No. 80-210 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1981 

L. D. STENSVAD, personally and as representative 

of the investing shareholders of AGRI-SERVICES, et al., 

Plaintiffs and Respondents, 

THE MINERS AND MERCHANTS BANK OF ROUNDUP, MONTANA, 

Defendant and Appellant. 

Appeal from: District Court of the Fourteenth Judicial District, 

In and for the County of Mussellshell 

Honorable R. D. McPhillips, Judge presiding. 

Counsel of Record: 

For Appellant: 

Towe, Ball, Enright and Mackey, Billings, Montana 

Thomas Towe argued, Billings, Montana 

Gerald Neely argued, Billings, Montana 

For Respondents: 

Wright, Tolliver, Guthals and Prater, Billings, Montana 

Kenneth Tolliver argued, Billings, Montana 

Submitted: September 16, 1981 

Decided: January 7, 1982 

Filed: 7- ,/ f fZ 
Mr. Justice John C. Sheehy delivered the Opinion of the 

Court. 

Appeal is by Miners and Merchants Bank from a judgment 

rendered against it on Stensvad's complaint in the District 

Court, Fourteenth Judicial District, Musselshell County. 

mhe bank had counterclaimed against Stensvad on unpaid 

promissory notes. 

The District Court found that the bank had breached an 

agreement to finance Stensvad's corporations and after that 

breach had converted or appropriated his property, resulting 

in damages to Stensvad of $1,631,047, plus lost profits in 

the sum of $511,695. The court granted a set-off of $1,750,234 

as of January 31, 1979 by reason of the indebtedness of the 

plaintiff to the bank. The court's net judgment of $392,508 

against the bank was subsequently reduced nunc pro tunc by 

deducting $117,904 on June 23, 1980. The resulting judgment 

against the bank is $274,604. 

The bank appealed from the judgment. There is no 

cross-appeal. 

This action arises from a cattle-feeding operation 

located at Roundup and Melstsne, Montana. The banking 

relationship between L. D. Stensvad and the Miners and 

Merchants Bank of Roundup (hereinafter Stensvad and the 

bank) commenced in 1965. The activities of the four corporations, all of which L. D. Stensvad represents in this case, 

played intertwining roles in the operation. Originally L. D. 

Stensvad Cattle Company would buy cattle and place them for 

feed in feedlots operated by M & S Cattle Feeders and by M. 

V. Enterprises, Inc. Agri-Services, Inc. purchased feed 

which it sold to the cattle feed operators. In reality, 

however, the four corporations for the purposes of this case 
are L. D. Stensvad, personally, although there were other 

investing stockholders not shown in the record. 

During 1965 and subsequent years, the bank loaned to 

Stensvad funds for the purchase and feeding of cattle for 

his personal account. In November 1968, Stensvad purchased 

feed mill facilities at Roundup, Montana, which substantially 

expanded his capacity to feed cattle. In the spring of 

1968, he acquired 300 acres of land near Roundup and completed 

construction of a 3,500 animal feedlot. In the fall of 1969, 

an opportunity arose to place investor-owned cattle in 

Stensvad's feedlots. The investors desired financing to 

allow them to purchase cattle on margin and to feed cattle 

on margin. Arrangements were made between the bank and the 

various investors whereby the bank loaned to the investors 

funds for the purchase of feeding costs. The program was 

popular with investors, and the feedlot at Roundup was 

expanded with temporary facilities to accomodate additional 

cattle. 

In early 1970, the bank indicated an inability to 

provide purchase money financing for the expanding investorsfeeders group. As a result, this portion of the financing 

was placed with the Production Credit Association of Lewistown, 

Montana, during the spring of 1970, with the bank continuing 

to provide financing for the feeding costs of the cattle. 

However, in order to simplify its recordkeeping, the 

bank requested and obtained a change in procedure which 

allowed the bank to loan the feeding cost funds directly to 

one of the four plaintiff corporations which were created 

for the purpose of conducting this business. During the 

summer of 1970, the bank advanced funds for the construction 

of additional feedlot capacity at Roundup, as well as for 

feed. The PCA made loans to investors for the purchase of 
cattle to be fed at the facilities. 

As of March 9, 1970, the PCA participation was on the 

following basis: the borrowers (the California investors) 

advanced the sum of $100 per head in cash, or part in cash 

and part by letter of credit so as to provide $50 per head 

for feed to be supplied by Stensvad, and $50 toward the 

purchase of the cattle. The PCA agreed to finance the 

balance of the purchase price of the cattle. 

Until such time as Stensvad completed his financing 

with the PCA on each purchase, he obtained interim financing 

from the bank. The monies advanced by the bank for the 

construction of additional feedlot capacity were carried by 

the bank on short-term notes, although the parties had in 

mind that such indebtedness would eventually be placed on 

long-term notes. As of June 1971, however, this had not 

been done. 

In June 1971, Edward Towe, a principal stockholder of 

the bank, indicated to Stensvad his intention to withdraw as 

a participant in the cattle-feeding program unless Stensvad 

withdrew his efforts from the creation of a new bank in 

Roundup. Meetings between the bank and Stensvad culminated 

in a Stensvad agreement to withdraw from participation in 

the founding of the new bank and the bank's agreement to 

continue to provide financing as it had previously done for 

the cattle-feeding operation, operated by Stensvad and the 

plaintiff corporations. In furtherance of this renewed 

commitment, the plaintiffs' furnished to the bank a complete 

portfolio of security interests in the plaintiffs' assets, 

as well as a guarantee from Otto Stensvad, the father of the 

plaintiff. 
The arrangement under the June meeting continued until 

August or September 1971, when the bank found that it was 

overextended on its loans to the Stensvad corporations. Its 

officers went to Stensvad and asked that he arrange for the 

PCA to take over the feeding costs which would be involved 

in the fattening of the cattle with the bank to handle the 

interim financing. On September 7, 1971, the PCA, through 

its executive committee, changed its financing arrangement 

to this extent: 

1. The margin requirement from investors was kept at 

$100 per head in cash or $50 per head in cash and $50 per 

head letter of credit to be paid by the borrower to the PCA 

prior to the disbursement of any loan funds. 

