### No. 11934 IN

### THE SUPREME COURT OF THE 

### STATE OF MONTANA 1971

DAN 

### DAVIS and DONALD DAVIS, Plaintiff and Respondent,

-vs

# - GEORGE 

### V. 

### DAVIS, Defendant and Appellant.

Appeal from: District Court of theThird JudicialDistrict, Honorable Sid G. 

### Stewart, Judge presiding. Counsel of Record: For Appellant

### : William R. 

### Taylor argued, Deer Lodge, Montana. Hughes, Bennett and Alan F. Cain, Helena, Montana. Alan F. Cain argued, Helena, Montana. For Respondent: 

### C. W. 

### Leaphart, 

### Jr. argued, Helena, Montana.

Submitted: December 

### 2, 1971 Decided

### :

## JAN2

## 7

## 19n Filed

### :

## JAN

## 27

## 1972

### Mr. Justice Gene B. 

### Daly delivered the Opinion of the Court.

This cause involves two actions consolidated for trial purposes in the district court of the third judicial district, Powell County. The actions were brought by two brothers against their uncle forbreach of oralcontracts tomanage ranch properties. The matter was tried to the court sittingwith a jury. From a jury verdict and judgment in favor of the plaintiffs, the defendant appeals. The plaintiffs areDan Davis and Donald Davis. The defendant 

### is George V. Davis, their uncle. Each plaintiff's complaint was drawn in three counts. Count I 

### alleged an oralcontract running from the year 1957 through 1964, whereby plaintiffs were to each receive a salary of $350 per month, plus freemeat, milk, utilities, and housing. Plaintiffs were alsotoreceive one-third of the profits of the ranches and as a further compensation each plaintiff was tobe designated in a will, 

### tobe executed by defendant, to receive theranch upon which he was living in the event of defendant's death. The respective complaints allege that the full share of profits was not paid toeach plaintiff. Dan Davis prays for $71,310 damages and Donald Davis prays for $68,653 damages. Count I1 alleges a similar oral agreement running from 1965 through 1966, under which each plaintiff was toreceive the remuneration outlined in Count I, 

### except that each plaintiff was toreceive one-half of the profits of the ranches, less depreciation; and each was tohold the profits received for the purpose of paying inheritance taxes. Plaintiffs allege that for the years 1965 and 1966, they received no profits. Donald Davis prays for $32,000 damages and Dan Davis prays for $38,000 damages.

### Count 

### 111 alleges in substance that by his manner and actions defendant prevented plaintiffs from performing their contracts; that plaintiffs believe defendant has not provided for them inhis will

### as agreed and they pray for relief in thenature of specific performance,foccing defendant to execute a will

### in the manner agreed upon. By way of answer defendant admitted that plaintiffs were employed by him for the years stated in the complaints but denied the existence of any such agreements as alleged in the complaints. The bonus payments which were paid toplaintiffs by defendant

were admitted; defendant denied they were paid pursuant to any setcontracts, but were paid inthe discretion of defendant. Defendant further alleged that plaintiffs breached the terms of whatever agreements they considered existed between defendant and themselves by demanding $1,000 per month salary and threatening toquit defendant's employ ifhe failed toaccede totheir demands.Defendant additionally setup the defense that plaintiffs' claims through the year 1961, were barred by the statute of limitations, section 93-2604(1), R.C.M. 

### 1947, which provides

II

### An action upon a contract

# **

# * not founded on an instrument in writing" must be commenced within fiveyears. Further, that the alleged oral contracts tomake a will

### were void as inviolation of the statute of frauds, section 13-606, R.C.M. 

### 1947, and section 93-1401-7(1) and (4), R.C.M. 

### 1947. During the course of the trialthe district judge granted defendant's motion for a directed verdict as tothe claims of plaintiffs forwages and shares of profit for the years 1956 to 1961, on the ground that such claims were barred by the applicablestatuteof limitations. The court alsodetermined the defendant had performed that portion of the agreementsregarding the drafting of a 

### will, since defendant had drafted and executed a 

### willnaming plaintiffs Donald Davis and Dan Davis as devisees of certain properties in Powell County which plaintiffs had been managing for defendant. Consequently, atthe close of the evidence,Count 

### I11 in each complaint was dismissed, without objection.The matter was then submitted to the jury, which returned a verdict in favor of each plaintiff in the amount of $38,205.34. Defendant-appellant presents five issues for review: 

### 1. Whether the verdict and judgment in the district court are supported by substantial evidence. 2. Whether plaintiffs must be held, as a matter of law, tohave waived their right to insist on the performance they claim tobe due from defendant under the alleged oral contracts. 3. Whether plaintiffs areprecluded from recovery on the alleged contracts in view of their own breach. 4. Whether the district court erred in admitting evidence of the alleged oral contracts tomake 

