier of fact in this case, the District Court did not believe 

the testimony was so complex or specialized as to constitute expert 

testimony. 

Furthermore, I do not understand the majority's reliance on 

the fact that the court, as trier of fact, used Kaufman's testimony 

in drawing its conclusions. The majority seems to suggest that the 

court's actual use of the testimony renders the testimony "expert." 

If that is to be the definition of expert testimony, then we have 

reached a point where mere relevant testimony equates to expert 

testimony. 

As to Ken Staninger, the majority correctly notes that he is 

a real estate broker of some years' experience who was involved 

with both parcels of property at issue in this case. Stevens' 

counsel's "expert opinion" objection to Staninger's opinion 

testimony on the $775,000 selling price for the Buttrey parcel was 

sustained because the testimony amounted to expert appraisal-type 

testimony. Staninger did provide testimony on the 6 acre tract, 

for which he was the exclusive listing broker. A letter from 

Staninger to UFF, in which Staninger discussed market conditions 

and his personal experiences in attempting to sell the property at 

the $250,000 asking price, was admitted over objection by Stevens' 

counsel that it constituted expert opinion on the value of the 

property. The majority apparently concludes that this letter was 

expert opinion testimony and that, as such, the District Court 
abused its discretion in admittingthe letter because Staninger was 

not identified as an expert. I disagree. 

It is my view that the Staninger letter is lay opinion 

testimony under Rule 701, M.R.Evid. There is nothing of a 

scientific, technical or particularly specialized nature in 

Staningerls letter which would constitute Rule 702 expert opinion. 

Nor does Staninger's nineteen years1 experience in the real estate 

business necessitate a conclusion that everything he says or does 

invokes expert status requiring disclosure under Rule 26, 

M.R.Civ.P. The letter recounts Staningerls personal experience in 

trying to market the Russell property; it includes Staninger's 

observations on market conditions he experienced relative to the 

property and UFF1s asking price. Nothing in the letter approaches 

the kind of expert valuation or appraisal testimony the majority 

seems to suggest is there. The majority's conclusion that the 

letter is expert testimony subject to Rule 26 disclosure is an 

extremely broad view which renders virtually all testimony by any 

person engaged in any trade or profession expert testimony. The 

majority states that I1[t]he days of disclosure are here." As a 

result of the majority opinion, that is certainly true; the 

traditional distinction between lay and expert testimony is no 

more. 

It is my view that the majority similarly mischaracterizes the 

testimony of James Benn. Benn did not testify as to the value of 

the property at the foreclosure sale; he testified as to his own 

involvement in the foreclosure of both parcels and in helping UFF 
establish its bid price for each parcel. 

Benn testified to the bid price for the Buttrey Suburban 

Building. His testimony included the information that Barney Olson 

was retained by UFF to provide a range of values for the property; 

neither Olson's letter nor any specific valuation information from 

that letter was testified to by Benn. No objection was made to the 

referenced portion of Benn's testimony on the bid price, and the 

manner of establishing it, for the Buttrey parcel. An objection 

was made and sustained on "expert testimony" grounds to a later 

portion of Benn's testimony about fair market value. 

Benn then testified that the same process was utilized in 

establishing UFF's $200,000 bid price for the 6 acre tract. 

Stevenst counsel objected that the question called for hearsay 

based on Olson's valuation; the objection was overruled. It is 

this action by the District Court in overruling a hearsay objection 

that the majority holds is an abuse of discretion because the 

testimony was in violation of Rule 26, M.R.Evid. Again, I cannot 

agree. 

Benn's testimony as to the bid price for the 6 acre tract, and 

how it was established, is not expert testimony. It is factual 

testimony of Benn's own participation in UFFfs action to foreclose 

the 6 acre tract. There is nothing specialized or technical about 

it, it does not constitute opinion testimony of any kind, and it is 

not valuation testimony as suggested by the majority. Furthermore, 

the testimony was not inadmissible on the hearsay grounds upon 

which the objection was based since it contained no reference 
whatsoever to the contents of Olson's letter. I cannot find an 

abuse of discretion by the District Court on these facts. 

The majority's brief and generalized treatment of Benn's 

testimony, and its resulting lack of clarity in concluding that 

that testimony was expert testimony requiring disclosure under Rule 

26, does not provide guidance to the bench and bar of Montana in 

distinguishing lay and expert opinion. Instead, as noted above, 

the message seems to be that the difference between the two no 

longer exists. I dissent. 

Chief Justice J. A. Turnage: 

I concur in the foregoing concurring and dissenting 

opinion of Justice Gray.