2. PCA would finance the full purchase price of the 

cattle and provide $80 per head for feed. Feed requirements 

were to be budgeted by months, and PCA was not to advance 

these funds until the feed was actually consumed. No advancement 

of funds for stockpiling of feed was to be allowed. The 

feeder was to be paid by PCA upon presentation of invoices 

every two weeks. 

On September 16, 1971, Stensvad wrote the bank setting 

out his need for interim financing after the changed PCA 

program. He said: 

"This does not mean, however, that there will 

be no need for any operating capital for our 

feed yards because as each lot of cattle is 

fed, there will be a 30 day delay between the 

time said cattle are put on feed and any money 

is received from the P.C.A., for we will be 

on a 30 day billing program. Since we purchase 

our feed and pay weekly, you can see that we will 

need interim financing for this purpose. In 

addition, of course, interim financing will be 

necessary to pay for cattle purchased for custom 

feeders between the time the cattle are contracted 

for, or bought outright, and the time the P.C.A. 

pays for the same. There is also a need for 

interim financing for accounts receivable and 
inventory for our regular retail trade at 

Agri-Services . . . 

"The question may arise in your minds as to why 

I still need $500,000 operating capital when I 

have stated that I am having my feed financed 

by the P.C.A. This is explained above and I will further 

clarify it here. I will still need operating 

interim financing for a 30 day period for feed 

being fed to cattle owned by custom feeders. The 

security therefor [sic] would be accounts receivable. 

The inventory necessary for each company for 

interim financing for cattle contracted for and 

purchased by L. D. Stensvad Cattle Co., an expected 

increase in accounts receivable and inventory at 

Agri-Services . . ." 

On Friday, September 17, 1971, another meeting was held 

at the bank between representatives of the bank, and Stensvad 

and Stensvad's attorney. In essence, the parties at that 

time agreed: 

During the transaction period from the old PCA program 

to the new, there would be 4,000 or 5,000 head of cattle 

under the old program, and as each pen was sold, Stensvad 

would repay the Miners and Merchants Bank the amount of 

money advanced by it when those cattle were put on feed. 

Since new cattle were being purchased under the new program 

to replace the cattle sold, and because of the proposal to 

build up the number of cattle to as many as 13,000 to 15,000 

head, the bank agreed "to immediately reloan the amount of 

money repaid to the Miners and Merchants Bank when each pen 

of cattle under the old program has been sold to enable me 

to feed the cattle for the 30 days" before the PCA provided 

the feed monies. 

Stensvad confirmed the Friday, September 17, 1971 

agreement in a letter of September 21, 1971, setting forth 

substantially what is said above here, and in addition 

stating: 
"It was explained to the Miners and Merchants 

Bank that under the old program, the operating 

capital which had been extended to me amounted 

to $502,000, That under the new program, the 

total amount of operating capital which would 

be necessary would still amount to a total amount 

of $500,000, but that the operating capital would 

be earmarked as follows: [setting out the 

allocation between the 4 Stensvad corporations]." 

On September 30, 1971, another meeting was held between 

the representatives of the bank and Stensvad. The only 

written evidence of the meeting is provided by Wally Otto, 

the PCA representative, who prepared a memorandum of the 

meeting. The bank apparently decided that the financial 

condition of the Stensvad operation was deteriorating badly. 

Otto reported that the current balance due to the bank was 

$440,000, secured by 1,000 head of cattle, not assigned, and 

2,000 head of cattle, contracted for but not delivered, feed 

inventory of $90,000, accounts receivable of $180,000, 

machinery at $35,000, and prepaid fees to ~tensvad. 

The bank then requested the PCA to make all future 

checks jointly payable to the bank and Stensvad to which all 

parties agreed. The bank gave PCA a general release covering 

the cattle purchased and the feed paid for under the new 

program and the bank delivered also to the PCA manager an 

assignment that it had received from Stensvad granting to 

the bank all of L. D. Stensvad Cattle Company's rights to 

monies after the investor loans had been paid. 

The record is unclear as to what occurred between 

September 30 and October 7, 1971. However, on October 7, 

1971, the Board of Directors of the bank adopted the following 

resolution with regard to the Stensvad operations: 

"The motion was made and seconded that present 

assigned income shall be received and applied 

to present notes with regard to all Stensvad 

Corporation loans and only the requested amount, 

namely, $10.00 per head per 15 days for each 

animal in the feed lot shall be advanced in 

addition to the advances needed to finance 

interm [sic] purchases of cattle for refinancing 

through PCA. 
"Motion was made and seconded that no funds shall 

be advanced hereafter for interm [sic] financing of 

cattle purchased or for costs of feed in the 

Stensvad cattle operation (all corporation) 

unless such cattle and the feed in question are 

to be fed to cattle located in the feed lots at 

Roundup and Melstone, only." 

Stensvad was notified of the resolution by letter on 

October 8, 1971. 

In the time that elapsed between the June meeting and 

September 1971, Stensvad, although requested, had not presented 

the bank with financial statements. Sometime, the date is 

unclear, the bank received statements reflecting the financial 

condition of the corporations. L. D. Stensvad Cattle Company 

was particularly in bad shape. The accountant's report 

showed a negative balance of about $271,000. Of the assets 

claimed by the corporation, approximately $150,000 represented 

bounced checks, and one of the liabilities was for nearly 

$385,000 for prepaid feed. 

On October 11, 1971, by letter from Stensvad's attorney, 

Stensvad notified the bank that he considered the directors' 

resolution a breach of the agreements made between Stensvad's 

corporations and the bank. The letter demanded that the 

bank assume control of the physical plant and operations of 

the company. Stensvad claimed he had no operating funds with 

which to pay employees, purchase feed or pay other expenses 

because of the Board of Directors decision of October 7. 