### a willdevising real property. 5. Whether the alleged oral contracts todevise real property and topay a certain share of profits from ranch operations areunenforceable as being in violation of the statuteof frauds. Plaintiffs argue the appeal should be dismissed for failure of defendant tomove for a new trial, and that defendant's issue 

### 2, waiver, and issue 

### 3, breach, arenot proper issues as they were not raised atthe district court level. In the first instance, defendant has adequate procedural ground to support his appeal and a failure tomove for a new trial

### is not fatal to his appeal, as urged by plaintiffs. Defendant did move the district court for.a directed verdict atthe close of allthe evidence based principally on the ground that the evidence presented attrialwas insufficient to establish a basis upon which thejury could reasonably find that the contracts existed. This motion presented tothe trial court the same question which plaintiffs urge can only be presented ina motion for

a new trial following the verdict, if this Court 

### is toreview the evidence presented attrial on appeal. The question urged on appeal here

# --- that evidence to support a verdict in favor of plaintiffs was totally lacking---

was directly presented toand ruled on by the district court. This matter was treated"inKuchinski v. Security Gen.Ins. Co., 141Mont. 515, 518, 380 P.2d 889, thusly:

I1IA motion for a judgment of non-suit, or a motion for a directed verdict, 

### is in effect a demurrer tothe evidence and presents to the trialcourt a question of law tobe determined [Citing cases], 

### and where either of such motions ismade in the trial court and overruled, the question of the sufficiency of the evidence to support the verdict and judgment 

### is before this court on appeal from thejudgment.

## ' La Bonte v. Mutual Fire etc. Ins. Co., 75 Mont. 

### 1 [lo], 241 P. 631, 634.

111If a motion for a new trialhas not been made, the court

### willreview the evidence todetermine whether there 

### is any substantial evidence to justify the verdict. [Citing cases.]

## ' Harrington v. H. D. Lee Mercantile Co., 97 Mont. 40, 55, 33 P.2d 553, 556." Here, the two issues presented by defendant having to do with the alleged waiver and breach of plaintiffs, should be considered. Under the admitted employment agreements for the periods from 1957 to 1964, and from 1965 to 1966, and concurrently under the alleged contracts to share in the profits and todraw a 

### will,defendant admitted an employment agreement terminable at

### will, but denied the existence of any alleged contracts toshare in the profits or draw a 

### will. In the pretrial order issued by the district court setting the triable issues of fact and law, defendant's position 

### is consistently stated as a denial of any alleged contracts either to share in the profits or to fulfill any obligation todevise orbequeath toplaintiffs any property by 

### will.Rule 16, Montana Rules of Civil Procedure, provides

a pretrial conference 

### will formulate the issues:

"Jc 

# * JcThe court shallmake an order which recites the action taken atthe conference, the amendments allowed tothe pleadings, and the agreements made by the parties as toany of the matters considered, and which 

### limits the issues for trial to those not disposed of by admissions or agreements of counsel; and such order when entered controls the subsequent course of the action, unless modified atthe trial toprevent manifest injustice.

# * **" The pretrial order setting forth defendant's contentions indicates that the contracts under which the plaintiffs were employed were terminable at

### will, and maintains a denial of any of plaintiffs' alleged contracts with defendant. This Court 

### is compelled toagreewith plaintiffs' argument that it stands to

reason if there were no contracts there could be no breaches, and if the agreements were terminable at

### will, the plaintiffs were entitled to terminate atany time they saw fit. However, of more crucialweight 

### is the procedural process which recognizes that the issues of waiver and breach were not made issues atthe trial and thus may not be introduced on appeal. This Court has said

on numerous occasions that it

### willconsider for review only those questions raised in the trialcourt. Spencer v. Robertson, 151 Mont. 307, 

### 445 P.2d 

### 48; Clark v. Worrall, 146 Mont. 

### 374, 406 P.2d

### In reference to issue4, we deem the admission of evidence of the alleged oral contracts tomake a will

### devising real property tohave no bearing on this appeal, in view 05 the district court's dismissal of Count 

### I11 in each complaint atthe close of the evidence. The issue of the alleged oral contracts todevise property under the will

### of defendant was removed from thejury without objection and thus 

### is not a part of this appeal. In considering the principal question presented by defendant in this appeal, namely

# --- that evidence to support a verdict in favor of plaintiffs was totally lacking

# --- we willbe guided by the long standing rule inMontana as stated inBernhard v. Lincoln County, 150Mont. 557, 560, 437 P.2d 377: "\hen such a question isbefore this court we 

### will only review the evidence todecide if the verdict 

### is supported by substantia

### 1evidence. Breen v. Industria

### 1 Accident Board (Mont. 1968), 436 P.2d 701. The fact that there were conflicts in the testimony does not mean there 

### is not substantial evidence to support the verdict. We must accept the evidence believed by the I 

### jury unless that evidence 

### is so inherently impossible or improbable asnot tobe entitled tobelief 

# **.' Wallace v. Wallace, 85 Mont. 492, 279 P. 374, 377, 66 A.L.R. 587 (1929)." An 

### examina'tion of the entirerecord reveals conflicting but substantial evidence to support thejury's finding of 

### a contract

as opposed toa voluntary bonus. Defendant makes a strong argument that the testimony of his two accountants, both C.P.A. 