By letter of October 14, 1971, the bank confirmed to 

the PCA representative that it would corrtinue to finance the 

interim funds necessary for operating money until permanent 

financing was obtained from the PCA through its commitment 

of October 11, 1971. On October 19, the PCA wrote to Stensvad's 

corporations that it was notifying the investors in the 

cattle feeding program of the assignment of the monies to 

the bank. Apparently at this time Stensvad was "out of 

trust" with the investors. 
On November 16, 1971, the bank advised PCA that it 

would continue its loan arrangements with the Stensvad 

Cattle Company for the interim purchase of cattle and their 

feeding subject to a limitation of $5 per head per week. 

Also on November 16, 1971, the bank issued a letter stating 

it was taking over all the assets of the Stensvad Corporations 

and notified all that no cattle were to be removed from the 

feedyards or sold without first making arrangements with the 

bank. 

Over the course of the next several months, the bank 

sold the assets of the Stensvad corporations. The sale of 

personal property resulted in the recoupment of $354,111.73. 

The cattle were eventually sold for $520,000, The real 

estate was foreclosed upon, and eventually sold to Faunco, 

another company which thereafter hired Larry Stensvad to run 

the cattle operation. 

The District Court found that the commitment of the 

bank to finance the Stensvad corporations in the manner 

agreed to in June and in September 1971 was a binding 

agreement upon the bank; that no "change of circumstances" 

occurred between September 17 and October 7, 1971 when the 

bank's board of directors adopted the resolution we have set 

forth above; that the effect of the resolution was to eliminate 

any financing for the cattle operation conducted by the 

plaintiffs, to severely limit the corporation's ability to 

do business and to cause the eventual withdrawal of the PCA 

from financing the Stensvad operations. 

The District Court, in reaching judgment, adopted 

November 11, 1979, as the accounting date between the parties. 

As of that date, the court found that Stensvad was indebted 

to the bank for all borrowings in the amount of $1,022,325.71. 
The District Court concluded that the bank was entitled to 

interest, though it had found that the bank had breached the 

agreement to finance. Based on valuations which the District 

Court found the property to be worth at the time of the 

foreclosures and sales, and its computation of lost profits, 

the court entered a judgment based on the following elements: 

DISTRICT COURT AWARD 

A. STENSVAD CLAIM 

1. Conversion of personal -- $354,111 

property 

2. Conversion of cattle ---- 382,000 

3. Conversion of feedlot & 

elevators --------------- 814,936 

4. Mishandling of business - 80,000 

5. Lost profits ------------ 511,695 

$2,142,742 

B. BANK COUNTERCLAIM 

1. Principle -------------- $1,022,325 

2. Interest through 1/31/79 ----------------- 727,909 

3. Interest from 2/1/79 to 

judgment ---------------- 117 I 904 

NET JUDGMENT TO STENSVAD -------------- $ 274,604 

The issues argued by the bank in this appeal are 

as follows: 

1. Whether the bank agreed to finance the Stensvad 

operation sufficient to keep the Stensvad companies in 

operation and sufficient to complete the business on hand 

or not less than the time required to complete the fattening 

of two cycles of cattle? 

2. Whether, if such an agreement is found to have 

existed, it is unenforceable on grounds of indefiniteness, 

lack of mutuality, or failure of consideration? 
3. If such an agreement is found to be enforceable, 

whether it was terminable at will or breached by the bank? 

4. Whether, if such an agreement is enforceable and 

not terminable at will and breached by the bank, the evidence 

supports the awarding of any damages? 

a. Whether any damages are limited to the agreed 

interest rate and the interest rate required to obtain the 

money elsewhere? 

b. If not, whether the proper measure of damages is 

at most the amount of lost profits plus mismanagement of 

assets? 

c. Whether lost profits, if any, were proximately 

caused by the bank resolution of October 7, 1971? 

d. Whether there is any reasonable certainty that 

any lost profits would have in fact occurred? 

e. If so, whether the District Court erred in allowing 

testimony and exhibits showing gross profits per animal? 

f. If not, whether the level of lost profits awarded 

is appropriate? 

g. Whether the damages awarded for mismanagement of 

assets find support in the evidence, should have been admitted, 

are a duplication of lost profits, and are excessive? 

h. Whether the award of the cost of the fixed assets 

in the amount of $814,936 is supported by the evidence, 

excessive in amount, or even available in conversion? 

5. Whether the District Court erred in vacating its 

earlier order for a summary judgment in favor of the bank? 

The respondent urges that the findings made by the 

District Court were proper in all respects, and additionally, 
although it has not cross-appealed, urges that the District 

Court erred in allowing interest to the bank after the 

bank's breach of contract, and in failing to credit the cash 

funds received by the bank when liquidation of the Stensvad 

property against the loan balance before calculating interest 

due to the bank. 

THE BANK'S CONTRACT TO LEND MONEY 

The first issue we must determine is whether the 

District Court erred in finding that a contract existed 

between the bank and Stensvad to finance the feeder operation. 

The District Court found that as of September 21, 1971, 

agreements had been reached between the bank and Stensvad to 

the effect that Stensvad would furnish or continue to furnish 

the bank with security interests in all of the plaintiff's 

assets; that the bank would continue to furnish financing 

for the four to five thousand head of cattle then in the 

plaintiff's feed lots, without modification; feed financing 

sufficient to feed the cattle under the modified agreement 

for 30 days; interim financing for the purchase of new 

cattle; feed financing for newly purchased cattle prior to 

their sale to PCA financed owners; feed financing for 

rancher owned cattle, and inventory and accounts receivable 

financing for Agri-Services, Inc. 

In the absence of an express agreement as to the term 

of the bank's contracts, the court determined that it was in 

the contemplation of the parties that the term would be 

related to the investor-feeding contracts, the time required 

to fatten for sale two cycles of cattle. 
Presumably the consideration moving to the bank was the 

interest, at rates ranging from 8 1/2 percent to 10 percent 

per annum on the unpaid balances, that would be collected 

during the operation of the agreement. An extra element of 

prejudice, however, was the agreement of Stensvad not to 

engage in the formation of another bank in Roundup. Such 

consideration meets the statutory definition of good consideration, section 28-2-801, MCA, a benefit agreed to be 

conferred upon a promissor to which the promissor is not 

likely entitled, or a prejudice suffered or agreed to be 

suffered by the promissee other than what he is at the time 

lawfully bound to suffer. 

The District Court also concluded that the PCA participation in the Stensvad operation was dependent upon the agreement 

of the bank to furnish the necessary funds. 

While the exact nature of the bank's agreement is 

arguable, especially as to term, the findings of the court 

must be supported on appeal where substantial evidence 

supports such findings and may not be set aside by us unless 

clearly erroneous. Rule 52 (a) , M. R.Civ.P. 

The intention of the parties to a contract may be 

furnished by their conduct and declarations. Glantz v. 

Gabel (1923), 66 Mont. 134, 212 P. 858; section 28-2-103, 

MCA . 

We conclude the District Court did not err in finding 

an agreement on the part of the bank to finance the Stensvad 

operation. 

THE AWARD OF $511,695 FOR LOST PROFITS 

To support this award, the District Court found and 

concluded that the bank's wrongful breach of contract prevented 

Stensvad from earning profits in his business; that Stensvad 
had enough qualified investors to fill the lots to capacity; 

that the term of the investment contracts with the investors 

was the time required to fatten two cycles of cattle; that 

the bank's contract, though not expressed definitely, would 

reasonably require financing for two cycles of fattening; 

that Stensvad would realize net profits on yardage services, 

a 12 1/2 percent bonus from the investor's profits, and its 

anticipated feed profits; that a reasonable estimate of such 

profits was $511,695. 

The bank objects to this item on the grounds that the 

Stensvad operation was not shown to be profitable; that the 

profits found by the court are gross, and not net profits, 

and are duplicative of other damages allowed. 

The proper objective of an award of damages for wrongful 

breach of contract is to place the party wronged in as good 

position as if the contract had been performed. Kirby v. 

Kinyon-Noble Lumber Company (1976), 171 Mont. 329, 332, 558 

P.2d 452, 454. The bank contends that the measure of damages 

should be limited to the cost of obtaining money elsewhere, 

when money is wrongfully withheld. See Miller v. Federal 

Land Bank of Spokane (9th Cir. 1978), 587 F.2d 415, 424, 

cert-den. 441 U.S. 962, 99 S.Ct. 2407, 60 L.Ed.2d 1067. 

Damages for loss of profits may be awarded if not speculative. 

Silfvast v. Asplund (1935), 99 Mont. 152, 161, 42 P.2d 452, 

456. The rule that prohibits speculative profits does not 

apply to uncertainty as to the amount of such profits but to 

uncertainty or speculation as to whether the loss of profits 

is the result of the wrong and whether such profit would 

have been derived at all. Tri-Tron Intern. v. Velto (9th 

Cir. 1975), 525 F.2d 432, 437. Once liability is shown, 

that is the certainty that the damages are caused by the 
breach, then loss of profits on a reasonable basis for 

computation and the best evidence available under the 

circumstances will support a reasonably close estimate of 

the loss by a District Court. Smith v. Zepp (1977), 173 

Mont. 358, 370, 567 P.2d 923, 930. But no damages are 

recoverable which are not clearly ascertainable both in 

nature and origin, and only profits which are reasonably 

certain may be awarded. Smith v. Fergus County (1934), 98 

Mont. 377, 386, 39 P.2d 193, 195. 

The award of lost profits in this case may be sustained 

only if we can say that the profits are not based on speculation, 

since no profit record of the Stensvad enterprises was shown 

prior to the breach. We find here clearly that the damages 

for lost profits are speculative. There is no reasonable 

certainty in the record that Stensvad lost profits as the 

result of the wrong, or that a profit would have been derived 

at all. Tri-Tron Intern., supra. 

In reaching our decision on this phase of the case, we 

have looked at evidence presented during the main trial, and 

in supplemental hearings. The procedural situation came 

about because the court ordered that the bank's claims of 

set off would be heard subsequent to the trial. The court 

made findings on all of the issues, except loss of profits 

by its order of December 14, 1978, and provided for supplemental 

hearings in that order respecting the loss of profits and 

additional evidence to be offered by the parties on the 

remaining claims. 

A supplementary hearing was held before the District 

Court on January 22, 1979, and at that time, the parties 

entered into certain stipulations of fact, offered to enter 

into other stipulations of fact, and eventually agreed that 
affidavits or other forms of evidence would be offered to 

the court for its consideration. 

Thereafter, on February 20, 1979, an affidavit of Larry 

D. Stensvad was filed setting forth his claimed valuation of 

certain items, including cost of assets, proceeds from the 

sale of personal property by the bank and other items. On 

March 27, 1979, the bank filed a motion asking the court to 

adopt as facts certain proposed stipulations of fact which 

were attached to the motion, to take judicial notice of the 

accuracy of certain calculations, and to strike the affidavit 

of Larry Stensvad earlier mentioned. We find no record of 

how the court ruled on these motions, except that we find 

that some of the proposed facts were used in the court's 

final judgment from the affidavit of Stensvad. 

Inasmuch as all relevant evidence is admissible (Rule 

402, Mont.R.Evid.), we will advert to certain of the proferred 

evidence, as well as the record of the trial, in explaining 

why we determine that there is no reasonable certainty in 

the record or otherwise that Stensvad lost profits as the 

result of the claimed wrong of the bank, or that a profit 

would have been derived at all. 

The financial statements for Agri-Services, Inc., show 

that on June 30, 1971, on total assets of $426,228.80, the 

corporation had retained earnings of $1,739.89. Included in 

the liabilities was an overdraft to the bank of $65,692.67. 

Cash on hand was $2,793.36. The statement as of October 31, 

1971, for the same corporation, showed retained earnings 

totaling $4,368.15 on total assets of $401,871.10. In that 

four month interim, however, the short-term notes payable to 

the bank had increased to $198,999.99, from $187,000.00 on 

June 30, 1971. 