### 's, demonstrates the yearly payment was a bonus that was paid by defendant tothe plaintiffs and understood tobe paid only out of "net operating profitsf'of the ranching operations. At

### the trialone accountant defined the

1f

### net operating profitffas "that would include allranch sales, except the sales of livestock upon which the Federal income tax people will

### give us capitalgains treatment". The other described

### the operating profit as the gross sales of the cattle less expenses, and.that a schedule of capitalgains was kept with such sums being treated differently for income tax purposes. A 

### retired vice-president and trust officer of the First National Bank and Trust Company of Helena, testified as tohis understanding in these matters as the result of an estate planning meeting in 1965with George Davis, Donald Davis and the account-



### "A. Well, as I 

### recall it,

### Mr. George Davis explained what his idea was of net operating income for the purpose of determining salaryand bonuses--for a salary and bonus arrangement, and thatwas the gross operating income, excluding capita

### 1gains, less ordinary operating expenses, and not including depreciation, and that would be thenet--that would leaveyou thenet profit from the operation." (Emphasis supplied) In contrast tothe above statements supporting defendant's position, the testimony of the brothers, Donald and Dan Davis, stands ina different light from the outset. While the element of depreciation 

### is not contested by the plaintiffs in determining the net operating profits, clearly different testimony was given in regard to the inclusion of the element of capitalgains in the net operating income. Dan Davis testified: "Q. 

### Now, ifyou know, when you made this original agreement or arrangement in 1965, was there any discussion had as towhether the capital gains income would be treated the same way that the other income was, Mr. Davis? [Objection sustained atthis point.] 

### "MR LEAPHART: Was thereany discussion, letme put it 

### that way? A. 

### The discussion that took place, well, 

### that was never discussed

# --- they never told me 

### that it 

### was tobe deducted. It was just supposed tobe net profit.

11Q. 

### [Cross-examination] And when you say 'all of the profit' what do you mean by that? "A. 

### The differencebetween total sales and total expenses, the profit."Q. Now, in that claim that you make, were you contending that you were entitled tocapitalpain? "A. When he made the agreement with us, he never said anything about holding out capital gains.11 (Emphasis supplied)

# . Dan Davis went 

### on to statethat his statement applied toboth of the alleged contracts. Donald Davis on cross-examination testified: 

### "Q. Now, these years when hewent over the income and the expense or the ranch with you, and showed his profit, you and he frequently didn't see the profit the same, orwhat the prorit was asyou contend was tobe shared, 

### is that right? 

### 'A. I don't ever remember of having any discussion with him. Attimes when we were looking over these figures, no, he never indicated that capitalgains ever entered into this deal atall, but only that the profit was the difference between the total sales and total expenses. He claimed that the monies that were treated as capital gains, as far as tax purposes were concerned, were included in thenet profits, inhis tax return.

"Q. Do you believe he [defendant]was confused about it? 

### "A. Well, atfirst, there were times that 

### I thought that that was a possibility. "Q. That he was confused, and didn't understand it theway you did, 

### is that right? I



# . Well, there was no doubt inmy mind that there was a difference. Now. 

### I don't know how he understood it. but he had been inthe business long enough that 

### it was certainly hard tor me tobelieve that he really understood it the way he was telling me he understood it--- he had been in the business too long tomake me believe that.1

## ' (Emphasis supplied) While the evidence may stand inapparent conflict on the inclusion or exclusion of the capital gains in the net operating profit of the ranches, thejury was vested with the sole consideration of the factual issues and the credibility of witnesses and tes

### timony

# .This Court finds nothing incompatible that might not be explained by the proposition that defendant was concerned with tax matters with his accountants, and treated Donald Davis and Dan Davis differentlywith regard to the contract of protit sharing. 

### It would be wholly corsistent with the normal understanding and representations given to the Davis brothers that the prof

### its meant revenues minus expenses. The relative positions taken in the lawsuits and the introduction of testimony regarding tax matters iscollateral to the issue of the understanding between George Davis and thebrothers. This Court 

### willnot disturb the factual determinations of the jury and finds nothing that 

### is incredible or insufficient in the evidence produced attrial, upon which thejury relied. In regard to defendant's tinal issue---the statute of frauds as a bar to oral contracts---it 

### is sufficient tonote that the oral contracts of profit sharing relied upon attrial,

were fully executed on the part of the plaintiffs and as such represent a well recognized exception to the statuteof frauds. Besse v. McHenry, 89 Mont. 520, 300 

### P. 199. The judgment of the trial 

# / Associate Justice

Chief Justice 

# Ua*-------

Associae Qstices.