-16- 
The financial statements for M & S Cattle Feeders, 

Inc., show as of November 30, 1971, retained earnings of 

$7,813.89 on total assets of $260,638.59. Claimed assets 

include a stock subscription reserve of $17,499.57. The 

notes payable to the bank increase from $82,500.00 on June 

30, 1971, to $110,874.79 on November 30, 1971. On June 30, 

1971, this corporation had no cash on hand, and an overdraft 

to the bank of $241.22. 

The financial statements for M. V. Enterprises, Inc. 

show retained earnings before provision for income taxes of 

$55,261.86, on total assets of $336,261.51. Notes payable 

to the bank at that time are shown in the sum of $159,597.86. 

The accountants noted with respect to the June 30, 1971 

statement, that inasmuch as M. V. Enterprises, Inc. was part 

of a "brother-sister" group of controlled corporations, and 

the accountants not having been able to determine any intercorporate transactions, the income tax liability could not 

be determined. We find no November 30, 1971 statement for 

M. V. Enterprises. 

The financial statement of L. D. Stensvad Cattle Co. 

for June 30, 1971, is worthless. As it is, it reflects 

total assets of $421,802.55, and total liability of $692,860.72, 

for a negative net worth of $271,058.17. Even the claimed 

assets are questionable. The accountant reports: 

"NOTE 3. This amount of $76,500.00 is represented 

by a check of $45,000.00 that did not clear Mr. 

Wilson's bank and $31,500.00 that Mr. Wilson did 

not remit to L. D. Stensvad Cattle Co. on 

client's deposit. Collection probability not 

ascertained as of now. 

"NOTE 4. This $121,000.00 represents amounts 

withheld by Mr. Jack Dean from California cattle 

feeding clients as a commission. L. D. Stensvad 

Cattle Co. believes this is an error and 

steps to collect this are in process. Collection 

probability not ascertained as of now." 
The liabilities include an item of $383,568.26 owed to 

Custom Feeding clients for advance payments on feed. 

Most telling are the reports of the bank examiners who 

investigated the bankability of the loans made by this bank 

to the Stensvad corporations. 

With respect to the Agri-Services, Inc. statement of 

June 30, 1971, the examiners noted: 

"The operating results mentioned above 

indicate insufficient cash flow to service and 

repay indebtedness over a reasonable period 

of time, there is no evidence of control of 

the proceeds of sales from inventory, and the 

extent to which collateral is shared between 

this loan and placed paper behind the SBA loan, 

indicates questionable margin at best. Furthermore, the indicated 7 1/2% owner equity is too 

small to be expected to protect against shrinkage in 

value in the event it should be necessary to resort 

to force liquidation." 

With respect to M. V. Enterprises, Inc.: 

"A review of the checking accounts of subject 

and affiliated companies indicates frequent 

transfers of funds in substantial amounts between 

the various affiliates to cover checks being 

presented for payment and which apparently were 

issued without sufficient funds on deposit to 

cover at the time of issue or when originally 

presented here for payment. In view of these 

intercompany transactions and the apparent common 

controlling ownership vested in Larry D. Stensvad 

the borrowings of the affiliated companies must 

be considered together, and all of them appear 

to have the common weaknesses of undercapitalization 

and disproportionate total debt and short-term 

debt and virtually no working capital which necessitates 

reliance on credit to sustain operations." 

With respect to M & S Cattle Feeders: 

"Review by bank management subsequent to date of 

examination and subsequent to 60 M [$60,000] 

advance made by bank indicates current assets 

regarded as a source of repayment funds are limited 

to feed inventories aggregating 31.4 M [$31,400]." 

With respect to L. D. Stensvad Cattle Co.: 

"Checks on subject company have been issued in 

substantial amounts at times when insufficient 

funds were on deposit to cover them. In this 

connection it is observed that the checking 

account of this firm was overdrawn in the amount 
of $83,907.10 on 3-22-71 and the firm was 

indebted on loans here on that date in the amount 

of 110 M so that the liabilities of that firm 

were far in excess of subject banks lending limit 

on that date. Overdrafts have been noted on 

other occasions also. 

"At the time of a return visit to the bank on 11-12- 

71 a fiscal year end (6-30-71) P.S. [financial 

statement] had not been received for the L.D. 

Stensvad Cattle Company, Inc. Despite the nearly 

3 1/2 months since the end of the fiscal year 

reportedly the accountant for the firm has been 

unable to compile a financial statement that will 

balance or which he is prepared to certify and 

it has been indicated that unresolved differences 

are in excess of 200 MI an amount between 2 and 3 

times the NW [net worth] of the corporation in 

the 12-31-70 PS above. In the absence of the 

statement for this firm a consolidated PS for 

the affiliated corporations cannot be compiled, 

thus, the overall financial condition of the 

related firms cannot be determined. Furthermore 

the PSs on hand for the other corporations do 

not include information on intercompany receivables 

and payables that also would be needed for meaningful 

consolidation. Also, the bank is without information 

as to any obligations to other creditors of the 

L. D. Stensvad Cattle Company, Inc., and does not 

have a PS of Patton-Stensvad Cattle Feeders in which 

L. D. Stensvad has a minority (40%) stock interest 

and which has dealings with the L. D. Stensvad 

Cattle Company, Inc. 

"It appears that the bank is providing virtually 

all of the operating capital for the various 

enterprises in addition to financing the fixed 

assets of the corporations and conclusive evidence 

of collateral coverage cannot be ascertained. 

Assets sufficient to cover liabilities is suggested 

but not definitely established and the bank is 

making every effort to exercise control of cash 

proceeds for application on debts here." 

We turn now to examine the method used by the District 

Court in arriving at the lost profits figure of $511,695.00. 

In its findings of fact, the District Court found that L. D. 

Stensvad Cattle Company derived net profits from fees charged 

cattle owners for yarding services, and from 12 1/2% bonus 

based upon the cattleowners' profit from the sale of cattle. 

It found that the profit figure of $511,695.00 is the amount 

the plaintiffs would reasonably have been expected to realize 
from yardage fees and the 12 1/2 percent bonus payments 

based upon the completion of existing business. 

The District Court did not indicate what portion of the 

profit figure it attributed to bonus payments. In order to 

determine bonus payments, however, it must have utilized 

plaintiffs' trial exhibit no. 49, which purported to establish 

a net margin for investors based on a 600 pound steer when 

purchased, and sold at 1,050 pounds for a gain of 450 pounds. 

In that exhibit, figures are utilized from the United 

States Department of Agriculture which showed the price that 

feeder cattle would bring in Kansas City as compared to the 

price that fat or fed cattle would bring in Omaha -- on the 

-- same day. The difference was tabulated to find the gross 

margin on that day for the cattle investor. Offset against 

this margin was the cost of feed which the witness determined 

from barley prices published by the Montana Crop Reporting 

Service, plus 30 cents for freight and handling. From these 

figures, based on the ratio of feed used to pound of weight 

gained, the witness computed a cost of gain, (averaging 20.8 

cents per pound in 1972) which when multiplied by the 

theoretical 450 pound gain in the steer, produced the cost 

of feed for the steer. The difference between the gross 

margin and the cost of feed represented a net profit, on 

exhibit no. 49, to the cattle investor. The witness testified 

that irrespective of different prices that might prevail in 

the Roundup market or other Montana markets for the purchaser's 

sale of feeder cattle or fed cattle, the margin of profit 

could nevertheless be determined in the manner set forth in 

exhibit no. 49 because it would be the same nationwide. 

Such figures were computed for each month from November 1971 

until December 1974 on exhibit no. 49. The evidence does 
not indicate the date of each month on which the computations 

were made. It is strongly speculative whether such figures 

had any relationship to the Stensvad feeder operation. Most 

important, no computation for interest cost to the California 

investor that would be charged by the bank or by the PCA for 

the monies advanced by these institutions appears in exhibit 

no. 49. 

Likewise, plaintiffs' exhibit no. 52 purports to show 

the income to be derived by Stensvad's operations, based 

upon the numbers of cattle to be fed in the pens from the 

business on hand on the date of the bank's alleged breach. A 

number is given in that exhibit for the average number of 

cattle per month, usually 13,000 head in the pens. Income 

is determined by multiplying the average number of cattle 

times 15 cents per day for 30 days. Offset against the 

income thus generated are fixed costs and variable costs. 

Fixed costs are shown as an unvarying $11,604.36. Variable 

costs are determined by multiplying the average number of 

cattle for that month by the figure of $1.44. The difference 

between the income generated, and the sum of the fixed costs 

and variable costs yields a profit to Stensvad on the exhibit. 

When exhibit no. 52 was offered in evidence, it was 

stated that the computation for fixed costs and variable 

costs on that exhibit would be "connected up." However, 

such connecting up was never done. The result is a very 

speculative figure of profit used by the District Court in 

computing lost profits. 

Stensvad contends in brief that the net operating 

profits of the Stensvad operation for the fiscal year ending 

June 1972 would be $207,615.12 and for the 1973 fiscal year 

$334,237.68. In addition, the bonus payments that would have 
been received under the projections would equal $230,985.00 

for 1971-1972, and $103,400.00 for 1972-1973. The total of 

these figures is $876,237.80. The court's finding of lost 

profits is approximately 59 percent of this total figure. 

We are unable to determine, and no brief of the parties 

delineates the basis for the award. 

We cannot escape the conclusion that on the basis of 

the record here presented and the underlying evidence, that 

the award of the court for lost profits was based entirely 

on speculation, and no reasonable certainty appears to us to 

indicate that such profits were lost by the alleged wrong of 

the bank in refusing to further finance the Stensvad operations. 

This is not to say that in a proper case, damages for 

lost profits are not recoverable, arising out of a breach by 

a lender of a contract to loan money. The authorities agree 

that such damages may be awarded, see Hunt v. United Bank 

& Trust. Co. (Cal. 1930), 291 P. 184, especially when the 

lender knows the intended use of the proceeds. In such case 

the profits which would have been made, as contemplated by 

the parties, are recoverable, Milbourn v. Buzzard (Okla. 1926) , 

252 P. 15, if they are established by factual data to a 

reasonable certainty, even in the absence of a past history 

of profitable operations. Welch v. U. S. Bancorp. Realty 

and Mortg. (Ore. 1979), 596 P.2d 947, 963-964. The borrower 

is not restricted in his damages to the cost of obtaining 

money elsewhere, as the bank contends in this case. See 

Welch, supra. 

DAMAGES RECOVERABLE FOR BREACH OF CONTRACT 

The District Court concluded, after finding that the 

contract to lend money existed, that the bank had breached 

its contract, and resultantly had taken over the property of 

Stensvad wrongfully. The damages awarded by the District 

Court are attacked from all directions by the bank. We have 

already indicated that the lost profits awarded by the bank 
are improper in this case. We turn now to examine the other 

elements of damages awarded by the court in favor of Stensvad. 

There can be little argument that the amount of $354,111.00 

for the conversion of personal property awarded by the court 

is proper. It is substantially supported in the evidence 

and was the subject of a stipulation between the parties. 

The item for conversion of cattle, $382,000.00, includes 

a profit of $104,897.73 made by the bank in the difference 

between what the bank would have received had the cattle 

been sold in November 1971, and the amount actually received 

at the later time of sale. The District Court, by awarding 

the full amount received by the bank from the sale of the 

cattle, $382,000.00, gave Stensvad the benefit of the profit 

made by the bank in making the sale as it did. 

The item of $80,000.00 for mishandling of business, 

however, must be examined by us, and amended downward. 

The District Court awarded Stensvad the sum of $80,000.00, 

for the "losses sustained by the plaintiffs during the 

process of the Bank's wrongful foreclosure, for loss of 

downpayments on cattle, for loss of livestock through death, 

and for losses sustained through the disruption in shipment 

of the cattle." 

The evidence sustains $58,000.00 of that award. Larry 

Stensvad testified that at the time of the take-over by the 

bank, his operations had paid out $58,000.00 on agreements 

for the purchase of cattle, and that these sums were forfeited 

to the prospective sellers when Stensvad was unable to 

complete the contracts of purchase. Such an item of damages 

is within the contemplation of section 27-1-311, MCA, with 

respect to the measure of damages for the breach of contract, 

because they were proximately caused by the take-over, and 
in the ordinary course of things would be likely to result 

therefrom. 

The remaining part of the $80,000.00 award, that is the 

sum of $22,000.00, is apparently based on this portion of 

the record: 

"Q. Mr. Stensvad, I would like to direct your 

attention to the situation involving the cattle 

that were moved from the lot in Roundup to the 

lot at Melstone by the bank after the 

bank took control of these cattle. Did you have 

occasion to review the closeout figures produced 

by the bank, with regard to these cattle? A. The 

bank didn't produce the closeout figures on them. 

I produced the closeout figures on them. 

"Q. How did you obtain this information? A. Well, 

I had the information on what the cattle weighed when 

they went in down there, and then when the cattle 

were shipped, in terms of weight and numbers. And 

when the cattle were shipped out of the Melstone 

yards in the spring of 1972, I was there and obtained 

copies of the weights when the cattle went out, and 

numbers, so that I could compare the weights going 

out with the weights going in, as well as numbers. 

And then I also--the bank used forms that we were 

using at the time, before they took over, to keep 

track of daily feed fed out to the cattle, while 

they had it. And I had the opportunity to have those 

records to prepare feed consumption and cost data 

on the cattle while they had them in there. Then 

I returned these documents to the yards down there, 

when I completed my calculations. 

"Q. From these documents that you had at this 

point in time, did you prepare a calculation as 

to the amount of money that was lost by reason of 

the manner and means in which the cattle were 

cared for and fed. A. Yes, I did. 

"Q. And what was that amount? A. The amount 

was a few dollars over $22,000.00." 

Missing from the foregoing testimony is any basis upon 

which it could be determined that the bank overspent for 

feed, or underfed the cattle, or that the amounts spent by 

the bank in caring for the cattle until they were sold were 

unreasonable. Damages which are not clearly ascertainable 

in both their nature and origin cannot be recovered for a 

breach of contract. Section 27-1-311, MCA. 
We next consider the award of $814,936.00 for the loss 

of Stensvad's feedlots and elevators. The District Court in 

its findings based this award upon the original cost of 

construction and acquisition. Among the various values of 

the feedlot and elevators appearing in the evidence, the 

award is top dollar. On the books of three of the Stensvad 

corporations (L. D. Stensvad Cattle Co. had no fixed assets) 

the feedlots and elevators were carried at a depreciated 

value of $430,944.81 in total. 

At the request of Larry Stensvad, in April 1972, Hall 

and Hall, appraisers from Billings, appraised the fair 

market value of the Melstone feedlot, the Roundup feedlot, 

the Roundup mill and rolling stock, and found a total market 

value of $488,000.00. At the time of the sheriff's sale on 

foreclosure, the bank bid in for the feedlot and elevators 

the sum of $200,000.00, and was the successful bidder. 

Later the bank contracted to sell the feedlots and elevators 

to Roundup Feeders, Inc., a corporation formed by the owners 

of the bank, for $350,000.00. Roundup Feeders, Inc. in turn 

leased the properties to a corporation named Faunco, Inc., 

for cattle feeding operations under the management of Larry 

Stensvad, which resulted in a payment of $176,731.00 lease 

payments either to Roundup Feeders, Inc. or the bank, the 

record is not clear. On March 27, 1979, the bank offered to 

stipulate that as of June 30, 1971, the value of the fixed 

assets of the Stensvad corporations was $696,968.00. 

In Bos v. Dolajak (1975), 167 Mont. 1, 6, 534 P.2d 

1258, 1260, we quoted with approval from Spackman v. Ralph 

M. Parsons Company (1966), 147 Mont. 500, 506, 414 P.2d 918, 

921, though it related to personal property, the following 

quotation: 
"As for the issue of compensatory damages, 

the question is always a difficult one. In 

tort actions, the wrongdoer is liable, in general, 

for any injury which is the natural and probable 

consequence of the wrong. These may include both 

the direct and indirect, but reasonably probable, 

results of the wrong. Where damage to the property 

is concerned, the purpose of awarding damages is to 

return the party injured to the same, or as nearly 

possible the same, condition as he enjoyed before the 

injury to his property. The injured party is to 

be made as nearly whole as possible--but not to 

realize a profit. Compensatory damages are designed 

to compensate the injured party for actual loss or 

injury--no more, no less. " 

In - Bos, supra, we approved a measure of damages based on 

replacement cost of a silo, in an action for breach of 

contract to erect a silo, but in that case it appeared that 

the replacement item was a second-hand silo and its cost was 

well within the actual market value of the silo that was 

destroyed. The fairest value of the feedlots and elevators 

in this case, found by a professional and untinged by any 

personal bias of the parties, is the fair market value found 

by Hall & Hall, the sum of $488,000.00. We find the District 

Court should have used that figure in a determination of the 

proper amount to be awarded to plaintiff for his ouster from 

the feedlots and elevators. It should be noted however, that 

Hall & Hall's appraisal included Stensvad's rolling stock. 

The value of the rolling stock is already included in the 

personal property award of $354,111.00. The auction receipts 

from the sale of the rolling stock which were included in 

that amount were $66,064.70. We should in fairness deduct 

the value of the rolling stock from Hall & Hall's appraisal 

of the feedlots and elevators, which leaves a net figure 

rounded market value of $411,935.00 as the proper value of 

the feedlots and elevators. 

Accordingly, we amend the District Court's award of 

damages to Stensvad as follows: 
1. Conversion of personal property 

2. Conversion of cattle 

3. Value of feedlot and elevators 

4. Mishandling of business 

5. Lost profits 

TOTAL 

THE SET-OFF TO THE BANK 

The District Court found, and the parties agree, that 

the principal amount of the notes due and owing to the bank 

as of November 11, 1971, was the sum of $1,022,325. The 

District Court however, awarded interest on that amount to 

the date of the judgment. In view of the fact that the 

Stensvad property I aken. by the bank and sold as, 

collateral for the indebtedness due it, exceeded in value as 

we have above shown the amount of the principle indebtedness, 

it is improper in this case to award interest to the bank on 

the note balances to the date of judgment. Once the value 

of the collateral had been applied to the principle indebtedness 

through means of foreclosure and other sales, Stensvad's 

obligation for further interest on those notes to the extent 

of collection was obviously terminated. The bank is entitled 

to a set-off of no more than the amount of the principal 

indebtedness as of the date of the breach found by the 

District Court. 

THE ISSUE OF SUMMARY JUDGMENT 

When this action was first commenced, the then presiding 

district judge granted summary judgment in favor of the 

bank. Plaintiff filed a motion for reconsideration of the 

summary judgment when a second judge was qualified to sit on 

the cause. The second judge, considering the issues, reversed 

the summary judgment and opened the cause for trial. In 

spite of the bank's contentions to the contrary, it is clear 

that material questions of fact existed from the inception 
of this litigation and that the first entry of summary 

judgment was improper. We find no merit therefore in the 

bank's contention that the District Court improperly reversed 

the stand on the summary judgment question. 

CONCLUSION 

The amount of the Stensvad claim, as we find it above, 

is subject to a set-off to the bank in the sum of $1,022,325. 

We therefore remand this cause to the District Court with 

instructions to modify the judgment heretofore entered in 

this cause, and to enter judgment in favor of Stensvad in 

the sum of $183,721, which when paid, shall constitute full 

and final settlement of all claims of L. D. Stensvad, personally, 

and as representative of investing shareholders of the 

corporations and of the corporations. Interest on the 

amount of the judgment shall run from the date of its entry 

after remittitur herein. Costs to Stensvad. 

We Concur: 

wef Justice 

........................... Justice 
Mr. Justice Fred J. Weber dissents: 

I commend Justice Sheehy for his careful and competent 

analysis of the complex and confusing facts in this case. 

He has done an excellent job in putting together an understandable 

opinion. 

I agree with the conclusion of the majority that the 

bank did have an agreement to loan money to the Stensvad 

interests. However, I find there was an ample factual basis 

for the termination by the bank of that agreement to loan 

money, and the subsequent taking of possession of the Stensvad 

properties. The majority opinion refers to the reports of 

bank examiners, who examined the Stensvad loan on November 

12, 1971, just prior to the taking possession of the assets 

by the bank. The examiners point out that on November 12, 

nearly three and one-half months after the end of the fiscal 

year of Stensvad Cattle Co. Inc., the firm had been unable 

to compile a financial statement which would balance and 

which the accountant was prepared to certify. The examiners 

noted that as of June 30, 1971, checks had been issued in 

substantial amounts when insufficient funds were available 

to cover. The majority opinion points out that as of June 

30, 1971, L. D. Stensvad Cattle Co. had a negative net worth 

of $271,058.17 with questionable assets even on that statement. 

In addition, there is evidence that during the weeks prior 

to taking of possession by the bank, Stensvad failed to 

remit substantial funds to the bank, Stensvad had failed to 

make payments to his investors, and funds were being diverted 

to other feedlot operations in direct disregard of bank 

instructions. As pointed out in the majority opinion, 

during all of 1971, Stensvad was grossly under financed, 
which made his operations subject to any adverse turns in 

the market. All of these facts are a sufficient basis for 

the action taken by the bank. I would therefore hold that 

the bank properly terminated the agreement to loan money to 

Stensvad, and refused to make additional loans, and properly 

took possession of the various assets which constituted 

security for the loans. 

I do concur with the majority opinion that the award 

of lost profits at the District Court level was speculative 

and not sustainable. I also agree that the valuation of the 

personal property in the amount of $354,111.00 and the value 

of the feedlot and elevators in the amount of $411,935.00 is 

correct. I would reduce the cattle valuation of $382,000.00 

by the profit of $104,897.73 made by the bank because I 

would not find a conversion of the cattle. I would also 

eliminate the award of $58,000.00 for mishandling of business. 

Last, I would award interest to the bank after the appropriate 

reduction of its loan totals 
IN THE SUPREME COURT OF THE STATE OF MONTANA 

No. 80-210 

L. D. STENSVAD, personally and as 

representative of the investing 

shareholders of AGRI-SERVICES, INC., 

M. V. ENTERPRISES, INC., M. & S. 

CATTLE FEEDERS, and L. D. STENSVAD 

CATTLE CO., all Montana Corporations, - 

plaintiffs, FEB 25 7982 

vs . E,$ERK OF SUPREME cOuRT 

&*ATE PF MONTANA THE MINERS AND MERCHANTS BANK OF 

ROUNDUP, MONTANA, 

Defendants. 

ORDER DENYING PETITION FOR REHEARING 

We deny petition of defendant bank for rehearing of our 

opinion entered January 7, 1982 with the following comments: 

1. Petitioner bank contended it is entitled to a set-off 

for interest accrued on the principal indebtedness on the notes 

from the date of breach until the monies received on foreclosures 

by the bank were applied on the notes. We so indicated in our 

opinion. However, we carefully searched the record to determine 

the applicable amounts and dates, and were unable to identify 

either in any case. This Court is bound by the record before 

us. Therefore, we held that the set-off would be the amount of 

principal indebtedness as of the date of t,he breach on facts 

found by the District Court. 

2. Petitioner contends respondent is not entitled to the 

benefit of the profit realized by the bank after it had taken 

possession of the cattle and eventually sold the same. We do 

not agree, but point out that if we did, it would result in 
a higher judgment against the bank in the amount of the 

profit. 

3. Petitioner contends that its foreclosure of the 

properties has been hampered by lis pendens filed by Stensvad. 

We have no record of that before us, but in any event, Stensvad, 

we assume, must dismiss any lis pendens which relate to issues 

settled in this appeal upon payment of judgment by respondent. 

According, the petition for rehearing is denied. 

DATED this 2By of February, 1982. 

Chief Justice / 

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